TIDMHOC
RNS Number : 0730C
Hochschild Mining PLC
12 March 2014
12 March 2014
Hochschild Mining plc
Preliminary Results for the twelve months ended 31 December
2013
Financial highlights[1]
-- Revenue of $622.2 million (2012: $818.0 million)
-- Adjusted EBITDA of $195.5 million (2012: $384.8 million)
-- EPS of $(0.15) (2012: $0.19)
-- Cash balance of $291.0 million & short term borrowings
reduced to $17.8 million[2]
-- Full year dividend suspended
-- Minority investments valued at $52.4 million[3]
-- Cashflow optimisation programme already delivered $145
million of savings[4]:
o Production costs reduced by $48 million versus initial
guidance
o Administration costs reduced by $19 million versus 2012
o Sustaining capital expenditure reduced by $33 million versus
initial guidance
o Exploration costs reduced by $25 million versus initial
guidance
Acquisition & Refinancing highlights
-- Key acquisition of Pallancata and Inmaculada minorities
completed
o Consolidates minority shareholding in assets already
controlled and operated by Hochschild
o Inmaculada set to reduce average unit cost
-- Corporate refinancing completed in January 2014
o 7.75% $350 million Senior Notes issued due 2021
Operational highlights
-- Full year production of 20.5 million attrib. silver
equivalent ounces achieved, exceeding 20.0 million target
-- Main operation all-in sustaining costs lowered by 14% to
$18.6 per ounce[5];
-- Inmaculada project set to begin commissioning in Q4 2014
o Plant construction on track with all key equipment
delivered
o Mine development, infrastructure, energy and engineering
targets significantly developed
-- Resource life-of-mine increased to 10.0 years
2014 Outlook
-- 2014 production target set at 21.0 million attributable
silver equivalent ounces
-- 2.0 million silver ounces sold forward for 2014 at $22 per
ounce; 33,000 gold ounces sold forward for 2014 at $1,338 per
ounce
-- 0-5% reduction in all-in sustaining costs expected for
2014
-- Sustaining capital expenditure expected to be $130
million
-- Exploration and geology budget set at approximately $30
million
$000, pre-exceptional unless stated Year ended Year ended % change
31 Dec 2013 31 Dec 2012
------------------------------------------------------------- ------------- ------------- ---------
Attributable silver production (koz) 13,588 13,550 (-)
Attributable gold production (koz) 116 112 4
Net Revenue[6] 622,158 817,952 (24)
Adjusted EBITDA[7] 195,463 384,791 (49)
(Loss)/profit from continuing operations (42,103) 128,581 (133)
(Loss)/profit from continuing operations (post-exceptional) (128,677) 126,866 (201)
Earnings per share ($ pre-exceptional) (0.15) 0.19 (179)
Earnings per share ($ post-exceptional) (0.36) 0.19 (289)
------------------------------------------------------------- ------------- ------------- ---------
Commenting on the results, Ignacio Bustamante, CEO, said:
"In 2013, Hochschild reacted quickly to a very negative market
environment by initiating a wide-ranging cost savings programme to
preserve the Company's operating profitability and, whilst
maintaining production levels, capitalised on a weak market
environment to consolidate our ownership in our most valuable
assets. We were also able to reorganise the Company's financial
position, leaving us in an advantageous position to deliver value
enhancing growth. We can now look forward to a key year of
construction at the Inmaculada project which, when commissioned at
the end of 2014, will signal the start of four years of production
growth."
____________________________________________________________________________
A presentation will be held for analysts & investors at
9.30am (UK time) on Wednesday 12 March 2014 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 3427 1900 (Please quote confirmation code 7501261)
_________________________________________________________________________
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
2013 Overview
2013 proved to be a challenging year due to the considerable
drop in gold and silver prices but also presented significant
opportunities that we were able to capitalise on through the
acquisition of International Minerals ("IMZ"). We believe that the
fundamental case for stronger precious metal prices remains in
place due to the financial difficulties in the world's biggest
economies continuing to threaten the confidence in currencies, and
our observation of a growing scarcity of new world class assets in
the precious metals universe. However, the markets have been
ruthless in imposing a short term lower price environment.
In the first half of the year, the industry was confronted with
extreme falls in precious metals prices that far exceeded existing
market forecasts. In response and within a very short space of
time, our management team initiated a comprehensive cashflow
optimisation programme and we have already seen some very positive
results with improvements in margins ensuring a better second half
of the year and better prospects for 2014. However, notwithstanding
another year of very solid operational performance, given the
prevailing market conditions and ahead of sizeable capital
expenditure on our flagship Inmaculada project, the Board proposes
to not reinstate the dividend until the Company's cash position
improves.
The price fall provided Hochschild with a value enhancing
opportunity that will allow us, not only to improve our cost
position in the short term, but also to grow the Company in a
precious metals market in which we truly believe. In September, we
announced the acquisition of IMZ, a company that owned the 40%
minority stakes in our Pallancata mine and Inmaculada project. It
is my firm belief that our management have chosen an opportune
stage in the cycle to execute the acquisition of assets we know
extremely well and already control.
In line with the IMZ transaction, Hochschild also undertook a
broad corporate refinancing initiative in order to meet the cost of
the acquisition, fully support the Company's anticipated remaining
capital expenditure at Inmaculada and to provide capacity to
satisfy the upcoming convertible bond maturity towards the end of
this year. It is a great credit to our whole team that at a time of
unprecedented industry volatility, we retained the focus to deliver
a complex re-financing package that places the Company in an
excellent position to capitalise on a period of opportunistic
growth.
In addition, one of the key consequences of the dramatic price
falls was the necessity to reduce discretionary expenditure and
refocus the exploration programme for the year, reducing the budget
and prioritising the most promising prospects. The Board remains
convinced by the importance of the ongoing exploration strategy to
the future growth potential of the Company but recognises the need
to adjust the financial commitment depending on the stage in the
cycle.
Outlook
The short term outlook for the precious metals markets remains
uncertain. However, the Company continues to believe that the long
term fundamentals for both silver and gold will eventually reassert
themselves. I am confident that, despite a difficult 2013, we have
the proven operational and geological expertise, an improving cost
position, solid balance sheet and an experienced management team to
navigate volatile markets and deliver profitable production into
the future.
Operating Responsibly
Our commitment to our people, the communities and the
environment remains at the core of our business model. During 2013,
the Company produced its first standalone Sustainability Report
demonstrating our commitment to informing our stakeholders of our
progress in this area. Our ability to operate in a way that
respects the environment is supported by our reporting systems
which continue to be certified compliant with the international
standard, ISO14001. We have also made further progress with our key
Travelling Doctor and Teacher Leader initiatives and I am proud
that our flagship Digital Chalhuanca project has been recognised
externally for its innovation and as an example of successful
public/private collaboration. Further details of all of these
initiatives will be provided in the Annual Report.
In 2013, we made an unprecedented level of improvement in our
safety record with a 37% reduction in the Group's accident
frequency rate and a 43% reduction in the accident severity rate.
However, as impressive as these figures are, we must continue with
our efforts as there were two fatalities at our operations during
2013. We consider each accident to be avoidable and for this reason
the management team are in the process of implementing a
behaviour-based safety programme that will encourage our people to
value safety above all else and continue improving the safety
culture.
Board Changes
In acknowledgement of the Board's own contribution to the
cashflow optimisation programme, we announced in July reductions in
Directors' remuneration and the size of the Board. I would like to
convey my gratitude to both Fred Vinton and Rupert Pennant-Rea for
their longstanding support and commitment.
These changes to the composition of the Board necessitated a
review of our non-executive succession plans and I wish to record
my appreciation to Sir Malcolm Field for delaying his retirement
from the Board and for his ongoing support as Enrico Bombieri
succeeds to the role of Senior Independent Director
On a final note, I wish to thank the entire Hochschild team for
their contributions and our shareholders for their continued
support in what will be remembered as a tough year but one from
which I believe we have emerged in a stronger position.
Eduardo Hochschild
Executive Chairman
11 March 2014
CHIEF EXECUTIVE OFFICER'S STATEMENT
2013 presented Hochschild Mining with an unprecedented level of
gold and silver price declines prompting the management team to
implement a series of measures throughout the Company. The actions
taken were aimed at conserving capital and to position the Company
to operate profitably at all stages of the precious metals cycle
while delivering our key growth project in 2014. The strategy
remains focused on creating value for shareholders by optimising
current operations, focusing on exploration and pursuing
opportunistic, early-stage acquisitions and is underpinned by our
commitment to operate responsibly.
Strategic progress
We announced in September a strategic milestone for Hochschild
by consolidating ownership in Pallancata, currently our biggest
cash flow generator and in Inmaculada, our most exciting growth
project. The transaction represented an important low risk
opportunity to increase our exposure to our attractive Southern
Peru Cluster, reduce our overall operating cost position and to
potentially enhance our cash flow generating potential at no
additional ongoing administrative cost. At the same time, we
announced the launch of a re-financing process which we
successfully completed in January 2014 with our inaugural senior
note offering raising approximately $350 million at a highly
competitive rate against a backdrop of extremely difficult markets
for the mining industry. We remain in a solid financial position
with capacity to fund the remaining Inmaculada project capital
expenditure as well as the convertible bond maturity later in 2014
whilst retaining flexibility to continue to pursue our strategic
priorities.
The construction of the Inmaculada project is clearly the
strategic focus for 2014 with the Company commencing significant
production increases with the aim of reaching a target of almost 35
million ounces by 2017. In September, we received, as expected, the
mill construction permit from the Peruvian government, signalling
the start of the crucial final phase of this key project's
development. In this regard, we have made excellent progress in
2013 with significant steps made in procurement, infrastructure,
engineering and, importantly, mine development and commissioning is
set to begin at the end of the year. After a ramp-up period, the
average annual production for the life of mine is set at
approximately 12 million silver equivalent ounces per annum.
Initial production is scheduled to be sourced from one single wide
vein (Angela) with reduced dilution and overall operating costs and
sustaining capital expenditure expected to be the lowest of all of
Hochschild's operating assets.
As previously announced, the strategy with regard to the Crespo
Advanced Project was revised in the light of the acquisition of
IMZ, resulting in the decision to delay the project in order to
better sequence capital allocation with this move postponing
approximately $80 million of remaining project expenditure.
The key area of operational focus during the last nine months
has been our organisational reaction to the precious metal price
falls that occurred during H1. With a plan initially prepared
during the budgeting process towards the end of 2012, we were able
to rapidly implement our cashflow optimisation programme. This
resulted in the identification of almost $200 million of cash
savings within the business, encompassing operating costs,
sustaining capital expenditure, administrative costs and a
refocused exploration programme. The overall exploration budget was
reduced from $77 million to approximately $50 million and the
greenfield programme, in particular, was significantly reduced with
the focus narrowed to the most promising prospects.
The brownfield exploration programme, which has been so
successful over the last few years, also continued with the focus
on improvements in our resource base. Attributable resources
increased by 8% to almost 1.3 billion silver equivalent ounces with
the overall resource life-of-mine now at a comfortable 10 years. In
line with the reduction in discretionary expenditure, we have also
scaled back exploration work at the Volcan gold project in Chile
although we can look forward to a new geological model of the
porphyry system early this year and remain excited by the long term
potential of this project which already has almost 10 million
ounces of gold resources.
Other key individual initiatives included significant cuts to
administrative and exploration headcount, renegotiation with
suppliers and contractors, the temporary suspension of work at the
Azuca project and $33 million of reductions to sustaining capital
expenditure in 2013. As a team, we are confident that, although the
full annualised effects of the programme will only be evident
through 2014, the strong improvements already achieved in the
Company's underlying profitability allied with the concurrent fall
in industry cost inflation, leave the Company in a much more robust
position to withstand any further price volatility.
2013 overview
It is particularly pleasing that, despite all the volatility in
the industry and the cashflow optimisation measures in place within
the Company, Hochschild met the annual production target for the
seventh year in a row producing 20.5 million silver equivalent
ounces and therefore exceeding the 20.0 million ounce target. Both
Pallancata in Peru and San Jose in Argentina enjoyed a very solid
operational performance and at Arcata, the team have skilfully
handled the complicated flow of reserve grade material from an
increasing number of stopes and the low grade, low cost material
from the Macarena waste dam which is now almost exhausted.
Hochschild will continue to adhere to its policy of mining close to
the average reserve grade at its core operations throughout the
cycle. The two ageing operations, Ares in Peru and Moris in Mexico
have now finally reached the end of their lives with Moris already
closed and Ares scheduled to cease operations towards the middle of
the year.
A number of the cost savings initiatives from our cashflow
optimisation programme started to have a positive effect on the
overall cost performance of the Company during the second half of
the year. In addition, although 2013 began with continuing industry
cost inflation, this began to subside as the year went on and
allied to unanticipated devaluation in both the Peruvian Sol and
the Argentinean Peso, Hochschild was able to achieve year-on-year
reductions in 'all-in sustaining costs' ("AISC") at our main
operations of around 14%. This is expected to continue into 2014
with further reductions forecast although the quantum is expected
to be lower at between 0-5% on an AISC basis, notwithstanding any
further major local currency devaluation.
Hochschild has achieved a resilient set of financial results, in
particular in the second half, with the 30% fall in the average
silver price received in 2013 leading to a decline in Revenue to
$622.2m. Pre-exceptional EBITDA was at $195.5 million but with the
second half much improved by the Company's cost savings initiatives
and representing 54% of the total under a significantly lower
average price received. Pre-exceptional EPS was $(15) cents per
share but, again, the second half saw Hochschild reduce the loss to
only 5 cents per share. The cash balance is currently $291.0
million with minority investments valued at just over $52 million
which takes into account two sales from our non-core investment in
Gold Resource Corporation.
Outlook
Hochschild's production target for 2014 is 21.0 million
attributable silver equivalent ounces. This increase is explained
by the inclusion of the remaining 40% of Pallancata following the
completion of the IMZ acquisition, offsetting the effect of the
closure of Moris and the significant fall in the contribution from
Ares. Management will continue to be focused on implementing
measures to further optimise costs, expenses and capex. 2014 also
promises to be a year of peak project capital expenditure as we
focus our efforts on beginning commissioning the now 100% owned
Inmaculada project by the year end marking a new chapter of growth
for the Company. However, in order to provide the Company with a
degree of cashflow certainty in a crucial year of investment and
with precious metal prices remaining volatile, Hochschild has
forward sold four million ounces of silver equivalent production.
This does not reflect our view of the long term direction of
precious metal prices but increases our short term confidence as we
invest in the future extraction of
sustainable low cost ounces from Inmaculada.
We remain committed to an exploration-led long term growth
strategy and the budget of almost $30 million for 2014 reflects a
belief that our extensive pipeline of both brownfield, greenfield
projects and current operations offer not only optionality but
further scope for creating value at all stages of the investment
cycle.
The entire Hochschild organisation has had to endure a very
difficult 2013 with a significant number of job losses throughout
the Company and therefore the management team is grateful for the
resilience and commitment shown by all our teams in making an
important contribution to an exciting future for Hochschild Mining.
Although 2014 is expected to be a transitional year for us, I am
confident that we are in a stronger position with a key acquisition
completed, a clean financial structure, strong growth prospects and
a focus on project delivery.
Ignacio Bustamante
Chief Executive Officer
11 March 2014
OPERATING REVIEW
2013 Highlights
-- Full year production of 20.5 million attributable silver
equivalent ounces achieved, exceeding guidance
-- Main operation all-in sustaining costs reduced by 14% in 2013
-- Excellent progress at Inmaculada Advanced Project with mill
permit received from Peruvian government and on track to begin
commissioning at the end of 2014
CURRENT OPERATIONS
Production
In 2013, Hochschild has once again successfully exceeded its
full year production target, delivering attributable production of
20.5 million silver equivalent ounces, including 13.6 million
ounces of silver and 116 thousand ounces of gold. Hochschild's
production target for 2014 is 21.0 million attributable silver
equivalent ounces. The increase is explained by the inclusion of
the remaining 40% of Pallancata following the completion of the IMZ
acquisition offsetting the effect of the closure of Moris and a
significant reduction in the contribution from the ageing Ares
operation which is also set to close in H1 2014.
Costs
Although significant industry inflation persisted in the first
few months of the year, the Company's all-in sustaining costs at
its main operations were reduced by 14% in 2013 to $18.6 per ounce
driven by operational initiatives resulting from the cashflow
optimisation programme, devaluation of local operating currencies
and a subsequent fall in industry cost inflation. Unit cost per
tonne at its main Peruvian operations was reduced to $74.2 (2012:
$75.1). In Argentina, unit cost per tonne increased by 4% to $210.0
(2012: $202.2). Please see page 19 of the Financial Review for
further details on costs.
Main operations
Arcata: Peru
The 100% owned Arcata underground operation is located in the
Department of Arequipa in southern Peru. It commenced production in
1964.
Arcata summary Year ended Year ended % change
31 Dec 2013 31 Dec 2012
------------------------------- ------------- ------------- ---------
Ore production (tonnes) 900,861 773,498 16
Average silver grade (g/t) 217 271 (20)
Average gold grade (g/t) 0.74 0.83 (11)
Silver produced (koz) 4,984 5,526 (10)
Gold produced (koz) 16.83 17.27 (3)
Silver equivalent produced
(koz) 5,994 6,562 (9)
Silver sold (koz) 4,924 5,236 (6)
Gold sold (koz) 15.95 15.94 -
Unit cost ($/t) 81.3 86.3 (6)
Total cash cost ($/oz Ag
co-product)([8]) 12.7 14.5 (12)
All-in sustaining cost ($/oz) 20.9 23.9 (13)
------------------------------- ------------- ------------- ---------
Production and sales
Full year silver equivalent production at Arcata in 2013 was 6.0
million ounces (2012: 6.6 million ounces), slightly lower than 2012
as a result of lower grades from stopes and developments in line
with the Company's policy of mining close to average reserve grade.
Tonnage was higher than that of 2012 due to the planned increase in
volumes processed from the low grade Macarena waste dam deposit,
facilitated by the 500 tonne per day capacity expansion at the
Arcata plant (completed in H2 2012). Macarena tonnage continued in
the second half and after the expected processing of a small volume
in Q1 2014 is now considered to be exhausted and will be replaced
by tonnage from stopes and developments in 2014. In addition,
production at Arcata included the decrease in ounces recovered as a
result of processing 100% of Arcata's concentrate into Doré.
Table Showing Contribution from Macarena Waste Dam Deposit
12 mths 2013 12 mths 2012
------------------------------- ------------- -------------
Total
Tonnage 900,861 773,498
Average head grade gold (g/t) 0.74 0.83
Average head grade silver
(g/t) 217 271
------------------------------- ------------- -------------
Macarena
Tonnage 290,226 133,825
Average head grade gold (g/t) 0.29 0.30
Average head grade silver
(g/t) 88 105
Stopes and Developments
Tonnage 610,635 639,673
Average head grade gold (g/t) 0.95 0.94
Average head grade silver
(g/t) 278 306
------------------------------- ------------- -------------
In 2013, the silver/gold doré from Arcata was sold to Johnson
Matthey, Standard Bank, HSBC Bank, Argor Heraeus INTL Commodities
and Auramet Trading.
Costs
In 2013, the unit cost per tonne at Arcata was materially better
than expectations, decreasing by 6% versus the same period last
year to $81.3 per tonne, despite continuing industry inflation at
the start of the year. This was mainly due to the overall effects
of the cost savings initiatives initiated towards the end of the
first half of the year as well as the processing of higher volumes
of low cost Macarena material and a significant local currency
weakening versus expectations.
Resource life and Brownfield exploration
The resource life of Arcata stands at 11.6 years as at 31
December 2013. In 2013, a total of 10,899 metres of drilling was
carried out at Arcata. The exploration programme in the first half
of the year focused on the definition of new high-grade structures
from known vein systems (potential drilling), and a new geological
interpretation of the Ares-Arcata corridor that identified
high-grade structures. In addition, diamond drilling was conducted
at the Pamela, Blanca 2, Baja 2, Tunel 3, Ramal Leslie, Tunel 4,
Irma and Blanca veins. Significant intercepts included:
Vein Results
--------- -----------------------------------------
Pamela DDH425-LM13: 1.41m at 7.83 g/t Au &
2,028 Ag
DDH399-GE13: 1.76m at 6.19 g/t Au &
1,479 Ag
DDH389-GE13: 1.00m at 2.84 g/t Au &
1,208 Ag
--------- -----------------------------------------
DDH373-EX13: 1.17m at 0.33 g/t Au &
Blanca 2 1,295 Ag
--------- -----------------------------------------
Baja DDH434-S13: 1.90m at 3.10 g/t Au &
612 Ag
--------- -----------------------------------------
Baja 2 DDH427-S13: 1.60m at 2.8 g/t Au & 1,901
Ag
--------- -----------------------------------------
DDH401-GE13: 0.78m 1.82 g/t Au & 1,213
Tunel 3 Ag
--------- -----------------------------------------
Tunel 4 DDH506-LM13: 1.20m at 1.65 g/t Au &
1,054 Ag
--------- -----------------------------------------
Irma DDH492-GE13: 1.18m at 0.75 g/t Au &
5,029 g/t Ag
--------- -----------------------------------------
Blanca DDH526-LM13: 1.09m at 3.24 g/t Au &1,146
g/t Ag
--------- -----------------------------------------
In 2014, the 25,000 metre exploration and drilling programme at
Arcata will focus on the potential, near mine and inferred resource
exploration, focusing on the definition of new high grade
structures from known vein systems.
Pallancata: Peru
The 100% owned 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 up until December 2013 was a joint venture,
in which Hochschild held a controlling interest of 60% with
International Minerals Corporation ("IMZ"). Following the purchase
of IMZ, Hochschild now owns 100% of the operation. Ore from
Pallancata is transported 22 kilometres to the Selene plant for
processing.
Pallancata summary(*) Year ended Year ended % change
31 Dec 2013 31 Dec 2012
------------------------------- ------------- ------------- ---------
Ore production (tonnes) 1,088,712 1,094,250 (1)
Average silver grade (g/t) 264 256 3
Average gold grade (g/t) 1.13 1.09 4
Silver produced (koz) 7,628 7,441 3
Gold produced (koz) 27.83 26.23 6
Silver equivalent produced
(koz) 9,298 9,014 3
Silver sold (koz) 7,567 7,280 4
Gold sold (koz) 26.67 25.07 6
Unit cost ($/t) 68.3 67.2 2
Total cash cost ($/oz Ag
co-product) 10.3 11.4 (10)
All-in sustaining cost ($/oz) 16.7 19.5 (14)
------------------------------- ------------- ------------- ---------
Production and sales
Overall in 2013, Pallancata enjoyed a very solid year of
production, delivering silver equivalent production of 9.3 million
ounces (2012: 9.0 million) with higher average grades the result of
a higher proportion of material from stopes.
In 2013, the silver/gold concentrate from Pallancata was sold to
Teck Metals Ltd., LS-Nikko Copper Inc and Glencore.
Costs
Unit cost per tonne at Pallancata also enjoyed a better 2013
than expected increasing by only 2% in 2013, to $68.3 despite
continuing industry inflation at the start of the year. As at
Arcata, costs were positively impacted by the cashflow optimisation
programme as well as the higher than expected depreciation of the
local currency. Further positive pressure resulted from lower
personnel and supply costs as a higher proportion of mineral was
extracted using mechanised methods.
Resource life and Brownfield exploration
The resource life of the Pallancata operation has been increased
substantially in 2013 to 8.2 years as at 31 December 2013. During
2013, a total of 20,972 metres of diamond drilling was carried out
over the course of the year (2012: 50,326 metres). Both infill and
potential drilling were carried out at Pallancata during the year,
to further delineate inferred resources and to test new possible
vein extensions.
The Yurika West vein mapping programme continued, and identified
major structural lineaments trending NE-EW associated with
silicified hydrothermal breccias. 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 and towards the end of the year,
mapping campaigns focused on the south side of Pallancata (at the
Sonia, San Angela, Virgen del Carmen, Lilina and Debora veins) with
total coverage for the whole year of 1,164 ha.
Significant intercepts included:
Vein Results
---------------- ----------------------------------------
Yurika DLYU-A08: 1.02m at 17.86 g/t Au & 1,702
g/t Ag
DLYU-A16: 2.17m at 11.17 g/t Au & 949
g/t Ag
DLYU-A20: 2.75m at 6.35 g/t Au & 931
g/t Ag
DLYU-A12: 0.91m at 6.72 g/t Au & 539
g/t Ag
---------------- ----------------------------------------
Luisa DLLU-A134: 1.96m at 1.11 g/t Au & 727
g/t Ag
DLLU-A136: 1.17m at 1.09 g/t Au & 420
g/t Ag
---------------- ----------------------------------------
Yanely DLYU-A02: 0.82m at 33.91 g/t Au & 326
g/t Ag
---------------- ----------------------------------------
Nine DLRI-A107: 1.35m at 4.19 g/t Au & 1,026
g/t Ag
---------------- ----------------------------------------
Rina NW (Charo) DLRI-A97: 0.88m at 2.92 g/t Au & 617
g/t Ag
---------------- ----------------------------------------
In 2014, the 25,000 metre exploration programme at Pallancata
will focus on increasing life-of-mine through drilling in the
Yurika, Charo, Mercedes and Sonia veins with potential drilling set
to be targeting the Mercedes, Jacqueline, San Cayetano, Charo,
Paola and Rina veins.
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 2013 31 Dec 2012
------------------------------- ------------- ------------- ---------
Ore production (tonnes) 536,937 509,851 5
Average silver grade (g/t) 425 417 2
Average gold grade (g/t) 6.42 5.79 11
Silver produced (koz) 6,357 5,953 7
Gold produced (koz) 98.83 85.77 15
Silver equivalent produced
(koz) 12,286 11,099 11
Silver sold (koz) 6,278 5,897 6
Gold sold (koz) 94.76 84.29 12
Unit cost ($/t) 210.0 202.2 4
Total cash cost ($/oz Ag
co-product) 13.4 14.4 (7)
All-in sustaining cost ($/oz) 19.0 22.1 (14)
------------------------------- ------------- ------------- ---------
(*) The Company has a 51% interest in San Jose
Production and sales
2013 has been a strong year for the San Jose operation with
silver equivalent production up 11% to 12.3 million ounces (2012:
11.1 million) driven by increased tonnages and increased grades, in
particular gold. Higher tonnage was explained by the 10% plant
capacity increase completed in December 2012 with higher grades
resulting from incorporation of new high grade reserves into the
mine plan.
In 2013, the dore produced at San Jose was sold to Argor Heraeus
and Republic Metals whilst the concentrate produced at the
operation was sold to Teck Metals ltd., Aurubis AG, LS-Nikko Copper
Inc, Consorcio Minero and Glencore.
Costs
At San Jose, unit cost per tonne rose by only 4% versus 2012 to
$210.0. The increase was slightly below the 2013 revised guidance
of 5-10% due to the impact of the cashflow optimisation initiatives
and a stronger than expected devaluation of the Argentine peso
offsetting the effects of continuing high local inflation and a
number of brief stoppages at the mine during the first half.
Resource life and Brownfield exploration
The resource life of San Jose stands at 11.8 years as at 31
December 2013. The key event in exploration at the mine was the
incorporation of various surrounding properties, from both
Hochschild and McEwen Mining, into the Minera Santa Cruz JV.
For much of 2013 the exploration programme at San Jose focused
on the geological mapping of the district area and identifying new
structures, with new high-grade structures identified in the
northern part of the district. A total of 10,529 metres of diamond
drilling was completed during 2013. In addition, new structures
were identified in the Juanita vein system located in the south of
the property. Drilling was conducted on the Huevos Verdes, Emilia
and Juanita veins with detailed surface mapping and sampling being
completed over the Colorado Grande, Juanita, Saavedra and Tres
Colores areas. Significant intercepts included:
Vein Results
-------------------- ---------------------------------------
Ramal Huevos Verdes SJD-1387: 0.87m at 70.03 g/t Au & 2060
g/t Ag
SJD-1387: 0.73m at 2.08 g/t Au & 234
g/t Ag
-------------------- ---------------------------------------
Emilia SJD-1393: 5.00m at 40.08 g/t Au & 882
g/t Ag
SJD-1398: 1.50m at 4.28 g/t Au & 152
g/t Ag
-------------------- ---------------------------------------
SJD-1450: 0.70m at 2.27 g/t Au & 210
Antonella g/t Ag
-------------------- ---------------------------------------
Kospi SE SJD-1408: 1.00m at 7.42 g/t Au & 522
g/t Ag
-------------------- ---------------------------------------
In 2014, the 2,000 metre potential drilling campaign will focus
on the definition of the new Ayelen, Nuevo 1 and Karina veins as
well as drilling in the Los Pinos area.
Other operations
Ares: Peru
The Ares mine, which commenced production in 1998, is a 100%
owned operation located approximately 25 kilometres from
Hochschild's Arcata mine in southern Peru.
Ares summary Year ended Year ended % change
31 Dec 2013 31 Dec 2012
---------------------------- ------------- ------------- ---------
Ore production (tonnes) 329,095 336,423 (2)
Average silver grade
(g/t) 82 54 52
Average gold grade
(g/t) 2.39 2.65 (10)
Silver produced (koz) 757 481 57
Gold produced (koz) 23.40 26.28 (11)
Silver equivalent produced
(koz) 2,162 2,058 5
Silver sold (koz) 761 473 61
Gold sold (koz) 23.25 25.75 (10)
---------------------------- ------------- ------------- ---------
Production and sales
The Company's ageing Ares mine in Peru continued to operate in
2013, delivering total silver equivalent production of 2.2 million
silver equivalent ounces a 5% improvement on the 2012 figure of 2.1
million ounces. Ares is currently expected to cease production in
H1 2014. The Company continues to monitor production closely at
Ares to ensure the extraction of profitable ounces during the last
few months of its mine life.
100% of Ares' production is processed into dore, all of which
was sold to Johnson Matthey in 2013.
Brownfield exploration
The exploration programme at Ares in 2013 focused on the
exploration of potential mineralisation in the extensions of known
veins and the definition of new high-grade structures. In addition,
exploration continued at the Isabel, Paola, Karina and Victoria
veins. In the Paola, Falla Marion and Ares West veins, surface
mapping and sampling was conducted over an area of 3,567 ha. A new
geophysical survey was also completed.
In 2014, geological work will continue to generate targets
within the Ares-Arcata corridor and a 2000 metre drilling campaign
is planned.
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 2013 31 Dec 2012
---------------------------- ------------- ------------- ---------
Ore production (tonnes) - - -
Average silver grade - - -
(g/t)
Average gold grade - - -
(g/t)
Silver produced (koz) 27 43 (37)
Gold produced (koz) 8.33 8.79 (5)
Silver equivalent produced
(koz) 527 570 (8)
Silver sold (koz) 26 42 (38)
Gold sold (koz) 7.93 8.74 (9)
---------------------------- ------------- ------------- ---------
Production and sales
Despite mine production at Moris having ceased in September
2011, in 2013 continued leaching of the pads produced a further 527
thousand silver equivalent ounces (2012: 570 thousand ounces).
However, towards the end of the year the Moris operation was
finally closed and subsequently transferred to a local third
party.
In 2013, the gold/silver dore produced at Moris was sold to
Johnson Matthey, INTL Commodities and Auramet Trading.
Brownfield exploration
Exploration work at Moris during 2013 continued to focus on
identifying new economic structures and the completion of the
potential geological model of the property to identify new drill
targets. Two new structures were discovered to the north of the
original mine location including the Los Alamos area, and
preliminary data suggested significant mineralisation in the
surrounding extensions of the veins. However, the final conclusion
was that no further work was needed in the area.
PROJECT REVIEW
Hochschild started 2013 with one Advanced Project, Inmaculada
and three Growth Projects, Crespo, Azuca and Volcan. Following the
significant price declines towards the middle of the year, the
Company renewed its commitment to the flagship Inmaculada project.
The acquisition of the IMZ minorities, completed in December 2013,
gave the Company 100% of this project which is expected to
contribute, after a ramp-up period, almost 12 million silver
equivalent ounces on average per annum with the start of
commissioning due towards the end 2014.
The strategy with regards to Crespo has been revised and in
early October 2013, the Company announced plans to delay the
project in order to better sequence overall Company capital
allocation, with the focus now firmly on the construction of the
Inmaculada project and the acquisition of the IMZ minorities. This
is expected to postpone approximately $80 million of remaining
Crespo project expenditure. Despite the prioritisation of
Inmaculada, Crespo remains an important component of the company's
portfolio of development assets. It is management's intention that
in the event that precious metals markets show sustained
improvement, this would allow the Company to re-allocate capital to
the Crespo project and potentially re-initiate development sooner
than would be otherwise anticipated.
The Volcan gold project in Chile, acquired following the
acquisition of Andina Minerals Inc in November 2012, also had its
budgeted exploration capital expenditure reduced as part of the
Company's cashflow optimisation programme. However, Hochschild
remains excited by the potential for this long term project, which
has almost 10 million ounces of gold resources and will continue
with desktop geological work in the first part of 2014.
Although a portion of drilling was completed at Azuca during the
first half, work has since ceased and the project is now on hold.
The Company remains excited by the potential of this large
mineralised district but capital allocation is now refocused on
more advanced projects.
Inmaculada
Inmaculada is a 20,000 hectare gold-silver project located in
the Company's existing operational cluster in southern Peru and is
100% owned and controlled by Hochschild, following the acquisition
of the remaining 40% from IMZ stake in December 2013.
Following the announcement on 20 September 2013 that the
Peruvian government had approved the mill construction permit for
the Inmaculada project, work began in Q4 on the construction of the
plant with major site clearance and earthworks ongoing throughout
the quarter. Procurement of the main plant equipment is also almost
complete with only lime slakers still to be delivered. These are
expected in March.
The detailed civil and underground engineering continued
throughout the year and is close to completion with mine
development plans updated in line with a recently completed and
approved mine schedule. In addition, the detailed engineering for
the electricity transmission line was also completed during the
first half, and procurement commenced and was completed in the
third quarter. Tests were also successfully carried out on the main
equipment and electrical substations.
Underground mine development progressed well during 2013 with
almost 5.7km of tunneling and 1.8km of raised boring carried out
during the year bringing the total to over 10.4km achieved since
the project's commencement. In addition, the project's
infrastructure requirements also made good progress with
construction of the camp now complete, and the main access road
expected to be finished in the first quarter of 2014.
The exploration drilling programme in and around the Inmaculada
project continued in 2013. Surface exploration drilling was
completed, with one drill rig in operation to test geophysical
anomalies and alteration lineaments parallel to the Mirella vein,
and to test the NE extension of the Martha vein. In addition, a new
potential high-grade vein, Mayte, was intercepted. In the second
half of the year surface mapping and sampling campaigns started
over the Huarmapata 3 area identifying a high sulphidation system
with advanced argillic alteration.
During the year, a total of 4,796 metres were drilled in
Shakira, Mirella, Susana, Angela, Roxana and Mayte veins, with
significant results including:
Vein Results
-------- --------------------------------------
Mayte MIR13-003: 1.51m at 2.37 g/t Au & 9
g/t Ag
-------- --------------------------------------
Mirella MIR13-001: 1.53m at 4.21 g/t Au & 72
g/t Ag
-------- --------------------------------------
Shakira SHK13-003: 1.10m at 4.10 g/t Au & 10
g/t Ag
-------- --------------------------------------
Martha MIR13-001: 0.20m at 31.02 g/t Au &
3,269 g/t Ag
-------- --------------------------------------
MIR13-003: 0.88m at 5.96 g/t Au & 330
Roxana g/t Ag
-------- --------------------------------------
In 2014, the exploration programme will involve a 5,000 metre
programme consisting of potential drilling in the Mayte vein
corridor as well as near mine exploration at selected targets , in
order to expand the number of current resources.
Crespo
Crespo is 100% owned by Hochschild and is located in the
Company's existing operating cluster in southern Peru. This has the
potential to 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 tonne per day
operation with an average annual production of 2.7 million silver
equivalent ounces.
Work continued on the Crespo project up until the decision to
delay the development in the third quarter. In the first half of
the year, the detailed integration engineering continued and was
completed in Q3 2013. Basic and detailed engineering for the mine
also progressed as did construction of the new access road to the
mine site which was completed in December.
With regards to the permit application process, the surface land
agreement for the project was approved by the local community on 11
January 2013 and the underground water study was approved in Q2
2013. In addition, in July, the Company received the Environmental
Impact Study ('EIS') permit. Hochschild also submitted the
project's construction permit application at the end of February
and received positive feedback from the Peruvian government and
currently remains under evaluation.
Although exploration work ceased altogether in the third
quarter, in the first half of the year district surface exploration
was carried out and a new high sulphidation target, Jackelin, was
identified. Furthermore, surface geochemistry sampling programmes
were completed, with gold and silver anomalies reported.
Volcan
Exploration was not scheduled at the long term Volcan project
for 2013. However, work continued throughout the second half in
line with the refocused exploration budget and comprised systematic
relogging of 56,331 metres of the Andina Minerals drill core in
order to construct a more robust geological model of the porphyry
system which is expected to be completed in the first half of this
year.
Azuca
In H1 2013, a total of 13,108 metres of diamond drilling were
completed at Azuca although these campaigns at Azuca were
subsequently halted in late April following the decision to place
the project on hold.
EXPLORATION REVIEW
In 2013, investment in exploration totalled $51.9 million and
91,429 metres of drilling was completed at the Company's
brownfield, Advanced and Growth Projects and greenfield projects.
As part of Hochschild's cashflow optimisation programme, initiated
as a response to the volatility in precious metal prices towards
the middle of the year, the Company conducted a detailed review of
discretionary elements of its exploration budget with the result
that the Company reduced its 2013 exploration budget from the
original $77 million forecast. Exploration at the Company's main
operations focused on the development of potential resources as
opposed to increasing resource life-of-mine, reflecting the
Company's confidence in their long term sustainability. In
addition, the Company's greenfield exploration programme was
significantly curtailed to concentrate only on the Company's most
promising prospects.
The 2014 budget, representing 63,500 metres, will be split
between exploration work at the Company's existing operations,
Advanced Projects and greenfield opportunities in Peru and Mexico.
The main focus will continue to be brownfield exploration.
In 2014, exploration work at the core operations will be mainly
focused on identifying new potential and near mine high grade areas
to further improve the resource quality whilst at the Inmaculada
Advanced Project, efforts will be focused on identifying new
potential high grade areas.
Exploration at 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. Hochschild also aims to continue its generative
programme to conduct further exploration on the Company's extensive
land package of premium geological properties.
Mines and Advanced Projects exploration
Approximately 33% of the exploration budget was invested in
mines and Advanced and Growth Project exploration in 2013.
Greenfield exploration
In 2013, approximately 41% of the 2013 exploration budget was
invested in the Company's greenfield programme, with the proportion
set to be 17% in 2014. In 2013, a total of 27,958 metres was
drilled at the Company's greenfield projects.
Company Makers
Valeriano
At the Valeriano Company Maker project, a total of 6,669 metres
were drilled during 2013 to further test at depth, the porphyry
copper and gold mineralisation encountered in the 2012 drilling
campaign. The exploration confirmed the discovery of a potentially
significant porphyry Cu - Au deposit at depth. However, there are
no plans for further drilling in 2014 until market conditions
improve.
Pachuca
The Pachuca project is located in Mexico and was added to the
Company's project pipeline as a Company Maker project in Q2 2013.
The Pachuca property encompasses approximately 19,000 hectares of
mineral rights in and around the Pachuca silver-gold mining
district. Historic production from the Pachuca district totals
approximately 1.4 billion ounces of silver and over 7.0 million
ounces of gold, making it one of the largest silver-gold districts
in the world.
The JV with Solitario Exploration & Royalty Corp (TSX: SLR)
has been focusing on the northwestern extension of the historical
vein mining district. Following extensive geological mapping and
geochemical sampling along the vein systems, almost half of the
5,000 metre programme has already been drilled during November and
December. The assay results from the Escondida vein have shown some
significant intersections and a new reinterpretation of the data
has led to further drilling focus on the Sorpresa vein, a splay off
the Escondida vein, with a potential extension of 2km. In light of
this progress, a further 3,000 metres of drilling is scheduled for
2014.
La Falda
At the La Falda Company Maker project in Chile, four holes were
completed in the drilling campaign, totaling 2,605 metres. Surface
exploration was held to identify new drill targets but no further
work has been scheduled for 2014, or until market conditions
improve.
Potrero
At the Potrero Company Maker project in Chile, drilling
commenced in January 2013 and centred around known mineralised
structures as well as to the North East along the projected strike
of the mineralisation. During the first quarter, a total of 2,763
metres of diamond drilling were completed and significant gold
anomalies were reported. No further drilling campaign has been
scheduled for 2014.
Mercurio
In 2013, a total of 2,898 metres of drilling were carried out at
the Mercurio Company Maker project in Mexico focused on the Barite
zone. As a result of the cashflow optimisation programme, the
project area was significantly refocused to the more prospective
north-western Barite area. Soil sampling has delineated a zone of
Au mineralisation, which will be followed up by a geochemistry grid
over the relevant area. No further drilling has been scheduled for
2014.
Baborigame
At the Baborigame Company Maker project in Mexico, exploration
drilling commenced in March 2013. Drilling was carried out on the
Cebolla target to test for mineralisation following the indication
of gold mineralisation from surface geochemistry. A total of 4,018
metres of diamond drilling were completed in the quarter. No
further work has been scheduled for 2014, or until market
conditions improve.
Julieta
At the Julieta project, Hochschild completed a 2,000 metres
diamond drill programme during Q4 2013. The programme was aimed at
testing the hydrothermal breccias found during the surface
reconnaissance of the area. Seven drill holes were completed in
December 2013 employing two rigs. Favorable alteration was
encountered throughout the volcanic sequence in six of the holes,
some of which show lengthy anomalous gold intercepts. The seventh
hole cut a wide mineralised hydrothermal breccia with locally
significant gold mineralization although the extent of this breccia
body has not been determined. Significant results from the drill
programme are summarised below:
Results
---------------------------------------------------
DDHJU-1303: from 145 to 338 // 189m at 0.16 g/t Au
---------------------------------------------------
DDHJU-1307: from 182 to 252 // 70m at 0.33 g/t Au
---------------------------------------------------
DDHJU-1307: from 195 to 207 // 12m at 1.07 g/t Au
---------------------------------------------------
Riverside Joint Venture
Hochschild has supplied Riverside with additional funding to
carry out further target generation on the Clemente project in the
northern part of the state of Sonora, Mexico. 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. This JV agreement continues into 2014.
Medium Scale projects
FarallĂ³n
At the Farallon Medium Scale project in Peru, the first stage of
exploration drilling was completed in Q1 2013 with three drill
holes and a total of 1,257 metres of drilling completed. Results
have indentified multiple intercepts of quartz veins and veinlets
with sphalerite, galena and chalcopyrite up to one metre in width,
associated with tensional structures. No further work has been
scheduled for 2014, or until market conditions improve.
Cuello Cuello
At the Cuello Cuello Medium Scale project in Peru, during H1
2013, a total of 310 metres were drilled. This was the second
drilling programme carried out at the property and near surface
mineralised structures were again intersected, and two structural
trends were identified. Metallurgical tests on ore show that some
areas of the deposit are amenable to cyanide leaching with good
recoveries. The Company is currently evaluating the economics of
the project before defining the next phase of the exploration
programme although no further work has been scheduled for 2014.
Fresia
At the Fresia Medium Scale project, a town hall meeting was held
in the project area, whereby the Company's plans for the upcoming
drill programme in the area were presented to the local communities
and authorities. The successful completion of this process allows
the Company to proceed with filing an application for an
exploration drill permit for the project. A 1,500 metre programme
is scheduled to begin in Q2 2014.
San Martin
At the San Martin Medium Scale project in Peru, a total of 3,003
metres of exploration drilling were carried out to explore the
continuity of quartz veins outside of the Rhyodacite dome. Drilling
holes intercepted structures with good mineralisation including
sphalerite, galena, ruby silver and high grade gold and silver
mineralisation. No further work has been scheduled for 2014, or
until market conditions improve.
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. No
further work has been scheduled for 2014, or until market
conditions improve.
FINANCIAL REVIEW
Key performance indicators
(before exceptional items, unless otherwise indicated)
$000 unless otherwise indicated Year ended Year ended % change
31 Dec 2013 31 Dec 2012
------------------------------------------------------------- ------------- ------------- ---------
Net Revenue[9] 622,158 817,952 (24)
Attributable silver production (koz) 13,588 13,550 (-)
Attributable gold production (koz) 116 112 (4)
Cash costs ($/oz Ag co-product)[10] 12.31 13.41 (8)
Cash costs ($/oz Au co-product) (24) 748 735 2
Total all-in sustaining costs ($/oz) 19.9 23.8 (16)
Main operation all-in sustaining costs ($/oz) 18.6 21.7 (14)
Adjusted EBITDA[11] 195,463 384,791 (49)
(Loss)/profit from continuing operations (42,103) 128,581 (133)
(Loss)/profit from continuing operations (post exceptional) (128,677) 126,866 (201)
Earnings per share (pre exceptional) (0.15) 0.19 (179)
Earnings per share (post exceptional) (0.36) 0.19 (289)
Cash flow from operating activities[12] 64,674 254,879 (75)
Resource life of mine (years) 10.0 9.8 2
------------------------------------------------------------- ------------- ------------- ---------
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.
Revenue
Gross revenue
Gross revenue from continuing operations decreased 24% to $658.2
million in 2013 (2012: $869.1 million) driven by the significant
fall in precious metal prices.
Silver
Gross revenue from silver decreased 28% in 2013 to $432.5
million (2012: $599.4 million) as a result of lower prices
offsetting the increase in the total amount of silver ounces sold
which rose by 3% to 19,555 koz (2012:18,928 koz).
Gold
Gross revenue from gold decreased 16% in 2013 to $225.6 million
(2011: $269.2 million) also as a result of lower prices although
offset to some extent by a 5% increase in gold sales - the total
amount of gold ounces sold in 2013 at 168.6 koz (2012: 160.0
koz).
Gross average realised sales prices
The following table provides figures for average realised prices
and ounces sold for 2013 and 2012:
Average realised prices Year ended Year ended
31 Dec 2013 31 Dec 2012
----------------------------------- ------------- -------------
Silver ounces sold (koz) 19,555 18,928
Avg. realised silver price ($/oz) 22.12 31.6
Gold ounces sold (koz) 168.56 159.8
Avg. realised gold price ($/oz) 1,338 1,684
----------------------------------- ------------- -------------
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 2013, the
Group recorded commercial discounts of $36.1 million (2012: $51.2
million). This decrease is explained by lower prices and a lower
volume of concentrate sold in 2013, mainly as a result of the
Arcata dore project. The ratio of commercial discounts to gross
revenue in 2013 remained at 6% (2012: 6%).
Net revenue
Net revenue decreased by 24% to $622.2 million (2012: $818.0
million), comprising silver revenue of $405.5 million and gold
revenue of $216.6 million. In 2013 silver accounted for 65% and
gold 35% of the Company's consolidated net revenue compared to 68%
and 32% respectively in 2012.
Revenue by mine
$000 unless otherwise indicated Year ended Year ended % change
31 Dec 2013 31 Dec 2012
--------------------------------- ------------- ------------- ---------
Silver revenue
Arcata 115,522 165,464 (30)
Ares 17,712 14,653 21
Pallancata 163,394 232,503 (30)
San Jose 135,291 184,635 (27)
Moris 650 1,315 (51)
Commercial discounts (27,050) (40,784) (34)
Net silver revenue 405,519 557,786 (27)
Gold revenue
Arcata 22,271 26,850 (17)
Ares 32,650 42,927 (24)
Pallancata 35,189 42,620 (17)
San Jose 123,905 142,151 (13)
Moris 11,597 14,616 (21)
Commercial discounts (9,036) (9,528) (5)
Net gold revenue 216,576 259,636 (17)
--------------------------------- ------------- ------------- ---------
Other revenue[13] 63 530 (88)
--------------------------------- ------------- ------------- ---------
Net revenue 622,158 817,952 (24)
--------------------------------- ------------- ------------- ---------
Costs
Total pre-exceptional cost of sales increased 11% to $466.8
million in 2013 (2012: $420.3 million). The direct production cost
increased by 3% in 2013, to $311.7 million (2012: $301.5 million)
mainly as a result of an increase in tonnage treated mainly in
Arcata and San José as a result of plant expansions. Depreciation
in 2013 was $144.1 million (2012: $121.2 million), with the
increase mainly due to full depreciation of the Ares operation,
depreciation of new tailings dams at Arcata as well as a higher
future capex depreciation resulting from the increasing cost to
convert resources into reserves in all operating units. Other
items, which principally includes workers' profit sharing, was $7.0
million in 2013 (2012: $15.4 million) and change in inventories
which was $3.9 million in 2013 (2012: $(17.7) million).
$000 Year ended Year ended % Change
31 Dec 2013 31 Dec 2012
---------------------------------- ------------- ------------- ---------
Direct production cost excluding
depreciation 311,699 301,476 3
Depreciation in production cost 144,137 121,156 19
Other items 7,004 15,401 (55)
Change in inventories 3,926 (17,708) (122)
---------------------------------- ------------- ------------- ---------
Pre-exceptional Cost of Sales 466,766 420,325 11
---------------------------------- ------------- ------------- ---------
Unit cost per tonne
The Company reported unit cost per tonne at its main operations
of $103.2 in 2013, flat compared to 2012 (2012: $103.2). For
further explanation on the increase in unit cost per tonne please
refer to page 7 of the Operating Review.
Unit cost per tonne by operation (including royalties)[14]:
Operating unit ($/tonne) Year ended Year ended % change
31 Dec 2013 31 Dec 2012
-------------------------- ------------- ------------- ---------
Main operations 103.2 103.2 -
Peru 74.2 75.1 (1)
Arcata 81.3 86.3 (6)
Pallancata[15] 68.3 67.2 2
-------------------------- ------------- ------------- ---------
Argentina 210.0 202.2 4
San Jose 210.0 202.2 4
-------------------------- ------------- ------------- ---------
Others 128.3 138.4 (7)
Ares 128.3 138.4 (7)
Total 106.1 107.8 (2)
-------------------------- ------------- ------------- ---------
Cash costs
Cash costs include cost of sales, commercial deductions and
selling expenses before exceptional items, less depreciation
included in cost of sales.
Cash cost reconciliation[16]:
$000 unless otherwise indicated Year ended Year ended % change
31 Dec 2013 31 Dec 2012
--------------------------------- ------------- ------------- ---------
Group Cash Cost 387,686 392,825 (1)
--------------------------------- ------------- ------------- ---------
(+) Cost of sales 466,766 420,325 11
(-) Depreciation in Cost
of Sales (144,923) (117,627) 23
(+) Selling expenses 28,785 39,460 (27)
(+) Commercial deductions 37,058 51,197 (28)
Gold 9,065 9,552 (5)
Silver 27,993 41,645 (33)
--------------------------------- ------------- ------------- ---------
Revenue 622,158 817,952 (24)
--------------------------------- ------------- ------------- ---------
Gold 216,576 259,636 (17)
Silver 405,519 557,786 (27)
Others 63 530 (88)
--------------------------------- ------------- ------------- ---------
Ounces Sold 19,724 19,088 3
--------------------------------- ------------- ------------- ---------
Gold 168.6 159.8 6
Silver 19,555 18,928 3
--------------------------------- ------------- ------------- ---------
Group Cash Cost ($/oz)
--------------------------------- ------------- ------------- ---------
Co product Au 801 781 3
Co product Ag 12.9 14.2 (9)
By product Au (272) (1,293) (79)
By product Ag 8.3 6.5 28
--------------------------------- ------------- ------------- ---------
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.
All-in sustaining cost reconciliation
All-in sustaining cash costs per silver equivalent
ounce([17])
Year ended 31 Dec 2013
$000 unless otherwise Arcata Pallancata San José Main Operations Other Corporate Total
indicated Operations & Others
-------------------------------- ------- ---------- ------------- --------------- ----------- --------- -------
(+) Production Cost excluding
depreciation 72,706 75,321 112,764 260,791 50,908 - 311,699
(+) Other items in Cost of
Sales -638 571 7,074 7,007 -3 - 7,004
(+) Operating & Exploration
capex for units 43,255 44,356 56,502 144,113 4,715 2,510 151,338
(+) Brownfield exploration
expenses 2,052 2,149 1,795 5,996 581 3,201 9,778
(+) Administrative expenses
(w/o depreciation) 6,469 11,472 8,589 26,530 2,983 22,274 51,787
(+) Royalties - 1,822 - 1,822 522 - 2,344
-------------------------------- ------- ---------- ------------- --------------- ----------- --------- -------
Sub-Total 123,844 135,691 186,724 446,259 59,706 27,985 533,950
-------------------------------- ------- ---------- ------------- --------------- ----------- --------- -------
Ounces Produced (Ag Eq oz) 5,994 9,298 12,286 27,578 2,689 - 30,267
-------------------------------- ------- ---------- ------------- --------------- ----------- --------- -------
Sub-total ($/oz) 20.7 14.6 15.2 16.2 22.2 17.6
-------------------------------- ------- ---------- ------------- --------------- ----------- --------- -------
(+) Commercial deductions 920 16,788 19,335 37,043 15 - 37,058
(+) Selling expenses 325 2,369 25,899 28,593 192 - 28,785
-------------------------------- ------- ---------- ------------- --------------- ----------- --------- -------
Sub-total 1,245 19,157 45,234 65,636 207 - 65,843
-------------------------------- ------- ---------- ------------- --------------- ----------- --------- -------
Ounces Sold (Ag Eq oz) 5,881 9,167 11,963 27,011 2,658 - 29,669
-------------------------------- ------- ---------- ------------- --------------- ----------- --------- -------
Sub-total ($/oz) 0.2 2.1 3.8 2.4 0.1 2.2
-------------------------------- ------- ---------- ------------- --------------- ----------- --------- -------
Total cash cost ($/oz Ag
Eq) 12.2 10.3 13.5 12.1 19.0 - 12.7
-------------------------------- ------- ---------- ------------- --------------- ----------- --------- -------
All-in sustaining costs ($/oz
Ag Eq) 20.9 16.7 19.0 18.6 22.3 - 19.9
-------------------------------- ------- ---------- ------------- --------------- ----------- --------- -------
Year ended 31 Dec 2012
$000 unless otherwise Arcata Pallancata San José Main Operations Other Corporate Total
indicated Operations & Others
-------------------------------- ------- ---------- ------------- --------------- ----------- --------- -------
(+) Production Cost excluding
depreciation 65,522 72,101 106,621 244,244 55,002 2,230 301,476
(+) Other items in Cost of
Sales 6,691 4,686 - 11,377 4,024 - 15,401
(+) Operating & Exploration
capex for units 52,791 56,871 71,188 180,850 8,322 604 189,776
(+) Brownfield exploration
expenses 4,467 4,062 5,788 14,317 1,820 6,976 23,113
(+) Administrative expenses
(w/o depreciation) 7,109 13,723 9,957 30,790 3,800 36,120 70,710
(+) Royalties - 3,267 - 3,267 567 - 3,834
-------------------------------- ------- ---------- ------------- --------------- ----------- --------- -------
Sub-Total 136,580 154,710 193,554 484,845 73,535 45,930 604,310
-------------------------------- ------- ---------- ------------- --------------- ----------- --------- -------
Ounces Produced (Ag Eq oz) 6,562 9,014 11,099 26,676 2,628 - 29,304
-------------------------------- ------- ---------- ------------- --------------- ----------- --------- -------
Sub-total ($/oz) 20.8 17.2 17.4 18.2 28.0 20.6
-------------------------------- ------- ---------- ------------- --------------- ----------- --------- -------
(+) Commercial deductions 16,512 17,398 17,287 51,197 - - 51,197
(+) Selling expenses 2,381 3,523 33,457 39,361 99 - 39,460
-------------------------------- ------- ---------- ------------- --------------- ----------- --------- -------
Sub-total 18,893 20,921 50,744 90,558 99 - 90,657
-------------------------------- ------- ---------- ------------- --------------- ----------- --------- -------
Ounces Sold (Ag Eq oz) 6,192 8,784 10,955 25,931 2,585 - 28,516
-------------------------------- ------- ---------- ------------- --------------- ----------- --------- -------
Sub-total ($/oz) 3.1 2.4 4.6 3.5 - - 3.2
-------------------------------- ------- ---------- ------------- --------------- ----------- --------- -------
Total cash cost ($/oz Ag
Eq) 14.1 10.9 14.2 13.1 22.5 14.0
-------------------------------- ------- ---------- ------------- --------------- ----------- --------- -------
All-in sustaining costs ($/oz
Ag Eq) 23.9 19.5 22.1 21.7 28.0 23.8
-------------------------------- ------- ---------- ------------- --------------- ----------- --------- -------
Administrative expenses
Administrative expenses before exceptional items decreased by
25% to $54.4 million (2012: $73.0 million) primarily due to the
impact of the cashflow optimisation programme. Post-exceptional
administrative expenses in 2013 totaled $56.8 million and include
an expense of $2.4 million due to termination benefits paid to
employees following the restructuring as part of the above
mentioned cashflow optimisation programme.
Exploration expenses
In 2013, pre-exceptional exploration expenses, decreased by 34%
to $42.9 million (2012: $64.6 million). Post-exceptional
exploration expenses in 2013 totaled $46.3 million and include an
expense of $3.5 million due to termination benefits paid to
employees following the restructuring as part of the Company's
cashflow optimisation programme.
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 2013, the Company capitalised $1.7 million relating to
brownfield exploration compared to $15.9 million in 2012, bringing
the total investment in exploration for 2013 to $44.6 million
(2012: $80.5 million). In addition, $7.4 million was invested in
the Company's Advanced and Growth Projects.
Selling expenses
Selling expenses were lower than 2012at $28.8 million (2012:
$39.5 million) as a result of lower prices. Selling expenses mainly
consist 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 $4.0 million (2012:
$8.7 million), mainly reflecting a $1.7 million export tax credit
in Argentina. Other expenses before exceptional items reached $15.6
million (2012: $9.5 million) mainly due to an increase in mine
closure provisions of $5.5m and the new reserves tax in Argentina
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 $17.7 million (2012:
$219.8 million) as a result of the factors detailed above.
Adjusted EBITDA
Adjusted EBITDA decreased by 49% over the period to $195.5
million (2012: $384.8 million) driven primarily by significantly
lower silver prices.
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 2013 31 Dec 2012
----------------------------------------------------------------------------- ------------- ------------- ---------
Profit from continuing operations before exceptional items, net finance
cost, foreign exchange
loss and income tax 17,730 219,768 (92)
Operating margin 3% 27%
Depreciation and amortisation in cost of sales 144,923 117,627 23
Depreciation and amortisation in administrative expenses 2,638 2,285 15
Exploration expenses 42,871 64,612 (34)
Personnel and other exploration related fixed expenses (12,699) (19,501) (35)
----------------------------------------------------------------------------- ------------- ------------- ---------
Adjusted EBITDA 195,463 384,791 (49)
----------------------------------------------------------------------------- ------------- ------------- ---------
Adjusted EBITDA margin 31% 47%
----------------------------------------------------------------------------- ------------- ------------- ---------
Impact of investment in associate
The Company's pre-exceptional share of the profit/(loss) after
tax of associates totaled $5.9 million in 2013
(2012: $6.5 million). In both 2013 and 2012, the Company's share
of post tax profits/(losses) in associates reflects profits related
to its holdings in Gold Resource Corporation ('GRC').
Since March 2013, the Company no longer recognised this profit
due to the loss of significant influence with regards to its
investment in GRC, and its resulting reclassification from an
associate to an available-for-sale asset.
Finance income
Finance income before exceptional items of $10.7 million was
higher than that of 2012 (2012: $2.0 million) mainly due to
interest received on deposits and liquidity funds ($6.8 million)
and dividends received from Gold Resource Corporation (considered
as available-for-sale financial asset since 27 March 2013 ($3.6
million).
Finance costs
Finance costs before exceptional items decreased by 9% to $11.7
million in 2013 (2012: $12.9 million).
At 31 Dec 2013, the Group had no outstanding positions on
currency or commodity hedges.
Foreign exchange losses
The Group recognised a foreign exchange loss of $19.8 million
(2012: $1.2 million loss). This loss is principally the result of
the impact of a devaluation of the Peruvian Sol versus the US
Dollar on cash deposits held in Peru. This impact will be more than
offset by the positive effects of the local currency weakening on
the Company's unit costs and capital expenditure programme.
Income tax
The Company's pre-exceptional income tax was $45.0 million
(2012: $85.5 million). The reduction is mainly explained by lower
metal prices reflected in a reduced pre-exceptional profit before
income tax ($2.9 million in 2013 vs. $214.1 million in 2012). This
effect was partially offset by the devaluation of the Peru and
Argentina local currencies which generated a negative impact of
$(30.4) million in income tax.
Exceptional items
Exceptional items in 2013 totalled $(86.6) million after tax
(2012: $(1.7) million). The tables below detail the exceptional
items excluding the exceptional tax effect that amounted to $35.9
million.
Exceptional items in 2013 totalled ($122.5) million before tax
(2012: $1.9 million). This mainly comprises the following
items:
Positive exceptional items:
Main items $000 Description of main items
----------------------------------------------------- -------- -----------------------------------------------------
Other income 2,442 Gain on sale of exploration concessions in Peru
Gain on transfer from investment accounted for under 107,942 Gain on the reclassification of GRC shares from an
the equity method to available-for-sale investment accounted for under equity method
financial assets to an available-for-sale financial asset of $107.9
million, as a result of ceasing to have
the ability to exercise significant influence over
GRC.
2,417 Adjustment of fair value of International Mineral
Corporation (IMZ) shares as a result of
the IMZ acquisition
----------------------------------------------------- -------- -----------------------------------------------------
Negative exceptional items:
Main items $000 Description of main items
--------------------- ---------- -----------------------------------------------------------------------------------
Termination benefits (8,273) Termination benefits paid to employees between April and September 2013, following
the restructuring
plan approved by management during the first half of 2013 (Cost of Sales: $2.5
million, administrative
expense: $2.4 million and exploration expenses: $3.5 million)
Other expenses (90,671) Impairment of the San Jose mine unit of $40.9 million, the Azuca project of $30.3
million,
the Crespo project $29.1 millio, the Ares unit $3.8m and $1.0 million of write-off
of PP&E;
and reversal of impairment of the San Felipe property of $14.4 million.
Finance cost (136,353) The impairment of investments in GRC of $105.3 million, IMZ of $12.9 million and
other Available-for-Sale
assets of $11.4 million. Also includes $4.7 million of transaction costs related
to the Bridge
Loan Facility and the undrawn Suyamarca Medium Term loan. Also includes $7.8
million of loss
on disposal of GRC shares.
--------------------- ---------- -----------------------------------------------------------------------------------
Cash flow & balance sheet review
Cash flow:
$000 unless otherwise Year ended Year ended Change
indicated 31 Dec 2013 31 Dec 2012
------------------------------- ------------- ------------- ----------
Net cash generated from
operating activities 64,674 254,879 (190,205)
Net cash used in investing
activities (218,113) (427,869) 209,756
Cash flows generated/(used)
in financing activities 99,830 (94,842) 194,672
------------------------------- ------------- ------------- ----------
Net (decrease)/increase
in cash and cash equivalents
during the period (53,609) (267,832) 214,223
------------------------------- ------------- ------------- ----------
Operating cash flow decreased from $254.9 million in 2012 to
$64.7 million in 2013, mainly due to significantly lower silver
prices. Net cash used in investing activities decreased to $(218.1)
million in 2013 from $(427.9) million in 2012 mainly due to (i)
lower capital expenditures in line with the implementation of the
cashflow optimisation programme during 2013 ($(246.6) million vs.
$(297.5) million in 2012), (ii) Andina Minerals Inc acquisition
($90.1 million) in 2012, (iii) proceeds from deferred income
related to the sale of San Felipe ($16.0 million) in 2013 and (iv)
proceeds from the sale of Gold Resource Corporation shares ($33.5
million) in 2013. Finally, cash used in financing activities
increased to $99.8 million from $(94.8) million in 2012, primarily
as a result of the bridge loan facility disbursed in 2013 ($270.0
million), proceeds from equity placing ($71.9 million) and lower
dividends paid in 2013 ($18.5 million vs. $62.5 million paid in
2012). This effects were partially offset by the acquisition of IMZ
minority interest in 2013 ($271 million) As a result, total cash
generated increased from $(267.8) million in 2012 to $(53.6)
million in 2013 ($214.2 million difference).
Working capital
$000 unless otherwise indicated Year ended Year ended
31 Dec 2013 31 Dec 2012
-------------------------------------------- ------------- -------------
Trade and other receivables 179,868 174,786
Inventories 69,556 76,413
Net other financial assets / (liabilities) (2,294) (6,741)
Net Income tax receivable / (payable) 20,842 (4,459)
Trade and other payables and provisions (208,618) (252,823)
-------------------------------------------- ------------- -------------
Working Capital 59,354 (12,824)
-------------------------------------------- ------------- -------------
The Company's working capital position increased to $59.4
million in 2013 from $(12.8) million in 2012. This was primarily
explained by higher income tax receivables ($25.3 million) due to
lower tax provision in line with lower prices; and by lower
provisions ($(44.2) million) resulted from lower personnel bonus
provisions and workers profit sharing provisions in 2013.
Net cash
$000 unless otherwise indicated Year ended Year ended
31 Dec 2013 31 Dec 2012
--------------------------------- ------------- -------------
Cash and cash equivalents 286,435 358,944
Long term borrowings - (106,850)
Short term borrowings[18] (435,925) (6,973)
--------------------------------- ------------- -------------
Net cash/(debt) (149,490) 245,121
--------------------------------- ------------- -------------
The Group reported net cash of $(149.5) million as at 31
December 2013 (2012: $245.1 million). This was primarily driven by
the acquisition of International Minerals Corporation in 2013 and
lower cash generated as a result of the drop of metal prices.
The Company's short-term borrowings are its convertible bond
that has a current conversion price of GBP3.80 due in October 2014,
the bridge loan facility ($270.0 million) refinanced in January
2014 with a $350 million 7-year Senior Unsecured bond, and short
term debt raised in Peru and Argentina.
Capital expenditure([19])
$000 unless otherwise indicated Year ended Year ended
31 Dec 2013 31 Dec 2012
--------------------------------- ------------- -------------
Arcata 43,255 52,791
Ares 3,783 7,476
Selene 1,364 1,152
Pallancata 42,992 55,719
San Jose 56,502 71,188
Moris 932 846
Operations 148,828 189,172
Inmaculada 98,614 96,060
Crespo 21,469 17,984
Volcan 4,312 86,631
Azuca 4,741 12,476
Other 3,614 18,062
--------------------------------- ------------- -------------
Total 281,578 420,385
--------------------------------- ------------- -------------
2013 capital expenditure of $281.6 million (2012: $420.4
million) includes operating capex of $147.3 million, capitalised
exploration costs of $1.7 million in respect of the Group's
operating mines, $98.6 million capitalised in Inmaculada, $21.5
capitalised in Crespo, $9.0 million in Azuca and Volcan, and
administrative capital expenditure of $3.6 million.
Capital expenditure at Arcata was lower in 2013 without the
effect of two important projects completed in 2012: the plant
capacity increase and the Doré project. In addition, the
implementation of the cashflow optimisation programme also reduced
capex. In Pallancata and San Jose, lower capital expenditure is
mainly due to reduced mine development as well as the
above-mentioned cashflow optimisation programme.
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 2013
Year ended 31 December Year ended 31 December
2013 2012
------------------------------------------ ------------------------------------
Before
Exceptional exceptional Exceptional
Before exceptional items Total items items Total
Notes items US$000 US$000 US$000 US$000 US$000 US$000
----------------------------- ----- ------------------ ----------- --------- ------------ ----------- ---------
Continuing operations
----------------------------- ----- ------------------ ----------- --------- ------------ ----------- ---------
Revenue 3,5 622,158 - 622,158 817,952 - 817,952
----------------------------- ----- ------------------ ----------- --------- ------------ ----------- ---------
Cost of sales 6 (466,766) (2,466) (469,232) (420,325) - (420,325)
----------------------------- ----- ------------------ ----------- --------- ------------ ----------- ---------
Gross profit 155,392 (2,466) 152,926 397,627 - 397,627
----------------------------- ----- ------------------ ----------- --------- ------------ ----------- ---------
Administrative expenses 7 (54,425) (2,351) (56,776) (72,995) - (72,995)
----------------------------- ----- ------------------ ----------- --------- ------------ ----------- ---------
Exploration expenses 8 (42,871) (3,456) (46,327) (64,612) - (64,612)
----------------------------- ----- ------------------ ----------- --------- ------------ ----------- ---------
Selling expenses 9 (28,785) - (28,785) (39,460) - (39,460)
----------------------------- ----- ------------------ ----------- --------- ------------ ----------- ---------
Other income 11 3,974 2,442 6,416 8,733 1,099 9,832
----------------------------- ----- ------------------ ----------- --------- ------------ ----------- ---------
Other expenses (15,555) - (15,555) (9,525) - (9,525)
----------------------------- ----- ------------------ ----------- --------- ------------ ----------- ---------
Impairment and write-off
of assets net 11 - (90,671) (90,671) - (245) (245)
----------------------------- ----- ------------------ ----------- --------- ------------ ----------- ---------
Profit/(loss) from
continuing operations
before net finance
income/(cost), foreign
exchange loss and
income tax 17,730 (96,502) (78,772) 219,768 854 220,622
----------------------------- ----- ------------------ ----------- --------- ------------ ----------- ---------
Share of post-tax
profit/(losses)
of associates and
joint ventures
accounted for under
equity method 11,18 5,921 - 5,921 6,456 (1,376) 5,080
----------------------------- ----- ------------------ ----------- --------- ------------ ----------- ---------
Finance income 11,12 10,675 2,417 13,092 1,988 - 1,988
----------------------------- ----- ------------------ ----------- --------- ------------ ----------- ---------
Gain on transfer from
investment accounted
for under the equity
method to available-for-sale
financial assets - 107,942 107,942 - - -
----------------------------- ----- ------------------ ----------- --------- ------------ ----------- ---------
Finance costs 11,12 (11,697) (136,353) (148,050) (12,870) (1,334) (14,204)
----------------------------- ----- ------------------ ----------- --------- ------------ ----------- ---------
Foreign exchange loss (19,753) - (19,753) (1,212) - (1,212)
----------------------------- ----- ------------------ ----------- --------- ------------ ----------- ---------
(Loss)/profit from
continuing
operations before
income tax 2,876 (122,496) (119,620) 214,130 (1,856) 212,274
----------------------------- ----- ------------------ ----------- --------- ------------ ----------- ---------
Income tax (expense)/benefit 13 (44,979) 35,922 (9,057) (85,549) 141 (85,408)
----------------------------- ----- ------------------ ----------- --------- ------------ ----------- ---------
(Loss)/profit for
the year from continuing
operations (42,103) (86,574) (128,677) 128,581 (1,715) 126,866
----------------------------- ----- ------------------ ----------- --------- ------------ ----------- ---------
Attributable to:
----------------------------- ----- ------------------ ----------- --------- ------------ ----------- ---------
Equity shareholders
of the Company (50,345) (72,738) (123,083) 64,830 (1,759) 63,071
----------------------------- ----- ------------------ ----------- --------- ------------ ----------- ---------
Non-controlling interests 8,242 (13,836) (5,594) 63,751 44 63,795
----------------------------- ----- ------------------ ----------- --------- ------------ ----------- ---------
(42,103) (86,574) (128,677) 128,581 (1,715) 126,866
----------------------------- ----- ------------------ ----------- --------- ------------ ----------- ---------
Basic and diluted
(loss)/earnings per
ordinary share
from continuing operations
for the year (expressed
in US dollars per
share) 14 (0.15) (0.21) (0.36) 0.19 - 0.19
----------------------------- ----- ------------------ ----------- --------- ------------ ----------- ---------
Consolidated statement of comprehensive income
For the year ended 31 December 2013
Year ended
31 December
------------------
2013 2012
Notes US$000 US$000
----------------------------------------------------- ----- --------- -------
(Loss)/profit for the year (128,677) 126,866
----------------------------------------------------- ----- --------- -------
Other comprehensive income to be reclassified
to profit or loss in subsequent periods:
----------------------------------------------------- ----- --------- -------
Exchange differences on translating foreign
operations (842) 268
----------------------------------------------------- ----- --------- -------
Change in fair value of available-for-sale financial
assets 19 (125,932) (9,269)
----------------------------------------------------- ----- --------- -------
Recycling of the loss on available-for-sale
financial assets 130,286 266
----------------------------------------------------- ----- --------- -------
Deferred income tax relating to components of
other comprehensive income 13 - 615
----------------------------------------------------- ----- --------- -------
Other comprehensive gain/(loss) for the period,
net of tax 3,512 (8,120)
----------------------------------------------------- ----- --------- -------
Total comprehensive (expense)/income for the
year (125,165) 118,746
----------------------------------------------------- ----- --------- -------
Total comprehensive (expense)/income attributable
to:
----------------------------------------------------- ----- --------- -------
Equity shareholders of the Company (119,571) 54,951
----------------------------------------------------- ----- --------- -------
Non-controlling interests (5,594) 63,795
----------------------------------------------------- ----- --------- -------
(125,165) 118,746
----------------------------------------------------- ----- --------- -------
Consolidated statement of financial position
As at 31 December 2013
As at As at
31 December 31 December
2013 2012
Notes US$000 US$000
-------------------------------------------------- ----- ------------ ------------
ASSETS
-------------------------------------------------- ----- ------------ ------------
Non-current assets
-------------------------------------------------- ----- ------------ ------------
Property, plant and equipment 15 873,477 636,555
-------------------------------------------------- ----- ------------ ------------
Evaluation and exploration assets 16 204,643 396,557
-------------------------------------------------- ----- ------------ ------------
Intangible assets 17 43,683 43,903
-------------------------------------------------- ----- ------------ ------------
Investments accounted for under equity method 18 - 78,188
-------------------------------------------------- ----- ------------ ------------
Available-for-sale financial assets 19 51,658 30,609
-------------------------------------------------- ----- ------------ ------------
Trade and other receivables 20 12,128 8,613
-------------------------------------------------- ----- ------------ ------------
Deferred income tax assets 2,416 856
-------------------------------------------------- ----- ------------ ------------
1,188,005 1,195,281
-------------------------------------------------- ----- ------------ ------------
Current assets
-------------------------------------------------- ----- ------------ ------------
Inventories 21 69,556 76,413
-------------------------------------------------- ----- ------------ ------------
Trade and other receivables 20 167,740 166,173
-------------------------------------------------- ----- ------------ ------------
Income tax receivable 22,156 23,023
-------------------------------------------------- ----- ------------ ------------
Other financial assets 22 - 150
-------------------------------------------------- ----- ------------ ------------
Cash and cash equivalents 23 286,435 358,944
-------------------------------------------------- ----- ------------ ------------
545,887 624,703
-------------------------------------------------- ----- ------------ ------------
Total assets 1,733,892 1,819,984
-------------------------------------------------- ----- ------------ ------------
EQUITY AND LIABILITIES
-------------------------------------------------- ----- ------------ ------------
Capital and reserves attributable to shareholders
of the Parent
-------------------------------------------------- ----- ------------ ------------
Equity share capital 170,389 158,637
-------------------------------------------------- ----- ------------ ------------
Share premium 396,021 395,928
-------------------------------------------------- ----- ------------ ------------
Treasury shares (898) (898)
-------------------------------------------------- ----- ------------ ------------
Other reserves (211,143) (214,946)
-------------------------------------------------- ----- ------------ ------------
Retained earnings 511,492 720,011
-------------------------------------------------- ----- ------------ ------------
865,861 1,058,732
-------------------------------------------------- ----- ------------ ------------
Non-controlling interests 104,375 264,518
-------------------------------------------------- ----- ------------ ------------
Total equity 970,236 1,323,250
-------------------------------------------------- ----- ------------ ------------
Non-current liabilities
-------------------------------------------------- ----- ------------ ------------
Trade and other payables 24 174 -
-------------------------------------------------- ----- ------------ ------------
Borrowings 25 - 106,850
-------------------------------------------------- ----- ------------ ------------
Provisions 26 79,649 76,550
-------------------------------------------------- ----- ------------ ------------
Deferred income 24(3) 22,000 -
-------------------------------------------------- ----- ------------ ------------
Deferred income tax liabilities 93,505 95,715
-------------------------------------------------- ----- ------------ ------------
195,328 279,115
-------------------------------------------------- ----- ------------ ------------
Current liabilities
-------------------------------------------------- ----- ------------ ------------
Trade and other payables 24 119,222 149,585
-------------------------------------------------- ----- ------------ ------------
Other financial liabilities 22 2,294 6,891
-------------------------------------------------- ----- ------------ ------------
Borrowings 25 435,925 6,973
-------------------------------------------------- ----- ------------ ------------
Provisions 26 9,573 26,688
-------------------------------------------------- ----- ------------ ------------
Income tax payable 1,314 27,482
-------------------------------------------------- ----- ------------ ------------
568,328 217,619
-------------------------------------------------- ----- ------------ ------------
Total liabilities 763,656 496,734
-------------------------------------------------- ----- ------------ ------------
Total equity and liabilities 1,733,892 1,819,984
-------------------------------------------------- ----- ------------ ------------
These financial statements were approved by the Board of
Directors on 11 March 2014 and signed on its behalf by:
Ignacio Bustamante
Chief Executive Officer
11 March 2014
Consolidated statement of cash flows
For the year ended 31 December 2013
Year ended
31 December
--------------------
2013 2012
Notes US$000 US$000
---------------------------------------------------- ----- --------- ---------
Cash flows from operating activities
---------------------------------------------------- ----- --------- ---------
Cash generated from operations 116,084 344,119
---------------------------------------------------- ----- --------- ---------
Interest received 6,236 2,614
---------------------------------------------------- ----- --------- ---------
Interest paid (10,292) (9,987)
---------------------------------------------------- ----- --------- ---------
Payment of mine closure costs 26 (4,781) (3,667)
---------------------------------------------------- ----- --------- ---------
Tax paid (42,573) (78,200)
---------------------------------------------------- ----- --------- ---------
Net cash generated from operating activities 64,674 254,879
---------------------------------------------------- ----- --------- ---------
Cash flows from investing activities
---------------------------------------------------- ----- --------- ---------
Purchase of property, plant and equipment (248,335) (297,537)
---------------------------------------------------- ----- --------- ---------
Purchase of evaluation and exploration assets (10,781) (46,903)
---------------------------------------------------- ----- --------- ---------
Purchase of intangibles (1,625) -
---------------------------------------------------- ----- --------- ---------
Acquisition of subsidiary 4(b) (14,615) (96,332)
---------------------------------------------------- ----- --------- ---------
Dividends received 2,423 -
---------------------------------------------------- ----- --------- ---------
Dividends received from associates 3,385 8,454
---------------------------------------------------- ----- --------- ---------
Proceeds from deferred income 24(3) 17,593 4,000
---------------------------------------------------- ----- --------- ---------
Proceeds from sale of available-for-sale financial
assets 33,498 -
---------------------------------------------------- ----- --------- ---------
Proceeds from sale of property, plant and equipment 344 449
---------------------------------------------------- ----- --------- ---------
Net cash used in investing activities (218,113) (427,869)
---------------------------------------------------- ----- --------- ---------
Cash flows from financing activities
---------------------------------------------------- ----- --------- ---------
Proceeds from borrowings 440,010 53,500
---------------------------------------------------- ----- --------- ---------
Repayment of borrowings (116,701) (93,221)
---------------------------------------------------- ----- --------- ---------
Transaction costs of borrowings (9,145) -
---------------------------------------------------- ----- --------- ---------
Acquisition of non-controlling interest (272,127) -
---------------------------------------------------- ----- --------- ---------
Proceeds from issue of ordinary shares 71,916 -
---------------------------------------------------- ----- --------- ---------
Dividends paid 27 (18,503) (62,467)
---------------------------------------------------- ----- --------- ---------
Capital contribution from non-controlling interests 4,380 7,346
---------------------------------------------------- ----- --------- ---------
Cash flows generated/(used) in financing activities 99,830 (94,842)
---------------------------------------------------- ----- --------- ---------
Net decrease in cash and cash equivalents during
the year (53,609) (267,832)
---------------------------------------------------- ----- --------- ---------
Exchange difference (18,900) (705)
---------------------------------------------------- ----- --------- ---------
Cash and cash equivalents at beginning of year 358,944 627,481
---------------------------------------------------- ----- --------- ---------
Cash and cash equivalents at end of year 23 286,435 358,944
---------------------------------------------------- ----- --------- ---------
Consolidated statement of changes in equity
For the year 31 December 2013
Other reserves
-------------------------------------------------------------------------
Capital
and
Unrealised reserves
gain/ attributable
(loss) Bond to
on equity Share- shareholders
Equity available-for-sale component Cumulative based Total of
share Share Treasury financial (note translation Merger payment Other Retained the Non-controlling Total
capital premium shares assets 25(b)) 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
2012 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 27 - - - - - - - - - (20,278) (20,278) - (20,278)
---------------- ----- ------- ------- -------- ------------------ --------- ----------- --------- ------- --------- --------- ------------ --------------- ---------
Dividends
paid to
non-controlling
interests 27 - - - - - - - - - - - (34,877) (34,877)
---------------- ----- ------- ------- -------- ------------------ --------- ----------- --------- ------- --------- --------- ------------ --------------- ---------
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
---------------- ----- ------- ------- -------- ------------------ --------- ----------- --------- ------- --------- --------- ------------ --------------- ---------
Other
comprehensive
(loss)/income - - - 4,354 - (842) - - 3,512 - 3,512 - 3,512
---------------- ----- ------- ------- -------- ------------------ --------- ----------- --------- ------- --------- --------- ------------ --------------- ---------
Loss for
the year - - - - - - - - - (123,083) (123,083) (5,594) (128,677)
---------------- ----- ------- ------- -------- ------------------ --------- ----------- --------- ------- --------- --------- ------------ --------------- ---------
Total
comprehensive
income/(loss)
for 2013 - - - 4,354 - (842) - - 3,512 (123,083) (119,571) (5,594) (125,165)
---------------- ----- ------- ------- -------- ------------------ --------- ----------- --------- ------- --------- --------- ------------ --------------- ---------
Capital
contribution
from
non-controlling
interest - - - - - - - - - - - 4,380 4,380
---------------- ----- ------- ------- -------- ------------------ --------- ----------- --------- ------- --------- --------- ------------ --------------- ---------
Purchase
of shares
from
non-controlling
interest 4(a) - - - - - - - - - (135,368) (135,368) (148,185) (283,553)
---------------- ----- ------- ------- -------- ------------------ --------- ----------- --------- ------- --------- --------- ------------ --------------- ---------
Issuance
of shares 11,752 93 - - - - 60,071 - 60,071 - 71,916 - 71,916
---------------- ----- ------- ------- -------- ------------------ --------- ----------- --------- ------- --------- --------- ------------ --------------- ---------
Transfer
to retained
earnings - - - - - - (60,071) - (60,071) 60,071 - - -
---------------- ----- ------- ------- -------- ------------------ --------- ----------- --------- ------- --------- --------- ------------ --------------- ---------
CEO LTIP - - - - - - - 291 291 - 291 - 291
---------------- ----- ------- ------- -------- ------------------ --------- ----------- --------- ------- --------- --------- ------------ --------------- ---------
Expiration
of dividends - - - - - - - - - - - (38) (38)
---------------- ----- ------- ------- -------- ------------------ --------- ----------- --------- ------- --------- --------- ------------ --------------- ---------
Dividends 27 - - - - - - - - - (10,139) (10,139) - (10,139)
---------------- ----- ------- ------- -------- ------------------ --------- ----------- --------- ------- --------- --------- ------------ --------------- ---------
Dividends
paid to
non-controlling
interests 27 - - - - - - - - - - - (10,706) (10,706)
---------------- ----- ------- ------- -------- ------------------ --------- ----------- --------- ------- --------- --------- ------------ --------------- ---------
Balance
at 31 December
2013 170,389 396,021 (898) 1,024 8,432 (11,289) (210,046) 736 (211,143) 511,492 865,861 104,375 970,236
---------------- ----- ------- ------- -------- ------------------ --------- ----------- --------- ------- --------- --------- ------------ --------------- ---------
1 Notes to the consolidated financial statements
For the year ended 31 December 2013
The financial information for the year ended 31 December 2013
and 2012 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 2013 and 2012
have been extracted from the consolidated financial statements of
Hochschild Mining plc for the year ended 31 December 2013 which
have been approved by the directors on 11 March 2014 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 in the preparation of the
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.
-- 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
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
TransmisiĂ³n Callalli S.A.C. (a power generation company), HMX, S.A.
de C.V. (a service company in Mexico), Empresa de TransmisiĂ³n
Aymaraes S.A.C. (a power generation company), 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 Other1 and
Ares Arcata Pallancata Jose Moris eliminations Total
US$000 US$000 US$000 US$000 US$000 ExplorationUS$000 US$000 US$000 US$000
---------------- ------- -------- ---------- -------- ------- ----------------- ------- ------------ ---------
Year ended
31 December
2013
---------------- ------- -------- ---------- -------- ------- ----------------- ------- ------------ ---------
Revenue from
external
customers 50,362 136,968 181,795 240,723 12,247 - 63 - 622,158
---------------- ------- -------- ---------- -------- ------- ----------------- ------- ------------ ---------
Inter segment
revenue - - - - - - 8,796 (8,796) -
---------------- ------- -------- ---------- -------- ------- ----------------- ------- ------------ ---------
Total revenue 50,362 136,968 181,795 240,723 12,247 - 8,859 (8,796) 622,158
---------------- ------- -------- ---------- -------- ------- ----------------- ------- ------------ ---------
Segment
profit/(loss) (3,515) 31,710 49,357 44,142 1,430 (50,894) 4,037 1,547 77,814
---------------- ------- -------- ---------- -------- ------- ----------------- ------- ------------ ---------
Others(2) (185,284)
---------------- ------- -------- ---------- -------- ------- ----------------- ------- ------------ ---------
Profit from
continuing
operations
before
income tax (107,470)
---------------- ------- -------- ---------- -------- ------- ----------------- ------- ------------ ---------
Other segment
information
---------------- ------- -------- ---------- -------- ------- ----------------- ------- ------------ ---------
Depreciation(3) (8,723) (31,044) (50,222) (52,790) (1,757) (1,927) (3,151) - (149,614)
---------------- ------- -------- ---------- -------- ------- ----------------- ------- ------------ ---------
Amortisation - - - (1,300) - (441) - - (1,741)
---------------- ------- -------- ---------- -------- ------- ----------------- ------- ------------ ---------
Assets
---------------- ------- -------- ---------- -------- ------- ----------------- ------- ------------ ---------
Capital
expenditure 3,783 43,255 44,356 56,502 932 119,671 13,079 - 281,578
---------------- ------- -------- ---------- -------- ------- ----------------- ------- ------------ ---------
Current assets 13,211 14,009 34,735 73,844 1,269 1,874 316 - 139,258
---------------- ------- -------- ---------- -------- ------- ----------------- ------- ------------ ---------
Other
non-current
assets 1,328 142,618 149,057 217,344 12 594,263 29,331 - 1,133,953
---------------- ------- -------- ---------- -------- ------- ----------------- ------- ------------ ---------
Total segment
assets 14,539 156,627 183,792 291,188 1,281 596,137 29,647 - 1,273,211
---------------- ------- -------- ---------- -------- ------- ----------------- ------- ------------ ---------
Not reportable
assets(4) - - - - - - 472,831 - 472,831
---------------- ------- -------- ---------- -------- ------- ----------------- ------- ------------ ---------
Total assets 14,539 156,627 183,792 291,188 1,281 596,137 502,478 - 1,746,042
---------------- ------- -------- ---------- -------- ------- ----------------- ------- ------------ ---------
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$56,776,000, other
income of US$6,416,000, other expenses of US$15,555,000, impairment
and write-off of assets of US$78,521,000, share of gains of
associates and joint ventures of US$5,921,000, gain on transfer
from onvestments accounted under the equity method to
available-for-sale financial assets of US$107,942,000, finance
income of US$13,092,000, finance expense of US$148,050,000, and
foreign exchange loss of US$19,753,000.
3 Includes US$28,000, US$613,000 and US$1,158,000 of
depreciation capitalised in San Jose mine unit, the Crespo project
and the Inmaculada project respectively.
4 Not reportable assets are comprised of available-for-sale
financial assets of US$51,658,000, other receivables of
US$110,166,000, income tax receivable of US$22,156,000, deferred
income tax assets of US$2,416,000 and cash and cash equivalents of
US$286,435,000.
3 Segment reporting (continued)
(a) Reportable segment information
Adjustment
San Other1 and
Ares Arcata Pallancata Jose Moris eliminations Total
US$000 US$000 US$000 US$000 US$000 ExplorationUS$000 US$000 US$000 US$000
-------------- ------- -------- ---------- -------- ------- ----------------- ------- ------------- ---------
Year ended
31 December
2013
-------------- ------- -------- ---------- -------- ------- ----------------- ------- ------------- ---------
Revenue from
external
customers 50,362 136,968 181,795 240,723 12,247 - 63 - 622,158
-------------- ------- -------- ---------- -------- ------- ----------------- ------- ------------- ---------
Inter segment
revenue - - - - - - 8,796 (8,796) -
-------------- ------- -------- ---------- -------- ------- ----------------- ------- ------------- ---------
Total revenue 50,362 136,968 181,795 240,723 12,247 - 8,859 (8,796) 622,158
-------------- ------- -------- ---------- -------- ------- ----------------- ------- ------------- ---------
Segment
profit/(loss) (3,515) 31,710 49,357 44,142 1,430 (50,894) 4,037 1,547 77,814
-------------- ------- -------- ---------- -------- ------- ----------------- ------- ------------- ---------
Others(2) (185,284)
-------------- ------- -------- ---------- -------- ------- ----------------- ------- ------------- ---------
Profit from
continuing
operations
before
income tax (107,470)
-------------- ------- -------- ---------- -------- ------- ----------------- ------- ------------- ---------
Other segment
information
-------------- ------- -------- ---------- -------- ------- ----------------- ------- ------------- ---------
(8,723) (31,044) (50,222) (52,790) (1,757) (1,927) (3,151) - (149,614)
-------------- ------- -------- ---------- -------- ------- ----------------- ------- ------------- ---------
Amortisation - - - (1,300) - (441) - - (1,741)
-------------- ------- -------- ---------- -------- ------- ----------------- ------- ------------- ---------
Assets
-------------- ------- -------- ---------- -------- ------- ----------------- ------- ------------- ---------
Capital
expenditure 3,783 43,255 44,356 56,502 932 119,671 13,079 - 281,578
-------------- ------- -------- ---------- -------- ------- ----------------- ------- ------------- ---------
Current assets 13,211 14,009 34,735 73,844 1,269 1,874 316 - 139,258
-------------- ------- -------- ---------- -------- ------- ----------------- ------- ------------- ---------
Other
non-current
assets 1,328 142,618 149,057 217,344 12 594,263 29,331 - 1,133,953
-------------- ------- -------- ---------- -------- ------- ----------------- ------- ------------- ---------
Total segment
assets 14,539 156,627 183,792 291,188 1,281 596,137 29,647 - 1,273,211
-------------- ------- -------- ---------- -------- ------- ----------------- ------- ------------- ---------
Not reportable
assets(4) - - - - - - 472,831 - 472,831
-------------- ------- -------- ---------- -------- ------- ----------------- ------- ------------- ---------
Total assets 14,539 156,627 183,792 291,188 1,281 596,137 502,478 - 1,746,042
-------------- ------- -------- ---------- -------- ------- ----------------- ------- ------------- ---------
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$56,776,000, other
income of US$6,416,000, other expenses of US$15,555,000, impairment
and write-off of assets of US$78,521,000, share of gains of
associates and joint ventures of US$5,921,000, gain on transfer
from onvestments accounted under the equity method to
available-for-sale financial assets of US$107,942,000, finance
income of US$13,092,000, finance expense of US$148,050,000, and
foreign exchange loss of US$19,753,000.
3 Includes US$28,000, US$613,000 and US$1,158,000 of
depreciation capitalised in San Jose mine unit, the Crespo project
and the Inmaculada project respectively.
4 Not reportable assets are comprised of available-for-sale
financial assets of US$51,658,000, other receivables of
US$110,166,000, income tax receivable of US$22,156,000, deferred
income tax assets of US$2,416,000 and cash and cash equivalents of
US$286,435,000.
3 Segment reporting (continued)
(b) Geographical information
The revenue for the period based on the country in which the
customer is located is as follows:
Year ended
31 December
----------------
2013 2012
US$000 US$000
------------------ ------- -------
External customer
------------------ ------- -------
USA 148,201 118,409
------------------ ------- -------
Peru 91,781 63,769
------------------ ------- -------
Canada 53,664 104,509
------------------ ------- -------
Germany 4,901 75,202
------------------ ------- -------
Switzerland 149,452 154,200
------------------ ------- -------
United Kingdom 38,697 40,664
------------------ ------- -------
Mexico - 480
------------------ ------- -------
Korea 135,100 260,719
------------------ ------- -------
Japan 362 -
------------------ ------- -------
Total 622,158 817,952
------------------ ------- -------
Inter-segment
------------------ ------- -------
Peru 3,122 1,324
------------------ ------- -------
Mexico 5,674 5,177
------------------ ------- -------
Total 630,954 824,453
------------------ ------- -------
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
2013 Year ended 31 December 2012
--------------------------------- ----------------------------------
US$000 % Revenue Segment US$000 % Revenue Segment
----------------- ------- --------- ------------- ------- --------- --------------
Pallancata Pallancata
LS Nikko 135,100 22% and San Jose 234,066 29% and San Jose
----------------- ------- --------- ------------- ------- --------- --------------
Ares, Arcata
Argor Heraus 105,730 17% and San Jose 121,122 15% San Jose
----------------- ------- --------- ------------- ------- --------- --------------
Ares, Arcata,
Johnson Matthey Ares, Arcata Moris and San
Inc. 70,547 11% and Moris 25,194 3% Jose
----------------- ------- --------- ------------- ------- --------- --------------
Teck Metals Ltd.
(formerly Teck
Cominco Metals Pallancata Pallancata
Ltd) 53,664 9% and San Jose 104,509 13% and San Jose
----------------- ------- --------- ------------- ------- --------- --------------
3 Segment reporting (continued)
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
--------------------
2013 2012
US$000 US$000
------------------------------------ --------- ---------
Peru 746,211 684,471
------------------------------------ --------- ---------
Argentina 217,415 251,935
------------------------------------ --------- ---------
Mexico 40,591 27,075
------------------------------------ --------- ---------
Chile 117,466 113,387
------------------------------------ --------- ---------
United Kingdom 120 78,335
------------------------------------ --------- ---------
Total non-current segment assets 1,121,803 1,155,203
------------------------------------ --------- ---------
Available-for-sale financial assets 51,658 30,609
------------------------------------ --------- ---------
Trade and other receivables 12,128 8,613
------------------------------------ --------- ---------
Deferred income tax assets 2,416 856
------------------------------------ --------- ---------
Total non-current assets 1,188,005 1,195,281
------------------------------------ --------- ---------
4 Acquisitions and disposals
(a) Acquisition of Non-controlling interest
Minera Suyamarca S.A.C.
On October 2013, Hochschild Mining entered into a binding
agreement to acquire the 40% interests held by International
Minerals Corporation ("IMZ") in Minera Suyamarca S.A.C., which
holds the Pallancata mine and Inmaculada Advanced Project in Peru
(the "Peruvian Assets"). The transaction was executed by way of a
court-approved Plan of Arrangement under the Business Corporations
Act (Yukon) ("the Canadian Act"). Prior to the Acquisition,
Hochschild held a 60% interest in the Peruvian Assets.
IMZ was a Canadian public company headquartered in Scottsdale,
Arizona, with interests in gold and silver properties, both
producing and under development, in Peru and the USA. The company
was listed on the Toronto and Swiss stock exchanges under the
symbol "IMZ" and quoted on the Frankfurt stock exchange under the
symbol "MIW". 117,636,376 common shares were issued and
outstanding, of which 3,755,746 shares (3.2%) were owned by
Hochschild.
As a condition to the completion of the acquisition, IMZ
transferred all of its assets (other than the Peruvian Assets) and
all of its liabilities (other than the liabilities related to the
Peruvian Assets), to Chaparral Gold. The IMZ internal
re-organisation was effected pursuant to the terms of a master
re-organisation agreement among IMZ, Chaparral Gold and the
directly-held, non-Peruvian subsidiaries of IMZ.
In connection with the acquisition, each IMZ shareholder (other
than Hochschild or its affiliates) received a cash payment of $2.38
per IMZ share (for aggregate cash consideration of $271 million)
and each IMZ shareholder (including Hochschild and its affiliates)
received one common share of Chaparral Gold Corp ("Chaparral Gold")
per IMZ share.
Hochschild (through a newly established Canadian acquisition
subsidiary, HOC Holdings Canada Inc.) acquired 100% of the shares
of IMZ (which, at the point of acquisition, held only the Peruvian
Assets and liabilities related to the Peruvian Assets) that it did
not already own by way of the plan of arrangement under the
Canadian Act. IMZ was delisted on 20 December 2013.
IMZ is 100% owner of Minera Oro Vega S.A.C. ("MOV"). MOV is 40%
owner of Minera Suyamarca S.A.C and 100% owner of Minera Qorihuayta
S.A.C., all registered in Peru.
In compliance with the Group's accounting policy, the difference
between the consideration paid and the carrying value of the
non-controlling interest at the acquisition date has been
recognised in retained earnings as follows:
US$000
--------------------------------------------------- ---------
Cash and cash equivalents (US$2.38 per share) (271,036)
--------------------------------------------------- ---------
Cash and cash equivalents (transaction costs paid) (1,091)
--------------------------------------------------- ---------
Transaction costs pending of payment (4,264)
--------------------------------------------------- ---------
Available-for-sale financial assets (note 19) (8,939)
--------------------------------------------------- ---------
Net assets received from Minera Oro Vega S.A.C 1,777
--------------------------------------------------- ---------
Total consideration (283,553)
--------------------------------------------------- ---------
Non-controlling interest 148,185
--------------------------------------------------- ---------
Retained earnings (135,368)
--------------------------------------------------- ---------
(b) Acquisition of assets
Andina Minerals Inc
On 8 November 2012, the Group made a CAD$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 its shareholders vote in favour of the
transaction.
Andina's major asset, the 100% owned Volcan project, includes
the Dorado area.
Andina was based in Alberta, Canada and was the 100% owner of
Quitovac Mining Company Limited and Andina Holdings Inc, both based
in Canada. Andina Holdings Inc owned 99.99% of Andina Minerals
Chile Limitada, based in Santiago, Chile. The Chilean company owned
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, representing an 81.4% interest
on a fully diluted basis (86.7% basic basis ). 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 costs 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 therefore
consolidated it as a subsidiary undertaking from that date. The
transaction was recognised as an asset acquisition, and the fair
value of the net assets acquired was US$115,388,000.
The outstanding balance at 31 December 2012 of US$13,787,427 was
paid between January 2013 (US$4,268,605) and February 2013
(US$9,518,822). The Group completed the acquisition on 20 February
2013. The total consideration was settled in cash.
During 2013 the Group's 50% interest in Sociedad Contractual
Minera Pampa Buenos Aires was transferred to Iron Creek Chile (BVI)
Ltd. and all the Canadian companies were dissolved.
5 Revenue
Year ended
31 December
----------------
2013 2012
US$000 US$000
-------------------------- ------- -------
Gold (from dore bars) 112,855 124,581
-------------------------- ------- -------
Silver (from dore bars) 179,773 153,509
-------------------------- ------- -------
Gold (from concentrate) 103,721 135,055
-------------------------- ------- -------
Silver (from concentrate) 225,746 404,277
-------------------------- ------- -------
Services 63 530
-------------------------- ------- -------
Total 622,158 817,952
-------------------------- ------- -------
Included within revenue is a loss of US$29,866,952 relating to
provisional pricing adjustments representing the change in the fair
value of embedded derivatives (2012: loss of US$4,015,265) arising
on sales of concentrates and dore (refer to note 2(r) and footnote
1 of note 22).
6 Cost of sales
Included in cost of sales are:
Year ended
31 December
-----------------
2013 2012
US$000 US$000
------------------------------------------------- ------- --------
Depreciation and amortisation 146,918 124,387
------------------------------------------------- ------- --------
Personnel expenses (note 10) 124,834 121,775
------------------------------------------------- ------- --------
Mining royalty (note 30) 8,293 9,672
------------------------------------------------- ------- --------
Change in products in process and finished goods 3,926 (17,708)
------------------------------------------------- ------- --------
7 Administrative expenses
Year ended
31 December
----------------
2013 2012
US$000 US$000
----------------------------------------- ------- -------
Personnel expenses (note 10 and 11(1)) 28,445 40,006
----------------------------------------- ------- -------
Professional fees 5,553 6,180
----------------------------------------- ------- -------
Social and community welfare expenses(1) 3,216 6,459
----------------------------------------- ------- -------
Lease rentals 1,925 1,510
----------------------------------------- ------- -------
Travel expenses 1,342 2,443
----------------------------------------- ------- -------
Communications 834 990
----------------------------------------- ------- -------
Indirect taxes 3,044 3,723
----------------------------------------- ------- -------
Depreciation and amortisation 2,638 2,285
----------------------------------------- ------- -------
Technology and systems 1,092 828
----------------------------------------- ------- -------
Security 1,083 991
----------------------------------------- ------- -------
Supplies 243 238
----------------------------------------- ------- -------
Other 7,361 7,342
----------------------------------------- ------- -------
Total 56,776 72,995
----------------------------------------- ------- -------
1 Represents amounts expended by the Group on social and
community welfare activities surrounding its mining units.
8 Exploration expenses
Year ended
31 December
----------------
2013 2012
US$000 US$000
------------------------------ ------- -------
Mine site exploration1
------------------------------ ------- -------
Arcata 2,052 4,467
------------------------------ ------- -------
Ares 452 1,507
------------------------------ ------- -------
Sipan 600 1,415
------------------------------ ------- -------
Pallancata 2,149 4,062
------------------------------ ------- -------
San Jose 1,795 5,788
------------------------------ ------- -------
Moris 129 313
------------------------------ ------- -------
7,177 17,552
------------------------------ ------- -------
Prospects2
------------------------------ ------- -------
Peru 1,459 4,795
------------------------------ ------- -------
Argentina 294 1,028
------------------------------ ------- -------
Mexico 3,504 6,605
------------------------------ ------- -------
Chile 12,696 9,580
------------------------------ ------- -------
17,953 22,008
------------------------------ ------- -------
Generative3
------------------------------ ------- -------
Peru 3,502 4,798
------------------------------ ------- -------
Argentina 53 141
------------------------------ ------- -------
Mexico 1,157 497
------------------------------ ------- -------
Chile 330 115
------------------------------ ------- -------
5,042 5,551
------------------------------ ------- -------
Personnel (note 10 and 11(1)) 12,302 13,865
------------------------------ ------- -------
Others 3,853 5,636
------------------------------ ------- -------
Total 46,327 64,612
------------------------------ ------- -------
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 practicable to
separate the liabilities related to the exploration activities of
these companies from their operating liabilities.
As at 31 December
-------------------
2013 2012
US$000 US$000
---------------------------------------------- --------- --------
Liabilities related to exploration activities 1,636 2,082
---------------------------------------------- --------- --------
Cash flows on exploration activities are as follows:
As at 31 December
-------------------
2013 2012
US$000 US$000
--------- --------- --------
Payments 23,441 27,285
--------- --------- --------
9 Selling expenses
Year ended
31 December
----------------
2013 2012
US$000 US$000
--------------------------------------------------------- ------- -------
Transportation of dore, concentrate and maritime freight 4,256 5,745
--------------------------------------------------------- ------- -------
Sales commissions 1,050 2,264
--------------------------------------------------------- ------- -------
Personnel expenses (note 10) 210 374
--------------------------------------------------------- ------- -------
Warehouse services 3,256 3,918
--------------------------------------------------------- ------- -------
Taxes 16,596 23,323
--------------------------------------------------------- ------- -------
Other 3,417 3,836
--------------------------------------------------------- ------- -------
Total 28,785 39,460
--------------------------------------------------------- ------- -------
10 Personnel expenses1
Year ended
31 December
----------------
2013 2012
US$000 US$000
--------------------------- ------- -------
Salaries and wages 128,225 129,208
--------------------------- ------- -------
Workers' profit sharing (737) 18,487
--------------------------- ------- -------
Other legal contributions 24,641 21,084
--------------------------- ------- -------
Statutory holiday payments 7,860 7,600
--------------------------- ------- -------
Long Term Incentive Plan (1,127) 7,891
--------------------------- ------- -------
Termination benefits 10,487 975
--------------------------- ------- -------
Other 6,584 13,079
--------------------------- ------- -------
Total 175,933 198,324
--------------------------- ------- -------
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$124,834,000 (2012: US$121,775,000), US$28,445,000 (2012:
US$40,006,000), US$12,302,000 (2012: US$13,865,000), US$210,000
(2012: US$374,000) and US$10,142,000 (2012: US$22,304,000)
respectively.
Average number of employees for 2013 and 2012 were as
follows:
As at 31 December
-------------------
2013 2012
--------------- --------- --------
Peru 3,226 3,011
--------------- --------- --------
Argentina 1,227 1,226
--------------- --------- --------
Mexico 122 135
--------------- --------- --------
Chile 38 40
--------------- --------- --------
United Kingdom 12 12
--------------- --------- --------
Total 4,625 4,424
--------------- --------- --------
11 Pre-tax exceptional items
Year ended Year ended
31 December 31 December
2013 2012
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
-------------------------------------------------------- ------------ ------------
Gain on sale of property, plant and equipment 2,442 -
-------------------------------------------------------- ------------ ------------
Total 2,442 1,099
-------------------------------------------------------- ------------ ------------
Impairment and write-off of assets (net)
-------------------------------------------------------- ------------ ------------
Impairment and write-off of assets(3) (105,071) (484)
-------------------------------------------------------- ------------ ------------
Reversal of write-off and impairment of assets(4) 14,400 239
-------------------------------------------------------- ------------ ------------
Total (90,671) (245)
-------------------------------------------------------- ------------ ------------
Share of post-tax losses of associates and joint
ventures accounted under equity method(5) - (1,376)
-------------------------------------------------------- ------------ ------------
Total - (1,376)
-------------------------------------------------------- ------------ ------------
Finance income
-------------------------------------------------------- ------------ ------------
Gain from changes in the fair value of financial
instruments(6) 2,417 -
-------------------------------------------------------- ------------ ------------
Total 2,417 -
-------------------------------------------------------- ------------ ------------
Gain on transfer from investment accounted under
the equity method to available-for-sale financial
assets(7) 107,942 -
-------------------------------------------------------- ------------ ------------
Total 107,942 -
-------------------------------------------------------- ------------ ------------
Finance costs
-------------------------------------------------------- ------------ ------------
Amortisation of transaction costs on secure bank
loans(8) (1,072) -
-------------------------------------------------------- ------------ ------------
Transaction costs on bank loans(9) (2,577) -
-------------------------------------------------------- ------------ ------------
Loss from changes in the fair value of financial
instruments(10) (124,899) (1,334)
-------------------------------------------------------- ------------ ------------
Loss on sale of available-for-sale financial assets(11) (7,805) -
-------------------------------------------------------- ------------ ------------
Total (136,353) (1,334)
-------------------------------------------------------- ------------ ------------
1 Termination benefits paid to 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 for the
workers of the 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 31 December 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$29,150,000 and the Ares
unit of US$3,771,000, and to the write-off of assets of US$991,000.
As at 31 December 2012 mainly corresponds to the write-off of
assets in CompañĂa Minera Ares of US$471,000.
4 As at 31 December 2013 corresponds to the reversal of the
impairment of San Felipe property of US$14,400,000. As at 31
December 2012 corresponds to the reversal of the write-off recorded
in 2010 related to the 100% dore project at the San Jose mine.
5 Corresponds to the loss from dilution related to Gold Resource
Corp. investment (note 18).
6 Corresponds to the recycling of the unrealised gain generated
by the shares of International Minerals Corporation, due to the
acquisition (refer to note 4(a)).
7 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 (refer to note 18).
8 Corresponds to the attributable issue cost of the syndicated
loan granted to Compania Minera Ares S.A.C. (note 25), disclosed as
an exceptional item as it is a significant one off expense.
9 Corresponds to the write-off of transaction costs related to
bank loans facilities never drawn by Minera Suyamarca S.A.C.
disclosed as an exceptional item as it is a significant one off
expense.
10 As at 31 December 2013 corresponds to the impairment of
investments in Gold Resource Corp. of US$105,298,000, 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$422,000, Iron Creek Capital Corp. of US$207,000, Empire
Petroleum Corp. of US$22,000 and Brionor Resources of US$4,000. As
at 31 December 2012 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.
11 Corresponds to the loss on sale of part of the Group's
holding in Gold Resource Corp. of US$7,805,000. The Group sold
3,375,000 and 1,800,000 shares on 11 July 2013 and 12 December
2013, respectively.
12 Finance income and finance costs before exceptional items
Year ended Year ended
31 December 31 December
2013 2012
Before Before
exceptional exceptional
items items
US$000 US$000
----------------------------------------------------- ------------ ------------
Finance income
----------------------------------------------------- ------------ ------------
Interest on deposits and liquidity funds 6,751 1,429
----------------------------------------------------- ------------ ------------
Interest on loans to non-controlling interests (note
20) - 123
----------------------------------------------------- ------------ ------------
Interest income 6,751 1,552
----------------------------------------------------- ------------ ------------
Dividends 3,551 -
----------------------------------------------------- ------------ ------------
Other 373 436
----------------------------------------------------- ------------ ------------
Total 10,675 1,988
----------------------------------------------------- ------------ ------------
Finance costs
----------------------------------------------------- ------------ ------------
Interest on secured bank loans (note 25) (4,633) (1,924)
----------------------------------------------------- ------------ ------------
Interest on convertible bond (note 25) (4,594) (8,956)
----------------------------------------------------- ------------ ------------
Interest expense (9,227) (10,880)
----------------------------------------------------- ------------ ------------
Unwind of discount rate (1,267) (731)
----------------------------------------------------- ------------ ------------
Loss from changes in the fair value of financial
instruments (220) -
----------------------------------------------------- ------------ ------------
Other (983) (1,259)
----------------------------------------------------- ------------ ------------
Total (11,697) (12,870)
----------------------------------------------------- ------------ ------------
13 Income tax expense
Year ended 31 December Year ended 31 December
2013 2012
---------------------------------- ----------------------------------
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 10,971 (752) 10,219 48,285 - 48,285
--------------------------------- ------------ ----------- ------- ------------ ----------- -------
Current mining royalty charge
(note 30) 2,344 - 2,344 3,834 - 3,834
--------------------------------- ------------ ----------- ------- ------------ ----------- -------
Current special mining tax
charge (note 30) 905 - 905 4,256 - 4,256
--------------------------------- ------------ ----------- ------- ------------ ----------- -------
Withholding taxes (641) - (641) 1,571 - 1,571
--------------------------------- ------------ ----------- ------- ------------ ----------- -------
13,579 (752) 12,827 57,946 - 57,946
--------------------------------- ------------ ----------- ------- ------------ ----------- -------
Deferred taxation
--------------------------------- ------------ ----------- ------- ------------ ----------- -------
Origination and reversal
of temporary differences
from continuing operations 31,400 (35,170) (3,770) 28,627 (141) 28,486
--------------------------------- ------------ ----------- ------- ------------ ----------- -------
Recognition of deferred tax
not
previously recognised following
a change in estimate/outlook - - - (1,024) - (1,024)
--------------------------------- ------------ ----------- ------- ------------ ----------- -------
31,400 (35,170) (3,770) 27,603 (141) 27,462
--------------------------------- ------------ ----------- ------- ------------ ----------- -------
Total taxation charge in
the income statement 44,979 (35,922) 9,057 85,549 (141) 85,408
--------------------------------- ------------ ----------- ------- ------------ ----------- -------
The weighted average statutory income tax rate was 28.5% for
2013 and 32.4% for 2012. 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
-------------------
2013 2012
US$000 US$000
--------------------------------------------------------- --------- --------
Deferred taxation:
--------------------------------------------------------- --------- --------
Deferred income tax relating to fair value gains on
available-for-sale financial assets - (615)
--------------------------------------------------------- --------- --------
Total tax charge in the statement of other comprehensive
income - (615)
--------------------------------------------------------- --------- --------
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
-------------------
2013 2012
US$000 US$000
------------------------------------------------------- ---------- -------
Loss/(profit) from continuing operations before income
tax (119,620) 212,274
------------------------------------------------------- ---------- -------
At average statutory income tax rate of 28.4% (2012:
32.4%) (34,140) 68,814
------------------------------------------------------- ---------- -------
Expenses not deductible for tax purposes 2,685 4,163
------------------------------------------------------- ---------- -------
Non-taxable income(1) (1,366) (275)
------------------------------------------------------- ---------- -------
Utilisation of losses in respect of deferred tax not
previously recognised(2) (2,214) (1,024)
------------------------------------------------------- ---------- -------
Non-taxable share of gains of associates (1,377) (1,181)
------------------------------------------------------- ---------- -------
Net deferred tax assets generated in the year not
recognised 15,262 6,795
------------------------------------------------------- ---------- -------
Deferred tax recognised on special investment regime (4,246) (2,481)
------------------------------------------------------- ---------- -------
Derecognition of deferred income tax assets - 615
------------------------------------------------------- ---------- -------
Withholding tax (641) 1,571
------------------------------------------------------- ---------- -------
Special mining tax and mining royalty(2) 3,249 8,090
------------------------------------------------------- ---------- -------
Foreign exchange rate effect(3) 30,366 (1,303)
------------------------------------------------------- ---------- -------
Other 1,479 1,624
------------------------------------------------------- ---------- -------
At average effective income tax rate of -11.8% (2012:
40.2%) 9,057 85,408
------------------------------------------------------- ---------- -------
Taxation charge attributable to continuing operations 9,057 85,408
------------------------------------------------------- ---------- -------
Total taxation charge in the income statement 9,057 85,408
------------------------------------------------------- ---------- -------
1 Mainly corresponds to dividends received from Gold Resource
Corp. and International Minerals Corporation (2012: Mainly
corresponds to the reversal of accrued non deductible personnel
expenses recorded in 2011).
2 Corresponds to the impact of the new mining royalty and
special mining tax in Peru (note 30).
3 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 (loss)/earnings per share
(Loss)/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
-------------------
2013 2012
----------------------------------------------------------- ----------- ------
Basic (loss)/earnings per share from continuing operations
----------------------------------------------------------- ----------- ------
Before exceptional items (US$) (0.15) 0.19
----------------------------------------------------------- ----------- ------
Exceptional items (US$) (0.21) -
----------------------------------------------------------- ----------- ------
Total for the year and from continuing operations
(US$) (0.36) 0.19
----------------------------------------------------------- ----------- ------
Diluted (loss)/earnings per share from continuing
operations
----------------------------------------------------------- ----------- ------
Before exceptional items (US$) (0.15) 0.19
----------------------------------------------------------- ----------- ------
Exceptional items (US$) (0.21) -
----------------------------------------------------------- ----------- ------
Total for the year and from continuing operations
(US$) (0.36) 0.19
----------------------------------------------------------- ----------- ------
Net (loss)/profit from continuing operations before exceptional
items and attributable to equity holders of the parent is derived
as follows:
As at 31 December
-------------------
2013 2012
------------------------------------------------------------ --------- --------
(Loss)/profit for the year from continuing operations
(US$000) (128,677) 126,866
------------------------------------------------------------ --------- --------
Less non-controlling interests (US$000) 5,594 (63,795)
------------------------------------------------------------ --------- --------
(Loss)/profit attributable to equity holders of the
parent - continuing operations (US$000) (123,083) 63,071
------------------------------------------------------------ --------- --------
Exceptional items after tax - attributable to equity
holders of the parent (US$000) 72,738 1,759
------------------------------------------------------------ --------- --------
(Loss)/profit from continuing operations before exceptional
items attributable to equity holders
of the parent (US$000) (50,345) 64,830
------------------------------------------------------------ --------- --------
Interest on convertible bond (US$000)(1) - -
------------------------------------------------------------ --------- --------
Diluted (loss)/profit from continuing operations before
exceptional items attributable to equity
holders of the parent (US$000) (50,345) 64,830
------------------------------------------------------------ --------- --------
The following reflects the share data used in the basic and
diluted (loss)/earnings per share computations:
As at 31 December
-------------------
2013 2012
---------------------------------------------------------- --------- --------
Basic weighted average number of ordinary shares in
issue (thousands) 345,225 338,022
---------------------------------------------------------- --------- --------
Dilutive potential ordinary shares related to convertible
bond (thousands)(1) - -
---------------------------------------------------------- --------- --------
Diluted weighted average number of ordinary shares
in issue and dilutive potential
ordinary shares (thousands) 345,225 338,022
---------------------------------------------------------- --------- --------
1 The potential ordinary shares related to the convertible bond
have not been included in the calculation of diluted EPS for 2013
and 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 US$000 US$000 US$000 US$000
----------------------- ---------------- -------------- -------------- -------- -------- ------------ ---------
Year ended 31 December
2013
----------------------- ---------------- -------------- -------------- -------- -------- ------------ ---------
Cost
----------------------- ---------------- -------------- -------------- -------- -------- ------------ ---------
At 1 January 2013 540,324 179,940 313,457 5,360 67,356 119,381 1,225,818
----------------------- ---------------- -------------- -------------- -------- -------- ------------ ---------
Additions 141,504 2,823 49,700 323 - 73,421 267,771
----------------------- ---------------- -------------- -------------- -------- -------- ------------ ---------
Change in discount rate - - - - (1,481) - (1,481)
----------------------- ---------------- -------------- -------------- -------- -------- ------------ ---------
Disposals - - (724) (43) - - (767)
----------------------- ---------------- -------------- -------------- -------- -------- ------------ ---------
Write-offs (321) (57) (7,089) (150) - - (7,617)
----------------------- ---------------- -------------- -------------- -------- -------- ------------ ---------
Change in mine closure
estimate - - - - 8,487 - 8,487
----------------------- ---------------- -------------- -------------- -------- -------- ------------ ---------
Transfers and other
movements (50) 37,377 15,611 1,021 - (56,419) (2,460)
----------------------- ---------------- -------------- -------------- -------- -------- ------------ ---------
Transfers from
evaluation
and
exploration assets 188,323 - - - - - 188,323
----------------------- ---------------- -------------- -------------- -------- -------- ------------ ---------
Foreign exchange - - 124 - - - 124
----------------------- ---------------- -------------- -------------- -------- -------- ------------ ---------
At 31 December 2013 869,780 220,083 371,079 6,511 74,362 136,383 1,678,198
----------------------- ---------------- -------------- -------------- -------- -------- ------------ ---------
Accumulated
depreciation
and impairment
----------------------- ---------------- -------------- -------------- -------- -------- ------------ ---------
At 1 January 2013 306,443 87,679 146,823 2,574 44,808 936 589,263
----------------------- ---------------- -------------- -------------- -------- -------- ------------ ---------
Depreciation for the
year 96,862 20,377 29,316 989 2,070 - 149,614
----------------------- ---------------- -------------- -------------- -------- -------- ------------ ---------
Write-offs (41) (9) (5,567) (110) - - (5,727)
----------------------- ---------------- -------------- -------------- -------- -------- ------------ ---------
Disposals - - (351) (14) - - (365)
----------------------- ---------------- -------------- -------------- -------- -------- ------------ ---------
Impairment(2) 42,080 5,883 8,520 204 1,547 3,899 62,133
----------------------- ---------------- -------------- -------------- -------- -------- ------------ ---------
Transfers from
evaluation
and exploration assets 7,418 - - - - - 7,418
----------------------- ---------------- -------------- -------------- -------- -------- ------------ ---------
Transfers and other
movements 15 6,993 (3,350) 2 - (1,337) 2,323
----------------------- ---------------- -------------- -------------- -------- -------- ------------ ---------
Foreign exchange - - 62 - - - 62
----------------------- ---------------- -------------- -------------- -------- -------- ------------ ---------
At 31 December 2013 452,777 120,923 175,453 3,645 48,425 3,498 804,721
----------------------- ---------------- -------------- -------------- -------- -------- ------------ ---------
Net book amount at 31
December 2013 417,003 99,160 195,626 2,866 25,937 132,885 873,477
----------------------- ---------------- -------------- -------------- -------- -------- ------------ ---------
1 The carrying value of plant and equipment held under finance
leases at 31 December 2013 was US$539,627 (2012: US$991,230).
Additions during
the year included US$Nil (2012: US$Nil) of plant and equipment
under finance leases. Leased assets are pledged as security for the
related finance lease.
2 There were borrowing costs capitalised in property, plant and
equipment amounting to US$5,736,000 (2012:US$Nil). The
capitalisation rate used was 9.45%.
3 The Group recorded an impairment of US$450,000 with respect to
the Azuca project, US$22,535,000 with respect to the Crespo
project, US$35,377,000 with respect to the San Jose mine unit and
US$3,771,000 with respect to the Ares mine unit. These impairment
charges arose primarily as a result of decreases in the prices of
silver and gold and were determined using the fair value less costs
to dispose (FVLCD) methodology. FVLCD was determined using a
discounted cash flow model to estimate the amount that would be
paid by a willing third party in an arm's length transaction. Any
variation in the key assumptions would either result in further
impairment or a reduction of the impairment.
15 Property, plant and equipment (continued)
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 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
----------------------- ---------------- -------------- -------------- -------- -------- ------------ ---------
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
2012 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
------------------------------ ------- -------- ---------- ---------- ------- -------- ---------
Additions 4,736 179 965 - 4,300 2,006 12,186
------------------------------ ------- -------- ---------- ---------- ------- -------- ---------
Foreign exchange - (512) - - - - (512)
------------------------------ ------- -------- ---------- ---------- ------- -------- ---------
Write- off - - - - (26) (4) (30)
------------------------------ ------- -------- ---------- ---------- ------- -------- ---------
Transfers from/(to)
property plant and equipment - (38,106) (117,727) - - (32,490) (188,823)
------------------------------ ------- -------- ---------- ---------- ------- -------- ---------
Balance at 31 December
2013 75,540 29,176 - 55,950 90,575 10,684 261,925
------------------------------ ------- -------- ---------- ---------- ------- -------- ---------
Accumulated impairment
------------------------------ ------- -------- ---------- ---------- ------- -------- ---------
Balance at 1 January
2012 22 9,904 - 30,950 - 1,171 42,047
------------------------------ ------- -------- ---------- ---------- ------- -------- ---------
Balance at 31 December
2012 22 9,904 - 30,950 - 1,171 42,047
------------------------------ ------- -------- ---------- ---------- ------- -------- ---------
Impairment(2) 29,840 5,507 - (14,400) - 1,706 22,653
------------------------------ ------- -------- ---------- ---------- ------- -------- ---------
Transfers from property,
plant and equipment - (6,281) - - (1,137) (7,418)
------------------------------ ------- -------- ---------- ---------- ------- -------- ---------
Balance at 31 December
2013 29,862 9,130 - 16,550 - 1,740 57,282
------------------------------ ------- -------- ---------- ---------- ------- -------- ---------
Net book value as at
31 December 2012 70,782 57,711 116,762 25,000 86,301 40,001 396,557
------------------------------ ------- -------- ---------- ---------- ------- -------- ---------
Net book value as at
31 December 2013 45,678 29,046 - 39,400 90,575 8,944 204,643
------------------------------ ------- -------- ---------- ---------- ------- -------- ---------
1 There were no borrowing costs capitalised in evaluation and exploration assets.
2 The Group recorded an mpairment with respect to the Azuca
project of US$29,840,000 , the Crespo project of US$5,507,000 and
the San Jose mine unit of US$1,706,000, and partially reversed the
impairment of the San Felipe project of US$14,400,000. These
impairment charges arose primarily as a result of decreases in the
prices of silver and gold and were determined using the fair value
less costs to dispose (FVLCD) methodology. FVLCD was determined
using a discounted cash flow model to estimate the amount that
would be paid by a willing third party in an arm's length
transaction. Any variation in the key assumptions would either
result in further impairment or a reduction of the impairment.
17 Intangible assets
Transmission Water Software Legal
Goodwill line(1) permits(2) licences rights(3) Total
US$000 US$000 US$000 US$000 US$000 US$000
--------------------------------- -------- ------------ ------------ --------- ---------- -------
Cost
--------------------------------- -------- ------------ ------------ --------- ---------- -------
Balance at 1 January 2012 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
--------------------------------- -------- ------------ ------------ --------- ---------- -------
Additions - - - - 1,621 1,621
--------------------------------- -------- ------------ ------------ --------- ---------- -------
Transfer - - - 11 4,783 4,794
--------------------------------- -------- ------------ ------------ --------- ---------- -------
Balance at 31 December 2013 2,091 22,157 26,583 1,348 6,404 58,583
--------------------------------- -------- ------------ ------------ --------- ---------- -------
Accumulated amortisation
--------------------------------- -------- ------------ ------------ --------- ---------- -------
Balance at 1 January 2012 - 5,686 - 1,050 - 6,736
--------------------------------- -------- ------------ ------------ --------- ---------- -------
Amortisation for the year(4) - 1,452 - 77 - 1,529
--------------------------------- -------- ------------ ------------ --------- ---------- -------
Balance at 31 December 2012 - 7,138 - 1,127 - 8,265
--------------------------------- -------- ------------ ------------ --------- ---------- -------
Amortisation for the year(4) - 1,213 - 87 441 1,741
--------------------------------- -------- ------------ ------------ --------- ---------- -------
Impairment of the period(5) 2,091 1,671 - 24 1,108 4,894
--------------------------------- -------- ------------ ------------ --------- ---------- -------
Balance at 31 December 2013 2,091 10,022 - 1,238 1,549 14,900
--------------------------------- -------- ------------ ------------ --------- ---------- -------
Net book value as at 31 December
2012 2,091 15,019 26,583 210 - 43,903
--------------------------------- -------- ------------ ------------ --------- ---------- -------
Net book value as at 31 December
2013 - 12,135 26,583 110 4,855 43,683
--------------------------------- -------- ------------ ------------ --------- ---------- -------
1 The transmission line is amortised using the units of
production method. At 31 December 2013 the remaining amortisation
period is 10 years.
2 Corresponds to the acquisition of water permits of Andina
Minerals Group ("Andina") (refer to note 4(b)). They have an
indefinite life according the Chilean law.
3 Legal rights correspond to expenditures required to give the
Group the right to use a property for the surface exploration work,
development and production. At 31 December 2013 the remaining
amortisation period is 12 years.
4 The amortisation for the period is included in cost of sales
and administrative expenses in the income statement.
5 The Group recorded an impairment in relation to all of the
goodwill of US$2,091,000 and other intangibles of US$1,695,000
related to the San Jose mine unit, and US$1,108,000 related to the
Crespo project. These impairment charges arose primarily as a
result of decreases in the prices of silver and gold and were
determined using the fair value less costs to dispose (FVLCD)
methodology. FVLCD was determined using a discounted cash flow
model to estimate the amount that would be paid by a willing third
party in an arm's length transaction. Any variation in the key
assumptions would either result in further impairment or a
reduction of the impairment (not in the case of the goodwill).
The carrying amount of goodwill and water permits is reviewed
annually to determine whether it is in excess of its recoverable
amount.
In the case of the goodwill, the fair value less cost of
disposal is determined at the cash-generating unit level, in this
case being the San Jose, by discounting the expected cash flows
estimated by management over the life of the mine.
(a) Goodwill:
The calculation of fair value less cost of disposal is most
sensitive to the following assumptions:
-- Commodity prices - Commodity prices of gold and silver are
based on prices considered in the Group's 2013 forecast (2012: 2013
budget) and external market consensus forecasts. The prices
considered in the 2013 (2012) impairment tests were:
Year 2013 2014 2015 2016 2017 2018 2019 2020-2024
-------------- ------- ------- ------- ------- ------- ------- ------- ---------
2013 - Gold
- US$/oz 1,343.9 1,405.9 1,379.3 1,319.3 1,272.1 1,272.1 1,272.1 1,272.1
-------------- ------- ------- ------- ------- ------- ------- ------- ---------
2013 - Silver
- US$/oz 21.2 25.0 23.5 20.7 22.3 22.3 22.3 22.3
-------------- ------- ------- ------- ------- ------- ------- ------- ---------
2012 - Gold
- US$/oz 1,823.0 1,723.0 1,550.0 1,411.0 1,411.0 1,411.0 1,411.0 1,411.0
-------------- ------- ------- ------- ------- ------- ------- ------- ---------
2012 - Silver
- US$/oz 35.0 31.0 29.0 26.0 26.0 26.0 26.0 26.0
-------------- ------- ------- ------- ------- ------- ------- ------- ---------
-- 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
(2012: 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 2013 impairment test was 23.77% (2012: 25.59%).
-- As at 31 December 2012, management believed that the
following changes to the main assumptions would have caused the
carrying value of the cash generating unit (including the goodwill)
to equal its recoverable amount. Therefore, any higher deviation
would have caused the carrying value of goodwill to exceed its
recoverable amount resulting in the recognition of an impairment
provision. As goodwill has been fully impaired during the year
ended 31 December 2013, no such analysis has been prepared as at 31
December 2013.
2012
Assumption Variation
----------------------- ----------
Gold price (19.3)%
----------------------- ----------
Silver price (15.5)%
----------------------- ----------
Reserves and resources (109.6)%
----------------------- ----------
Costs 17.7%
----------------------- ----------
Discount rates 99.4%
----------------------- ----------
Cash flows used for impairment tests were based on the annual
2013 forecast. The starting point in all cases was January 2013.
Individual cash flows are based on the annual 2013 forecast 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 forecast. Future capital expenditure is based on the
2013 forecast, excluding one-off expenses and considering the
Operations team's view of developments and infrastructure,
according to the estimated set of reserves and resources.
Headroom for the 2012 impairment test was US$92,349,000
Water permits:
In the case of the water permits the Group applied a value in
situ methodology, which applies a realisable 'enterprise value' to
unprocessed mineral resources. The methodology is used to determine
the fair value less costs of disposal of the Andina cash-generating
unit, which includes the water permits held by the Group. The
enterprise value used in the calculation performed at 31 December
2013 was US$13.60 per gold equivalent ounce of resources. The
enterprise value figures are based on observable external market
information.
Headroom for the 2013 impairment test was US$14,172,000.
A change in key assumptions on which the recoverable amount of
the Andina cash-generating unit was determined could cause the
unit's carrying value to exceed its recoverable amount.
18 Investments accounted under equity method
Gold Resource Corp.
The Group has an interest in Gold Resource Corp.("GRC"), which
is involved in the exploration for and production of gold and
silver in Mexico. The company is incorporated 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.
On 27 March 2013 equity accounting for the investment was
discontinued as a result of developments during the period which
resulted in the Group concluding that it no longer had the ability
to influence significantly that company's strategic, operational
and financial direction. The investment in GRC was reclassified as
an available-for-sale financial asset. As of 27 March 2013 the
Group had a 27.77% interest in GRC.
The following table summarises the financial information of the
Group's investment in GRC:
Year ended
31 December
-----------------
2013 2012
US$000 US$000
---------------------------------------------------------- ------- --------
Share of the associate's statement of financial position:
---------------------------------------------------------- ------- --------
Current assets - 17,872
---------------------------------------------------------- ------- --------
Non-current assets - 51,002
---------------------------------------------------------- ------- --------
Current liabilities - (3,742)
---------------------------------------------------------- ------- --------
Non-current liabilities - (11,300)
---------------------------------------------------------- ------- --------
Net assets - 53,832
---------------------------------------------------------- ------- --------
Goodwill on acquisition - 24,356
---------------------------------------------------------- ------- --------
Share of the associate's revenue, profit and loss:
---------------------------------------------------------- ------- --------
Revenue 11,750 33,737
---------------------------------------------------------- ------- --------
Profit(1) 5,921 5,080
---------------------------------------------------------- ------- --------
Carrying amount of the investment - 78,188
---------------------------------------------------------- ------- --------
1 Share of the associate's profit in 2013 includes (1) a
pre-exceptional gain from the Group's share of GRC's results for
the period in which it exercised significant influence of
US$5,921,000 (2012: US$6,456,000) and (2) an exceptional loss from
dilution of US$Nil (2012: US$1,376,000).
19 Available-for-sale financial assets
Year ended
31 December
------------------
2013 2012
US$000 US$000
-------------------------------------------------- --------- -------
Beginning balance 30,609 40,769
-------------------------------------------------- --------- -------
Additions(1) 1,119 -
-------------------------------------------------- --------- -------
Impairment - (891)
-------------------------------------------------- --------- -------
Fair value change recorded in equity (125,932) (9,269)
-------------------------------------------------- --------- -------
Reclassification from investments accounted under
the equity method(2) 189,418 -
-------------------------------------------------- --------- -------
Disposals(3) (33,498) -
-------------------------------------------------- --------- -------
Other(4) (10,058) -
-------------------------------------------------- --------- -------
Ending balance 51,658 30,609
-------------------------------------------------- --------- -------
1 Represents 3,755,746 shares of Chaparral Gold Corp. received
due to the Group's 3.2% interest in International Minerals
Corporation (refer to note 4(a))
2 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.
3 Sale of 3,375,000 and 1,800,000 share sof Gold Resource Corp
on 11 July 2013 and 12 December 2013 respectively.
4 In connection with the acquisition of the non-controlling
interest of Minera Suyamarca S.A.C. the Group disposed of its
3,755,746 shares of International Minerals Corporation (IMZ) and
received 3,755,746 class A shares of IMZ, recognising them as
investment in subsidiary and consequently eliminating them in
consolidation (refer to note 4(a)).
Available-for-sale financial assets include the following:
Year ended
31 December
----------------
2013 2012
US$000 US$000
---------------------------------------------- ------- -------
Equity securities - quoted Canadian companies 2,030 17,800
---------------------------------------------- ------- -------
Equity securities - quoted US companies(1) 42,883 23
---------------------------------------------- ------- -------
Equity securities - quoted British companies 745 777
---------------------------------------------- ------- -------
Equity securities - unquoted(2) 6,000 12,009
---------------------------------------------- ------- -------
Total 51,658 30,609
---------------------------------------------- ------- -------
1 Primarily includes Gold Resource Corp shares of US$42,817,000 (2012: US$Nil).
2 Includes Pembrook Mining Corp and ECI Exploration and Mining Inc. shares.
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 less any
recognised impairment losses 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:
2013 2012
US$000 US$000
----------------- ------- -------
Canadian dollars 8,030 29,809
----------------- ------- -------
US dollars 42,883 23
----------------- ------- -------
Pounds sterling 745 777
----------------- ------- -------
Total 51,658 30,609
----------------- ------- -------
20 Trade and other receivables
As at 31 December
------------------------------------------
2013 2012
-------------------- --------------------
Non-current Current Non-current Current
US$000 US$000 US$000 US$000
-------------------------------------------------- ----------- ------- ----------- -------
Trade receivables - 69,702 - 88,435
-------------------------------------------------- ----------- ------- ----------- -------
Advances to suppliers - 22,667 - 17,916
-------------------------------------------------- ----------- ------- ----------- -------
Credit due from exports of Minera Santa Cruz 5,776 - 5,609 2,578
-------------------------------------------------- ----------- ------- ----------- -------
Due from non-controlling interests(1) - - - 2,224
-------------------------------------------------- ----------- ------- ----------- -------
Receivables from related parties - 111 - 1,017
-------------------------------------------------- ----------- ------- ----------- -------
Loans to employees 2,030 909 2,276 1,608
-------------------------------------------------- ----------- ------- ----------- -------
Interest receivable - 600 - 85
-------------------------------------------------- ----------- ------- ----------- -------
Receivable from Kaupthing, Singer and Friedlander
Bank - 294 - 361
-------------------------------------------------- ----------- ------- ----------- -------
Other 2,638 19,115 102 6,575
-------------------------------------------------- ----------- ------- ----------- -------
Provision for impairment(2) - (5,084) - (3,819)
-------------------------------------------------- ----------- ------- ----------- -------
Financial assets classified as receivables 10,444 108,314 7,987 116,980
-------------------------------------------------- ----------- ------- ----------- -------
Prepaid expenses 755 11,602 626 10,237
-------------------------------------------------- ----------- ------- ----------- -------
Value Added Tax (VAT)(3) 929 47,824 - 38,956
-------------------------------------------------- ----------- ------- ----------- -------
Total 12,128 167,740 8,613 166,173
-------------------------------------------------- ----------- ------- ----------- -------
The fair values of trade and other receivables approximate their
book value.
1 Corresponds to an amount receivable from Iron Creek Capital Corp.
2 Includes the provision for impairment of trade receivable from
a customer in Peru of US$1,108,000 (2012: US$1,108,000), the
impairment of deposits in Kaupthing, Singer and Friedlander of
US$294,000 (2012: US$361,000) and other receivables of US$3,682,000
(2012: US$2,350,000).
3 This includes an amount of US$17,807,000 (2012: US$18,736,000)
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$10,639,000
(2012: US$6,388,000), CompañĂa Minera Ares S.A.C. of US$11,005,000
(2012: US$8,574,000) and Minas Santa MarĂa de Moris of US$3,108,000
(2012: US$2,445,000). The VAT is valued at its recoverable
amount.
Movements in the provision for impairment of receivables:
Individually
impaired
US$000
----------------------------- ------------
At 1 January 2012 2,406
----------------------------- ------------
Provided for during the year 1,567
----------------------------- ------------
Released during the year (154)
----------------------------- ------------
At 31 December 2012 3,819
----------------------------- ------------
Provided for during the year 1,485
----------------------------- ------------
Released during the year (220)
----------------------------- ------------
At 31 December 2013 5,084
----------------------------- ------------
As 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 91 to Over
due nor than 30 to 61 to 120 120
Total impaired 30 days 60 days 90 days days days
Year US$000 US$000 US$000 US$000 US$000 US$000 US$000
----- ------- --------- -------- -------- -------- ------- -------
2013 118,758 118,758 - - - - -
----- ------- --------- -------- -------- -------- ------- -------
2012 124,967 124,967 - - - - -
----- ------- --------- -------- -------- -------- ------- -------
21 Inventories
As at As at
31 December 31 December
2013 2012
US$000 US$000
--------------------------------------- ------------ ------------
Finished goods 7,871 4,874
--------------------------------------- ------------ ------------
Products in process 21,246 28,162
--------------------------------------- ------------ ------------
Raw materials 2 1
--------------------------------------- ------------ ------------
Supplies and spare parts 47,118 49,021
--------------------------------------- ------------ ------------
76,237 82,058
--------------------------------------- ------------ ------------
Provision for obsolescence of supplies (6,681) (5,645)
--------------------------------------- ------------ ------------
Total 69,556 76,413
--------------------------------------- ------------ ------------
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 2013 included in
products in process is US$697,000 (2012: US$9,370,000).
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$94,235,000 (2012: US$85,651,000).
Movements in the provision for obsolescence comprise an increase
in the provision of US$1,832,000 (2012: US$3,608,000) and the
reversal of US$Nil relating to the sale of supplies and spare
parts, that had been provided for (2012: US$504,000).
The amount of income relating to the reversal of the inventory
provision is US$90,000 (2012: US$Nil).
22 Other financial assets and liabilities
As at 31 December
-------------------
2013 2012
US$000 US$000
---------------------------------------------------- --------- --------
Other financial assets
---------------------------------------------------- --------- --------
Warrants in Iron Creek Capital Corp. - 1
---------------------------------------------------- --------- --------
Bonds - 149
---------------------------------------------------- --------- --------
Total financial assets at fair value through profit
or loss - 150
---------------------------------------------------- --------- --------
Other financial liabilities
---------------------------------------------------- --------- --------
Embedded derivatives(1) 2,294 6,891
---------------------------------------------------- --------- --------
Total financial liabilities at fair value through
profit or loss 2,294 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. 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
-------------------
2013 2012
US$000 US$000
------------------------------------------------------- --------- --------
Cash at bank 454 322
------------------------------------------------------- --------- --------
Liquidity funds(1) 8,751 72,803
------------------------------------------------------- --------- --------
Current demand deposit accounts(2) 62,259 61,654
------------------------------------------------------- --------- --------
Time deposits(3) 214,971 224,165
------------------------------------------------------- --------- --------
Cash and cash equivalents considered for the statement
of cash flows(4) 286,435 358,944
------------------------------------------------------- --------- --------
The fair value of cash and cash equivalents approximates their
book value. The Group does not have undrawn borrowing facilities
available in the future for operating activities or capital
commitments.
1 The liquidity funds are mainly invested in certificates of
deposit, commercial papers and floating rate notes with a weighted
average maturity of 8 days as at 31 December 2013 (2012: average of
5 days). In addition, liquidity funds include US Treasury bonds
amounting to US$Nil (2012: US$49,967,000).
2 Relates to bank accounts which are freely available and bear
interest.
3 These deposits have an average maturity of 27 days (2012:
Average of 36 days).
4 Funds deposited in Argentinean institutions are effectively
restricted for transfer to other countries and are invested
locally. Included within cash and cash equivalents at 31 December
2013 is US$29,112,000 (2012: US$25,452,000), which is not readily
available for use in subsidiaries outside of Argentina.
24 Trade and other payables
As at 31 December
------------------------------------
2013 2012
----------------- -----------------
Non- Non-
current Current current Current
US$000 US$000 US$000 US$000
---------------------------------------------- -------- ------- -------- -------
Trade payables(1) - 73,339 - 76,012
---------------------------------------------- -------- ------- -------- -------
Salaries and wages payable(2) - 18,620 - 31,935
---------------------------------------------- -------- ------- -------- -------
Dividends payable - 4,584 - 2,242
---------------------------------------------- -------- ------- -------- -------
Taxes and contributions - 8,264 - 9,077
---------------------------------------------- -------- ------- -------- -------
Accrued expenses - - - 383
---------------------------------------------- -------- ------- -------- -------
Guarantee deposits - 7,266 - 6,325
---------------------------------------------- -------- ------- -------- -------
Mining royalty (note 30) - 840 - 1,630
---------------------------------------------- -------- ------- -------- -------
Deferred income(3) - - - 4,000
---------------------------------------------- -------- ------- -------- -------
Amount payable to non-controlling interest(4) - - - 13,787
---------------------------------------------- -------- ------- -------- -------
Accounts payable to related parties (note 30) - 16 - -
---------------------------------------------- -------- ------- -------- -------
Other 174 6,293 - 4,194
---------------------------------------------- -------- ------- -------- -------
Total 174 119,222 - 149,585
---------------------------------------------- -------- ------- -------- -------
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:
2013 2012
US$000 US$000
----------------------------------- ------- -------
Remuneration payable 17,885 26,404
----------------------------------- ------- -------
Board members' remuneration 152 581
----------------------------------- ------- -------
Executive Long Term Incentive Plan 583 4,950
----------------------------------- ------- -------
Total 18,620 31,935
----------------------------------- ------- -------
3 Deferred income represents non-refundable advance receipts in
respect of an option granted to a third party to acquire the
Group's San Felipe project in Mexico. On August 2013 the Group
signed an amendment to extend the option for the third party to
purchase the San Felipe project to 31 October 2015. Due to the
significance of the amount advanced the Group deemed it appropriate
to disclose the amount separately on the face of the consolidated
statement of financial position for the year 2013. A further
US$22,000,000 payment is expected to be made by the third party to
fulfil the option agreement and acquire a full interest in the
project.
4 Amount payable to complete the purchase of Andina Minerals Inc
non-controlling shareholders' interests (note 4(b)).
25 Borrowings
As at 31 December
----------------------------------------------------------
2013 2012
---------------------------- ----------------------------
Effective Non- Effective Non-
interest current Current interest current Current
rate US$000 US$000 rate US$000 US$000
------------------------------ --------- -------- ------- --------- -------- -------
Secured bank loans (a)
------------------------------ --------- -------- ------- --------- -------- -------
Pre-shipment loans in
Minera Santa Cruz (note
21) - 24,122 - - -
------------------------------ --------- -------- ------- --------- -------- -------
Pre-shipment loans in
Minera Suyamarca S.A.C.(note
21) - 30,053 - - -
------------------------------ --------- -------- ------- --------- -------- -------
Leasing agreement with
Banco de Credito
del Peru - - - 3.5% - 336
------------------------------ --------- -------- ------- --------- -------- -------
Leasing agreement with
Banco Interamericano de
Finanzas - - - 6% - 24
------------------------------ --------- -------- ------- --------- -------- -------
Syndicated loan 25.26% - 265,877 - - -
------------------------------ --------- -------- ------- --------- -------- -------
Convertible bond payable
(b) 8.26% - 115,873 8.26% 106,850 6,613
------------------------------ --------- -------- ------- --------- -------- -------
Total - 435,925 106,850 6,973
------------------------------ --------- -------- ------- --------- -------- -------
(a) Secured bank loans:
Leasing agreements:
The following table demonstrates the present value and maturity
of future minimum lease payments as at 31 December 2013 and
2012:
As at 31 December
-------------------
2013 2012
US$000 US$000
------------------------ --------- --------
Not later than one year - 360
------------------------ --------- --------
Between 1 and 2 years - -
------------------------ --------- --------
Between 2 and 5 years - -
------------------------ --------- --------
Total - 360
------------------------ --------- --------
The following table reconciles the total minimum lease payments
and their present values as at 31 December 2013 and 2012:
As at 31 December
-------------------
2013 2012
US$000 US$000
----------------------------- --------- --------
Present value of leases - 360
----------------------------- --------- --------
Future interest - 4
----------------------------- --------- --------
Total minimum lease payments - 364
----------------------------- --------- --------
The carrying amount of net lease liabilities approximate their
fair value.
Syndicated loan:
Loan facility with a syndicate of lenders with Bank of America
acting as the Administrative Agent. Total secured term loan
facility of US$340,000,000 that accrued an effective interest rate
of 25.26% and is guaranteed by a group of subsidiaries headed by
Hochschild Mining plc. The balance at 31 December 2013 is comprised
of the carrying value of US$265,560,000 determined in accordance
with the effective interest method plus accrued interest payable of
US$317,000. The loan was repaid on 23 January 2014.
Upon initial recognition, the syndicated loan was recorded at a
value of US$263,432,000, representing a principal of US$270,000,000
less transaction costs of US$6,568,000.
(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 Group expect to settle the
convertible bond in cash. 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: GBP 3.80;
-- Fixed Exchange Rate: US$1.59/GBP 1.00.
The balance at 31 December 2013 is comprised of the carrying
value of US$113,118,000 determined in accordance with the effective
interest method plus accrued interest payable of US$2,755,000.
Upon initial recognition, the convertible bonds were recorded at
a value of US$ 103,827,000, representing a principal of
US$115,000,000 less transaction costs of US$2,741,000 and the bond
equity component of $8,432,000.
The maturity of non-current borrowings is as follows:
As at 31 December
-------------------
2013 2012
US$000 US$000
---------------------- --------- --------
Between 1 and 2 years - 106,850
---------------------- --------- --------
Between 2 and 5 years - -
---------------------- --------- --------
Over 5 years - -
---------------------- --------- --------
Total - 106,850
---------------------- --------- --------
The carrying amount of current borrowings differs their fair
value only with respect to differences arising under the effective
interest rate calculations described above. 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
-------------------- --------------------
2013 2012 2013 2012
US$000 US$000 US$000 US$000
------------------------- --------- --------- --------- ---------
Secured bank loans - - - -
------------------------- --------- --------- --------- ---------
Convertible bond payable - 106,850 - 112,867
------------------------- --------- --------- --------- ---------
Total - 106,850 - 112,867
------------------------- --------- --------- --------- ---------
26 Provisions
Provision Long
for Workers' Term
mine profit Incentive Contingent
closure(1) sharing(2) Plan(3) consideration(4) Other Total
US$000 US$000 US$000 US$000deg US$000 US$000
----------------------- ----------- ----------- ---------- ----------------- ------- --------
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 estimates(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
----------------------- ----------- ----------- ---------- ----------------- ------- --------
At 1 January 2013 74,214 18,549 6,027 - 4,448 103,238
----------------------- ----------- ----------- ---------- ----------------- ------- --------
Additions - - - - 1,171 1,171
----------------------- ----------- ----------- ---------- ----------------- ------- --------
Accretion 224 - - - - 224
----------------------- ----------- ----------- ---------- ----------------- ------- --------
Change in discount
rate (1,481) - - - - (1,481)
----------------------- ----------- ----------- ---------- ----------------- ------- --------
Change in estimates 14,005(5) (427) (2,960) - - 10,618
----------------------- ----------- ----------- ---------- ----------------- ------- --------
Payments (4,781) (17,645) (651) - (83) (23,160)
----------------------- ----------- ----------- ---------- ----------------- ------- --------
Amounts transferred
to payables - - (537) - - (537)
----------------------- ----------- ----------- ---------- ----------------- ------- --------
Foreign exchange (32) (103) - - (716) (851)
----------------------- ----------- ----------- ---------- ----------------- ------- --------
At 31 December 2013 82,149 374 1,879 - 4,820 89,222
----------------------- ----------- ----------- ---------- ----------------- ------- --------
Less current portion (6,311) (374) - - (2,888) (9,573)
----------------------- ----------- ----------- ---------- ----------------- ------- --------
Non-current portion 75,838 - 1,879 - 1,932 79,649
----------------------- ----------- ----------- ---------- ----------------- ------- --------
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
2013 and 2012 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. The discount rates used are from 0.29%
to 0.56%.
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 2013 is: (i) Legal US$374,000 (2012: US$5,788,000), (ii)
Voluntary US$Nil (2012: US$12,761,000).
3 Corresponds to the provision related to awards granted under
the Long Term Incentive Plan to designated personnel of the Group.
Includes the following benefits: (i) 2013 awards, granted in March
2013, payable in March 2016 (ii) 2012 awards, granted in March
2012, payable in March 2015. Only employees who remain in the
Group's employment on the vesting date will be entitled to a cash
payment, subject to exceptions approved by the Remuneration
Committee of the Board. The provision represents the discounted
values of the estimated cost of the long-term employee benefit. In
2013 there is a provision of US$-2,960,000 (2012: US$7,322,000)
that is disclosed under administrative expenses US$-1,698,000
(2012: US$5,420,000), exploration expenses US$-244,000 (2012:
US$843,000) and capitalised as evaluation and exploration expenses
US$-1,018,000 (2012: US$1,059,000). The amount of US$537,000
corresponds to the Exploration incentive Plan 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 2013 and 2012 internal review of mine
rehabilitation budgets, an increase of US$14,005,000 (2012:
US$3,362,000) was recognised.
27 Dividends paid and proposed
2013 2012
US$000 US$000
--------------------------------------------------------- ------- -------
Declared and paid during the year
--------------------------------------------------------- ------- -------
Equity dividends on ordinary shares:
--------------------------------------------------------- ------- -------
Final dividend for 2012: US$0.03 (2011: US$0.03) 10,139 10,139
--------------------------------------------------------- ------- -------
Interim dividend for 2013: US$Nil (2012: US$0.03) - 10,139
--------------------------------------------------------- ------- -------
Dividends declared to non-controlling interests: US$0.03
and US$0.05 (2012: US$0.18 and 0.08) 6,197 32,690
--------------------------------------------------------- ------- -------
Dividends declared and paid 16,336 52,968
--------------------------------------------------------- ------- -------
Dividends declared to non-controlling interests: US$0.03
(2012: US$0.08) 4,509 2,187
--------------------------------------------------------- ------- -------
Dividends declared and not paid 4,509 2,187
--------------------------------------------------------- ------- -------
Total dividends declared 20,845 55,155
--------------------------------------------------------- ------- -------
Proposed for approval by shareholders at the AGM
--------------------------------------------------------- ------- -------
Final dividend for 2013: US$Nil (2012: US$0.03) - 10,139
--------------------------------------------------------- ------- -------
Dividends per share
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 a dividend in respect of the year ended 31 December
2013.
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 2013 and 2012. 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
--------------------- --------------------
2013 2012 2013 2012
US$000 US$000 US$000 US$000
------------------------------- ---------- --------- --------- ---------
Current related party balances
------------------------------- ---------- --------- --------- ---------
Cementos Pacasmayo S.A.A. 111 139 16 -
------------------------------- ---------- --------- --------- ---------
Gold Resource Corp (note 18) - 878 - -
------------------------------- ---------- --------- --------- ---------
Total 111 1,017 16 -
------------------------------- ---------- --------- --------- ---------
As at 31 December 2013 and 2012, 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
----------------
2013 2012
US$000 US$000
------------------------------------------------------- ------- -------
Income
------------------------------------------------------- ------- -------
Dividend recognised for Gold Resource Corp. investment
(note 18) 2,633 10,093
------------------------------------------------------- ------- -------
Expenses
------------------------------------------------------- ------- -------
Expense recognised for the rental paid to Cementos
Pacasmayo S.A.A. (164) (164)
------------------------------------------------------- ------- -------
Transactions between the Group and these companies are on an
arm's length basis.
29 Related-party balances and transactions (continued)
(b) Compensation of key management personnel of the Group
As at 31 December
-------------------
Compensation of key management personnel (including 2013 2012
Directors) US$000 US$000
---------------------------------------------------- --------- --------
Short-term employee benefits 5,781 6,742
---------------------------------------------------- --------- --------
Termination benefits 77 -
---------------------------------------------------- --------- --------
Long Term Incentive Plan (434) 2,789
---------------------------------------------------- --------- --------
Workers' profit sharing - 44
---------------------------------------------------- --------- --------
Others 1 556
---------------------------------------------------- --------- --------
Total compensation paid to key management personnel 5,425 10,131
---------------------------------------------------- --------- --------
This amount includes the remuneration paid to the Directors of
the parent company of the Group of US$4,410,956 (2012:
US$5,467,700), out of which US$193,831 (2012: US$199,606) relates
to pension payments.
(c) Participation in placing by Inversiones Pacasmayo S.A. ("IP
SA")
IP SA, a company controlled by Eduardo Hochschild, participated
in a placing of the Company's Ordinary Shares ("Shares") in October
2013 by subscribing for 16,905,066 Shares at a price of 155p per
Share.
30 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 sold, 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
additional tax is calculated by applying a progressive scale of
rates ranging from 2% to 8.4%, of the quarterly operating
profit.
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.
d) In the case of the Arcata mine unit, the company quit the tax
stability agreement, but has mantained the agreement for the mining
royalties, such that the Arcata unit, is liable for the new SMT but
the mining royalties remain payable at the same rate as they were,
before the modification in 2011.
As at 31 December 2013, 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$389,000 (2012: US$835,000), US$629,000 (2012: US$1,089,000), and
US$148,000 (2012: US$1,051,000) 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$1,784,000 (2012: US$3,224,000) representing the former mining
royalty, classified as cost of sales, US$2,344,000 (2012:
US$3,834,000) of new mining royalty and US$904,000 (2012:
US$4,256,000) of SMT, both classified 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.
Since November 2012 Minera Santa Cruz S.A. has been paying and
expensing the increased 3% royalty although it has filed an
administrative claim against the new law. As at 31 December 2013,
the amount payable as mining royalties amounted to US$451,000
(2012: US$795,000). The amount recorded in the income statement was
US$6,509,000 (2012: as cost of sales of US$6,448,000).
On 13 June 2013, the congress of the Province of Santa Cruz
passed Law No. 3318, which created a tax on mining reserves.
Accordingly, the owners of mining concessions located in the
Province of Santa Cruz must pay a tax on mining reserves at a rate
of 1%, calculated at the end of each year and determined according
to the international price of metals at that date. This law was
later regulated by the Provincial Government Decree No. 1252/2013
and by the Provincial Tax Authority Disposition No. 084/2013.
According to these regulations, the tax applies only on "measured
reserves" and certain deductions (related to the production cost)
apply. Minera Santa Cruz S.A. (an affiliate of Hochschild Mining
plc) is affected by this tax, and therefore, has been paying it. On
20 December 2013, Minera Santa Cruz S.A. filed before the Argentine
Supreme Court a legal claim against the tax on mining reserves.
Such legal claim challenges the legality of the tax on mining
reserves arguing its unconstitutionality on the grounds that it
violates the Federal Mining Policy created by national law No.
24.196. As at 31 December 2013, the amount payable as tax on mining
reserves was US$1,381,000 recorded as 'Trade and other payables'.
The amount recorded in the income statement was US$2,453,000 as
other expenses.
31 Subsequent events
-- On 1 January 2014, following the acquisition of International
Minerals Corporation (note 4(a)), the Group proceeded with the
merger of CompañĂa Minera Ares S.A.C. and Minera Suyamarca
S.A.C.
-- On 23 January 2014, the Group completed an offering of
US$350,000,000 of Senior Notes with a coupon rate of 7.750% due for
repayment in 2021 via its wholly owned subsidiary, CompañĂa Minera
Ares S.A.C. The Notes were offered only to qualified institutional
buyers under Rule 144A under the Securities Act and to non-U.S.
persons outside the United States in reliance on Regulation S of
the Securities Act. The Notes are guaranteed by Hochschild Mining
plc and certain of its subsidiaries. The net proceeds from the sale
of the Notes was used to repay the outstanding borrowings under the
Syndicated Loan (see note 25) in full, plus accrued and unpaid
interest, and to pay related fees and expenses.
-- On 28 February 2014 the Group sold its interest in Minas
Santa MarĂa de Moris, S.A. de C.V. ("Moris") to Exploraciones y
Desarrollos Regiomontanos, S.A. de C.V. ("EDR") and Arturo Préstamo
Elizondo ("APE"). The terms of the transaction stipulate that:
o the Group is entitled to a 1% net smelter return over the
Moris concessions; and
o EDR and APE will assume all costs associated with the mine and
plant rehabilitation obligations.
The transaction does not include the cash balances of Moris,
which will be transferred to the Group.
The transaction resulted in a loss of US$2,963,000.
-- In March 2014, the Group signed agreements with Citibank
N.A., Goldman Sachs International and JP Morgan to hedge the sale
of 1,000,000 ounces of silver at US$22 per ounce, 1,000,000 ounces
of silver at US$22 per ounce and 3,300 ounces of gold at
US$1,338.45 per ounce, during the period from March to December
2014.
Profit by operation(1)
(Segment report reconciliation) as at 31 December 2013
Consolidation
adjustment
Company (US$ 000) Ares Arcata Pallancata San Jose Moris and others Total/HOC
-------------------------------------- -------- --------- ---------- --------- -------- ------------- ---------
Revenue 50,362 136,968 181,795 240,723 12,247 63 622,158
Cost of sales (Pre consolidation) (53,684) (104,933) (130,034) (170,682) (10,817) 918 (469,232)
-------------------------------------- -------- --------- ---------- --------- -------- ------------- ---------
Consolidation adjustment 647 1,253 (2,821) 3 - 918 -
Cost of sales (Post consolidation) (54,331) (106,186) (127,213) (170,685) (10,817) - (469,232)
Production cost excluding
depreciation (42,521) (73,128) (75,934) (114,053) (8,529) - (314,165)
Depreciation in
production
cost (9,029) (32,038) (50,142) (51,173) (1,755) - (144,137)
Other items 3 638 (571) (7,074) - - (7,004)
Change in inventories (2,784) (1,658) (566) 1,615 (533) - (3,926)
-------------------------------------- -------- --------- ---------- --------- -------- ------------- ---------
Gross profit (3,322) 32,035 51,761 70,041 1,430 981 152,926
-------------------------------------- -------- --------- ---------- --------- -------- ------------- ---------
Administrative expenses - - - - - (56,776) (56,776)
Exploration expenses - - - - - (46,327) (46,327)
Selling expenses (193) (325) (2,404) (25,899) - 36 (28,785)
Other income/expenses - - - - - (9,139) (9,139)
-------------------------------------- -------- --------- ---------- --------- -------- ------------- ---------
Operating profit before
impairment (3,515) 31,710 49,357 44,142 1,430 (111,225) 11,899
-------------------------------------- -------- --------- ---------- --------- -------- ------------- ---------
Impairment of assets - - - - - (90,671) (90,671)
Investments under equity
method - - - - - 5,921 5,921
Finance income - - - - - 121,034 121,034
Finance costs - - - - - (148,050) (148,050)
FX loss - - - - - (19,753) (19,753)
-------------------------------------- -------- --------- ---------- --------- -------- ------------- ---------
Profit/(loss) from continuing
operations before income
tax (3,515) 31,710 49,357 44,142 1,430 (242,744) (119,620)
-------------------------------------- -------- --------- ---------- --------- -------- ------------- ---------
Income tax - - - - - (9,057) (9,057)
-------------------------------------- -------- --------- ---------- --------- -------- ------------- ---------
Profit/(loss) for the year
from continuing operations (3,515) 31,710 49,357 44,142 1,430 (251,801) (128,677)
-------------------------------------- -------- --------- ---------- --------- -------- ------------- ---------
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 65 to 69 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 2013, 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 2013
Proved
and probable Ag Au Ag Au Ag Eq
Reserve category (t) (g/t) (g/t) (moz) (koz) (moz)
---------------------- ------------- ------- ------ ------ ------- ------
MAIN OPERATIONS(1)
---------------------- ------------- ------- ------ ------ ------- ------
Arcata
---------------------- ------------- ------- ------ ------ ------- ------
Proved 803,568 324 0.9 8.4 23.7 9.8
---------------------- ------------- ------- ------ ------ ------- ------
Probable 1,205,831 304 0.8 11.8 32.7 13.7
---------------------- ------------- ------- ------ ------ ------- ------
Total 2,009,399 312 0.9 20.1 56.4 23.5
---------------------- ------------- ------- ------ ------ ------- ------
Pallancata
---------------------- ------------- ------- ------ ------ ------- ------
Proved 1,742,995 251 1.2 14.1 64.9 18.0
---------------------- ------------- ------- ------ ------ ------- ------
Probable 1,121,338 241 1.1 8.7 39.6 11.1
---------------------- ------------- ------- ------ ------ ------- ------
Total 2,864,332 247 1.1 22.8 104.5 29.0
---------------------- ------------- ------- ------ ------ ------- ------
San Jose
---------------------- ------------- ------- ------ ------ ------- ------
Proved 484,606 597 7.8 9.3 121.8 16.6
---------------------- ------------- ------- ------ ------ ------- ------
Probable 440,167 426 6.2 6.0 87.1 11.2
---------------------- ------------- ------- ------ ------ ------- ------
Total 924,773 515 7.0 15.3 208.9 27.9
---------------------- ------------- ------- ------ ------ ------- ------
Main operations total
---------------------- ------------- ------- ------ ------ ------- ------
Proved 3,031,169 326 2.2 31.7 210.5 44.4
---------------------- ------------- ------- ------ ------ ------- ------
Probable 2,767,336 298 1.8 26.5 159.4 36.1
---------------------- ------------- ------- ------ ------ ------- ------
Total 5,798,505 312 2.0 58.2 369.9 80.4
---------------------- ------------- ------- ------ ------ ------- ------
OTHER OPERATIONS
---------------------- ------------- ------- ------ ------ ------- ------
Ares
---------------------- ------------- ------- ------ ------ ------- ------
Proved 76,997 148 2.1 0.4 5.2 0.7
---------------------- ------------- ------- ------ ------ ------- ------
Probable 19,085 184 1.6 0.1 1.0 0.2
---------------------- ------------- ------- ------ ------ ------- ------
Total 96,082 155 2.0 0.5 6.2 0.9
---------------------- ------------- ------- ------ ------ ------- ------
ADVANCED PROJECTS
---------------------- ------------- ------- ------ ------ ------- ------
Inmaculada(2)
---------------------- ------------- ------- ------ ------ ------- ------
Proved 3,840,000 106 3.4 13.1 424.7 38.6
---------------------- ------------- ------- ------ ------ ------- ------
Probable 3,960,000 134 3.3 17.0 424.5 42.5
---------------------- ------------- ------- ------ ------ ------- ------
Total 7,800,000 120 3.4 30.1 849.2 81.1
---------------------- ------------- ------- ------ ------ ------- ------
Group total
---------------------- ------------- ------- ------ ------ ------- ------
Proved 6,948,166 202 2.9 45.2 640.4 83.6
---------------------- ------------- ------- ------ ------ ------- ------
Probable 6,746,421 201 2.7 43.6 584.8 78.7
---------------------- ------------- ------- ------ ------ ------- ------
TOTAL 13,694,587 202 2.8 88.9 1,225.2 162.4
---------------------- ------------- ------- ------ ------ ------- ------
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 2013
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 1,451,282 456 1.35 - - - 537 21.3 63.0 25.1 - - -
----------------- ---------- ------ ------ ---- ---- ---- ------ ------ -------- ------ ----- ----- -----
Indicated 2,233,235 368 1.31 - - - 446 26.4 93.7 32.0 - - -
----------------- ---------- ------ ------ ---- ---- ---- ------ ------ -------- ------ ----- ----- -----
Total 3,684,517 403 1.32 - - - 482 47.7 156.7 57.1 - - -
----------------- ---------- ------ ------ ---- ---- ---- ------ ------ -------- ------ ----- ----- -----
Inferred 3,489,726 309 1.14 - - - 377 34.7 127.9 42.4 - - -
----------------- ---------- ------ ------ ---- ---- ---- ------ ------ -------- ------ ----- ----- -----
Pallancata
----------------- ---------- ------ ------ ---- ---- ---- ------ ------ -------- ------ ----- ----- -----
Measured 3,384,579 340 1.57 - - - 434 37.0 170.6 47.3 - - -
----------------- ---------- ------ ------ ---- ---- ---- ------ ------ -------- ------ ----- ----- -----
Indicated 1,307,053 293 1.34 - - - 374 12.3 56.2 15.7 - - -
----------------- ---------- ------ ------ ---- ---- ---- ------ ------ -------- ------ ----- ----- -----
Total 4,691,631 327 1.50 - - - 417 49.3 226.8 63.0 - - -
----------------- ---------- ------ ------ ---- ---- ---- ------ ------ -------- ------ ----- ----- -----
Inferred 3,943,208 284 1.41 - - - 369 36.0 179.0 46.7 - - -
----------------- ---------- ------ ------ ---- ---- ---- ------ ------ -------- ------ ----- ----- -----
San Jose
----------------- ---------- ------ ------ ---- ---- ---- ------ ------ -------- ------ ----- ----- -----
Measured 777,207 640 8.85 - - - 1,171 16.0 221.1 29.3 - - -
----------------- ---------- ------ ------ ---- ---- ---- ------ ------ -------- ------ ----- ----- -----
Indicated 1,465,734 448 6.71 - - - 850 21.1 316.0 40.1 - - -
----------------- ---------- ------ ------ ---- ---- ---- ------ ------ -------- ------ ----- ----- -----
Total 2,242,941 515 7.45 - - - 962 37.1 537.2 69.3 - - -
----------------- ---------- ------ ------ ---- ---- ---- ------ ------ -------- ------ ----- ----- -----
Inferred 944,372 455 7.23 - - - 889 13.8 219.6 27.0 - - -
----------------- ---------- ------ ------ ---- ---- ---- ------ ------ -------- ------ ----- ----- -----
Main operations
total
----------------- ---------- ------ ------ ---- ---- ---- ------ ------ -------- ------ ----- ----- -----
Measured 5,616,068 412 2.52 - - - 563 74.3 454.8 101.6 - - -
----------------- ---------- ------ ------ ---- ---- ---- ------ ------ -------- ------ ----- ----- -----
Indicated 5,006,022 372 2.90 - - - 546 59.9 466.0 87.8 - - -
----------------- ---------- ------ ------ ---- ---- ---- ------ ------ -------- ------ ----- ----- -----
Total 10,619,090 393 2.70 - - - 555 134.1 920.7 189.4 - - -
----------------- ---------- ------ ------ ---- ---- ---- ------ ------ -------- ------ ----- ----- -----
Inferred 8,377,307 314 1.95 - - - 431 84.5 526.5 116.1 - - -
----------------- ---------- ------ ------ ---- ---- ---- ------ ------ -------- ------ ----- ----- -----
OTHER OPERATIONS
----------------- ---------- ------ ------ ---- ---- ---- ------ ------ -------- ------ ----- ----- -----
Ares
----------------- ---------- ------ ------ ---- ---- ---- ------ ------ -------- ------ ----- ----- -----
Measured 523,206 184 5.82 - - - 533 3.1 97.9 9.0 - - -
----------------- ---------- ------ ------ ---- ---- ---- ------ ------ -------- ------ ----- ----- -----
Indicated 152,060 199 3.02 - - - 380 1.0 14.8 1.9 - - -
----------------- ---------- ------ ------ ---- ---- ---- ------ ------ -------- ------ ----- ----- -----
Total 675,266 187 5.19 - - - 499 4.1 112.6 10.8 - - -
----------------- ---------- ------ ------ ---- ---- ---- ------ ------ -------- ------ ----- ----- -----
Inferred 414,112 171 3.74 - - - 395 2.3 49.7 5.3 - - -
----------------- ---------- ------ ------ ---- ---- ---- ------ ------ -------- ------ ----- ----- -----
Other operations
total
----------------- ---------- ------ ------ ---- ---- ---- ------ ------ -------- ------ ----- ----- -----
Measured 523,206 184 5.82 - - - 533 3.1 97.9 9.0 - - -
----------------- ---------- ------ ------ ---- ---- ---- ------ ------ -------- ------ ----- ----- -----
Indicated 152,060 199 3.02 - - - 380 1.0 14.8 1.9 - - -
----------------- ---------- ------ ------ ---- ---- ---- ------ ------ -------- ------ ----- ----- -----
Total 675,266 187 5.19 - - - 499 4.1 112.6 10.8 - - -
----------------- ---------- ------ ------ ---- ---- ---- ------ ------ -------- ------ ----- ----- -----
Inferred 414,112 171 3.74 - - - 395 2.3 49.7 5.3 - - -
----------------- ---------- ------ ------ ---- ---- ---- ------ ------ -------- ------ ----- ----- -----
ADVANCED/GROWTH
PROJECTS
----------------- ---------- ------ ------ ---- ---- ---- ------ ------ -------- ------ ----- ----- -----
Inmaculada(1)
----------------- ---------- ------ ------ ---- ---- ---- ------ ------ -------- ------ ----- ----- -----
Measured 3,283,431 128 4.10 - - - 374 13.5 432.8 39.4 - - -
----------------- ---------- ------ ------ ---- ---- ---- ------ ------ -------- ------ ----- ----- -----
Indicated 3,782,818 159 4.05 - - - 402 19.3 492.3 48.9 - - -
----------------- ---------- ------ ------ ---- ---- ---- ------ ------ -------- ------ ----- ----- -----
Total 7,066,249 144 4.07 - - - 389 32.8 925.1 88.3 - - -
----------------- ---------- ------ ------ ---- ---- ---- ------ ------ -------- ------ ----- ----- -----
Inferred 4,937,776 152 3.91 - - - 387 24.2 620.0 61.4 - - -
----------------- ---------- ------ ------ ---- ---- ---- ------ ------ -------- ------ ----- ----- -----
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 2013
(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/GROWTH
PROJECTS
---------------- ----------- ------ ------ ---- ---- ---- ------ ------ -------- ------ ----- ----- -----
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/Growth
Projects
total
---------------- ----------- ------ ------ ---- ---- ---- ------ ------ -------- ------ ----- ----- -----
Measured 114,603,091 6 0.82 - - - 56 22.9 3,027.1 204.5 - - -
---------------- ----------- ------ ------ ---- ---- ---- ------ ------ -------- ------ ----- ----- -----
Indicated 311,702,641 8 0.72 - - - 52 81.5 7,250.6 516.5 - - -
---------------- ----------- ------ ------ ---- ---- ---- ------ ------ -------- ------ ----- ----- -----
Total 426,305,732 8 0.75 - - - 53 104.3 10,277.6 721.0 - - -
---------------- ----------- ------ ------ ---- ---- ---- ------ ------ -------- ------ ----- ----- -----
Inferred 54,212,547 36 0.86 - - - 88 63.2 1,504.7 153.5 - - -
---------------- ----------- ------ ------ ---- ---- ---- ------ ------ -------- ------ ----- ----- -----
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 122,133,081 26 0.91 0.08 0.04 0.00 84 103.3 3,580.6 329.2 99.3 43.1 5.5
---------------- ----------- ------ ------ ---- ---- ---- ------ ------ -------- ------ ----- ----- -----
Indicated 318,214,983 14 0.76 0.03 0.01 0.00 61 145.9 7,733.8 619.0 83.2 37.0 4.2
---------------- ----------- ------ ------ ---- ---- ---- ------ ------ -------- ------ ----- ----- -----
Total 440,348,064 18 0.80 0.04 0.02 0.00 67 249.2 11,314.3 948.2 182.4 80.1 9.7
---------------- ----------- ------ ------ ---- ---- ---- ------ ------ -------- ------ ----- ----- -----
Inferred 76,448,966 62 0.90 0.10 0.04 0.21 140 153.4 2,209.6 343.9 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 2012 Production(1) Movements(2) 2013 Net difference % change
------------------------- --------- -------- ------------- ------------ -------- -------------- --------
Arcata Resource 106.4 - (6.9) 99.4 (6.9) (6.5)
------------------------- --------- -------- ------------- ------------ -------- -------------- --------
Reserve 25.6 7.6 5.5 23.5 (2.1) (8.2)
----------------------------------- -------- ------------- ------------ -------- -------------- --------
Pallancata Resource 110.7 - (1.0) 109.7 (1.0) (0.9)
------------------------- --------- -------- ------------- ------------ -------- -------------- --------
Reserve 37.0 11.6 3.7 29.0 (7.9) (21.4)
----------------------------------- -------- ------------- ------------ -------- -------------- --------
San Jose Resource 189.7 - (0.8) 188.9 (0.8) (0.4)
------------------------- --------- -------- ------------- ------------ -------- -------------- --------
Reserve 48.8 14.0 19.8 54.6 5.8 11.9
----------------------------------- -------- ------------- ------------ -------- -------------- --------
Main operations total Resource 406.8 - (8.7) 398.0 (8.7) (2.1)
------------------------- --------- -------- ------------- ------------ -------- -------------- --------
Reserve 111.4 33.2 28.9 107.2 (4.2) (3.8)
----------------------------------- -------- ------------- ------------ -------- -------------- --------
Ares Resource 15.8 - 0.3 16.1 0.3 1.7
------------------------- --------- -------- ------------- ------------ -------- -------------- --------
Reserve 2.6 2.4 0.6 0.9 -1.8 (67.9)
----------------------------------- -------- ------------- ------------ -------- -------------- --------
Other operations
total Resource 15.8 - 0.3 16.1 0.3 1.7
------------------------- --------- -------- ------------- ------------ -------- -------------- --------
Reserve 2.6 2.4 0.6 0.9 -1.8 (67.9)
----------------------------------- -------- ------------- ------------ -------- -------------- --------
Inmaculada Resource 149.7 - - 149.7 - -
------------------------- --------- -------- ------------- ------------ -------- -------------- --------
Reserve 48.8 - 32.3 81.1 32.3 66.1
----------------------------------- -------- ------------- ------------ -------- -------------- --------
Crespo Resource 48.9 - - 48.9 - -
------------------------- --------- -------- ------------- ------------ -------- -------------- --------
Reserve - - - - - -
------------------------- --------- -------- ------------- ------------ -------- -------------- --------
Azuca Resource 103.0 - - 103.0 - -
------------------------- --------- -------- ------------- ------------ -------- -------------- --------
Reserve - - - - - -
------------------------- --------- -------- ------------- ------------ -------- -------------- --------
Volcan Resource 572.9 - - 572.9 - -
------------------------- --------- -------- ------------- ------------ -------- -------------- --------
Reserve - - - - - -
------------------------- --------- -------- ------------- ------------ -------- -------------- --------
Advanced/Growth Projects
total Resource 874.5 - - 874.5 - -
------------------------- --------- -------- ------------- ------------ -------- -------------- --------
Reserve 48.8 - 32.3 81.1 32.3 66.1
----------------------------------- -------- ------------- ------------ -------- -------------- --------
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 1,393.1 (8.5) 1,384.6 (8.5) (0.6)
------------------------- --------- -------- ------------- ------------ -------- -------------- --------
Reserve 162.9 35.5 61.8 189.1 26.3 16.1
----------------------------------- -------- ------------- ------------ -------- -------------- --------
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 2012 2013
(million ounces) Category 2013 Att.(1) Att.(1) Net difference % change
------------------------- --------- ------------- -------- -------- -------------- --------
Arcata Resource 100% 106.4 99.4 (6.9) (6.5)
------------------------- --------- ------------- -------- -------- -------------- --------
Reserve 25.6 23.5 (2.1) (8.2)
----------------------------------- ------------- -------- -------- -------------- --------
Pallancata Resource 100% 66.4 109.7 43.3 65.2
------------------------- --------- ------------- -------- -------- -------------- --------
Reserve 37.0 29.0 (7.9) (21.4)
----------------------------------- ------------- -------- -------- -------------- --------
San Jose Resource 51% 96.8 96.3 (0.4) (0.4)
------------------------- --------- ------------- -------- -------- -------------- --------
Reserve 24.9 27.9 3.0 11.9
----------------------------------- ------------- -------- -------- -------------- --------
Main operations total Resource 269.5 305.5 35.9 13.3
------------------------- --------- ------------- -------- -------- -------------- --------
Reserve 87.5 80.4 (7.1) (8.1)
----------------------------------- ------------- -------- -------- -------------- --------
Ares Resource 100% 15.8 16.1 0.3 1.7
------------------------- --------- ------------- -------- -------- -------------- --------
Reserve 2.6 0.9 (1.8) (67.9)
----------------------------------- ------------- -------- -------- -------------- --------
Other operations
total Resource 15.8 16.1 0.3 1.7
------------------------- --------- ------------- -------- -------- -------------- --------
Reserve 2.6 0.9 (1.8) (67.9)
----------------------------------- ------------- -------- -------- -------------- --------
Inmaculada Resource 100% 89.8 149.7 59.9 66.7
------------------------- --------- ------------- -------- -------- -------------- --------
Reserve 48.8 81.1 32.3 66.1
----------------------------------- ------------- -------- -------- -------------- --------
Crespo Resource 100% 48.9 48.9 - -
------------------------- --------- ------------- -------- -------- -------------- --------
Reserve - - - -
------------------------- --------- ------------- -------- -------- -------------- --------
Azuca Resource 100% 103.0 103.0 - -
------------------------- --------- ------------- -------- -------- -------------- --------
Reserve - - - -
------------------------- --------- ------------- -------- -------- -------------- --------
Volcan Resource 100% 572.9 572.9 - -
------------------------- --------- ------------- -------- -------- -------------- --------
Reserve - -
------------------------- --------- ------------- -------- -------- -------------- --------
Advanced/Growth Projects
total Resource 814.6 874.5 59.9 7.3
------------------------- --------- ------------- -------- -------- -------------- --------
Reserve 48.8 81.1 32.3 66.1
----------------------------------- ------------- -------- -------- -------------- --------
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 1,196.0 1,292.1 96.1 8.0
------------------------- --------- ------------- -------- -------- -------------- --------
Reserve 138.9 162.4 23.4 (9.8)
----------------------------------- ------------- -------- -------- -------------- --------
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 % change
31 December 31 December
2013 2012
------------------------------ ------------ ------------ --------
Silver production (koz) 19,754 19,443 2
Gold production (koz) 175.22 164.34 7
Total silver equivalent (koz) 30,267 29,304 3
Total gold equivalent (koz) 504.45 488.40 3
Silver sold (koz) 19,555 18,928 3
Gold sold (koz) 168.56 159.79 5
------------------------------ ------------ ------------ --------
(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 % change
31 December 31 December
2013 2012
-------------------------------- ------------ ------------ --------
Silver production (koz) 13,588 13,550 -
Gold production (koz) 115.7 111.82 3
Attrib. silver equivalent (koz) 20,528 20,260 1
Attrib. gold equivalent (koz) 342.13 337.66 1
-------------------------------- ------------ ------------ --------
(2) Attributable production includes 100% of all production from
Arcata, Ares and Moris, 60% from Pallancata and 51% from San
Jose.
2013 production by mine
Arcata
Year ended Year ended % change
31 December 31 December
Product 2013 2012
--------------------------------- ------------ ------------ --------
Ore production (tonnes) 900,861 773,498 16
Average silver grade (g/t) 217 271 (20)
Average gold grade (g/t) 0.74 0.83 (11)
Silver produced (koz) 4,984 5,526 (10)
Gold produced (koz) 16.83 17.27 (3)
Silver equivalent produced (koz) 5,994 6,562 (9)
Silver sold (koz) 4,924 5,236 (6)
Gold sold (koz) 15.95 15.94 -
--------------------------------- ------------ ------------ --------
Ares
Year ended Year ended % change
31 December 31 December
Product 2013 2012
--------------------------------- ------------ ------------ --------
Ore production (tonnes) 329,095 336,423 (2)
Average silver grade (g/t) 82 54 (52)
Average gold grade (g/t) 2.39 2.65 (10)
Silver produced (koz) 757 481 57
Gold produced (koz) 23.40 26.28 (11)
Silver equivalent produced (koz) 2,162 2,058 5
Silver sold (koz)(1) 761 473 61
Gold sold (koz)(2) 23.25 25.75 (10)
--------------------------------- ------------ ------------ --------
Pallancata(3)
Year ended Year ended % change
31 December 31 December
Product 2013 2012
--------------------------------- ------------ ------------ --------
Ore production (tonnes) 1,088,712 1,094,250 (1)
Average silver grade (g/t) 264 256 3
Average gold grade (g/t) 1.13 1.09 4
Silver produced (koz) 7,628 7,441 3
Gold produced (koz) 27.83 26.23 6
Silver equivalent produced (koz) 9,298 9,014 3
Silver sold (koz) 7,567 7,280 4
Gold sold (koz) 26.67 25.07 6
--------------------------------- ------------ ------------ --------
(3) Until 20 Dec 2013 the Company had a 60% interest in
Pallancata. Following completion of the International Minerals
acquisition the Company now owns 100% of Pallancata.
San Jose(4)
Year ended Year ended % change
31 December 31 December
Product 2013 2012
--------------------------------- ------------ ------------ --------
Ore production (tonnes) 536,937 509,851 5
Average silver grade (g/t) 425 417 2
Average gold grade (g/t) 6.42 5.79 11
Silver produced (koz) 6,357 5,953 7
Gold produced (koz) 98.83 85.77 15
Silver equivalent produced (koz) 12,286 11,099 11
Silver sold (koz) 6,278 5,897 6
Gold sold (koz) 94.76 84.29 12
--------------------------------- ------------ ------------ --------
(4) The Company has a 51% interest in San Jose.
Moris
Year ended Year ended % change
31 December 31 December
Product 2013 2012
--------------------------------- ------------ ------------ --------
Ore production (tonnes) - -
Average silver grade (g/t) -
Average gold grade (g/t) - -
Silver produced (koz) 27 43 (37)
Gold produced (koz) 8.33 8.79 (5)
Silver equivalent produced (koz) 527 570 (8)
Silver sold (koz) 26 42 (38)
Gold sold (koz) 7.93 8.74 (9)
--------------------------------- ------------ ------------ --------
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.
All-in sustaining costs (AISC)
All-in sustaining cash cost per silver equivalent ounce is a non
IFRS measure. It is calculated before exceptional items includes
cost of sales less depreciation and change in inventories, administrative
expenses, brownfield exploration, operating capex and royalties divided
by silver equivalent ounces produced using a ratio of 60:1 (Au/Ag).
Also includes commercial discounts and selling expenses divided by
silver equivalent ounces sold using a ratio of 60:1 (Au/Ag).
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 22 May 2014 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
Investor relations
For investor enquiries please contact: Charles Gordon, by
writing to the London Office address (see below), by phone on 020
7907 2933 or by email at charles.gordon@hocplc.com.
Financial calendar
Annual General Meeting 22 May 2014
Half-yearly results announced 20 August 2014
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]As at 28 Feb 2014. Does not include Hochschild's convertible
bond.
[3]Market value (as at 31 January 2014) of investments accounted
for as available for sale financial assets
[4]Includes saving from suspension of dividend
[5]All-in sustaining cash cost per silver equivalent ounce (non
IFRS measure).Calculated before exceptional items includes cost of
sales less depreciation and change in inventories, administrative
expenses, brownfield exploration, operating capex and royalties
divided by silver equivalent ounces produced using a ratio of 60:1
(Au/Ag). Also includes commercial discounts and selling expenses
divided by silver equivalent ounces sold using a ratio of 60:1
(Au/Ag)
[6]Revenue presented in the financial statements is disclosed as
net revenue (in the Financial Review it is calculated as gross
revenue less commercial discounts)
[7]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
[8]Cash costs are calculated to include cost of sales, treatment
charges, and selling expenses before exceptional items less
depreciation included in cost of sales.
[9]Revenue presented in the financial statements is disclosed as
net revenue (in this Financial Review it is calculated as gross
revenue less commercial discounts.
[10]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.
[11]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.
[12]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.
[13]Other revenue includes revenue from (i) the sale of energy
in Peru and, (ii) administrative services in Mexico.
[14]Unit cost per tonne is calculated by dividing mine and
geology costs by extracted tonnage and plant and other costs by
treated tonnage.
[15]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.
[16]Cash costs are calculated to include cost of sales,
treatment charges, and selling expenses before exceptional items
less depreciation included in cost of sales.
([17]) All-in sustaining cash cost per silver equivalent ounce:
Calculated before exceptional items includes cost of sales less
depreciation and change in inventories, administrative expenses,
brownfield exploration, operating capex and royalties divided by
silver equivalent ounces produced using a ratio of 60:1 (Au/Ag).
Also includes commercial discounts and selling expenses divided by
silver equivalent ounces sold using a ratio of 60:1 (Au/Ag).
[18]Includes pre-shipment loans which were previously reported
under working capital.
[19]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 asset
This information is provided by RNS
The company news service from the London Stock Exchange
END
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