TIDMHOC
RNS Number : 5678P
Hochschild Mining PLC
20 August 2014
20 August 2014
Hochschild Mining plc
Interim Results for the six months ended 30 June 2014
Financial highlights[1]
-- Revenue of $282.0 million (H1 2013: $308.6 million)
-- Adjusted EBITDA of $94.3 million (H1 2013: $90.4
million)[2]
-- Profit before net finance income, FX and tax of $25.7 million
(H1 2013: $1.2 million)
-- Profit before tax of $9.1 million (H1 2013: $(10.3
million))
-- EPS of $(0.01) (H1 2013: $(0.10))
-- Cashflow optimisation programme exceeding expectations -
approx. $270 million of savings achieved[3]:
o Production costs reduced by $94 million versus initial 2013
guidance
o Administration costs reduced by $34 million versus 2012
o Sustaining capital expenditure reduced by $67 million versus
initial 2013 guidance
o Exploration costs reduced by $53 million versus initial 2013
guidance
-- Main operation all-in sustaining costs lowered by 16% to
$16.8 per ounce (H1 2013: $19.9)[4]
-- Cash balance of $225.6 million as at 30 June 2014
-- Term sheet signed for $100 million medium term credit
facility[5]
Operational highlights
-- H1 2014 attributable production of 11.9 million silver
equivalent ounces
-- Progress continues at flagship Inmaculada project:
o 68% overall project completion; plant at 33%
o Mine development, infrastructure, energy and engineering
targets almost complete
Outlook
-- Inmaculada plant set to commence commissioning at end of
2014
-- 2014 production target of 21.0 million attributable silver
equivalent ounces on track
-- 0-5% reduction in all-in sustaining costs expected for 2014
vs. 2013
$000, pre-exceptional unless stated Six months to Six months to % change
30 June 2014 30 June 2013
------------------------------------------------------------- -------------- -------------- ---------
Attributable silver production (koz) 8,526 7,665 11
Attributable gold production (koz) 55 64 (14)
Net Revenue[6] 282,012 308,577 (9)
Adjusted EBITDA 94,282 90,410 4
Profit from continuing operations before income tax 9,129 (10,277) 189
(Loss)/profit from continuing operations (1,546) (25,215) 94
(Loss)/profit from continuing operations (post-exceptional) (11,749) (38,427) 69
Earnings per share ($ pre-exceptional) (0.01) (0.10) 90
Earnings per share ($ post-exceptional) (0.04) (0.10) 60
------------------------------------------------------------- -------------- -------------- ---------
Commenting on the results, Eduardo Hochschild, Executive
Chairman, said:
"Hochschild has continued to operate in an uncertain precious
metal pricing environment but the Board is encouraged that over the
last year, the organisation as a whole, has responded with a
programme of measures that has substantially exceeded our initial
projections and places the Company in a far firmer financial
position. We are now looking forward to the commissioning of our
latest mine and a return to value accretive growth.
The Board recognises that whilst there has been a marked
improvement in the Company's financial results, the current level
of capital expenditure required by the Inmaculada project restricts
the potential to pay an interim dividend. We remain committed to
the long term principle of delivering shareholder returns and the
Board intends to once again reassess the position subject to the
overall full year financial results."
_______________________________________________________________________________________
A live conference call & audio webcast will be held at 2pm
(London time) on Wednesday 20 August 2014 for analysts and
investors. Details as follows:
For a live webcast of the presentation please click on the link
below:
http://www.media-server.com/m/p/6w42kwyd
Conference call dial in details:
UK: +44(0)20 3427 1914 (Please use the following confirmation
code: 2818807).
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 3427 0598(Access code: 2818807)
The On Demand version of the webcast will be available within
two hours after the end of the presentation and is accessible using
the same webcast link.
_______________________________________________________________________________________
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.
CHIEF EXECUTIVE OFFICER'S STATEMENT
I am pleased to report that the cash optimisation programme
carried out over the last year has exceeded expectations and
Hochschild is now in a much better position in today's lower
precious metal price environment. As the interim results
demonstrate, the Company has shown its resilience and discipline
with improved profitability despite lower price levels. We have
also continued to invest for the future, and I can report that
progress has continued to be made with the construction of our key
Inmaculada project. When this mine reaches full capacity next year
it will herald a new phase of low cost growth for the Company.
Hochschild's operational teams delivered a robust half,
producing 11.9 million silver equivalent ounces at a much lower
overall cost. Despite the average price of silver achieved falling
by a further 11% year-on year, we have produced a 4% rise in first
half EBITDA to just over $94 million, an impressive result
reflecting the ongoing success of our cost reduction initiatives.
The increase in finance costs is related to the bond issued in
January to fund the construction of Inmaculada and the
soon-to-be-repaid convertible bond due in October. However, once
the new mine commences production and the convertible repaid, the
significance of this charge will be less important. We were still
able to deliver a turnaround in profit before tax from a
significant loss last year to $9.1 million for this half. From an
income tax standpoint, we were also impacted by a charge resulting
from the Argentine peso devaluation and the consequent decrease in
the value of our peso-denominated tax base. On a net basis, I am
pleased that we have seen a strong improvement from last year's
pre-exceptional loss of $25 million.
On the financing side, our balance sheet has sufficient capacity
to complete the construction of Inmaculada and fund the convertible
loan repayment due in October of this year. I am also pleased that
we have recently demonstrated our financial flexibility with the
signing of a term sheet for a $100 million medium term credit
facility at advantageous rates which, subject to closing, will
provide more financial short term support if required as we enter a
key stage of development with capital expenditure at its peak.
Local short term credit lines remain mostly undrawn. We have also
taken advantage of short periods of commodity price improvement to
hedge almost 30% of our production for 2014 in order to realise a
degree of cashflow certainty whilst project construction is in
progress.
The Inmaculada project itself has made good progress in the
first half as it moves towards completion at the end of the year.
The EPC contractor commenced construction of the plant early in the
second quarter and achieved almost 33% completion by the end of
July although progress has been impacted by poor weather earlier in
the year and slower than expected on-site recruitment. We have also
had a busy period in terms of the other deliverables with
procurement of all main equipment complete and another three
kilometres of tunneling and raise boring also carried out bringing
the total achieved for the entire project to over 13 kilometres. In
addition, work on the transmission lines is complete and connection
to the national grid was achieved at the end of May.
We implemented the cashflow optimisation programme a year ago
with a target of approximately $200 million of efficiencies spread
over H2 2013 and the first half of 2014 and I can now report that
we have exceeded expectations with approximately $270 million of
savings from across the organisation. At the operational level,
where we have realised over $90 million of efficiencies, we have
improved our supply chain negotiations, optimised a wide array of
workforce practices and implemented several initiatives to lower
ongoing costs at both the mining and processing operations.
Sustaining capital expenditure has also been significantly reduced
with only $56 million spent year-to-date versus an original 2013
full year budget of $180 million. In administration, we have
continued to achieve significant savings in professional fees,
further headcount reductions and the minimisation of compensatory
schemes and travel expenses. In addition, the exploration and
Advanced Project teams have undergone a substantial reorganisation
which has now delivered over $50 million of savings versus our
original 2013 budget. We remain focused on the delivery of further
efficiencies and are targeting opportunities from operational areas
such as mine planning, metallurgy, dilution control and
procurement.
In line with the achievements from the above programme, the
operations have enjoyed another solid half in terms of production
and costs. The three main operations, Arcata and Pallancata in Peru
and San Jose in Argentina, improved their collective ounce
contribution versus the same period of last year and we were also
able to deliver a better than expected final production result from
the now closed Ares mine. On the operational cost side, all-in
sustaining costs (AISC) at our main operations were reduced by 16%
to $16.8 per silver equivalent ounce versus the first half of last
year although we do expect that a number of annual cost items to be
processed in the second half will limit the overall 2014 reduction
to our current forecast of 0-5%.
The short term outlook for our underlying markets remains
uncertain but with the beginning of Inmaculada's operation
imminent, the cash optimisation programme generating better than
expected results and the financial position of the Company secure,
I am confident that we can look forward to an exciting twelve
months as our latest capital project delivers new growth for the
Company and our shareholders.
Ignacio Bustamante
Chief Executive Officer
19 August 2014
OPERATING REVIEW
CURRENT OPERATIONS
Production
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.
Costs
The Company's all-in sustaining costs (AISC) at its main
operations were reduced by 16% in H1 2014 to $16.8 per ounce driven
by operational initiatives resulting from the cashflow optimisation
programme, an ongoing decrease in industry cost inflation and grade
improvements particularly in Peru.7 Unit cost per tonne at its main
Peruvian operations was reduced to $74.0 (H1 2013: $75.5). In
Argentina, unit cost per tonne was reduced by 13% to $200.0 (H1
2013: $229.9). Please see page 14 of the Financial Review for
further details on costs.
Main operations
Arcata: Peru
The 100% owned Arcata underground operation is located in the
Department of Arequipa in southern Peru. It commenced production in
1964.
Arcata summary Six months Six months % change
to to 30 June
30 June 2014 2013
------------------------------- -------------- ------------ ---------
Ore production (tonnes) 365,573 427,274 (14)
Average silver grade (g/t) 262 195 34
Average gold grade (g/t) 0.81 0.69 17
Silver produced (koz) 2,895 2,292 26
Gold produced (koz) 8.76 7.88 11
Silver equivalent produced
(koz) 3,420 2,764 24
Silver sold (koz) 2,947 2,332 26
Gold sold (koz) 8.58 7.83 10
Unit cost ($/t) 82.2 83.4 (1)
Total cash cost ($/oz Ag
co-product)([8]) 12.5 13.8 (9)
All-in sustaining cost ($/oz) 17.9 22.3 (20)
------------------------------- -------------- ------------ ---------
Production and sales
At Arcata, total silver equivalent production in the first half
of 2014 increased by 24% to 3.4 million ounces (H1 2013: 2.8
million ounces) driven by higher grades and recoveries resulting
from 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. Due to
better commercial terms for concentrate versus dore in 2014, the
Company has decided to produce only concentrate this year.
On the 8(th) August 2014, the Arcata operation stopped
production following strike action over 2014 remuneration
arrangements. The dispute, initiated by one of the Peruvian labour
unions, is expected to be declared illegal by the Ministry of
Labour. A significant percentage of the workforce has now returned
to work and the Company does not currently expect the dispute to
impact the mine's full year production forecast.
Table Showing Contribution from Macarena Waste Dam Deposit
H1 2014 H1 2013
------------------------------- -------- --------
Total
Tonnage 365,573 427,274
Average head grade gold (g/t) 0.81 0.69
Average head grade silver
(g/t) 261.93 194.67
------------------------------- -------- --------
Macarena
Tonnage 38,366 144,350
Average head grade gold (g/t) 0.25 0.29
Average head grade silver
(g/t) 63.35 93.25
Stopes and Developments
Tonnage 327,207 282,924
Average head grade gold (g/t) 0.88 0.90
Average head grade silver
(g/t) 285.21 246.42
------------------------------- -------- --------
In H1 2014, the dore produced at Arcata was sold to INTL
Commodities, Johnson Matthey, Auramet and HSBC whilst the
concentrate produced at the operation was sold to Consorcio Minero,
Trafigura and Glencore.
Costs
In H1 2014, the unit cost per tonne at Arcata at $82.2 per tonne
was flat versus the same period last year with the overall effects
of the ongoing cost savings initiatives partially offset by the
planned fall in the processing of the low cost Macarena material.
However, all-in sustaining costs fell by 20% to $17.9 per ounce (H1
2013: $22.3 per ounce) due to a decline in production costs and
sustaining capex resulting from cashflow optimisation programme
initiatives as well as better grades.
Exploration
In H1 2014, 4,331 metres of drilling were carried out at Arcata.
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. A drilling campaign with the aim of adding new
resources began in early May with five drill holes carried out at
the Irma, Pamela and Paralelas veins. Significant intercepts during
the half included:
Vein Results
------------- -------------------------------------
DDH616-LM14 :1.36m at 1.16 g/t Au &
Pamela 663.95 g/t Ag
------------- -------------------------------------
DDH626-GE14: 1.47m at 1.66 g/t Au &
Pamela Norte 953.96 g/t Ag
------------- -------------------------------------
DDH587-LM14: 1.43m at 6.75 g/t Au &
Paralela 1 985 g/t Ag
------------- -------------------------------------
Paralela 2 DDH587-LM14: 1.02m at 2.93 g/t Au &
465 g/t Ag
DDH617-LM14: 1.35m at 1.35 g/t Au &
242.53 g/t Ag
------------- -------------------------------------
DDH587-LM14: 1.00m at 4.02 g/t Au &
Paralela 3 374 g/t Ag
------------- -------------------------------------
DDH599-LM14: 1.74m at 0.23 g/t Au &
Irma 1,025 g/t Ag
------------- -------------------------------------
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, Hochschild held a
controlling interest of 60%, with International Minerals
Corporation ("IMZ") as minority shareholder. 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 Six months Six months % change
to to
30 June 2014 30June 2013
------------------------------- -------------- ------------- ---------
Ore production (tonnes) 523,695 523,824 -
Average silver grade (g/t) 264 253 4
Average gold grade (g/t) 1.12 1.13 (1)
Silver produced (koz) 3,588 3,534 2
Gold produced (koz) 12.84 14.11 (9)
Silver equivalent produced
(koz) 4,358 4,380 (1)
Silver sold (koz) 3,615 3,590 1
Gold sold (koz) 13.11 13.67 (4)
Unit cost ($/t) 68.1 69.0 (1)
Total cash cost ($/oz Ag
co-product) 10.1 10.6 (5)
All-in sustaining cost ($/oz) 15.3 17.9 (15)
------------------------------- -------------- ------------- ---------
Production and sales
At the 100% owned Pallancata operation, consistent tonnage and
silver and gold grades led to similar production versus the first
half of 2013. Total silver equivalent production was 4.4 million
silver equivalent ounces (H1 2013: 4.4 million ounces).
In H1 2014, the silver/gold concentrate from Pallancata was sold
to Teck Metals Ltd., LS-Nikko Copper Inc and Glencore.
Costs
Cost per tonne at Pallancata decreased to $68.1 in H1 2014
versus the same period last year ($69.0 per tonne). As at Arcata,
costs were positively impacted by the cashflow optimisation
programme although the impact was partially offset by a higher
proportion of mineral extracted using conventional methods due to
narrower veins. All-in sustaining costs fell by 15% versus the same
period of 2013 with the positive effects of the cash optimisation
programme reducing sustaining and development capital expenditure
as well as administrative expenses.
Exploration
In H1 2014, 3,939 metres of drilling were carried out at
Pallancata. The first half programme, which focused on mapping and
sampling a total of 1,200 ha, was concentrated on the Yurika,
Jakeline, Pilar, Jessica, Emilia, Tatiana, Vianka, Isis and
Huararani vein systems. New surface structures Tatiana, Vianca and
Larisa have also been recognised. In addition, drilling has been
ongoing at two holes in the Vianca-Claudia and Yurika vein
systems.
San Jose: Argentina
The San Jose silver/gold mine is located in Argentina, in the
province of Santa Cruz, 1,750 kilometres south-southwest of Buenos
Aires and commenced production in 2007. Hochschild holds a
controlling interest of 51% and is the mine operator with McEwen
Mining Inc (formerly Minera Andes Inc.) holding the remaining
49%.
San Jose summary(*) Six months Six months % change
to to
30 June 2014 30 June 2013
------------------------------- -------------- -------------- ---------
Ore production (tonnes) 276,663 249,195 11
Average silver grade (g/t) 385 430 (10)
Average gold grade (g/t) 5.60 6.57 (15)
Silver produced (koz) 2,975 2,926 2
Gold produced (koz) 43.91 46.69 (6)
Silver equivalent produced
(koz) 5,610 5,728 (2)
Silver sold (koz) 3,004 2,880 4
Gold sold (koz) 43.25 44.79 (3)
Unit cost ($/t) 200.0 229.9 (13)
Total cash cost ($/oz Ag
co-product) 12.9 14.9 (13)
All-in sustaining cost ($/oz) 17.3 20.4 (15)
------------------------------- -------------- -------------- ---------
(*) The Company has a 51% interest in San Jose
Production and sales
At the San Jose operation, total silver equivalent production
for the first half was 5.6 million ounces (H1 2013: 5.7 million
ounces) with lower silver and gold grades offset by increased
tonnage versus the first half of 2013.
In H1 2014, the dore produced at San Jose was sold to Argor
Heraeus and Republic Metals whilst the concentrate produced at the
operation was sold to Aurubis AG, LS-Nikko Copper Inc, Consorcio
Minero and Trafigura.
Costs
At San Jose, unit cost per tonne decreased by 13% versus H1 2013
to $200.0. This was due to the impact of the cash 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. All-in sustaining costs were reduced by 15% versus the
same period of 2013 with cash optimisation initiatives helping to
reduce sustaining and development capital expenditure by some 23%
year-on-year.
Exploration
In 2014, the 2,000 metre potential drilling campaign has been
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 In
addition, 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.
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 Six months to Six months to % change
30 June 2014 30 June 2013
---------------------------- -------------- -------------- ---------
Ore production (tonnes) 167,331 149,828 12
Average silver grade
(g/t) 110 71 55
Average gold grade
(g/t) 2.34 2.52 (7)
Silver produced (koz) 525 328 60
Gold produced (koz) 11.46 11.84 (3)
Silver equivalent produced
(koz) 1,213 1,038 17
Silver sold (koz) 518 334 55
Gold sold (koz) 11.00 11.97 (8)
---------------------------- -------------- -------------- ---------
Production and sales
The Company's Ares mine in Peru was closed in the second quarter
with remaining production in the period delivering a
better-than-expected total silver equivalent production of 626
thousand ounces (Q2 2013: 511 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)
100% of Ares' production is processed into dore, which was sold
to Johnson Matthey and INTL Commodities in H1 2014.
Exploration
In 2014, exploration work has been focused on generating targets
within the Ares-Arcata corridor and a 2,000 metre drilling campaign
is taking place. 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.
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.
PROJECT REVIEW
Inmaculada
At the Inmaculada project, the EPC contractor Graña y Montero
started construction of the plant in late March and by the end of
July, progress has reached almost 33%. Procurement of all main
equipment has been completed and delivery to site is expected to be
concluded by the end of August.
During the period, a further 2,226 metres of tunneling and 637
metres of raise boring were carried out with the total achieved for
the entire project at 13,296 metres. Detailed engineering for the
paste backfill is complete with filters, pumps and thickeners on
order whilst work on the transmission lines has also finished with
connection to the Peruvian national grid system carried out on 31
May 2014.
As of the end of June, mapping is being carried out at the
Puquiopata and Huarmapata veins with a drilling campaign expected
to follow. In addition, re-logging of the Angela vein system
continues in order to optimise the geological model. The 2014 plan
also includes a 5,000 metres drilling campaign in the Mayte vein
corridor as well as near mine exploration at selected targets, in
order to expand the current resources. A sampling and mapping
campaign is also planned.
EXPLORATION REVIEW
The Company has an exploration budget of almost $30 million for
2014, representing 63,500 metres. This is being 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.
Mexico
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
were drilled on 13 holes during the 2013 and 2014 campaigns.
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 Ltd.
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 REVIEW
Key performance indicators
(before exceptional items, unless otherwise indicated)
$000 unless otherwise indicated Six months to 30 June 2014 Six months to 30 June 2013[9] % change
---------------------------------------------- --------------------------- ------------------------------ ---------
Net Revenue[10] 282,012 308,577 (9)
Attributable silver production (koz) 8,526 7,665 11
Attributable gold production (koz) 55 64 (14)
Cash costs ($/oz Ag co-product)[11] 11.83 13.35 (11)
Cash costs ($/oz Au co-product)(11) 803 785 2
Total all-in sustaining costs ($/oz) 17.5 21.2 (17)
Main operation all-in sustaining costs ($/oz) 16.8 19.9 (16)
Adjusted EBITDA[12] 94,282 90,410 4
(Loss)/profit from continuing operations (1,546) (25,215) 94
(Loss)/profit from continuing operations
(post exceptional) (11,749) (38,427) 69
Earnings per share (pre exceptional) (0.01) (0.10) 90
Earnings per share (post exceptional) (0.04) (0.10) 60
Cash flow from operating activities[13] 44,159 4,279 932
---------------------------------------------- --------------------------- ------------------------------ ---------
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 5% to $308.1
million in H1 2014 (H1 2013: $325.2 million) driven by the
significant fall in precious metal prices.
Silver
Gross revenue from silver was broadly flat in H1 2014 versus the
same period of 2013 at $206.8 million (H1 2013: $210.9 million)
with lower metal prices offsetting the increase in the total amount
of silver ounces sold which rose by 10% to 10,086 koz (H1 2013:
9,153 koz).
Gold
Gross revenue from gold decreased 11% in H1 2014 to $101.3
million (H1 2013: $114.3 million) also as a result of lower prices
and also to some extent by a 9% decrease in gold sales with gold
ounces sold in H1 2014 at 76.3 koz (H1 2013: 83.6 koz).
Gross average realised sales prices
The following table provides figures for average realised prices
and ounces sold for H1 2014 and H1 2013:
Average realised prices Six months to Six months to
30 June 2014 30 June 2013
----------------------------------- -------------- --------------
Silver ounces sold (koz) 10,086 9,153
Avg. realised silver price ($/oz) 20.5 23.0
Gold ounces sold (koz) 76.29 83.56
Avg. realised gold price ($/oz) 1,328 1,367
----------------------------------- -------------- --------------
In March 2014, 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.
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 H1 2014, the
Group recorded commercial discounts of $26.2 million (H1 2013:
$16.6 million). This increase is explained the decision to sell
100% of production from Arcata as concentrate due to improved
commercial terms. The ratio of commercial discounts to gross
revenue in H1 2014 increased to 9% (H1 2013: 5%).
Net revenue
Net revenue decreased by 9% to $282.0 million (H1 2013: $308.6
million), comprising silver revenue of $186.2 million and gold
revenue of $95.8 million. In H1 2014, silver accounted for 66% and
gold 34% of the Company's consolidated net revenue compared to 64%
and 36% respectively in H1 2013.
Revenue by mine
$000 unless otherwise indicated Six months to Six months to % change
30 June 2014 30 June 2013
--------------------------------- -------------- -------------- ---------
Silver revenue
Arcata 60,273 60,334 -
Ares 10,420 8,604 21
Pallancata 75,154 79,056 (5)
San Jose 60,930 62,431 (2)
Moris 30 475 (94)
Commercial discounts (20,634) (12,323) 67
Net silver revenue 186,173 198,577 (6)
Gold revenue
Arcata 11,308 11,686 (3)
Ares 14,391 17,825 (19)
Pallancata 17,555 18,166 (3)
San Jose 57,629 58,367 (1)
Moris 441 8,209 (95)
Commercial discounts (5,517) (4,285) 29
Net gold revenue 95,807 109,968 (13)
--------------------------------- -------------- -------------- ---------
Other revenue[14] 32 32 -
--------------------------------- -------------- -------------- ---------
Net revenue 282,012 308,577 (9)
--------------------------------- -------------- -------------- ---------
Costs
Total pre-exceptional cost of sales decreased by 10% to $209.4
million in H1 2014 (H1 2013: $233.4 million). Direct production
costs decreased by 14% in H1 2014, to $131.3 million (H1 2013:
$153.0 million) principally due to the positive effects of the
Company's ongoing cash optimisation programme. Depreciation in H1
2014 was $58.9 million (H1 2013: $65.0 million) with the decrease
mainly due to lower future capex depreciation resulting from a
lower level of metres expected to be developed in 2014. Other
items, which principally includes workers' profit sharing, was $3.0
million in H1 2014 (H1 2013: $3.7 million) with change in
inventories at $16.3 million in H1 2014 (H1 2013: $11.6
million).
$000 Six months Six months % Change
to to
30 June 2014 30 June 2013
---------------------------------- -------------- -------------- ---------
Direct production cost excluding
depreciation 131,276 153,047 (14)
Depreciation in production cost 58,856 64,961 (9)
Other items 2,978 3,724 (20)
Change in inventories 16,311 11,639 40
---------------------------------- -------------- -------------- ---------
Pre-exceptional Cost of Sales 209,421 233,371 (10)
---------------------------------- -------------- -------------- ---------
Unit cost per tonne
The Company reported unit cost per tonne at its main operations
of $102.8 in H1 2014, a reduction of 5% compared to H1 2013 (H1
2014: $107.7). For further explanation on the increase in unit cost
per tonne please refer to page 6 of the Operating Review.
Unit cost per tonne by operation[15]:
Operating unit ($/tonne) Six months Six months % change
to to
30 June 2014 30 June 2013
-------------------------- -------------- -------------- ---------
Main operations 102.8 107.7 (5)
-------------------------- -------------- -------------- ---------
Peru 74.0 75.5 (2)
Arcata 82.2 83.4 (1)
Pallancata 68.1 69.0 (1)
-------------------------- -------------- -------------- ---------
Argentina
San Jose 200.0 229.9 (13)
-------------------------- -------------- -------------- ---------
Others
Ares 117.8 145.9 (19)
-------------------------- -------------- -------------- ---------
Total 104.6 111.8 (6)
-------------------------- -------------- -------------- ---------
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]:
$000 unless otherwise indicated Six months to Six months % change
30 June 2014 to
30 June 2013
--------------------------------- -------------- -------------- ---------------------------
Group Cash Cost 187,672 199,474 (6)
--------------------------------- -------------- -------------- ---------------------------
(+) Cost of sales 209,421 233,371 (10)
(-) Depreciation in Cost
of Sales (62,761) (67,462) (7)
(+) Selling expenses 14,536 16,408 (11)
(+) Commercial deductions 26,476 17,157 54
Gold 5,529 4,301 29
Silver 20,947 12,856 63
--------------------------------- -------------- -------------- ---------------------------
Revenue 282,012 308,577 (9)
--------------------------------- -------------- -------------- ---------------------------
Gold 95,807 109,968 (13)
Silver 186,173 198,577 (6)
Others 32 32 -
--------------------------------- -------------- -------------- ---------------------------
Ounces Sold
--------------------------------- -------------- -------------- ---------------------------
Gold 76.3 83.6 (9)
Silver 10,086 9,153 10
--------------------------------- -------------- -------------- ---------------------------
Group Cash Cost ($/oz)
--------------------------------- -------------- -------------- ---------------------------
Co product Au 836 851 (2)
Co product Ag 12.3 14.0 (12)
By product Au (255) (143) 78
By product Ag 8.6 9.3 (8)
--------------------------------- -------------- -------------- ---------------------------
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])
Six months to 30 June 2014
$000 unless otherwise indicated Arcata Pallancata San José Main Operations Other Corporate Total
Operations & Others
--------------------------------- ------ ---------- ------------- --------------- ----------- --------- -------
(+) Production Cost excluding
depreciation 29,059 34,779 49,838 113,676 17,600 - 131,276
(+) Other items in Cost of
Sales 992 647 656 2,295 683 - 2,978
(+) Operating & Exploration
capex for units 18,164 17,859 20,926 56,949 (5) 431 57,375
(+) Brownfield exploration
expenses 214 629 91 934 (61) 688 1,561
(+) Administrative expenses
(w/o depreciation) 2,144 2,947 4,063 9,154 166 10,709 20,029
(+) Royalties - 897 - 897 262 - 1,159
--------------------------------- ------ ---------- ------------- --------------- ----------- --------- -------
Sub-Total 50,573 57,758 75,574 183,905 18,645 11,828 214,378
--------------------------------- ------ ---------- ------------- --------------- ----------- --------- -------
Ounces Produced (Ag Eq oz) 3,420 4,358 5,610 13,388 1,213 - 14,602
--------------------------------- ------ ---------- ------------- --------------- ----------- --------- -------
Sub-total ($/oz) 14.8 13.3 13.5 13.7 15.4 - 14.7
--------------------------------- ------ ---------- ------------- --------------- ----------- --------- -------
(+) Commercial deductions 9,846 7,872 8,758 26,476 - - 26,476
(+) Selling expenses 1,054 977 12,461 14,492 44 - 14,536
--------------------------------- ------ ---------- ------------- --------------- ----------- --------- -------
Sub-total 10,900 8,849 21,219 40,968 44 - 41,012
--------------------------------- ------ ---------- ------------- --------------- ----------- --------- -------
Ounces Sold (Ag Eq oz) 3,461 4,402 5,599 13,462 1,201 - 14,663
--------------------------------- ------ ---------- ------------- --------------- ----------- --------- -------
Sub-total ($/oz) 3.1 2.0 3.8 3.0 0.04 - 2.8
--------------------------------- ------ ---------- ------------- --------------- ----------- --------- -------
Total cash cost ($/oz Ag
Eq) 11.9 10.1 12.8 11.7 15.1 - 12.0
--------------------------------- ------ ---------- ------------- --------------- ----------- --------- -------
All-in sustaining costs ($/oz
Ag Eq) 17.9 15.3 17.3 16.8 15.4 - 17.5
--------------------------------- ------ ---------- ------------- --------------- ----------- --------- -------
Six months to 30 June 2013
$000 unless otherwise indicated Arcata Pallancata San José Main Operations Other Corporate Total
Operations & Others
--------------------------------- ------ ---------- ------------- --------------- ----------- --------- -------
(+) Production Cost excluding
depreciation 34,780 37,134 55,536 127,450 25,397 - 152,847
(+) Other items in Cost of
Sales (638) 18 4,547 3,927 (3) - 3,924
(+) Operating & Exploration
capex for units 22,816 25,580 27,156 75,552 3,715 1,316 80,583
(+) Brownfield exploration
expenses 826 760 861 2,447 158 1,303 3,908
(+) Administrative expenses
(w/o depreciation) 3,540 4,639 4,252 12,430 1,184 13,455 27,069
(+) Royalties - 943 - 943 268 - 1,211
--------------------------------- ------ ---------- ------------- --------------- ----------- --------- -------
Sub-Total 61,324 69,074 92,352 222,749 30,719 16,074 269,542
--------------------------------- ------ ---------- ------------- --------------- ----------- --------- -------
Ounces Produced (Ag Eq oz) 2,764 4,380 5,728 12,872 1,411 - 14,283
--------------------------------- ------ ---------- ------------- --------------- ----------- --------- -------
Sub-total ($/oz) 22.2 15.8 16.1 17.3 21.8 - 18.9
--------------------------------- ------ ---------- ------------- --------------- ----------- --------- -------
(+) Commercial deductions 133 8,121 8,891 17,145 12 - 17,157
(+) Selling expenses 134 1,368 14,809 16,311 97 - 16,408
--------------------------------- ------ ---------- ------------- --------------- ----------- --------- -------
Sub-total 267 9,489 23,700 33,456 109 - 33,565
--------------------------------- ------ ---------- ------------- --------------- ----------- --------- -------
Ounces Sold (Ag Eq oz) 2,802 4,410 5,568 12,779 1,388 - 14,167
--------------------------------- ------ ---------- ------------- --------------- ----------- --------- -------
Sub-total ($/oz) 0.1 2.2 4.3 2.6 0.1 - 2.4
--------------------------------- ------ ---------- ------------- --------------- ----------- --------- -------
Total cash cost ($/oz Ag
Eq) 12.4 10.6 14.7 12.8 18.1 - 13.3
--------------------------------- ------ ---------- ------------- --------------- ----------- --------- -------
All-in sustaining costs ($/oz
Ag Eq) 22.3 17.9 20.4 19.9 21.9 - 21.2
--------------------------------- ------ ---------- ------------- --------------- ----------- --------- -------
Administrative expenses
Administrative expenses before exceptional items were reduced by
26% to $21.4 million (H1 2013: $29.0 million) primarily due to the
ongoing impact of the cashflow optimisation programme.
Post-exceptional administrative expenses in H1 2014 totalled $22.2
million.
Exploration expenses
In H1 2014, pre-exceptional exploration expenses, decreased by
71% to $8.2 million (H1 2013: $27.8 million) again due to the
effects of the cashflow optimisation programme. Post-exceptional
exploration expenses in H1 2014 totalled $8.7 million.
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 H1 2014, the Company capitalised $1.2 million relating
to brownfield exploration compared to $0.3 million in H1 2013,
bringing the total investment in exploration for 2013 to $9.4
million (H1 2013: $28.1 million). $79.6 million was also invested
in the Company's Advanced and Growth Projects.
Selling expenses
Selling expenses were lower than H1 2013at $14.5 million (H1
2013: $16.4 million) as a result of lower prices. Selling expenses
mainly consist of export duties at San Jose with export duties in
Argentina levied at 10% of revenue for concentrate and 5% of
revenue for dore.
Other income/expenses
Other income before exceptional items was $2.0 million (H1 2013:
$3.5 million), whilst other expenses before exceptional items
reached $4.8 million (H1 2013: $4.3 million) mainly due the new
reserves tax in Argentina.
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 increased to $25.7 million (H1 2013:
$1.2 million) as a result of the factors detailed above.
Adjusted EBITDA
Adjusted EBITDA increased by 4% despite lower silver and gold
prices over the period to $94.3 million (H1 2013: $90.4 million)
principally due to lower cost of sales and administrative
expenses.
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 Six months to Six months to % change
30 June 2014 30 June 2013
--------------------------------------------------------------------------- -------------- -------------- ---------
Profit from continuing operations before exceptional items, net finance
cost, foreign exchange
loss and income tax 25,738 1,195 (2,054)
Operating margin 9% 0%
Depreciation and amortisation in cost of sales 62,761 67,462 (7)
Depreciation and amortisation in administrative expenses 1,324 1,969 (33)
Exploration expenses 8,175 27,770 (71)
Personnel and other exploration related fixed expenses (3,716) (7,986) 53
--------------------------------------------------------------------------- -------------- -------------- ---------
Adjusted EBITDA 94,282 90,410 (4)
--------------------------------------------------------------------------- -------------- -------------- ---------
Adjusted EBITDA margin 33% 29%
--------------------------------------------------------------------------- -------------- -------------- ---------
Finance income
Finance income before exceptional items of $1.8 million was
reduced from H1 2013 ($5.3 million) mainly due to lower interest
received on deposits and liquidity funds ($2.6 million) as well as
lower dividends received from Gold Resource Corporation ($1.2
million).
Finance costs
Finance costs before exceptional items increased to $18.1
million in H1 2014 (H1 2013: $7.3 million) principally due to the
interest due on $350 million of Senior Notes (issued in January
2014 via the Company's wholly owned subsidiary, Compañía Minera
Ares S.A.C) with a coupon rate of 7.75% due for repayment in
2021.
Foreign exchange losses
The Group recognised a foreign exchange loss of $0.3 million (H1
2013: $15.4 million loss) as a result of exposures in currencies
other than the functional currency.
Income tax
The Company's pre-exceptional income tax was $10.7 million (H1
2013: $14.9 million). H1 2014 income tax was negatively affected by
the reduction of the local currency tax base in Argentina resulting
from the devaluation of the Argentinean Peso (US$ 5.9 million).
Exceptional items
Exceptional items in H1 2014 totalled $(10.2) million after tax
(H1 2013: $(13.2) million). The tables below detail the exceptional
items excluding the exceptional tax effect that amounted to $2.3
million.
Exceptional items in H1 2014 totalled ($12.5) million before tax
(H1 2013: $38.4 million). This mainly comprises the following
items:
Negative exceptional items:
Main items $000 Description of main items
----------------------------------------------------- -------- -----------------------------------------------------
Termination benefits (4,916) Termination benefits paid to the workers following
the Ares mine unit closure ($3.5 million)
and the ongoing cashflow optimisation programme
restructuring (Administrative expenses: $0.9
million and Exploration expenses: $0.5 million)
Other expenses (2,963) Loss generated by the sale of the Group's interest
in Minas Santa María de Moris, S.A.
de C.V. ("Moris") to Exploraciones y Desarrollos
Regiomontanos, S.A. de C.V. and Arturo Préstamo
Elizondo.
Impairment and write-off of non-financial assets (476) Write off of assets in Compañía Minera
(net) Ares S.A.C. of $345,000 and Minera Santa
Cruz S.A. of $131,000
Finance cost (4,189) Includes $3.3 million of transaction costs related
to the Bridge Loan Facility and $1.7 million
loss on disposal of GRC shares, partially offset by
a net gain on the sale of part of the
Group's holding in Chaparral Gold Corp and Mirasol
Resources Ltd of $547,000 and $201,000
respectively.
----------------------------------------------------- -------- -----------------------------------------------------
Cash flow & balance sheet review
Cash flow:
$000 unless otherwise Six months to Six months to change
indicated 30 June 2014 30 June 2013
------------------------------- -------------- -------------- -------
Net cash generated from
operating activities 44,159 4,279 39,880
Net cash used in investing
activities (127,049) (130,463) 3,414
Cash flows generated/(used)
in financing activities 27,374 20,764 6,610
------------------------------- -------------- -------------- -------
Net (decrease)/increase
in cash and cash equivalents
during the period (55,516) (105,420) 49,904
------------------------------- -------------- -------------- -------
Operating cash flow increased from $4.3 million in H1 2013 to
$44.2 million in H1 2014, mainly due to cost reductions. Net cash
used in investing activities remained flat at $(127.0) million in
H1 2014 from $(130.5) million in H1 2013 due to lower operational
expenditures in line with the implementation of the cashflow
optimisation programme during H1 2014 ($(56.9) million vs. $(79.3)
million in H1 2013), offset by higher project capex at Inmaculada
during H1 2014 ($(75.6) million vs. $(40.0) million in H1 2013.
Finally, cash used in financing activities increased to $27.4
million from $20.8 million in H1 2013, primarily as a result of the
proceeds from the $350 million Senior Notes, partially offset by
repayment of the bridge loan facility ($270.0 million) and short
term debt in Peru ($30.0 million) and Argentina. As a result, total
cash generated increased from $(105.4) million in H1 2013 to
$(55.5) million in H1 2014 ($49.9 million difference).
Working capital
$000 unless otherwise indicated Six months to Six months to
30 June 2014 30 June 2013
-------------------------------------------- -------------- --------------
Trade and other receivables 194,265 155,682
Inventories 54,135 68,905
Net other financial assets / (liabilities) 5,207 (16,123)
Net Income tax receivable / (payable) 21,514 23,137
Trade and other payables and provisions (181,641) (173,740)
-------------------------------------------- -------------- --------------
Working Capital 93,480 57,861
-------------------------------------------- -------------- --------------
The Company's working capital position increased to $93.5
million in H1 2014 from $57.9 million in H1 2013. This was
primarily explained by higher trade and other receivables ($38.6
million) due to longer concentrate sales collection periods at
Arcata. Also, net other financial assets increased to $5.2 million
in H1 2014 from $(16.1) million in H1 2013 due to recognised gain
from hedge agreements.
Net cash
$000 unless otherwise indicated Six months to Six months to
30 June 2014 30 June 2013
--------------------------------- -------------- --------------
Cash and cash equivalents 225,550 239,274
Long term borrowings (354,512) (107,944)
Short term borrowings[18] (126,340) (39,775)
--------------------------------- -------------- --------------
Net cash/(debt) (255,302) 91,555
--------------------------------- -------------- --------------
The Group reported net cash of $(255.3) million as at 30 June
2014 (H1 2013: $91.6 million). Changes were driven by: i) lower
cash and cash equivalents of $13.7 million due to the acquisition
of International Minerals Corporation in 2013 ($271 million) and
capex at Inmaculada ($134 million), partially offset by proceeds
from the $350 million Senior Notes issued in January 2014 and the
equity placing in October 2013 ($71.3 million); ii) higher long
term borrowings resulting from the Senior Notes issue.
The Company's short-term borrowings are its $115 million
convertible bond that has a current conversion price of GBP3.80 due
in October 2014and short term debt raised in Argentina.
Capital expenditure([19])
$000 unless otherwise indicated Six months to Six months to
30 June 2014 30 June 2013
--------------------------------- -------------- --------------
Arcata 18,164 22,816
Ares (5) 2,798
Selene 156 672
Pallancata 17,703 24,908
San Jose 20,926 27,156
Moris - 917
Operations 56,949 79,267
--------------------------------- -------------- --------------
Inmaculada 75,595 39,970
Crespo 2,467 11,177
Volcan 972 3,253
Azuca 578 3,194
Other 431 1,347
--------------------------------- -------------- --------------
Total 136,987 138,208
--------------------------------- -------------- --------------
H1 2014 capital expenditure of $137.0 million (H1 2013: $138.2
million) includes operating capex of $55.7 million, capitalised
exploration costs of $1.2 million in respect of the Group's
operating mines, $75.6 million capitalised in Inmaculada, $2.5
million capitalised in Crespo, $1.6 million in Azuca and Volcan,
and administrative capital expenditure of $0.4 million.
RISKS
The principal risks and uncertainties facing the Company in
respect of the year ended 31 December 2013 are set out in detail in
the Risk Management section of the 2013 Annual Report and in Note
36 to the 2013 Consolidated Financial Statements.
The key risks disclosed in the 2013 Annual Report (available at
www.hochschildmining.com) are categorised as:
o Financial risks which include commodity price risk and
counterparty credit risk;
o Operational risks including the risks associated with
operational performance, delivery of projects, business
interruption, exploration & reserve and resource replacement
and personnel;
o Macro-economic risks which include political, legal and
regulatory risks; and
o Sustainability risks including risks associated with health
and safety, environmental and community relations.
These risks continue to apply to the Company in respect of the
remaining six months of the financial year.
In terms of the changes in the profile of these risks, the Board
recognises the heightened level of financial risk that results from
the combination of (i) a volatile precious metals pricing
environment and (ii) the Company's forthcoming commitments which
include the maturity of the convertible bond in October and the
capital demands of the Inmaculada project as it enters its final
stages before production commences.
The Company's risk management strategy overseen by the Board has
prompted a number of actions taken by management to mitigate this
risk which primarily include:
o implementation of the Cash Optimisation Plan which has led to
material savings that are sustainable going forward; and
o the successful negotiation, subsequent to 30 June 2014, of a
term sheet for the arrangement of a $100m medium term loan facility
which, on closing, together with undrawn short-term credit lines,
will provide the Company with further financial flexibility.
The Board expects that the Group's financial position will
improve significantly after the commencement of production at
Inmaculada which in addition to increasing the Group's total
production, will increase margins given its lower costs of
production relative to the Group's other mines.
GOING CONCERN
Having considered cash flow projections under a number of gold
and silver pricing scenarios which take into account, among other
things, the convertible bond maturity and the expenditure required
at Inmaculada on the one hand and the mitigating actions taken by
management described above on the other hand, the Directors are
satisfied that the Company has sufficient resources to continue in
operation for the foreseeable future. Accordingly, adoption of the
going concern basis in the preparation of the financial statements
contained herein is considered to be appropriate.
STATEMENT OF DIRECTORS' RESPONSIBILITIES
The Directors confirm that, to the best of their knowledge, the
interim condensed consolidated financial statements have been
prepared in accordance with IAS 34 "Interim Financial Reporting" as
adopted by the European Union and that the interim management
report includes a fair review of the information required by
Disclosure and Transparency Rules 4.2.7 and 4.2.8.
A list of current Directors and their functions is maintained on
the Company's website.
For and on behalf of the Board
Ignacio Bustamante
Chief Executive Officer
19 August 2014
INDEPENDENT REVIEW REPORT TO HOCHSCHILD MINING PLC
Introduction
We have been engaged by Hochschild Mining plc (the 'Company') to
review the condensed set of financial statements in the half-yearly
financial report for the six months ended 30 June 2014 which
comprises the Interim condensed consolidated income statement, the
Interim condensed consolidated statement of comprehensive income,
the Interim condensed consolidated statement of financial position,
the Interim condensed consolidated statement of cash flows, the
Interim condensed consolidated statement of changes in equity and
the related notes 1 to 19. We have read the other information
contained in the half yearly financial report and considered
whether it contains any apparent misstatements or material
inconsistencies with the information in the condensed set of
financial statements.
This report is made solely to the company in accordance with
guidance contained in International Standard on Review Engagements
2410 (UK and Ireland) "Review of Interim Financial Information
Performed by the Independent Auditor of the Entity" issued by the
Auditing Practices Board. To the fullest extent permitted by law,
we do not accept or assume responsibility to anyone other than the
company, for our work, for this report, or for the conclusions we
have formed.
Directors' Responsibilities
The half-yearly financial report is the responsibility of, and
has been approved by, the directors. The directors are responsible
for preparing the half-yearly financial report in accordance with
the Disclosure and Transparency Rules of the United Kingdom's
Financial Conduct Authority.
As disclosed in note 2, the annual financial statements of the
Group are prepared in accordance with IFRSs as adopted by the
European Union. The condensed set of financial statements included
in this half-yearly financial report has been prepared in
accordance with International Accounting Standard 34, "Interim
Financial Reporting", as adopted by the European Union.
Our Responsibility
Our responsibility is to express to the Company a conclusion on
the condensed set of financial statements in the half-yearly
financial report based on our review.
Scope of Review
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410, "Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity" issued by the Auditing Practices Board for use in
the United Kingdom. A review of interim financial information
consists of making enquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other
review procedures. A review is substantially less in scope than an
audit conducted in accordance with International Standards on
Auditing (UK and Ireland) and consequently does not enable us to
obtain assurance that we would become aware of all significant
matters that might be identified in an audit. Accordingly, we do
not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the half-yearly financial report for the six months ended 30
June 2014 is not prepared, in all material respects, in accordance
with International Accounting Standard 34 as adopted by the
European Union and the Disclosure and Transparency Rules of the
United Kingdom's Financial Conduct Authority.
Ernst & Young LLP
London
19 August 2014
Interim condensed consolidated income statement
Six-months ended 30 Six-months ended 30
Notes June 2014 (Unaudited) June 2013 (Unaudited)
----- ------------------------------------- -------------------------------------
Exceptional Exceptional
Before items Before items
exceptional (Note exceptional (Note
items 6) Total items 6) Total
US$000 US$000 US$000 US$000 US$000 US$000
----------- ----------- --------- ----------- ----------- ---------
Continuing
operations
Revenue 4 282,012 - 282,012 308,577 - 308,577
Cost of sales 5 (209,421) (3,511) (212,932) (233,371) (200) (233,571)
----------- ----------- --------- ----------- ----------- ---------
Gross profit 72,591 (3,511) 69,080 75,206 (200) 75,006
Administrative expenses (21,355) (868) (22,223) (29,039) (1,006) (30,045)
Exploration expenses (8,175) (537) (8,712) (27,770) (1,911) (29,681)
Selling expenses (14,536) - (14,536) (16,408) - (16,408)
Other income 2,030 - 2,030 3,501 - 3,501
Other expenses (4,817) (2,963) (7,780) (4,295) - (4,295)
Impairment and
write-off
of non-financial
assets
(net) - (476) (476) - (61,930) (61,930)
Profit/(loss) from
continuing operations
before net finance
income/(cost), foreign
exchange gain/(loss)
and income tax 25,738 (8,355) 17,383 1,195 (65,047) (63,852)
Share of post tax
profit of associates
and joint ventures
accounted under the
equity method - - - 5,921 - 5,921
Finance income 7 1,813 - 1,813 5,311 - 5,311
Gain on transfer from
investment accounted
under the equity
method
to available-for-sale
financial assets - - - - 107,942 107,942
Finance costs 7 (18,087) (4,189) (22,276) (7,331) (81,320) (88,651)
Foreign exchange loss (335) - (335) (15,373) - (15,373)
----------- ----------- --------- ----------- ----------- ---------
(Loss)/profit from
continuing operations
before income tax 9,129 (12,544) (3,415) (10,277) (38,425) (48,702)
Income tax
(expense)/benefit 8 (10,675) 2,341 (8,334) (14,938) 25,213 10,275
----------- ----------- --------- ----------- ----------- ---------
(Loss)/profit for
the period from
continuing
operations (1,546) (10,203) (11,749) (25,215) (13,212) (38,427)
Attributable to:
Equity shareholders
of the Company (2,469) (10,161) (12,630) (34,406) (49) (34,455)
Non-controlling
interests 923 (42) 881 9,191 (13,163) (3,972)
----------- ----------- --------- ----------- ----------- ---------
(1,546) (10,203) (11,749) (25,215) (13,212) (38,427)
=========== =========== ========= =========== =========== =========
Basic and diluted
earnings per ordinary
share from continuing
operations and for
the period (expressed
in U.S. dollars per
share) (0.01) (0.03) (0.04) (0.10) - (0.10)
=========== =========== ========= =========== =========== =========
Interim condensed consolidated statement of comprehensive
income
Six-months ended
Notes 30 June
------ ----------------------------------
2014 (Unaudited) 2013 (Unaudited)
US$000 US$000
---------------- ----------------
Loss for the period (11,749) (38,427)
Other comprehensive income to be reclassified
to profit or loss in subsequent periods:
Exchange differences on translating foreign
operations (79) (910)
Change in fair value of available-for-sale
financial assets 2,538 (77,289)
Recycling of the loss on available-for-sale
financial assets 934 81,191
Change in fair value of cash flow hedges 4,294 -
Recycling of the gain on cash flow hedges (2,189) -
Deferred income tax relating to components
of other comprehensive income (631) -
---------------- ----------------
Other comprehensive gain for the period,
net of tax 4,867 2,992
---------------- ----------------
Total comprehensive (expense)/income
for the period (6,882) (35,435)
---------------- ----------------
Total comprehensive (expense)/income
attributable to:
Equity shareholders of the Company (7,763) (31,463)
Non-controlling interests 881 (3,972)
---------------- ----------------
(6,882) (35,435)
================ ================
Interim condensed consolidated statement of financial
position
As at 30 As at 31
June December
2014 2013
(Unaudited)
Notes US$000 US$000
----- ------------- ----------
ASSETS
Non-current assets
Property, plant and equipment 9 942,363 873,477
Evaluation and exploration assets 10 210,701 204,643
Intangible assets 10 43,713 43,683
Available-for-sale financial assets 11 40,075 51,658
Trade and other receivables 11,565 12,128
Deferred income tax assets 1,960 2,416
1,250,377 1,188,005
------------- ----------
Current assets
Inventories 54,135 69,556
Trade and other receivables 182,700 167,740
Income tax receivable 25,720 22,156
Other financial assets 12 5,207 -
Cash and cash equivalents 14 225,550 286,435
------------- ----------
493,312 545,887
------------- ----------
Total assets 1,743,689 1,733,892
============= ==========
EQUITY AND LIABILITIES
Capital and reserves attributable
to shareholders of the Parent
Equity share capital 170,389 170,389
Share premium 396,021 396,021
Treasury shares (898) (898)
Other reserves (205,910) (211,143)
Retained earnings 498,862 511,492
------------- ----------
858,464 865,861
Non-controlling interests 99,745 104,375
Total equity 958,209 970,236
------------- ----------
Non-current liabilities
Trade and other payables 118 174
Borrowings 15 343,174 -
Provisions 83,558 79,649
Deferred income 23,000 22,000
Deferred income tax liabilities 95,781 93,505
------------- ----------
545,631 195,328
------------- ----------
Current liabilities
Trade and other payables 90,730 119,222
Other financial liabilities 12 - 2,294
Borrowings 15 137,678 435,925
Provisions 7,235 9,573
Income tax payable 4,206 1,314
------------- ----------
239,849 568,328
------------- ----------
Total liabilities 785,480 763,656
------------- ----------
Total equity and liabilities 1,743,689 1,733,892
============= ==========
Interim condensed consolidated statement of cash flows
Six-months ended
Notes 30 June
----- ----------------------------------
2014 (Unaudited) 2013 (Unaudited)
US$000 US$000
---------------- ----------------
Cash flows from operating activities
Cash generated from operations 56,477 19,695
Interest received 1,533 1,614
Interest paid (6,021) (3,303)
Payments of mine closure costs (2,485) (1,176)
Income tax paid (5,345) (12,551)
---------------- ----------------
Net cash generated from operating
activities 44,159 4,279
---------------- ----------------
Cash flows from investing activities
Purchase of property, plant and equipment (140,456) (123,864)
Purchase of evaluation and exploration
assets (2,188) (11,707)
Purchase of intangibles (281) (678)
Dividends received 414 4,098
Acquisition of subsidiary - (14,615)
Deferred income received related
to San Felipe property 1,223 16,000
Proceeds from sale of available-for-sale
financial assets 14,121 -
Proceeds from sale of property, plant
and equipment 118 303
Net cash used in investing activities (127,049) (130,463)
---------------- ----------------
Cash flows from financing activities
Proceeds of borrowings 15 357,812 33,114
Repayment of borrowings 15 (322,828) (412)
Dividends paid 16 (7,610) (16,318)
Capital contribution from non-controlling
interest - 4,380
Cash flows generated from financing
activities 27,374 20,764
---------------- ----------------
Net decrease in cash and cash equivalents
during the period (55,516) (105,420)
Exchange difference (5,369) (14,250)
Cash and cash equivalents at beginning
of period 286,435 358,944
---------------- ----------------
Cash and cash equivalents at end
of period 14 225,550 239,274
================ ================
Interim condensed consolidated statement of changes in
equity
Other reserves
Capital
Unrealised and reserves
gain/(loss) attributable
on to
Equity available-for-sale Unrealised Bond Cumulative Share-based Total shareholders
share Share Treasury financial gain/(loss) equity translation Merger payment other Retained of the Non-controlling Total
capital premium Shares assets on hedges component adjustment reserve reserve reserves earnings Parent interests Equity
Notes US$000 US$000 US$000 US$000 US$000 US$000 US$000 US$000 US$000 US$000 US$000 US$000 US$000 US$000
Balance at 1
January
2014 170,389 396,021 (898) 1,024 - 8,432 (11,289) (210,046) 736 (211,143) 511,492 865,861 104,375 970,236
------- ------- ----- ------- ----- ----- -------- --------- ----- --------- -------- --------- ------- ---------
Other
comprehensive
gain/ (loss) - - - 3,472 1,474 - (79) - - 4,867 - 4,867 - 4,867
Loss for the
period - - - - - - - - - - (12,630) (12,630) 881 (11,749)
----- ------- ----- -------- -----
Total
comprehensive
(loss)/income
for
the period - - - 3,472 1,474 - (79) - - 4,867 (12,630) (7,763) 881 (6,882)
Deferred bonus
plan - - - - - - - - 106 106 - 106 - 106
CEO LTIP - - - - - - - - 260 260 - 260 - 260
Dividends
declared
to
non-controlling
interests 16 - - - - - - - - - - - - (5,511) (5,511)
Balance at 30
June
2014 170,389 396,021 (898) 4,496 1,474 8,432 (11,368) (210,046) 1,102 (205,910) 498,862 858,464 99,745 958,209
======= ======= ===== ======= ===== ===== ======== ========= ===== ========= ======== ========= ======= =========
Balance at 1
January
2013 158,637 395,928 (898) (3,330) - 8,432 (10,447) (210,046) 445 (214,946) 720,011 1,058,732 264,518 1,323,250
----- ------- ----- -------- -----
Other
comprehensive
(loss) - - - 3,902 - - (910) - - 2,992 - 2,992 - 2,992
Loss for the
period - - - - - - - - - - (34,455) (34,455) (3,972) (38,427)
----- ------- ----- -------- -----
Total
comprehensive
(loss)/income
for
the period - - - 3,902 - - (910) - - 2,992 (34,455) (31,463) (3,972) (35,435)
Issuance of
shares 7 93 - - - - - - - - - 100 - 100
Expiration of
dividends - - - - - - - - - - - - (38) (38)
Capital
contribution
from
non-controlling
interest - - - - - - - - - - - - 4,381 4,381
CEO LTIP - - - - - - - - 145 145 - 145 - 145
Dividends
declared
to
non-controlling
interests 16 - - - - - - - - - - - - (6,000) (6,000)
Dividends 16 - - - - - - - - - - (10,139) (10,139) - (10,139)
----- ------- ----- -------- -----
Balance at 30
June
2013 158,644 396,021 (898) 572 - 8,432 (11,357) (210,046) 590 (211,809) 675,417 1,017,375 258,889 1,276,264
======= ======= ===== ======= ===== ===== ======== ========= ===== ========= ======== ========= ======= =========
Notes to the interim condensed consolidated financial
statements
1 Corporate Information
Hochschild Mining plc (hereinafter the "Company") is a public
limited company incorporated on 11 April 2006 under the Companies
Act 1985 as a limited company and registered in England and Wales
with registered number 05777693. The Company's registered office is
located at 23 Hanover Square, London W1S 1JB, United Kingdom. Its
ordinary shares are traded on the London Stock Exchange.
The Group's principal business is the mining, processing and
sale of silver and gold. The Group has two operating mines (Arcata
and Pallancata) and two plants (Selene used to treat ore from the
Pallancata mine and Ares) located in Southern Peru, and one
operating mine (San Jose) located in Argentina. The Group also has
a portfolio of projects located across Peru, Argentina, Mexico and
Chile at various stages of development.
The Group sold the Moris plant, located in Mexico, and closed
the Ares mine unit, located in Peru, during the six month period
ended 30 June 2014.
These interim condensed consolidated financial statements were
approved for issue on behalf of the Board of Directors on 19 August
2014.
2 Significant Accounting Policies
(a) Basis of preparation
These interim condensed consolidated financial statements set
out the Group's financial position as at 30 June 2014 and 31
December 2013 and its financial performance and cash flows for the
periods ended 30 June 2014 and 30 June 2013.
They have been prepared in accordance with IAS 34 Interim
Financial Reporting in accordance with International Financial
Reporting Standards ('IFRS') as adopted by the European Union.
Accordingly, the interim condensed consolidated financial
statements do not include all the information required for full
annual financial statements and therefore, should be read in
conjunction with the Group's 2013 annual consolidated financial
statements as published in the 2013 Annual Report.
The interim condensed consolidated financial statements do not
constitute statutory accounts as defined in the Companies Act 2006.
The financial information for the full year is based on the
statutory accounts for the financial year ended 31 December 2013. A
copy of the statutory accounts for that year, which were prepared
in accordance with IFRS as adopted by the European Union has been
delivered to the Registrar of Companies. The auditors' report under
section 495 of the Companies Act 2006 in relation to those accounts
was unmodified and did not include a reference to any matters to
which the auditors drew attention by way of emphasis without
qualifying the report and did not contain a statement under s498(2)
or s498(3) of the Companies Act 2006.
The impact of the seasonality or cyclicality of operations is
not regarded as significant on the interim condensed consolidated
financial statements.
The interim condensed consolidated financial statements are
presented in US dollars ($) and all monetary amounts are rounded to
the nearest thousand ($000) except when otherwise indicated.
(b) Changes in accounting policies and disclosures
The accounting policies adopted in the preparation of the
interim condensed consolidated financial statements are consistent
with those applied in the preparation of the consolidated financial
statements for the year ended 31 December 2013, except for the
adoption of the following standards and interpretations:
-- IFRS 7 'Disclosures - Offsetting Financial Assets and
Financial Liabilities - Amendments to IFRS 7', applicable for
annual periods beginning on or after 1 July 2013
These amendments require an entity to disclose information about
rights to set-off and related arrangements. The disclosures would
provide users with information that is useful in evaluating the
effect of netting arrangements on an entity's financial position.
The new disclosures are required for all recognised financial
instruments that are set off in accordance with IAS 32 'Financial
Instruments: Presentation.' The disclosures also apply to
recognised financial instruments that are subject to an enforceable
master netting arrangement or similar agreement, irrespective of
whether they are set off in accordance with IAS 32. These
amendments have no impact on the Group's financial position or
performance.
-- IFRS 10 'Consolidated Financial Statements', applicable for
annual periods beginning on or after 1 January 2014
IFRS 10 replaces the portion of IAS 27 'Consolidated and
separate financial statements' that addresses the accounting for
consolidated financial statements. It also includes the issues
raised in SIC-12 'Consolidation-special purposes entities'. IFRS 10
establishes a single control model that applies to all entities
including special purpose entities. The application of this new
standard has no impact on the Group's financial position or
performance.
-- IFRS 11 'Joint arrangements', applicable for annual periods
beginning on or after 1 January 2014
IFRS 11 replaces IAS 31 'Interests in joint ventures' and SIC-13
'Jointly-controlled entities non-monetary contributions by
venturers'. Instead, jointly-controlled entities that meet the
definition of a joint venture must be accounted for using the
equity method. The application of this new standard has no impact
on the Group's financial position or performance.
-- IFRS 12 'Disclosure of involvement with other entities',
applicable for annual periods beginning on or after 1 January
2014
IFRS 12 applies to an entity that has an interest in
subsidiaries, joint arrangements, associates and/or structured
entities. Many of the disclosure requirements of IFRS 12 were
previously included in IAS 27, IAS 31, and IAS 28. A number of new
disclosures are also required. The standard affects financial
statement disclosure only and has no impact on the Group's
financial position or performance.
-- IAS 28 'Investments in Associates and Joint Ventures (as
revised in 2011)', applicable for annual periods beginning on or
after 1 January 2014
IAS 28 'Investments in Associates', has been renamed IAS 28
'Investments in Associates and Joint Ventures', and describes the
application of the equity method to investments in joint ventures
in addition to associates. The amendment has no impact on the
Group's financial position or performance.
-- IAS 32 'Offsetting Financial Assets and Financial Liabilities
- Amendment to IAS 32', applicable for annual periods beginning on
or after 1 January 2014
These amendments clarify the meaning of 'currently has a legally
enforceable right to set-off'. The amendments also clarify the
application of the IAS 32 offsetting criteria to settlement systems
which apply gross settlement mechanisms that are not simultaneous.
The amendment has no impact on the Group's financial position or
performance.
-- IAS 36 'Impairment of Assets' - recoverable amount disclosures
The amendment to the standard was issued in May 2013 and becomes
effective for financial years beginning on or after 1 January 2014.
The amendment removes the requirement to disclose recoverable
amounts when there has been no impairment or reversal of
impairment. Further to that, the disclosure requirements have been
aligned with those under US GAAP for impaired assets. The standard
affects financial statement disclosure only and has no impact on
the Group's financial position or performance.
-- IFRIC Interpretation 21 Levies (IFRIC 21), applicable for
annual periods beginning on or after 1 January 2014
IFRIC 21 clarifies that an entity recognises a liability for a
levy when the activity that triggers payment, as identified by the
relevant legislation, occurs. For a levy that is triggered upon
reaching a minimum threshold, the interpretation clarifies that no
liability should be anticipated before the specified minimum
threshold is reached. The rule has no impact on the Group's
financial position or performance.
-- IAS 39 Novation of Derivatives and Continuation of Hedge
Accounting - Amendments to IAS 39, applicable for annual periods
beginning on or after 1 January 2014
These amendments provide relief from discontinuing hedge
accounting when novation of a derivative designated as a hedging
instrument meets certain criteria. The Group has not novated its
derivatives during the current period. However, these amendments
would be considered for future novations.
The Group has not early adopted any other standard,
interpretation or amendment that has been issued but is not yet
effective.
The Group has also entered into certain commodity forward
contracts during the period. The Group has applied its policy for
interest rate swaps qualifying as cash flow hedges, as disclosed in
the consolidated financial statements for the year ended 31
December 2013, to these contracts.
3 Segment Reporting
The following tables present revenue, profit and asset
information for the Group's operating segments for the six months
ended 30 June 2014 and 2013 respectively:
Exploration
Six months San and Advanced Adjustments
ended 30 Ares Arcata Pallancata Jose Moris Projects Other and eliminations Total
June 2014 US$000 US$000 US$000 US$000 US$000 US$000 US$000 US$000 US$000
----------------- ------- ------- ---------- ------- ------- ------------- ------- ---------------- ---------
Revenue from
external
customers 24,811 61,735 84,837 110,126 471 - 32 - 282,012
Inter segment
revenue - - - - - - 1,952 (1,952) -
Total revenue 24,811 61,735 84,837 110,126 471 - 1,984 (1,952) 282,012
------- ------- ---------- ------- ------- ------------- ------- ---------------- ---------
Segment
profit/(loss) (574) 10,275 22,415 22,687 (491) (9,178) 1,146 (448) 45,832
Others(1) (49,247)
---------
Profit/(loss)
from continuing
operations
before income
tax (3,415)
---------
Assets
Capital
expenditure (5) 18,164 17,859 20,926 - 74,572 5,471 - 136,987
Current assets 13,508 25,376 34,237 63,625 - 2,564 195 - 139,505
Other non-current
assets 914 145,820 143,325 220,311 - 653,557 32,850 - 1,196,777
------- ------- ---------- ------- ------- ------------- ------- ---------------- ---------
Total segment
assets 14,422 171,196 177,562 283,936 - 656,121 33,045 - 1,336,282
Not reportable
assets(2) - - - - - - 407,407 - 407,407
------- ------- ---------- ------- ------- ------------- ------- ---------------- ---------
Total assets 14,422 171,196 177,562 283,936 - 656,121 440,452 - 1,743,689
------- ------- ---------- ------- ------- ------------- ------- ---------------- ---------
(1) Comprised of administrative expenses of US$22,223,000, other
income of US$2,030,000, other expenses of US$7,780,000, write off
of assets of US$476,000, finance income of US$1,813,000, finance
costs of US$22,276,000, and foreign exchange loss of
US$335,000.
(2) Not reportable assets are comprised of available-for-sale
financial assets of US$40,075,000, other receivables of
US$108,895,000, income tax receivable of US$25,720,000 deferred
income tax assets of US$1,960,000, other financial assets of
US$5,207,000, and cash and cash equivalents of US$225,550,000.
Exploration
Six-months San and Advanced Adjustments
ended 30 Ares Arcata Pallancata Jose Moris Projects Other and eliminations Total
June 2013 US$000 US$000 US$000 US$000 US$000 US$000 US$000 US$000 US$000
----------------- ------- ------- ---------- ------- ------- ------------- ------- ---------------- ---------
Revenue from
external
customers 26,429 71,962 89,101 112,369 8,684 - 32 - 308,577
Inter segment
revenue - - - - - - 3,643 (3,643) -
Total revenue 26,429 71,962 89,101 112,369 8,684 - 3,675 (3,643) 308,577
------- ------- ---------- ------- ------- ------------- ------- ---------------- ---------
Segment
profit/(loss) (1,616) 18,797 24,049 13,104 3,298 (37,628) 2,702 6,211 28,917
Others(1) (77,619)
---------
Profit/(loss)
from continuing
operations
before income
tax (48,702)
---------
Year ended
31 December
2013
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 12 582,113 29,331 - 1,121,803
------- ------- ---------- ------- ------- ------------- ------- ---------------- ---------
Total segment
assets 14,539 156,627 183,792 291,188 1,281 583,987 29,647 - 1,261,061
Not reportable
assets(2) - - - - - - 472,831 - 472,831
------- ------- ---------- ------- ------- ------------- ------- ---------------- ---------
Total assets 14,539 156,627 183,792 291,188 1,281 583,987 502,478 - 1,733,892
------- ------- ---------- ------- ------- ------------- ------- ---------------- ---------
(1) Comprised of administrative expenses of US$30,045,000, other
income of US$3,501,000, other expenses of US$4,295,000, impairment
of assets of US$61,930,000, share of profit of associates and joint
ventures of US$5,921,000, gain on transfer from investments
accounted under the equity method to available-for-sale financial
assets of US$107,942,000, finance income of US$5,311,000, finance
costs of US$88,651,000, and foreign exchange loss of
US$15,373,000.
(2) 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.
4 Revenue
Six-months ended 30
June
----------------------------------
2014 (Unaudited) 2013 (Unaudited)
US$000 US$000
---------------- ----------------
Gold (from dore bars) 36,418 63,026
Silver (from dore bars) 37,303 96,517
Gold (from concentrate) 59,389 46,942
Silver (from concentrate) 148,870 102,060
Services 32 32
282,012 308,577
================ ================
The realised gain on gold and silver forward sales contracts in
the period recognised within revenue was US$2,189,000 (Gold:
US$506,000, Silver: US$1,683,000).
5 Cost of sales before exceptional items
Included in cost of sales are:
Six-months ended 30
June
----------------------------------
2014 (Unaudited) 2013 (Unaudited)
US$000 US$000
---------------- ----------------
Depreciation and amortisation 60,043 66,171
Personnel expenses 55,480 63,530
Mining royalty 3,029 3,931
Change in products in process and finished
goods 16,311 11,639
---------------- ----------------
6 Exceptional items
Exceptional items relate to:
Six-months ended 30
June
----------------------------------
2014 (Unaudited) 2013 (Unaudited)
US$000 US$000
----------------
Cost of sales
Termination benefits Ares mine unit(1) (3,511) -
Termination benefits(2) - (200)
---------------- ----------------
Total (3,511) (200)
---------------- ----------------
Administrative expenses
Termination benefits(2) (868) (1,006)
---------------- ----------------
Total (868) (1,006)
---------------- ----------------
Exploration expenses
Termination benefits(2) (537) (1,911)
---------------- ----------------
Total (537) (1,911)
---------------- ----------------
Other expenses
Loss on sale of subsidiary(3) (2,963) -
Total (2,963) -
Impairment and write-off of assets (net)
Impairment and write-off of assets(4) (476) (74,930)
Reversal of write-off and impairment of assets(4) - 13,000
Total (476) (61,930)
Gain on transfer from investment accounted
under the equity method to available-for-sale
financial assets(5) - 107,942
Total - 107,942
Finance costs
Loss from changes in the fair value of financial
instruments(6) (18) (81,320)
Amortisation of transaction costs on secure
bank loans(7) (3,256) -
Loss on sale of available-for-sale financial
assets(8) (915) -
---------------- ----------------
Total (4,189) (81,320)
---------------- ----------------
(1) Termination benefits generated in connection with the
closure of the Ares mine unit.
(2) The termination benefits paid to the workers following the
restructuring plan approved by management amounting to US$1,405,000
(2013: US$3,117,000).
(3) Loss generated by the sale of the Group's interest in Minas
Santa María 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 carrying value of the net assets disposed
was:
US$000
-------
Property, plant and equipment 197
Inventories 278
Trade and other receivables 3,694
Income tax receivable 241
Cash and cash equivalents 33
Trade and other payables (214)
Provisions (1,266)
Net assets disposed 2,963
=======
(4) Write off of assets in Compañía Minera Ares S.A.C. of
US$345,000 and Minera Santa Cruz S.A. of US$131,000. As at 30 June
2013 this comprised an impairment of assets at the San José mine
unit of US$40,869,000, Azuca project of US$30,290,000 and Ares unit
of US$3,771,000; and reversal of the impairment of San Felipe
property of US$13,000,000.
(5) Gain on the reclassification of Gold Resource Corp ('GRC')
shares from investment accounted under the equity method to
available-for-sale financial assets of US$107,942,000 as a result
of the Company ceasing to have the ability to exercise significant
influence over GRC (refer to note 11).
(6) Represents the impairment of Brionor Resources (US$18,000).
In 2013 corresponds to the impairment of investments in Gold
Resource Corp. (US$62,018,000), International Minerals
(US$12,920,000), Pembrook Mining Corp. (US$5,745,000), Mariana
Resources Ltd. (US$281,000), Northern Superior Resources Inc.
(US$227,000), Iron Creek Capital Corp. (US$103,000), Empire
Petroleum Corp. (US$22,000) and Brionor Resources (US$4,000).
(7) Corresponds to the attributable issue cost of the syndicated
loan granted to Compañía Minera Ares S.A.C. (refer to note 15),
disclosed as an exceptional item as a significant one-off expense
and shown net of capitalised borrowing costs of US$1,184,000.
(8) Corresponds to the loss on sale of part of the Group's
holding in Gold Resource Corp. ("GRC") of US$1,663,000, net of the
gain on sale of part of the Group's holding in Chaparral Gold Corp
and Mirasol Resources Ltd of US$547,000 and US$201,000
respectively.
7 Finance income and finance cost before exceptional items
The Group recognised the following finance income and finance
cost before exceptional items:
Six-months ended 30
June
----------------------------------
2014 (Unaudited) 2013 (Unaudited)
US$000 US$000
---------------- ----------------
Finance income:
Interests on deposits and liquidity funds 910 3,468
Interest on loans 73 56
---------------- ----------------
Interest income 983 3,524
---------------- ----------------
Dividends 504 1,658
Others 326 129
---------------- ----------------
Total 1,813 5,311
---------------- ----------------
Finance cost:
Interest on secured bank loans (2,938) (393)
Interest on convertible bond (3,370) (4,497)
Interest on bond (9,143) -
---------------- ----------------
Interest expense (15,451) (4,890)
---------------- ----------------
Unwind of discount rate (1,837) (1,904)
Others (799) (537)
---------------- ----------------
Total (18,087) (7,331)
---------------- ----------------
Finance costs above are presented net of capitalised borrowing
costs of US$5,912,000 (note 9). Capitalised borrowing costs by
borrowing consist of: i) Secured bank loans US$177,000 (2013:
US$Nil); ii) convertible bond US$1,225,000 (2013: US$Nil); iii)
senior notes US$3,326,000 (2013: US$Nil); and iv) syndicated loan
(note 6) US$1,184,000 (2013: US$Nil).
8 Income tax expense
Six-months ended 30
June
----------------------------------
2014 (Unaudited) 2013 (Unaudited)
US$000 US$000
---------------- ----------------
Current income tax expense 5,348 2,713
Current mining royalty charge 1,159 1,211
Current special mining tax charge 392 657
Deferred income tax relating to origination
and reversal of temporary differences 2,168 (15,422)
Withholding taxes (733) 566
Total taxation charge/(credit) in the income
statement 8,334 (10,275)
================ ================
The pre exceptional tax charge of the period was US$10,675,000
(2013: US$14,938,000). The variance is mainly originated as result
of a decrease in the value of the peso-denominated tax base due to
the devaluation of the Argentine peso relative to the US
dollar.
The tax related to items charged or credited to equity is as
follows:
Six-months ended 30
June
----------------------------------
2014 (Unaudited) 2013 (Unaudited)
US$000 US$000
---------------- ----------------
Deferred income tax relating to origination
and reversal of temporary differences 631 -
Total taxation charge in the statement of comprehensive
income 631 -
================ ================
9 Property, plant and equipment
During the six months ended 30 June 2014, the Group acquired
assets at a cost of US$134,518,000 (2013: US$125,092,000). The
additions for the period ended 30 June 2014 relate to:
Other property
Mining properties plant and
and development equipment
US$000 US$000
----------------- --------------
San Jose 14,013 6,829
Pallancata 15,598 2,033
Inmaculada 18,318 51,870
Arcata 15,406 2,608
Crespo 1,116 1,363
Empresa de transmision Aymaraes - 4,763
Others - 601
----------------- --------------
64,451 70,067
================= ==============
Assets with a net book value of US$83,000 were disposed of by
the Group during the six month period ended 30 June 2014 (2013:
US$559,000) resulting in a net gain on disposal of US$35,000 (2013:
loss on disposal of US$256,000).
For the six months ended 30 June 2014, the depreciation charge
on property, plant and equipment was US$63,936,000 (2013:
US$67,409,000).
At 30 June 2013, the Group recorded an impairment of US$821,000
with respect to the Azuca project, US$34,305,000 with respect to
the San José mine unit and US$3,771,000 with respect to the Ares
mine unit.
For the six months ended 30 June 2014, additions include
capitalised borrowing costs of US$5,912,000 (2013: US$Nil).
10 Evaluation, exploration and intangible assets
a) Evaluation and exploration assets: During the six months
ended 30 June 2014, the Group capitalised evaluation and
explorations costs of US$2,188,000 (2013: US$13,116,000). The
additions mainly correspond to:
US$000
------
Azuca 559
San Jose 80
Pallancata 72
Inmaculada 367
Arcata 150
Crespo (12)
El Dorado 972
2,188
======
There were no transfers from evaluation and exploration assets
to property, plant and equipment during the period (2013:
US$35,853,000).
There were transfers from property, plant and equipment to
evaluation and exploration assets during the period of US$3,870,000
(2013:US$nil)
At 30 June 2013, the Group recorded impairments with respect to
the Azuca project (US$29,469,000) and the San José mine unit
(US$2,260,000), and partially reversed the impairment of the San
Felipe project by US$13,000,000.
b) Intangible assets: During the six months ended 30 June 2014,
the additions of intangibles amounted to US$281,000 (2013:
US$678,000). The additions for the period ended 30 June 2014 relate
to Empresa de transmission Ayamaraes of US$277,000 (2013: US$nil),
San José mine unit of US$4,000 (2013: US$nil) and the Crespo
project of US$nil (2013: US$678,000).
For the six months ended 30 June 2014, the amortisation charge
on intangibles was US$747,000 (2013: US$737,000).
There were transfers from property, plant and equipment to
intangibles during the period of US$496,000 (2013:
US$4,794,000).
At 30 June 2013, the Group recorded an impairment of all of the
goodwill of $2,091,000 and other intangibles of $2,213,000 related
to the San Jose mine unit.
11 Available-for-sale financial assets
As at 30
June
2014
(Unaudited)
US$000
-------------
Opening balance 51,658
Fair value change recorded in equity 2,538
Disposals(1) (14,121)
Closing balance(2) 40,075
=============
(1) Corresponds to the sale of 3,175,000 shares of GRC (May
2014), 2,182,000 shares of Chaparral Gold Corp. (May 2014), 180,500
shares of Mirasol Resources Ltd. (June 2014) and 9,000 shares of
Northern Superior Resources Inc. (June 2014).
(2) As at 30 June 2014, the amount represents the fair value of
shares of Gold Resource Corp. (US$31,761,000), Pembrook Mining
Corp. (US$6,000,000), Mirasol Resources Ltd. (US$361,000), Northern
Superior Resources Inc. (US$330,000), Mariana Resources Ltd.
(US$649,000), Iron Creek Capital Corp (US$112,000), Brionor
Resources (US$62,000), Chaparral Gold Corp. (US$766,000) and Empire
Petroleum Corp (US$34,000).
12 Other financial assets and liabilities
As at
30 June As at
31 December
2014 2013
(Unaudited)
US$000 US$000
--------------- -------------
Other financial assets
Embedded derivatives(1) 3,102 -
Forward contracts(2) 2,105 -
--------------- -------------
Other financial assets 5,207 -
=============== =============
Other financial liabilities
Embedded derivatives(1) 2,294
Other financial liabilities - 2,294
=============== =============
(1) Sales of concentrate and certain gold and silver volumes are
provisionally priced at the time the sale is recorded. The price is
then adjusted after an agreed period of time usually linked to the
length of time it takes for the smelter to refine and sell the
concentrate or for the refiner to process the dore into gold and
silver, with the Group either paying or receiving the difference
between the provisional price and the final price. At 30 June 2014
the provisional price adjustment resulted in an asset due to the
increase of forward prices of gold and silver. (At 31 December 2013
the provisional price adjustment resulted in a liability due to the
decrease in forward prices of gold and silver).
(2) Corresponds to the fair value of the following unsettled
commodity forward contracts:
a. Signed in March 2014, 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
respectively, during the period from March to December 2014;
and
b. Signed in June 2014, with Goldman Sachs International to
hedge the sale of 2,000,000 ounces of silver at US$21 per ounce,
during the period from July to December 2014.
13 Fair value hierarchy
The Group uses the following hierarchy for determining and
disclosing the fair value of financial instruments by valuation
technique:
Level 1: quoted (unadjusted) prices in active markets for
identical assets or liabilities.
Level 2: other techniques for which all inputs which have a
significant effect on the recorded fair value are observable,
either directly or indirectly.
Level 3: techniques which use inputs which have a significant
effect on the recorded fair value that are not based on observable
market data.
At 30 June 2014 and 31 December 2013, the Group held the
following financial instruments measured at fair value:
As at
30 June Level 1 Level 2 Level 3
2014 US$000 US$000 US$000 US$000
------------- -------- -------- --------
Assets measured at fair
value
Equity shares (note 11) 40,075 34,075 - 6,000
Forward contracts (note
12) 2,105 - 2,105 -
Embedded derivatives
(note 12) 3,102 - - 3,102
45,282 34,075 2,105 9,102
Liabilities measured
at fair value
Embedded derivatives
(note 12) - - - -
------------- -------- -------- --------
- - - -
------------- -------- -------- --------
As at
31 December
2013 Level 1 Level 2 Level 3
US$000 US$000 US$000 US$000
------------- -------- -------- --------
Assets measured at fair
value
Equity shares (note 11) 51,658 45,658 - 6,000
51,658 45,658 - 6,000
Liabilities measured
at fair value
Embedded derivatives
(note 12) (2,294) - - (2,294)
-------- -------- --------
(2,294) - - (2,294)
------------- -------- -------- --------
During the periods ending 30 June 2014 and 31 December 2013,
there were no transfers between these levels.
The reconciliation of the financial instruments categorised as
level 3 is as follows:
Embedded derivatives Equity
(liabilities)/assets shares
US$000 US$000
---------------------- --------
Balance at 1 January 2013 (6,891) 12,009
Gain from the period recognised in revenue 4,597 -
Impairment through profit and loss (finance
costs) - (5,745)
Fair value change through equity - (264)
Balance 31 December 2013 (2,294) 6,000
Gain from the period recognised in revenue 5,396 -
Balance 30 June 2014 3,102 6,000
---------------------- --------
Valuation techniques:
Level 2: Forwards are measured using a market valuation of
commodities swap technique that makes maximum use of market inputs
such as quoted market prices and discount rates.
Level 3: Comprises embedded derivatives and equity shares of
Pembrook Mining Corp.
Embedded derivatives: 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 4). The selling price of metals can be reliably
measured as these are actively traded on international exchanges
but the estimated metal content is a non observable input to this
valuation. At 30 June 2014 the fair value of embedded derivatives
within sales contracts was US$3,102,000 (31 December 2013:
US$(2,294,000)).
Equity shares: The unquoted shares of Pembrook Mining Corp are
measured based on a combination of observable and unobservable
market data. Based on available observable market data of similar
peers, the Group considers there is no need to recognise any change
in the value of the investment.
14 Cash and cash equivalents
As at
30 June As at
31 December
2014 2013
(Unaudited)
US$000 US$000
------------- -------------
Cash at bank 451 454
Liquidity funds(1) 6,030 8,751
Current demand deposit accounts(2) 22,315 62,259
Time deposits(3) 196,754 214,971
------------- -------------
Cash and cash equivalents 225,550 286,435
============= =============
(1) The liquidity funds are mainly invested in certificate of
deposits, commercial papers and floating rate notes with a weighted
average maturity of 8 days as at 30 June 2014 (as at 31 December
2013: 8 days).
(2) Relates to bank accounts which are readily accessible to the
Group and bear interest.
(3) These deposits have an average maturity of 40 days (as at 31
December 2013: 27 days).
15 Borrowings
The movement in borrowings during the period to 30 June 2014 is
as follows:
As at
1January As at
2014 Additions Repayments Reclassifications 30 June
US$000 US$000 US$000 US$000 2014 US$000
---------- ---------- ----------- ------------------ -------------
Current
Bank loans 320,052 14,669 (325,546) - 9,175(1)
Bond payable(2) - 11,338 - - 11,338
Convertible bond
payable 115,873 4,595 (3,303) - 117,165
435,925 30,602 (328,849) - 137,678
Non-current
Bond payable(2) - 343,174 - - 343,174
- 343,174 - - 343,174
---------- ---------- ----------- ------------------ -------------
Accrued Interest: (5,687) (15,964) 6,021 - (15,630)
---------- ---------- ----------- ------------------ -------------
Before accrued
interest 430,238 357,812 (322,828) - 465,222
---------- ---------- ----------- ------------------ -------------
(1) Mainly relates to pre-shipment loans for a total amount of
US$9,175,000 advanced to Minera Santa Cruz S.A. (at 31 December
2013: US$24,122,000) and US$Nil of Minera Suyamarca S.A.C. (at 31
December 2013: US$30,053,000). Pre-shipment loans are credit lines
given by banks to meet payment obligations arising from the Group's
exports.
(2) Relates to the issuance of US$350,000,000 7.75% Senior Notes
on 23 January 2014 for net proceeds after discounts and transaction
costs of US$342,043,000 plus interest to 30 June 2014 of
US$12,469,000. These proceeds were used to repay the US$270,000,000
syndicated loan on the same date.
(3) The carrying amount of current borrowings differ their fair
value only with respect to differences arising under the effective
interest rate calculations. The carrying amount and fair value of
the non--current borrowings are as follows:
Carrying amount Fair value
------------------------ ------------------------
As at 30 As at 31 As at 30 As at 31
June 2014 December June 2014 December
US$000 2013 US$000 US$000 2013 US$000
------------- ---------- ------------ ---------- ------------
Bond payable 343,174 - 376,250 -
------------- ---------- ------------ ---------- ------------
Total 343,174 - 376,250 -
------------- ---------- ------------ ---------- ------------
16 Dividends paid and declared
Six-months ended 30 June
2014 2013
US$000 US$000
------------ ------------
Declared and paid during the period:
Equity dividends on ordinary shares:
Final dividend for 2013: US$Nil (2012: US$0.03) - 10,139
Dividends declared to non-controlling interest: US$0.03 (2012: US$0.05) 3,101 6,000
Dividends declared and paid 3,101 16,139
------------ ------------
Dividends declared to non-controlling interest: US$0.03 2,410 -
Dividends declared and not paid 2,410 -
------------ ------------
Total dividends declared 5,511 16,139
------------ ------------
2014 Interim dividend: US$Nil (2013: US$Nil) - -
------------ ------------
There was no final dividend in respect of the year ended 31
December 2013. The Directors of the Company have not declared an
interim dividend in respect of the year ending 31 December
2014.
17 Related party transactions
There were no significant transactions with related parties
during the six month period ending 30 June 2014.
18 Commitments
a) Mining rights purchase options
During the ordinary course of business, the Group enters into
agreements to carry out exploration under concessions held by third
parties. Generally, under the terms of these agreements, the Group
has the option to acquire the concession or invest in the entity
holding the concession. In order to exercise the option the Group
must satisfy certain financial and other obligations over the
agreement term. The option lapses in the event that the Group does
not meet the financial requirements. At any point in time, the
Group may cancel the agreements without penalty, except in certain
specific circumstances.
The Group continually reviews its requirements under the
agreements and determines on an annual basis whether to proceed
with the financial commitment. Based on management's current
intention regarding these projects, the commitments at the balance
sheet date are as follows:
As at As at
30 June 2014 US$000 31 December 2013 US$000
-------------------- ------------------------
Less than one year 1,150 1,484
Later than one year 16,140 16,250
b) Capital commitments
The future capital commitments of the Group are as follows:
As at As at
30 June 2014 US$000 31 December 2013 US$000
-------------------- ------------------------
Peru 141,050 151,362
Argentina 10,113 6,767
151,163 158,129
-------------------- ------------------------
19 Subsequent events
a) Sale of available for sale financial assets
Subsequent to 30 June 2014, the Group has sold 5,048,464 shares
of Gold Resource Corp. for proceeds of US$25,531,000, 1,573,746
shares of Chaparral Gold Corp for proceeds of US$765,000, 652,000
shares of Northern Superior Resources Inc. for proceeds of
US$22,000 and 319,500 shares of Mirasol Resources Ltd. for proceeds
of US$360,000, generating a total gain on disposal of
US$3,046,000.
The Group is continuing with the process of disposing of its
available-for-sale financial assets, such that their value can be
realised and optimally deployed within the Group.
b) Medium term loan facility
Subsequent to 30 June 2014, the Group successfully negotiated
the term sheet of a US$100,000,000 medium term loan facility, with
formal credit approval. As at the date of issue of these interim
condensed consolidated financial statements, the facility is
subject to final documentation and closing.
Profit by operation(1)
(Segment report reconciliation) as at 30 June 2014
Consolidation
adjustment
Company (US$000) Ares Arcata Pallancata San Jose Moris and others Total/HOC
---------------------------------------- -------- -------- ---------- -------- ----- ------------- ----------
Revenue 24,811 61,735 84,837 110,126 471 32 282,012
Cost of sales (Pre consolidation) (25,341) (50,406) (61,445) (74,978) (962) 200 (212,932)
---------------------------------------- -------- -------- ---------- -------- ----- ------------- ----------
Consolidation adjustment 2 329 (131) - - (200) -
Cost of sales (Post consolidation) (25,339) (50,077) (61,576) (74,978) (962) - (212,932)
Production cost excluding
Depreciation (17,600) (29,059) (34,779) (49,838) - - (131,276)
Depreciation in
production
cost (430) (15,483) (24,354) (18,589) - - (58,856)
Other items (4,194) (992) (647) (656) - - (6,489)
Change in inventories (3,115) (4,543) (1,796) (5,895) (962) - (16,311)
---------------------------------------- -------- -------- ---------- -------- ----- ------------- ----------
Gross profit (530) 11,329 23,392 35,148 (491) 232 69,080
---------------------------------------- -------- -------- ---------- -------- ----- ------------- ----------
Administrative expenses - - - - - (22,223) (22,223)
Exploration expenses - - - - - (8,712) (8,712)
Selling expenses (44) (1,054) (977) (12,461) - - (14,536)
Other income/expenses - - - - - (5,750) (5,750)
---------------------------------------- -------- -------- ---------- -------- ----- ------------- ----------
Operating profit before
impairment (574) 10,275 22,415 22,687 (491) (36,453) 17,859
---------------------------------------- -------- -------- ---------- -------- ----- ------------- ----------
Impairment of assets - - - - - (476) (476)
Finance income - - - - - 1,813 1,813
Finance costs - - - - - (22,276) (22,276)
FX gain/(loss) - - - - - (335) (335)
---------------------------------------- -------- -------- ---------- -------- ----- ------------- ----------
Profit/(loss) from continuing
operations before income
tax (574) 10,275 22,415 22,687 (491) (57,727) (3,415)
---------------------------------------- -------- -------- ---------- -------- ----- ------------- ----------
Income tax (8,334) (8,334)
---------------------------------------- -------- -------- ---------- -------- ----- ------------- ----------
Profit/(loss) for the year
from continuing operations (574) 10,275 22,415 22,687 (491) (66,061) (11,749)
---------------------------------------- -------- -------- ---------- -------- ----- ------------- ----------
1 On a post-exceptional basis.
SHAREHOLDER INFORMATION
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
Enquiries concerning shareholdings, dividends and changes in
personal details should be referred to the Company's registrars,
Capita Asset Services as detailed below.
By post: Capita Asset Services, 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-Fri)
-- If calling from overseas: +44 20 8639 3399
By fax: +44 (0) 20 8639 2342
Investor Relations
For investor enquiries please contact the London office by
writing to the registered office (given below) or by telephone on
020 3714 9040 or by email to info@hocplc.com.
Hochschild Mining plc
23 Hanover Square
London
W1S 1JB
Registered in England and Wales with Company Number 5777693
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.
[1]On a pre-exceptional basis
[2]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
[3]Includes saving from suspension of 2013 dividend payments
[4]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)
[5]This facility is subject to customary closing conditions
[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]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).
[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]H1 2013 attributable production for Pallancata has been
restated to 100% of production and also includes production from
the recently-sold Moris operation.
[10]Revenue presented in the financial statements is disclosed
as net revenue. In this Financial Review it is calculated as gross
revenue less commercial discounts.
[11]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.
[12]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 and includes hedge
gains.
[13]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.
[14]Other revenue includes revenue from (i) the sale of energy
in Peru and, (ii) administrative services in Mexico.
[15]Unit cost per tonne is calculated by dividing mine and
geology costs by extracted tonnage and plant and other costs by
treated tonnage.
[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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