TIDMHOC
RNS Number : 4179M
Hochschild Mining PLC
16 July 2014
16 July 2014
Production Report for the 6 months ended 30 June 2014
Highlights
-- Q2 2014 production of 5.9 million attributable silver
equivalent ounces
-- H1 2014 production of 11.9 million attributable silver
equivalent ounces
-- On track to achieve 2014 production target of 21.0 million
attributable silver equivalent ounces
-- Significant progress achieved at Inmaculada Advanced
Project
o Plant commissioning to begin towards end of Q4 2014
-- Cashflow optimisation programme - approximately $200 million
of savings surpassed
-- Total cash of approximately $225 million as at 30 June
2014
-- Minority investments valued at approximately $40 million as
at 30 June 2014
Ignacio Bustamante, Chief Executive Officer commented:
"The Company is in a strong position to realise our production
targets for the year at all our operations. Furthermore, our cash
optimisation programme has also continued to make substantial
progress with the original target of approximately $200 million on
track and additional operational and administrative efficiencies
also achieved.
The rapid pace of development at our Inmaculada project
continued during the quarter with much of the work focused on plant
construction whilst several of the other key project deliverables
including infrastructure, mine development and energy access are
nearing completion. Overall, Hochschild is entering a crucial
period in our transition to a new phase of exciting, low cost, low
risk production growth."
__________________________________________________________________________________
A conference call will be held at 2pm (London time) on Wednesday
16 July 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: 5586008
__________________________________________________________________________________
Overview
In Q2 2014, the Company delivered attributable production of 5.9
million silver equivalent ounces, comprised of 4.3 million ounces
of silver and 27.9 thousand ounces of gold. Overall, in the first
half of 2014, the Company delivered attributable production of 11.9
million silver equivalent ounces, including 8.5 million ounces of
silver and 55.5 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 Q2 was 1.6
million ounces (Q2 2013: 1.3 million ounces) bringing the total for
the first half to 3.4 million ounces (H1 2013: 2.8 million ounces).
Higher grades and recoveries were driven by a greater proportion of
material from stopes and developments, partially replacing, as
expected, volumes processed from the low-grade Macarena Waste Dam
Deposit which was almost entirely depleted by the end of the half.
Arcata also benefited (in the first quarter) from the processing of
stock mined in 2013.
Table Showing Contribution From Macarena Waste Dam Deposit
Q2 2014 Q1 2014
------------------------- -------- --------
Total
Tonnage 171,334 194,239
Average head grade
gold (g/t) 0.85 0.78
Average head grade
silver (g/t) 277 248
------------------------- -------- --------
Macarena
Tonnage 6,200 32,166
Average head grade
gold (g/t) 0.19 0.26
Average head grade
silver (g/t) 52 66
Stopes and Developments
Tonnage 165,134 162,073
Average head grade
gold (g/t) 0.87 0.89
Average head grade
silver (g/t) 286 285
------------------------- -------- --------
At the 100% owned Pallancata operation, higher silver and gold
grades led to higher production versus the first quarter of the
year. Q2 production was 2.3 million silver equivalent ounces (Q2
2013: 2.4 million ounces) with total production for the half at 4.4
million ounces, in line with the corresponding period in 2013.
At the San Jose operation, total silver equivalent production
for the quarter was 2.8 million ounces (Q2 2013: 3.1 million
ounces) with the total for the first half at 5.6 million ounces (H1
2013: 5.7 million ounces). Lower silver and gold grades were offset
by increased tonnage versus Q1 2014.
Other operations
The Company's Ares mine in Peru was closed in Q2 with remaining
production in the period delivering a better-than-expected total
silver equivalent production of 626 thousand ounces (Q1 2013: 588
thousand ounces) driven by consistent grades. Total production for
the first half was 1.2 million silver equivalent ounces (H1 2013:
1.0 million ounces)
Average realisable prices and sales
Average realisable precious metal prices in Q2 2014 (which are
reported before the deduction of commercial discounts and include
the effects of the announced hedging agreements) were $1,310/ounce
for gold and $20.3/ounce for silver (Q2 2013: $1,240/ounce for gold
and $18.99/ounce for silver). For H1 2014, average realisable
precious metal prices were $1,328/ounce for gold and $20.5/ounce
for silver (H1 2013: $1,367/ounce for gold and $23.04/ounce for
silver).
In March, the Company 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/ounce, during the period from March to December 2014.
Subsequently in June, the Company signed additional agreements to
hedge the sale of a further 2,000,000 ounces of silver at
$21/ounce, during the period from July 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 remains focused, as
previously announced, on only the most promising prospects,
specifically in Peru and Mexico.
Brownfield exploration(1)
Arcata
In Q2, 3,539 metres have been drilled at the Arcata property. A
detailed surface mapping and sampling campaign has been completed
covering the Tunel 4, Marciano, Veta D and Looby areas covering a
total of 1,330 ha. In addition, five holes are currently being
drilled in the Irma, Pamela and Paralelas veins with significant
intercepts including:
Vein Results
------------- -------------------------------------
Pamela 1.36m at 1.16 g/t Au & 663.95 g/t Ag
------------- -------------------------------------
Paralela 2 1.35m at 1.35 g/t Au & 242.53 g/t Ag
------------- -------------------------------------
Pamela Norte 1.47m at 1.66 g/t Au & 953.96 g/t Ag
------------- -------------------------------------
Irma 1.74m at 0.23 g/t Au & 1,025 g/t Ag
------------- -------------------------------------
Pallancata
In Q2, 2,642 metres of drilling has been executed at the
Pallancata site and during the period, exploration work has
resulted in the recognition of the new surface structures Tatiana,
Vianca and Larisa. In addition, drilling is ongoing at two holes in
the Vianca-Claudia and Yurika vein systems.
San Jose
At San Jose, mapping of the Coyi and Nueva Ramona Rubia veins
has identified additional corridors for the next drilling campaigns
to focus on whilst further structures have been identified in the
Sigmoide sector (located to the north east side) and to the west in
the El Retiro Zone 4.
Ares
Geological mapping to the south west of Ares is currently being
carried out to identify drill targets for the next campaign with
the required environmental permits in the process of being
obtained.
Advanced Projects
Inmaculada
At the Inmaculada project, the contractor Graña y Montero
started construction of the plant in late March and by the end of
the second quarter, progress has reached almost 30%. Procurement of
all main equipment has been completed and delivery to site is
expected to be concluded by August.
During the period, a further 1,055 metres of tunnelling and 637
metres of raise boring has been carried out in the second quarter
with the total achieved for the entire project at 13,296 metres.
Detailed engineering for the paste backfill is almost complete with
filters, pumps and thickeners on order whilst work on the
transmission lines is close to completion.
As of June, mapping is being carried out at the Puquiopata and
Huarmapata veins with a drilling campaign expected to follow. In
addition, relogging of the Angela vein system continues in order to
optimise the geological model. The 2014 plan also includes a 5,000
metres drilling campaign, as well as a sampling and mapping
campaign.
Greenfield pipeline
Highlights of the exploration programme during the period are
provided below.
Mexico
Pachuca
At the Pachuca project, the JV with Solitario Exploration &
Royalty Corp (TSX: SLR) focused on the northwestern extension of
the historical vein mining district. However, despite some drill
holes showing economic gold and silver grades, continuous
mineralisation could not be identified and therefore the project
has been transferred back to Solitario.
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. Positive sampling
campaigns have shown similar characteristics to the San Francisco
mine, also in the Sonora district.
Peru
During the first half, the Company's exploration efforts in Peru
focused on optimising the existing portfolio and reviewing any
industry opportunities. One of these is the Corina project, located
15 - 20 km from the Selene plant and owned by Lara Exploration. The
agreement drawn up includes an option giving Hochschild full
ownership of the project over four years.
In addition, promising geochemical results have been obtained
from the Ibel prospect in Peru.
Financial position
The Company's financial position remains robust, with total cash
of approximately $225 million and minority investments valued at
approximately $40 million.(2)
During May 2014, the Company sold three tranches of its holding
in Gold Resource Corporation totaling 3.2 million shares for a net
consideration of $12.7 million in line with its policy of
monetising non-core investments. The Company's remaining holding in
Gold Resource Corporation is 11.6%.
Outlook
The Company is on track to achieve its full year production
target of 21.0 million attributable silver equivalent ounces whilst
the original cash optimisation programme target of approximately
$200 million of savings has been surpassed. Furthermore, the
Company has maintained its focus on cost savings and has identified
further initiatives in administration, operations and
exploration.
The Company confirms that all-in sustaining costs per silver
equivalent ounce are on track to fall by 0-5% in 2014.
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 3714 9044
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 three underground epithermal vein mines, two 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
Q2 Q1 Q2 H1 H1
2014 2014 2013 2014 2013
------------------------- ------- ------- ------- ------- -------
Silver production
(koz) 4,992 4,992 4,770 9,983 9,099
Gold production (koz) 38.67 38.30 44.76 76.97 86.40
Total silver equivalent
(koz) 7,312 7,290 7,456 14,602 14,283
Total gold equivalent
(koz) 121.87 121.50 124.27 243.36 238.05
Silver sold (koz) 4,974 5,112 5,651 10,086 9,153
Gold sold (koz) 38.18 38.11 54.03 76.29 83.56
------------------------- ------- ------- ------- ------- -------
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
Q2 Q1 Q2 H1 H1
2014 2014 2013 2014 2013
----------------------- ------- ------- ------ ------- -------
Silver production
(koz) 4,255 4,271 3,998 8,526 7,665
Gold production (koz) 27.92 27.53 32.21 55.45 63.53
Silver equivalent
(koz) 5,930 5,923 5,931 11,853 11,476
Gold equivalent (koz) 98.83 98.72 98.85 197.55 191.27
----------------------- ------- ------- ------ ------- -------
Attributable production for Q2 2014 and H1 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 Q2 Q1 Q2 H1 H1
2014 2014 2013 2014 2013
---------------------------- -------- -------- -------- -------- --------
Ore production (tonnes
treated) 171,334 194,239 223,386 365,573 427,274
Average grade silver
(g/t) 277 248 188 262 195
Average grade gold
(g/t) 0.85 0.78 0.66 0.81 0.69
Silver produced (koz) 1,321 1,574 1,101 2,895 2,292
Gold produced (koz) 3.96 4.80 3.72 8.76 7.88
Silver equivalent produced
(koz) 1,559 1,862 1,325 3,420 2,764
Silver sold (koz) 1,293 1,654 1,401 2,497 2,332
Gold sold (koz) 3.66 4.91 4.73 8.58 7.83
---------------------------- -------- -------- -------- -------- --------
ARES
Product Q2 Q1 Q2 H1 H1
2014 2014 2013 2014 2013
---------------------------- ------- ------- ------- -------- --------
Ore production (tonnes
treated) 89,853 77,479 72,469 167,331 149,828
Average grade silver
(g/t) 114 105 79 110 71
Average grade gold
(g/t) 2.26 2.43 2.70 2.34 2.52
Silver produced (koz) 282 244 162 525 328
Gold produced (koz) 5.73 5.73 5.82 11.46 11.84
Silver equivalent produced
(koz) 626 588 511 1,213 1,038
Silver sold (koz) 325 193 202 518 334
Gold sold (koz) 6.68 4.32 7.26 11.00 11.97
---------------------------- ------- ------- ------- -------- --------
PALLANCATA
Product Q2 Q1 Q2 H1 H1
2014 2014 2013 2014 2013
---------------------------- -------- -------- -------- -------- --------
Ore production (tonnes
treated) 269,213 254,483 272,122 523,695 523,824
Average grade silver
(g/t) 269 259 266 264 253
Average grade gold
(g/t) 1.19 1.04 1.17 1.12 1.13
Silver produced (koz) 1,885 1,703 1,926 3,588 3,534
Gold produced (koz) 7.05 5.79 7.58 12.84 14.11
Silver equivalent produced
(koz) 2,307 2,051 2,380 4,358 4,380
Silver sold (koz) 1,844 1,771 2,050 3,615 3,590
Gold sold (koz) 6.88 6.23 7.74 13.11 13.67
---------------------------- -------- -------- -------- -------- --------
Comparatives from 2013 for Pallancata have been restated to 100%
of production.
SAN JOSE
Product Q2 Q1 Q2 H1 H1
2014 2014 2013 2014 2013
---------------------------- -------- -------- -------- -------- --------
Ore production (tonnes
treated) 142,074 134,589 140,816 276,663 249,195
Average grade silver
(g/t) 378 391 407 385 430
Average grade gold
(g/t) 5.45 5.77 6.34 5.60 6.57
Silver produced (koz) 1,504 1,471 1,575 2,975 2,926
Gold produced (koz) 21.94 21.97 25.61 43.91 46.69
Silver equivalent produced
(koz) 2,820 2,790 3,112 5,610 5,728
Silver sold (koz) 1,511 1,493 1,991 3,004 2,880
Gold sold (koz) 20.95 22.30 31.99 43.25 44.79
---------------------------- -------- -------- -------- -------- --------
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 30 June 2014
This information is provided by RNS
The company news service from the London Stock Exchange
END
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