TIDMHOC
RNS Number : 5410B
Hochschild Mining PLC
18 April 2012
18 April 2012
Production Report and Interim Management Statement
for the 3 months ended 31 March 2012
Highlights
-- Q1 2012 production of 5.1 million attributable silver
equivalent ounces; on track to deliver 2012 production target of
20.0 million attributable silver equivalent ounces
-- Development of Inmaculada and Crespo projects underway
-- Arcata dore project on schedule to process 100% of Arcata's
concentrate by H2 2012
-- Record $90 million 2012 exploration programme in progress
Ignacio Bustamante, Chief Executive Officer commented:
"We have once again delivered a solid start to the year and we
are on track to meet our 2012 production target of 20.0 million
silver equivalent ounces. We continued to manage extraction grades
during the quarter in order to maintain sustainable long-term
production levels, whilst our extensive brownfield exploration
programme to incorporate further resources and discover new high
grade areas saw good progress.
Our Advanced Projects Inmaculada and Crespo are progressing
well, with engineering, development and infrastructure contracts
awarded during the quarter to local contractors, and increased
community engagement at both sites. In our greenfield exploration
programme, work continued at our Company Makers and Medium Scale
projects during the quarter."
Overview
In Q1 2012 the Company delivered attributable production of 5.1
million silver equivalent ounces, comprised of 3.4 million ounces
of silver and 28.3 thousand ounces of gold, leaving it well
positioned to meet its full year production target of 20.0 million
attributable silver equivalent ounces in 2012.
Production
Main operations
San Jose continued to deliver strong production in Q1 2012, with
total silver equivalent production of 2.6 million ounces (Q1 2011:
2.8 million ounces). Grades and tonnage continued to be robust in
Q1 2012 and a slight increase in recoveries also resulted in
production being in line with the Q4 2011 rate, despite there being
fewer production days.
At Arcata, production was 5.1% lower than Q4 2011 at 1.8 million
silver equivalent ounces (Q1 2011: 1.8 million ounces), mainly due
to the reduced number of production days in the quarter in addition
to electricity supply interruptions due to the effects of the rainy
season. Both silver and gold grades increased, reflecting a
decrease in the volume of lower grade material from the Macarena
waste dam deposit. However, during the second half of 2012 the
Macarena contributions are expected to increase again as a plant
expansion will be completed to facilitate more efficient treatment
of this material.
The Arcata dore project is progressing well and currently 40% of
concentrate is being processed into dore with the project scheduled
for completion in the second half of the year when the level will
reach 100%.
In Q1 2012, silver equivalent production at Pallancata was 2.1
million ounces (Q1 2011: 2.5 million ounces). The performance at
Pallancata reflects the fewer production days as well as the above
mentioned disruption to the electricity supply resulting from the
effects of the rainy season. In addition, temporary delays in mine
plan execution led to the treatment of a greater proportion of
lower grade mineral from the mine. The Company will continue its
policy of mining close to the average reserve grade at Pallancata
in order to ensure a consistent and sustainable level of
production.
Other operations
The Company's Ares mine in Peru continued to operate in Q1 2012,
producing 515 thousand silver equivalent ounces (Q1 2011: 535
thousand ounces). Production is being closely monitored to ensure
the extraction of profitable ounces as Ares is in the last stage of
its life cycle. Subject to additional resources and the price
environment, production at the mine is expected to continue
throughout 2012.
At Moris, the Company's open pit operation in Mexico, mine
production ceased in September 2011 although continued leaching of
the pads produced a further 218 thousand silver equivalent ounces
in Q1 2012 (Q1 2011: 298 thousand ounces). Moris is currently in
the final stage of the pads' cyanidation process. However,
exploration continues at the property.
Average realisable prices and sales
Average realisable precious metal prices in Q1 2012 (which are
reported before the deduction of commercial discounts) were
$1,782.1/ounce for gold and $36.9/ounce for silver. (Q1 2011:
$1,391.4/ounce for gold and $36.2/ounce for silver).
Project pipeline & exploration
Hochschild has reaffirmed its commitment to its exploration
strategy with a 29% increase in the exploration budget for 2012 to
$90 million, the largest ever for the Company. Of this budget, 30%
has been allocated to brownfield exploration, 35% to greenfield
exploration and 19% to exploration at the Company's Advanced
Projects.
Brownfield exploration(1)
San Jose
A comprehensive brownfield exploration programme continued at
San Jose, to the north and south of the current operation area,
towards the El Pluma and Saavedra targets. During the quarter,
14,715 metres of exploration drilling was completed to continue to
incorporating further resources. Drilling focused on the Pluma,
Pilar, Nadia and Ramal veins with significant intercepts
including(1) :
Vein Results
------ ---------------------------------------
Pilar SJD1047 6.16m at 24.94 g/t Au & 394
g/t Ag
SJD1052 0.84m at 13.00 g/t Au & 2,275
g/t Ag
SJD1055 3.75m at 3.09 g/t Au & 119
g/t Ag
------ ---------------------------------------
Pluma SJD1044 1.81m at 3.23 g/t Au & 40 g/t
Ag
------ ---------------------------------------
Arcata
During Q1 2012, 11,355 metres of drilling was carried out at
Arcata. Exploration work focused on defining new high grade
structures and incorporating high quality resources from known vein
systems as well as providing new geological interpretation of the
district. Exploration work continued to delineate resources at the
Sorpresa, Amparo, Leslie, and Blanca 2 veins through diamond
drilling, and testing was carried out in potential areas including
Socorro Oeste, Tunel 4 and Lucrecia. Significant intercepts
included(1) :
Vein Results
-------------- ---------------------------------------
Sorpresa DDH155 0.40m at 5.28 g/t Au & 1,627
g/t Ag
-------------- ---------------------------------------
Socorro Oeste DDH171 0.79m at 8.81 g/t Au & 1,109
g/t Ag
-------------- ---------------------------------------
Tunel 4 DDH284 0.66m at 4.81 g/t Au & 1,743
g/t Ag
DDH289 2.39m at 0.41 g/t Au & 747 g/t
Ag
-------------- ---------------------------------------
Pallancata
In Q1 2012 exploration work at Pallancata focused on locating
new structures as well as continuing the incorporation of new
resources. Drilling continued at the Luisa, Paola and Pallancata
Este veins, with 8,565 metres of diamond drilling completed.
Promising intercepts included(2) :
Vein Results
---------------- ----------------------------------------
Luisa DLLU-A21 5.80m at 1.21 g/t Au & 372 g/t
Ag
DLLU-A26 3.79m at 4.44 g/t Au & 1,061
g/t Ag
---------------- ----------------------------------------
Paola DLLU-A28 7.13m at 2.52 g/t Au & 279 g/t
Ag
---------------- ----------------------------------------
Pallancata Este DLLU-A87 1.70m at 3.87 g/t Au & 473 g/t
Ag
---------------- ----------------------------------------
Advanced Projects
On 11 January 2012, Hochschild announced the successful
completion of the Inmaculada and Crespo feasibility studies which
are forecast to contribute 10 million silver equivalent ounces of
attributable production on average per annum at an initial combined
capital cost of $335 million (attributable). Full details of the
feasibility studies can be found in the announcement.
Inmaculada
Good progress was made at Inmaculada in Q1 2012. The basic
engineering study was submitted and the main equipment requirements
were identified and the purchasing process initiated. The detailed
engineering phase is scheduled to commence in June 2012 and the
mine engineering and development contracts are expected to be
granted in the second half of the year. Construction of the first
of three mine tunnels at Inmaculada commenced in 2011 with the
remaining two set to commence in Q2 2012. The contract for the
power transmission line was awarded to a third-party in the first
quarter and the engineering phase commenced in March.
Active community engagement is a key priority for the Company at
Inmaculada, not only with respect to the Government's Environmental
Impact Study ('EIS') permitting approval process, but also as part
of the Company's long-term policy and experience of working
alongside local communities. In order to ensure a positive dialogue
with our local stakeholders, we have put in place comprehensive
community relations programmes at Inmaculada, and the process for
responding to the EIS observations also started in Q1 2012.
During the quarter, three drill rigs were in operation at
Inmaculada and 6,965 metres of exploration drilling was completed
in order to continue with the incorporation of inferred resources
and to identify new structures. Drilling was carried out in the
Angela SW Cimoide, Angela, Shakira and Lucy veins, with encouraging
results including(2) :
Vein Results
------------------ --------------------------------------
Angela SW Cimoide ASW12-016 10.75m at 4.03 g/t Au & 188
g/t Ag
5.70m at 1.41 g/t Au & 312 g/t Ag
------------------ --------------------------------------
Lucy ASW12-010 2.65m at 5.52 g/t Au & 214
g/t Ag
------------------ --------------------------------------
Crespo
At the Company's 100% owned Crespo project, the basic and
detailed engineering contracts for the mine were awarded to a local
mining company, and engineering contracts for the plant, leaching
pads and infrastructure will be granted later this month.
Community engagement is also a key area of focus at Crespo, for
the same reasons mentioned above. Community relations support
programmes are progressing at Crespo and a permanent office was
established on site to provide information to the community about
the Company's plans. An important milestone in the EIS permitting
process was met on 12 April, when the relevant public information
hearing was successfully held on site. The project's associated
land purchase programme is also ongoing.
Greenfield pipeline
In Q1 2012, a total of 8,106 metres was drilled as part of the
greenfield exploration programme, which is on track to meet its
targets for 2012. Drilling was carried out at six projects during
the quarter; at four Company Maker projects and two Medium Scale
projects.
During the quarter, the Encrucijada project in Chile was
re-categorised from a Medium Scale project to a Company Maker
project based on the positive results obtained from exploration
work, whilst two new projects were added to the exploration
pipeline; El Tanque (Medium Scale) in Mexico, and Potrero (Company
Maker) in Chile.
Financial Position
The Company has a strong financial position with total cash of
approximately US$590 million as at 31 March 2012 and minority
investments of over US$396 million.
Other than as described in this announcement, there have been no
material events or transactions in the period from 1 January 2012
to 18 April 2012 which have affected the Company's financial
position.
Outlook
The Company is on track to achieve its full year production
target of 20.0 million attributable silver equivalent ounces in
2012. Production at the main operations is forecast to remain
broadly stable throughout the year as the Company continues to mine
close to average reserve grade to ensure a consistent and
sustainable level of production. Our Advanced Projects are
progressing according to schedule and we will continue to provide
updates on progress over the course of the year.
The Company remains confident that it has the financial
flexibility to continue pursuing high return investment
opportunities whether through brownfield expansion at our existing
mines, value enhancing acquisitions or adding to our exploration
investment. (1) Please note that all mineralised intersections in
this release are quoted as down-hole lengths, not true widths. (2)
Please note that all mineralised intersections in this release are
quoted as down-hole lengths, not true widths.
__________________________________________________________________
A conference call will be held at 3pm (London time) on Wednesday
18 April 2012 for analysts and investors.
Dial in details as follows:
UK: +44 (0) 20 3003 2666
Password: Hochschild
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: 6974632
__________________________________________________________________
Enquiries:
Hochschild Mining plc
Charles Gordon +44 (0)20 7907 2934
Head of Investor Relations
RLM 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 almost fifty years' experience in
the mining of precious metal epithermal vein deposits and currently
operates four underground epithermal vein mines, three located in
southern Peru and one in southern Argentina. Hochschild also has
numerous long-term projects throughout the Americas.
PRODUCTION & SALES INFORMATION*
TOTAL GROUP PRODUCTION(1)
Q1 Q4 Q1 12 mths 2011
2012 2011 2011
------------------------- ------- ------- ------------- -------------
Silver production
(koz) 4,762 5,477 5,240 21,363
Gold production (koz) 40.51 44.12 44.92 180.51
Total silver equivalent
(koz) 7,193 8,124 7,935 32,193
Total gold equivalent
(koz) 119.88 135.39 132.24 536.56
Silver sold (koz) 4,068 6,326 5,100 21,792
Gold sold (koz) 27.7 54.1 39.1 182.0
------------------------- ------- ------- ------------- -------------
1 Total production includes 100% of all production, including
production attributable to joint venture partners at San Jose and
Pallancata.
ATTRIBUTABLE GROUP PRODUCTION(1)
Q1 Q4 Q1 12 mths 2011
2012 2011 2011
----------------------- ------- ------- ------- -------------
Silver production
(koz) 3,386 3,849 3,687 14,980
Gold production (koz) 28.29 30.54 31.31 127.29
Silver equivalent
(koz) 5,083 5,681 5,565 22,617
Gold equivalent (koz) 84.7 94.7 92.8 377.0
----------------------- ------- ------- ------- -------------
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
Q1 Q4 Q1 12 mths 2011
Product 2012 2011 2011
---------------------------- -------- -------- -------------- -------------
Ore production (tonnes
treated) 164,160 190,609 156,976 687,966
Average grade silver
(g/t) 317 297 349 312
Average grade gold
(g/t) 0.94 0.85 0.95 0.88
Silver produced (koz) 1,498 1,593 1,550 6,081
Gold produced (koz) 4.48 4.48 4.34 17.38
Silver equivalent produced
(koz) 1,766 1,861 1,810 7,124
Silver sold (koz) 1,112 1,732 1,316 5,979
Gold sold (koz) 2.8 4.9 3.7 16.7
---------------------------- -------- -------- -------------- -------------
ARES
Q1 Q4 Q1 12 mths 2011
Product 2012 2011 2011
---------------------------- ------- ------- --------------- -------------
Ore production (tonnes
treated) 78,265 97,115 73,502 344,085
Average grade silver
(g/t) 47 56 64 61
Average grade gold
(g/t) 2.62 3.01 3.03 2.90
Silver produced (koz) 112 132 134 581
Gold produced (koz) 6.71 7.94 6.69 29.03
Silver equivalent produced
(koz) 515 608 535 2,323
Silver sold (koz) 85 190 102 598
Gold sold (koz) 3.2 10.3 5.6 29.7
---------------------------- ------- ------- --------------- -------------
PALLANCATA(1)
Q1 Q4 Q1 12 mths 2011
Product 2012 2011 2011
---------------------------- -------- -------- -------- -------------
Ore production (tonnes
treated) 257,339 293,060 242,061 1,070,466
Average grade silver
(g/t) 263 293 303 301
Average grade gold
(g/t) 0.99 1.27 1.31 1.33
Silver produced (koz) 1,780 2,289 2,018 8,767
Gold produced (koz) 5.61 8.30 7.78 33.88
Silver equivalent produced
(koz) 2,117 2,787 2,485 10,800
Silver sold (koz) 1,826 2,636 2,327 9,064
Gold sold (koz) 5.5 9.3 8.6 33.9
---------------------------- -------- -------- -------- -------------
1 The Company has a 60% interest in Pallancata.
SAN JOSE(1)
Q1 Q4 Q1 12 mths 2011
Product 2012 2011 2011
---------------------------- -------- -------- -------------- -------------
Ore production (tonnes
treated) 115,531 126,675 113,696 462,825
Average grade silver
(g/t) 416 412 459 444
Average grade gold
(g/t) 5.98 5.68 6.08 5.86
Silver produced (koz) 1,356 1,454 1,522 5,870
Gold produced (koz) 20.36 20.93 21.41 80.95
Silver equivalent produced
(koz) 2,577 2,710 2,807 10,727
Silver sold (koz) 1,032 1,750 1,342 6,087
Gold sold (koz) 14.3 25.0 17.6 82.4
---------------------------- -------- -------- -------------- -------------
1 The Company has a 51% interest in San Jose.
MORIS
Q1 Q4 Q1 12 mths 2011
Product 2012 2011 2011
---------------------------- ------- ------- --------------- -------------
Ore production (tonnes
treated) - - 305,411 858,028
Average grade silver
(g/t) - - 4.12 5.02
Average grade gold
(g/t) - - 0.76 0.96
Silver produced (koz) 17 9 16 64
Gold produced (koz) 3.35 2.46 4.69 19.26
Silver equivalent produced
(koz) 218 157 298 1,220
Silver sold (koz) 13 18 13 64
Gold sold (koz) 1.9 4.6 3.6 19.3
---------------------------- ------- ------- --------------- -------------
* Ounces sold figures for all operations have been restated to
include gross revenue divided by gross ounces (previously included
net revenue divided by net ounces)
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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