TIDMHOC
RNS Number : 0147U
Hochschild Mining PLC
27 November 2013
26 November 2013
Hochschild Mining plc
Financial Performance Update
As previously announced on 2 October 2013, Hochschild Mining plc
(the "Company") is progressing with the second stage of a balance
sheet refinancing (the "Refinancing") in connection with the
proposed acquisition, announced on that date, of the 40% interests
held by International Minerals Corporation in the Pallancata mine
and Inmaculada Advanced Project in Peru.
In preparation for the Refinancing, the Board of Directors has
approved interim financial results for the nine months ended 30
September 2013, details of which are being announced today.
Q3 year-to-date 2013 financial highlights(1)
-- Revenue of $466.4 million (H1 2013: $308.6 million)
-- Q3 operating margin improvements as cashflow optimisation
programme delivers material savings
-- Q3 cash cost per ounce reduced by over 16% at all three main operations compared to H1 2013
-- Pre-exceptional Profit Before Tax increased to $10.3 million
versus H1 2013 Loss Before Tax of $(10.3) million
-- Adjusted EBITDA of $164.8 million (H1 2013: $98.4 million)(2)
Ignacio Bustamante, Chief Executive Officer commented:
"Hochschild has enjoyed a much improved quarter with healthy
increases in operating margins versus the half-year results.
Significant benefits are already being seen from our cash
optimisation programme, which is on track to deliver approximately
$200 million of savings and I am confident that we will maintain
momentum and continue to demonstrate the effectiveness of this
Company-wide initiative."
"We have also made good progress with regards to the IMZ
transaction with an equity raise of approximately $73 million
completed and a $340 million acquisition bridge financing facility
arranged."
_______________________________________________________________________
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
_______________________________________________________________________
(1) On a pre-exceptional basis.
(2) Adjusted EBITDA is calculated on a pre-exceptional basis as
profit for the year from continuing operations, income tax expense,
foreign exchange loss, finance costs, finance income, share of
profit / (losses) of associates and joint ventures accounted for
under the equity method, exploration and expenses and depreciation
and amortization.
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.
Interim condensed consolidated income statement
Nine months ended Nine months ended
30 September 2013 30 September 2012
Notes (Unaudited) (Unaudited)
----- ------------------------------------- -------------------------------------
Exceptional Exceptional
Before items Before items
exceptional (Note exceptional (Note
items 6) Total items 6) Total
US$000 US$000 US$000 US$000 US$000 US$000
----------- ----------- --------- ----------- ----------- ---------
Continuing
operations
Revenue 4 466,446 - 466,446 602,658 - 602,658
Cost of sales 5 (339,869) (2,466) (342,335) (295,671) - (295,671)
----------- ----------- --------- ----------- ----------- ---------
Gross profit 126,577 (2,466) 124,111 306,987 - 306,987
Administrative expenses (43,765) (2,351) (46,116) (51,272) - (51,272)
Exploration expenses (35,877) (3,456) (39,333) (47,275) - (47,275)
Selling expenses (21,218) - (21,218) (28,710) - (28,710)
Other income 1,902 - 1,902 4,326 1,099 5,425
Other expenses (4,003) - (4,003) (4,826) - (4,826)
Impairment and
write-off
of non-financial
assets
(net) - (77,530) (77,530) - (177) (177)
(Loss)/profit from
continuing operations
before net finance
income/(cost), foreign
exchange gain/(loss)
and income tax 23,616 (85,803) (62,187) 179,230 922 180,152
Share of post tax
profit/(losses) of
associates and joint
ventures accounted
under the equity
method 5,921 - 5,921 5,083 99 5,182
Gain on transfer from
investment accounted
under the equity
method
to available-for-sale
financial assets - 107,942 107,942 - - -
Finance income 7 8,162 - 8,162 1,196 - 1,196
Finance costs 7 (11,755) (108,704) (120,459) (10,403) (1,091) (11,494)
Foreign exchange loss (15,648) - (15,648) (551) - (551)
----------- ----------- --------- ----------- ----------- ---------
(Loss)/profit from
continuing operations
before income tax 10,296 (86,565) (76,269) 174,555 (70) 174,485
Income tax
(expense)/recovery 8 (31,423) 31,591 168 (68,256) - (68,256)
----------- ----------- --------- ----------- ----------- ---------
(Loss)/profit for
the period from
continuing
operations (21,127) (54,974) (76,101) 106,299 (70) 106,229
Attributable to:
Equity shareholders
of the Company (32,422) (41,302) (73,724) 56,189 (187) 56,002
Non-controlling
interests 11,295 (13,672) (2,377) 50,110 117 50,227
----------- ----------- --------- ----------- ----------- ---------
(21,127) (54,974) (76,101) 106,299 (70) 106,229
=========== =========== ========= =========== =========== =========
Nine months ended Nine months ended
30 September 2013 30 September 2012
Notes (Unaudited) (Unaudited)
------ ---------------------------------- ---------------------------------
Exceptional Exceptional
Before items Before items
exceptional (Note exceptional (Note
items 6) Total items 6) Total
Basic and diluted
earnings per ordinary
share from continuing
operations and for
the period (expressed
in U.S. dollars per
share) (0.10) (0.12) (0.22) 0.17 - 0.17
=========== =========== ====== =========== =========== =====
Interim condensed consolidated statement of comprehensive
income
Nine months ended
Notes 30 September
------ ----------------------------------
2013 (Unaudited) 2012 (Unaudited)
US$000 US$000
---------------- ----------------
(Loss)/profit for the period (76,101) 106,229
Other comprehensive income to be reclassified
to profit or loss in subsequent periods:
Exchange differences on translating foreign
operations (1,055) 567
Change in fair value of available-for-sale
financial assets (102,185) (3,162)
Recycling of the loss on available-for-sale
financial assets 108,704 1,065
Deferred income tax relating to components
of other comprehensive income - 615
---------------- ----------------
Other comprehensive gain/(loss) for the
period, net of tax 5,464 (915)
---------------- ----------------
Total comprehensive (expense)/income
for the period (70,637) 105,314
---------------- ----------------
Total comprehensive (expense)/income
attributable to:
Equity shareholders of the Company (68,260) 55,087
Non-controlling interests (2,377) 50,227
---------------- ----------------
(70,637) 105,314
================ ================
Interim condensed consolidated statement of financial
position
As at 30 As at 31
September December
2013 2012
(Unaudited)
Notes US$000 US$000
----- ------------- ----------
ASSETS
Non-current assets
Property, plant and equipment 9 692,173 636,555
Evaluation and exploration assets 10 353,693 396,557
Intangible assets 10 43,137 43,903
Investments accounted under equity
method - 78,188
Available-for-sale financial assets 11 92,191 30,609
Trade and other receivables 11,493 8,613
Deferred income tax assets 1,244 856
1,193,931 1,195,281
------------- ----------
Current assets
Inventories 76,406 76,413
Trade and other receivables 152,731 166,173
Income tax receivable 28,043 23,023
Other financial assets 12 - 150
Cash and cash equivalents 14 273,302 358,944
------------- ----------
530,482 624,703
------------- ----------
Total assets 1,724,413 1,819,984
============= ==========
EQUITY AND LIABILITIES
Capital and reserves attributable
to shareholders of the Parent
Equity share capital 158,644 158,637
Share premium 396,021 395,928
Treasury shares (898) (898)
Other reserves (209,264) (214,946)
Retained earnings 636,148 720,011
------------- ----------
980,651 1,058,732
Non-controlling interests 260,483 264,518
Total equity 1,241,134 1,323,250
------------- ----------
Non-current liabilities
Trade and other payables 143 -
Borrowings 15 106,939 106,850
Provisions 72,502 76,550
Deferred income 22,000 -
Deferred income tax liabilities 89,477 95,715
------------- ----------
291,061 279,115
------------- ----------
Current liabilities
Trade and other payables 89,668 149,585
Other financial liabilities 12 601 6,891
Borrowings 15 95,272 6,973
Provisions 6,000 26,688
Income tax payable 677 27,482
------------- ----------
192,218 217,619
------------- ----------
Total liabilities 483,279 496,734
------------- ----------
Total equity and liabilities 1,724,413 1,819,984
============= ==========
Interim condensed consolidated statement of cash flows
Nine months ended
Notes 30 September
----- ----------------------------------
2013 (Unaudited) 2012 (Unaudited)
US$000 US$000
---------------- ----------------
Cash flows from operating activities
Cash generated from operations 54,043 163,656
Interest received 2,515 1,851
Interest paid (6,606) (8,803)
Payments of mine closure costs (1,978) (3,221)
Income tax paid (26,973) (30,726)
---------------- ----------------
Net cash generated from operating
activities 21,001 122,757
---------------- ----------------
Cash flows from investing activities
Purchase of property, plant and equipment (183,574) (181,963)
Purchase of evaluation and exploration
assets (14,982) (28,890)
Purchase of intangibles (1,203) -
Dividends received 5,045 6,216
Acquisition of subsidiary (14,615) -
Deferred income received related
to San Felipe property 16,700 -
Proceeds from sale of available-for-sale
financial assets 25,650 -
Proceeds from sale of property, plant
and equipment 1,531 253
Net cash used in investing activities (165,448) (204,384)
---------------- ----------------
Cash flows from financing activities
Proceeds of borrowings 15 126,258 44,963
Repayment of borrowings 15 (38,461) (62,971)
Dividends paid 16 (17,667) (50,639)
Capital contribution from non-controlling
interest 4,380 -
Cash flows generated from/(used in)
financing activities 74,510 (68,647)
---------------- ----------------
Net decrease in cash and cash equivalents
during the period (69,937) (150,274)
Exchange difference (15,705) (476)
Cash and cash equivalents at beginning
of period 358,944 627,481
---------------- ----------------
Cash and cash equivalents at end
of period 14 273,302 476,731
================ ================
Interim condensed consolidated statement of changes in
equity
Other reserves
Capital
and
reserves
Unrealised attributable
gain/(loss) to
on shareholders
Equity available-for-sale Bond Cumulative Share-based Total of
share Share Treasury financial equity translation Merger payment other Retained the Non-controlling Total
capital premium Shares assets 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
Balance at 1
January 2013 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
----- ------- -------- --------- ------------------ ---------- ----------- --------- ----------- --------- -------- ------------ --------------- ---------
Other
comprehensive
(loss) -- -- -- 6,519 -- (1,055) -- -- 5,464 -- 5,464 -- 5,464
Loss for the
period -- -- -- -- -- -- -- -- -- (73,724) (73,724) (2,377) (76,101)
--------- ------------------ ---------- -----------
Total
comprehensive
income/(loss)
for the period -- -- -- 6,519 -- (1,055) -- -- 5,464 (73,724) (68,260) (2,377) (70,637)
Issuance of
shares 7 93 -- -- -- -- -- -- -- -- 100 -- 100
Expiration of
dividends -- -- -- -- -- -- -- -- -- -- -- (38) (38)
Capital
contribution
from
non-controlling
interest -- -- -- -- -- -- -- -- -- -- -- 4,380 4,380
CEO LTIP -- -- -- -- -- -- -- 218 218 -- 218 -- 218
Dividends paid
to
non-controlling
interests 16 -- -- -- -- -- -- -- -- -- -- -- (6,000) (6,000)
Dividends 16 -- -- -- -- -- -- -- -- -- (10,139) (10,139) -- (10,139)
------- -------- --------- ------------------ ---------- ----------- --------- ----------- --------- -------- ------------ --------------- ---------
Balance at 30
September 2013
(Unaudited) 158,644 396,021 (898) 3,189 8,432 (11,502) (210,046) 663 (209,264) 636,148 980,651 260,483 1,241,134
======= ======== ========= ================== ========== =========== ========= =========== ========= ======== ============ =============== =========
Balance at 1 8,432
January 2012 158,637 395,928 (898) 5,058 (10,715) (210,046) 154 (207,117) 677,218 1,023,768 195,299 1,219,067
--------- ------------------ ---------- -----------
Other
comprehensive
(loss)/income -- -- -- (1,482) -- 567 -- -- (915) -- (915) -- (915)
Profit for the
period -- -- -- -- -- -- -- -- -- 56,002 56,002 50,227 106,229
--------- ------------------ ---------- -----------
Total
comprehensive
(loss)/income
for the period -- -- -- (1,482) -- 567 -- -- (915) 56,002 55,087 50,227 105,314
Capital
contribution
from
non-controlling
interest -- -- -- -- -- -- -- -- -- -- -- 32,115 32,115
CEO LTIP -- -- -- -- -- -- -- 218 218 -- 218 -- 218
Dividends paid
to
non-controlling
interests 16 -- -- -- -- -- -- -- -- -- -- -- (30,877) (30,877)
Dividends 16 -- -- -- -- -- -- -- -- -- (20,278) (20,278) -- (20,278)
--------- ------------------ ---------- -----------
Balance at 30
September 2012
(Unaudited) 158,637 395,928 (898) 3,576 8,432 (10,148) (210,046) 372 (207,814) 712,942 1,058,795 246,764 1,305,559
======= ======== ========= ================== ========== =========== ========= =========== ========= ======== ============ =============== =========
Notes to the interim condensed consolidated financial
statements
1 Corporate Information
Hochschild Mining plc (the "Company") is a public limited
company incorporated on 11 April 2006 under the Companies Act 1985
as a limited company and registered in England and Wales with
registered number 05777693. The Company's registered office is
located at 46 Albemarle Street, London W1S 4JL, United Kingdom. Its
ordinary shares are traded on the London Stock Exchange.
The Group's principal business is the mining, processing and
sale of silver and gold. The Group has three operating mines (Ares,
Arcata and Pallancata) and a plant (Selene used to treat ore from
the Pallancata mine) located in Southern Peru, one operating mine
(San Jose) located in Argentina and one plant (Moris) located in
Mexico. The Group also has a portfolio of projects located across
Peru, Argentina, Mexico and Chile at various stages of
development.
These interim condensed consolidated financial statements were
approved for issue on behalf of the Board of Directors on 14
November 2013.
2 Significant Accounting Policies
(a) Basis of preparation
These interim condensed consolidated financial statements set
out the Group's financial position as at 30 September 2013 and 31
December 2012 and its financial performance and cash flows for the
periods ended 30 September 2013 and 30 September 2012.
They have been prepared in accordance with IAS 34 Interim
Financial Reporting in accordance with International Financial
Reporting Standards ('IFRS') as adopted by the European Union.
Accordingly, the interim condensed consolidated financial
statements do not include all the information required for full
annual financial statements and therefore, should be read in
conjunction with the Group's 2012 annual consolidated financial
statements as published in the 2012 Annual Report.
The interim condensed consolidated financial statements do not
constitute statutory accounts as defined in the Companies Act 2006.
The financial information for the full year is based on the
statutory accounts for the financial year ended 31 December 2012. A
copy of the statutory accounts for that year, which were prepared
in accordance with IFRS as adopted by the European Union has been
delivered to the Registrar of Companies. The auditors' report under
section 495 of the Companies Act 2006 in relation to those accounts
was unmodified and did not include a reference to any matters to
which the auditors drew attention by way of emphasis without
qualifying the report and did not contain a statement under s498(2)
or s498(3) of the Companies Act 2006.
The impact of the seasonality or cyclicality of operations is
not regarded as significant on the interim condensed consolidated
financial statements.
The interim condensed consolidated financial statements are
presented in US dollars ($) and all monetary amounts are rounded to
the nearest thousand ($000) except when otherwise indicated.
(b) Changes in accounting policies and disclosures
The accounting policies adopted in the preparation of the
interim condensed consolidated financial statements are consistent
with those applied in the preparation of the consolidated financial
statement for the year ended 31 December 2012, except for the
adoption of the following standards and interpretations:
-- IFRS 13 "Fair value measurement", applicable for annual
periods beginning on or after 1 January 2013
IFRS 13 establishes a single source of guidance under IFRS for
all fair value measurements.
IFRS 13 does not change when an entity is required to use fair
value, but rather provides guidance on how to measure fair value
under IFRS when fair value is required or permitted. The amendment
affects disclosure but has no impact on the Group's financial
position and performance. Refer to note 13 for the additional
disclosures on fair value measurement.
-- IAS 1 "Financial statements presentation - Presentation of
items in other comprehensive income", applicable for annual periods
beginning on or after 1 July 2012
The amendments to IAS 1 change the grouping of items presented
in other comprehensive income. Items that could be reclassified (or
recycled) to profit and loss at a future point in time would be
presented separately from items that will never be reclassified.
The amendment affects presentation only and has no impact on the
Group's financial position and performance.
-- IAS 19 "Employee benefits (amendment)", applicable for annual
periods beginning on or after 1 January 2013
The IASB has issued numerous amendments to IAS 19. These range
from fundamental changes such as removing the corridor mechanism
and the concept of expected returns on plan assets to simple
clarifications and re-wording. The application of this new standard
has no impact on the Group's financial position or performance.
-- IFRIC 20 "Stripping costs in the production phase of a
surface mine", applicable for annual periods beginning on or after
1 January 2013
This interpretation applies to waste removal (stripping) costs
incurred in surface mining activity, during the production phase of
the mine. There can be two benefits accruing to the entity from the
stripping activity: usable ore that can be used to produce
inventory and improved access to further quantities of material
that will be mined in future periods. When the benefit from the
stripping activity is the production of inventory, an entity is
required to account for the stripping activity costs as part of the
cost of inventory. When the benefit is the improved access to ore,
the entity recognises these costs as a non-current asset only if
certain criteria are met, which is referred to as the stripping
activity asset. The amendment has no material impact on the Group's
financial position and performance.
-- "Improvements to IFRSs (issued in May 2012)", applicable for
annual periods beginning on or after 1 January 2013
The IASB issued improvements to IFRSs, including IAS 1
Presentation of Financial Statements, IAS 16 Property Plant and
Equipment, IAS 32 Financial Instruments, Presentation, and IAS 34
Interim Financial Reporting.
The Group made an assessment of the changes and determined there
is no significant impact in its financial position and
performance.
The Group has not early adopted any other standard,
interpretation or amendment that has been issued but is not yet
effective.
3 Segment Reporting
The following tables present revenue, profit and asset
information for the Group's operating segments for the nine months
ended 30 September 2013 and 2012 respectively:
Nine months Exploration
ended 30 San and Advanced Adjustments
September Ares Arcata Pallancata Jose Moris Projects Other and eliminations Total
2013 (Unaudited) US$000 US$000 US$000 US$000 US$000 US$000 US$000 US$000 US$000
----------------- ------- ------- ---------- ------- ------- ------------- ------- ---------------- ---------
Revenue
from external
customers 39,145 102,524 131,933 182,031 10,764 - 49 - 466,446
Inter segment
revenue - - - - - - 5,583 (5,583) -
Total revenue 39,145 102,524 131,933 182,031 10,764 - 5,632 (5,583) 466,446
------- ------- ---------- ------- ------- ------------- ------- ---------------- ---------
Segment
profit/(loss) (1,379) 25,422 37,447 37,437 2,552 (46,383) 4,143 4,321 63,560
Others(1) (139,829)
---------
Profit/(loss)
from continuing
operations
before income
tax (76,269)
---------
As at 30
September
2013 (Unaudited)
Assets
Capital
expenditure 3,321 34,676 34,972 40,675 924 76,446 8,286 - 199,300
Current
assets 14,186 15,952 40,914 67,582 1,737 2,997 385 - 143,753
Other non-current
assets 4,247 141,050 152,839 211,581 1,091 550,578 27,617 - 1,089,003
------- ------- ---------- ------- ------- ------------- ------- ---------------- ---------
Total segment
assets 18,433 157,002 193,753 279,163 2,828 553,575 28,002 - 1,232,756
Not reportable
assets(2) - - - - - - 491,657 - 491,657
------- ------- ---------- ------- ------- ------------- ------- ---------------- ---------
Total assets 18,433 157,002 193,753 279,163 2,828 553,575 519,659 - 1,724,413
------- ------- ---------- ------- ------- ------------- ------- ---------------- ---------
(1) Comprised of administrative expenses of US$46,116,000, other
income of US$1,902,000, other expenses of US$4,003,000, impairment
of assets of US$77,530,000, share of profit of associates and joint
ventures of US$5,921,000, gain on transfer from investments
accounted under the equity method to available-for-sale financial
assets of US$107,942,000, finance income of US$8,162,000, finance
costs of US$120,459,000, and foreign exchange loss of
US$15,648,000.
(2) Not reportable assets are comprised of available-for-sale
financial assets of US$92,191,000, other receivables of
US$96,877,000, income tax receivable of US$28,043,000, deferred
income tax assets of US$1,244,000, other financial assets of
US$Nil, and cash and cash equivalents of US$273,302,000.
Nine months Exploration
ended 30 San and Advanced Adjustments
September Ares Arcata Pallancata Jose Moris Projects Other and eliminations Total
2012 (Unaudited) US$000 US$000 US$000 US$000 US$000 US$000 US$000 US$000 US$000
----------------- ------- ------- ---------- ------- ------- ------------- ------- ---------------- ---------
Revenue
from external
customers 38,738 129,604 190,290 232,437 11,110 - 479 - 602,658
Inter segment
revenue - - - - - - 4,776 (4,776) -
Total revenue 38,738 129,604 190,290 232,437 11,110 - 5,255 (4,776) 602,658
------- ------- ---------- ------- ------- ------------- ------- ---------------- ---------
Segment
profit/(loss) 4,682 64,870 101,943 100,699 4,975 (49,746) 3,192 387 231,002
Others(1) (56,517)
---------
Profit/(loss)
from continuing
operations
before income
tax 174,485
---------
As at 31
December
2012
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 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(2) - - - - - - 578,121 - 578,121
------- ------- ---------- ------- ------- ------------- ------- ---------------- ---------
Total assets 23,604 141,465 210,277 324,418 8,298 503,838 608,084 - 1,819,984
------- ------- ---------- ------- ------- ------------- ------- ---------------- ---------
(1) Comprised of administrative expenses of US$51,272,000, other
income of US$5,425,000, other expenses of US$4,826,000, impairment
of assets of US$177,000, share of profit of associates and joint
ventures of US$5,182,000, finance income of US$1,196,000, finance
costs of US$11,494,000, and foreign exchange loss of
US$551,000.
(2) 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.
4 Revenue
Nine months ended
30 September
----------------------------------
2013 (Unaudited) 2012 (Unaudited)
US$000 US$000
---------------- ----------------
Gold (from dore bars) 87,696 83,677
Silver (from dore bars) 135,357 96,728
Gold (from concentrate) 78,578 102,151
Silver (from concentrate) 164,766 319,623
Services 49 479
466,446 602,658
================ ================
5 Cost of sales before exceptional items
Included in cost of sales are:
Nine months ended
30 September
----------------------------------
2013 (Unaudited) 2012 (Unaudited)
US$000 US$000
---------------- ----------------
Depreciation and amortisation 104,508 87,615
Personnel expenses 93,126 104,473
Mining royalty 6,168 7,508
Change in products in process and finished
goods 2,792 (17,633)
---------------- ----------------
6 Exceptional items
Exceptional items relate to:
Nine months ended
30 September
---------------------------------------
2013 (Unaudited) 2012 (Unaudited)
US$000 US$000
---------------- ----------------
Cost of sales
)
Termination benefits(1) (2,466 -
---------------- -----------------
)
Total (2,466 -
---------------- -----------------
Administrative expenses
)
Termination benefits(1) (2,351 -
---------------- -----------------
)
Total (2,351 -
---------------- -----------------
Exploration expenses
)
Termination benefits(1) (3,456 -
---------------- -----------------
)
Total (3,456 -
---------------- -----------------
Other income
Termination benefits(2) - 1,099
Total - 1,099
Impairment and write-off of assets (net)
)
Impairment and write-off of assets(3) (91,930 (416 )
Reversal of write-off and impairment
of assets(4) 14,400 239
)
Total (77,530 (177 )
Share of post-tax gains of associates
and joint ventures accounted under equity
method(5) - 99
Total - 99
Gain on transfer from investment accounted
under the equity method to available-for-sale
financial assets(6) 107,942 -
Total 107,942 -
Finance costs
Loss from changes in the fair value )
of financial instruments(7) (104,958 (1,091 )
Loss on sale of available-for-sale financial )
assets(8) (3,746 -
---------------- -----------------
)
Total (108,704 (1,091 )
---------------- -----------------
1 Termination benefits paid to the workers between April and
September 2013 following the restructuring plan approved by
management during the first half of 2013, amounting to
US$8,273,000.
2 Reversal of the provision of termination benefits of the
workers of Moris mine of US$1,099,000. At 30 September 2012 the
restructuring plan agreed at 31 December 2011 was not in effect,
and Moris was still in operation.
3 As at 30 September 2013 corresponds to the impairment of the
San José mine unit of US$40,869,000, the Azuca project of
US$30,290,000, the Crespo project of US$17,000,000 and the Ares
unit of US$3,771,000. As at 30 September 2012 corresponds to the
write-off of assets in Compañía Minera Ares of US$416,000.
4 As at 30 September 2013 corresponds to the reversal of the
impairment of San Felipe property of US$14,400,000. As at 30
September 2012 corresponds to the gain of US$239,000 generated by
the reversal of the write-off recorded in 2010 related to the 100%
dore project at the San Jose mine.
5 Gain from dilution of US$99,000 generated by the Group's investment in Gold Resource Corp.
6 Gain on the reclassification of Gold Resource Corp ('GRC')
shares from an investment accounted for under the equity method to
an available-for-sale financial asset of US$107,942,000, as a
result of the Company ceasing to have the ability to exercise
significant influence over GRC (refer to note 11).
7 As at 30 September 2013 corresponds to the impairment of
investments in Gold Resource Corp. of US$85,591,000, International
Minerals of US$12,920,000, Pembrook Mining Corp. of US$5,745,000,
Mariana Resources Ltd. of US$281,000, Northern Superior Resources
Inc. of US$226,000, Iron Creek Capital Corp. of US$169,000, Empire
Petroleum Corp. of US$22,000 and Brionor Resources of US$4,000. As
at 30 September 2012 corresponds to the losses arising from the
fair value adjustments in relation to warrants in Iron Creek
Capital Corp. of US$26,000 and the impairment of Brionor Resources
and Iron Creek Capital Corp. of US$67,000 and US$998,000
respectively.
8 The loss on sale of the investment in Gold Resource Corp. of
US$3,746,000. On 11 July 2013, the Group sold 3,375,000 shares for
a total consideration of US$25,650,000.
7 Finance income and finance cost before exceptional items
The Group recognised the following finance income and finance
cost before exceptional items:
Nine months ended
30 September
------------------------------------
2013 (Unaudited) 2012 (Unaudited)
US$000 US$000
---------------- ----------------
Finance income:
Interest on deposits and liquidity funds 5,130 798
Interest on loans 112 196
Dividends 2,671 -
Others 249 202
---------------- -----------------
8,162 1,196
---------------- -----------------
Finance cost:
Interest on bank loans and long-term
debt (2,766 ) (1,612)
Interest on convertible bond (6,795 ) (6,682)
Unwind of discount rate (1,268 ) (1,239)
Others (926 ) (870)
(11,755 ) (10,403)
================ =================
8 Income tax expense
Nine months ended
30 September
----------------------------------
2013 (Unaudited) 2012 (Unaudited)
US$000 US$000
---------------- ----------------
Current income tax expense 3,364 36,250
Current mining royalty charge 1,714 2,820
Current special mining tax charge 755 3,265
Deferred income tax relating to origination
and reversal of temporary differences (6,668) 24,878
Withholding taxes 667 1,043
Total taxation charge in the income statement (168) 68,256
================ ================
The tax related to items charged or credited to equity is as
follows:
Nine months ended
30 September
----------------------------------
2013 (Unaudited) 2012 (Unaudited)
US$000 US$000
---------------- ----------------
Deferred income tax relating to origination
and reversal of temporary differences - (615)
Total taxation credit in the statement
of comprehensive income - (615)
================ ================
9 Property, plant and equipment
During the nine months ended 30 September 2013, the Group
acquired assets for a cost of US$182,913,000 (2012:
US$176,996,000). The additions for the nine month period ended 30
September 2013 relate to:
Other property
Mining properties plant and
and development equipment
US$000 US$000
----------------- --------------
San Jose 24,649 15,898
Pallancata 20,313 10,361
Inmaculada 26,734 25,502
Arcata 20,600 10,458
Crespo 5,903 9,889
Empresa de transmision Aymaraes - 6,343
Others 2,582 3,681
----------------- --------------
100,781 82,132
================= ==============
Assets with a net book value of US$1,606,000 were disposed of by
the Group during the nine month period ended 30 September 2013
(2012: US$293,000) resulting in a net loss on disposal of US$75,000
(2012: loss on disposal of US$40,000).
For the nine month period ended 30 September 2013, the
depreciation charge on property, plant and equipment was
US$106,272,000 (2012: US$88,090,000).
The Group recorded an impairment of US$821,000 with respect to
the Azuca project, US$10,384,000 with respect to the Crespo
project, US$34,228,000 with respect to the San José mine unit and
US$3,771,000 with respect to the Ares mine unit.
10 Evaluation, exploration and intangible assets
a) Evaluation and exploration assets: During the nine month
period ended 30 September 2013, the Group capitalised evaluation
and explorations costs of US$16,387,000 (2012: US$30,018,000). The
additions relate to:
US$000
------
Azuca 3,922
San Jose 127
Pallancata 4,290
Inmaculada 607
Arcata 3,618
Crespo 143
El Dorado 3,708
Others (28)
------
16,387
======
There were transfers from evaluation and exploration assets to
property plant and equipment during the period of
US$35,853,000.
The Group recorded an impairment with respect to the Azuca
project (US$29,469,000), the Crespo project (US$5,508,000) and the
San José mine unit (US$2,282,000), and partially reversed the
impairment of the San Felipe project by US$14,400,000.
b) Intangible assets: During the nine month period ended 30
September 2013, additions of intangibles amounted to US$1,203,000
(2012: US$88,000). The additions for the nine month period ended 30
September 2013 relate to the Crespo project of US$678,000 and
Empresa de transmission Aymaraes of US$521,000.
For the nine month period ended 30 September 2013, the
amortisation charge on intangibles was US$1,296,000 (2012:
US$1,153,000).
There were transfers from property, plant and equipment to
intangibles during the period of US$4,794,000.
The Group recorded an impairment in relation to all of the
goodwill of $2,091,000 and other intangibles of $2,268,000 related
to the San Jose mine unit, and US$1,108,000 related to the Crespo
project.
11 Available-for-sale financial assets
As at
As at 30
September 31 December
2013 2012
(Unaudited)
US$000 US$000
------------ -------------
Opening balance 30,609 40,769
Additions - -
Reclassification from investments accounted
under the equity method(1) 189,417 -
Fair value change recorded in equity (102,185) (10,160)
Disposals(2) (25,650) -
Closing balance(3) 92,191 30,609
============ =============
9 Corresponds to the gain on the reclassification of the Group's
Gold Resource Corp. shares from an associate accounted for under
the equity method to an available-for-sale financial asset on 27
March 2013. Equity accounting of the investment was discontinued as
a result of developments during the period that led the Company to
conclude that it no longer had the ability to influence
significantly that company's strategic, operational and financial
direction. Consequently, the asset is now recognised as an
available-for-sale asset at fair value.
10 Corresponds to the sale of 3,375,000 shares of Gold Resource
Corporation for a total consideration of US$25,650,000 (US$7.6 per
share).
11 As at 30 September 2013, the carrying value represents the
fair value of shares of Gold Resource Corp. (US$74,431,000),
International Minerals Corporation (US$9,671,000), Pembrook Mining
Corp. (US$6,000,000), Mirasol Resources Ltd. (US$617,000), Northern
Superior Resources Inc. (US$490,000), Mariana Resources Ltd.
(US$558,000), Iron Creek Capital Corp (US$136,000), Brionor
Resources (US$109,000), and Empire Petroleum Corp (US$179,000).
12 Other financial assets and liabilities
As at 30
September As at
31 December
2013 2012
(Unaudited)
US$000 US$000
------------ -------------
Other financial assets
Bonds - 149
Warrants in Iron Creek Capital Corp. - 1
------------ -------------
Other financial assets - 150
============ =============
Other financial liabilities
Embedded derivatives(1) 601 6,891
Other financial liabilities 601 6,891
============ =============
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. At 30 September
2013 and at 31 December 2012 the provisional price adjustment
resulted in a liability due to decreases in forward prices of gold
and silver.
13 Fair value hierarchy
The Group uses the following hierarchy for determining and
disclosing the fair value of financial instruments by valuation
technique:
Level 1: quoted (unadjusted) prices in active markets for
identical assets or liabilities.
Level 2: other techniques for which all inputs which have a
significant effect on the recorded fair value are observable,
either directly or indirectly.
Level 3: techniques which use inputs which have a significant
effect on the recorded fair value that are not based on observable
market data.
At 30 September 2013 and 31 December 2012, the Group held the
following financial instruments measured at fair value:
As at 30
September
2013 (Unaudited) Level 1 Level 2 Level 3
US$000 US$000 US$000 US$000
------------------ -------- ----------- --------
Assets measured
at fair value
Equity shares
(note 11) 92,191 86,191 - 6,000
Warrants - - - -
Bonds - - - -
92,191 86,191 - 6,000
Liabilities measured
at fair value
Embedded derivatives
(note 12) (601) - - (601)
------------------ -------- ----------- --------
(601) - - (601)
------------------ -------- ----------- --------
As at
31 December
2012 Level 1 Level 2 Level 3
US$000 US$000 US$000 US$000
------------- -------- ------------- --------
Assets measured
at fair value
Equity shares
(note 11) 30,609 18,600 - 12,009
Warrants 1 - 1 -
Bonds 149 - 149 -
30,759 18,600 150 12,009
Liabilities measured
at fair value
Embedded derivatives
(note 12) (6,891) - - (6,891)
-------- ------------- --------
(6,891) - - (6,891)
------------- -------- ------------- --------
During the periods ending 30 September 2013 and 31 December
2012, there were no transfers between these levels.
The reconciliation of the financial instruments categorised as
level 3 is as follows:
Embedded
derivatives Equity
liabilities shares
US$000 US$000
------------- ----------
Balance at 1 January
2012 (12,831) 11,841
Gain from the period
recognised in revenue 5,940 -
Fair value change through
equity - 168
Balance 31 December 2012 (6,891) 12,009
Gain from the period
recognised in revenue 6,290 -
Impairment through profit
and loss (finance costs) - (5,745)
Recycling fair value
adjustment from equity - (264)
------------- ----------
Balance 30 September
2013 (Unaudited) (601) 6,000
------------- ----------
Valuation techniques:
Level 2: Bonds are measured based on observable data from
financial institutions.
Level 3: Comprises embedded derivatives and equity shares of
Pembrook Mining Corp.
Embedded derivatives: Sales of concentrates and doré bars are
"provisionally priced" and revenue is initially recognised using
this provisional price and the Group's best estimate of the
contained metal. Revenue is subject to final price and metal
content adjustments subsequent to the date of delivery. This price
exposure is considered to be an embedded derivative and is
separated from the sales contract. At each reporting date the
provisionally priced metal content is revalued based on the forward
selling price for the quotational period stipulated in the relevant
sales contract. The selling price of metals can be reliably
measured as these are actively traded on international exchanges
but the estimated metal content is a non observable input to this
valuation. At 30 September 2013 the fair value of embedded
derivatives within sales contracts was US$(601,000) (31 December
2012: US$(6,891,000)). The revaluation effects of embedded
derivatives arising from these sales contracts are recorded as an
adjustment to revenue.
Equity shares: The unquoted shares of Pembrook Mining Corp are
measured based on a combination of observable and unobservable
market data.
14 Cash and cash equivalents
As at 30
September As at
31 December
2013 2012
(Unaudited)
US$000 US$000
------------- -------------
Cash at bank 984 322
Liquidity funds(1) 4,934 72,803
Current demand deposit accounts(2) 47,561 61,654
Time deposits(3) 219,823 224,165
------------- -------------
Cash and cash equivalents 273,302 358,944
============= =============
1 The liquidity funds are mainly invested in certificate of
deposits, commercial papers and floating rate notes with a weighted
average maturity of 9 days as at 30 September 2013 (as at 31
December 2012: 5 days). In addition, liquidity funds include US
Treasury bonds amounting to US$Nil (as at 31 December 2012:
US$49,967,000)
2 Relates to bank accounts which are readily accessible to the Group and bear interest.
3 These deposits have an average maturity of 145 days and are
readily accessible to the Group (as at 31 December 2012: 36
days).
15 Borrowings
The movement in borrowings during the period to 30 September
2013 is as follows:
As at 30
As at 1 September
January Additions Repayments Reclassifications 2013 (Unaudited)
2013 US$000 US$000 US$000 US$000 US$000
------------- ---------- ----------- ------------------ ------------------
Current
Bank loans 360 126,660 (38,361) - 88,659(1)
Convertible
bond payable 6,613 763 (6,606) 5,843 6,613
6,973 127,423 (44,967) 5,843 95,272
Non-current
Convertible
bond payable 106,850 6,032 (100) (5,843) 106,939
106,850 6,032 (100) (5,843) 106,939
------------- ---------- ----------- ------------------ ------------------
Accrued Interest: (9,636) (7,197) 6,606 - (10,227)
------------- ---------- ----------- ------------------ ------------------
Net of accrued
interest 104,187 126,258 (38,461) - 191,984
------------- ---------- ----------- ------------------ ------------------
1 Mainly relates to pre-shipment loans for a total amount of
US$26,756,000 advanced to Minera Santa Cruz S.A. (at 31 December
2012: US$Nil) and US$61,500,000 of Minera Suyamarca S.A.C. (at 31
December 2012: US$Nil) These obligations accrue an effective annual
interest rate ranging from 1.28% to 24.50% and are guaranteed by
the inventories and the trade receivables of the Company (at 31
December 2012: Nil). Pre-shipment loans are credit lines given by
banks to meet payment obligations arising from the exports of the
Group.
16 Dividends paid and declared
Nine months ended 30 September
(Unaudited)
2013 2012
US$000 US$000
--------------- ---------------
US$(000)
Declared and paid during the period:
Equity dividends on ordinary shares:
Final dividend for 2012: US$0.03 (2011: US$0.03) 10,139 10,139
Dividends paid to non-controlling interest: US$0.05 (2012: US$0.05) 6,000 30,877
2013 Interim dividend: US$Nil (2012: US$0.03) - 10,139
--------------- ---------------
Dividends paid 16,139 51,155
--------------- ---------------
Declared dividend to be paid:
2013 Interim dividend: US$Nil (2012: US$Nil) - -
--------------- ---------------
A final dividend in respect of the year ended 31 December 2012
of US$0.03 per share, amounting to a total dividend of
US$10,139,237 was approved by shareholders at the Annual General
Meeting held on 30 May 2013. The Directors of the Company have not
declared an interim dividend in respect of the year ending 31
December 2013.
17 Related party transactions
During the period, in addition to the normal arrangements the
Group has with its related parties, the Group recognised a dividend
from its former associate, Gold Resource Corporation of
US$4,961,925 (30 September 2012: US$7,459,707). At 30 September
2013 the dividend receivable from Gold Resource Corporation
amounted to US$337,556 (31 December 2012: US$877,612).
18 Commitments
a) Mining rights purchase options
During the ordinary course of business, the Group enters into
agreements to carry out exploration under concessions held by third
parties. Generally, under the terms of these agreements, the Group
has the option to acquire the concession or invest in the entity
holding the concession. In order to exercise the option the Group
must satisfy certain financial and other obligations over the
agreement term. The option lapses in the event that the Group does
not meet the financial requirements. At any point in time, the
Group may cancel the agreements without penalty, except in certain
specific circumstances.
The Group continually reviews its requirements under the
agreements and determines on an annual basis whether to proceed
with the financial commitment. Based on management's current
intention regarding these projects, the commitments at the balance
sheet date are as follows:
As at As at
30 September 2013 US$000 31 December 2012 US$000
------------------------- ------------------------
Less than one year 2,436 3,363
Later than one year 20,644 32,188
b) Capital commitments
The future capital commitments of the Group are as follows:
As at As at
30 September 2013 US$000 31 December 2012 US$000
------------------------- ------------------------
Peru 74,773 64,603
Argentina 12,786 11,907
87,559 76,510
------------------------- ------------------------
19 Subsequent events
a) Agreement to acquire non-controlling interests
On 1 October 2013, Hochschild Mining plc entered into a binding
agreement to acquire the 40% interests held by International
Mineral Corporation ("IMZ") in the Pallancata mine and Inmaculada
advanced project in Peru (the "Peruvian Assets", and collectively
the "Acquisition"). Prior to the Acquisition, Hochschild 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 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 31 December 2013.
b) Issuance of Hochschild Mining plc shares
Hochschild Mining plc completed an equity placing of 29,000,000
new ordinary shares of GBP0.25 each in Hochschild Mining plc at a
price of GBP1.55 per placing share, raising gross proceeds of
approximately US$72.8 million.
The placing shares issued represent approximately 8.6% of
Hochschild's issued ordinary share capital prior to the
placing.
Settlement of payment for the placing shares issued pursuant to
the placing, as well as admission, took place on 7 October
2013.
OTHER FINANCIAL INFORMATION
As at As at
30 September 30 September
2013 2012
----------------------------------------------- ------------------- -------------------
Adjusted EBITDA (Dollars in Thousands)(1) 164,831 309,891
Adjusted EBITDA margin (%)(2) 35% 51%
Total debt (Dollars in Thousands)(3) 204,410 137,073
Interest expenses (Dollars in Thousands) 9,561 8,294
Leverage (Total debt / Last 12 months EBITDA) 0.79x 0.31x
Net Leverage (Net total debt(4) / Last
12 months EBITDA) (0.27)x (0.76)x
Interest coverage ratio (Last 12 months
EBITDA / Interest Expenses) 20.56x 39.00x
----------------------------------------------- ------------------- -------------------
(1) Adjusted EBITDA is calculated on a pre-exceptional basis as
profit for the year from continuing operations, income tax expense,
foreign exchange loss, finance costs, finance income, share of
profit / (losses) of associates and joint ventures accounted for
under the equity method, exploration and expenses and depreciation
and amortisation. (2) Adjusted EBITDA divided by net revenue.
(3) Includes the principal outstanding on our debt.
(4) Net Total debt is Total debt less cash and cash
equivalents.
OPERATING DATA
Nine months
ended 30 September
2013 (unaudited)
--------------------------------------- --------------------
Silver production (000 oz)
Ares 563
Arcata 3,647
Pallancata 5,430
San José 4,616
Moris 24
--------------------------------------- --------------------
Gold production (000 oz)
Ares 18.50
Arcata 12.51
Pallancata 20.86
San José 72.30
Moris 7.25
--------------------------------------- --------------------
Silver Co-product cash cost ($/oz)(1)
Ares 21.44
Arcata 13.10
Pallancata 10.54
San José 13.65
Moris 18.19
--------------------------------------- --------------------
(1) Co-product silver cash costs are total cash costs multiplied
by the percentage of revenue from silver, divided by the number of
silver ounces sold in the applicable period. Cash costs are
calculated to include cost of sales, treatment charges, and selling
expenses before exceptional items, less depreciation included in
costs of sales
This information is provided by RNS
The company news service from the London Stock Exchange
END
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