TIDMHOC
RNS Number : 6932K
Hochschild Mining PLC
20 July 2011
20 July 2011
Production Report for the 6 months ended 30 June 2011
Highlights
-- Q2 2011 production of 5.6 million attributable silver
equivalent ounces
-- H1 2011 production of 11.1 million attributable silver
equivalent ounces
-- Hochschild on track to deliver 2011 production target of 22.5
million attributable silver equivalent ounces
-- Ongoing delivery of organic growth strategy:
- Inmaculada and Crespo feasibility studies due for Q4
completion;
- Azuca feasibility study due for completion in H1 2012
-- US$70 million exploration programme progressing as
planned
-- Strong balance sheet underpin for project pipeline
development
Ignacio Bustamante, Chief Executive, commented:
"In spite of a continuing challenging industry environment faced
by the Company, I am pleased to report that Hochschild has
delivered a robust set of production figures for the first half
placing us firmly on track to achieve our full year target of 22.5
million attributable silver equivalent ounces. In addition, the two
feasibility studies on the exciting Inmaculada and Crespo projects,
scheduled for completion towards the end of 2011, are on track,
whilst the bulk of results from the Company's ambitious drilling
programme for 2011 are expected to be available at the full
year."
Overview
Hochschild delivered attributable production of 5.6 million
silver equivalent ounces in Q2 2011, comprised of 3.7 million
ounces of silver and 32.0 thousand ounces of gold. Overall in the
first half of 2011 the Group has delivered 7.3 million ounces of
silver and 63.3 thousand ounces of gold placing it on track to
achieve its full year production target of 22.5 million
attributable silver equivalent ounces in 2011.
Compared to H1 2010, attributable silver equivalent production
decreased by 13% due to declines in grade at the Company's two main
Peruvian operations, in line with its previously mentioned long
term goal of mining close to the average reserve grade at each of
its core operations. In addition, as expected the contribution from
the Company's two ageing mines, Ares and Moris also declined versus
the first half of 2010 although the expected closure dates for both
these mines have been delayed in the light of continued high
precious metal prices. At the San Jose mine, production was lower
in the second quarter versus the first due to industrial action at
the mine leading to the loss of 18 days of production (including
five days of ramping up).
Production
Main operations
San Jose delivered a very strong performance in the first half
of 2011, in line with plan, despite the effects of the strike.
Silver equivalent production rose by 23% versus the first half of
2010 with improved silver grades (up 38%) resulting from a
scheduled shift to the higher reserve grade zones as well as an
increase in gold recovery rates to 90% and silver to 87%. An
agreement has now been reached with the AOMA union (Argentine
Mining Labour Association) in line with expectations as well a
parallel satisfactory conclusion to the annual wage
negotiations.
As expected, Arcata's production in the first half was 3.6
million silver equivalent ounces with the Company reducing the
extraction grade towards the average reserve grade level in order
to ensure a consistent and sustainable level of production. Q2
production was in line with the Q1 rate of 1.8 million ounces. The
Company continues to mine at reserve grade levels in the lower
grade border areas with associated narrower veins and increased
dilution but is confident that the Arcata system continues to
display strong long term geological potential. In addition,
Hochschild took advantage of the strong first half precious metal
prices by deciding to process developmental waste material which,
although increasing the half-on-half tonnage produced by 7%,
further reduced the overall treated grade.
At Pallancata, the Company's other main Peruvian operation,
first half silver equivalent production was reduced to 5.2 million
silver equivalent ounces, mainly driven by lower silver and gold
grades which decreased 12% and 6% year-on-year respectively. In the
first half the mine plan focused on deeper and narrower veins
compared to H1 2010 with mined grades in line with the reserve
grade but experiencing the normal volatility associated with this
type of deposit. In addition, the Company took the opportunity
afforded by the prevailing high precious metals price environment
to process some lower grade economic material (not from the mine's
resources) extracted from the borders of the main vein
structures.
Other operations
The Company's ageing Ares mine produced 1.1 million silver
equivalent ounces in H1 2011 (H1 2010: 1.5 million silver
equivalent ounces), whilst Moris, the Company's operation in
Mexico, produced 0.7 million silver equivalent ounces (H1 2010: 0.8
million silver equivalent ounces).Moris is currently still due for
closure towards the end of 2011. However, Ares continues to be a
flexible deposit that is producing not only from ore that was
previously uneconomic in a different price environment but also
yielding new marginal areas with economic material that will allow
operations to continue into 2012. Management continues to monitor
closely the grade and cost profile of each mine to ensure that they
are in line with the Company's policy of producing profitable
ounces.
Average realisable prices and sales
Average realisable precious metal prices (which are reported
before the deduction of commercial discounts) in Q2 2011 were
US$1,524/ounce for gold and US$36.68/ounce for silver. Average
realisable precious metal prices in H1 2011 were US$1,466/ounce for
gold and US$36.46/ounce for silver.
Advanced projects
Crespo
At the start of the year, Hochschild reported positive results
from a scoping study completed by an independent company, Ausenco,
at the Company's 100% owned Crespo project, located in the
Company's existing operating cluster in southern Peru. The scoping
study is based on resources of 31.3 million silver equivalent
ounces (measured and indicated) and estimates initial production of
2.3 million silver equivalent ounces per annum starting from the
end of 2013. Hochschild already has 5.0 million additional ounces
of Measured & Indicated resources that will be added for the
feasibility study. For further details of the scoping study, please
see the press release published on 19 January 2011.
Both the feasibility study and the Environmental Impact Study
("EIS") have made good progress in the first half and remain on
track for completion in the fourth quarter of 2011 with the process
for obtaining drilling permits for the hydrological assessment also
underway. Drilling for the geotechnical and geomechanical studies
commenced in late June with results due in the second half. In
parallel, metallurgic test work is underway and expected to be
finished in the third quarter of 2011. This information will be
used to complete the feasibility study during Q4.
Inmaculada
On 25 February 2011, the Company announced an increase in both
the total Mineral Resource estimate and Measured and Indicated
Resources for the Inmaculada gold-silver project located in
Hochschild's existing southern Peru cluster, following the
announcement of a positive scoping study published by International
Minerals Inc ("IMZ") in September 2010. The project, in which
Hochschild now owns a controlling 60% stake (IMZ holds the
remaining 40%), is currently at feasibility stage with completion
expected in Q4 2011. The Company expects to commence production in
December 2013 at a processing capacity of 3,000 tonnes per day. The
highlights of the announcement were:
-- 59% increase in Measured & Indicated Resources to 76.0
million silver equivalent ounces
-- 29% increase in silver equivalent grades to 498 g/t
-- Total resources of 128.3 million silver equivalent ounces
Hochschild expects the results to significantly improve the
economics of the project detailed in the 2010 scoping study. An
infill drill programme commenced at the property in March 2011 to
convert Inferred Resources to Measured and Indicated Resources in
the Angela Vein and 4,619 metres of the Brownfield drilling
programme was executed as of June, at the Jimena, Martha and Angela
SW Veins. A total drill programme of 30,995m is planned for the
full year 2011 with approximately 13% completed so far.
The feasibility study for the project is due for completion on
schedule towards the end of the year with the Environmental Impact
Study due to be presented to the relevant authorities also towards
the end of 2011.
Azuca
Intensive drilling continues at the 100% owned Azuca property
with the aim of expanding the scale of the project. The Company
expects to complete feasibility in the first half of 2012 with
production targeted for Q4 2013 at an initial estimate of 3.5
million silver equivalent ounces per year.
Year to date, 67,000 metres of infill drilling have been
completed at the Azuca and Azuca Oeste veins which aims to convert
Inferred Resources to the Indicated category and advance the
project to feasibility stage. Assays are pending from drilling at
the Minaspata vein worked in the past by Hochschild. The
Environmental Impact Study is also underway and is on track for
submission in the second half of 2011.
The brownfield drilling programme was carried out in the first
half at the Azuca East, Yanamayo and Minaspata veins. A total drill
programme of 43,562m is planned for the full year 2011.
Core operations
Arcata
The 2011 drill programme is underway at Arcata and aims to
incorporate new resources at the Blanca, Marion and Baja veins. A
magnetometry geophysical survey was completed which will help to
delineate favourable corridors in the northern and western areas of
the mine. Positive results from the drill programme:
Marion DDH-022: 1.21 metres at 1.79 g/t Au and 480 g/t
Ag
DDH-028: 3.03 metres at 3.88 g/t Au and 1,008 g/t
Ag
DDH-034: 3.32 metres at 1.02 g/t Au and 474 g/t
Ag
------- ---------------------------------------------------
Blanca DDH-015: 0.92 metres at 1.52 g/t Au and 974 g/t
Ag
DDH-039: 0.30 metres at 2.76 g/t Au and 1,010 g/t
Ag
------- ---------------------------------------------------
Baja DDH-187: 1.75 metres at 8.04 g/t Au and 243 g/t
Ag
DDH-032: 1.44 metres at 1.8 g/t Au and 451 g/t
Ag
DDH-037: 1.08 metres at 2.94 g/t Au and 452 g/t
Ag
------- ---------------------------------------------------
Pallancata
Underground development continues at the Pallancata, San Javier
and Virgen del Carmen veins. 13,397 metres of drilling was executed
as of June, at the Rina, Thalia and Yanina Veins. A total drill
programme of 55,292 metres is planned for the full year 2011.
Drill results in Q2 2011 include:
Yanina DLVC-006: 0.42 metres at 11.3 g/t Au and 1,819
g/t Ag
DLVC-008: 0.71 metres at 3.1 g/t Au and 566 g/t
Ag
DLVC-009: 0.66 metres at 2.37 g/t Au and 410 g/t
Ag
DLVC-010: 0.77 metres at 6.10 g/t Au and 1,300
g/t Ag
------- --------------------------------------------------
Rina DLRI-A14: 2.47 metres at 3.19 g/t Au and 905 g/t
Ag
DLRI-A17: 2.45 metres at 2.15 g/t Au and 357 g/t
Ag;
DLRI-A21: 1.72 metres at 6.12 g/t Au and 1,614
g/t Ag
DLRI-A22: 2.11 metres at 2.09 g/t Au and 476 g/t
Ag
------- --------------------------------------------------
San Jose
A total drilling programme of 50,606m is planned for 2011.
During the quarter,diamond drilling was carried out at the Luli
and Susana Veins to convert inferred to measured and indicated
resources. Selected intercepts include:
Luli SJD-865: 1.63 metres at 7.52 g/t Au and 400 g/t
Ag
SJD-869: 1.05 metres at 16.89 g/t Au and 1,642
g/t Ag
SJD-871: 2.00 metres at 19.55 g/t Au and 1,721
g/t Ag
SJD-872: 9.00 metres at 6.10 g/t Au and 243 g/t
Ag
SJD-879: 0.82 metres at 11.90 g/t Au and 1,263
g/t Ag
----------- -----------------------------------------------------
Susana SJD-864: 1.10 metres at 6.62 g/t Au and 1,028 g/t
Ag
0.61 metres at 6.93 g/t Au and 1,504 g/t Ag (Susana
Split)
----------- -----------------------------------------------------
Split Luli SJD-865: 0.96 metres at 6.52 g/t Au and 1,285 g/t
Ag
DJD-871: 1.00 metres at 44.48 g/t Au and 7,747
g/t Ag
SJD-875: 0.44 metres at 13.18 g/t Au and 1,090
g/t Ag
----------- -----------------------------------------------------
Greenfield pipeline
Victoria
The Victoria project in Chile is 60% owned by Hochschild, with
the remaining 40% held by Iron Creek Capital. A 5,000m drilling
programme is due to recommence in H2 after geological
reinterpretation and target validation of the Vida and Cenizas
areas are complete. Metallurgical testing of old ore at the
Vaquillas target is also underway.
Valeriano
At the Valeriano property in Chile which is located 27
kilometres north of Barrick Gold Corporation's Pascua Lama project,
preliminary results received to date have confirmed the anomalies
identified in past drill reports. Results of the geophysical survey
have been interpreted with the definition of a porphyry-like
anomaly at depth which corresponds with the surface geochemistry
studies as well as the historic magnetic survey. Preliminary drill
targets have been selected and the Company is planning to commence
an intensive drilling campaign in H2 2011.
Mercurio
The 100% owned Mercurio project in Mexico is located within the
prolific silver belt of the Fresnillo-Sombrerete deposits. Initial
surface mapping and sampling have been completed in the property
and drilling is underway. The 8,000m drilling programme for 2011 is
focused on deeper areas of the project to evaluate potential
similarities to comparable mines in the vicinity.
Mosquito
At the 100% owned Mosquito project in Argentina, strong
anomalous mineralisation results have been reported for a number of
the drill holes completed in H1 2011. The programme for the second
half which includes a number of further promising drill targets
will be completed by the end of the year.
Financial position
The Company's financial position remains strong with total cash
of approximately US$692 million as at 30 June 2011 and minority
investments of over US$420 million.
Outlook
Despite the continuous upwards pressure on wages and supplies,
Hochschild currently expects that, excluding the effects of
continuing high prices on royalty levels paid by the Company, unit
cost per tonne performance in the first half at the main operations
to be broadly in line with the 10% increase forecast in January for
Peru and between 25-30% increase in Argentina.
However, the Company is well positioned to achieve its full year
production target of 22.5 million attributable silver equivalent
ounces in 2011 with strong production increases at San Jose, solid
and stable production from Arcata and Pallancata and continued
smaller contributions from Ares and Moris. Key stage development at
all three advanced projects remains on track and the Company looks
forward to the delivery of the feasibility studies towards the end
of the year. We will provide further updates on progress over the
course of the second half of the year.
__________________________________________________________________
A conference call will be held at 3pm (London time) on Wednesday
20 July 2011 for analysts and investors.
Dial in details as follows:
UK: +44 (0)20 3003 2666
A recording of the conference call will be available for one
week following its conclusion, accessible from the following
telephone number:
UK: +44 (0)20 8196 1998
Access code: 7780258#
__________________________________________________________________
Enquiries:
Hochschild Mining plc
Charles Gordon +44 (0)20 7907 2934
Head of Investor Relations
Finsbury
Faeth Birch +44 (0)20 7251 3801
Public Relations
__________________________________________________________________
About Hochschild Mining plc:
Hochschild Mining plc is a leading precious metals company
listed on the London Stock Exchange (HOCM.L / HOC LN) with a
primary focus on the exploration, mining, processing and sale of
silver and gold. Hochschild has over forty years' experience in the
mining of precious metal epithermal vein deposits and currently
operates four underground epithermal vein mines, three located in
southern Peru, one in southern Argentina and one open pit mine in
northern Mexico. Hochschild also has numerous long-term projects
throughout the Americas.
PRODUCTION & SALES INFORMATION*
TOTAL GROUP PRODUCTION(1)
Q2 Q2 H1 H1
2011 2010 2011 2010
-------------------------- ------- ------- ------- -------
Silver production (koz)(
) 5,174 6,133 10,414 11,423
Gold production (koz)(
) 43.99 50.95 88.91 97.25
Total silver equivalent
(koz) 7,814 9,191 15,748 17,258
Total gold equivalent
(koz) 130.23 153.18 262.47 287.64
Silver sold (koz) 5,658 6,544 10,758 11,575
Gold sold (koz) 50.27 61.76 89.39 98.90
-------------------------- ------- ------- ------- -------
1 Total production includes 100% of all production, including
production attributable to joint venture partners at San Jose and
Pallancata.
ATTRIBUTABLE GROUP PRODUCTION(1)
Q2 Q2 H1 H1
2011 2010 2011 2010
--------------------------- ------ ------- ------- -------
Silver production (koz)(
) 3,653 4,524 7,340 8,477
Gold production (koz)(
) 31.95 37.57 63.26 72.53
Attrib. silver equivalent
(koz) 5,570 6,778 11,136 12,829
Attrib. gold equivalent
(koz) 92.84 112.97 185.60 213.81
--------------------------- ------ ------- ------- -------
1Attributable production includes 100% of all production from
Arcata, Ares and Moris, 60% from Pallancata and 51% from San
Jose.
QUARTERLY PRODUCTION BY MINE
ARCATA
Q2 Q2 H1 H1
2011 2010 2011 2010
---------------------------- -------- -------- -------- --------
Ore production (tonnes) 159,110 152,754 316,086 295,434
Average head grade silver
(g/t) 334.19 482.60 342 471
Average head grade gold
(g/t) 0.94 1.65 0.94 1.59
Silver produced (koz) 1,506 2,156 3,056 4,024
Gold produced (koz) 4.32 7.22 8.66 13.36
Silver equivalent produced
(koz) 1,765 2,590 3,575 4,826
Silver sold (koz) 1,703 2,239 3,020 4,053
Gold sold (koz) 4.66 7.82 8.36 13.06
---------------------------- -------- -------- -------- --------
ARES
Q2 Q2 H1 H1
2011 2010 2011 2010
---------------------------- ------- ------- -------- --------
Ore production (tonnes) 82,181 77,965 155,683 156,606
Average head grade silver
(g/t) 64 92 64 102
Average head grade gold
(g/t) 2.99 3.62 3.01 3.78
Silver produced (koz) 151 204 284 446
Gold produced (koz) 7.39 8.56 14.08 17.90
Silver equivalent produced
(koz) 594 717 1,129 1,520
Silver sold (koz) 186 187 287 425
Gold sold (koz)( ) 8.75 12.64 14.32 16.85
---------------------------- ------- ------- -------- --------
PALLANCATA(1)
Q2 Q2 H1 H1
2011 2010 2011 2010
---------------------------- -------- -------- -------- --------
Ore production (tonnes) 266,673 269,311 508,734 517,343
Average head grade silver
(g/t) 295 341 299 340
Average head grade gold
(g/t) 1.31 1.39 1.31 1.39
Silver produced (koz) 2,170 2,528 4,188 4,862
Gold produced (koz) 8.43 9.32 16.21 17.54
Silver equivalent produced
(koz) 2,676 3,087 5,160 5,914
Silver sold (koz) 2,166 2,755 4,492 4,959
Gold sold (koz) 7.94 10.28 16.57 17.48
---------------------------- -------- -------- -------- --------
1 The Company holds a 60% interest in Pallancata.
SAN JOSE(1)
Q2 Q2 H1 H1
2011 2010 2011 2010
---------------------------- ------- -------- -------- --------
Ore production (tonnes)(
) 98,251 116,259 211,947 212,743
Average head grade silver
(g/t) 463 368 461 334
Average head grade gold
(g/t) 5.98 5.81 6.03 5.86
Silver produced (koz)(
) 1,332 1,221 2,854 2,044
Gold produced (koz) 17.70 19.71 39.11 36.14
Silver equivalent produced
(koz) 2,394 2,403 5,201 4,212
Silver sold (koz)( ) 1,585 1,331 2,927 2,080
Gold sold (koz)( ) 21.69 22.68 39.32 37.27
---------------------------- ------- -------- -------- --------
1The Company holds a 51% interest in San Jose.
MORIS
Q2 Q2 H1 H1
2011 2010 2011 2010
---------------------------- -------- -------- -------- --------
Ore production (tonnes) 306,846 346,095 612,257 648,416
Average head grade silver
(g/t) 5.54 4.89 4.83 4.41
Average head grade gold
(g/t) 1.12 1.26 0.94 1.25
Silver produced (koz) 15.3 24.0 31.72 48.15
Gold produced (koz) 6.2 6.15 10.86 12.31
Silver equivalent produced
(koz) 385 393 683 787
Silver sold (koz)( ) 19 33 31 57
Gold sold (koz)( ) 7.23 8.34 10.82 14.24
---------------------------- -------- -------- -------- --------
* H1 2010 ounces sold have been restated to include gross
revenue divided by gross ounces sold (previously included net
revenue divided by net ounces sold)
Forward looking statements
This announcement may contain forward looking statements. By
their nature, forward looking statements involve risks and
uncertainties because they relate to events and depend on
circumstances that will or may occur in the future. Actual results,
performance or achievements of Hochschild Mining plc may, for
various reasons, be materially different from any future results,
performance or achievements expressed or implied by such forward
looking statements.
The forward looking statements reflect knowledge and information
available at the date of preparation of this announcement. Except
as required by the Listing Rules and applicable law, the Board of
Hochschild Mining plc does not undertake any obligation to update
or change any forward looking statements to reflect events
occurring after the date of this announcement. Nothing in this
announcement should be construed as a profit forecast.
- ends -
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