TIDMHOC
RNS Number : 8616Z
Hochschild Mining PLC
13 March 2013
___________________________________________________________________________
13 March 2013
Hochschild Mining plc
Preliminary Results for the twelve months ended 31 December
2012
Financial highlights[1]
-- Revenue of $818.0 million (2011: $987.7 million)
-- Adjusted EBITDA of $384.8 million (2011: $563.4 million)
-- EPS of $0.19 (2011: $0.49)
-- Strong financial position with a year-end cash balance of
$359 million[2]
-- Minority investments valued at $256 million[3]
-- Proposed final dividend of $0.03 per share, bringing the
total dividend for 2012 to $0.06 per share
Operational highlights
-- Full year production of 20.3 million attributable silver
equivalent ounces in line with guidance
-- Overall unit cost performance in 2012 in line with
guidance
-- Good progress at Inmaculada and Crespo; set to increase
production levels by 50% from H2 2014
o Key steps achieved in both projects' permitting processes
including granting of Inmaculada EIS
o Project engineering, procurement and construction progressing
according to schedule
o Positive exploration results at Inmaculada
-- Acquisition of Andina Minerals boosts long-term project
pipeline with Volcan gold deposit in Chile
-- Exploration programme continues to deliver positive
results:
o Excellent results from brownfield exploration programmes
o Core asset resource base optimised
-- 2013 production target maintained at 20.0 million
attributable silver equivalent ounces
-- $77 million exploration budget for 2013
$000, pre-exceptional unless stated Year ended Year ended % change
31 Dec 2012 31 Dec 2011
------------------------------------------------------ ------------- ------------- ---------
Attributable silver production (koz) 13,550 14,980 (10)
Attributable gold production (koz) 112 127 (12)
Net Revenue[4] 817,952 987,662 (17)
Adjusted EBITDA[5] 384,791 563,403 (32)
Profit from continuing operations 128,581 268,919 (52)
Profit from continuing operations (post exceptional) 126,866 272,338 (53)
Earnings per share ($) 0.19 0.49 (61)
Earnings per share ($ post-exceptional) 0.19 0.50 (62)
------------------------------------------------------ ------------- ------------- ---------
Commenting on the results, Ignacio Bustamante, CEO, said:
"I am pleased to report that in the face of a very challenging
environment for mining companies we have been able to deliver a
very solid performance, meeting our full year production target and
delivering a solid set of financial results. We have also received
some very promising results from our brownfield and greenfield
exploration programmes and have made good progress at our
Inmaculada and Crespo Advanced Projects, which will increase our
annual production levels by 50%, with the commissioning date for
both projects set for the second half of 2014. Finally, the
acquisition of Andina Minerals bolstered our project pipeline with
its principal asset, the Volcan gold deposit, located in Chile,
which is one of our favoured mining jurisdictions. We remain
enthusiastic about the significant potential of our current
operations and our extensive project pipeline to deliver
substantial optionality and shareholder value in the long
term."
____________________________________________________________________________
A presentation will be held for analysts & investors at
9.30am (UK time) on Wednesday 13 March 2013 at Holborn Bars,
138-142 Holborn, London, EC1N 2NQ.
For a live webcast of the presentation please visit our
website:
www.hochschildmining.com
Conference call dial in details:
UK: +44 (0)20 3364 5381 (Please quote 'Hochschild Mining
webcast' or confirmation code 6842507).
_________________________________________________________________________
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.
CHAIRMAN'S STATEMENT
2012 Overview
2012 has provided the mining industry with a number of
challenges to which I believe our team has responded with energy
and confidence. The outperformance of the Company's share price
over the course of the year was evidence that a growing number of
stakeholders agreed that our organic growth pipeline represents the
best opportunity to generate long-term sustainable shareholder
value. This resilience in the face of continuing global economic
uncertainty is testament to our achievements in meeting our
production targets once again, making considerable progress with
our Advanced Projects despite the delays caused by changes in the
Peruvian permitting process and identifying and executing
acquisitions such as Andina Minerals with long-term potential for
significant value enhancement.
In 2012, we generated revenue of just over $800 million leading
to EBITDA in the region of $400 million with earnings per share of
$0.19. The Board has decided to maintain the total dividend at 6
cents per share. This balances Hochschild's strong financial
position and outstanding near-term potential for significant
earnings growth with the Company's short-term capital expenditure
commitments as well as current industry-wide pressures.
In November, we announced the purchase of Andina Minerals, our
first sizeable acquisition since 2009. I am confident that we have
secured an attractive opportunity at a purchase price significantly
below recent comparable transactions. The move into large scale
gold assets is entirely consistent with our longstanding "Company
Maker" exploration strategy. Our Board has already visited the site
and whilst there are undeniable potential challenges in bringing
the deposit into production, the Volcan project represents a viable
option to diversify our asset base by building a strong presence in
a very prospective area of Northern Chile in the long term.
Our organic growth strategy continued to unfold during 2012 and
during the year we approved two feasibility studies and
subsequently made excellent progress at our two Advanced Projects
with significant targets met in procurement, engineering and
construction and also in both project's social development
programmes. We did experience delays in the process of obtaining
the final construction permits but I remain excited by the
potential of these projects to increase our current production
levels by 50% and also the significant exploration upside
opportunity at Inmaculada.
Our exploration-led strategy and the current capital constrained
industry environment requires that disciplined resource allocation
and effective risk management be inherent in all our initiatives
across the four countries that we explore. We have ensured that we
are not only focusing our exploration capital on the most promising
prospects, but also that we retain the discipline to exit or
farm-out deposits or prospects that do not clear a defined set of
hurdles. The year saw meaningful progress at many of our projects
both in the Company Maker and Medium Scale categories, and I am
confident that we will begin to witness the benefits of our
greenfield investment as well as further success in brownfield
exploration. I firmly believe this is the key to creating long-term
shareholder value.
Operating Responsibly
Underpinning our strategy is our commitment to operate
responsibly. During 2012, Hochschild Mining was granted the
'Socially Responsible Company' accreditation by Peru 2021, an
organisation that reviews companies' efforts in this crucial area.
As a mining company, we are conscious of the impact our activities
have on the environment. To assist us, we seek to rely on leading
environmental reporting systems and so I am delighted that an
external audit has confirmed that systems at our active operations
remain compliant with ISO14001.
We also advanced during the year with the implementation of our
Community Relations strategy acknowledging our social commitment to
operate in long-term harmony with our communities. A notable
initiative for the year was "Digital City" where we dedicated
significant financial and human resources to create a digital hub
at the town of Chalhuanca located close to our operations at
Pallancata. This project sought to improve access to education and
to encourage economic sustainability through the installation of
free internet access for the whole town. Further details of all of
these initiatives will be provided in the Annual Report.
On the issue of safety, we continue to make progress with an 8%
reduction in the Group's accident frequency rate. However, there is
still a lot more work to be done as most regrettably, there were
four fatalities at our operations during 2012. In keeping with
Group's practice, all mining activity was suspended immediately
after each incident while investigations were carried out. We
consider each accident to be avoidable and we therefore took the
active decision to re-emphasise management's zero tolerance policy
on accidents by designating 14(th) November 2012 as the Hochschild
Safety Day when production across all sites was suspended and we
conducted Group-wide safety training sessions.
Outlook
Despite ongoing price volatility, long-term precious metal
fundamentals remain robust as inflation fears continue to drive
demand and resource scarcity restricts supply. Looking ahead, our
consistent performance and our growth opportunities clearly show
that we are on the right track and in 2013 we can expect further
progress on the development of our Advanced Projects. In addition,
there is significant potential and indeed the financial strength to
continue to add optionality to our extensive project pipeline
through organic development or further value enhancing
acquisitions.
Board Composition
I am delighted that we were able to announce during the year the
appointment of Enrico Bombieri as an Independent Non-Executive
Director. Enrico brings a wealth of global capital markets'
experience from his previous roles as a senior member of management
at JP Morgan. I would also like to take this opportunity to express
my gratitude to Sir Malcolm Field for agreeing to postpone his
retirement from the Board until the end of 2013 allowing us to
further benefit from his invaluable contribution.
On behalf of the Board, I would like to thank the entire
talented Hochschild team for another year of strong performance,
and our shareholders for your continued support.
Eduardo Hochschild
Executive Chairman
13 March 2013
CHIEF EXECUTIVE OFFICER'S STATEMENT
I am pleased to report that Hochschild has delivered a robust
set of results in 2012 reflecting the successful achievement of our
annual production target, considerable progress with regards to our
organic growth pipeline and towards the end of the year, the
announcement of the exciting purchase of Andina Minerals. Despite
further economic, financial and political difficulties continuing
to affect many markets in 2013, Hochschild remains in a strong
position to enter a critical delivery phase. We remain committed to
the safe and sustainable delivery of optimised production,
complementing our value enhancing growth potential.
Strategic progress
The geological conditions at our main operations continue to be
extremely promising and during 2012 our brownfield exploration
results have been significant with high grade discoveries at all
three operations. Having previously exceeded all our original
life-of-mine targets, in 2012 we shifted the focus of our
brownfield exploration programme to improving the quality of our
resource base and the results received have confirmed the potential
for continued high quality resource additions in the future. As
part of this work, we have also completed a full review of our
resource base and have been able to optimise the geological models
of our main operations. Furthermore, in an effort to improve our
resource to reserve conversion ratios, we have optimised our mine
plans by removing resources that although economic at our stringent
cut-off threshold, are unlikely to be mined at present. These
include: resources that necessitate high capex; inaccessible
resources from previous mining campaigns; or those that still
require further evaluation before inclusion in the mine plan. As a
result we have been able to maintain a life-of-mine that is now
supported by a more robust resource base. I remain positive about
the exploration potential of these outstanding mines and their
ability to continue producing high value resources into the
future.
The development of our project pipeline remains a key pillar of
our strategy and during the year, our Advanced Projects, which will
increase our production levels by 50%, made good progress.
Following the Board's approval of both feasibility studies in
January, several key procurement, engineering and construction
targets were achieved throughout the year with the expected
start-up date for both projects now set for the second half of
2014. We have also made significant advances with regards to the
projects' social development programmes and environmental aspects,
as demonstrated by the approval of Inmaculada's Environmental
Impact Study in October.
Our ambitious greenfield programme also continued in 2012 and I
am pleased that we have received further positive results from our
Company Maker pipeline, in particular at Valeriano in Northern
Chile where initial drilling testing encountered evidence of a
mineralised porphyry copper system at depth with significant copper
and gold mineralisation, capped by a mineralised lithocap. Drilling
continues at the property to evaluate grades and the size of a
potential resource. We have again reaffirmed our continuing
commitment to our exploration strategy with a $77 million budget
set for 2013 with almost half assigned to the greenfield
programme.
We have always stated that we will look for opportunities to
create value not only from our project pipeline but also from
acquisitions that meet our disciplined acquisition criteria. In
this regard, the announcement in November of the purchase of Andina
Minerals was consistent with our strategic model, providing
Hochschild with further long-term optionality as well as increased
geographical balance within our extensive project pipeline. Its
principal asset, the Volcan project, is located in Chile, one of
the most attractive, mining-friendly jurisdictions in the Americas.
The impressive size of the deposit necessitates careful planning
before committing any development capital and therefore we intend
to conduct substantial geological and technical evaluation work on
the deposit throughout 2013 and are confident that our experienced
professionals will develop its strong potential in the long
term.
2012 overview
Hochschild has established a reputation for consistently meeting
its annual production targets and in 2012 our operations once again
delivered, producing 20.3 million silver equivalent ounces. The San
Jose mine in Argentina enjoyed another robust year, with full year
production up by 3% and can look forward to an even stronger 2013
following a cost effective 10% plant capacity expansion. Our
Peruvian operations continued their policy of mining close to their
average reserve grades whilst pursuing opportunities to optimise
their performance. For example, the Arcata mine further capitalised
on high silver prices to process low grade previously mined
material, as well as completing the value enhancing Dore
project.
In 2012, Hochschild experienced ongoing cost increases in Peru
that were consistent with industry-wide inflation. This trend is
set to continue in 2013 with further labour cost increases and
currency appreciation currently forecast. In Argentina, we were
encouraged by the Company's ability to mitigate the ongoing effects
of high local inflation with increased year-on-year tonnages,
further helped by a degree of local currency devaluation. We expect
local cost inflation in Argentina to continue to be high in 2013,
but are confident that the combination of increased tonnage from
the capacity increase with further currency devaluation will
provide a significant offset.
Hochschild reported revenue of $818 million in 2012. This
reflected a fall of almost 10% in the average silver price received
that more than offset the 6% rise in year-on-year gold prices, as
well as the scheduled fall in production versus 2011. EBITDA
reached $385 million, in line with the fall in revenue, as well as
the above mentioned cost inflation, and pre-exceptional EPS was
$0.19 for the full year. We continue to have a strong cash balance
of approximately $359 million even after the payment for 86.7% of
Andina Minerals, as well as just over $250 million in minority
investments. Together with our healthy operating cashflow,
Hochschild retains the flexibility to begin full construction at
the Inmaculada and Crespo projects in the second half of 2013,
execute our $77 million exploration programme and, subject to
satisfying the Company's strict criteria, further capitalise on the
significant range of acquisition opportunities in the current
environment.
Outlook
The Company's production target for 2013 is 20.0 million
attributable silver equivalent ounces driven by stable production
from our core Peruvian operations and a continued decline in
contribution from our two ageing mines, Ares in Peru and Moris in
Mexico, offset by the increased output from San Jose following the
capacity increase.
2013 promises to be an important year in Hochschild's
development, as the expected receipt of construction permits for
our two Advanced Projects in the second half will signal the start
of a key phase of capital expenditure aiming to take the Company
smoothly to the next level of production. Our core strategy is
unchanged. We will once again be focused on delivering on our
stated operational targets, begin the detailed process of
assessment at the exciting Volcan project and continue to develop
our comprehensive project pipeline supported by its $77 million
budget and further selective acquisitions.
We retain great confidence in our experienced workforce to
deliver operational improvements and efficiencies, while balancing
increased investment in the drivers of long-term profitable growth
with opportunities to enhance returns. I am confident we can
continue to deliver significant value for all our stakeholders.
Ignacio Bustamante
Chief Executive Officer
13 March 2013
OPERATING REVIEW
2012 Highlights
-- Full year production of 20.3 million attributable silver
equivalent ounces achieved, in line with guidance
-- Good progress at Advanced Projects - Inmaculada plant
construction contract awarded and EIS granted by Peruvian
government; detailed engineering and construction continued at
Inmaculada and Crespo
-- Excellent results from brownfield exploration programmes at core assets
CURRENT OPERATIONS
Production
In 2012, Hochschild once again met its full year production
target, producing 20.3 million attributable silver equivalent
ounces, comprised of 13.6 million ounces of silver and 111.8
thousand ounces of gold. The Company has announced a production
target of 20.0 million attributable silver equivalent ounces for
2013. Production at each of the Company's main operations is
expected to be in line with 2012. As anticipated, production at the
ageing Ares mine will continue to decline, reflecting lower
tonnages and grades. Production at the Moris mine in Mexico is not
expected to be material.
Costs[6]
In 2012, excluding mine royalties and the cost impact of the
increased dore production at Arcata, (which is more than
compensated for by a reduction in commercial discounts and selling
expenses), the Company reported a 17% increase in unit cost per
tonne at its main Peruvian operations, to $70.9 per tonne (2011:
$60.8). The increase in unit cost per tonne excluding royalties,
including the cost impact of the dore project, was 21% (from $60.8
per tonne in 2011, to $73.3 in 2012). In Argentina, unit cost per
tonne excluding royalties increased by 12% to $190.4 per tonne
(2011: $169.6). The Company expects the increase in overall 2013
unit cost per tonne in Peru to be approximately 15-20% excluding
royalties and the increased refining cost due to the effects of the
dore project at Arcata. In Argentina, expected continuing local
inflation, partially offset by local currency devaluation, is
anticipated to result in a unit cost per tonne increase of 10-15%.
Please see page 24 of the Financial Review for further details on
costs.
Main operations
Arcata: Peru
The 100% owned Arcata underground operation is located in the
Department of Arequipa in southern Peru. It commenced production in
1964.
Arcata summary Year ended Year ended % change
31 Dec 2012 31 Dec 2011
---------------------------- ------------- ------------- ---------
Ore production (tonnes) 773,498 687,966 12
Average silver grade (g/t) 271 312 (13)
Average gold grade (g/t) 0.83 0.88 (6)
Silver produced (koz) 5,526 6,081 (9)
Gold produced (koz) 17.27 17.38 (1)
Silver equivalent produced
(koz) 6,562 7,124 (8)
Silver sold (koz) 5,236 5,979 (12)
Gold sold (koz) 15.9 16.7 (5)
Unit cost ($/t) 86.3 77.0 12
Unit cost excl. royalties
($/t) 82.0 70.2 17
Total cash cost ($/oz Ag
co-product)([7]) 14.5 12.8 13
---------------------------- ------------- ------------- ---------
Production and sales
In 2012, full year silver equivalent production at Arcata was
6.6 million ounces (2011: 7.1 million ounces). There was an
increase in tonnage compared to 2011 mainly reflecting a planned
fourth quarter increase in volumes processed from the low grade
Macarena Waste Dam Deposit. This was achieved following a 500 tonne
per day capacity expansion at the Arcata plant, completed in Q3
2012. The decrease in production was also a result of lower grades,
in line with the Company's policy of mining close to the average
reserve grade at its core assets.
Table Showing Contribution from Macarena Waste Dam Deposit
12 mths 2012 12 mths 2011
------------------------------- ------------- -------------
Total
Tonnage 773,498 687,966
Average head grade gold (g/t) 0.83 0.88
Average head grade silver
(g/t) 271 312
------------------------------- ------------- -------------
Macarena
Tonnage 133,825 86,859
Average head grade gold (g/t) 0.30 0.30
Average head grade silver
(g/t) 105 95
Stopes and Developments
Tonnage 639,673 601,107
Average head grade gold (g/t) 0.94 0.97
Average head grade silver
(g/t) 306 344
------------------------------- ------------- -------------
In addition, production at Arcata included the decrease in
ounces recovered as a result of the ramping up of the dore project.
This initiative was completed in the fourth quarter with 100% of
Arcata's concentrate now being converted into dore, resulting in
significant commercial savings which more than offset the decrease
in ounces recovered from the process. Excluding the effect of this
project, Arcata would have produced an additional 234 thousand
silver equivalent ounces in the full year.
In 2012, the silver/gold concentrate from Arcata was sold to
Consorcio Minero S.A, Korea Zinc Co and MRI Trading AG. 47% of
Arcata's production was processed into dore; all of which was sold
to Johnson Matthey in 2012.
Costs
Unit cost per tonne, excluding royalties and the additional cost
of increased dore production increased by 9%. Including the
additional cost of increased dore production, the unit cost
increased by 17% to $82.0 (2011: $70.2). The main drivers were
higher mining costs resulting from a higher proportion of
production from narrower veins, a 4% appreciation in the Peruvian
Sol and higher wage costs, in line with industry inflation. These
effects were partly offset by economies of scale resulting from an
increase in treated tonnage.
Resource life and Brownfield exploration
The resource life of Arcata stands at 11.7 years as at 31
December 2012. During the year, exploration work at Arcata focused
on the definition of new high grade structures and the
incorporation of high quality resources from known vein systems, as
well as to provide further geological interpretation of the area.
Positive results included the discovery of high grade resources in
the Tunel 4 area, the discovery of the new Katty vein, and the
extension of the Alexia vein with the potential to increase the
life of mine and to improve the average grade quality of the
resource. In total, 56,269 metres of diamond drilling was completed
during 2012 (2011: 94,656 metres) with significant intercepts
including([8]) :
Vein Results
-------- ---------------------------------------
Alexia DDH380 2.00m at 4.56 g/t Au & 814 g/t
Ag
DDH400 9.34m at 3.34 g/t Au & 984 g/t
Ag
-------- ---------------------------------------
Katty DDH354 1.45m at 13.69 g/t Au & 1,965
g/t Ag
DDH397 1.50m at 47.01 g/t Au & 3,642
g/t Ag
-------- ---------------------------------------
Tunel 4 DDH355 2.24m at 4.68 g/t Au & 1,162
g/t Ag
DDH306 1.15m at 6.87 g/t Au & 2,387
g/t Ag
DDH304 1.33m at 3.48 g/t Au & 2,815
g/t Ag
-------- ---------------------------------------
Sandra DDH301 1.18m at 2.06 g/t Au & 1,059
g/t Ag
-------- ---------------------------------------
In 2013, the exploration and drilling programme of 34,000 metres
at Arcata will continue in the potential and near mine exploration
areas in the northern part of the district surrounding the Socorro,
Alexia and Katty vein systems.
Pallancata: Peru
The Pallancata silver/gold property is located in the Department
of Ayacucho in southern Peru, approximately 160 kilometres from the
Arcata operation. Pallancata commenced production in 2007 and is a
joint venture, in which Hochschild holds a controlling interest of
60% and is the mine operator, with International Minerals
Corporation ("IMZ"). Ore from Pallancata is transported 22
kilometres to the Selene plant for processing.
Pallancata summary(*) Year ended Year ended % change
31 Dec 2012 31 Dec 2011
---------------------------- -------------- ------------- ---------
Ore production (tonnes) 1,094,250 1,070,466 2
Average silver grade (g/t) 256 301 (15)
Average gold grade (g/t) 1.09 1.33 (18)
Silver produced (koz) 7,441 8,767 (15)
Gold produced (koz) 26.23 33.88 (23)
Silver equivalent produced
(koz) 9,014 10,800 (17)
Silver sold (koz) 7,280 9,064 (20)
Gold sold (koz) 25.1 33.9 (26)
Unit cost ($/t) 67.2 60.4 11
Unit cost excl. royalties
($/t)[9] 67.2 54.5 23
Total cash cost ($/oz Ag
co-product) 11.4 9.9 15
---------------------------- -------------- ------------- ---------
(*) The Company has a 60% interest in Pallancata
Production and sales
Full year production at Pallancata in 2012 was 9.0 million
silver equivalent ounces (2011: 10.8 million). The decrease in
production compared to 2011 was mainly due to lower grades
reflecting the Company's policy of mining close to the average
reserve grade at its core assets, as well as the processing of a
higher proportion of mineral from narrower structures with higher
mine dilution and lower metallurgic recovery. In addition,
temporary delays in the mine execution plan in the first half of
the year that led to the treatment of a greater proportion of lower
grade material from the mine also contributed to the decrease in
production.
In 2012, the silver/gold concentrate from Pallancata was sold to
Teck Metals ltd., Aurubis AG, LS-Nikko Copper Inc and Consorcio
Minero S.A.
Costs
Excluding mine royalties, unit cost per tonne increased by 23%,
to $67.2 per tonne (2011: $54.5)(9) . Including royalties, the
increase in 2012 was 11%, to $67.2 per tonne (2011: $60.4). This
rise was principally due to an increase in mine costs reflecting
the higher proportion of production from narrower veins as well as
an increase in mined areas and higher cement consumption following
the temporary delays in the mine execution plan in the first half
of the year, as mentioned above. In addition, an increase in wage
costs resulting from industry inflation and a 4% appreciation of
the Peruvian Sol also contributed to the rise.
Resource life and Brownfield exploration
The resource life of the Pallancata operation stands at 7.4
years as at 31 December 2012. During 2012, a total of 50,326 metres
of diamond drilling was carried out over the course of the year
(2011: 50,748 metres), focused on the identification of wider
structures and the incorporation of new resources. Drilling in 2012
mainly focused on the Paola, Luisa, Pallancata West, Huararani,
Rina, Yurika and Teresa veins with intercepts including[10]:
Vein Results
---------------- -----------------------------------------
Luisa DLLU-A26 3.79m at 4.44 g/t Au & 1,061
g/t Ag
DLLU-A88 3.03m at 1.76 g/t Au & 523 g/t
Ag
DLLU-A99 1.20m at 12.17 g/t Au & 1,670
g/t Ag
---------------- -----------------------------------------
Huararani DLHU-A14 3.01m at 3.61 g/t Au & 1,236
g/t Ag
---------------- -----------------------------------------
Paola DLLU-A28 7.13m at 2.52 g/t Au & 279 g/t
Ag
---------------- -----------------------------------------
Pallancata East DLPE-A87 1.70m at 3.87 g/t Au & 473 g/t
Ag
---------------- -----------------------------------------
Yurika DLTE-A11 1.65m at 2.93 g/t Au & 451 g/t
Ag
---------------- -----------------------------------------
In 2013, the exploration programme at Pallancata will focus on
the definition of structures with high quality resources from known
veins systems. The drilling campaign will also concentrate on
identifying new high grade veins, with 39,050 metres of drilling
planned in total.
San Jose: Argentina
The San Jose silver/gold mine is located in Argentina, in the
province of Santa Cruz, 1,750 kilometres south-southwest of Buenos
Aires. San Jose commenced production in 2007 and is a joint venture
with McEwen Mining Inc (formerly Minera Andes Inc.). Hochschild
holds a controlling interest of 51% of the joint venture and is the
mine operator.
San Jose summary(*) Year ended Year ended % change
31 Dec 2012 31 Dec 2011
---------------------------- ------------- ------------- ---------
Ore production (tonnes) 509,851 462,825 10
Average silver grade (g/t) 417 444 (6)
Average gold grade (g/t) 5.79 5.86 (1)
Silver produced (koz) 5,953 5,870 1
Gold produced (koz) 85.77 80.95 6
Silver equivalent produced
(koz) 11,099 10,727 3
Silver sold (koz) 5,897 6,087 (3)
Gold sold (koz) 84.3 82.4 2
Unit cost ($/t) 202.2 181.7 11
Unit cost excl. royalties
($/t) 190.4 169.6 12
Total cash cost ($/oz Ag
co-product) 14.4 13.7 5
---------------------------- ------------- ------------- ---------
(*) The Company has a 51% interest in San Jose
Production and sales
San Jose delivered another strong performance in 2012, with
silver equivalent production of 11.1 million ounces (2011: 10.7
million ounces). The 3% rise in production versus 2011 resulted
from an increase in overall tonnage due to a greater availability
of lower grade economic development material as well as operational
efficiencies that allowed for an increase in mill throughput. The
decrease in silver grades reflected this higher proportion of
development material as well as the Company's policy of mining
close to the average reserve grade at each of its core
operations.
San Jose experienced a temporary accumulation of concentrate
inventory during Q2 2012 due to the impact of industry-wide
regulatory changes in Argentina. However, exports resumed at the
end of Q2 and sales of this inventory were completed in Q3
2012.
In 2012, the dore produced at San Jose was sold to Argor Heraeus
S.A. The concentrate produced at the operation was sold to Teck
Metals ltd., Aurubis AG, LS-Nikko Copper Inc and Consorcio Minero
S.A.
Costs
Unit cost per tonne at San Jose, excluding royalties, increased
by 12% to $190.4 (2011: $169.6). Including royalties, the increase
in 2012 was 11%, at $202.2 per tonne (2011: $181.7). The key driver
was wage cost increases driven by local inflation in Argentina
continuing to run at between 25% and 30% in 2012. In addition, this
also impacted energy costs. These effects were partially offset by
a 10% devaluation of the Argentinian peso, and economies of scale
achieved through an increase in tonnages extracted and treated.
Resource life and Brownfield exploration
The resource life of San Jose stands at 12.2 years as at 31
December 2012. The Company received some excellent results from the
exploration programme at San Jose in 2012, including the discovery
of the Emilia vein located within the San Jose area, followed by
the discovery of two further high grade structures: the Rosario and
Kospi extension veins. During the year, a total of 81,099 metres
(2011: 55,678 metres) of drilling was carried out to incorporate
further resources and new economic areas. Drilling focused on a
number of veins and significant intercepts included[11]:
Vein Results
-------------- --------------------------------------------
Kospi SE SJM-217 9.50m at 21.25 g/t Au & 3,404
g/t Ag
-------------- --------------------------------------------
Emilia SJD-496 1.00m at 46.37 g/t Au & 6,951
g/t Ag
SJD-1246: 1.00m at 71.31g/t Au & 3,579g/t
Ag
SJD-1264: 0.90m at 147.04g/t Au & 1,276g/t
Ag
-------------- --------------------------------------------
Chenque SJD-1121 1.70m at 11.05 g/t Au & 1,186
g/t Ag
-------------- --------------------------------------------
Frea SJD-1319 1.00m at 35.54 g/t Au & 267
g/t Ag
-------------- --------------------------------------------
Huevos Verdes SJD-1322 1.00m at 5.99 g/t Au & 1,632
g/t Ag
-------------- --------------------------------------------
Pilar SJD-1052 0.84m at 13.00 g/t Au & 2,275
g/t Ag
-------------- --------------------------------------------
In 2013, the exploration programme at San Jose will include
geological mapping and a 32,000 metres drilling campaign to
continue exploration in and around the San Jose mine and the
Saavedra areas.
Other operations
Ares: Peru
The Ares mine, which commenced production in 1998, is a 100%
owned operation located approximately 275 kilometres from the city
of Arequipa in southern Peru.
Ares summary Year ended Year ended % change
31 Dec 2012 31 Dec 2011
---------------------------- -------------- ------------- ------------------
Ore production (tonnes) 336,423 344,085 (2)
Average silver grade
(g/t) 54 61 (11)
Average gold grade
(g/t) 2.65 2.90 (9)
Silver produced (koz) 481 581 (17)
Gold produced (koz) 26.28 29.03 (9)
Silver equivalent produced
(koz) 2,058 2,323 (11)
Silver sold (koz) 473 598 (21)
Gold sold (koz) 25.8 29.7 (13)
---------------------------- -------------- ------------- ------------------
Production and sales
Although production at Ares was expected to end in 2011, the
Company continues to extract mineral from new veins and production
continued in 2012.Full year production at Ares was 2.1 million
ounces (compared to 2.3 million ounces in 2011). The Company
continues to monitor production closely at Ares to ensure the
extraction of profitable ounces during the last stage of its life
cycle, with production expected to continue into 2013. The
exploration programme is continuing at the property and positive
results have already been received.
100% of Ares' production is processed into dore, all of which
was sold to Johnson Matthey in 2012.
Brownfield exploration
In 2012, a full geophysical survey was conducted at Ares and as
a result new intersections at the Isabel vein were discovered and
new structural corridors were detected. During the second half of
the year, near mine exploration continued on the Apolo vein in the
NW corridor. In addition, several new anomalies were detected and
drilling was carried out in the Rosario and Isabel veins to define
new resources. During the year, a total of 17,534 metres of
drilling was carried out at Ares. Positive intercepts included(12)
:
Vein Results
------- -----------------------------------------
Isabel AM-1515 1.70m at 3.36 g/t Au & 578 g/t
Ag
AM-1493: 1.35m at 9.83 g/t Au & 68 g/t
Ag
AM-1482: 6.05m at 0.44 g/t Au & 155 g/t
Ag
------- -----------------------------------------
Olga AM-1482: 2.65m at 0.13 g/t Au & 448 g/t
Ag
------- -----------------------------------------
Apolo AM-1497 0.70m at 0.10 g/t Au & 243 g/t
Ag
------- -----------------------------------------
In 2013, the exploration programme and 2,800 metres drilling
campaign at Ares will focus on exploring the potential extensions
of known veins systems and in new structures.
Moris: Mexico
The 100% owned Moris mine, is an open pit mine and is located in
the district of Chihuahua, Mexico.
Moris summary Year ended Year ended % change
31 Dec 2012 31 Dec 2011
---------------------------- ------------- ------------- ---------
Ore production (tonnes) - 858,028 -
Average silver grade - 5.02 -
(g/t)
Average gold grade - 0.96 -
(g/t)
Silver produced (koz) 42 64 (34)
Gold produced (koz) 8.79 19.26 (54)
Silver equivalent produced
(koz) 570 1,220 (53)
Silver sold (koz) 42 64 (34)
Gold sold (koz) 8.7 19.3 (55)
---------------------------- ------------- ------------- ---------
Production and sales
Despite mine production at Moris having ceased in September
2011, in 2012, continued leaching of the pads produced a further
570,000 silver equivalent ounces (2011: 1.2 million ounces). The
Company expects to continue recovering mineral from the pads in
2013, although this is not expected to be material. Exploration
continues at the property.
In 2012, the gold/silver dore produced at Moris was sold to
Johnson Matthey.
Brownfield exploration
Exploration work at Moris during 2012 focused on identifying new
economic structures. During the year, 13,994 metres of drilling was
carried out in the La Nopalera, Creston, Eureka, La Mexicana, Los
Alamos and San Luis areas. Positive intercepts included[12]:
Area Results
------------ ---------------------------------------
La Mexicana DM-34 1.72m at 4.97 g/t Au & 7 g/t Ag
DM-37 4.91m at 2.56 g/t Au & 3 g/t Ag
DM-36 5.85m at 1.74 g/t Au & 3 g/t Ag
------------ ---------------------------------------
During 2013, further mapping and sampling will be carried out in
order to better define the new resource areas.
ADVANCED PROJECTS
The Company has four Advanced Projects: Inmaculada, Crespo and
Azuca in Peru and the Volcan Gold project in Chile. In 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. In November 2012, the Company
announced that following industry-wide delays in the permitting
process in Peru, it now expects to receive the final mill
construction permits for the Inmaculada and Crespo projects in the
second half of 2013 with commissioning for both projects' mills
scheduled for the second half of 2014. At Azuca, the Company
continued exploration work at the project throughout 2012 in order
to consolidate resources and provide a more comprehensive picture
of the complex vein structures in the area. The Volcan Gold deposit
was acquired following the acquisition of Andina Minerals Inc in
November 2012.
Inmaculada
Inmaculada is a 20,000 hectare gold-silver project located in
the Company's existing operational cluster in southern Peru and is
60% owned and controlled by Hochschild, following the acquisition
of a controlling stake in October 2010. The remaining 40% is held
by the Company's joint venture partner at Pallancata, International
Minerals Corporation ('IMZ').
Following the substantial progress made by the Company during
2012 with regards to detailed engineering and also procurement and
construction contracts for the Inmaculada project, the revised
total capital expenditure estimate for the project is now expected
to be approximately $370 million for a 3,500 tonne per day ('tpd')
underground operation with average annual production of 12 million
silver equivalent ounces (7 million attributable ounces). The
project is due to be commissioned in the second half of 2014.
During the year, the Company also continued to receive positive
results from the exploration programme at the property which
consists of 40 mining concessions with resources which are
currently estimated at a total of 150 million silver equivalent
ounces.
In August 2012 the Company awarded the contract for the
construction of the plant at Inmaculada, within budget, for $142
million and in September, the Environmental Impact Study ('EIS')
for the project was awarded, representing a key step in the
project's permitting process. Also during the year, the purchase of
the main plant equipment was completed and the Company progressed
with the detailed plant engineering, as well as the detailed
engineering for the mine. In addition, engineering for the camp
facilities and for the workshops, warehouses and offices was
completed. Construction of the water treatment plant was also
underway and construction of the exploration tunnels continued,
with 2,920 metres completed during the year. Finally, the contract
for the construction of the main access road to the site was
granted, with completion due in H1 2013, and work also continued on
the construction of the electricity transmission line during the
year.
Exploration at Inmaculada in 2012 focused on the definition and
incorporation of potential systems outside of the current resource
area. During the year, five drill rigs were in operation and a
total of 45,942 metres of drilling was carried out, focused on the
Tensional Lourdes, Tensional Lourdes II, Martha and Angela and
Juliana veins, as well as the newly discovered Susana and Mirella
veins where assay results showed excellent mineralisation. Positive
results included[13]:
Vein Results
------------------ ----------------------------------------
Martha MAR12-006 0.85m at 51.77 g/t Au & 175
g/t Ag
------------------ ----------------------------------------
Susana MAR12-004 1.03m at 17.15 g/t Au & 1,851
g/t Ag
MAR12-006 2.52m at 4.97 g/t Au & 531
g/t Ag
------------------ ----------------------------------------
Lourdes LOU12-013 1.13m at 18.23 g/t Au & 155
g/t Ag
LOU12-001 3.50m at 7.12 g/t Au & 369
g/t Ag
------------------ ----------------------------------------
Angela SW Cimoide ASW12-016 10.75m at 4.03 g/t Au & 188
g/t Ag includes:
ASW12-016 5.70m at 1.41 g/t Au & 312
g/t Ag
------------------ ----------------------------------------
Mirella LOU12-023 1.60m at 8.54 g/t Au & 81
g/t Ag
LOU12-024 1.23m at 8.26 g/t Au & 81
g/t Ag
------------------ ----------------------------------------
In 2013, the 13,450 metres drilling campaign will continue with
near mine and potential drilling to expand the current resources at
Inmaculada.
Crespo
Crespo is 100% owned by Hochschild and is located in the
Company's existing operating cluster in southern Peru. This will be
a relatively simple open pit project with high gold recovery rates,
and as with the Inmaculada project, will benefit from operational
synergies due to its proximity to the Company's existing
operations. The project has an estimated total capital expenditure
of approximately $110 million for a 6,850 tpd operation with an
average annual production of 2.7 million silver equivalent ounces
from the second half of 2014.
In 2012 the Company made good progress at Crespo, the detailed
engineering for the mine and the plant was in progress during the
fourth quarter and is expected to be completed in the first half of
2013. In addition, the final engineering for the camp design and
construction was completed and work on the access road to the
project commenced.
In April 2012, the Company held a successful public hearing in
relation to the project's EIS permit, and during the year, the
Company continued the process of responding to the relevant
observations with regards to the EIS permit, whilst community
relations support programmes also continued. Furthermore, on 28
December 2012, the surface water study for the Crespo project was
approved and subsequently on 11 January 2013, the surface land
agreement for the project was approved by the local community. Both
of these are key steps in the project's approval process and the
Company is now in a position to submit the project's construction
permit application.
The exploration programme at Crespo continued to deliver
positive results in 2012. During the year, lithological and
alteration models were completed and a surface sampling campaign
was concluded. Exploration and infill drilling at the Crespo and
Queshca areas started in September with three drill rigs in
operation. A total of 2,311 metres of exploration drilling was
completed during the year as exploration focused on the transition
of inferred resources into measured and indicated resources and to
test the extension of gold mineralisation below the current pit.
Positive results were received from superficial levels and in
addition assay results from the Queshca area confirmed a structural
domain mineralisation. Positive intercepts included[14]:
Vein Results
------------- --------------------------------------
Queshca area DDHQS-1207 22.50m at 2.86 g/t Au &
29 g/t Ag
DDHQS-1205 1.60m at 1.93 g/t Au & 10
g/t Ag
DDHQS-1208 24.00m at 8.93 g/t Au &
45 g/t Ag
------------- --------------------------------------
In 2013, a surface exploration programme will be carried out at
Crespo.
Azuca
The 100% owned Azuca project is also located in the Company's
southern Peru cluster. In January 2012, the Company took the
decision to delay the feasibility study at Azuca and continue
exploration work throughout 2012 in order to consolidate resources
and to provide a more comprehensive picture of the vein structures
present in the area.
Moreover, the Company believes that the geological potential of
the Azuca property may produce richer structures that could further
support the investment required to develop the asset but could
alter the design and location of future mine and plant
infrastructure, tailings ponds and other key equipment.
The focus of the exploration programme at Azuca in 2012 was on
the exploration of new areas at the property with the potential for
high grade mineral structures, as opposed to the addition of
resources. As of December 2012, the Azuca project has Measured
& Indicated resources totalling 7.05 million tonnes at 0.77 g/t
of gold and 188 g/t of silver containing 173,500 ounces of gold and
42.7 million ounces of silver.
Exploration at the site continued in 2012 with promising
intercepts indicating the presence of new higher grade veins.
Surface geology and detailed mapping was conducted at Azuca and
drilling continued during the year with four drill rigs in
operation. A total of 29,488 metres of drilling was carried out
focused on the Azuca West, Paralela, Colombiana, Yanamayo,
Esperanza and Prometida veins. Assay results from the Azuca West
vein confirmed the continuity of a high grade mineral structure to
the southwest. Furthermore, the North-West Colombiana vein
intercepts also yielded excellent results that indicate a new
possible orientation or new structures towards the north. Positive
results included[15]:
Vein Results
------------ --------------------------------------
Yanamayo NE DAYA-A1204 1.20m at 3.65g/t Au & 764
g/t Ag
DAYA-A1205 0.90m at 4.11g/t Au & 513
g/t Ag
------------ --------------------------------------
Azuca West DAAW-A1205 2.80m at 1.90g/t Au & 854
g/t Ag
DAAW-A1205 4.10m at 2.37g/t Au & 769
g/t Ag
------------ --------------------------------------
Paralela DAYA-A1209 1.50m at 1.57g/t Au & 439
g/t Ag
------------ --------------------------------------
The 2013 drilling programme at Azuca will focus on identifying
new high grade potential mineral structures, with a programme of
17,100 metres planned.
Volcan gold deposit
On 8 November 2012, the Company announced that it had made a
recommended cash offer of C$0.80 per share for all of the issued
and outstanding common shares of Andina Minerals Inc. ("Andina").
Andina owns the Volcan gold project located in the prolific
Maricunga gold belt in Chile. Full details can be found in the
announcement.
On 20 February 2013, the Company announced that it had completed
the acquisition of all of the outstanding Andina Minerals Inc
shares and therefore indirectly owned 100% of the issued and
outstanding Andina Minerals Inc shares. Andina Minerals Inc was
delisted from the TSX Venture Exchange on 22 February 2013.
This acquisition adds to the Company's extensive project
pipeline, doubling the current resource base and is located in
Chile, one of the Company's key targeted mining jurisdictions. In
addition, it is in line with the Company's long standing criteria
of acquiring highly value accretive, early stage opportunities with
strong geological conditions and with full control. During 2013,
the Company will commence an extensive technical and geological
evaluation of the Volcan deposit and continue with the relevant
permitting processes and applications.
In February 2011, Andina published details of a Pre-Feasibility
Study carried out on the Volcan deposit disclosing initial Proven
and Probable mineral reserves of 6.6 million ounces of gold. During
the process of evaluation mentioned above Hochschild will
re-classify the reported reserves as resources.
The exploration programme at the Volcan gold deposit in 2013
will focus on a re-logging campaign to characterise resource data
and improve the geological model of the property.
According to Andina's February 2011 Pre-Feasibility Study, the
project has the following mineral resources:
Classification Total In-Pit Resource
====================== =============================================
Tonnes Gold grade (g/t Contained Gold
Au) Ounces
====================== ============ ===============
Measured 105,918,000 0.738 2,511,000
Indicated 283,763,000 0.698 6,367,000
Measured & Indicated 389,681,000 0.709 8,878,000
Inferred 41,553,000 0.502 671,000
---------------------- ------------ --------------- --------------
(a.) All quantities are rounded to the appropriate number of
significant figures, consequently sums may not add due to
rounding.
(b.) The estimate of mineral resources may be materially
affected by environmental, permitting, legal, title, taxation,
socio-political, marketing or other relevant issues.
(c.) The quantity and grade of reported Inferred Resources in
this estimation are conceptual in nature and there has been
insufficient exploration to define these Inferred Resources as an
Indicated or Measured Mineral Resource. It is uncertain if further
exploration will result in the upgrading of the Inferred Resources
into an Indicated or Measured Mineral Resource category.
(d.) The Volcan mineral resource estimate is effective as of 16
September 2010.
EXPLORATION REVIEW
2012 Highlights
-- $97.5 million invested in exploration in 2012; 33%
brownfield,17% Advanced Projects and 38% greenfield[16]
-- Resource life of 9.8 years
-- Total resources of 527 million silver equivalent ounces[17]
-- Increase in 'Company Maker' pipeline from 13 to 16 projects
-- 2013 exploration budget of $77 million; 26% brownfield at
current operations, 14% Advanced Projects, 44% greenfield, others
and support 16%
In 2012, investment in exploration totalled $97.5 million and
350,150 metres of drilling was completed at the Company's
brownfield, Advanced Projects, greenfield and copper projects. The
2013 budget, representing 154,700 metres, will be split between
exploration work at the Company's existing operations, the Advanced
Projects and greenfield opportunities in Peru, Argentina, Mexico
and Chile.
The Company's exploration programme in 2012 delivered some
excellent results, especially in the brownfield exploration at its
current operations. The Company's greenfield exploration programme
also produced positive results and its project pipeline was further
expanded, to include 16 'Company Makers' and 20 'Medium Scale'
projects.
In 2013, exploration work at the Company's core operations will
be mainly focused on identifying new potential and near mine high
grade areas to further improve the resource quality. At the
Inmaculada and Crespo Advanced Projects, exploration efforts will
be focused on identifying new potential high grade areas whilst at
Azuca, Hochschild will concentrate on the exploration of high
quality resources that better support a significant investment. At
the Volcan gold deposit in Chile, the Company will commence an
extensive technical and geological evaluation of the deposit.
Exploration at the Company Maker projects will include continued
drilling and further analysis and at the Company's Medium Scale
projects, work will continue to develop those high-quality, early
stage projects that have the potential to move through the pipeline
to production. Work will also continue on the Company's generative
programme to conduct further exploration on the Company's extensive
land package of premium properties. In 2012, the number of
geologists employed by the Company was 120.
Brownfield exploration
Approximately 33% of the exploration budget was invested in
brownfield exploration in 2012.
The geological conditions at the Company's main operations
continue to be extremely promising and during 2012, brownfield
exploration results have been significant, with high grade
discoveries at all three operations. Having previously exceeded all
of Hochschild's original life-of-mine targets, in 2012 the focus
was shifted to improving the quality of the Company's resource base
and the results received have confirmed the potential for continued
high quality resource additions in the future. As part of this
work, a full review of the resource base was also completed and the
Company has been able to optimise the geological models of the main
operations. Furthermore, in an effort to improve the resource to
reserve conversion ratios, the Company's mine plans have been
optimised by removing resources that although economic at
Hochschild's stringent cut-off threshold, are unlikely to be mined.
These include: resources that necessitate high capex; inaccessible
resources from previous mining campaigns; or those that still
require further evaluation before inclusion in the mine plan. As a
result, life-of-mine has been maintained and is now supported by a
more robust resource base.
For full reserve and resource tables, please see page 64.
Greenfield exploration
In 2012 approximately 38% of the 2012 exploration budget was
invested in the Company's greenfield programme, and in 2013, the
proportion will increase to 44%. In 2012, a total of 53,188 metres
was drilled at the Company's greenfield projects.
The Company conducted minimum exploration work at its greenfield
projects in Argentina in 2012. Although exploration and business
development teams did remain active in the country throughout the
year, a decision has been made to suspend all exploration
activities in Argentina for the foreseeable future.
Company Makers
The Company currently has 16 potential "Company Makers". These
are projects with the potential to achieve production of 20-30
million silver equivalent ounces per year. They are typically high
sulphidation, disseminated or gold/copper porphyry deposits. In
2012, $20.0 million was invested in finding and developing such
deposits and the 2013 budget is $17.9 million.
Valeriano
The Valeriano property in Chile is located 27 kilometres north
of Barrick Gold Corporation's Pascua Lama project, in close
proximity to the border with Argentina, and covers an area of 3,750
hectares. The property hosts both high-sulphidation as well as
porphyry style disseminated copper and gold mineralisation. The
property has been explored by a number of mining companies in the
past, including Phelps Dodge (1989-1991) and Barrick (1995-1997),
which completed drill campaigns totalling 12,575 metres.
Hochschild's initial programme in 2012 was the first significant
exploration programme since 1997 and the Company has an option to
earn in 100% of the Valeriano property through a mix of cash
payments and work commitments.
In 2012 a total of 5,294 metres of drilling was carried out at
Valeriano. Initial drill testing at the property in early 2012
encountered evidence of a mineralised porphyry copper system at
depth with significant copper and gold mineralisation, capped by a
mineralised lithocap. During 2012, drilling was conducted to test
the upper epithermal and lower porphyry levels. Near surface
epithermal mineralisation was encountered at the property and
positive intercepts reported included[18]:
Intercept Results*
------------- -----------------------------------
VALDDH-12009 94.10m at 0.59% Cu Eq. includes:
28.00m at 1.02% Cu Eq.
20.00m at 0.86% Cu Eq.
599.90m at 0.54% Cu Eq. includes:
284.00m at 0.66% Cu Eq.
------------- -----------------------------------
*results contain Au, Ag, Cu and Mo at current rates.
The current exploration programme at Valeriano has been extended
into the first half of 2013 to further test the porphyry copper and
gold mineralisation at depth.
Victoria
The Victoria project is located in northern Chile and is 66%
owned by Hochschild, with the remaining 34% held by Iron Creek
Capital. The exploration programme is delivering positive results
at the property which covers 46,100 hectares of continuous strike
length at the highly productive Domeyko Fault Zone. A total of
7,586 metres of drilling was completed at the deposit in 2012 in
the Picaron Exotic, Victoria II and Incahuasi areas. During the
year, a surface exploration programme was carried out over the
entire property and geological interpretation of historical
exploration data was also completed, with new drill targets being
identified in the Victoria II and Incahuasi areas. In addition, a
detailed mapping programme commenced, in order to define targets
for the 2013 exploration season.
In 2013, additional compilation of geophysical studies will be
carried out at Victoria and further mapping of the northern area of
the property will be conducted to define drill targets for the
year's exploration programme.
Encrucijada
Following the acquisition of Andina Minerals the Encrucijada
property in Chile is now 100% owned by Hochschild. As a result of
positive exploration results, Encrucijada was re-categorised as a
Company Maker project in Q1 2012. During the year, historical
geological data was compiled and integrated and a total of 1,674
metres was drilled at Encrucijada. In addition, further geophysical
interpretation and targeting of the porphyry style mineralisation
below the San Bernardo tourmaline breccias and dome complex, and in
the surrounding area, was carried out. At the end of the year,
mapping of target areas to the east and north east of the project
commenced and initial results identified similar vein
mineralisation to the San Bernardo dome, with strongly anomalous
copper porphyry style mineralisation. Results indicate that this
controlling structure is part of a major caldera ring structure.
Positive drilling results included the following
intercepts[19]:
Intercept Results*
------------ ----------------------------------
ENCDD11-026 68.00m at 0.20% Cu Eq.
113.90m at 0.15% Cu Eq.includes:
21.90m at 0.18% Cu Eq.
------------ ----------------------------------
ENCDD12-030 241.20m at 0.13% Cu Eq. includes:
82.95m at 0.17% Cu Eq.
------------ ----------------------------------
*results contain Au, Ag and Cu at current rates.
In 2013, a mapping programme will be completed at Encrucijada to
define further drill targets in the east and north east, as well as
throughout the south east extension of the property.
Mercurio
Mercurio is a 100% owned 36,388 hectare property in Mexico,
located between two high grade mines, Sombrerete and Fresnillo. In
2012, a total of 12,292 metres of drilling was completed at the
property with results to date indicating strong base metal, as well
as moderate silver mineralisation, associated with a large vein
system similar to Fresnillo.
The exploration programme at Mercurio in 2012 focused on
expanding the known mineralisation and identifying new mineralised
structures. Geochemical sampling continued at the property and
drilling was carried out on the Santa Rosa and Virginia vein
systems and along the large north east structural zone which hosts
a barite vein, to define the extension and continuity of
mineralisation in these silver-based vein corridors. Positive
intercepts included(19) :
Intercept Results*
------------ ---------------------------
DDHME 12-35 1.00m at 520.34 g/t Ag Eq.
------------ ---------------------------
DDHME 12-36 2.45m at 315.78 g/t Ag Eq.
------------ ---------------------------
DDHME 12-40 1.65m at 208.85 g/t Ag Eq.
------------ ---------------------------
DDHME 12-44 1.21m at 144.65 g/t Ag Eq.
------------ ---------------------------
DDHME 12-46 1.68m at 147.67 g/t Ag Eq.
------------ ---------------------------
*results contain Ag, Zn and Cu at current rates.
In 2013, drilling will continue at Mercurio and will concentrate
on the barite structure zone.
Apacheta
At the 100% owned Apacheta project in Peru, a total of 2,524
thousand metres of drilling was completed 2012. The initial
exploration programme at Apacheta 1 was completed with no positive
results. Work continued on the process to obtain the necessary
social permits for Apacheta 2 in order to initiate the planned
drilling programme there.
Soranpampa
At the 100% owned Soranpampa project in Peru, a total of 3,040
metres of drilling was carried out in 2012. Drilling was carried
out on a geophysical anomaly area in order to identify economic
near-surface gold mineralisation. In addition, further detailed
geophysical work carried out during the year identified targets in
and adjacent to the primary target and exploration work was carried
out on these targets. No further exploration work is planned for
the Soranpampa project in 2013.
La Falda
The La Falda property in northern Chile is located close to the
Company's other projects in the area and was acquired in December
2011 as an earn-in project. The target is a porphyry gold-copper
system, similar to other deposits in the Maricunga belt. The
drilling programme at La Falda commenced in Q4 2012 and totaled
3,009 metres, testing both lithocap high sulphidation type
mineralisation as well as porphyry style gold mineralisation.
Drilling results indicated that gold mineralisation does exist and
is related to the porphyry gold setting. Additional targets were
identified following continued mapping and sampling programmes and
will be developed for drill testing in the north west of the
property. The target is characterized by porphyry with banded
quartz veins. Positive intercepts from the drilling programme at La
Falda included[20]:
Intercept Results*
------------ --------------------------
FLDRC-12002 4.00m at 10.38 g/t Au Eq.
------------ --------------------------
FLDRC-12004 8.00m at 0.43 g/t Au Eq.
3.00m at 1.13 g/t Au Eq.
3.00m at 0.55 g/t Au Eq.
------------
FLDRC-12007 6.00m at 0.51 g/t Au Eq.
------------ --------------------------
*results contain Au, Ag and Cu at current rates.
Potrero
The Potrero property is located in northern Chile, close to the
La Falda property. Potrero was added to the Company's exploration
pipeline in Q1 2012. Following the completion of geochemical,
geological and geophysical mapping programmes early in the year, a
NE-SW trend to mineralisation was confirmed. In addition, results
of a geochemical sampling programme returned anomalies associated
with the central anomaly and related to NE trending structures and
an increase in sheeted veining. The magnetic survey also completed
at the property defined lineaments trending NE and NW, with the
intersection of these lineaments defining the central area of the
property where the porphyry crops out. In conjunction with this
programme, a surface mapping programme was completed and identified
mineralised porphyries extending to the NE. In 2013, a drill
programme has been designed, to test the porphyry target along the
NE trend.
Baborigame
The 51% owned Baborigame project is located in Mexico, in the
Chihuahua district. The project was added to the project pipeline
in Q3 2012 and is a series of low sulphidation veins with
disseminated mineralisation. A detailed mapping and sampling
programme was completed on the Cebollas target which is considered
to be the most prospective area within the property, a mining
district with more than 20 kilometres of quartz veins. Two gold
anomalies were identified during the initial exploration works, and
in 2013, a drilling programme will be carried out to test the
Cebolla target as well as classic epithermal veins located
elsewhere on the property.
Other Company Maker projects
Coriwasi
This is a 9,800 hectare high sulphidation epithermal and
porphyry copper-gold type target in northern Peru optioned from a
private party. During 2012, the Company continued the process of
completing the relevant permits and approvals process for the
project and conducted an airborne magnetic survey of the property
which identified a number of magnetic lineaments that correspond
with surface gold anomalies.
Corazon de Tinieblas
The Corazon de Tinieblas property is located in Southern Mexico.
The Company is in the process of completing the relevant permits
and approvals process for the property.
Huachoja
This is a 3,000 hectare, high sulphidation epithermal target in
southern Peru optioned from Teck Peru SA. In 2012, a total of 2,278
metres of drilling was carried out at Huachoja to test four
targets. No significant mineralisation was reported in 2012.
Josnitoro
The Josnitoro project is located in Southern Peru. The Company
continued the process of obtaining the relevant permit and
approvals for the project during 2012.
Julieta
The Julieta property is located in Northern Peru. During 2012,
the Company conducted a geological survey of the property and
subsequent target definition and commenced the relevant permit and
approval processes for the drilling campaign.
Medium Scale projects
The Company's project pipeline also contains various Medium
Scale properties in the target delineation and drill testing
categories. These are projects that each have the potential to
contribute 5-10 million silver equivalent ounces of production per
year and tend to be low sulphidation epithermal gold/silver type
deposits with varying base metal content and are typically mined
underground.
In 2012, the Company assigned $7.8 million to finding and
developing Medium Scale projects, and in 2013 plans to invest $5.4
million in this category. The Company continued to receive positive
results from the exploration programmes at its Medium Scale
projects in 2012 and in addition, added the El Tanque property in
Mexico to the pipeline.
Cuello Cuello
At the Cuello Cuello project in Peru, the relevant government
and community permits were received in December 2011 and at the end
of H1 2012 the drilling programme commenced with a total of 2,407
metres drilled during the year. Four silica structures with high
sulphide content were identified, and near surface gold and silver
structures were intersected in the drilling campaign. The Company
plans to continue drilling at the property in 2013. Positive
intercepts from the 2012 drilling campaign included[21]:
Intercept Results
------------- -----------------------------------
DDH-CC-12003 0.8m at 0.39 g/t Au & 1,159 g/t Ag
1.1m at 0.16 g/t Au & 596 g/t Ag
------------- -----------------------------------
DDH-CC-12001 1.5m at 7.00 g/t Au & 56 g/t Ag
------------- -----------------------------------
DDH-CC-0712 2.3m at 1.4 g/t Au & 375 g/t Ag
------------- -----------------------------------
DDH-CC-0912 2.2m at 0.1 g/t Au & 861 g/t Ag
------------- -----------------------------------
Astana/Farallon
Astana is a 100% owned project located in the Company's southern
Peru cluster, with high sulphidation of disseminated gold/silver
mineralisation. Historical drilling at superficial levels reported
anomalous results in gold and silver associated to pyrite with
values of 200 to 390 g/t Ag eq. Farallon is a 100% owned low
sulphidation silver veins system, located 1.5 km to the east of
Astana. Previous drilling at superficial levels reported anomalous
results in gold, silver, lead and zinc.
In 2012 the Company continued the process of attaining the
relevant permits and approvals for both projects and received the
necessary social permits. At the Astana property, the testing of
anomalies was carried out whilst at Farallon a drilling campaign
commenced during the year and a total of 518 metres of drilling
were carried out to test the economic potential of the property.
Historical drilling has already identified moderate silver and gold
mineralisation with the current drilling programme expected to
continue in the first half of 2013.
San Martin
Work at the San Martin project in Peru in 2012 was focused on
obtaining the relevant government and community permits and
approvals. In 2013, the Company will finalise the social permit
application process and allow for the exploration work to commence,
with the focus on defining potential mineralization. Previous
drilling campaigns that intercepted high quality
mineralisation.
Huacullo
At the Huacullo project in Peru, in 2012, a surface mapping
programme commenced to define the extension of the principal
structures at the property where potential economic mineralisation
in low to intermediate sulphidation veins were identified in
previous drilling campaigns conducted by other companies. In 2013,
the Company will finalise the relevant permits application process
and continue exploration work at the property.
Other Medium Scale projects
El Tanque
At the El Tanque project in Mexico following a drilling campaign
totalling 2,734 metres in 2012, no significant intercepts were
reported to support a relevant mineralised body. The Company will
not conduct further exploration work at the property in 2013.
Ibel
At the Ibel project in Peru, work in 2012 continued on the
completion of the relevant government and community permits and
approval process. Geological work and target definition was also
carried out in order to test potential economic mineralisation in
low to intermediate sulphidation veins and hydrothermal breccias
located in sedimentary rocks.
Copper projects
Following the acquisition of Southwestern Resources in 2008, the
Company currently holds a number of copper projects located in the
southern Andes in Peru, within a highly prospective area for copper
deposits.
Jasperoide
In 2012 a total of 1,906 metres of drilling was carried out at
Jasperoide, focused on the already identified mineralised zone and
surrounding area to locate new skarn blankets and to test for a
potential associated porphyritic system. The Company is not
planning to conduct further exploration work at the property in
2013.
Alpacocha
At the Alpacocha project an airborne geophysical magnetometer
survey was completed and new targets were generated. A total of
3,012 metres of drilling was carried out during the year,
concentrated in the Paraiso target, next to a known copper skarn
porphyry target. Results have indicated a weak to moderately copper
mineralised skarn and porphyry system with the potential for
mineralisation to increase at depth. Positive intercepts from the
drilling programme at Alpacocha in 2012 included[22]:
Intercept Results*
----------- ------------------------
PADDH12-01 18.20m at 0.99% Cu. Eq.
----------- ------------------------
PADDH12-05 18.00m at 0.60% Cu. Eq.
----------- ------------------------
PADDH12-03 3.60m at 0.70% Cu. Eq.
3.20m at 0.84% Cu. Eq.
----------- ------------------------
PADDH12-06 2.00m at 0.66% Cu. Eq.
----------- ------------------------
*results contain Au, Ag, Cu and Mo at 19.01.2013 rates.
Antay
At the 100% owned Antay copper project, in 2012 the Company
continued the process of obtaining the necessary access permits for
the project.
Generative
The Company holds over one million hectares of prime land in key
geological regions across four countries and continues to commit
resources to conduct further exploration in these premium
areas.
FINANCIAL REVIEW
Key performance indicators
(before exceptional items, unless otherwise indicated)
$000 unless otherwise indicated Year ended Year ended % change
31 Dec 2012 31 Dec 2011
------------------------------------------------------ ------------- -------------- ---------
Net Revenue[23] 817,952 987,662 (17)
Attributable silver production (koz) 13,550 14,980 (10)
Attributable gold production (koz) 112 127 (12)
Cash costs ($/oz Ag co-product)[24] 13.41 11.96 12
Cash costs ($/oz Au co-product) (24) 735 561 31
Adjusted EBITDA[25] 384,791 563,403 (32)
Profit from continuing operations 128,581 268,919 (52)
Profit from continuing operations (post exceptional) 126,866 272,338 (53)
Earnings per share (pre exceptional) $0.19 $0.49 (61)
Earnings per share (post exceptional) $0.19 $0.50 (62)
Cash flow from operating activities [26] 254,879 464,110 (45)
Resource life of mine (years) 9.8 9.7 1
------------------------------------------------------ ------------- -------------- ---------
The reporting currency of Hochschild Mining plc is U.S. dollars.
In discussions of financial performance the Group removes the
effect of exceptional items, unless otherwise indicated, and in the
income statement results are shown both pre and post such
exceptional items. Exceptional items are those items, which due to
their nature or the expected infrequency of the events giving rise
to them, need to be disclosed separately on the face of the income
statement to enable a better understanding of the financial
performance of the Group and to facilitate comparison with prior
years.
Following the revision of the mining royalty regime in Peru in
2011 (as detailed in the Company's 2011 Full Year Results
announcement), the mine royalties incurred by the Pallancata and
Ares units are now accounted for as Income Tax, whereas previously,
royalties for both units were treated as production costs. The
effect of this change should be taken into account when comparing
the units' production cost per tonne, cash costs and Adjusted
EBITDA metrics in 2012 with those of 2011.
Revenue
Gross revenue
Gross revenue from continuing operations decreased 17% to $869.1
million in 2012 (2011: $1,043.7 million) driven by a decrease in
production and a fall in the silver price, partially offset by a
rise in the gold price.
Silver
Gross revenue from silver decreased 21% in 2012 to $599.4
million (2011: $755.8 million) as a result of lower prices. The
total amount of silver ounces sold in 2012 decreased to 18,928 koz
(2011: 21,792 koz) mainly due to lower year-on-year production.
Gold
Gross revenue from gold decreased 6% in 2012 to $269.2 million
(2011: $287.8 million) also as a result of lower ounces produced
although offset to some extent by an increase in the received gold
price. The total amount of gold ounces sold in 2012 decreased to
159.8 koz (2011: 182.0 koz) mainly due to lower year-on-year
production.
Gross average realised sales prices
The following table provides figures for average realised prices
and ounces sold for 2012 and 2011:
Average realised prices Year ended Year ended
31 Dec 2012 31 Dec 2011
----------------------------------- ------------- -------------
Silver ounces sold (koz) 18,928 21,792
Avg. realised silver price ($/oz) 31.6 34.7
Gold ounces sold (koz) 159.8 182.0
Avg. realised gold price ($/oz) 1,684 1,582
----------------------------------- ------------- -------------
Commercial discounts
Commercial discounts refer to refinery treatment charges,
refining fees and payable deductions for processing concentrates,
and are discounted from gross revenue on a per tonne basis
(treatment charge), per ounce basis (refining fees) or as a
percentage of gross revenue (payable deductions). In 2012, the
Group recorded commercial discounts of $51.2 million (2011: $56.0
million). This decrease resulted from a lower volume of concentrate
sold in 2012, mainly due to the Arcata dore project. The ratio of
commercial discounts to gross revenue in 2012 increased to 6%
(2011: 5%).
Net revenue
Net revenue decreased by 17% to $818.0 million (2011: $987.7
million), comprising silver revenue of $557.8 million and gold
revenue of $259.6 million. In 2012 silver accounted for 68% and
gold 32% of the Company's consolidated net revenue compared to 72%
and 28% respectively in 2011.
Revenue by mine
$000 unless otherwise indicated Year ended Year ended % change
31 Dec 2012 31 Dec 2011
--------------------------------- ------------- ------------- ---------
Silver revenue
Arcata 165,464 207,429 (20)
Ares 14,653 21,168 (31)
Selene - - -
Pallancata 232,503 316,344 (27)
San Jose 184,635 208,579 (11)
Moris 1,315 2,273 (42)
Commercial discounts (40,784) (47,465) (14)
Net silver revenue 557,786 708,328 (21)
Gold revenue
Arcata 26,850 26,449 2
Ares 42,927 46,929 (9)
Selene - - -
Pallancata 42,620 54,437 (22)
San Jose 142,151 129,994 9
Moris 14,616 30,025 (51)
Commercial discounts (9,528) (8,584) 11
Net gold revenue 259,636 279,250 (7)
--------------------------------- ------------- ------------- ---------
Other revenue[27] 530 84 531
--------------------------------- ------------- ------------- ---------
Net revenue 817,952 987,662 (17)
--------------------------------- ------------- ------------- ---------
Costs
Total pre-exceptional cost of sales increased 4% to $420.3
million in 2012 (2011: $404.3 million) resulting from an increase
in the direct production cost, an increase in depreciation and from
changes in inventory. These factors were partially offset by lower
workers' profit sharing reflecting the decrease in production in
Peru and a lower silver price in 2012. The direct production cost
increased by 15% in 2012, to $301.5 million (2011: $261.2 million)
mainly as a result of an increase in the number of stopes,
inflation in labour and supplies and rising oil prices in Peru and
Argentina. Depreciation in 2012 was $121.2 million (2011: $103.7
million), with the increase mainly due to full depreciation of the
Ares operation, depreciation of new tailings dams at Pallancata as
well as a higher future capex depreciation resulting from the
increasing cost to convert resources into reserves in all operating
units and higher depreciation ratios. Other items, which
principally includes workers' profit sharing, was $15.4 million in
2012 (2011: $32.4 million) and change in inventories which was
$(17.7) million in 2012 (2011: $6.9 million).
Unit cost per tonne
The Company reported an overall increase in unit cost per tonne
at its main operations of 13% in 2012 to $103.2 (2011: $91.4). The
higher unit cost per tonne reported in 2012 includes the effect of
the Arcata dore project which in turn, provides significant savings
on commercial expenses. For further explanation on the increase in
unit cost per tonne please refer to page 7 of the Operating
Review.
Unit cost per tonne by operation (including royalties)[28]:
Operating unit ($/tonne) Year ended Year ended % change
31 Dec 2012 31 Dec 2011
-------------------------- ------------- -------------- ---------
Main operations 103.2 91.4 13
Peru 75.1 67.1 12
Arcata 86.3 77.0 12
Pallancata[29] 67.2 60.4 11
-------------------------- ------------- -------------- ---------
Argentina 202.2 181.7 11
San Jose 202.2 181.7 11
-------------------------- ------------- -------------- ---------
Others 138.4 120.6 15
Ares(28) 138.4 120.6 15
Total underground 107.8 95.3 13
-------------------------- ------------- -------------- ---------
Moris - 17.9 -
-------------------------- ------------- -------------- ---------
Unit cost per tonne by operation (excluding royalties)(27) :
Operating unit ($/tonne) Unit cost per Unit cost % change
tonne 2012 per
tonne 2011
-------------------------- -------------- ----------------------- ---------
Main operations 99.1 83.8 18
Peru 73.3 60.8 21
Arcata 82.0 70.2 17
Pallancata(28) 67.2 54.5 23
-------------------------- -------------- ----------------------- ---------
Argentina 190.4 169.6 12
San Jose 190.4 169.6 12
-------------------------- -------------- ----------------------- ---------
Others 138.4 118.0 17
Ares(28) 138.4 118.0 17
Total underground 104.2 88.4 18
-------------------------- -------------- ----------------------- ---------
Moris - 17.9 -
-------------------------- -------------- ----------------------- ---------
Cash costs
Cash costs include cost of sales, commercial deductions and
selling expenses before exceptional items, less depreciation
included in cost of sales.
Co-product silver/gold cash costs are total cash costs
multiplied by the percentage of revenue from silver/gold, divided
by the number of silver/gold ounces sold in the year. Silver and
gold cash costs increased from $13.0 to $14.2 per ounce and from
$613 to $781 per ounce, respectively. Silver and gold cash costs
from the Company's main operations (Arcata, Pallancata and San
Jose) increased from $12.0 to $13.4 per ounce and from $561 to $735
per ounce, respectively. The increase in silver cash costs resulted
from higher production costs and lower average grades, partially
offset by lower workers' profit sharing, lower commercial discounts
and a lower proportion of costs allocated to silver as a result of
lower silver prices.
By-product silver/gold cash costs are total cash costs less
revenue from gold/silver, divided by the number of silver/gold
ounces sold in the year. By-product cash costs for the period were
$6.5 per silver ounce (2011:$ 4.9 per silver ounce) and ($1,293)
per gold ounce (2011: ($1,987) per gold ounce).
Cash cost reconciliation[30]:
$000 unless otherwise indicated Year ended Year ended % change
31 Dec 2012 31 Dec 2011
--------------------------------- ------------- ----------------------------- ---------------------------
Group Cash Cost 392,825 394,225 (0.4)
--------------------------------- ------------- ----------------------------- ---------------------------
(+) Cost of sales 420,325 404,291 4
(-) Depreciation in Cost
of Sales (117,627) (105,085) 12
(+) Selling expenses 39,460 38,970 1
(+) Commercial deductions 51,197 56,049 (9)
Gold 9,552 8,584 11
Silver 41,645 47,465 (12)
--------------------------------- ------------- ----------------------------- ---------------------------
Revenue 817,952 987,662 (17)
--------------------------------- ------------- ----------------------------- ---------------------------
Gold 259,636 279,250 (7)
Silver 557,786 708,328 (21)
Others 530 84 531
--------------------------------- ------------- ----------------------------- ---------------------------
Ounces Sold 19,088 21,974 (13)
--------------------------------- ------------- ----------------------------- ---------------------------
Gold 159.8 182.0 (12)
Silver 18,928 21,792 (13)
--------------------------------- ------------- ----------------------------- ---------------------------
Group Cash Cost ($/oz)
--------------------------------- ------------- ----------------------------- ---------------------------
Co product Au 781 613 27
Co product Ag 14.2 13.0 9
By product Au (1,293) (1,987) (35)
By product Ag 6.53 4.88 34
--------------------------------- ------------- ----------------------------- ---------------------------
Cash costs are calculated based on pre-exceptional figures.
Co-product cash cost per ounce is the cash cost allocated to the
primary metal (allocation based on proportion of revenue), divided
by the ounces sold of the primary metal. By-product cash cost per
ounce is the total cash cost minus revenue and commercial discounts
of the by-product divided by the ounces sold of the primary
metal.
As detailed in the introduction to the Financial Review, in
calculating 2012 cash costs royalties at Pallancata and Ares are
now excluded from the cost of sales figure used. Consequently, for
comparison purposes, please see below 2011 Group cash costs
adjusting the royalties effect.
Group Cash Cost ($/oz) Year ended Restated % change
31 Dec 2012 Year ended
31 Dec 2011
------------------------ ------------------- ------------- ---------------------------
Co-product Au 781 602 30
Co-product Ag 14.2 12.7 12
By-product Au (1,293) (2,026) 36
By-product Ag 6.53 4.56 43
------------------------ ------------------- ------------- ---------------------------
Administrative expenses
Administrative expenses before exceptional items increased by
13% to $73.0 million (2011: $64.4 million) primarily due to rises
in personnel expenses mainly resulting from local inflation and the
appreciation of local currencies. An increase in the Company's
Long-term Incentive Plan ('LTIP') provision, reflecting the
Company's share price performance in 2012, also contributed to the
increase. These increases were partially offset by the absence of
voluntary contributions in 2012.
Exploration expenses
As a result of the Group's decision to focus on organic growth
through exploration, exploration expenses, which primarily relate
to greenfield exploration, increased by 36% to $64.6 million in
2012 (2011: $47.3 million). Further detail on the exploration
programme can be found in the exploration section on page 16.
In addition, the Group capitalises part of its brownfield
exploration, which mostly relates to costs incurred converting
potential resource to the Inferred or Measured and Indicated
category. In 2012, the Group capitalised $15.9 million relating to
brownfield exploration compared to $13.2 million in 2011, bringing
the total investment in exploration for 2012 to $80.5 million
(2011: $60.6 million). In addition, $17.0 million was invested in
the Company's Advanced Projects.
Selling expenses
Selling expenses were in line with 2011at $39.5 million (2011:
$39.0 million) principally consisting of export duties at San Jose
(export duties in Argentina are levied at 10% of revenue for
concentrate and 5% of revenue for dore).
Other income/expenses
Other income before exceptional items was $8.7 million (2011:
$7.1 million), mainly reflecting a $2.4 million export tax credit
in Argentina. Other expenses before exceptional items reached $9.5
million (2011: $15.8 million), which included a provision for
obsolescence of supplies of $2.5 million.
Profit from continuing operations before exceptional items, net
finance costs, foreign exchange loss and income tax
Profit from continuing operations before exceptional items, net
finance costs and income tax decreased to $219.8 million (2011:
$424.0 million) as a result of the factors detailed above.
Adjusted EBITDA
Adjusted EBITDA decreased by 32% over the period to $384.8
million (2011: $563.4 million) driven primarily by lower silver
prices, lower production and higher costs.
Adjusted EBITDA is calculated as profit from continuing
operations before exceptional items, net finance costs and income
tax plus depreciation and exploration expenses other than personnel
and other exploration related fixed expenses.
$000 unless otherwise indicated Year ended Year ended % change
31 Dec 2012 31 Dec 2011
----------------------------------------------------------------------------- ------------- ------------- ---------
Profit from continuing operations before exceptional items, net finance
cost, foreign exchange
loss and income tax 219,768 423,973 (48)
Operating margin 27% 43%
Depreciation and amortisation in cost of sales 117,627 105,085 12
Depreciation and amortisation in administrative expenses 2,285 1,903 20
Exploration expenses 64,612 47,336 36
Personnel and other exploration related fixed expenses (19,501) (14,894) 31
----------------------------------------------------------------------------- ------------- ------------- ---------
Adjusted EBITDA 384,791 563,403 (32)
----------------------------------------------------------------------------- ------------- ------------- ---------
Adjusted EBITDA margin 47% 57%
----------------------------------------------------------------------------- ------------- ------------- ---------
Impact of investment in associate
An associate is an entity in which Hochschild has significant
influence but not control and is accounted for using the equity
method.
Hochschild's pre exceptional share of the profit/(loss) after
tax of associates totalled $6.5 million in 2012 (2011: $11.7
million), a result of the Group's share of the results of Gold
Resource Corporation. After exceptional items, the share of the
profit/(loss) after tax of associates totalled $5.1 million.
Finance income
Finance income before exceptional items of $2.0 million was
lower than that of 2011 (2011: $4.7 million) mainly due to the
absence in 2012 of interest income received from McEwen Mining
following the settlement of loans (2011: $1.7 million).
Finance costs
Finance costs before exceptional items decreased by 40% to $12.9
million in 2012 (2011: $21.3 million) reflecting interest costs
associated with the prepayment of a shareholder loan at San Jose
during 2011 ($3.4 million), total prepayment of short-term debt in
Peru during 2011 ($2.1 million) and the prepayment of a Syndicated
loan in 2011 ($1.3 million).
The Group has no outstanding positions on currency or commodity
hedges.
Foreign exchange losses
The Group recognised a foreign exchange loss of $1.2 million
(2011: $1.6 million loss) as a result of exposures in currencies
other than the functional currency.
Income tax
The Group's pre-exceptional effective tax rate increased to
40.0% in 2012 (2011: 35.6%). This increase is partly due to the
introduction of three new taxes in Peru in Q4 2011 - the New Mining
Royalty, the Special Mining Tax and the Special Mining Assessment.
Detailed information on these taxes (collectively referred to as
the 'New Taxes') is provided in the Company's 2011 Preliminary
Results announcement released on 20 March 2012.
In 2012, income tax included $8.1 million from the New Mining
Royalty and Special Mining Tax. Excluding these impacts, the
effective tax rate was 36.2% compared to 34.3% in 2011. The
increase in the tax rate mainly reflects lower profit before income
tax in the operating companies (due to lower sales) and higher
non-deductible expenses, mainly related to increases in the
exploration budget.
Exceptional items
Exceptional items in 2012 totaled ($1.7) million after tax
(2011: $3.4 million). This mainly comprises:
Positive exceptional items:
Main items $000 Description of main items
------------- ------ -------------------------------------------------------------------------------------------
Other income 1,099 Relates to the provision of termination benefits due to workers as a result of the closure
of the Moris mine accrued in 2011 and partially reversed in 2012.
Income tax 141 Deferred taxation
------------- ------ -------------------------------------------------------------------------------------------
Negative exceptional items:
Main items $000 Description of main items
----------------------------------------------------- --------- ----------------------------------------------------
Impairment and write-off on assets (245) Corresponds to assets write-off in Ares and MH
Share of post tax losses of associates and joint Mexico. Partially offset by the reversal of
ventures accounted under equity method the write-off recorded in 2010 related to the 100%
(1,376) dore project at the San Jose mine.
Loss resulting from dilution of holding in Gold
Resource Corp.
Finance cost (1,334) Mainly corresponds to the impairment of Iron Creek
Capital Corp, Brionor Resources and Empire
Petroleum Corp of US$1,043,671, US$105,000 and
US$8,000 respectively.
----------------------------------------------------- --------- ----------------------------------------------------
Cash flow & balance sheet review
Cash flow:
$000 unless otherwise Year ended Year ended Change
indicated 31 Dec 2012 31 Dec 2011
------------------------------- ------------- ------------- ----------
Net cash generated from
operating activities 254,879 464,110 (209,231)
Net cash used in investing
activities (427,869) (139,898) (287,971)
Cash flows generated/(used)
in financing activities (94,842) (221,901) 127,059
------------------------------- ------------- ------------- ----------
Net (decrease)/increase
in cash and cash equivalents
during the period (267,832) 102,311 (370,143)
------------------------------- ------------- ------------- ----------
Operating cashflow decreased by 44% to $254.9 million from
$464.1 million in 2011, mainly due to lower silver prices and lower
production. Net cash from investing activities increased to
$(427.9) million in 2012 from $(139.9) million in 2011, primarily
due to the acquisition of Andina Minerals Inc ($90.1 million) in
2012, the sale of Lake Shore Gold shares ($80.5 million) in 2011
and higher capex during 2012. Finally, cash used in financing
activities decreased to $(94.8) million from $(221.9) million in
2011, primarily as a result of the prepayment of the syndicated
loan ($114.3 million), and lower dividend payments to IMZ ($22.0
million in 2012 compared to $54.0 million in 2011), partially
offset by higher dividends to McEwen Mining ($19.8 million in 2012
compared to $0.0 million in 2011). As a result, total cash
generated decreased from $102.3 million in 2011 to $(267.8) million
in 2012 ($(370) million difference).
Working capital
$000 unless otherwise indicated Year ended Year ended
31 Dec 2012 31 Dec 2011
-------------------------------------------- ------------- -------------
Trade and other receivables 174,786 175,672
Inventories 76,413 53,032
Net other financial assets / (liabilities) (6,741) (12,803)
Net Income tax receivable / (payable) (4,459) (23,859)
Trade and other payables and provisions (252,823) (259,907)
-------------------------------------------- ------------- -------------
Working Capital (12,824) (67,865)
-------------------------------------------- ------------- -------------
The Company's working capital position increased to $(12.8)
million in 2012 from $(67.9) million in 2011. This was primarily
explained by higher inventories ($23.4 million), from stockpiles at
San Jose and from dore in Peru (due to timing differences), as well
as lower income tax payable ($19.4 million) as a result of a lower
current tax provision in 2012.
Net cash
$000 unless otherwise indicated Year ended Year ended
31 Dec 2012 31 Dec 2011
--------------------------------- ------------- -------------
Cash and cash equivalents 358,944 627,481
Long term borrowings (106,850) (104,866)
Short term borrowings[31] (6,973) (46,334)
--------------------------------- ------------- -------------
Net cash 245,121 476,281
--------------------------------- ------------- -------------
The Group reported net cash of $245.1 million as at 31 December
2012 (2011: $476.3 million). This was primarily driven by the net
decrease in cash generated in 2012 as well as the acquisition of
Andina Minerals Inc, partially offset by the repayment of
short-term borrowings, mainly at San Jose.
The Company's long-term borrowings are only its convertible bond
that has a current conversion price of GBP3.90. Under its terms,
the Company is entitled to force conversion of the bonds at any
time after 20 October 2012 if, for a period of 20 out of 30
consecutive days, the average share price, calculated under the
terms of the bonds, exceeds 130% of the conversion price
(GBP5.07).
Capital expenditure[32]
$000 unless otherwise indicated Year ended Year ended
31 Dec 2012 31 Dec 2011
--------------------------------- ------------- -------------
Arcata 52,791 33,040
Ares 7,476 2,673
Selene 1,152 4,570
Pallancata 55,719 50,489
San Jose 71,188 62,994
Moris 846 555
Inmaculada 96,060 19,447
Crespo 17,984 10,232
Azuca 12,476 31,641
Other 18,062 2,306
--------------------------------- ------------- -------------
Sub-Total 333,754 217,947
--------------------------------- ------------- -------------
Andina Minerals 86,631 -
--------------------------------- ------------- -------------
Total 420,385 217,947
--------------------------------- ------------- -------------
2012 capital expenditure of $420.4 million (2011: $217.9
million) includes operating capex of $182.5 million, capitalised
exploration costs of $15.9 million in respect of the Group's
operating mines, $134.4 million capitalised in respect of the
Advanced Projects (Inmaculada, Crespo and Azuca) and administrative
capex of $1.0 million. Capital expenditure in 2012 also included
$86.6 million relating to the acquisition of Andina Minerals
Inc.
Capital expenditure at Arcata rose by $19.8 million in 2012 due
to the construction of the Dore project and the plant capacity
increase.
Capital expenditure at San Jose increased by $8.2 million in
2012, reflecting local inflation in mine development costs.
Other capex increased by $15.8 million, mainly due to the
acquisition of the Conenhua energy transmission line to improve the
energy supply to our operations in Peru, and the construction of
the energy transmission line for Inmaculada.
Dividends
The directors recommend a final dividend of $0.03 per ordinary
share which, subject to shareholder approval at the 2013 AGM, will
be paid on 4 June 2013 to those shareholders appearing on the
register on 10 May 2013. If approved, this will result in a total
dividend for the year of $0.06 per share.
Dividends are declared in US dollars. Unless a shareholder
elects to receive dividends in US dollars, they will be paid in
pounds sterling with the US dollar dividend converted into pound
sterling at exchange rates prevailing at the time of payment. Our
dividend policy takes into account the profitability of the
business and the underlying growth in earnings of the Company, as
well as its capital requirements and cash flow.
Dividend dates 2013
----------------------------------------------- -------
Ex-dividend date 8 May
Record date 10 May
Deadline for return of currency election forms 15 May
Payment date 4 June
----------------------------------------------- -------
Forward looking Statements
This announcement contains certain forward looking statements,
including such statements within the meaning of Section 27A of the
US Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. In particular, such
forward looking statements may relate to matters such as the
business, strategy, investments, production, major projects and
their contribution to expected production and other plans of
Hochschild Mining plc and its current goals, assumptions and
expectations relating to its future financial condition,
performance and results.
Forward-looking statements include, without limitation,
statements typically containing words such as "intends", "expects",
"anticipates", "targets", "plans", "estimates" and words of similar
import. 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 be
materially different from any future results, performance or
achievements expressed or implied by such forward looking
statements. Factors that could cause or contribute to differences
between the actual results, performance or achievements of
Hochschild Mining plc and current expectations include, but are not
limited to, legislative, fiscal and regulatory developments,
competitive conditions, technological developments, exchange rate
fluctuations and general economic conditions. Past performance is
no guide to future performance and persons needing advice should
consult an independent financial adviser.
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, 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.
Statement of Directors' responsibilities
The Directors confirm that to the best of their knowledge:
- the financial statements, prepared in accordance with the
applicable set of accounting standards, give a true and fair view
of the assets, liabilities, financial position and profit or loss
of the Company and the undertakings included in the consolidation
taken as a whole; and
- the Management report includes a fair review of the
development and performance of the business and the position of the
Company and the undertakings included in the consolidation taken as
a whole, together with a description of the principal risks and
uncertainties that they face.
Consolidated income statement
For the year ended 31 December 2012
Year ended 31 December Year ended 31 December
2012 2011
------------------------------------ ------------------------------------
Before Before
exceptional Exceptional exceptional Exceptional
items items Total items items Total
Notes US$000 US$000 US$000 US$000 US$000 US$000
---------------------------------- ----- ------------ ----------- --------- ------------ ----------- ---------
Continuing operations
---------------------------------- ----- ------------ ----------- --------- ------------ ----------- ---------
Revenue 3,5 817,952 - 817,952 987,662 - 987,662
---------------------------------- ----- ------------ ----------- --------- ------------ ----------- ---------
Cost of sales 6 (420,325) - (420,325) (404,291) - (404,291)
---------------------------------- ----- ------------ ----------- --------- ------------ ----------- ---------
Gross profit 397,627 - 397,627 583,371 - 583,371
---------------------------------- ----- ------------ ----------- --------- ------------ ----------- ---------
Administrative expenses 7 (72,995) - (72,995) (64,354) - (64,354)
---------------------------------- ----- ------------ ----------- --------- ------------ ----------- ---------
Exploration expenses 8 (64,612) - (64,612) (47,336) - (47,336)
---------------------------------- ----- ------------ ----------- --------- ------------ ----------- ---------
Selling expenses 9 (39,460) - (39,460) (38,970) - (38,970)
---------------------------------- ----- ------------ ----------- --------- ------------ ----------- ---------
Other income 11 8,733 1,099 9,832 7,062 - 7,062
---------------------------------- ----- ------------ ----------- --------- ------------ ----------- ---------
Other expenses 11 (9,525) - (9,525) (15,800) (1,408) (17,208)
---------------------------------- ----- ------------ ----------- --------- ------------ ----------- ---------
Impairment and write-off
of assets (net)/(reversal) 11 - (245) (245) - 1,210 1,210
---------------------------------- ----- ------------ ----------- --------- ------------ ----------- ---------
Profit from continuing
operations before net
finance income/(cost),
foreign exchange loss
and income tax 219,768 854 220,622 423,973 (198) 423,775
---------------------------------- ----- ------------ ----------- --------- ------------ ----------- ---------
Share of post-tax profit/(losses)
of associates and
joint ventures accounted
under equity method 11,18 6,456 (1,376) 5,080 11,707 (261) 11,446
---------------------------------- ----- ------------ ----------- --------- ------------ ----------- ---------
Finance income 11,12 1,988 - 1,988 4,689 5,989 10,678
---------------------------------- ----- ------------ ----------- --------- ------------ ----------- ---------
Finance costs 11,12 (12,870) (1,334) (14,204) (21,331) (2,111) (23,442)
---------------------------------- ----- ------------ ----------- --------- ------------ ----------- ---------
Foreign exchange loss (1,212) - (1,212) (1,562) - (1,562)
---------------------------------- ----- ------------ ----------- --------- ------------ ----------- ---------
Profit from continuing
operations before
income tax 214,130 (1,856) 212,274 417,476 3,419 420,895
---------------------------------- ----- ------------ ----------- --------- ------------ ----------- ---------
Income tax (expense)/benefit 13 (85,549) 141 (85,408) (148,557) - (148,557)
---------------------------------- ----- ------------ ----------- --------- ------------ ----------- ---------
Profit for the year
from continuing operations 128,581 (1,715) 126,866 268,919 3,419 272,338
---------------------------------- ----- ------------ ----------- --------- ------------ ----------- ---------
Attributable to:
---------------------------------- ----- ------------ ----------- --------- ------------ ----------- ---------
Equity shareholders
of the Company 64,830 (1,759) 63,071 165,890 2,826 168,716
---------------------------------- ----- ------------ ----------- --------- ------------ ----------- ---------
Non-controlling interests 63,751 44 63,795 103,029 593 103,622
---------------------------------- ----- ------------ ----------- --------- ------------ ----------- ---------
128,581 (1,715) 126,866 268,919 3,419 272,338
---------------------------------- ----- ------------ ----------- --------- ------------ ----------- ---------
Basic earnings per
ordinary share
from continuing operations
for the year (expressed
in US dollars per share) 14 0.19 - 0.19 0.49 0.01 0.50
---------------------------------- ----- ------------ ----------- --------- ------------ ----------- ---------
Diluted earnings per
ordinary share
from continuing operations
for the year (expressed
in US dollars per share) 14 0.19 - 0.19 0.49 0.01 0.50
---------------------------------- ----- ------------ ----------- --------- ------------ ----------- ---------
Consolidated statement of comprehensive income
For the year ended 31 December 2012
Year ended
31 December
-----------------
2012 2011
Notes US$000 US$000
----------------------------------------------------- ----- ------- --------
Profit for the year 126,866 272,338
----------------------------------------------------- ----- ------- --------
Other comprehensive income
----------------------------------------------------- ----- ------- --------
Exchange differences on translating foreign
operations 268 (1,143)
----------------------------------------------------- ----- ------- --------
Change in fair value of available-for-sale financial
assets 19 (9,269) (33,078)
----------------------------------------------------- ----- ------- --------
Recycling of the loss/(gain) on available-for-sale
financial assets 266 (6,836)
----------------------------------------------------- ----- ------- --------
Recycling of the change in fair value of cash
flow hedges taken to equity - 1,930
----------------------------------------------------- ----- ------- --------
Deferred income tax relating to components of
other comprehensive income 13 615 7,164
----------------------------------------------------- ----- ------- --------
Other comprehensive income for the period, net
of tax (8,120) (31,963)
----------------------------------------------------- ----- ------- --------
Total comprehensive income for the year 118,746 240,375
----------------------------------------------------- ----- ------- --------
Total comprehensive income attributable to
----------------------------------------------------- ----- ------- --------
Equity shareholders of the Company 54,951 136,689
----------------------------------------------------- ----- ------- --------
Non-controlling interests 63,795 103,686
----------------------------------------------------- ----- ------- --------
118,746 240,375
----------------------------------------------------- ----- ------- --------
Consolidated statement of financial position
As at 31 December 2012
As at As at
31 December 31 December
2012 2011
Notes US$000 US$000
-------------------------------------------------- ----- ------------ ------------
ASSETS
-------------------------------------------------- ----- ------------ ------------
Non-current assets
-------------------------------------------------- ----- ------------ ------------
Property, plant and equipment 15 636,555 461,554
-------------------------------------------------- ----- ------------ ------------
Evaluation and exploration assets 16 396,557 274,507
-------------------------------------------------- ----- ------------ ------------
Intangible assets 17 43,903 18,772
-------------------------------------------------- ----- ------------ ------------
Investments accounted under equity method 18 78,188 83,201
-------------------------------------------------- ----- ------------ ------------
Available-for-sale financial assets 19 30,609 40,769
-------------------------------------------------- ----- ------------ ------------
Trade and other receivables 20 8,613 8,741
-------------------------------------------------- ----- ------------ ------------
Deferred income tax assets 856 -
-------------------------------------------------- ----- ------------ ------------
1,195,281 887,544
-------------------------------------------------- ----- ------------ ------------
Current assets
-------------------------------------------------- ----- ------------ ------------
Inventories 21 76,413 53,032
-------------------------------------------------- ----- ------------ ------------
Trade and other receivables 20 166,173 166,931
-------------------------------------------------- ----- ------------ ------------
Income tax receivable 23,023 601
-------------------------------------------------- ----- ------------ ------------
Other financial assets 22 150 28
-------------------------------------------------- ----- ------------ ------------
Cash and cash equivalents 23 358,944 627,481
-------------------------------------------------- ----- ------------ ------------
624,703 848,073
-------------------------------------------------- ----- ------------ ------------
Total assets 1,819,984 1,735,617
-------------------------------------------------- ----- ------------ ------------
EQUITY AND LIABILITIES
-------------------------------------------------- ----- ------------ ------------
Capital and reserves attributable to shareholders
of the Parent
-------------------------------------------------- ----- ------------ ------------
Equity share capital 158,637 158,637
-------------------------------------------------- ----- ------------ ------------
Share premium 395,928 395,928
-------------------------------------------------- ----- ------------ ------------
Treasury shares (898) (898)
-------------------------------------------------- ----- ------------ ------------
Other reserves (214,946) (207,117)
-------------------------------------------------- ----- ------------ ------------
Retained earnings 720,011 677,218
-------------------------------------------------- ----- ------------ ------------
1,058,732 1,023,768
-------------------------------------------------- ----- ------------ ------------
Non-controlling interests 264,518 195,299
-------------------------------------------------- ----- ------------ ------------
Total equity 1,323,250 1,219,067
-------------------------------------------------- ----- ------------ ------------
Non-current liabilities
-------------------------------------------------- ----- ------------ ------------
Trade and other payables 24 - 8
-------------------------------------------------- ----- ------------ ------------
Borrowings 25 106,850 104,866
-------------------------------------------------- ----- ------------ ------------
Provisions 26 76,550 68,430
-------------------------------------------------- ----- ------------ ------------
Deferred income tax liabilities 95,715 68,152
-------------------------------------------------- ----- ------------ ------------
279,115 241,456
-------------------------------------------------- ----- ------------ ------------
Current liabilities
-------------------------------------------------- ----- ------------ ------------
Trade and other payables 24 149,585 117,037
-------------------------------------------------- ----- ------------ ------------
Other financial liabilities 22 6,891 12,831
-------------------------------------------------- ----- ------------ ------------
Borrowings 25 6,973 46,334
-------------------------------------------------- ----- ------------ ------------
Provisions 26 26,688 74,432
-------------------------------------------------- ----- ------------ ------------
Income tax payable 27,482 24,460
-------------------------------------------------- ----- ------------ ------------
217,619 275,094
-------------------------------------------------- ----- ------------ ------------
Total liabilities 496,734 516,550
-------------------------------------------------- ----- ------------ ------------
Total equity and liabilities 1,819,984 1,735,617
-------------------------------------------------- ----- ------------ ------------
These financial statements were approved by the Board of
Directors on 12 March 2013 and signed on its behalf by:
Ignacio Bustamante
Chief Executive Officer
12 March 2013
Consolidated statement of cash flows
For the year ended 31 December 2012
Year ended
31 December
--------------------
2012 2011
Notes US$000 US$000
----------------------------------------------------- ----- --------- ---------
Cash flows from operating activities
----------------------------------------------------- ----- --------- ---------
Cash generated from operations 344,119 520,262
----------------------------------------------------- ----- --------- ---------
Interest received 2,614 13,690
----------------------------------------------------- ----- --------- ---------
Interest paid (9,987) (29,474)
----------------------------------------------------- ----- --------- ---------
Payment of mine closure costs 26 (3,667) (4,113)
----------------------------------------------------- ----- --------- ---------
Tax paid (78,200) (36,255)
----------------------------------------------------- ----- --------- ---------
Net cash generated from operating activities 254,879 464,110
----------------------------------------------------- ----- --------- ---------
Cash flows from investing activities
----------------------------------------------------- ----- --------- ---------
Purchase of property, plant and equipment (297,537) (140,004)
----------------------------------------------------- ----- --------- ---------
Purchase of evaluation and exploration assets (46,903) (73,010)
----------------------------------------------------- ----- --------- ---------
Acquisition of subsidiary 4(a) (96,332) (15,594)
----------------------------------------------------- ----- --------- ---------
Dividends received from associates 8,454 6,603
----------------------------------------------------- ----- --------- ---------
Purchase of available-for-sale financial assets - (491)
----------------------------------------------------- ----- --------- ---------
Proceeds from deferred income 24(3) 4,000 -
----------------------------------------------------- ----- --------- ---------
Proceeds from sale of available-for-sale financial
assets - 82,485
----------------------------------------------------- ----- --------- ---------
Proceeds from sale of property, plant and equipment 449 113
----------------------------------------------------- ----- --------- ---------
Net cash used in investing activities (427,869) (139,898)
----------------------------------------------------- ----- --------- ---------
Cash flows from financing activities
----------------------------------------------------- ----- --------- ---------
Proceeds from borrowings 53,500 117,670
----------------------------------------------------- ----- --------- ---------
Repayment of borrowings (93,221) (272,379)
----------------------------------------------------- ----- --------- ---------
Purchase of treasury shares - (898)
----------------------------------------------------- ----- --------- ---------
Dividends paid 27 (62,467) (74,285)
----------------------------------------------------- ----- --------- ---------
Capital contribution from non-controlling interests 7,346 7,991
----------------------------------------------------- ----- --------- ---------
Cash flows used in financing activities (94,842) (221,901)
----------------------------------------------------- ----- --------- ---------
Net (decrease)/increase in cash and cash equivalents
during the year (267,832) 102,311
----------------------------------------------------- ----- --------- ---------
Exchange difference (705) (312)
----------------------------------------------------- ----- --------- ---------
Cash and cash equivalents at beginning of year 627,481 525,482
----------------------------------------------------- ----- --------- ---------
Cash and cash equivalents at end of year 23 358,944 627,481
----------------------------------------------------- ----- --------- ---------
Consolidated statement of changes in equity
For the year 31 December 2012
Other reserves
--------------------------------------------------------------------------------------
Capital
and
reserves
Unrealised Unrealised attributable
gain/(loss) gain/(loss) to
on on Share- shareholders
Equity available-for-sale cash Bond Cumulative based Total of
share Share Treasury financial flow equity translation Merger payment Other Retained the Non-controlling Total
capital premium shares assets hedges component adjustment reserve reserve reserves earnings Parent interests equity
Notes US$000 US$000 US$000 US$000 US$000 US$000 US$000 US$000 US$000 US$000 US$000 US$000 US$000 US$000
---------------- ----- ------- ------- -------- ------------------ ----------- --------- ----------- --------- ------- --------- -------- ------------ --------------- ---------
Balance
at
1 January
2011 158,637 395,928 - 37,808 (1,930) 8,432 (9,508) (210,046) - (175,244) 528,788 908,109 147,120 1,055,229
---------------- ----- ------- ------- -------- ------------------ ----------- --------- ----------- --------- ------- --------- -------- ------------ --------------- ---------
Other
comprehensive
income/(loss) - - - (32,750) 1,930 - (1,207) - - (32,027) - (32,027) 64 (31,963)
---------------- ----- ------- ------- -------- ------------------ ----------- --------- ----------- --------- ------- --------- -------- ------------ --------------- ---------
Profit
for the
year - - - - - - - - - - 168,716 168,716 103,622 272,338
---------------- ----- ------- ------- -------- ------------------ ----------- --------- ----------- --------- ------- --------- -------- ------------ --------------- ---------
Total
comprehensive
income
for 2011 - - - (32,750) 1,930 - (1,207) - - (32,027) 168,716 136,689 103,686 240,375
---------------- ----- ------- ------- -------- ------------------ ----------- --------- ----------- --------- ------- --------- -------- ------------ --------------- ---------
Capital
contribution
from
non-controlling
interest - - - - - - - - - - - - 7,991 7,991
---------------- ----- ------- ------- -------- ------------------ ----------- --------- ----------- --------- ------- --------- -------- ------------ --------------- ---------
CEO LTIP - - - - - - - - 154 154 - 154 - 154
---------------- ----- ------- ------- -------- ------------------ ----------- --------- ----------- --------- ------- --------- -------- ------------ --------------- ---------
Treasury
shares - - (898) - - - - - - - - (898) - (898)
---------------- ----- ------- ------- -------- ------------------ ----------- --------- ----------- --------- ------- --------- -------- ------------ --------------- ---------
Dividends
declared
during
the year 29 - - - - - - - - - - (20,286) (20,286) (63,498) (83,784)
---------------- ----- ------- ------- -------- ------------------ ----------- --------- ----------- --------- ------- --------- -------- ------------ --------------- ---------
Balance
at
31 December
2011 158,637 395,928 (898) 5,058 - 8,432 (10,715) (210,046) 154 (207,117) 677,218 1,023,768 195,299 1,219,067
---------------- ----- ------- ------- -------- ------------------ ----------- --------- ----------- --------- ------- --------- -------- ------------ --------------- ---------
Other
comprehensive
(loss)/income - - - (8,388) - - 268 - - (8,120) - (8,120) - (8,120)
---------------- ----- ------- ------- -------- ------------------ ----------- --------- ----------- --------- ------- --------- -------- ------------ --------------- ---------
Profit
for the
year - - - - - - - - - - 63,071 63,071 63,795 126,866
---------------- ----- ------- ------- -------- ------------------ ----------- --------- ----------- --------- ------- --------- -------- ------------ --------------- ---------
Total
comprehensive
income
for 2012 - - - (8,388) - - 268 - - (8,120) 63,071 54,951 63,795 118,746
---------------- ----- ------- ------- -------- ------------------ ----------- --------- ----------- --------- ------- --------- -------- ------------ --------------- ---------
Capital
contribution
from
non-controlling
interest - - - - - - - - - - - - 39,568 39,568
---------------- ----- ------- ------- -------- ------------------ ----------- --------- ----------- --------- ------- --------- -------- ------------ --------------- ---------
CEO LTIP - - - - - - - - 291 291 - 291 - 291
---------------- ----- ------- ------- -------- ------------------ ----------- --------- ----------- --------- ------- --------- -------- ------------ --------------- ---------
Expiration
of dividends - - - - - - - - - - - - 733 733
---------------- ----- ------- ------- -------- ------------------ ----------- --------- ----------- --------- ------- --------- -------- ------------ --------------- ---------
Dividends
declared
during
the year 27 - - - - - - - - - - (20,278) (20,278) (34,877) (55,155)
---------------- ----- ------- ------- -------- ------------------ ----------- --------- ----------- --------- ------- --------- -------- ------------ --------------- ---------
Balance
at
31 December
2012 158,637 395,928 (898) (3,330) - 8,432 (10,447) (210,046) 445 (214,946) 720,011 1,058,732 264,518 1,323,250
---------------- ----- ------- ------- -------- ------------------ ----------- --------- ----------- --------- ------- --------- -------- ------------ --------------- ---------
1 Notes to the consolidated financial statements
For the year ended 31 December 2012
The financial information for the year ended 31 December 2012
and 2011 contained in this document does not constitute statutory
accounts as defined in section 435 of the Companies Act 2006. The
financial information for the years ended 31 December 2012 and 2011
have been extracted from the consolidated financial statements of
Hochschild Mining plc for the year ended 31 December 2012 which
have been approved by the directors on 12 March 2013 and will be
delivered to the Registrar of Companies in due course. The
auditor's report on those financial statements was unqualified and
did not contain a statement under section 498 of the Companies Act
2006.
2 Significant accounting policies
The accounting policies adopted are consistent with those of the
previous financial year except for the adoption of new
and amended standards.
The Group has adopted the following new and amended IFRS and
IFRIC interpretations during the year. Adoption of these revised
standards and interpretations did not have any effect on the
financial performance or position of the Group:
-- IAS 12 "Income Taxes", applicable for annual periods
beginning on or after 1 January 2012
Under IAS 12, an entity is to measure the deferred tax relating
to an asset depending on whether the entity expects to recover the
carrying amount of the asset through use or sale. The amendment
introduces a presumption that recovery of the carrying amount will
normally be through sale. The amendment is deemed to have no impact
on the financial statements of the Group.
-- IFRS 7 "Financial Instruments: Disclosures - Enhanced
derecognition disclosure requirements", applicable for annual
periods beginning on or after 1 July 2011
The amendment requires additional disclosure about financial
assets that have been transferred but not derecognised to enable
the user of the Group's financial statements to understand the
relationship with those assets that have not been derecognised and
their associated liabilities. In addition, the amendment requires
disclosures about the entity's continuing involvement in
derecognised assets to enable the users to evaluate the nature of,
and risks associated with, such involvement. The amendment affects
disclosure only and has no impact on the Group's financial position
or performance.
3 Segment reporting
The Group's activities are principally related to mining
operations which involve the exploration, production and sale of
gold and silver. Products are subject to the same risks and returns
and are sold through the same distribution channels. The Group
undertakes a number of activities solely to support mining
operations including power generation and services. Transfer prices
between segments are set on an arm's length basis in a manner
similar to that used for third-parties. Segment revenue, segment
expense and segment results include transfers between segments.
Those transfers are eliminated on consolidation.
For internal reporting purposes, management takes decisions and
assesses the performance of the Group through consideration of the
following reporting segments:
-- Operating unit - Ares, which generates revenue from the sale
of gold and silver
-- Operating unit - Arcata, which generates revenue from the
sale of gold, silver and concentrate
-- Operating unit - Pallancata, which generates revenue from the
sale of concentrate
-- Operating unit - San Jose, which generates revenue from the
sale of gold, silver, concentrate and dore
-- Operating unit - Moris, which generates revenue from the sale
of gold and silver
-- Exploration, which explores and evaluates areas of interest
in brownfield and greenfield sites with the aim of extending the
life-of-mine of existing operations and to assess the feasibility
of new mines. The exploration segment includes expenses reflected
through profit and loss and capitalised as assets
-- Other - includes the profit or loss generated by Empresa de
Transmisión Callalli S.A.C. (a power generation company), HMX, S.A.
de C.V. (a service company in Mexico), and the Selene mine, that
closed in 2009 and which, as a consequence, is not considered to be
a reportable segment .
The Group's administration, financing, other activities
(including other income and expense), and income taxes are managed
at a corporate level and are not allocated to operating
segments.
Segment information is consistent with the accounting policies
adopted by the Group. Management evaluates the financial
information based on International Financial Reporting Standards
(IFRS) as adopted for use in the European Union.
The Group measures the performance of its operating units by the
segment profit or loss that comprises gross profit, selling
expenses and exploration expenses.
Segment assets include items that could be allocated directly to
the segment.
(a) Reportable segment information
Adjustment
San and
Ares Arcata Pallancata Jose Moris Exploration(1) Other(2) eliminations Total
US$000 US$000 US$000 US$000 US$000 US$000 US$000 US$000 US$000
---------------- ------- -------- ---------- -------- ------- -------------- -------- ------------- ---------
Year ended
31 December
2012
---------------- ------- -------- ---------- -------- ------- -------------- -------- ------------- ---------
Revenue for
external
customers 57,580 175,802 257,725 310,384 15,931 - 530 - 817,952
---------------- ------- -------- ---------- -------- ------- -------------- -------- ------------- ---------
Inter segment
revenue - - - - - - 6,501 (6,501) -
---------------- ------- -------- ---------- -------- ------- -------------- -------- ------------- ---------
Total revenue 57,580 175,802 257,725 310,384 15,931 - 7,031 (6,501) 817,952
---------------- ------- -------- ---------- -------- ------- -------------- -------- ------------- ---------
Segment
profit/(loss) 8,635 82,020 132,305 127,015 7,697 (72,024) 3,565 4,342 293,555
---------------- ------- -------- ---------- -------- ------- -------------- -------- ------------- ---------
Others(3) (81,281)
---------------- ------- -------- ---------- -------- ------- -------------- -------- ------------- ---------
Profit from
continuing
operations
before income
tax 212,274
---------------- ------- -------- ---------- -------- ------- -------------- -------- ------------- ---------
Other segment
information
---------------- ------- -------- ---------- -------- ------- -------------- -------- ------------- ---------
Depreciation(4) (4,073) (23,124) (40,327) (53,801) (7) (860) (2,969) - (125,161)
---------------- ------- -------- ---------- -------- ------- -------------- -------- ------------- ---------
Amortisation - - - (1,452) - - (77) - (1,529)
---------------- ------- -------- ---------- -------- ------- -------------- -------- ------------- ---------
Assets
---------------- ------- -------- ---------- -------- ------- -------------- -------- ------------- ---------
Capital
expenditure 7,476 52,791 56,871 71,188 846 213,380 17,833 - 420,385
---------------- ------- -------- ---------- -------- ------- -------------- -------- ------------- ---------
Current assets 12,569 14,374 54,078 72,605 7,459 3,239 524 - 164,848
---------------- ------- -------- ---------- -------- ------- -------------- -------- ------------- ---------
Other
non-current
assets(5) 11,035 127,091 156,199 251,813 839 500,599 29,439 - 1,077,015
---------------- ------- -------- ---------- -------- ------- -------------- -------- ------------- ---------
Total segment
assets 23,604 141,465 210,277 324,418 8,298 503,838 29,963 - 1,241,863
---------------- ------- -------- ---------- -------- ------- -------------- -------- ------------- ---------
Not reportable
assets(6) - - - - - - 578,121 - 578,121
---------------- ------- -------- ---------- -------- ------- -------------- -------- ------------- ---------
Total assets 23,604 141,465 210,277 324,418 8,298 503,838 608,084 - 1,819,984
---------------- ------- -------- ---------- -------- ------- -------------- -------- ------------- ---------
1 Includes the asset acquisition of Andina Minerals Group (refer
to note 4(a)).
2 "Other" revenue primarily relates to revenues earned by HMX
S.A. de C.V. for services provided to the Moris mine, and the
Mexican exploration activities.
3 Comprised of administrative expenses of US$72,995,000, other
income of US$9,832,000, other expenses of US$9,525,000, impairment
of assets of US$245,000, share of gains of associates and joint
ventures of US$5,080,000, finance income of US$1,988,000, finance
expense of US$14,204,000, and foreign exchange loss of
US$1,212,000.
4 Includes US$18,000 of depreciation capitalised in Minera Santa
Cruz S.A.
5 Includes goodwill in respect of San Jose amounting to
US$2,091,000.
6 Not reportable assets are comprised of investments accounted
under the equity method of US$78,188,000, available-for-sale
financial assets of US$30,609,000, other receivables of
US$86,351,000, income tax receivable of US$23,023,000, deferred
income tax assets of US$856,000, other financial assets of
US$150,000 and cash and cash equivalents of US$358,944,000.
Adjustment
San and
Ares Arcata Pallancata Jose Moris Exploration Other(1) eliminations Total
US$000 US$000 US$000 US$000 US$000 US$000 US$000 US$000 US$000
------------------- ------- -------- ---------- -------- ------- ----------- -------- ------------- ---------
Year ended
31 December
2011
------------------- ------- -------- ---------- -------- ------- ----------- -------- ------------- ---------
Revenue for
external customers 68,097 209,239 352,642 325,302 32,298 - 84 987,662
------------------- ------- -------- ---------- -------- ------- ----------- -------- ------------- ---------
Inter segment
revenue - - - - - - 7,966 (7,966) -
------------------- ------- -------- ---------- -------- ------- ----------- -------- ------------- ---------
Total revenue 68,097 209,239 352,642 325,302 32,298 - 8,050 (7,966) 987,662
------------------- ------- -------- ---------- -------- ------- ----------- -------- ------------- ---------
Segment
profit/(loss) 20,297 125,209 230,281 160,017 9,086 (50,048) 6,864 (4,641) 497,065
------------------- ------- -------- ---------- -------- ------- ----------- -------- ------------- ---------
Others(2) (76,170)
------------------- ------- -------- ---------- -------- ------- ----------- -------- ------------- ---------
Profit from
continuing
operations
before income
tax 420,895
------------------- ------- -------- ---------- -------- ------- ----------- -------- ------------- ---------
Other segment
information
------------------- ------- -------- ---------- -------- ------- ----------- -------- ------------- ---------
Depreciation(3) (1,291) (22,502) (34,923) (43,343) (1,929) (383) (1,903) - (106,274)
------------------- ------- -------- ---------- -------- ------- ----------- -------- ------------- ---------
Amortisation - - - (1,454) - - (100) - (1,554)
------------------- ------- -------- ---------- -------- ------- ----------- -------- ------------- ---------
Assets
------------------- ------- -------- ---------- -------- ------- ----------- -------- ------------- ---------
Capital expenditure 2,673 33,040 55,059 62,994 555 61,629 1,997 - 217,947
------------------- ------- -------- ---------- -------- ------- ----------- -------- ------------- ---------
Current assets 4,798 31,826 62,348 59,064 7,338 276 2,761 - 168,411
------------------- ------- -------- ---------- -------- ------- ----------- -------- ------------- ---------
Other non-current
assets(4) 10,971 94,583 141,635 231,757 - 255,473 20,414 - 754,833
------------------- ------- -------- ---------- -------- ------- ----------- -------- ------------- ---------
Total segment
assets 15,769 126,409 203,983 290,821 7,338 255,749 23,175 - 923,244
------------------- ------- -------- ---------- -------- ------- ----------- -------- ------------- ---------
Not reportable
assets(5) - - - - - - 812,373 - 812,373
------------------- ------- -------- ---------- -------- ------- ----------- -------- ------------- ---------
Total assets 15,769 126,409 203,983 290,821 7,338 255,749 835,548 - 1,735,617
------------------- ------- -------- ---------- -------- ------- ----------- -------- ------------- ---------
1 "Other" revenue primarily relates to revenues earned by HMX
S.A. de C.V. for services provided to the Moris mine, and the
Mexican exploration activities.
2 Comprised of administrative expenses of US$64,354,000, other
income of US$7,062,000, other expenses of US$17,208,000, reversal
of impairment of assets of US$ 1,210,000, share of gains of
associates and joint ventures of US$11,446,000, finance income of
US$10,678,000, finance expense of US$23,442,000, and foreign
exchange loss of US$1,562,000.
3 Includes US$28,000 of depreciation capitalised in Minera
Hochschild Mexico S.A. de C.V. due to the San Felipe project.
4 Includes goodwill in respect of San Jose amounting to
US$2,091,000.
5 Not reportable assets are comprised of investments accounted
under the equity method of US$83,201,000, available-for-sale
financial assets of US$40,769,000, other receivables of
US$60,293,000, income tax receivable of US$601,000, deferred income
tax assets of US$Nil, other financial assets of US$28,000 and cash
and cash equivalents of US$627,481,000.
(b) Geographical information
Based on the entity-wide disclosure stated in IFRS 8, the
revenue for the period based on the country in which the customer
is located is as follows:
Year ended
31 December
----------------
2012 2011
US$000 US$000
------------------ ------- -------
External customer
------------------ ------- -------
USA 118,409 153,301
------------------ ------- -------
Peru 63,769 82,223
------------------ ------- -------
Canada 104,509 148,023
------------------ ------- -------
Germany 75,202 185,447
------------------ ------- -------
Switzerland 154,200 152,612
------------------ ------- -------
United Kingdom 40,664 50,540
------------------ ------- -------
Korea 260,719 215,516
------------------ ------- -------
Mexico 480 -
------------------ ------- -------
Total 817,952 987,662
------------------ ------- -------
Inter-segment
------------------ ------- -------
Peru 1,324 667
------------------ ------- -------
Mexico 5,177 7,299
------------------ ------- -------
Total 824,453 995,628
------------------ ------- -------
In the periods set out below, certain customers accounted for
greater than 10% of the Group's total revenues as detailed
in the following table:
Year ended 31 December
2012 Year ended 31 December 2011
--------------------------------- ---------------------------------
US$000 % Revenue Segment US$000 % Revenue Segment
----------------------- ------- --------- ------------- ------- --------- -------------
Pallancata Pallancata
LS Nikko 234,066 29% and San Jose 176,397 18% and San Jose
----------------------- ------- --------- ------------- ------- --------- -------------
Teck Metals Ltd.
(formerly Teck
Cominco Metals Pallancata Pallancata
Ltd) 104,509 13% and San Jose 148,023 15% and San Jose
----------------------- ------- --------- ------------- ------- --------- -------------
Argor Heraus 121,122 15% San Jose 96,060 10% San Jose
----------------------- ------- --------- ------------- ------- --------- -------------
Aurubis AG (formerly
Nordeutsche Affinerie Pallancata Pallancata
AG) 75,202 9% and San Jose 185,447 19% and San Jose
----------------------- ------- --------- ------------- ------- --------- -------------
Based on the entity-wide disclosure requirements set out in IFRS
8, non-current assets, excluding financial instruments and income
tax assets, were allocated based on the geographical area where the
assets are located as follows:
As at 31 December
-------------------
2012 2011
US$000 US$000
------------------------------------ ---------- -------
Peru 684,471 496,395
------------------------------------ ---------- -------
Argentina 251,935 231,892
------------------------------------ ---------- -------
Mexico 27,075 26,224
------------------------------------ ---------- -------
Chile 113,387 146
------------------------------------ ---------- -------
United Kingdom 78,335 83,377
------------------------------------ ---------- -------
Total non-current segment assets 1,155,203 838,034
------------------------------------ ---------- -------
Available-for-sale financial assets 30,609 40,769
------------------------------------ ---------- -------
Trade and other receivables 8,613 8,741
------------------------------------ ---------- -------
Deferred income tax assets 856 -
------------------------------------ ---------- -------
Total non-current assets 1,195,281 887,544
------------------------------------ ---------- -------
4 Acquisitions and disposals
(a) Acquisition of assets
Minera Quellopata S.A.C.
On 12 October 2010, the Group signed a Framework Agreement with
International Minerals Corporation ("IMZ"), through which the Group
acquired an additional 30% interest in the Inmaculada project
(totalling 60%) in exchange for: (i) the purchase of US$20,000,000
of common shares in IMZ by way of a private placement, (ii) a
payment of US$15,000,000, (iii) a commitment to fund the first
US$100,000,000 needed to plan, develop and construct a mining
operation within the Inmaculada property, and (iv) the transfer of
Minera del Suroeste S.A.C.'s ownership in Minas Pacapausa S.A.C.,
to Minera Suyamarca S.A.C. Minera Oro Vega which transferred to
Minera Quellopata S.A.C. ("Quellopata"), together with the
Puquiopata project. The Group is the operator of the new venture
pursuant to a separate management agreement similar in form and
substance to the Pallancata management agreement.
This transaction has been accounted for as an asset acquisition
on the basis that Quellopata has no existing processes.
As a result of the acquisition, the Group obtained control over
Quellopata and consolidated it as a subsidiary. The net assets
received in the asset acquisition were US$91,782,000 and the IMZ
interest generated by the transaction was US$36,940,000. At 31
December 2010, the Group recognised a contingent consideration of
US$39,243,000 and an obligation to IMZ of US$15,594,000.
During 2011 the Group paid to IMZ its obligation of
US$15,594,000.
Andina Minerals Inc
On 8 November 2012, the Group made a C$0.80 per share all-cash
offer for all of the issued and outstanding common shares of Andina
Minerals Inc ("Andina"), a TSX-V listed gold exploration company
with projects in Chile, for a total consideration of C$103,416,870.
The Board of Directors of Andina unanimously recommended that their
shareholders vote in favour of the transaction.
Andina's major asset, the 100% owned Volcan project, includes
the Dorado area. Andina also has a 49% share in the Group's
Encrucijada project, and this acquisition would bring the Group's
interest to 100%.
Andina is based in Alberta, Canada and is 100% owner of Quitovac
Mining Company Limited and Andina Holdings Inc
both based in Canada. Andina Holdings Inc owns 99.99% of Andina
Minerals Chile Limitada, based in Santiago, Chile. The Chilean
company owns two properties: Encrucijada and Volcan and 50% of
Sociedad Contractual Minera Pampa Buenos Aires.
At 31 December 2012, the Group had paid US$90,156,869, for
112,124,252 common shares of Andina, reaching 81.4% interest on a
fully diluted basis (basic 86.7%). As a result of the acquisition
the Group incurred directly attributable transaction costs of
US$11,441,742. The Group recognised a liability of US$13,787,427 in
respect of the Group's commitment to acquire 17,146,835 remaining
shares as at 31 December 2012.
The fair value total cost of assets acquired and liabilities
assumed comprise the following:
US$000
----------------------------------------------- -------
Cash and cash equivalents 3,190
----------------------------------------------- -------
Trade and other receivables 543
----------------------------------------------- -------
Evaluation and exploration assets 86,301
----------------------------------------------- -------
Property, plant and equipment 330
----------------------------------------------- -------
Water permits 26,583
----------------------------------------------- -------
Total assets 116,947
----------------------------------------------- -------
Accounts payable and other liabilities 1,559
----------------------------------------------- -------
Total liabilities 1,559
----------------------------------------------- -------
Net assets acquired 115,388
----------------------------------------------- -------
Cash consideration 90,157
----------------------------------------------- -------
Liability to acquire non-controlling interests 13,788
----------------------------------------------- -------
Transaction costs 11,443
----------------------------------------------- -------
Total 115,388
----------------------------------------------- -------
Cash paid to acquire controlling interest 90,157
----------------------------------------------- -------
Transaction cost paid 9,365
----------------------------------------------- -------
Less cash acquired (3,190)
----------------------------------------------- -------
Net cash flow on acquisition 96,332
----------------------------------------------- -------
Based on the Group's ownership interest as at 31 December 2012,
the Group was deemed to have control over Andina and has therefore
consolidated it as a subsidiary undertaking. The transaction has
been recognised as an asset acquisition. The fair value of the net
assets received was US$115,388,000.
The balance of US$13,787,427 was paid between January
(US$4,268,605) and February 2013 (US$9,518,822). The Group
completed the total acquisition on 20 February 2013. The total
consideration was settled in cash.
(b) Disposal of shares
Lake Shore Gold Corp.
On 14 October 2010 the Group entered into an agreement with RBC
Dominion Securities Inc., BMO Nesbitt Burns Inc. and CIBC World
Markets Inc. to dispose of 109,000,000 common shares held in Lake
Shore Gold (approximately 27.3%) pursuant to a bought deal
transaction, at a price of CAD$3.60 per share. The sale was
completed on 3 November 2010. After this transaction, the Group
held an interest of approximately 5.4%, no longer had the right to
Board representation and no longer exercised significant influence
over Lake Shore Gold. On 2 December 2010 the Group entered into a
Block Trade Letter Agreement ("the Agreement") with RBC Capital
Markets to dispose of the Group's remaining 21,540,992 common
shares in Lake Shore Gold at a price of CAD$3.70 per share raising
total net proceeds of CAD$79,701,670. Due to the size of the
combined sales (the initial disposal of 27.3% of Lake Shore Gold in
November 2010 and the subsequent disposal of the remaining 5.4%),
the second transaction was subject to shareholder approval which
was granted on 8 February 2011. The transaction closed on the same
date and a gain of US$6,385,878 was recognised in 2011 in respect
of the disposal.
5 Revenue
Year ended 31
December
----------------
2012 2011
US$000 US$000
-------------------------- ------- -------
Gold (from dore bars) 124,581 144,812
-------------------------- ------- -------
Silver (from dore bars) 153,509 155,122
-------------------------- ------- -------
Gold (from concentrate) 135,055 134,438
-------------------------- ------- -------
Silver (from concentrate) 404,277 553,206
-------------------------- ------- -------
Services 530 84
-------------------------- ------- -------
Total 817,952 987,662
-------------------------- ------- -------
Included within revenue is a loss of US$4,015,265 relating to
provisional pricing adjustments representing the change in the fair
value of embedded derivatives (2011: gain of US$12,395,086) arising
on sales of concentrates and dore (refer to note 2(r) of the Annual
Report and footnote 1 of note 22).
6 Cost of sales
Included in cost of sales are:
Year ended 31
December
-----------------
2012 2011
US$000 US$000
------------------------------------------------- -------- -------
Depreciation and amortisation 124,387 105,897
------------------------------------------------- -------- -------
Personnel expenses (note 10) 121,775 109,011
------------------------------------------------- -------- -------
Mining royalty (note 29) 9,672 17,950
------------------------------------------------- -------- -------
Change in products in process and finished goods (17,708) 6,893
------------------------------------------------- -------- -------
7 Administrative expenses
Year ended 31
December
----------------
2012 2011
US$000 US$000
----------------------------------------- ------- -------
Personnel expenses 40,006 32,376
----------------------------------------- ------- -------
Professional fees 6,180 6,256
----------------------------------------- ------- -------
Social and community welfare expenses(1) 6,459 7,717
----------------------------------------- ------- -------
Lease rentals 1,510 1,088
----------------------------------------- ------- -------
Travel expenses 2,443 1,878
----------------------------------------- ------- -------
Communications 990 823
----------------------------------------- ------- -------
Indirect taxes 3,723 3,147
----------------------------------------- ------- -------
Depreciation and amortisation 2,285 1,903
----------------------------------------- ------- -------
Technology and systems 828 565
----------------------------------------- ------- -------
Security 991 457
----------------------------------------- ------- -------
Supplies 238 453
----------------------------------------- ------- -------
Other 7,342 7,691
----------------------------------------- ------- -------
Total 72,995 64,354
----------------------------------------- ------- -------
1 Represents amounts expended by the Group on social and
community welfare activities surrounding its mining units.
8 Exploration expenses
Year ended
31 December
----------------
2012 2011
US$000 US$000
------------------------- ------- -------
Mine site exploration(1)
------------------------- ------- -------
Arcata 4,467 4,512
------------------------- ------- -------
Ares 1,507 2
------------------------- ------- -------
Sipan 1,415 -
------------------------- ------- -------
Pallancata 4,062 2,917
------------------------- ------- -------
San Jose 5,788 1,612
------------------------- ------- -------
Moris 313 -
------------------------- ------- -------
17,552 9,043
------------------------- ------- -------
Prospects(2)
------------------------- ------- -------
Peru 4,795 2,952
------------------------- ------- -------
Argentina 1,028 3,534
------------------------- ------- -------
Mexico 6,605 2,419
------------------------- ------- -------
Chile 9,580 6,558
------------------------- ------- -------
22,008 15,463
------------------------- ------- -------
Generative(3)
------------------------- ------- -------
Peru 4,798 7,093
------------------------- ------- -------
Argentina 141 117
------------------------- ------- -------
Mexico 497 562
------------------------- ------- -------
Chile 115 164
------------------------- ------- -------
5,551 7,936
------------------------- ------- -------
Personnel 13,865 10,882
------------------------- ------- -------
Others 5,636 4,012
------------------------- ------- -------
Total 64,612 47,336
------------------------- ------- -------
1 Mine-site exploration is performed with the purpose of
identifying potential minerals within an existing mine-site, with
the goal of maintaining or extending the mine's life.
2 Prospects expenditure relates to detailed geological
evaluations in order to determine zones which have mineralisation
potential that is economically viable for exploration. Exploration
expenses are generally incurred in the following areas: mapping,
sampling, geophysics, identification of local targets and
reconnaissance drilling.
3 Generative expenditure is very early stage exploration
expenditure related to the basic evaluation of the region to
identify prospects areas that have the geological conditions
necessary to contain mineral deposits. Related activities include
regional and field reconnaissance, satellite images, compilation of
public information and identification of exploration targets.
The following table lists the liabilities (generally payables)
outstanding at the year-end, which relate to the exploration
activities of Group companies engaged only in exploration.
Liabilities related to exploration activities incurred by Group
operating companies are not included since it is not possible to
separate the liabilities related to the exploration activities of
these companies from their operating liabilities.
As at 31 December
-------------------
2012 2011
US$000 US$000
---------------------------------------------- --------- --------
Liabilities related to exploration activities 2,082 1,808
---------------------------------------------- --------- --------
Cash flows of exploration activities are as follows:
As at 31 December
-------------------
2012 2011
US$000 US$000
--------- --------- --------
Payments 27,285 22,708
--------- --------- --------
9 Selling expenses
Year ended
31 December
----------------
2012 2011
US$000 US$000
--------------------------------------------------------- ------- -------
Transportation of dore, concentrate and maritime freight 5,745 5,215
--------------------------------------------------------- ------- -------
Sales commissions 2,264 3,300
--------------------------------------------------------- ------- -------
Personnel expenses 374 340
--------------------------------------------------------- ------- -------
Warehouse services 3,918 2,526
--------------------------------------------------------- ------- -------
Taxes 23,323 24,625
--------------------------------------------------------- ------- -------
Other 3,836 2,964
--------------------------------------------------------- ------- -------
Total 39,460 38,970
--------------------------------------------------------- ------- -------
10 Personnel expenses(1)
Year ended
31 December
----------------
2012 2011
US$000 US$000
--------------------------- ------- -------
Salaries and wages 129,208 90,061
--------------------------- ------- -------
Workers' profit sharing 18,487 31,444
--------------------------- ------- -------
Other legal contributions 21,084 17,780
--------------------------- ------- -------
Statutory holiday payments 7,600 6,202
--------------------------- ------- -------
Long Term Incentive Plan 7,891 2,574
--------------------------- ------- -------
Termination benefits 975 2,232
--------------------------- ------- -------
Other 13,079 12,170
--------------------------- ------- -------
Total 198,324 162,463
--------------------------- ------- -------
1 Personnel expenses are distributed in cost of sales,
administrative expenses, exploration expenses, selling expenses and
capitalised as property plant and equipment amounting to
US$121,775,000 (2011: US$109,011,000), US$40,006,000 (2011:
US$32,376,000), US$13,865,000 (2011: US$10,882,000), US$374,000
(2011: US$340,000) and US$22,304,000 (2011: US$9,854,000)
respectively.
Average number of employees for 2012 and 2011 were as
follows:
As at 31 December
-------------------
2012 2011
--------------- --------- --------
Peru 3,011 2,402
--------------- --------- --------
Argentina 1,226 1,188
--------------- --------- --------
Mexico 135 148
--------------- --------- --------
Chile 40 28
--------------- --------- --------
United Kingdom 12 11
--------------- --------- --------
Total 4,424 3,777
--------------- --------- --------
11 Pre-tax exceptional items
Year ended Year ended
31 December 31 December
2012 2011
US$000 US$000
---------------------------------------------------------- ------------ ------------
Other income
---------------------------------------------------------- ------------ ------------
Termination benefits(1) 1,099 -
---------------------------------------------------------- ------------ ------------
Total 1,099 -
---------------------------------------------------------- ------------ ------------
Other expenses
---------------------------------------------------------- ------------ ------------
Termination benefits(1) - (1,408)
---------------------------------------------------------- ------------ ------------
Total - (1,408)
---------------------------------------------------------- ------------ ------------
Impairment and write-off of assets (net)
---------------------------------------------------------- ------------ ------------
Impairment and write-off of assets (484) -
---------------------------------------------------------- ------------ ------------
Reversal of write-off of assets(2) 239 1,210
---------------------------------------------------------- ------------ ------------
Total (245) 1,210
---------------------------------------------------------- ------------ ------------
Share of post-tax losses of associates and joint
ventures accounted under equity method(3) (1,376) (261)
---------------------------------------------------------- ------------ ------------
Total (1,376) (261)
---------------------------------------------------------- ------------ ------------
Finance income
---------------------------------------------------------- ------------ ------------
Gain on sale and exchange of available-for-sale financial
assets(4) - 5,989
---------------------------------------------------------- ------------ ------------
Total - 5,989
---------------------------------------------------------- ------------ ------------
Finance costs
---------------------------------------------------------- ------------ ------------
Loss from changes in the fair value of financial
instruments(5) (1,334) (2,111)
---------------------------------------------------------- ------------ ------------
Total (1,334) (2,111)
---------------------------------------------------------- ------------ ------------
1 Relates to the provision of termination benefits due to
workers as a result of the closure of Moris mine accrued in 2011
and reversed in 2012. As at 31 December 2012 the restructuring plan
agreed at 31 December 2011 was not in effect, as Moris is still in
operation.
2 Corresponds to the reversal of the write-off recorded in 2010
related to the 100% dore project at the San Jose mine.
3 Corresponds to the loss from dilution related to Gold Resource
Corp. investment (note 18).
4 The 2011 amount corresponds to the gain on sale of the
remaining Lake Shore Gold shares held of US$6,386,000, net of the
loss generated by the sale of Golden Minerals Company shares of
US$397,000.
5 Mainly corresponds to the impairment of Iron Creek Capital
Corp, Brionor Resources and Empire Petroleum Corp of US$1,043,671,
US$105,000 and US$8,000 respectively. In 2011, mainly corresponds
to the fair value adjustment of the Golden Minerals Company and
Iron Creek Capital Corp warrants of US$1,563,000 and US$139,000
respectively. In addition the amount includes the impairment of
Brionor Resources and Empire Petroleum Corp of US$380,000 and
US$50,000 respectively.
12 Finance income and finance costs before exceptional items
Year ended Year ended
31 December 31 December
2012 2011
Before Before
exceptional exceptional
items items
US$000 US$000
----------------------------------------------------- ------------ ------------
Finance income
----------------------------------------------------- ------------ ------------
Interest on deposits and liquidity funds 1,429 2,225
----------------------------------------------------- ------------ ------------
Interest on loans to non-controlling interests (note
20) 123 2,352
----------------------------------------------------- ------------ ------------
Interest income 1,552 4,577
----------------------------------------------------- ------------ ------------
Other 436 112
----------------------------------------------------- ------------ ------------
Total 1,988 4,689
----------------------------------------------------- ------------ ------------
Finance costs
----------------------------------------------------- ------------ ------------
Interest on secured bank loans and long-term debt
(note 25) (1,924) (6,517)
----------------------------------------------------- ------------ ------------
Interest on convertible bond (note 25) (8,956) (8,760)
----------------------------------------------------- ------------ ------------
Interest expense (10,880) (15,277)
----------------------------------------------------- ------------ ------------
Unwind of discount rate (731) (1,684)
----------------------------------------------------- ------------ ------------
Loss from changes in the fair value of financial
instruments - (1,810)
----------------------------------------------------- ------------ ------------
Other (1,259) (2,560)
----------------------------------------------------- ------------ ------------
Total (12,870) (21,331)
----------------------------------------------------- ------------ ------------
13 Income tax expense
Year ended 31 December Year ended 31 December
2012 2011
---------------------------------- ----------------------------------
Before Before
exceptional Exceptional exceptional Exceptional
items items Total items items Total
US$000 US$000 US$000 US$000 US$000 US$000
--------------------------------- ------------ ----------- ------- ------------ ----------- -------
Current corporate income
tax from
continuing operations
--------------------------------- ------------ ----------- ------- ------------ ----------- -------
Current corporate income
tax charge 48,285 - 48,285 86,154 - 86,154
--------------------------------- ------------ ----------- ------- ------------ ----------- -------
Current mining royalty charge
(note 29) 3,834 - 3,834 2,536 - 2,536
--------------------------------- ------------ ----------- ------- ------------ ----------- -------
Current special mining tax
charge (note 29) 4,256 - 4,256 3,002 - 3,002
--------------------------------- ------------ ----------- ------- ------------ ----------- -------
Withholding taxes 1,571 - 1,571 4,963 - 4,963
--------------------------------- ------------ ----------- ------- ------------ ----------- -------
57,946 - 57,946 96,655 - 96,655
--------------------------------- ------------ ----------- ------- ------------ ----------- -------
Deferred taxation
--------------------------------- ------------ ----------- ------- ------------ ----------- -------
Origination and reversal
of temporary differences
from continuing operations 28,627 (141) 28,486 54,277 - 54,277
--------------------------------- ------------ ----------- ------- ------------ ----------- -------
Recognition of deferred tax
not
previously recognised following
a change in estimate/outlook (1,024) - (1,024) (2,375) - (2,375)
--------------------------------- ------------ ----------- ------- ------------ ----------- -------
27,603 (141) 27,462 51,902 - 51,902
--------------------------------- ------------ ----------- ------- ------------ ----------- -------
Total taxation charge in
the income statement 85,549 (141) 85,408 148,557 - 148,557
--------------------------------- ------------ ----------- ------- ------------ ----------- -------
The weighted average statutory income tax rate was 32.4% for
2012 and 31.8% for 2011. This is calculated as the average of the
statutory tax rates applicable in the countries in which the Group
operates, weighted by the profit/(loss) before tax of the Group
companies in their respective countries as included in the
consolidated financial statements.
The change in the weighted average statutory income tax rate is
due to a change in the weighting of profit/(loss) before tax in the
various jurisdictions in which the Group operates.
The tax related to items charged or credited to equity is as
follows:
As at 31 December
-------------------
2012 2011
US$000 US$000
--------------------------------------------------------- --------- --------
Deferred taxation:
--------------------------------------------------------- --------- --------
Deferred income tax relating to fair value gains on
available-for-sale financial assets (615) (7,164)
--------------------------------------------------------- --------- --------
Total tax charge in the statement of other comprehensive
income (615) (7,164)
--------------------------------------------------------- --------- --------
The total taxation charge on the Group's profit before tax
differs from the theoretical amount that would arise using the
weighted average tax rate applicable to the consolidated profits of
the Group companies as follows:
As at 31 December
-------------------
2012 2011
US$000 US$000
------------------------------------------------------ --------- --------
Profit from continuing operations before income tax 212,274 420,895
------------------------------------------------------ --------- --------
At average statutory income tax rate of 32.4% (2011:
31.8%) 68,814 133,881
------------------------------------------------------ --------- --------
Expenses not deductible for tax purposes 4,163 2,742
------------------------------------------------------ --------- --------
Non-taxable income(1) (275) (3,096)
------------------------------------------------------ --------- --------
Utilisation of losses in respect of deferred tax not
previously recognised(2) (1,024) (2,375)
------------------------------------------------------ --------- --------
Non-taxable share of gains of associates (1,181) (3,033)
------------------------------------------------------ --------- --------
Net deferred tax assets generated in the year not
recognised 6,795 8,636
------------------------------------------------------ --------- --------
Deferred tax recognised on special investment regime (2,481) (2,092)
------------------------------------------------------ --------- --------
Derecognition of deferred income tax assets 615 5,981
------------------------------------------------------ --------- --------
Adjustment of tax base of Minera Quellopata S.A.C. - (2,692)
------------------------------------------------------ --------- --------
Withholding tax 1,571 4,963
------------------------------------------------------ --------- --------
Special mining tax and mining royalty(3) 8,090 5,538
------------------------------------------------------ --------- --------
Foreign exchange rate effect(4) (1,303) 4,532
------------------------------------------------------ --------- --------
Other 1,624 (4,428)
------------------------------------------------------ --------- --------
At average effective income tax rate of 40.2% (2011:
35.3%) 85,408 148,557
------------------------------------------------------ --------- --------
Taxation charge attributable to continuing operations 85,408 148,557
------------------------------------------------------ --------- --------
Total taxation charge in the income statement 85,408 148,557
------------------------------------------------------ --------- --------
1 Mainly corresponds to the reversal of accrued non deductible
personnel expenses recorded in 2011 (2011: Mainly corresponds to
the non-taxable gain on the sale of Lake Shore Gold shares of
US$1,692,000).
2 The amount for 2012 mainly corresponds to the utilisation of
losses in Minas Santa Maria de Moris (2011: mainly corresponds to
the recognition of a previously unrecognised mine closure provision
of US$8,278,000).
3 Corresponds to the impact of the new mining royalty and
special mining tax (note 35).
4 Mainly corresponds to the foreign exchange effect from
converting tax bases and monetary items from local currency to the
functional currency.
14 Basic and diluted earnings per share
Earnings per share ("EPS") is calculated by dividing profit for
the year attributable to equity shareholders of the Company by the
weighted average number of ordinary shares issued during the
year.
The Company has dilutive potential ordinary shares.
As at 31 December 2012 and 2011, EPS has been calculated as
follows:
As at 31 December
-------------------
2012 2011
-------------------------------------------------------- --------- --------
Basic and earnings per share from continuing operations
-------------------------------------------------------- --------- --------
Before exceptional items (US$) 0.19 0.49
-------------------------------------------------------- --------- --------
Exceptional items (US$) - 0.01
-------------------------------------------------------- --------- --------
Total for the year and from continuing operations
(US$) 0.19 0.50
-------------------------------------------------------- --------- --------
Diluted earnings per share from continuing operations
-------------------------------------------------------- --------- --------
Before exceptional items (US$) 0.19 0.49
-------------------------------------------------------- --------- --------
Exceptional items (US$) - 0.01
-------------------------------------------------------- --------- --------
Total for the year and from continuing operations
(US$) 0.19 0.50
-------------------------------------------------------- --------- --------
Net profit from continuing operations before exceptional items
and attributable to equity holders of the parent is derived
as follows:
As at 31 December
-------------------
2012 2011
------------------------------------------------------------- -------- ---------
Profit for the year from continuing operations (US$000) 126,866 272,338
------------------------------------------------------------- -------- ---------
Less non-controlling interests (US$000) (63,795) (103,622)
------------------------------------------------------------- -------- ---------
Profit attributable to equity holders of the parent
- continuing operations (US$000) 63,071 168,716
------------------------------------------------------------- -------- ---------
Exceptional items after tax - attributable to equity
holders of the parent (US$000) 1,759 (2,826)
------------------------------------------------------------- -------- ---------
Profit from continuing operations before exceptional
items attributable to equity holders
of the parent (US$000) 64,830 165,890
------------------------------------------------------------- -------- ---------
Interest on convertible bond (US$000)(1) - 8,760
------------------------------------------------------------- -------- ---------
Diluted profit from continuing operations before exceptional
items attributable to equity
holders of the parent (US$000) 64,830 174,650
------------------------------------------------------------- -------- ---------
The following reflects the share data used in the basic and
diluted earnings per share computations:
As at 31 December
-------------------
2012 2011
---------------------------------------------------------- --------- --------
Basic weighted average number of ordinary shares in
issue (thousands) 338,022 338,022
---------------------------------------------------------- --------- --------
Dilutive potential ordinary shares related to convertible
bond (thousands)(1) - 18,161
---------------------------------------------------------- --------- --------
Diluted weighted average number of ordinary shares
in issue and dilutive potential
ordinary shares (thousands) 338,022 356,183
---------------------------------------------------------- --------- --------
1 The potential ordinary shares related to the convertible bond
have not been included in the calculation of diluted EPS for 2012
as they have an anti dilutive effect.
15 Property, plant and equipment
Mining Construction
properties Mine in progress
and development Land Plant closure and capital
costs and buildings and Equipment Vehicles asset advances Total
US$000 US$000 US$000(1) US$000 US$000 US$000 US$000
----------------------- ---------------- -------------- -------------- -------- -------- ------------ ---------
Year ended 31 December
2012
----------------------- ---------------- -------------- -------------- -------- -------- ------------ ---------
Cost
----------------------- ---------------- -------------- -------------- -------- -------- ------------ ---------
At 1 January 2012 382,556 143,764 264,948 4,614 63,185 70,836 929,903
----------------------- ---------------- -------------- -------------- -------- -------- ------------ ---------
Additions 148,148 4,337 34,469 98 103,319 290,371
----------------------- ---------------- -------------- -------------- -------- -------- ------------ ---------
Change in discount rate - - - - 688 - 688
----------------------- ---------------- -------------- -------------- -------- -------- ------------ ---------
Disposals - (62) (5,135) (314) - - (5,511)
----------------------- ---------------- -------------- -------------- -------- -------- ------------ ---------
Write-offs - - (1,289) (31) - - (1,320)
----------------------- ---------------- -------------- -------------- -------- -------- ------------ ---------
Change in mine closure
estimate - - - - 3,483 - 3,483
----------------------- ---------------- -------------- -------------- -------- -------- ------------ ---------
Transfers and other
movements 455 31,901 20,429 991 - (54,774) (998)
----------------------- ---------------- -------------- -------------- -------- -------- ------------ ---------
Transfers from
evaluation
and exploration assets 9,165 - - - - - 9,165
----------------------- ---------------- -------------- -------------- -------- -------- ------------ ---------
Foreign exchange - - 35 2 - - 37
----------------------- ---------------- -------------- -------------- -------- -------- ------------ ---------
At 31 December 2012 540,324 179,940 313,457 5,360 67,356 119,381 1,225,818
----------------------- ---------------- -------------- -------------- -------- -------- ------------ ---------
Accumulated
depreciation
and impairment
----------------------- ---------------- -------------- -------------- -------- -------- ------------ ---------
At 1 January 2012 233,103 70,750 118,832 2,091 42,637 936 468,349
----------------------- ---------------- -------------- -------------- -------- -------- ------------ ---------
Depreciation for the
year 73,340 16,975 31,974 701 2,171 - 125,161
----------------------- ---------------- -------------- -------------- -------- -------- ------------ ---------
Write-offs - - (811) (18) - - (829)
----------------------- ---------------- -------------- -------------- -------- -------- ------------ ---------
Disposals - (46) (3,190) (200) - - (3,436)
----------------------- ---------------- -------------- -------------- -------- -------- ------------ ---------
Foreign exchange - - 18 - - - 18
----------------------- ---------------- -------------- -------------- -------- -------- ------------ ---------
At 31 December 2012 306,443 87,679 146,823 2,574 44,808 936 589,263
----------------------- ---------------- -------------- -------------- -------- -------- ------------ ---------
Net book amount at 31
December 2012 233,881 92,261 166,634 2,786 22,548 118,445 636,555
----------------------- ---------------- -------------- -------------- -------- -------- ------------ ---------
1 The carrying value of plant and equipment held under finance
leases at 31 December 2012 was US$991,230 (2011: US$5,741,000 ).
Additions during
the year included US$Nil (2011: US$900,000) of plant and
equipment under finance leases. Leased assets are pledged as
security for the related finance lease.
There were no borrowing costs capitalised in property, plant and
equipment as no significant qualifying assets were constructed
during 2012 and 2011.
Mining Construction
properties Mine in progress
and development Land Plant closure and capital
costs and buildings and Equipment Vehicles asset advances Total
US$000 US$000 US$000(1) US$000 US$000 US$000 US$000
------------------------- ---------------- -------------- -------------- -------- -------- ------------ -------
Year ended 31 December
2011
------------------------- ---------------- -------------- -------------- -------- -------- ------------ -------
Cost
------------------------- ---------------- -------------- -------------- -------- -------- ------------ -------
At 1 January 2011 299,871 120,948 234,888 3,606 56,093 61,925 777,331
------------------------- ---------------- -------------- -------------- -------- -------- ------------ -------
Additions 79,284 5,806 16,345 9 782 43,654 145,880
------------------------- ---------------- -------------- -------------- -------- -------- ------------ -------
Change in discount rate - - - - 2,884 - 2,884
------------------------- ---------------- -------------- -------------- -------- -------- ------------ -------
Disposals - - (1,867) (155) - - (2,022)
------------------------- ---------------- -------------- -------------- -------- -------- ------------ -------
Write-offs (6,379) - (321) (21) - - (6,721)
------------------------- ---------------- -------------- -------------- -------- -------- ------------ -------
Change in mine closure
estimate - - - - 3,318 - 3,318
------------------------- ---------------- -------------- -------------- -------- -------- ------------ -------
Transfers and other
movements 509 17,040 16,028 1,192 - (34,769) -
------------------------- ---------------- -------------- -------------- -------- -------- ------------ -------
Transfers from evaluation
and
exploration assets 9,269 - - - - - 9,269
------------------------- ---------------- -------------- -------------- -------- -------- ------------ -------
Foreign exchange 2 (30) (125) (17) 108 26 (36)
------------------------- ---------------- -------------- -------------- -------- -------- ------------ -------
At 31 December 2011 382,556 143,764 264,948 4,614 63,185 70,836 929,903
------------------------- ---------------- -------------- -------------- -------- -------- ------------ -------
Accumulated depreciation
and impairment
------------------------- ---------------- -------------- -------------- -------- -------- ------------ -------
At 1 January 2011 179,672 52,987 94,332 1,562 40,766 1,098 370,417
------------------------- ---------------- -------------- -------------- -------- -------- ------------ -------
Depreciation for the
year 59,830 17,763 26,329 664 1,871 (183) 106,274
------------------------- ---------------- -------------- -------------- -------- -------- ------------ -------
Write-offs (6,379) - (261) (15) - - (6,655)
------------------------- ---------------- -------------- -------------- -------- -------- ------------ -------
Disposals - - (1,500) (104) - - (1,604)
------------------------- ---------------- -------------- -------------- -------- -------- ------------ -------
Transfers to evaluation
and
exploration assets (22) - - - - - (22)
------------------------- ---------------- -------------- -------------- -------- -------- ------------ -------
Foreign exchange 2 - (68) (16) - 21 (61)
------------------------- ---------------- -------------- -------------- -------- -------- ------------ -------
At 31 December 2011 233,103 70,750 118,832 2,091 42,637 936 468,349
------------------------- ---------------- -------------- -------------- -------- -------- ------------ -------
Net book amount at 31
December 2011 149,453 73,014 146,116 2,523 20,548 69,900 461,554
------------------------- ---------------- -------------- -------------- -------- -------- ------------ -------
16 Evaluation and exploration assets
Azuca Crespo Inmaculada San Felipe Dorado Others Total
US$000 US$000 US$000 US$000 US$000 US$000 US$000
------------------------- ------- ------- ---------- ---------- ------- ------- -------
Cost
------------------------- ------- ------- ---------- ---------- ------- ------- -------
Balance at 1 January
2011 28,339 55,771 91,507 56,824 - 21,664 254,105
------------------------- ------- ------- ---------- ---------- ------- ------- -------
Additions 30,014 9,927 16,920 39 - 15,949 72,849
------------------------- ------- ------- ---------- ---------- ------- ------- -------
Foreign exchange - (280) 62 (913) - - (1,131)
------------------------- ------- ------- ---------- ---------- ------- ------- -------
Transfers to property,
plant and equipment - - 188 - - (9,457) (9,269)
------------------------- ------- ------- ---------- ---------- ------- ------- -------
Balance at 31 December
2011 58,353 65,418 108,677 55,950 - 28,156 316,554
------------------------- ------- ------- ---------- ---------- ------- ------- -------
Additions 12,326 1,777 8,085 - 86,301 21,525 130,014
------------------------- ------- ------- ---------- ---------- ------- ------- -------
Foreign exchange - 276 - - - - 276
------------------------- ------- ------- ---------- ---------- ------- ------- -------
Transfers from/(to)
property plant and
equipment 125 144 - - - (8,509) (8,240)
------------------------- ------- ------- ---------- ---------- ------- ------- -------
Balance at 31 December
2012 70,804 67,615 116,762 55,950 86,301 41,172 438,604
------------------------- ------- ------- ---------- ---------- ------- ------- -------
Accumulated impairment
------------------------- ------- ------- ---------- ---------- ------- ------- -------
Balance at 1 January
2011 - 9,904 - 30,950 - 1,171 42,025
------------------------- ------- ------- ---------- ---------- ------- ------- -------
Transfers from property,
plant and equipment 22 - - - - - 22
------------------------- ------- ------- ---------- ---------- ------- ------- -------
Balance at 31 December
2011 22 9,904 - 30,950 - 1,171 42,047
------------------------- ------- ------- ---------- ---------- ------- ------- -------
Balance at 31 December
2012 22 9,904 - 30,950 - 1,171 42,047
------------------------- ------- ------- ---------- ---------- ------- ------- -------
Net book value as at
31 December 2011 58,331 55,514 108,677 25,000 - 26,985 274,507
------------------------- ------- ------- ---------- ---------- ------- ------- -------
Net book value as at
31 December 2012 70,782 57,711 116,762 25,000 86,301 40,001 396,557
------------------------- ------- ------- ---------- ---------- ------- ------- -------
There were no borrowing costs capitalised in evaluation and
exploration assets.
17 Intangible assets
Transmission Water Software
Goodwill line(1) permits(2) licences Total
US$000 US$000 US$000 US$000 US$000
--------------------------------- -------- ------------ ------------ --------- -------
Cost
--------------------------------- -------- ------------ ------------ --------- -------
Balance at 1 January 2011 2,091 22,157 - 1,100 25,348
--------------------------------- -------- ------------ ------------ --------- -------
Additions - - - 161 161
--------------------------------- -------- ------------ ------------ --------- -------
Foreign exchange difference - - - (1) (1)
--------------------------------- -------- ------------ ------------ --------- -------
Balance at 31 December 2011 2,091 22,157 - 1,260 25,508
--------------------------------- -------- ------------ ------------ --------- -------
Additions - - 26,583 5 26,588
--------------------------------- -------- ------------ ------------ --------- -------
Transfer - - - 72 72
--------------------------------- -------- ------------ ------------ --------- -------
Balance at 31 December 2012 2,091 22,157 26,583 1,337 52,168
--------------------------------- -------- ------------ ------------ --------- -------
Accumulated amortisation
--------------------------------- -------- ------------ ------------ --------- -------
Balance at 1 January 2011 - 4,232 - 950 5,182
--------------------------------- -------- ------------ ------------ --------- -------
Amortisation for the year(3) - 1,454 - 100 1,554
--------------------------------- -------- ------------ ------------ --------- -------
Balance at 31 December 2011 - 5,686 - 1,050 6,736
--------------------------------- -------- ------------ ------------ --------- -------
Amortisation for the year(3) - 1,452 - 77 1,529
--------------------------------- -------- ------------ ------------ --------- -------
Balance at 31 December 2012 - 7,138 - 1,127 8,265
--------------------------------- -------- ------------ ------------ --------- -------
Net book value as at 31 December
2011 2,091 16,471 - 210 18,772
--------------------------------- -------- ------------ ------------ --------- -------
Net book value as at 31 December
2012 2,091 15,019 26,583 210 43,903
--------------------------------- -------- ------------ ------------ --------- -------
1 The transmission line is amortised using the units of
production method. At 31 December 2012, the remaining amortisation
period is 12 years.
2 Corresponds to the acquisition of water permits of Andina
Minerals Group (refer to note 4(a)).
3 The amortisation for the period is included in cost of sales
and administrative expenses in the income statement.
The carrying amount of goodwill is reviewed annually to
determine whether it is in excess of its recoverable amount. The
value-in-use is determined at the cash-generating unit level, in
this case being the San Jose mine, by discounting the expected cash
flows estimated by management over the life of the mine.
The calculation of value-in-use is most sensitive to the
following assumptions:
-- Commodity prices - Commodity prices of gold and silver are
based on prices considered in the Group's 2013 budget (2011: 2012
budget) and external market consensus forecasts. The prices
considered in the 2012 (2011) impairment tests were:
Year 2012 2013 2014 2015 2016 2017 2018 2019-2023
-------------- ------- ------- ------- ------- ------- ------- ------- ---------
2012 - Gold
- US$/oz 1823.0 1723.0 1550.0 1411.0 1411.0 1411.0 1411.0
-------------- ------- ------- ------- ------- ------- ------- ------- ---------
2012 - Silver
- US$/oz 35.0 31.0 29.0 26.0 26.0 26.0 26.0
-------------- ------- ------- ------- ------- ------- ------- ------- ---------
2011 - Gold
- US$/oz 1,825.0 1,750.0 1,500.0 1,400.0 1,324.6 1,323.1 1,300.0 1,300.0
-------------- ------- ------- ------- ------- ------- ------- ------- ---------
2011 - Silver
- US$/oz 40.0 35.0 29.6 30.0 25.5 25.4 25.0 25.0
-------------- ------- ------- ------- ------- ------- ------- ------- ---------
-- Estimation of reserves and resources - Reserves and resources
are based on management's estimates using appropriate exploration
and evaluation techniques;
-- Production volumes and grades - Tonnage produced was
estimated at plant capacity with 12 days of maintenance per year
(2011: 12 days);
-- Capital expenditure - The cash flows for each mining unit
include capital expenditures to maintain the mine and to convert
resources to reserves;
-- Operating costs - Costs are based on historical information
from previous years and current mining conditions;
-- Discount rates - The cash flows are discounted at real
pre-tax rates that reflect the current market assessments of the
time value of money and the risks specific to the cash-generating
unit. These rates are based on the weighted average cost of capital
specific to each cash-generating unit. The pre-tax discount rate
used in the 2012 impairment test was 25.59% (2011: 24.18%).
Management believes that the following changes to the main
assumptions would cause the carrying value of the cash--generating
unit (including the goodwill) to equal its recoverable amount.
Therefore, any higher deviation would
cause the carrying value of goodwill to exceed its recoverable
amount and an impairment provision would be required.
2012 2011
Assumption Variation Variation
----------------------- ---------- ----------
Gold price (19.3)% (37.1)%
----------------------- ---------- ----------
Silver price (15.5)% (27.1)%
----------------------- ---------- ----------
Reserves and resources (109.6)% (67.9)%
----------------------- ---------- ----------
Costs 17.7% 35.3%
----------------------- ---------- ----------
Discount rates 99.4% 292.3%
----------------------- ---------- ----------
Headroom for the 2012 and 2011 impairment tests were
US$92,349,000 and US$193,591,000 respectively.
Cash flows used for impairment tests were based on the annual
2013 budget presented and approved by the Board, subject to a
number of conditions, in November 2012. The starting point in all
cases was January 2013. Individual cash flows are based on the
annual 2013 budget and an estimated set of reserves and resources
as of December 2012 provided by the Exploration and Operations
teams. In addition, in respect of subsequent years, the Group makes
the necessary conservative adjustments to accurately reflect the
nature of each operation. In the case of revenue, production
figures were estimated assuming reserve grade (after extracted
tonnage) and full capacity. In the case of operating expenses, all
figures are based on the 2013 budget. Future capital expenditure is
based on the 2013 budget, excluding one-off expenses and
considering the Operations team's view on developments and
infrastructure, according to the estimated set of reserves and
resources.
18 Investments accounted under equity method
Gold Resource Corp.
The Group has a 24.8% interest on a fully diluted basis in Gold
Resource Corp., which is involved in the exploration for and
production of gold and silver in Mexico. The company was organised
under the laws of the State of Colorado, USA, where the principal
executive offices are located. The operations are conducted through
two wholly-owned subsidiaries, located in Mexico, Don David Gold
S.A. de C.V. and Golden Trump Resources S.A. de C.V.
Based on publically available information, at 31 December 2012,
the capital and reserves were US$112,254,000 (31.12.2011:
US$132,582,000), and US$2,035,000 (31.12.2011: US$3,978,000) (loss
on currency translation) respectively.
The profit for the period was US$26,056,000 (2011:
US$46,464,000).
The following table summarises the financial information of the
Group's investment in Gold Resource Corp:
Year ended
31 December
---------------------------------------------------------- ------------------
2012 2011
US$000 US$000
---------------------------------------------------------- -------- --------
Share of the associate's statement of financial position:
---------------------------------------------------------- -------- --------
Current assets 17,872 20,258
---------------------------------------------------------- -------- --------
Non-current assets 51,002 57,919
---------------------------------------------------------- -------- --------
Current liabilities (3,742) (7,605)
---------------------------------------------------------- -------- --------
Non-current liabilities (11,300) (11,727)
---------------------------------------------------------- -------- --------
Net assets 53,832 58,845
---------------------------------------------------------- -------- --------
Goodwill on acquisition 24,356 24,356
---------------------------------------------------------- -------- --------
Share of the associate's revenue, profit and loss:
---------------------------------------------------------- -------- --------
Revenue 33,737 26,496
---------------------------------------------------------- -------- --------
Profit(1) 5,080 11,446
---------------------------------------------------------- -------- --------
Carrying amount of the investment 78,188 83,201
---------------------------------------------------------- -------- --------
1 Share of the associate's profit in 2012 includes (1) a
pre-exceptional gain from the Group's share in the results of the
period of Gold Resource Corp. of US$6,456,000 (2011: US$11,707,000)
and (2) an exceptional loss from dilution of US$1,376,000 (2011:
US$261,000).
19 Available-for-sale financial assets
Year ended
31 December
-----------------
2012 2011
US$000 US$000
------------------------------------- ------- --------
Beginning balance 40,769 153,620
------------------------------------- ------- --------
Additions(1) - 2,910
------------------------------------- ------- --------
Impairment (891) (198)
------------------------------------- ------- --------
Fair value change recorded in equity (9,269) (33,078)
------------------------------------- ------- --------
Disposals(2) - (82,485)
------------------------------------- ------- --------
Ending balance 30,609 40,769
------------------------------------- ------- --------
1 The 2011 amount represents the fair value of shares at the
date of acquisition and mainly includes: (i) the conversion of
Golden Minerals Company warrants into shares of U$2,419,000, (ii)
the conversion of Iron Creek Capital Corp warrants into shares of
US$83,000 and the purchase of shares of Iron Creek Capital Corp.
for US$408,000.
2 Sale of: (i) 21,540,992 shares of Lake Shore Gold Corp, and
(ii) 104,889 shares of Golden Minerals Company.
Available-for-sale financial assets include the following:
Year ended
31 December
----------------
2012 2011
US$000 US$000
------------------------------------------------- ------- -------
Equity securities - quoted Canadian companies(1) 17,800 27,175
------------------------------------------------- ------- -------
Equity securities - quoted US companies 23 31
------------------------------------------------- ------- -------
Equity securities - quoted British companies 777 1,722
------------------------------------------------- ------- -------
Equity securities - unquoted(2) 12,009 11,841
------------------------------------------------- ------- -------
Total 30,609 40,769
------------------------------------------------- ------- -------
1 Mainly includes International Minerals Corporation shares of
US$15,169,000 (2011: US$21,414,000).
2 Includes Pembrook Mining Corp and ECI Exploration and Mining
Inc. shares.
During the period there were no reclassifications between quoted
and unquoted investments.
The fair value of the listed shares is determined by reference
to published price quotations in an active market.
The investments in unlisted shares (Pembrook Mining Corp. and
ECI Exploration and Mining Inc.) were recognised at
cost given that there is not an active market for these
investments. The investment in ECI Exploration and Mining Inc. is
fully impaired.
Available-for-sale financial assets are denominated in the
following currencies:
2012 2011
US$000 US$000
----------------- ------- -------
Canadian dollars 29,809 39,016
----------------- ------- -------
US dollars 23 31
----------------- ------- -------
Pound sterling 777 1,722
----------------- ------- -------
Total 30,609 40,769
----------------- ------- -------
20 Trade and other receivables
As at 31 December
------------------------------------------
2012 2011
-------------------- --------------------
Non-current Current Non-current Current
US$000 US$000 US$000 US$000
-------------------------------------------------- ----------- ------- ----------- -------
Trade receivables - 88,435 - 115,379
-------------------------------------------------- ----------- ------- ----------- -------
Advances to suppliers - 17,916 - 13,008
-------------------------------------------------- ----------- ------- ----------- -------
Credit due from exports of Minera Santa Cruz 5,609 2,578 5,413 964
-------------------------------------------------- ----------- ------- ----------- -------
Due from non-controlling interests(1) - 2,224 - 1,025
-------------------------------------------------- ----------- ------- ----------- -------
Receivables from related parties (note 28) - 1,017 - 932
-------------------------------------------------- ----------- ------- ----------- -------
Loans to employees 2,276 1,608 2,051 1,350
-------------------------------------------------- ----------- ------- ----------- -------
Interest receivable - 85 - 711
-------------------------------------------------- ----------- ------- ----------- -------
Receivable from Kaupthing, Singer and Friedlander
Bank - 361 - 515
-------------------------------------------------- ----------- ------- ----------- -------
Other 102 6,575 23 1,986
-------------------------------------------------- ----------- ------- ----------- -------
Provision for impairment(2) - (3,819) - (2,406)
-------------------------------------------------- ----------- ------- ----------- -------
Financial assets classified as receivables 7,987 116,980 7,487 133,464
-------------------------------------------------- ----------- ------- ----------- -------
Prepaid expenses 626 10,237 526 6,305
-------------------------------------------------- ----------- ------- ----------- -------
Value Added Tax (VAT)(3) - 38,956 728 27,162
-------------------------------------------------- ----------- ------- ----------- -------
Total 8,613 166,173 8,741 166,931
-------------------------------------------------- ----------- ------- ----------- -------
The fair values of trade and other receivables approximate their
book value.
1 Corresponds to an amount receivable from Iron Creek Capital
Corp. (2011: loan to International Minerals Corporation).
2 Includes the provision for impairment of trade receivable from
a customer in Peru of US$1,108,000 (2011: US$1,108,000), the
impairment of deposits in Kaupthing, Singer and Friedlander of
US$361,000 (2011: US$515,000) and other receivables of US$2,350,000
(2011: US$783,000).
3 This includes an amount of US$18,736,000 (2011: US$16,315,000)
VAT paid related to the San Jose project that will be recovered
through future sales of gold and silver by Minera Santa Cruz S.A.
It also includes the VAT of Minera Suyamarca of US$6,388,000 (2011:
US$3,040,000), Compañía Minera Ares S.A.C. of US$8,574,000 (2011:
US$6,503,000) and Minas Santa María de Moris of US$2,445,000 (2011:
US$1,256,000). The VAT is valued at its recoverable amount.
Movements in the provision for impairment of receivables:
Individually
impaired Total
US$000 US$000
----------------------------- ------------ -------
At 1 January 2011 2,533 2,533
----------------------------- ------------ -------
Provided for during the year 76 76
----------------------------- ------------ -------
Released during the year (203) (203)
----------------------------- ------------ -------
At 31 December 2011 2,406 2,406
----------------------------- ------------ -------
Provided for during the year 1,567 1,567
----------------------------- ------------ -------
Released during the year (154) (154)
----------------------------- ------------ -------
At 31 December 2012 3,819 3,819
----------------------------- ------------ -------
at 31 December, the ageing analysis of financial assets
classified as receivables net of impairment is as follows:
Past due but not impaired
------------------------------------------------
Neither
past Less Over
due nor than 30 to 61 to 91 to 120
Total impaired 30 days 60 days 90 days 120 days days
Year US$000 US$000 US$000 US$000 US$000 US$000 US$000
----- ------- --------- -------- -------- -------- --------- -------
2012 124,967 124,967 - - - - -
----- ------- --------- -------- -------- -------- --------- -------
2011 140,951 140,951 - - - - -
----- ------- --------- -------- -------- -------- --------- -------
21 Inventories
As at As at
31 December 31 December
2012 2011
US$000 US$000
--------------------------------------- ------------ ------------
Finished goods 4,874 1,791
--------------------------------------- ------------ ------------
Products in process 28,162 13,537
--------------------------------------- ------------ ------------
Raw materials 1 5
--------------------------------------- ------------ ------------
Supplies and spare parts 49,021 40,240
--------------------------------------- ------------ ------------
82,058 55,573
--------------------------------------- ------------ ------------
Provision for obsolescence of supplies (5,645) (2,541)
--------------------------------------- ------------ ------------
Total 76,413 53,032
--------------------------------------- ------------ ------------
Finished goods include ounces of gold and silver, dore and
concentrate. Dore is an alloy containing a variable mixture of
silver, gold and minor impurities delivered in bar form to refiners
and is considered a product in process. The refined products are
then sold to the customers and/or refiners. Concentrate is a
product containing sulphides with a variable content of base and
precious metals and is sold to smelters.
The amount of dore on hand at 31 December 2012 included in
products in process is US$9,370,000 (2011: US$1,379,000).
As part of the Group's short-term financing policies, it
acquires pre-shipment loans which are guaranteed by the sales
contracts.
The amount of expense recognised in profit and loss related to
the consumption of inventory of supplies, spare parts and raw
materials is US$85,651,000 (2011: US$72,105,000).
Movements in the provision for obsolescence comprise the amount
of the expense related to the increase of the provision of
US$3,608,000 and the reversal of US$504,000 relating to the sale of
supplies and spare parts, that had been provided for (2011:
US$695,000).
The amount of income relating to the reversal of the inventory
provision is US$nil (2011: US$21,000).
22 Other financial assets and liabilities
As at 31 December
-------------------
2012 2011
US$000 US$000
---------------------------------------------------- --------- --------
Other financial assets
---------------------------------------------------- --------- --------
Warrants in Iron Creek Capital Corp. 1 28
---------------------------------------------------- --------- --------
Bonds 149 -
---------------------------------------------------- --------- --------
Total financial assets at fair value through profit
or loss 150 28
---------------------------------------------------- --------- --------
Other financial liabilities
---------------------------------------------------- --------- --------
Embedded derivatives(1) 6,891 12,831
---------------------------------------------------- --------- --------
Total financial liabilities at fair value through
profit or loss 6,891 12,831
---------------------------------------------------- --------- --------
1 Sales of concentrate and certain gold and silver volumes are
provisionally priced at the time the sale is recorded. The price is
then adjusted after an agreed period of time (usually linked to the
length of time it takes for the smelter to refine and sell the
concentrate or for the refiner to process the dore into gold and
silver), with the Group either paying or receiving the difference
between the provisional price and the final price. This price
exposure is considered to be an embedded derivative in accordance
with IAS 39 "Financial Instruments: Recognition and Measurement".
The gain or loss that arises on the fair value of the embedded
derivative is recorded in "Revenue" (refer to note 5).
23 Cash and cash equivalents
As at 31 December
-------------------
2012 2011
US$000 US$000
------------------------------------------------------- --------- --------
Cash at bank 322 349
------------------------------------------------------- --------- --------
Liquidity funds(1) 72,803 370,021
------------------------------------------------------- --------- --------
Current demand deposit accounts(2) 61,654 45,030
------------------------------------------------------- --------- --------
Time deposits(3) 224,165 212,081
------------------------------------------------------- --------- --------
Cash and cash equivalents considered for the statement
of cash flows(4) 358,944 627,481
------------------------------------------------------- --------- --------
The fair value of cash and cash equivalents approximates their
book value. The Group does not have undrawn borrowing facilities
available in the future for operating activities or capital
commitments.
1 The liquidity funds are mainly invested in certificates of
deposit, commercial papers and floating rate notes with a weighted
average maturity of 5 days as at 31 December 2012 (2011: average of
18 days). In addition, liquidity funds include US Treasury bonds
amounting to US$49,967,000 (2011: US$199,924,000).
2 Relates to bank accounts which are freely available and bear
interest.
3 These deposits have an average maturity of 36 days (2011:
Average of 32 days).
4 Funds deposited in Argentinean institutions are effectively
restricted for transfer to other countries, and they are invested
locally. Included within cash and cash equivalents at 31 December
2012 is US$25,452,000 (2011: US$nil), which is not readily
available for use in subsidiaries outside of Argentina.
24 Trade and other payables
As at 31 December
----------------- -------------------
2012 2011
----------------- -------------------
Non- Non-
current Current current Current
US$000 US$000 US$000 US$000
---------------------------------------------- -------- ------- ---------- -------
Trade payables(1) - 76,012 - 57,720
---------------------------------------------- -------- ------- ---------- -------
Salaries and wages payable(2) - 31,935 - 24,748
---------------------------------------------- -------- ------- ---------- -------
Dividends payable - 2,242 - 9,797
---------------------------------------------- -------- ------- ---------- -------
Taxes and contributions - 9,077 - 6,302
---------------------------------------------- -------- ------- ---------- -------
Accrued expenses - 383 8 7,004
---------------------------------------------- -------- ------- ---------- -------
Guarantee deposits - 6,325 - 4,197
---------------------------------------------- -------- ------- ---------- -------
Mining royalty (note 35) - 1,630 - 1,205
---------------------------------------------- -------- ------- ---------- -------
Deferred income(3) - 4,000 - -
---------------------------------------------- -------- ------- ---------- -------
Amount payable to non-controlling interest(4) - 13,787 - -
---------------------------------------------- -------- ------- ---------- -------
Accounts payable to related parties (note 30) - - - 32
---------------------------------------------- -------- ------- ---------- -------
Other - 4,194 - 6,032
---------------------------------------------- -------- ------- ---------- -------
Total - 149,585 8 117,037
---------------------------------------------- -------- ------- ---------- -------
The fair value of trade and other payables approximate their
book values.
1 Trade payables relate mainly to the acquisition of materials,
supplies and contractors' services. These payables do not accrue
interest and no guarantees have been granted.
2 Salaries and wages payable were as follows:
2012 2011
US$000 US$000
----------------------------------- ------- -------
Remuneration payable 26,404 21,039
----------------------------------- ------- -------
Board members' remuneration 581 652
----------------------------------- ------- -------
Executive Long Term Incentive Plan 4,950 3,057
----------------------------------- ------- -------
Total 31,935 24,748
----------------------------------- ------- -------
3 The deferred income represents an advance receipt in respect
of an option granted to a third party to acquire the Group's San
Felipe project in Mexico.
4 Amount payable to complete the purchase of Andina Minerals Inc
non-controlling shareholders' interests (note 4(a)).
25 Borrowings
As at 31 December
----------------------------------------------------------
2012 2011
---------------------------- ----------------------------
Effective Non- Effective Non-
interest current Current interest current Current
rate US$000 US$000 rate US$000 US$000
--------------------------------------------------------- --------- -------- ------- --------- -------- -------
Secured bank loans (a)
--------------------------------------------------------- --------- -------- ------- --------- -------- -------
1.3% to
* Pre-shipment loans in Minera Santa Cruz (note 21) - - - 6.0% - 38,500
--------------------------------------------------------- --------- -------- ------- --------- -------- -------
3.25%
* Leasing agreement with Banco de Credito del Peru 3.5% - 336 to 3.5% 336 760
--------------------------------------------------------- --------- -------- ------- --------- -------- -------
* Leasing agreement with Banco Interamericano de 5% to
Finanzas 6% - 24 6% 24 461
--------------------------------------------------------- --------- -------- ------- --------- -------- -------
Convertible bond payable
(b) 5.75% 106,850 6,613 5.75% 104,506 6,613
--------------------------------------------------------- --------- -------- ------- --------- -------- -------
Total 106,850 6,973 104,866 46,334
--------------------------------------------------------- --------- -------- ------- --------- -------- -------
(a) The following table demonstrates the present value and
maturity of future minimum lease payments as at 31 December 2012
and 2011:
As at 31 December
-------------------
2012 2011
US$000 US$000
------------------------ --------- --------
Not later than one year 360 1,221
------------------------ --------- --------
Between 1 and 2 years - 360
------------------------ --------- --------
Between 2 and 5 years - -
------------------------ --------- --------
Total 360 1,581
------------------------ --------- --------
The following table reconciles the total minimum lease payments
and their present values as at 31 December 2012 and 2011:
As at 31 December
-------------------
2012 2011
US$000 US$000
----------------------------- --------- --------
Present value of leases 360 1,581
----------------------------- --------- --------
Future interest 4 40
----------------------------- --------- --------
Total minimum lease payments 364 1,621
----------------------------- --------- --------
The carrying amount of net lease liabilities approximate their
fair value.
(b) Convertible bond payable
Relates to the placement of US$115,000,000 of senior unsecured
convertible bonds, due 2014, which are convertible into ordinary
shares of Hochschild Mining plc. The bonds have a coupon of 5.75%
per annum payable semi-annually on 28 January and 28 July of each
year. The issuer has the option to call the bonds on or after 20
October 2012 until maturity in the event the trading price of the
ordinary shares exceeds 130% of the conversion price over a certain
period. In addition, the Group has the right to redeem the bonds
if, at any time, the aggregate principal amount of the bonds
outstanding is equal to or less than 15% of the aggregate principal
amount of the bonds initially issued.
The following information has to be considered for conversion of
the bonds into ordinary shares:
-- Conversion Price (before adjustment for the recommended 2011
final dividend): GBP 3.94;
-- Fixed Exchange Rate: US$1.59/GBP 1.00.
The balance as at 31 December 2012 is comprised of the principal
of US$115,000,000 (2011: US$115,000.000) plus accrued interest of
US$9,636,000 (2011: US$7,292,000), net of transaction costs of
US$2,741,000 (2011: US$2,741,000) and the bond equity component of
US$8,432,000 (2011: US$8,432,000).
The maturity of non-current borrowings is as follows:
As at 31 December
-------------------
2012 2011
US$000 US$000
---------------------- --------- --------
Between 1 and 2 years 106,850 1,039
---------------------- --------- --------
Between 2 and 5 years - 103,827
---------------------- --------- --------
Over 5 years - -
---------------------- --------- --------
Total 106,850 104,866
---------------------- --------- --------
The carrying amount of current borrowings approximates their
fair value. The carrying amount and fair value of the non--current
borrowings are as follows:
Carrying amount Fair value
as at 31 December as at 31 December
-------------------- --------------------
2012 2011 2012 2011
US$000 US$000 US$000 US$000
------------------------- --------- --------- --------- ---------
Secured bank loans - 360 - 375
------------------------- --------- --------- --------- ---------
Convertible bond payable 106,850 104,506 112,867 116,413
------------------------- --------- --------- --------- ---------
Total 106,850 104,866 112,867 116,788
------------------------- --------- --------- --------- ---------
26 Provisions
Provision Long
for Workers' Contributions term
mine profit to Peruvian incentive Contingent
Closure Sharing Government Plan Consideration Other Total
US$000(1) US$000(2) US$000 US$000(3) US$000(4) US$000 US$000
---------------------- ---------- ---------- ------------- ---------- -------------- ------- --------
At 1 January 2011 62,026 21,307 1,820 1,061 39,243 2,857 128,314
---------------------- ---------- ---------- ------------- ---------- -------------- ------- --------
Additions 782 31,444 38 2,594 - 1,000 35,858
---------------------- ---------- ---------- ------------- ---------- -------------- ------- --------
Accretion 533 - - - 204 - 737
---------------------- ---------- ---------- ------------- ---------- -------------- ------- --------
Change in discount
rate 3,541 - - - 313 - 3,854
---------------------- ---------- ---------- ------------- ---------- -------------- ------- --------
Change in estimate(5) 10,856 - - - 7 - 10,863
---------------------- ---------- ---------- ------------- ---------- -------------- ------- --------
Payments (4,113) (23,398) (1,776) - (7,389) (484) (37,160)
---------------------- ---------- ---------- ------------- ---------- -------------- ------- --------
Foreign exchange - 478 (82) - - - 396
---------------------- ---------- ---------- ------------- ---------- -------------- ------- --------
At 31 December 2011 73,625 29,831 - 3,655 32,378 3,373 142,862
---------------------- ---------- ---------- ------------- ---------- -------------- ------- --------
Less current portion (9,791) (29,831) - - (32,378) (2,432) (74,432)
---------------------- ---------- ---------- ------------- ---------- -------------- ------- --------
Non-current portion 63,834 - - 3,655 - 941 68,430
---------------------- ---------- ---------- ------------- ---------- -------------- ------- --------
At 1 January 2012 73,625 29,831 - 3,655 32,378 3,373 142,862
---------------------- ---------- ---------- ------------- ---------- -------------- ------- --------
Additions - 18,487 - 7,322 - 1,041 26,850
---------------------- ---------- ---------- ------------- ---------- -------------- ------- --------
Accretion 123 - - - - - 123
---------------------- ---------- ---------- ------------- ---------- -------------- ------- --------
Change in discount
rate 769 - - - - - 769
---------------------- ---------- ---------- ------------- ---------- -------------- ------- --------
Change in estimate(5) 3,362 - - - - - 3,362
---------------------- ---------- ---------- ------------- ---------- -------------- ------- --------
Payments (3,667) (30,893) - - (32,222) - (66,782)
---------------------- ---------- ---------- ------------- ---------- -------------- ------- --------
Amounts transferred
to payables - - - (4,950) - - (4,950)
---------------------- ---------- ---------- ------------- ---------- -------------- ------- --------
Foreign exchange 2 1,124 - - (156) 34 1,004
---------------------- ---------- ---------- ------------- ---------- -------------- ------- --------
At 31 December 2012 74,214 18,549 - 6,027 - 4,448 103,238
---------------------- ---------- ---------- ------------- ---------- -------------- ------- --------
Less current portion (4,105) (18,549) - (1,211) - (2,823) (26,688)
---------------------- ---------- ---------- ------------- ---------- -------------- ------- --------
Non-current portion 70,109 - - 4,816 - 1,625 76,550
---------------------- ---------- ---------- ------------- ---------- -------------- ------- --------
1 The provision represents the discounted values of the
estimated cost to decommission and rehabilitate the mines at the
expected date of closure of each of the mines. The present value of
the provision has been calculated using a real pre-tax annual
discount rate, based on a US Treasury bond of an appropriate tenure
adjusted for the impact of quantitative easing as at 31 December
2012 and 2011 respectively, and the cash flows have been adjusted
to reflect the risk attached to these cash flows. Uncertainties on
the timing for use of this provision include changes in the future
that could impact the time of closing the mines, as new resources
and reserves are discovered.
2 Corresponds to the legal and voluntary workers' profit sharing
of the Group. Legal workers' profit sharing represents 8% of
taxable income of Peruvian companies. Voluntary workers' profit
sharing is determined by the Group taking into account the market
conditions of employment. The balance of the provision as at 31
December 2012 is: (i) Legal US$5,788,000 (2011: US$21,584,000),
(ii) Voluntary US$12,761,000 (2011: US$8,247,000).
3 Corresponds to the provision related to awards granted under
the Long Term Incentive Plan to designated personnel of the Group.
Includes the following benefits: (i) 2012 awards, granted in March
2012, payable in March 2015, (ii) 2011 awards, granted in April
2011, payable in April 2014, and (iii) Exploration incentive plan
awards, granted in January 2011, payable 50% in March 2013 and 50%
in March 2014. Only employees who remain in the Group's employment
on the vesting date will be entitled to a cash payment, subject to
exceptions approved by the Remuneration Committee of the Board. The
provision represents the discounted values of the estimated cost of
the long-term employee benefit. In 2012 there is a provision of
US$7,322,000 (2011: US$2,594,000) that is disclosed under
administrative expenses US$5,420,000 (2011: US$1,467,000),
exploration expenses US$843,000 (2011: US$146,000) and capitalised
as evaluation and exploration expenses US$1,059,000 (2011:
US$981,000). The amount of US$4,950,000 corresponds to the 2010
award and was transferred to salary and wages payable as the
performance period ended at 31 December 2012 (note 24(2)).
4 This contingent consideration provision relates to
International Minerals Corporation's discounted share of
Hochschild's commitment to fund the first $100,000,000 needed to
plan, develop and construct mining operations within the Inmaculada
property. The amount of US$32,222,000 was settled as a capital
contribution from non-controlling interest (refer to consolidated
statement of changes in equity).
5 Based on the 2012 internal review of mine rehabilitation
budgets, an increase of US$3,362,000 was recognised. During 2011
the Group conducted an external review of the provision for mine
closure costs for all its mining units. Consequently, at 31
December 2011 an increase of US$10,856,000 in this provision was
recognised.
27 Dividends paid and proposed
2012 2011
US$000 US$000
--------------------------------------------------------- ------- -------
Declared and paid during the year
--------------------------------------------------------- ------- -------
Equity dividends on ordinary shares:
--------------------------------------------------------- ------- -------
Final dividend for 2011: US$0.03 (2010: US$0.03) 10,139 10,143
--------------------------------------------------------- ------- -------
Interim dividend for 2012: US$0.03 (2011: US$0.03) 10,139 10,143
--------------------------------------------------------- ------- -------
Dividends declared to non-controlling interests: US$0.18
and US$0.08 (2011: US$0.55) 32,690 53,999
--------------------------------------------------------- ------- -------
Dividends declared and paid 52,968 74,285
--------------------------------------------------------- ------- -------
Dividends declared to non-controlling interests: US$0.08
(2011: US$0.06) 2,187 9,499
--------------------------------------------------------- ------- -------
Dividends declared and not paid 2,187 9,499
--------------------------------------------------------- ------- -------
Total dividends declared 55,155 83,784
--------------------------------------------------------- ------- -------
Proposed for approval by shareholders at the AGM
--------------------------------------------------------- ------- -------
Final dividend for 2012: US$0.03 (2011: US$0.03) 10,139 10,139
--------------------------------------------------------- ------- -------
Dividends per share
The dividends declared in August 2012 were US$10,138,718
(US$0.03 per share). A dividend in respect of the year ending 31
December 2012 of US$0.03 per share, amounting to a total dividend
of US$10,138,754 is to be proposed at the Annual General Meeting on
30 May 2013. These financial statements do not reflect this
dividend payable.
28 Related-party balances and transactions
(a) Related-party accounts receivable and payable
The Group had the following related-party balances and
transactions during the years ended 31 December 2012 and 2011. The
related parties are companies owned or controlled by the main
shareholder of the parent company, joint ventures or
associates.
Accounts receivable Accounts payable
as at 31 December as at 31 December
--------------------- --------------------
2012 2011 2012 2011
US$000 US$000 US$000 US$000
------------------------------- ---------- --------- --------- ---------
Current related party balances
------------------------------- ---------- --------- --------- ---------
Cementos Pacasmayo S.A.A. 139 222 - 32
------------------------------- ---------- --------- --------- ---------
Gold Resource Corp (note 18) 878 710 - -
------------------------------- ---------- --------- --------- ---------
Total 1,017 932 - 32
------------------------------- ---------- --------- --------- ---------
As at 31 December 2012 and 2011 all other accounts are, or were,
non-interest bearing.
No security has been granted or guarantees given by the Group in
respect of these related party balances.
Principal transactions between affiliates are as follows:
Year ended
----------------
2012 2011
US$000 US$000
---------------------------------------------------------- ------- -------
Income
---------------------------------------------------------- ------- -------
Dividend recognised for Gold Resource Corp. investment
(note 18) 10,093 7,313
---------------------------------------------------------- ------- -------
Revenue recognised for services provided to Gold Resource
Corp - 35
---------------------------------------------------------- ------- -------
Expenses
---------------------------------------------------------- ------- -------
Expense recognised for the rental paid to Cementos
Pacasmayo S.A.A. (164) (170)
---------------------------------------------------------- ------- -------
Transactions between the Group and these companies are on an
arm's length basis.
(b) Compensation of key management personnel of the Group
As at 31 December
-------------------
Compensation of key management personnel (including 2012 2011
Directors) US$000 US$000
---------------------------------------------------- --------- --------
Short-term employee benefits 6,742 6,504
---------------------------------------------------- --------- --------
Termination benefits - -
---------------------------------------------------- --------- --------
Long Term Incentive Plan 2,789 1,200
---------------------------------------------------- --------- --------
Workers' profit sharing 44 184
---------------------------------------------------- --------- --------
Others 556 950
---------------------------------------------------- --------- --------
Total compensation paid to key management personnel 10,131 8,838
---------------------------------------------------- --------- --------
This amount includes the remuneration paid to the Directors of
the parent company of the Group of US$5,467,700 (2011:
US$4,816,370), out of which US$199,606 (2011: US$199,660) relates
to pension payments.
29 Mining royalties
Peru
In accordance with Peruvian legislation, owners of mining
concessions must pay a mining royalty for the exploitation of
metallic and non-metallic resources. Mining royalties have been
calculated with rates ranging from 1% to 3% of the value of mineral
concentrate or equivalent, based on quoted market prices.
In October 2011 changes came into effect for mining companies,
with the following features:
a) Introduction of a Special Mining Tax ("SMT"), levied on
mining companies at the stage of exploiting mineral resources. The
new tax is calculated by applying a progressive scale of rates
ranging from 2% to 8.4%, of the quarterly operating profit. This
new tax is in addition to existing mining royalties.
b) Modification of the mining royalty calculation, which
consists of applying a progressive scale of rates ranging from 1%
to 12%, of the quarterly operating profit. The former royalty was
calculated on the basis of monthly sales value of mineral
concentrates.
The SMT and modified mining royalty are accounted for as an
income tax in accordance with IAS 12.
c) For companies that have mining projects benefiting from tax
stability regimes, mining royalties are calculated and recorded as
they were previously, applying an additional new special charge on
mining that is calculated using progressive scale rates, ranging
from 4% to 13.12% of quarterly operating profit. This was the case
for the Arcata mine unit.
As at 31 December 2012, the amount payable as under the former
mining royalty (for the Arcata mining unit), the new mining royalty
(for the Ares and Pallancata mining units), and the SMT amounted to
US$835,000 (2011: US$709,000), US$1,089,000 (2011: US$1,261,000),
and US$1,051,000 (2011: US$1,394,000) respectively. The former
mining royalty is recorded as "Trade and other payables", and the
new mining royalty and SMT as "Income tax payable" in the Statement
of Financial Position. The amount recorded in the income statement
was US$3,224,000 comprising the former mining royalty, disclosed as
cost of sales (2011: US$11,921,000), and US$3,834,000 (2011:
US$2,536,000) of new mining royalty and US$4,256,000 (2011:
US$3,002,000) of SMT, both disclosed as income tax.
Argentina
In accordance with Argentinian legislation, Provinces (being the
legal owners of the mineral resources) are entitled to request
royalties from mine operators. For San Jose, the mining royalty was
originally fixed at 1.85% of the pit-head value of the production
where the final product is dore and 2.55% where the final product
is mineral concentrate or precipitates. In October 2012 a new
provincial law was passed, which increased the mining royalty
applicable to dore and concentrate to 3% of the pit-head value. As
of November 2012 Minera Santa Cruz S.A. is paying the increased 3%
royalty although it has filed an administrative claim against the
new law. As at 31 December 2012, the amount payable as mining
royalties amounted to US$ 795,000. The amount recorded in the
income statement as cost of sales was US$ 6,448,000.
Profit by operation(1)
(Segment report reconciliation) as at 31 December 2012
Consolidation
adjustment
Company (US$ 000) Ares Arcata Pallancata San Jose Moris and others Total/HOC
---------------------------------------- -------- -------- ---------- --------- ------- ------------- ---------
Revenue 57,580 175,802 257,725 310,384 15,931 530 817,952
Cost of sales (Pre consolidation) (48,846) (91,401) (121,863) (149,912) (8,234) (69) (420,325)
---------------------------------------- -------- -------- ---------- --------- ------- ------------- ---------
Consolidation adjustment 674 2,459 (2,878) (186) - (69) -
Cost of sales (Post consolidation) (49,520) (93,860) (118,985) (149,726) (8,234) - (420,325)
Production cost excluding
depreciation (47,191) (65,522) (72,101) (106,621) (7,811) (2,230) (301,476)
Depreciation in
production
cost (3,744) (25,129) (40,298) (51,978) (7) - (121,156)
Other items (4,024) (6,691) (4,686) - - - (15,401)
Change in inventories 5,439 3,482 (1,900) 8,873 (416) 2,230 17,708
---------------------------------------- -------- -------- ---------- --------- ------- ------------- ---------
Gross profit 8,734 84,401 135,862 160,472 7,697 461 397,627
---------------------------------------- -------- -------- ---------- --------- ------- ------------- ---------
Administrative expenses - - - - - (72,995) (72,995)
Exploration expenses - - - - - (64,612) (64,612)
Selling expenses (99) (2,381) (3,557) (33,457) - 34 (39,460)
Other income/expenses - - - - - 307 307
---------------------------------------- -------- -------- ---------- --------- ------- ------------- ---------
Operating profit before
impairment 8,635 82,020 132,305 127,015 7,697 (136,805) 220,867
---------------------------------------- -------- -------- ---------- --------- ------- ------------- ---------
Impairment of assets - - - - - (245) (245)
Investments under equity
method - - - - - 5,080 5,080
Finance income - - - - - 1,988 1,988
Finance costs - - - - - (14,204) (14,204)
FX loss - - - - - (1,212) (1,212)
---------------------------------------- -------- -------- ---------- --------- ------- ------------- ---------
Profit/(loss) from continuing
operations before income
tax 8,635 82,020 132,305 127,015 7,697 (145,398) 212,274
---------------------------------------- -------- -------- ---------- --------- ------- ------------- ---------
Income tax (85,408) (85,408)
---------------------------------------- -------- -------- ---------- --------- ------- ------------- ---------
Profit/(loss) for the year
from continuing operations 8,635 82,020 132,305 127,015 7,697 (230,806) 126,866
---------------------------------------- -------- -------- ---------- --------- ------- ------------- ---------
1 On a post exceptional basis.
Reserves and resources
Ore reserves and mineral resources estimates
Hochschild Mining plc reports its mineral resources and reserves
estimates in accordance with the Australasian Code for Reporting of
Exploration Results, Mineral Resources and Ore Reserves 2004
edition ("the JORC Code"). This establishes minimum standards,
recommendations and guidelines for the public reporting of
exploration results and mineral resources and reserves estimates.
In doing so it emphasises the importance of principles of
transparency, materiality and confidence. The information on ore
reserves and mineral resources on pages 64 to 68 were prepared by
or under the supervision of Competent Persons (as defined in the
JORC Code). Competent Persons are required to have sufficient
relevant experience and understanding of the style of
mineralisation, types of deposits and mining methods in the area of
activity for which they are qualified as a Competent Person under
the JORC Code. The Competent Person must sign off their respective
estimates of the original mineral resource and ore reserve
statements for the various operations and consent to the inclusion
of that information in this report, as well as the form and context
in which it appears.
Hochschild Mining plc employs its own Competent Person who has
audited all the estimates set out in this report. Hochschild Mining
Group companies are subject to a comprehensive programme of audits
which aim to provide assurance in respect of ore reserve and
mineral resource estimates. These audits are conducted by Competent
Persons provided by independent consultants. The frequency and
depth of an audit depends on the risks and/or uncertainties
associated with that particular ore reserve and mineral resource,
the overall value thereof and the time that has lapsed since the
previous independent third-party audit.
The JORC Code requires the use of reasonable economic
assumptions. These include long-term commodity price forecasts
(which, in the Group's case, are prepared by ex-house specialists
largely using estimates of future supply and demand and long-term
economic outlooks).
Ore reserve estimates are dynamic and are influenced by changing
economic conditions, technical issues, environmental regulations
and any other relevant new information and therefore these can vary
from year-to-year. Mineral resource estimates can also change and
tend to be influenced mostly by new information pertaining to the
understanding of the deposit and secondly the conversion to ore
reserves.
The estimates of ore reserves and mineral resources are shown as
at 31 December 2012, unless otherwise stated. Mineral resources
that are reported include those mineral resources that have been
modified to produce ore reserves. All tonnage and grade information
has been rounded to reflect the relative uncertainty in the
estimates; there may therefore be small differences. The prices
used for the reserves calculation were: Au Price: US$1,200 per
ounce and Ag Price: US$20 per ounce.
Attributable metal reserves as at 31 December 2012
Proved
and probable Ag Au Ag Au Ag Eq
Reserve category (t) (g/t) (g/t) (moz) (koz) (moz)
---------------------- ------------- ------- ------ ------ ------ ------
MAIN OPERATIONS(1)
---------------------- ------------- ------- ------ ------ ------ ------
Arcata
---------------------- ------------- ------- ------ ------ ------ ------
Proved 885,968 304 1.0 8.7 27.5 10.3
---------------------- ------------- ------- ------ ------ ------ ------
Probable 1,368,615 294 0.9 12.9 39.7 15.3
---------------------- ------------- ------- ------ ------ ------ ------
Total 2,254,583 298 0.9 21.6 67.2 25.6
---------------------- ------------- ------- ------ ------ ------ ------
Pallancata
---------------------- ------------- ------- ------ ------ ------ ------
Proved 1,332,846 276 1.3 11.8 56.3 15.2
---------------------- ------------- ------- ------ ------ ------ ------
Probable 631,282 269 1.3 5.5 25.6 7.0
---------------------- ------------- ------- ------ ------ ------ ------
Total 1,964,128 273 1.3 17.3 81.9 22.2
---------------------- ------------- ------- ------ ------ ------ ------
San Jose
---------------------- ------------- ------- ------ ------ ------ ------
Proved 423,482 470 6.7 6.4 91.6 11.9
---------------------- ------------- ------- ------ ------ ------ ------
Probable 480,408 471 6.2 7.3 95.5 13.0
---------------------- ------------- ------- ------ ------ ------ ------
Total 903,890 470 6.4 13.7 187.2 24.9
---------------------- ------------- ------- ------ ------ ------ ------
Main operations total
---------------------- ------------- ------- ------ ------ ------ ------
Proved 2,642,296 316 2.1 26.9 175.5 37.4
---------------------- ------------- ------- ------ ------ ------ ------
Probable 2,480,305 322 2.0 25.6 160.9 35.3
---------------------- ------------- ------- ------ ------ ------ ------
Total 5,122,601 319 2.0 52.5 336.4 72.7
---------------------- ------------- ------- ------ ------ ------ ------
OTHER OPERATIONS
---------------------- ------------- ------- ------ ------ ------ ------
Ares
---------------------- ------------- ------- ------ ------ ------ ------
Proved 200,844 127 3.1 0.8 20.0 2.0
---------------------- ------------- ------- ------ ------ ------ ------
Probable 70,992 175 1.6 0.4 3.7 0.6
---------------------- ------------- ------- ------ ------ ------ ------
Total 271,836 140 2.7 1.2 23.8 2.6
---------------------- ------------- ------- ------ ------ ------ ------
ADVANCED PROJECTS
---------------------- ------------- ------- ------ ------ ------ ------
Inmaculada(2)
---------------------- ------------- ------- ------ ------ ------ ------
Proved 2,304,000 106 3.4 7.9 254.8 23.2
---------------------- ------------- ------- ------ ------ ------ ------
Probable 2,376,000 134 3.3 10.2 254.7 25.5
---------------------- ------------- ------- ------ ------ ------ ------
Total 4,680,000 120 3.4 18.1 509.5 48.7
---------------------- ------------- ------- ------ ------ ------ ------
Group total
---------------------- ------------- ------- ------ ------ ------ ------
Proved 5,147,140 215 2.7 35.6 450.3 62.6
---------------------- ------------- ------- ------ ------ ------ ------
Probable 4,927,297 229 2.6 36.3 419.3 61.4
---------------------- ------------- ------- ------ ------ ------ ------
TOTAL 10,074,437 222 2.7 71.8 869.6 124.0
---------------------- ------------- ------- ------ ------ ------ ------
Note: Where reserves are attributable to a joint venture
partner, reserve figures reflect the Company's ownership only.
Includes discounts for ore loss and dilution.
1 Main operations were audited by P&E Consulting.
2 Inmaculada reserves as published in the Feasibility Study
released on 11 January 2012. Prices used for reserves calculation:
Au: $1,100/oz and Ag: $18/oz.
Attributable metal resources as at 31 December 2012
Ag Ag
Resource Tonnes Ag Au Zn Pb Cu Eq Ag Eq Zn Pb Cu
category (t) (g/t) (g/t) (%) (%) (%) (g/t) (moz) Au (koz) (moz) (kt) (kt) (kt)
----------------- --------- ------ ------ ---- ---- ---- ------ ------ -------- ------ ----- ----- -----
MAIN OPERATIONS
----------------- --------- ------ ------ ---- ---- ---- ------ ------ -------- ------ ----- ----- -----
Arcata
----------------- --------- ------ ------ ---- ---- ---- ------ ------ -------- ------ ----- ----- -----
Measured 1,299,637 464 1.45 - - - 551 19.4 60.7 23.0 - - -
----------------- --------- ------ ------ ---- ---- ---- ------ ------ -------- ------ ----- ----- -----
Indicated 1,658,155 407 1.25 - - - 483 21.7 66.8 25.8 - - -
----------------- --------- ------ ------ ---- ---- ---- ------ ------ -------- ------ ----- ----- -----
Total 2,957,792 432 1.34 - - - 513 41.1 127.6 48.8 - - -
----------------- --------- ------ ------ ---- ---- ---- ------ ------ -------- ------ ----- ----- -----
Inferred 4,239,373 342 1.35 - - - 423 46.6 183.8 57.6 - - -
----------------- --------- ------ ------ ---- ---- ---- ------ ------ -------- ------ ----- ----- -----
Pallancata
----------------- --------- ------ ------ ---- ---- ---- ------ ------ -------- ------ ----- ----- -----
Measured 1,984,973 358 1.69 - - - 459 22.8 107.6 29.3 - - -
----------------- --------- ------ ------ ---- ---- ---- ------ ------ -------- ------ ----- ----- -----
Indicated 715,484 338 1.58 - - - 433 7.8 36.4 10.0 - - -
----------------- --------- ------ ------ ---- ---- ---- ------ ------ -------- ------ ----- ----- -----
Total 2,700,457 352 1.66 - - - 452 30.6 144.0 39.2 - - -
----------------- --------- ------ ------ ---- ---- ---- ------ ------ -------- ------ ----- ----- -----
Inferred 2,000,762 338 1.41 - - - 422 21.7 90.7 27.2 - - -
----------------- --------- ------ ------ ---- ---- ---- ------ ------ -------- ------ ----- ----- -----
San Jose
----------------- --------- ------ ------ ---- ---- ---- ------ ------ -------- ------ ----- ----- -----
Measured 657,578 559 8.15 - - - 1,049 11.8 172.4 22.2 - - -
----------------- --------- ------ ------ ---- ---- ---- ------ ------ -------- ------ ----- ----- -----
Indicated 1,579,868 453 6.56 - - - 847 23.0 333.3 43.0 - - -
----------------- --------- ------ ------ ---- ---- ---- ------ ------ -------- ------ ----- ----- -----
Total 2,237,446 484 7.03 - - - 906 34.8 505.8 65.2 - - -
----------------- --------- ------ ------ ---- ---- ---- ------ ------ -------- ------ ----- ----- -----
Inferred 1,070,352 476 7.37 - - - 918 16.4 253.5 31.6 - - -
----------------- --------- ------ ------ ---- ---- ---- ------ ------ -------- ------ ----- ----- -----
Main operations
total
----------------- --------- ------ ------ ---- ---- ---- ------ ------ -------- ------ ----- ----- -----
Measured 3,942,188 426 2.69 - - - 588 54.0 340.7 74.5 - - -
----------------- --------- ------ ------ ---- ---- ---- ------ ------ -------- ------ ----- ----- -----
Indicated 3,953,507 413 3.44 - - - 619 52.5 436.6 78.7 - - -
----------------- --------- ------ ------ ---- ---- ---- ------ ------ -------- ------ ----- ----- -----
Total 7,895,695 420 3.06 - - - 603 106.5 777.3 153.2 - - -
----------------- --------- ------ ------ ---- ---- ---- ------ ------ -------- ------ ----- ----- -----
Inferred 7,310,487 360 2.25 - - - 495 84.7 528.0 116.4 - - -
----------------- --------- ------ ------ ---- ---- ---- ------ ------ -------- ------ ----- ----- -----
OTHER OPERATIONS
----------------- --------- ------ ------ ---- ---- ---- ------ ------ -------- ------ ----- ----- -----
Ares
----------------- --------- ------ ------ ---- ---- ---- ------ ------ -------- ------ ----- ----- -----
Measured 522,495 173 5.85 - - - 524 2.9 98.3 8.8 - - -
----------------- --------- ------ ------ ---- ---- ---- ------ ------ -------- ------ ----- ----- -----
Indicated 174,308 191 2.92 - - - 367 1.1 16.4 2.1 - - -
----------------- --------- ------ ------ ---- ---- ---- ------ ------ -------- ------ ----- ----- -----
Total 696,803 177 5.12 - - - 484 4.0 114.6 10.8 - - -
----------------- --------- ------ ------ ---- ---- ---- ------ ------ -------- ------ ----- ----- -----
Inferred 381,185 170 3.93 - - - 405 2.1 48.1 5.0 - - -
----------------- --------- ------ ------ ---- ---- ---- ------ ------ -------- ------ ----- ----- -----
Other operations
total
----------------- --------- ------ ------ ---- ---- ---- ------ ------ -------- ------ ----- ----- -----
Measured 522,495 173 5.85 - - - 524 2.9 98.3 8.8 - - -
----------------- --------- ------ ------ ---- ---- ---- ------ ------ -------- ------ ----- ----- -----
Indicated 174,308 191 2.92 - - - 367 1.1 16.4 2.1 - - -
----------------- --------- ------ ------ ---- ---- ---- ------ ------ -------- ------ ----- ----- -----
Total 696,803 177 5.12 - - - 484 4.0 114.6 10.8 - - -
----------------- --------- ------ ------ ---- ---- ---- ------ ------ -------- ------ ----- ----- -----
Inferred 381,185 170 3.93 - - - 405 2.1 48.1 5.0 - - -
----------------- --------- ------ ------ ---- ---- ---- ------ ------ -------- ------ ----- ----- -----
ADVANCED
PROJECTS
----------------- --------- ------ ------ ---- ---- ---- ------ ------ -------- ------ ----- ----- -----
Inmaculada(1)
----------------- --------- ------ ------ ---- ---- ---- ------ ------ -------- ------ ----- ----- -----
Measured 1,970,058 128 4.10 - - - 374 8.1 259.7 23.7 - - -
----------------- --------- ------ ------ ---- ---- ---- ------ ------ -------- ------ ----- ----- -----
Indicated 2,269,691 159 4.05 - - - 402 11.6 295.4 29.3 - - -
----------------- --------- ------ ------ ---- ---- ---- ------ ------ -------- ------ ----- ----- -----
Total 4,239,749 144 4.07 - - - 389 19.7 555.0 53.0 - - -
----------------- --------- ------ ------ ---- ---- ---- ------ ------ -------- ------ ----- ----- -----
Inferred 2,962,666 152 3.91 - - - 387 14.5 372.0 36.8 - - -
----------------- --------- ------ ------ ---- ---- ---- ------ ------ -------- ------ ----- ----- -----
1 Inmaculada resources as published in the Feasibility Study
released on 11 January 2012. Prices used for resources calculation:
Au: $1,100/oz and Ag: $18/oz.
Attributable metal resources as at 31 December 2012
(continued)
Ag Ag
Resource Tonnes Ag Au Zn Pb Cu Eq Ag Eq Zn Pb Cu
category (t) (g/t) (g/t) (%) (%) (%) (g/t) (moz) Au (koz) (moz) (kt) (kt) (kt)
--------------- ----------- ------ ------ ---- ---- ---- ------ ------ -------- ------ ----- ----- -----
ADVANCED
PROJECTS
CONTINUED
--------------- ----------- ------ ------ ---- ---- ---- ------ ------ -------- ------ ----- ----- -----
Crespo(2)
--------------- ----------- ------ ------ ---- ---- ---- ------ ------ -------- ------ ----- ----- -----
Measured 5,211,058 47 0.47 - - - 75 7.9 78.6 12.6 - - -
--------------- ----------- ------ ------ ---- ---- ---- ------ ------ -------- ------ ----- ----- -----
Indicated 17,298,228 38 0.40 - - - 62 21.0 222.5 34.3 - - -
--------------- ----------- ------ ------ ---- ---- ---- ------ ------ -------- ------ ----- ----- -----
Total 22,509,286 40 0.42 - - - 65 28.8 301.0 46.9 - - -
--------------- ----------- ------ ------ ---- ---- ---- ------ ------ -------- ------ ----- ----- -----
Inferred 775,429 46 0.57 - - - 80 1.1 14.2 2.0 - - -
--------------- ----------- ------ ------ ---- ---- ---- ------ ------ -------- ------ ----- ----- -----
Azuca
--------------- ----------- ------ ------ ---- ---- ---- ------ ------ -------- ------ ----- ----- -----
Measured 190,602 244 0.77 - - - 290 1.5 4.7 1.8 - - -
--------------- ----------- ------ ------ ---- ---- ---- ------ ------ -------- ------ ----- ----- -----
Indicated 6,858,594 187 0.77 - - - 233 41.2 168.8 51.3 - - -
--------------- ----------- ------ ------ ---- ---- ---- ------ ------ -------- ------ ----- ----- -----
Total 7,049,197 188 0.77 - - - 234 42.7 173.5 53.1 - - -
--------------- ----------- ------ ------ ---- ---- ---- ------ ------ -------- ------ ----- ----- -----
Inferred 6,946,341 170 0.89 - - - 223 37.9 199.5 49.9 - - -
--------------- ----------- ------ ------ ---- ---- ---- ------ ------ -------- ------ ----- ----- -----
Volcan(3)
--------------- ----------- ------ ------ ---- ---- ---- ------ ------ -------- ------ ----- ----- -----
Measured 105,918,000 - 0.738 - - - 44 - 2,511.0 150.7 - - -
--------------- ----------- ------ ------ ---- ---- ---- ------ ------ -------- ------ ----- ----- -----
Indicated 283,763,000 - 0.698 - - - 42 - 6,367.0 382.0 - - -
--------------- ----------- ------ ------ ---- ---- ---- ------ ------ -------- ------ ----- ----- -----
Total 389,681,000 - 0.709 - - - 43 - 8,878.0 532.7 - - -
--------------- ----------- ------ ------ ---- ---- ---- ------ ------ -------- ------ ----- ----- -----
Inferred 41,553,000 - 0.502 - - - 30 - 671.0 40.3 - - -
--------------- ----------- ------ ------ ---- ---- ---- ------ ------ -------- ------ ----- ----- -----
Advanced
Projects
total
--------------- ----------- ------ ------ ---- ---- ---- ------ ------ -------- ------ ----- ----- -----
Measured 113,289,719 5 0.78 - - - 52 17.5 2,853.9 188.7 - - -
--------------- ----------- ------ ------ ---- ---- ---- ------ ------ -------- ------ ----- ----- -----
Indicated 310,189,513 7 0.71 - - - 50 73.7 7,053.7 496.9 - - -
--------------- ----------- ------ ------ ---- ---- ---- ------ ------ -------- ------ ----- ----- -----
Total 423,479,232 7 0.73 - - - 50 91.2 9,907.6 685.7 - - -
--------------- ----------- ------ ------ ---- ---- ---- ------ ------ -------- ------ ----- ----- -----
Inferred 52,237,436 32 0.75 - - - 77 53.6 1,256.7 129.0 - - -
--------------- ----------- ------ ------ ---- ---- ---- ------ ------ -------- ------ ----- ----- -----
OTHER PROJECTS
--------------- ----------- ------ ------ ---- ---- ---- ------ ------ -------- ------ ----- ----- -----
Jasperoide(4)
--------------- ----------- ------ ------ ---- ---- ---- ------ ------ -------- ------ ----- ----- -----
Measured - - - - - - - - - - - - -
--------------- ----------- ------ ------ ---- ---- ---- ------ ------ -------- ------ ----- ----- -----
Indicated - - - - - - - - - - - - -
--------------- ----------- ------ ------ ---- ---- ---- ------ ------ -------- ------ ----- ----- -----
Total - - - - - - - - - - - - -
--------------- ----------- ------ ------ ---- ---- ---- ------ ------ -------- ------ ----- ----- -----
Inferred 12,187,270 - 0.32 - - 1.32 147 - 126.8 57.6 - - 161.2
--------------- ----------- ------ ------ ---- ---- ---- ------ ------ -------- ------ ----- ----- -----
San Felipe
--------------- ----------- ------ ------ ---- ---- ---- ------ ------ -------- ------ ----- ----- -----
Measured 1,393,716 69 0.02 7.12 3.10 0.39 315 3.1 0.9 14.1 99.3 43.1 5.5
--------------- ----------- ------ ------ ---- ---- ---- ------ ------ -------- ------ ----- ----- -----
Indicated 1,354,261 82 0.06 6.14 2.73 0.31 295 3.6 2.4 12.9 83.2 37.0 4.2
--------------- ----------- ------ ------ ---- ---- ---- ------ ------ -------- ------ ----- ----- -----
Total 2,747,977 76 0.04 6.64 2.92 0.35 305 6.7 3.3 27.0 182.4 80.1 9.7
--------------- ----------- ------ ------ ---- ---- ---- ------ ------ -------- ------ ----- ----- -----
Inferred 1,257,731 84 0.05 6.18 2.26 0.19 283 3.4 1.9 11.5 77.8 28.5 2.3
--------------- ----------- ------ ------ ---- ---- ---- ------ ------ -------- ------ ----- ----- -----
Other projects
total
--------------- ----------- ------ ------ ---- ---- ---- ------ ------ -------- ------ ----- ----- -----
Measured 1,393,716 69 0.02 7.12 3.10 0.39 315 3.1 0.9 14.1 99.3 43.1 5.5
--------------- ----------- ------ ------ ---- ---- ---- ------ ------ -------- ------ ----- ----- -----
Indicated 1,354,261 82 0.06 6.14 2.73 0.31 295 3.6 2.4 12.9 83.2 37.0 4.2
--------------- ----------- ------ ------ ---- ---- ---- ------ ------ -------- ------ ----- ----- -----
Total 2,747,977 76 0.04 6.64 2.92 0.35 305 6.7 3.3 27.0 182.4 80.1 9.7
--------------- ----------- ------ ------ ---- ---- ---- ------ ------ -------- ------ ----- ----- -----
Inferred 13,445,001 8 0.30 0.58 0.21 1.22 160 3.4 128.6 69.0 77.8 28.5 163.6
--------------- ----------- ------ ------ ---- ---- ---- ------ ------ -------- ------ ----- ----- -----
GRAND TOTAL
--------------- ----------- ------ ------ ---- ---- ---- ------ ------ -------- ------ ----- ----- -----
Measured 119,148,118 20 0.86 0.08 0.04 - 75 77.5 3,293.8 286.1 99.3 43.1 5.5
--------------- ----------- ------ ------ ---- ---- ---- ------ ------ -------- ------ ----- ----- -----
Indicated 315,671,590 13 0.74 0.03 0.01 - 58 130.9 7,509.1 590.6 83.2 37.0 4.2
--------------- ----------- ------ ------ ---- ---- ---- ------ ------ -------- ------ ----- ----- -----
Total 434,819,708 15 0.77 0.04 0.02 - 63 208.4 10,802.9 876.7 182.4 80.1 9.7
--------------- ----------- ------ ------ ---- ---- ---- ------ ------ -------- ------ ----- ----- -----
Inferred 73,374,109 61 0.83 0.11 0.04 0.22 135 143.8 1,961.4 319.3 77.8 28.5 163.6
--------------- ----------- ------ ------ ---- ---- ---- ------ ------ -------- ------ ----- ----- -----
2 Prices used for resources calculation: Au: $1,300/oz and Ag: $23/oz.
3 Resources reported in the NI 43-101 Technical Report published
by Andina Minerals, January 2011. Price used for resources
calculation: Au: $950/oz.
4 The silver equivalent grade (147 g/t Ag Eq) has being
calculated applying the following ratios, Cu/Ag=96.38 and
Au/Ag=60
Change in total reserves and resources
Ag equivalent content December December
(million ounces) Category 2011 Production(1) Movements(2) 2012 Net difference % change
---------------------- --------- -------- ------------- ------------ -------- -------------- --------
Arcata Resource 112.3 - (5.9) 106.4 (5.9) (5.3)
---------------------- --------- -------- ------------- ------------ -------- -------------- --------
Reserve 29.3 8.0 4.3 25.6 (3.7) (12.6)
-------------------------------- -------- ------------- ------------ -------- -------------- --------
Pallancata Resource 116.0 - (5.3) 110.7 (5.3) (4.6)
---------------------- --------- -------- ------------- ------------ -------- -------------- --------
Reserve 41.0 11.3 7.3 37.0 (4.0) (9.8)
-------------------------------- -------- ------------- ------------ -------- -------------- --------
San Jose Resource 172.1 - 17.6 189.7 17.6 10.2
---------------------- --------- -------- ------------- ------------ -------- -------------- --------
Reserve 42.9 13.2 19.1 48.8 5.9 13.8
-------------------------------- -------- ------------- ------------ -------- -------------- --------
Main operations total Resource 400.4 - 6.4 406.8 6.4 1.6
---------------------- --------- -------- ------------- ------------ -------- -------------- --------
Reserve 113.2 32.4 30.6 111.4 (1.8) (1.6)
-------------------------------- -------- ------------- ------------ -------- -------------- --------
Ares Resource 14.3 - 1.5 15.8 1.5 10.2
---------------------- --------- -------- ------------- ------------ -------- -------------- --------
Reserve 2.4 2.4 2.7 2.6 0.2 10.4
-------------------------------- -------- ------------- ------------ -------- -------------- --------
Other operations
total Resource 14.3 - 1.5 15.8 1.5 10.2
---------------------- --------- -------- ------------- ------------ -------- -------------- --------
Reserve 2.4 2.4 2.7 2.6 0.2 10.4
-------------------------------- -------- ------------- ------------ -------- -------------- --------
Inmaculada Resource 149.7 - - 149.7 - -
---------------------- --------- -------- ------------- ------------ -------- -------------- --------
Reserve - - 81.1 81.1 81.1 -
-------------------------------- -------- ------------- ------------ -------- -------------- --------
Crespo Resource 58.3 - (9.4) 48.9 (9.4) (16.1)
---------------------- --------- -------- ------------- ------------ -------- -------------- --------
Reserve - - - - - -
---------------------- --------- -------- ------------- ------------ -------- -------------- --------
Azuca Resource 103.0 - - 103.0 - -
---------------------- --------- -------- ------------- ------------ -------- -------------- --------
Reserve - - - - - -
---------------------- --------- -------- ------------- ------------ -------- -------------- --------
Volcan Resource - - 572.9 572.9 572.9 -
---------------------- --------- -------- ------------- ------------ -------- -------------- --------
Reserve - - - - - -
---------------------- --------- -------- ------------- ------------ -------- -------------- --------
Advanced Projects
total Resource 310.9 - 563.5 874.5 563.5 181.2
---------------------- --------- -------- ------------- ------------ -------- -------------- --------
Reserve - - 81.1 81.1 81.1 -
-------------------------------- -------- ------------- ------------ -------- -------------- --------
Jasperoide Resource 57.6 - - 57.6 - -
---------------------- --------- -------- ------------- ------------ -------- -------------- --------
Reserve - - - - - -
---------------------- --------- -------- ------------- ------------ -------- -------------- --------
San Felipe Resource 38.5 - - 38.5 - -
---------------------- --------- -------- ------------- ------------ -------- -------------- --------
Reserve - - - - - -
---------------------- --------- -------- ------------- ------------ -------- -------------- --------
Other projects total Resource 96.0 - - 96.0 - -
---------------------- --------- -------- ------------- ------------ -------- -------------- --------
Reserve - - - - - -
---------------------- --------- -------- ------------- ------------ -------- -------------- --------
Total Resource 821.7 - 571.4 1,393.1 571.4 69.5
---------------------- --------- -------- ------------- ------------ -------- -------------- --------
Reserve 115.6 34.9 114.4 195.1 79.5 68.8
-------------------------------- -------- ------------- ------------ -------- -------------- --------
1 Depletion: reduction in reserves based on ore delivered to the
mine plant.
2 Variation in reserves and resources due mainly to mine site
exploration but also to price changes.
Change in attributable reserves and resources
Percentage
attributable December December
Ag equivalent content December 2011 2012
(million ounces) Category 2012 Att.(1) Att.(1) Net difference % change
---------------------- --------- ------------- -------- -------- -------------- --------
Arcata Resource 100% 112.3 106.4 (5.9) (5.3)
---------------------- --------- ------------- -------- -------- -------------- --------
Reserve 29.3 25.6 (3.7) (12.6)
-------------------------------- ------------- -------- -------- -------------- --------
Pallancata Resource 60% 69.6 66.4 (3.2) (4.6)
---------------------- --------- ------------- -------- -------- -------------- --------
Reserve 24.6 22.2 (2.4) (9.8)
-------------------------------- ------------- -------- -------- -------------- --------
San Jose Resource 51% 87.8 96.8 9.0 10.2
---------------------- --------- ------------- -------- -------- -------------- --------
Reserve 21.9 24.9 3.0 13.8
-------------------------------- ------------- -------- -------- -------------- --------
Main operations total Resource 269.7 269.5 (0.1) (0.0)
---------------------- --------- ------------- -------- -------- -------------- --------
Reserve 75.8 72.7 (3.1) (4.1)
-------------------------------- ------------- -------- -------- -------------- --------
Ares Resource 100% 14.3 15.8 1.5 10.2
---------------------- --------- ------------- -------- -------- -------------- --------
Reserve 2.4 2.6 0.2 10.4
-------------------------------- ------------- -------- -------- -------------- --------
Other operations
total Resource 14.3 15.8 1.5 10.2
---------------------- --------- ------------- -------- -------- -------------- --------
Reserve 2.4 2.6 0.2 10.4
-------------------------------- ------------- -------- -------- -------------- --------
Inmaculada Resource 60% 89.8 89.8 - -
---------------------- --------- ------------- -------- -------- -------------- --------
Reserve - 48.7 48.7 -
-------------------------------- ------------- -------- -------- -------------- --------
Crespo Resource 100% 58.3 48.9 (9.4) (16.1)
---------------------- --------- ------------- -------- -------- -------------- --------
Reserve - - - -
---------------------- --------- ------------- -------- -------- -------------- --------
Azuca Resource 100% 103.0 103.0 - -
---------------------- --------- ------------- -------- -------- -------------- --------
Reserve - - - -
---------------------- --------- ------------- -------- -------- -------------- --------
Volcan Resource 100% - 572.9 572.9 -
---------------------- --------- ------------- -------- -------- -------------- --------
Reserve - - - -
---------------------- --------- ------------- -------- -------- -------------- --------
Advanced Projects
total Resource 251.1 814.6 563.5 224.4
---------------------- --------- ------------- -------- -------- -------------- --------
Reserve - 48.7 48.7 -
-------------------------------- ------------- -------- -------- -------------- --------
Jasperoide Resource 100% 57.6 57.6 - -
---------------------- --------- ------------- -------- -------- -------------- --------
Reserve - - - -
---------------------- --------- ------------- -------- -------- -------------- --------
San Felipe Resource 100% 38.5 38.5 - -
---------------------- --------- ------------- -------- -------- -------------- --------
Reserve -
---------------------- --------- ------------- -------- -------- -------------- --------
Other projects total Resource 96.0 96.0 - -
---------------------- --------- ------------- -------- -------- -------------- --------
Reserve - - - -
---------------------- --------- ------------- -------- -------- -------------- --------
Total Resource 631.1 1,196.0 564.9 89.5
---------------------- --------- ------------- -------- -------- -------------- --------
Reserve 78.2 124.0 45.8 6.3
-------------------------------- ------------- -------- -------- -------------- --------
1 Attributable reserves and resources based on the Group's
percentage ownership of its joint venture projects.
Production
Total Group production(1)
Year ended Year ended
31 December 31 December
2012 2011 % change
------------------------------ ------------ ------------- --------
Silver production (koz) 19,443 21,363 (9)
Gold production (koz) 164.34 180.51 (9)
Total silver equivalent (koz) 29,304 32,193 (9)
Total gold equivalent (koz) 488.40 536.56 (9)
Silver sold (koz) 18,928 21,792 (13)
Gold sold (koz) 159.8 182.0 (12)
------------------------------ ------------ ------------- --------
(1) Total production includes 100% of all production, including
production attributable to joint venture partners at San Jose and
Pallancata.
Attributable Group production(2)
Year ended Year ended
31 December 31 December
2012 2011 % change
-------------------------------- ------------ ------------- --------
Silver production (koz) 13,550 14,980 (10)
Gold production (koz) 111.82 127.29 (12)
Attrib. silver equivalent (koz) 20,260 22,617 (10)
Attrib. gold equivalent (koz) 337.7 377.0 (10)
-------------------------------- ------------ ------------- --------
(2) Attributable production includes 100% of all production from
Arcata, Ares and Moris, 60% from Pallancata and 51% from San
Jose.
2012 production by mine
Arcata
Year ended Year ended
31 December 31 December
Product 2012 2011 % change
--------------------------------- ------------ ------------- ------------------
Ore production (tonnes) 773,498 687,966 12
Average silver grade (g/t) 271 312 (13)
Average gold grade (g/t) 0.83 0.88 (6)
Silver produced (koz) 5,526 6,081 (9)
Gold produced (koz) 17.27 17.38 (1)
Silver equivalent produced (koz) 6,562 7,124 (8)
Silver sold (koz) 5,236 5,979 (12)
Gold sold (koz) 15.9 16.7 (5)
--------------------------------- ------------ ------------- ------------------
Ares
Year ended Year ended
31 December 31 December
Product 2012 2011 % change
--------------------------------- ------------- ------------- --------
Ore production (tonnes) 336,423 344,085 (2)
Average silver grade (g/t) 54 61 (11)
Average gold grade (g/t) 2.65 2.90 (9)
Silver produced (koz) 481 581 (17)
Gold produced (koz) 26.28 29.03 (9)
Silver equivalent produced (koz) 2,058 2,323 (11)
Silver sold (koz)(1) 473 598 (21)
Gold sold (koz)(2) 25.8 29.7 (13)
--------------------------------- ------------- ------------- --------
Pallancata(3)
Year ended Year ended
31 December 31 December
Product 2012 2011 % change
--------------------------------- ------------- ------------- --------
Ore production (tonnes) 1,094,250 1,070,466 2
Average silver grade (g/t) 256 301 (15)
Average gold grade (g/t) 1.09 1.33 (18)
Silver produced (koz) 7,441 8,767 (15)
Gold produced (koz) 26.23 33.88 (23)
Silver equivalent produced (koz) 9,014 10,800 (17)
Silver sold (koz) 7,280 9,064 (20)
Gold sold (koz) 25.1 33.9 (26)
--------------------------------- ------------- ------------- --------
(3) The Company has a 60% interest in Pallancata.
San Jose(4)
Year ended Year ended
31 December 31 December
Product 2012 2011 % change
--------------------------------- ------------ ------------- ---------
Ore production (tonnes) 509,851 462,825 10
Average silver grade (g/t) 417 444 (6)
Average gold grade (g/t) 5.79 5.86 (1)
Silver produced (koz) 5,953 5,870 1
Gold produced (koz) 85.77 80.95 6
Silver equivalent produced (koz) 11,099 10,727 3
Silver sold (koz) 5,897 6,087 (3)
Gold sold (koz) 84.3 82.4 2
--------------------------------- ------------ ------------- ---------
(4) The Company has a 51% interest in San Jose.
Moris
Year ended Year ended
31 December 31 December
Product 2012 2011 % change
--------------------------------- -------------- ------------- ---------------
Ore production (tonnes) - 858,028 -
Average silver grade (g/t) - 5.02 -
Average gold grade (g/t) - 0.96 -
Silver produced (koz) 42 64 (34)
Gold produced (koz) 8.79 19.26 (54)
Silver equivalent produced (koz) 570 1,220 (53)
Silver sold (koz) 42 64 (34)
Gold sold (koz) 8.7 19.3 (55)
--------------------------------- -------------- ------------- ---------------
Glossary
Ag
Silver
Adjusted EBITDA
Adjusted EBITDA is calculated as profit from continuing operations
before exceptional items, net finance costs and income tax plus depreciation
and exploration expenses other than personnel and other exploration
related fixed expenses.
Au
Gold
Attributable after tax profit
Profit for the year before dividends attributable to the equity shareholders
of Hochschild Mining plc from continuing operations before exceptional
items and after minority interest
Average head grade
Average ore grade fed into the mill
Board
The Board of Directors of the Company
Company
Hochschild Mining plc
CSR
Corporate social responsibility
Cu
Copper
Directors
The Directors of the Company
DNV
Det Norske Veritas is an independent foundation with the purpose
of safeguarding life, property, and the environment
Dore
Dore bullion is an impure alloy of gold and silver and is generally
the final product of mining and processing; the dore bullion will
be transported to be refined to high purity metal
Dollar or $
United States dollars
Effective Tax Rate
Income tax expense as a percentage of profit from continuing operations
before income tax
EPS
The per-share (using the weighted average number of shares outstanding
for the period) profit available to equity shareholders of the Company
from continuing operations after exceptional items
eq
equivalent
Exceptional item
Events that are significant and which, due to their nature or the
expected infrequency of the events giving rise to them, need to be
disclosed separately
g/t
Grammes per tonne
GAAP
Generally Accepted Accounting Principles
Group
Hochschild Mining plc and subsidiary undertakings
IAS
International Accounting Standards
IASB
International Accounting Standards Board
IFRS
International Financial Reporting Standards
JV
Joint venture
koz
Thousand ounces
kt
Thousand tonnes
ktpa
Thousand tonnes per annum
Listing or IPO (Initial Public Offering) or Global Offer
The listing of the Company's Ordinary Shares on the London Stock
Exchange on 8 November 2006
LTI
Lost Time Injury, meaning an occupational injury or illness that
results in days away from work
LTIFR
Lost Time Injury Frequency Rate = LTI x 1,000,000/hours worked
moz
Million ounces
Ordinary Shares
Ordinary Shares of 25p each in the Company
Pb
Lead
Spot or spot price
The purchase price of a commodity at the current price, normally
this is at a discount to the long-term contract price
t
tonne
tpa
tonnes per annum
tpd
tonnes per day
Zn
Zinc
Shareholder information
Annual General Meeting ('AGM')
The AGM will be held at 9:30am on 30 May 2013 at the offices of
Linklaters LLP, One Silk Street, London, EC2Y 8HQ.
Company website
Hochschild Mining plc Interim and Annual Reports and results
announcements are available via the internet on our website at
www.hochschildmining.com. Shareholders can also access the latest
information about the Company and press announcements as they are
released, together with details of future events and how to obtain
further information.
Registrars
The Registrars can be contacted as follows for information about
the AGM, shareholdings, dividends and to report changes in personal
details:
- By post
Capita Registrars, The Registry, 34 Beckenham Road, Beckenham,
Kent BR3 4TU
- By telephone
If calling from the UK: 0871 664 0300 (Calls cost 10p per minute
plus network extras, lines are open 8.30am - 5.30pm Mon to Fri) If
calling from overseas: +44 20 8639 3399
- By fax
+44 (0)1484 600 911
Currency option and dividend mandate
Shareholders wishing to receive their dividend in US dollars
should contact the Company's registrars to request a currency
election form. This form should be completed and returned to the
registrars by 15 May 2013.
The Company's registrars can also arrange for the dividend to be
paid directly into a shareholder's UK bank account. To take
advantage of this facility, a dividend mandate form, also available
from the Company's registrars, should be completed and returned to
the registrars by 15 May 2013. This arrangement is only available
in respect of dividends paid in UK pounds sterling. Shareholders
who have already completed one or both of these forms need take no
further action.
Investor relations
For investor enquiries please contact: Marianna Adams, by
writing to the London Office address (see below), by phone on 020
7907 2933 or by email at marianna.adams@hocplc.com.
Financial calendar
Dividend payments
Ex-dividend date 8 May 2013
Record date 10 May 2013
Deadline for return of currency election form 15 May 2013
Final dividend payable 4 June 2013
Other dates
Annual General Meeting 30 May 2013
Half-yearly results announced August 2013
London Office and Registered Office address
46 Albemarle Street
London
W1S 4JL
United Kingdom
Company Secretary
R D Bhasin
[1]On a pre-exceptional basis
[2]Including payment for 86.7% of Andina Minerals Inc.
[3]Market value (as at 31 December 2012) of investments
accounted under equity method and available for sale financial
assets.
[4]Revenue presented in the financial statements is disclosed as
net revenue (in the Financial Review it is calculated as gross
revenue less commercial discounts).
[5]Adjusted EBITDA is calculated as profit from continuing
operations before exceptional items, net finance costs and income
tax plus depreciation and exploration expenses other than personnel
and other exploration related fixed expenses.
[6]Following the revision of the mining royalty regime in Peru
in 2011, the mine royalties levied on the output of the Pallancata
and Ares units are now accounted for as Income Tax, whereas
previously, royalties for both units were treated as production
costs. The effect of this change should be taken into account when
comparing the units' production cost per tonne, cash costs and
Adjusted EBITDA metrics in 2012 with those of 2011.
[7]Cash costs are calculated to include cost of sales, treatment
charges, and selling expenses before exceptional items less
depreciation included in cost of sales.
[8]Please note that all mineralised intersections in this
release are quoted as down-hole lengths, not true widths.
[9]Following the revision of the mining royalty regime in Peru
in 2011, the mine royalties levied on the output of the Pallancata
and Ares units are now accounted for as Income Tax, whereas
previously, royalties for both units were treated as production
costs. The effect of this change should be taken into account when
comparing the units' production cost per tonne, cash costs and
Adjusted EBITDA metrics in 2012 with those of 2011.
[10]Please note that all mineralised intersections in this
release are quoted as down-hole lengths, not true widths.
[11]Please note that all mineralised intersections in this
release are quoted as down-hole lengths, not true widths.
[12]Please note that all mineralised intersections in this
release are quoted as down-hole lengths, not true widths.
[13]Please note that all mineralised intersections in this
release are quoted as down-hole lengths, not true widths.
[14]Please note that all mineralised intersections in this
release are quoted as down-hole lengths, not true widths.
[15]Please note that all mineralised intersections in this
release are quoted as down-hole lengths, not true widths.
[16]Amount disclosed refers to expenditure from the Group's
exploration budget and does not include expenditure from the
operational budget.
[17]Total resources here exclude base metal resources, excluding
Jasperoide, San Felipe and Volcan.
[18]Please note that all mineralised intersections in this
release are quoted as down-hole lengths, not true widths.
[19]Please note that all mineralised intersections in this
release are quoted as down-hole lengths, not true widths.
[20]Please note that all mineralised intersections in this
release are quoted as down-hole lengths, not true widths.
[21]Please note that all mineralised intersections in this
release are quoted as down-hole lengths, not true widths.
[22]Please note that all mineralised intersections in this
release are quoted as down-hole lengths, not true widths.
[23]Revenue presented in the financial statements is disclosed
as net revenue (in this Financial Review it is calculated as gross
revenue less commercial discounts.
[24]Includes Hochschild's main operations: Arcata, Pallancata
and San Jose. Cash costs are calculated to include cost of sales,
treatment charges, and selling expenses before exceptional items
less depreciation included in cost of sales. Please refer to
paragraph below on the changes of accounting treatment.
[25]Adjusted EBITDA is calculated as profit from continuing
operations before exceptional items, net finance costs and income
tax plus depreciation and exploration expenses other than personnel
and other exploration related fixed expenses.
[26]Cash flow from operations is calculated as profit for the
year from continuing operations after exceptional items, plus the
add-back of non-cash items within profit for the year (such as
depreciation and amortisation, impairments and write-off of assets,
gains/losses on sale of assets, amongst others) plus/minus changes
in liabilities/assets such as trade and other payables, trade and
other receivables, inventories, net tax assets, net deferred income
tax liabilities, amongst others.
[27]Other revenue includes revenue from (i) the sale of energy
in Peru and, (ii) administrative services in Mexico.
[28]Unit cost per tonne is calculated by dividing mine and
geology costs by extracted tonnage and plant and other costs by
treated tonnage.
[29]Please refer to footnote 6 on page 7 relating to the
treatment in the Company's accounts of mining royalties at the
Pallancata and Ares units in 2012.
[30]Cash costs are calculated to include cost of sales,
treatment charges, and selling expenses before exceptional items
less depreciation included in cost of sales.
[31]Includes pre-shipment loans which were previously reported
under working capital.
[32]Includes additions in property, plant and equipment and
evaluation and exploration assets (confirmation of resources) and
excludes increases in the expected closure
costs of mine assets.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR NKNDKKBKKFND
Hochschild Mining (LSE:HOC)
Historical Stock Chart
From Jun 2024 to Jul 2024
Hochschild Mining (LSE:HOC)
Historical Stock Chart
From Jul 2023 to Jul 2024
