TIDMHOC
RNS Number : 6188Q
Hochschild Mining PLC
16 October 2013
16 October 2013
Interim Management Statement and
Production Report for the 3 months ended 30 September 2013
Highlights
-- Q3 2013 attributable production of 5.4 million silver
equivalent ounces1
-- On track to achieve 2013 attributable production target of
20.0 million silver equivalent ounces
-- Proposed Acquisition of Pallancata and Inmaculada Minorities
announced:
o Net cash consideration of $271 million
o Consolidates minority shareholding in assets already
controlled and operated by Hochschild
o Reduces average unit cost
o Equity placing completed - raising $72.8 million
o $340 million acquisition bridge financing facility
arranged
-- Cashflow optimisation programme delivering material cost and
expenses savings
-- Inmaculada mill construction permit approved by Peruvian
government
Ignacio Bustamante, Chief Executive Officer commented:
"I am pleased to report that Hochschild has enjoyed another
solid quarter and is very much on track to meet our full year
production target of 20m silver equivalent ounces.
We have had an exciting quarter with the Inmaculada Advanced
Project receiving its mill construction permit, as expected, as
well as the recent announcement of our proposed buyout of the
International Minerals minorities in Peru. In addition,
Hochschild's cashflow optimisation programme continues apace and I
am confident that we will be able to demonstrate significant
savings at our Full Year results early in 2014."
__________________________________________________________________________________
A conference call will be held at 3pm (London time) on Wednesday
16 October 2013 for analysts and investors.
Dial in details as follows:
UK: +44 (0) 20 3003 2666
Password: Hochschild
A recording of the conference call will be available for one
week following its conclusion, accessible from the following
telephone number:
UK: +44 (0) 20 8196 1998
Access code: 8143722
__________________________________________________________________________________
Overview
In Q3 2013 the Company produced 5.4 million attributable silver
equivalent ounces, comprised of 3.6 million ounces of silver and 30
thousand ounces of gold. Overall, in the first nine months of 2013,
the Company delivered attributable production of 15.1 million
silver equivalent ounces, including 9.8 million ounces of silver
and 88 thousand ounces of gold, and remains on track to meet its
full year production target of 20.0 million attributable silver
equivalent ounces.
Production
Main operations
At Arcata, total silver equivalent production in Q3 2013 was 1.6
million ounces (Q3 2013: 1.6 million ounces). Tonnage in Q3 was in
line with Q2 but grades improved considerably as tonnage increased
from stopes and developments gradually replacing, as expected,
volumes processed from the low-grade Macarena Waste Dam
Deposit.
Table Showing Contribution From Macarena Waste Dam Deposit
Q3 2013 YTD 2013
------------------------- -------- ---------
Total
Tonnage 229,462 656,736
Average head grade
gold (g/t) 0.76 0.72
Average head grade
silver (g/t) 231 207
------------------------- -------- ---------
Macarena
Tonnage 66,414 210,764
Average head grade
gold (g/t) 0.29 0.29
Average head grade
silver (g/t) 82 81
Stopes and Developments
Tonnage 163,048 445,972
Average head grade
gold (g/t) 0.95 0.92
Average head grade
silver (g/t) 292 267
------------------------- -------- ---------
The Pallancata operation delivered another consistent quarter
with tonnage and grades in line with the previous quarter and the
same period of 2012 resulting in total silver equivalent production
of 2.3 million ounces (Q3 2012: 2.4 million ounces). Year-to-date,
Pallancata has produced 6.7 million silver equivalent ounces (Q3
YTD 2012: 6.6 million ounces).
San Jose once again delivered a strong quarter of production in
Q3 2013 with increased silver grades and improved recoveries
resulting in total silver equivalent production of 3.2 million
ounces (Q3 2012: 2.8 million ounces). Year-to-date San Jose has
produced 9.0 million silver equivalent ounces up 9% from the same
period of 2012.
Other operations
The Company's Ares mine in Peru continued to operate in Q3 2013,
delivering total silver equivalent production of 635 thousand
ounces (Q3 2012:559 thousand ounces).
At Moris, the Company's open pit operation in Mexico, leaching
of the pads continued during Q3 2013, producing a further 86
thousand silver equivalent ounces (Q3 2012: 155 thousand silver
equivalent ounces). Moris remains in the final stages of the pads'
cyanidation process with exploration continuing at the
property.
Proposed Acquisition of Pallancata and Inmaculada Minorities
On 2 October 2013, Hochschild announced that it has entered into
a binding agreement to acquire the 40% interests held by
International Minerals Corporation ("IMZ") in the Pallancata mine
and Inmaculada Advanced Project in Peru (the "Peruvian Assets", and
collectively the "Acquisition"). The transaction will be executed
by way of a court-approved Plan of Arrangement under the Business
Corporations Act (Yukon) (the "Canadian Act"). Hochschild currently
holds a 60% interest in the Peruvian Assets.
In connection with the Acquisition, each IMZ shareholder (other
than Hochschild or its affiliates) will receive a cash payment of
$2.38 per IMZ share (for aggregate cash consideration of $271
million) and each IMZ shareholder (including Hochschild or its
affiliates) will receive one common share of a newly incorporated
British Columbia, Canada company ("SpinCo") per share. Under the
terms of the Acquisition, Hochschild will acquire the Peruvian
Assets for a total value of approximately $280 million, taking into
account the cash payment of $271 million, the undisturbed market
value of Hochschild's existing 3.2% shareholding in IMZ, and the
3.2% shareholding in SpinCo which Hochschild will retain.
Assuming all conditions are satisfied or waived (where
applicable), Hochschild currently expects the Acquisition to be
completed by the end of Q4 2013.
Average realisable prices and sales
Average realisable precious metal prices in Q3 2013 (which are
reported before the deduction of commercial discounts) were
$1,417/ounce for gold and $23.24/ounce for silver (Q3 2012:
$1,729/ounce for gold and $34.13/ounce for silver). For the first
nine months of 2013, average realisable precious metal prices were
$1,384/ounce for gold and $23.11/ounce for silver (Q3 2012 YTD:
$1,694/ounce for gold and $32.30/ounce for silver).
Project pipeline & exploration
Following a detailed review of discretionary elements of its
2013 exploration budget, the Company announced, earlier in the
year, a reduction in its exploration budget, from $77 million to
$50 million.
Brownfield exploration2
Arcata
In Q3 2013, 3,207 metres of drilling were carried out at Arcata
with a total of 8,472 metres having been drilled year-to-date. The
exploration programme focused on the definition of new high-grade
structures from known vein systems and also a new geological
interpretation of the Amparo-Blanca corridor that has identified
high-grade structures. In addition, diamond drilling was conducted
at the Pamela, Blanca 2, Tunel 4, Tunel 3 SE and Irma veins.
Significant intercepts include(1) :
Vein Results
----------- ---------------------------------------
DDH487-LM13:1.26m at 1.31 g/t Au & 312
Blanca 2 Ag
----------- ---------------------------------------
DDH506-LM13: 1.20m at 1.65 g/t Au &
Tunel 4 1,054 Ag
----------- ---------------------------------------
DDH506-LM13: 1.00m at 0.45 g/t Au &
Tunel 3 SE 392 Ag
----------- ---------------------------------------
Irma DDH492-GE13: 1.18m at 0.75 g/t Au &
5,029 g/t Ag
----------- ---------------------------------------
In Q4, the near-mine exploration programme will continue with
drilling focused on the definition of new high-grade structures in
the Tunel 3&4, Alexia and Amparo veins.
Pallancata
In Q3 2013, 3,774 metres of drilling were carried out at
Pallancata with the total for the year-to-date at 13,742 metres.
New gold-rich high-grade structures were identified in the northern
part of the district with resource development drilling continuing
at the Yurika and Charo veins. Step-out drilling was conducted in
the Teresa vein with strong silicification results.
In Q4, the exploration programme at the operation will continue
to focus on completing the delineation of new potential structures
and incorporating new resources.
San Jose
In Q3 2013, the exploration programme at San Jose focused on the
geological mapping and sampling of the district area and
identifying new structures. A total of 4,362 metres of diamond
drilling was completed during the quarter with the year-to-date
total at 10,105 metres. Detailed surface mapping and sampling was
completed over the Juanita vein and the Saavedra Open Pit and a
drilling campaign is scheduled to start early in the quarter.
Significant intercepts in the quarter included(1) :
Vein Results
--------- -----------------------------------------
SJD-1408: 1.00m at 7.42 g/t Au & 522 g/t
Kospi SE Ag
--------- -----------------------------------------
In the last quarter, exploration will focus on the delineation
of the Juanita vein system to study the vein and the disseminated
potential.
Ares
The exploration programme at Ares in Q3 2013 focused on the
exploration of potential mineralisation in known vein extensions
and the definition of new high-grade structures. In addition,
exploration continued at the Paola, Karina and Victoria veins. In
the Paola vein, surface mapping and sampling was conducted over a
2,871 ha area. In the last quarter of the year, the exploration and
drilling programme at Ares will focus on potential resources.
Moris
In Q3 2013, exploration work at Moris continued to focus on
identifying new economic structures and the completion of a
geological model update of the property to identify new drill
targets. During this quarter a 4,000 metre drilling programme has
been defined at Los Alamos which will be completed in January
2014.
Advanced Projects
On 20 September 2013, Hochschild announced that the Peruvian
government had approved the mill construction permit for the
Inmaculada project representing completion of the final stage of
the project's construction permitting process.
Inmaculada
Project development continued at Inmaculada in the third
quarter. Detailed underground mine engineering is on track to be
completed early in Q3 and the procurement of the main mine
equipment as well as the transmission line components is also close
to completion. Almost 2.3km of tunneling and 1.3km of raised boring
has been carried out in 2013 with a total over 6km achieved since
the projects commencement. Finally, with the approval of the mill
construction permit, the contractor, Grana y Montero, has recently
commenced construction work at the site.
During the third quarter surface mapping and sampling campaigns
started over the Huarmapata 3 area identifying a high sulphidation
system with advanced argillic alteration. An exploration drilling
programme has been defined and will start in early Q4 with targets
in the Huarmpata and Mayte veins.
Crespo
At the Company's 100% owned Crespo project, in Q3 2013 the
detailed integration engineering continued with basic and detailed
mine engineering also in progress during the quarter whilst
construction of the new access road to the mine site progressed and
is anticipated to be completed in Q4 2013.
In July, the Company received the Environmental Impact Study
('EIS') permit for Crespo. The Company submitted the project's
construction permit application at the end of February and received
positive feedback from the Peruvian government, to move to the next
stage in the process.
Volcan
At the Volcan company maker project in Chile, work through H2
comprised systematic relogging of Andina Minerals drill core in
order to construct a more robust geological model of the porphyry
system. This will continue through the rest of 2013 in conjunction
with orebody modelling, to be followed by an updated resource
calculation in 2014.
Greenfield pipeline
In the period to 30 September 2013, a total of 23,524 metres
were drilled on eight projects as part of the Greenfield
exploration programme.
Highlights of the Greenfield exploration programme during the
period are provided below.
Valeriano
At the Valeriano Company Maker project, also in Chile, field
work through most of Q3 was stopped for the winter season, with
efforts focused on the compilation and interpretation of last
season's encouraging drilling results. A further drill programme of
this deep porphyry target is currently being planned for the coming
season.
Mercurio
At the Mercurio Company Maker project in Mexico, in line with
the cashflow optimisation programme, the project target area was
significantly reduced to concentrate on the more prospective
north-western Barite area with soil sampling delineating a zone of
gold mineralisation. The next stage will be to carry out a
geochemical grid survey over the area.
Pachuca
At the Pachuca Company Maker project in Mexico, the JV with
Solitario has been focusing on the northwestern extension of the
historical vein mining district. Promising gold and silver
intersections encountered in previous campaigns (mainly by Newmont)
will be followed up by drilling within the next few months with 3D
modelling of all historic data already contributing to target
generation.
Julieta
At the Julieta project in Peru, geologists continued their
surface exploration efforts, identifying new mineralised structures
along strike of the main structural control. These recent
discoveries extend the mineralisation by at least another 400
metres. A 2,000 metre diamond drill programme is scheduled to begin
in Q4 2013, once final government authorisation is received.
Fresia
At the Fresia Medium Scale project in Peru, an environmental
assessment report, required to obtain a drill permit, was completed
and will be filed with the Ministry of Mines in Q4 2013. 1,500
metres of diamond drilling are planned for early next year.
Ibel
At the Ibel Medium Scale project in Peru, surface mapping and
sampling has identified at least five distinct exploration targets,
including a large gold-bearing hydrothermal breccia with consistent
anomalous gold values over an area measuring 1.5km x 300 metres.
Additional surface work is planned for Q4 2013.
Riverside
Hochschild has supplied Riverside with additional funding to
carry out further target generation on the Clemente project in the
north Sonora, Mexico, later this year. The funding will be used for
further mapping, geochemistry and trenching work in order to better
delineate drill targets within the highly prospective mega
shear.
Financial position
The Company's financial position remains strong, with total cash
of approximately $345 million3 and minority investments valued at
approximately $69 million with short term borrowings of
approximately $90 million4.
In connection with the proposed acquisition of the Pallancata
and Inmaculada minorities (mentioned above), Hochschild has also
announced the first stage of a broader corporate refinancing
initiative and has:
-- raised commitments for a $340 million acquisition bridge
financing facility, subject to cancellation of the $140 million
Suyamarca loan facility; and
-- completed an equity placing to institutional investors,
including Eduardo Hochschild, of 29,000,000 new ordinary shares of
25 pence each in Hochschild at a price of 155 pence per Placing
Share, raising gross proceeds of approximately $72.8 million
(GBP45.0 million) and representing approximately 8.6% of
Hochschild's issued ordinary share capital prior to the
Placing.
These facilities have been sized to provide Hochschild with the
requisite funding to fully support the Company's anticipated
capital expenditure at Inmaculada of $230 million and to provide
capacity to satisfy the Company's upcoming convertible bond
maturity in October 2014.
A review of bond and bank refinancing alternatives for the
second stage of Hochschild's balance sheet refinancing is being
undertaken by Hochschild and its advisers.
Outlook
Hochschild is on track to achieve its full year production
target of 20.0 million attributable silver equivalent ounces in
2013, with production at its core operations set to remain broadly
stable throughout the rest of 2013.
With regards to Full Year 2013 unit costs, the Company is
maintaining its Interim Results guidance of a 0-5% increase in Peru
and a 5-10% increase at San Jose in Argentina.
________________________________________________________________________
Enquiries:
Hochschild Mining plc
Charles Gordon +44 (0)20 7907 2934
Head of Investor Relations
RLM Finsbury
Charles Chichester +44 (0)20 7251 3801
Public Relations
________________________________________________________________________
About Hochschild Mining plc
Hochschild Mining plc is a leading precious metals company
listed on the London Stock Exchange (HOCM.L / HOC LN) with a
primary focus on the exploration, mining, processing and sale of
silver and gold. Hochschild has almost fifty years' experience in
the mining of precious metal epithermal vein deposits and currently
operates four underground epithermal vein mines, three located in
southern Peru and one in southern Argentina. Hochschild also has
numerous long-term projects throughout the Americas.
PRODUCTION & SALES INFORMATION*
TOTAL GROUP PRODUCTION**
Q3 Q2 Q3 YTD YTD
2013 2013 2012 2013 2012
------------------------- ------- ------- ------- ------- -------
Silver production
(koz) 5,180 4,770 4,942 14,279 14,670
Gold production (koz) 45.02 44.76 41.53 131.42 123.00
Total silver equivalent
(koz) 7,881 7,456 7,434 22,164 22,050
Total gold equivalent
(koz) 131.36 124.27 123.90 369.40 367.50
Silver sold (koz) 4,660 5,651 5,263 13,813 13,859
Gold sold (koz) 41.43 54.03 47.95 125.00 113.86
------------------------- ------- ------- ------- ------- -------
Total production includes 100% of all production, including
production attributable to joint venture partners at San Jose and
Pallancata.
ATTRIBUTABLE GROUP PRODUCTION
Q3 Q2 Q3 YTD YTD
2013 2013 2012 2013 2012
----------------------- ------- ------- ------- ------- -------
Silver production
(koz) 3,594 3,228 3,424 9,845 10,311
Gold production (koz) 29.76 29.18 28.53 87.65 84.5
Silver equivalent
(koz) 5,380 4,979 5,136 15,104 15,379
Gold equivalent (koz) 89.67 82.99 85.60 251.74 256.31
----------------------- ------- ------- ------- ------- -------
Attributable production includes 100% of all production from
Arcata, Ares and Moris, 60% from Pallancata and 51% from San
Jose.
QUARTERLY PRODUCTION BY MINE
ARCATA
Product Q3 Q2 Q3 YTD YTD
2013 2013 2012 2013 2012
---------------------------- -------- -------- -------- -------- --------
Ore production (tonnes
treated) 229,462 223,386 194,484 656,736 539,144
Average grade silver
(g/t) 231 188 260 207 291
Average grade gold
(g/t) 0.76 0.66 0.78 0.72 0.86
Silver produced (koz) 1,355 1,101 1,358 3,647 4,370
Gold produced (koz) 4.62 3.72 4.15 12.51 13.19
Silver equivalent produced
(koz) 1,633 1,325 1,607 4,397 5,162
Silver sold (koz) 1,188 1,401 1,297 3,520 3,956
Gold sold (koz) 3.70 4.73 3.78 11.52 11.58
---------------------------- -------- -------- -------- -------- --------
ARES
Product Q3 Q2 Q3 YTD YTD
2013 2013 2012 2013 2012
---------------------------- ------- ------- ------- -------- --------
Ore production (tonnes
treated) 87,665 72,469 86,437 237,493 247,069
Average grade silver
(g/t) 96 79 55 80 52
Average grade gold
(g/t) 2.58 2.70 2.83 2.54 2.66
Silver produced (koz) 235 162 128 563 355
Gold produced (koz) 6.66 5.82 7.19 18.50 19.82
Silver equivalent produced
(koz) 635 511 559 1,673 1,544
Silver sold (koz) 213 202 141 547 319
Gold sold (koz) 6.01 7.26 7.74 17.98 17.68
---------------------------- ------- ------- ------- -------- --------
PALLANCATA
Product Q3 Q2 Q3 YTD YTD
2013 2013 2012 2013 2012
---------------------------- -------- -------- -------- -------- --------
Ore production (tonnes
treated) 273,147 272,122 277,093 796,972 805,392
Average grade silver
(g/t) 264 266 257 257 256
Average grade gold
(g/t) 1.12 1.17 1.18 1.12 1.09
Silver produced (koz) 1,896 1,926 1,893 5,430 5,499
Gold produced (koz) 6.76 7.58 6.81 20.86 18.83
Silver equivalent produced
(koz) 2,302 2,380 2,302 6,682 6,629
Silver sold (koz) 1,599 2,050 1,652 5,189 5,208
Gold sold (koz) 5.49 7.74 5.88 19.16 17.31
---------------------------- -------- -------- -------- -------- --------
The Company has a 60% interest in Pallancata.
SAN JOSE
Product Q3 Q2 Q3 YTD YTD
2013 2013 2012 2013 2012
---------------------------- -------- -------- -------- -------- --------
Ore production (tonnes
treated) 131,592 140,816 136,577 380,787 380,911
Average grade silver
(g/t) 446 407 402 435 416
Average grade gold
(g/t) 6.59 6.34 5.24 6.57 5.71
Silver produced (koz) 1,689 1,575 1,552 4,616 4,408
Gold produced (koz) 25.61 25.61 20.97 72.30 63.27
Silver equivalent produced
(koz) 3,226 3,112 2,810 8,953 8,204
Silver sold (koz) 1,656 1,991 2,166 4,536 4,344
Gold sold (koz) 24.71 31.99 29.13 69.50 61.13
---------------------------- -------- -------- -------- -------- --------
The Company has a 51% interest in San Jose.
MORIS
Product Q3 Q2 Q3 YTD YTD
2013 2013 2012 2013 2012
---------------------------- ------- ------- ------- ------- -------
Ore production (tonnes - - - - -
treated)
Average grade silver - - - - -
(g/t)
Average grade gold - - - - -
(g/t)
Silver produced (koz) 4 6 11 24 39
Gold produced (koz) 1.36 2.03 2.41 7.25 7.89
Silver equivalent produced
(koz) 86 128 155 459 512
Silver sold (koz) 5 8 7 22 32
Gold sold (koz) 1.52 2.31 1.43 6.83 6.16
---------------------------- ------- ------- ------- ------- -------
*Silver equivalent production assumes a gold/silver ratio of
60:1
**Ounces sold figures for all operations have been restated to
include gross revenue divided by gross ounces (previously included
net revenue divided by net ounces)
Forward looking statements
This announcement may contain forward looking statements. By
their nature, forward looking statements involve risks and
uncertainties because they relate to events and depend on
circumstances that will or may occur in the future. Actual results,
performance or achievements of Hochschild Mining plc may, for
various reasons, be materially different from any future results,
performance or achievements expressed or implied by such forward
looking statements.
The forward looking statements reflect knowledge and information
available at the date of preparation of this announcement. Except
as required by the Listing Rules and applicable law, the Board of
Hochschild Mining plc does not undertake any obligation to update
or change any forward looking statements to reflect events
occurring after the date of this announcement. Nothing in this
announcement should be construed as a profit forecast.
- ends -
1 Silver equivalent production assumes a gold/silver ratio of
60:1
2 Please note that in line with industry-wide standards, all
mineralised intersections in this release are quoted as true
widths.
3 Includes gross proceeds of approximately $72.8 million from
equity placing on 2 October 2013.
4 Minority investments and short term borrowings as at 30
September 2013.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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