TIDMHOC
RNS Number : 8109E
Hochschild Mining PLC
15 April 2014
15 April 2014
Production Report and Interim Management Statement
for the 3 months ended 31 March 2014
Highlights
-- Q1 2014 production of 5.9 million attributable silver
equivalent ounces
-- On track to achieve 2014 production target of 21.0 million
attributable silver equivalent ounces
-- Key Inmaculada Advanced Project set to begin commissioning in
Q4 2014
-- Cashflow optimisation programme on track to deliver
approximately $200 million of savings
o Over $145 million of savings already achieved
o Further initiatives targeted
-- Corporate refinancing completed in January 2014
o 7.75% $350 million Senior Notes issued due 2021
-- Total cash of approximately $274 million as at 31 March 2013;
short term borrowings reduced to $11 million
-- Minority investments valued at $55 million as at 31 March
2013
Ignacio Bustamante, Chief Executive Officer commented:
"Hochschild has started the year well with the first quarter
production performance placing the Company in a solid position to
reach our 21.0 million ounce target for 2014. We are also
continuing to move forward with our cashflow optimisation programme
which has already delivered more than $145 million of savings and
are currently targeting further initiatives in all areas of the
Company including operations, administration and exploration.
Strong developmental progress has also been made during the
quarter at our now 100% owned flagship Inmaculada project and I am
also pleased that we were able to complete our corporate
refinancing process in the first few weeks of the year."
__________________________________________________________________________________
A conference call will be held at 3pm (London time) on Tuesday
15 April 2014 for analysts and investors.
Dial in details as follows:
UK: +44 (0) 20 3003 2666
Password: Hochschild
A recording of the conference call will be available for one
week following its conclusion, accessible from the following
telephone number:
UK: +44 (0) 20 8196 1998
Access code: 7871054
__________________________________________________________________________________
Overview
In Q1 2014, the Company delivered attributable production of 5.9
million silver equivalent ounces, comprised of 4.3 million ounces
of silver and 27.5 thousand ounces of gold, and is on track to meet
its full year production target of 21.0 million attributable silver
equivalent ounces.
Production
Main operations
At Arcata, total silver equivalent production in Q1 2014 rose to
1.9 million ounces (Q1 2013: 1.4 million ounces) driven by
increased material from stopes and developments (resulting in
higher grades and recoveries) partially replacing, as expected,
volumes processed from the low-grade Macarena Waste Dam Deposit.
Arcata also benefited from the processing of stock mined in
2013.
Table Showing Contribution From Macarena Waste Dam Deposit
Q1 2014 Q1 2013
------------------------- -------- --------
Total
Tonnage 194,239 203,888
Average head grade
gold (g/t) 0.78 0.73
Average head grade
silver (g/t) 248 202
------------------------- -------- --------
Macarena
Tonnage 32,166 63,743
Average head grade
gold (g/t) 0.26 0.28
Average head grade
silver (g/t) 66 98
Stopes and Developments
Tonnage 162,073 140,145
Average head grade
gold (g/t) 0.89 0.93
Average head grade
silver (g/t) 285 249
------------------------- -------- --------
At the now 100% owned Pallancata operation, production was in
line with Q1 2013 with total silver equivalent production of 2.1
million ounces (Q1 2013: 2.0 million ounces).
At the San Jose operation, total silver equivalent production
was 2.8 million ounces (Q1 2013: 2.6 million ounces). Higher
production versus Q1 2013 was mainly due to higher tonnage
resulting from the increase in throughput capacity from 1,500 to
1,650 tonnes per day partially offset by lower grades.
Other operations
The Company's ageing Ares mine in Peru continued to operate in
Q1 2014, delivering total silver equivalent production of 588
thousand ounces (Q1 2013: 527 thousand ounces) driven by consistent
grades and the processing of stock from 2013. Ares is currently
expected to cease production towards the end of H1 2014.
Average realisable prices and sales
Average realisable precious metal prices in Q1 2014 (which are
reported before the deduction of commercial discounts) were
$1,347/ounce for gold and $20.7/ounce for silver (Q1 2013:
$1,600/ounce for gold and $29.6/ounce for silver).
In March, the Group signed agreements to hedge the sale of
2,000,000 ounces of silver at $22/ounce and 33,000 ounces of gold
at $1,338.45/ounce, during the period from March to December
2014.
Project pipeline & exploration
The Company has an exploration budget of almost $30 million for
2014, representing 63,500 metres. This will be split between
exploration work at the Company's existing operations, the
Inmaculada Advanced Project and greenfield opportunities in Peru
and Mexico. The main focus will continue to be on brownfield
exploration.
In 2014, exploration work at the core operations is principally
focused on identifying new potential and near-mine high grade areas
to further improve the resource quality whilst at the Inmaculada
Advanced Project, efforts are focused on identifying new potential
high grade areas.
Hochschild's greenfield strategy for 2014 is in line with
changes outlined as part of the Company's cashflow optimisation
programme with the focus remaining only on the most promising
prospects, specifically in Peru and Mexico.
Brownfield exploration[1]
Arcata
In Q1 2014, 729 metres of drilling were carried out at Arcata. A
detailed surface mapping and sampling campaign was conducted
between Tunel 3 and Tunel 4 areas where north east structures have
been identified. A drilling campaign with the aim of adding new
resources will begin in early May with five drill holes planned.
Significant intercepts during the quarter included:
Vein Results
----------- ------------------------------------
DDH587-LM14: 1.43m at 6.75 g/t Au &
Paralela 1 985 g/t Ag
----------- ------------------------------------
DDH587-LM14: 1.02m at 2.93 g/t Au &
Paralela 2 465 g/t Ag
----------- ------------------------------------
DDH587-LM14: 1.00m at 4.02 g/t Au &
Paralela 3 374 g/t Ag
----------- ------------------------------------
Pallancata
In Q1 2014, 1,297 metres of drilling were carried out at
Pallancata. The programme, which focused on mapping and sampling a
total of 1,200 ha, was concentrated on the Yurika, Jakeline, Pilar,
Jessica, Emilia, Tatiana, Vianka, Isis and Huararani vein
systems.
San Jose
In 2014, the 2,000 metre potential drilling campaign is focused
on the definition of the new Ayelen, Nuevo 1 and Karina veins as
well as drilling in the Los Pinos area. The team has already
completed detailed surface mapping and sampling over the Los Pinos
vein and identified another structure, Los Pinitos.
Ares
In 2014, exploration work is focused on generating targets
within the Ares-Arcata corridor and a 2,000 metre drilling campaign
is underway. A detailed surface mapping and sampling campaign has
also been conducted at Ares North West covering an area of 55 ha
which brings the total mapped area at the deposit to date to 3,731
ha.
Advanced Projects
Inmaculada
Work continued on the Immaculada project throughout the first
quarter with plant construction commencing, as scheduled, in March
following the end of the rainy season. Procurement of all the key
main equipment for the plant is now complete and will be
transported to site in April and May.
A further 1,925 metres of tunnelling and 421 metres of raise
boring has been carried out in the first quarter bringing the total
to 12,779 metres achieved since the project's commencement.
Engineering for the paste backfill has also continued with the main
required equipment including filters, pumps and thickeners
purchased in the period. In addition, construction of the project's
camp has now been completed as well as the 180km main access
road.
The 5,000 metre exploration programme consists of potential
drilling in the Mayte vein corridor as well as near mine
exploration at selected targets, in order to expand the current
resources. A detailed mapping programme is also due to begin
shortly.
Greenfield pipeline
Highlights of the exploration programme during the period are
provided below.
Pachuca
At the Pachuca Company Maker project in Mexico, the JV with
Solitario Exploration & Royalty Corp has been focusing on the
northwestern extension of the historical vein mining district. The
2014 plan includes testing the actual extensions of prior
intercepts tested by the previous operator. A total 2,454 metres
have been drilled on 13 holes during the 2013 and 2014 campaigns
with significant results including:
Vein Results
--------- ---------------------------------
Sorpresa DDHPA-1302: 0.6m at 6.21 g/t Au
& 520 g/t Ag
DDHPA-1413: 0.8m at 6.57 g/t Au
& 392 g/t Ag
--------- ---------------------------------
Riverside Joint Venture
The exploration team has accepted two targets generated by
Riverside, the JV partners in the western Sonora in Mexico. The
projects are called Bohemia and Cajon and whereas Bohemia exhibits
mineralised veins, orogenic type mineralisation has been observed
at Cajon with highly frequent small mineralised veins off a
detachment fault. Target definition is ongoing.
Peru
During the first quarter, the Company's exploration efforts in
Peru focused on optimising the project portfolio and reviewing new
opportunities that are resulting from the current mining industry
downturn. So far this year, Hochschild geologists have been
actively reviewing property submittals and existing projects,
resulting in target areas being prioritised and streamlined.
Financial position
The Company's financial position remains strong, with total cash
of approximately $274 million with short term borrowings down to
approximately $11 million and minority investments valued at
approximately $55 million.[2]
On 23 January 2014, Hochschild completed an offering of $350
million of Senior Notes with a coupon rate of 7.750% due for
repayment in 2021 via its wholly owned subsidiary, Compañía Minera
Ares S.A.C.
Outlook
The Company is on track to achieve its full year production
target of 21.0 million attributable silver equivalent ounces in
2014. Having already achieved over $145 million of savings to date,
Hochschild remains focused on delivering the full benefits of its
cashflow optimisation programme and is continuing in its efforts to
identify further savings throughout the Company.
The focus of the Company's brownfield exploration programme will
remain on further improving and optimising the Company's resource
base to ensure the continued addition of high quality resources in
the future.
__________________________________________________________________________________
Enquiries:
Hochschild Mining plc
Charles Gordon +44 (0)20 7907 2934
Head of Investor Relations
RLM Finsbury
Charles Chichester +44 (0)20 7251 3801
Public Relations
____________________________________________________________________________________
About Hochschild Mining plc
Hochschild Mining plc is a leading precious metals company
listed on the London Stock Exchange (HOCM.L / HOC LN) with a
primary focus on the exploration, mining, processing and sale of
silver and gold. Hochschild has almost fifty years' experience in
the mining of precious metal epithermal vein deposits and currently
operates four underground epithermal vein mines, three located in
southern Peru and one in southern Argentina. Hochschild also has
numerous long-term projects throughout the Americas.
PRODUCTION & SALES INFORMATION*
TOTAL GROUP PRODUCTION
Q1 Q4 Q1 12 mths
2014 2013 2013 2013
------------------------- ------- ------- ------- --------
Silver production
(koz) 4,992 5,475 4,328 19,754
Gold production (koz) 38.30 43.80 41.64 175.22
Total silver equivalent
(koz) 7,290 8,103 6,827 30,267
Total gold equivalent
(koz) 121.50 135.05 113.78 504.45
Silver sold (koz) 5,112 5,742 3,502 19,555
Gold sold (koz) 38.11 43.56 29.53 168.56
------------------------- ------- ------- ------- --------
Total production includes 100% of all production, including
production attributable to Hochschild's joint venture partner at
San Jose as well as production in 2013 from the recently-sold Moris
operation.
ATTRIBUTABLE GROUP PRODUCTION
Q1 Q4 Q1 12 mths
2014 2013 2013 2013
----------------------- ------- ------- ------- --------
Silver production
(koz) 4,271 4,622 3,666 16,639
Gold production (koz) 27.53 30.80 31.31 126.8
Silver equivalent
(koz) 5,923 6,470 5,545 24,247
Gold equivalent (koz) 98.72 107.83 92.42 404.11
----------------------- ------- ------- ------- --------
Attributable production for Q1 2014 includes 100% of all
production from Arcata, Pallancata and Ares and 51% from San Jose.
Comparatives from 2013 for Pallancata have been restated to 100% of
production and also include production from the recently-sold Moris
operation.
QUARTERLY PRODUCTION BY MINE
ARCATA
Product Q1 Q4 Q1 12 mths
2014 2013 2013 2013
---------------------------- -------- -------- -------- --------
Ore production (tonnes
treated) 194,239 244,125 203,888 900,861
Average grade silver
(g/t) 248 242 202 217
Average grade gold
(g/t) 0.78 0.81 0.73 0.74
Silver produced (koz) 1,574 1,337 1,190 4,984
Gold produced (koz) 4.80 4.32 4.16 16.83
Silver equivalent produced
(koz) 1,862 1,597 1,440 5,994
Silver sold (koz) 1,654 1,404 931 4,924
Gold sold (koz) 4.91 4.42 3.10 15.95
---------------------------- -------- -------- -------- --------
ARES
Product Q1 Q4 Q1 12 mths
2014 2013 2013 2013
---------------------------- ------- ------- ------- --------
Ore production (tonnes
treated) 77,479 91,602 77,359 329,095
Average grade silver
(g/t) 105 86 65 82
Average grade gold
(g/t) 2.43 2.00 2.36 2.39
Silver produced (koz) 244 195 166 757
Gold produced (koz) 5.73 4.90 6.02 23.40
Silver equivalent produced
(koz) 588 489 527 2,162
Silver sold (koz) 193 214 132 761
Gold sold (koz) 4.32 5.27 4.71 23.25
---------------------------- ------- ------- ------- --------
PALLANCATA
Product Q1 Q4 Q1 12 mths
2014 2013 2013 2013
---------------------------- -------- -------- -------- ----------
Ore production (tonnes
treated) 254,483 291,740 251,702 1,088,712
Average grade silver
(g/t) 259 285 239 264
Average grade gold
(g/t) 1.04 1.14 1.08 1.13
Silver produced (koz) 1,703 2,198 1,608 7,628
Gold produced (koz) 5.79 6.97 6.53 27.83
Silver equivalent produced
(koz) 2,051 2,616 2,000 9,298
Silver sold (koz) 1,771 2,378 1,539 7,567
Gold sold (koz) 6.23 7.51 5.93 26.67
---------------------------- -------- -------- -------- ----------
Comparatives from 2013 for Pallancata have been restated to 100%
of production.
SAN JOSE
Product Q1 Q4 Q1 12 mths
2014 2013 2013 2013
---------------------------- -------- -------- -------- --------
Ore production (tonnes
treated) 134,589 156,150 108,379 536,937
Average grade silver
(g/t) 391 399 459 425
Average grade gold
(g/t) 5.77 6.03 6.87 6.42
Silver produced (koz) 1,471 1,741 1,351 6,357
Gold produced (koz) 21.97 26.53 21.08 98.83
Silver equivalent produced
(koz) 2,790 3,333 2,616 12,286
Silver sold (koz) 1,493 1,742 889 6,278
Gold sold (koz) 22.30 25.25 12.80 94.76
---------------------------- -------- -------- -------- --------
The Company has a 51% interest in San Jose.
*Silver equivalent production assumes a gold/silver ratio of
60:1
Forward looking statements
This announcement may contain forward looking statements. By
their nature, forward looking statements involve risks and
uncertainties because they relate to events and depend on
circumstances that will or may occur in the future. Actual results,
performance or achievements of Hochschild Mining plc may, for
various reasons, be materially different from any future results,
performance or achievements expressed or implied by such forward
looking statements.
The forward looking statements reflect knowledge and information
available at the date of preparation of this announcement. Except
as required by the Listing Rules and applicable law, the Board of
Hochschild Mining plc does not undertake any obligation to update
or change any forward looking statements to reflect events
occurring after the date of this announcement. Nothing in this
announcement should be construed as a profit forecast.
- ends -
[1]Please note that in line with industry-wide standards, all
mineralised intersections in this release are quoted as calculated
true widths.
[2] All figures as at 31 March 2014
This information is provided by RNS
The company news service from the London Stock Exchange
END
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