TIDMHOC
RNS Number : 5289Q
Hochschild Mining PLC
20 October 2011
20 October 2011
Interim Management Statement and
Production Report for the 3 months ended 30 September 2011
Highlights
-- Q3 2011 production of 5.8 million attributable silver
equivalent ounces
-- Q3 year-to-date production of 16.9 million attributable
silver equivalent ounces
-- On track to deliver 2011 production target of 22.5 million
attributable silver equivalent ounces
-- Feasibility studies for Inmaculada and Crespo projects to be
delivered in Q4 2011; Azuca feasibility study due for completion in
H1 2012
-- Brownfield programme on schedule to deliver expected resource
increases; greenfield drilling campaign on track for full year
completion
-- Net proceeds of approximately US$96 million received by the
Company from full repayment of loans made to Argentinean joint
venture
-- Strong financial position with total cash of approximately
US$687 million as at 30 September 2011 (attributable cash balance:
US$660m)
Ignacio Bustamante, Chief Executive Officer commented:
"Hochschild has delivered another robust quarter of production
with the Company remaining on schedule to hit our 2011 target of
22.5 million attributable silver equivalent ounces. Feasibility
studies for the Inmaculada and Crespo projects are very close to
completion and we have also continued to make good progress with
our exploration programme placing the Company on track to complete
our full 2011 drilling campaign. Finally, our strong cash balance
puts us in an enviable position in a volatile economic
environment."
Overview
Hochschild delivered attributable production of 5.8 million
silver equivalent ounces in Q3 2011, comprised of 3.8 million
ounces of silver and 33.5 thousand ounces of gold. Overall in the
first nine months of 2011, the Group has delivered 11.1 million
ounces of silver and 96.8 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.[1]
Production
Main operations
San Jose has continued to deliver a very strong performance in
the third quarter of 2011. Silver equivalent production of 2.8
million ounces rose by 3% versus the same period of 2010 with the
overall year-to-date performance running 15% ahead of the first 9
months of 2010 supported by ongoing high recovery rates of gold at
89% and of silver at 85%.
In line with the revised 2011 mining policy, Arcata's production
in the third quarter was 1.7 million silver equivalent ounces with
the Company continuing to adjust the extraction grade to ensure a
consistent and sustainable level of long term production. Q3
production was in line with the Q2 rate of 1.8 million silver
equivalent ounces with the year-to-date level at 5.3 million silver
equivalent ounces. This quarter, the Company has continued
processing developmental material from previous campaigns as well
as certain ready-to-mine areas that have become economic at current
prices. Finally, higher dilution due to narrower veins also
affected Arcata's treated grade for the quarter.
Currently, 15% of concentrate produced at Arcata is converted
into dore at Ares' facilities. The Company is undertaking a two
step expansion project increasing Ares' capacity to treat 45% of
Arcata's concentrate by the start of 2012 and 100% by the start of
the third quarter of 2012. Whilst this project will result in a
reduction in reported produced ounces and an increase in treatment
costs, this is anticipated to be more than offset by a reduction in
commercial discounts due to dore's lower impurities, making it a
very profitable project for the Company.
Pallancata, the Company's other main Peruvian operation, had a
solid performance with silver equivalent production for the quarter
at 2.9 million silver equivalent ounces (Q3 2010: 3.0 million
silver equivalent ounces).
Other operations
The Company's ageing Ares mine produced 1.7 million silver
equivalent ounces in the nine months year-to-date (Q3 YTD 2010: 2.1
million silver equivalent ounces), whilst Moris, the Company's
operation in Mexico, produced 1.1 million silver equivalent ounces
(Q3 YTD 2010: 1.1 million silver equivalent ounces). Moris has
commenced its closure plan but continued leaching of the pads is
expected to yield further economic ounces. Ares, however, continues
to be a flexible deposit that is producing economic ounces and is
also yielding new marginal areas with viable material that will
allow operations to continue into 2012. In addition, in order to
take advantage of capacity at Ares' mill, Hochschild is exploring
the economics of transporting material from other Peruvian
operations and projects to be processed at Ares.
As has been stated previously, the Company's management
continues to work on identifying opportunities to produce
profitable ounces by optimising its mineral resources and the
capacity of its existing asset base. In line with this policy, the
Company has been able to identify new exploration targets at both
Ares and Moris with the goal of identifying new resources.
Average realisable prices and sales
Average realisable precious metal prices (which are reported
before the deduction of commercial discounts) in Q3 2011 were
US$1,762/ounce for gold and US$36.76/ounce for silver. Average
realisable precious metal prices for the first nine months of 2011
were US$1,555/ounce for gold and US$36.55/ounce for silver.
Advanced projects
Inmaculada
An infill drill programme commenced at the property earlier in
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 September at the Jimena,
Martha and Angela SW veins. A total drill programme of 30,995
metres is expected to be completed for the full year 2011. Selected
intercepts include[2]:
Angela DDH-04: 1.20 metres at 7.45 g/t Au & 68 g/t Ag
3.15 metres at 8.07 g/t Au & 180 g/t Ag
DDH-09: 3.45 metres at 12.65 g/t Au & 83 g/t Ag
DDH-ASW002: 0.30 metres at 5.35 g/t Au & 201 g/t
Ag
1.20 metres at 32.70 g/t Au & 508 g/t Ag
DDH-ASW007: 0.95 metres at 5.0 g/t Au & 12.5 g/t
Ag
DDH-ASW009: 3.45 metres at 12.63 g/t Au & 83.2
g/t Ag
DDH-ASW012: 0.80 metres at 45.73 g/t Au & 459.7
g/t Ag
------- -----------------------------------------------------------------------
Martha DDH-MAR016: 0.90 metres at 19.85 g/t Au & 56 g/t
Ag
DDH-MAR018: 0.95 metres at 8.62 g/t Au & 21 g/t
Ag
DDH-MAR020: 0.85 metres at 4.6 g/t Au & 44.5 g/t
Ag
------- -----------------------------------------------------------------------
All geomechanical, hydrological and geotechnical drilling
intended for data for the feasibility study has been completed on
schedule with the overall study on track for completion towards the
end of the year. The Environmental Impact Study ("EIS") was
presented to the relevant authorities in September and represents
the first step in the environmental and social approval
process.
Crespo
Both the feasibility study and the EIS have made good progress
year-to-date and remain on track for completion in the fourth
quarter, whilst drilling for the geotechnical and geomechanical
studies is on schedule to finish at the end of October. In
parallel, metallurgic test work is being carried out and the
results will also be incorporated in the feasibility study.
Azuca
Year to date, 88,928 metres of infill drilling has been
completed at the Azuca, Yanamayo and Azuca West veins which aims to
convert Inferred Resources to the Indicated category and advance
the project to feasibility stage. The EIS is also underway and is
on track for submission in the first half of 2012. The Company
expects to complete feasibility in the first half of 2012 with
production targeted at an initial estimate of 3.5 million silver
equivalent ounces per year.
The brownfield drilling programme was carried out in the third
quarter at the Azuca East, Azuca West and Colombiana veins.
Selected intercepts include:
Colombiana DACO-1101: 1.25 metres at 1.76 g/t Au & 330 g/t
Ag
DACO-1106: 1.0 metres at 3.05 g/t Au & 1,224 g/t
Ag
DAJU-1101: 4.10 metres at 1.15 g/t Au & 510 g/t
Ag
DAJU-1102: 1.00 metres at 3.89 g/t Au & 461 g/t
Ag
----------- --------------------------------------------------
Azuca West DAAW-A1104: 1.10 metres at 2.22 g/t Au & 443 g/t
Ag
DAAW-A1106: 0.90 metres at 1.98 g/t Au & 671 g/t
Ag
DAAW-A1108: 1.20 metres at 2.23 g/t Au & 294 g/t
Ag
----------- --------------------------------------------------
Azuca East DAAE-A1111: 0.95 metres at 1.57 g/t Au & 594 g/t
Ag
DAAE-A1112: 0.70 metres at 1.69 g/t Au & 451 g/t
Ag
----------- --------------------------------------------------
Brownfield exploration
Arcata
The 2011 drill programme is ongoing 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. Selected results from the drill programme include:
Marion DDH-057: 2.35 metres at 4.08 g/t Au & 1,183 g/t
Ag
DDH-099: 1.90 metres at 5.18 g/t Au & 1,704 g/t
Ag
------- --------------------------------------------------------------
Blanca DDH-079: 1.17 metres at 8.35 g/t Au & 3,171 g/t
Ag
------- --------------------------------------------------------------
Baja DDH-199: 1.62 metres at 2.99 g/t Au and 324 g/t
Ag
DDH-197: 2.36 metres at 1.79 g/t Au & 634 g/t Ag
------- --------------------------------------------------------------
West DDH-236: 1.5 metres at 0.52 g/t Au & 527 g/t Ag
0.71 metres at 1.0 g/t Au & 958 g/t Ag
------- --------------------------------------------------------------
Pallancata
Underground development continues at the Pallancata, San Javier
and Virgen del Carmen veins. 16,242 metres of drilling was executed
in the quarter at the Rina, Thalia and Yanina veins. A total drill
programme of 55,292 metres is planned for the full year 2011.
Selected drill results in Q3 2011 include:
Luisa DLLU-A01: 1.49 metres at 27.02 g/t Au & 448 g/t
Ag
0.90 metres at 0.91 g/t Au & 418 g/t Ag
3.75 metres at 2.16 g/t Au & 146 g/t Ag
DLLU-A03: 1.26 metres at 0.84 g/t Au & 335 g/t
Ag
1.72 metres at 2.42 g/t Au & 540 g/t Ag
DLLU-A04: 5.04 metres at 1.64 g/t Au & 322 g/t
Ag
DLLU-A07: 4.69 metres at 3.63 g/t Au & 462 g/t
Ag
DLLU-A08: 9.0 metres at 1.61 g/t Au & 301 g/t Ag
3.25 metres at 4.89 g/t Au & 1,382 g/t Ag
DLLU-A09: 1.08 metres at 2.67 g/t Au & 246 g/t
Ag
2.80 metres at 3.43 g/t Au & 118 g/t Ag
2.91 metres at 3.98 g/t Au & 429 g/t Ag
---------------- ------------------------------------------------------------------
Pallancata West DLPL-A796: 4.04 metres at 3.57 g/t Au & 813 g/t
Ag
2.02 metres at 3.23 g/t Au & 769 g/t Ag
---------------- ------------------------------------------------------------------
San Jose
During the quarter, 18,566 metres of diamond drilling was
carried out at several veins to incorporate new resources. Selected
intercepts include:
Antonella SJD921: 2.0 metres at 8.29 g/t Au & 105 g/t Ag
----------- ------------------------------------------------
Luli SJD947: 0.50 metres at 10.14 g/t Au & 1,115 g/t
Ag
----------- ------------------------------------------------
Dos Lauras SJD953: 7.40 metres at 2.12 g/t Au & 166 g/t Ag
----------- ------------------------------------------------
Corion SJD963: 1.10 metres at 6.69 g/t Au & 46 g/t Ag
----------- ------------------------------------------------
Neneo SJD963: 1.30 metres at 2.63 g/t Au & 261 g/t Ag
----------- ------------------------------------------------
Greenfield pipeline
In Chile, a 3,000 metre drilling programme commenced in mid
September at the Victoria project (Company Maker), whilst at the
Valeriano prospect (Company Maker), preliminary drill targets have
been selected and the drilling programme will commence this
month.
At the Mercurio project in Mexico (Company Maker), this year's
8,000 metre drilling programme is focusing on deeper areas of the
project and extensions of known veins to the south east to evaluate
potential similarities to comparable mines in the vicinity.
Encouraging vein type mineralisation has been intercepted and
preliminary results indicate that strong anomalous mineralisation
continues to the south east along trend.
In Argentina, at the Mosquito project (Medium Scale), strong
anomalous mineralisation has been reported for a number of the
drill holes completed in H1 2011. The programme for the second half
includes a number of additional targets defined by a recently
completed ground magnetic survey as well as detailed mapping of
altered structural zones and volcanic domes. At Apacheta in Peru
(Company Maker), an IP survey was completed in August with a
drilling campaign commencing in September.
In August, the Company announced that it had incorporated three
new property agreements into its exploration pipeline at Coriwasi
and Huachoja in Peru and San Antonio in Chile. Field work has
already commenced at all projects with the aim to start drilling in
2012.
Financial position
The Company's financial position remains strong with total cash
of approximately US$687 million as at 30 September 2011
(attributable cash of US$660m) and minority investments of over
US$300 million, principally comprising the Company's stake in Gold
Resource Corporation.
During the period, a new tax regime was passed by the Peruvian
Congress following consultation with the mining industry. This new
regime applies a sliding scale based on a company's operating
margin and will apply to results starting from the fourth quarter
of this year.
Outlook
Going into the fourth quarter, Hochschild remains well
positioned to achieve its full year production target of 22.5
million attributable silver equivalent ounces. The strong
production increases at San Jose will continue to be complemented
by robust contributions from Arcata and Pallancata and further
ounces from Ares and Moris. Development at all three advanced
projects remains on track and the Company looks forward to the
delivery of the feasibility studies for Inmaculada and Crespo in
the fourth quarter.
__________________________________________________________________
A conference call will be held at 3pm (London time) on Thursday
20 October 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: 6895851#
__________________________________________________________________
Enquiries:
Hochschild Mining plc
Charles Gordon +44 (0)20 7907 2934
Head of Investor Relations
Finsbury
Charles Chichester +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)
Q3 Q3 YTD YTD
2011 2010 2011 2010
------------------------- ------- ------- ------- -------
Silver production (koz) 5,473 6,227 15,886 17,650
Gold production (koz) 47.48 48.53 136.39 145.78
Total silver equivalent
(koz) 8,321 9,139 24,070 26,397
Total gold equivalent
(koz) 138.69 152.31 401.16 439.95
Silver sold (koz) 4,708 5,882 15,466 17,457
Gold sold (koz) 38.43 44.81 127.82 143.70
------------------------- ------- ------- ------- -------
[1] Total production includes 100% of all production, including
production attributable to joint venture partners at San Jose and
Pallancata.
ATTRIBUTABLE GROUP PRODUCTION(1)
Q3 Q3 YTD YTD
2011 2010 2011 2010
--------------------------- ------- ------- ------- -------
Silver production (koz) 3,791 4,532 11,131 13,009
Gold production (koz) 33.49 34.44 96.75 106.96
Attrib. silver equivalent
(koz) 5,800 6,598 16,936 19,427
Attrib. gold equivalent
(koz) 96.67 109.97 287.27 323.78
--------------------------- ------- ------- ------- -------
[1] Attributable production includes 100% of all production from
Arcata, Ares and Moris, 60% from Pallancata and 51% from San
Jose.
QUARTERLY PRODUCTION BY MINE
ARCATA
Q3 Q3 YTD YTD
2011 2010 2011 2010
---------------------------- ---------- ---------- -------- --------
Ore production (tonnes) 181,271 179,270 497,357 474,704
Average head grade silver
(g/t) 277 418 318 451
Average head grade gold
(g/t) 0.80 1.27 0.89 1.47
Silver produced (koz) 1,433 2,130 4,489 6,154
Gold produced (koz) 4.24 6.66 12.90 20.02
Silver equivalent produced
(koz) 1,688 2,529 5,263 7,355
Silver sold (koz) 1,228 1,965 4,247 6,018
Gold sold (koz) 3.40 6.13 11.76 19.19
---------------------------- ---------- ---------- -------- --------
ARES
Q3 Q3 YTD YTD
2011 2010 2011 2010
---------------------------- ---------- ---------- ------------- --------
Ore production (tonnes) 91,287 68,524 246,970 225,131
Average head grade silver
(g/t) 63 81 64 96
Average head grade gold
(g/t) 2.58 3.35 2.85 3.65
Silver produced (koz) 164 158 448 603
Gold produced (koz) 7.02 6.91 21.09 24.81
Silver equivalent produced
(koz) 585 572 1,714 2,092
Silver sold (koz) 121 171 409 596
Gold sold (koz) 5.03 7.09 19.35 23.95
---------------------------- ---------- ---------- ------------- --------
PALLANCATA(1)
Q3 Q3 YTD YTD
2011 2010 2011 2010
---------------------------- ---------- ---------- ------------- --------
Ore production (tonnes) 268,673 273,239 777,407 790,582
Average head grade silver
(g/t) 313 337 304 339
Average head grade gold
(g/t) 1.44 1.32 1.36 1.37
Silver produced (koz) 2,291 2,511 6,478 7,373
Gold produced (koz) 9.37 8.27 25.58 25.80
Silver equivalent produced
(koz) 2,853 3,007 8,013 8,921
Silver sold (koz) 1,935 2,490 6,428 7,449
Gold sold (koz) 8.02 7.92 24.59 25.40
---------------------------- ---------- ---------- ------------- --------
[1] The Company has a 60% interest in Pallancata.
SAN JOSE(1)
Q3 Q3 YTD YTD
2011 2010 2011 2010
---------------------------- ---------- ---------- ------------- --------
Ore production (tonnes) 124,204 112,681 336,151 325,424
Average head grade silver
(g/t) 448 423 456 365
Average head grade gold
(g/t) 5.75 6.42 5.93 6.05
Silver produced (koz) 1,562 1,409 4,416 3,452
Gold produced (koz) 20.91 22.02 60.02 58.16
Silver equivalent produced
(koz) 2,816 2,730 8,017 6,942
Silver sold (koz) 1,409 1,243 4,336 3,322
Gold sold (koz) 18.14 20.23 57.47 57.50
---------------------------- ---------- ---------- ------------- --------
[1] The Company has a 51% interest in San Jose.
MORIS
Q3 Q3 YTD YTD
2011 2010 2011 2010
---------------------------- ---------- ---------- ------------- --------
Ore production (tonnes) 245,771 251,260 858,028 899,676
Average head grade silver
(g/t) 5.5 4.7 5.0 4.5
Average head grade gold
(g/t) 1.00 1.16 0.96 1.22
Silver produced (koz) 23 20 55 68
Gold produced (koz) 5.94 4.67 16.80 16.98
Silver equivalent produced
(koz) 380 300 1,063 1,087
Silver sold (koz) 15 13 46 70
Gold sold (koz) 3.84 3.43 14.66 17.67
---------------------------- ---------- ---------- ------------- --------
* 2010 YTD 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 -
[1] Utilising a silver to gold ratio of 60:1.
[2] All mineralised intersections in this release are quoted as
down-hole lengths not true widths
This information is provided by RNS
The company news service from the London Stock Exchange
END
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