TIDMHOC
RNS Number : 0641V
Hochschild Mining PLC
23 October 2014
23 October 2014
Interim Management Statement and
Production Report for the 3 months ended 30 September 2014
Highlights
-- Q3 2014 production of 4.8 million attributable silver
equivalent ounces
-- Q3 YTD production of 16.7 million attributable silver
equivalent ounces
-- On track to achieve 2014 production target of 21.0 million
attributable silver equivalent ounces
-- Further progress achieved at Inmaculada Advanced Project:
o 2015 production target of 6-7 million silver equivalent ounces
remains in place
o Overall project 73% complete
o Key underground mine development plan ahead of schedule
o Company working with contractor to overcome delays in plant
construction
-- Cashflow optimisation programme continuing to reduce
costs:
o Approximately $270 million of savings already achieved
o Further savings of approximately $50 million identified for
2015
-- Total cash of approximately $180 million as at 30 September
2014
-- $115 million convertible bond repaid on 20 October 2014
-- 38,000 ounces of gold hedged for 2015 at $1,300 per ounce
-- Final Gold Resource Corporation holding sold in August
2014:
o Total cash proceeds from sales in 2014 of $46 million
Ignacio Bustamante, Chief Executive Officer commented:
"Hochschild remains comfortably on course to achieve its full
year production forecast of 21 million silver equivalent ounces
despite the absence of a contribution from the now-closed Ares
mine. Furthermore, our cash optimisation programme has also
continued to make substantial progress with an additional $50
million of operational, administrative and exploration savings
identified."
Construction continued at our exciting Inmaculada project and
whilst we are working with the contractor to overcome delays with
the construction of the plant, the strong progress made by our own
teams with other key deliverables is expected to ensure no changes
to our 2015 production forecast from that project."
__________________________________________________________________________________
A conference call will be held at 2.30pm (London time) on
Thursday 23 October 2014 for analysts and investors.
Dial in details as follows:
UK: +44 (0) 20 3003 2666
Password: Hochschild
A recording of the conference call will be available for one
week following its conclusion, accessible from the following
telephone number:
UK: +44 (0) 20 8196 1998
Access code: 7798602
__________________________________________________________________________________
Overview
In Q3 2014, the Company delivered attributable production of 4.8
million silver equivalent ounces, comprised of 3.5 million ounces
of silver and 21.1 thousand ounces of gold. The Company remains on
track to meet its full year production target of 21.0 million
attributable silver equivalent ounces.
Production
Main operations
At Arcata, total silver equivalent production in Q3 was 1.6
million ounces (Q3 2013: 1.6 million ounces). Despite the loss of
fourteen days of production due to industrial action in August and
the absence of a contribution from the now-depleted low-grade
Macarena waste deposit, a planned move to higher grade areas of the
mine (Tunel 4) and higher recoveries led to production being
similar to the level of Q2 2014.
At Pallancata, as a result of the Company's rigorous policy of
mining average reserve grades and the necessary adjustment of mine
plans arising from the cash optimisation programme to ensure the
extraction of profitable ounces, grades in the third quarter were
adjusted downwards with production at 1.7 million silver equivalent
ounces (Q3 2013: 2.3 million ounces).
The San Jose operation enjoyed another solid quarter with total
silver equivalent production at 2.9 million ounces, a 3%
improvement on the previous quarter, driven by better gold grades
and higher recoveries.
Average realisable prices and sales
Average realisable precious metal prices in Q3 2014 (which are
reported before the deduction of commercial discounts and include
the effects of the announced hedging agreements) were $1,226/ounce
for gold and $17.13/ounce for silver (Q3 2013: $1,417/ounce for
gold and $23.24/ounce for silver). For the first nine months of
2014, average realisable precious metal prices were $1,302/ounce
for gold and $19.61/ounce for silver (Q3 2013 YTD: $1,384/ounce for
gold and $23.11/ounce for silver).
In August, the Company signed a further agreement to hedge the
sale of 38,000 ounces of gold at $1,300/ounce for 2015.
Brownfield exploration[1]
Arcata
In Q3 7,203 metres have been drilled at Arcata including two
holes in the Paralela 2 vein and two holes in the Marciano and
Luisa veins. Drilling campaigns at new potential areas are
scheduled for the rest of the year subject to obtaining the
relevant environmental permits from local authorities. Significant
intercepts included:
Vein Results
----------- ----------------------------------------
DDH501-S14: 0.8m at 1.04 g/t Au & 12.21
Marciano g/t Ag
----------- ----------------------------------------
Paralela 2 DDH648-LM14: 0.98m at 1.16 g/t Au &
91.61 g/t Ag
DDH649-LM14: 0.95m at 5.20 g/t Au &
668.92 g/t Ag
DDH653-LM14: 2.0m at 10.10 g/t Au &
2,431.38 g/t Ag
----------- ----------------------------------------
Pallancata
In Q3, 2,924 metres of drilling was carried out at Pallancata
focusing on potential areas such as East Larissa, Isis, East
Pallancata, Pucanta and Emilia NW. Mapping campaigns were carried
out over 135 ha. including areas such as Ranichico, Yanacochita,
Roiropata and Yurika.
San Jose
In Q3 2014,3,102 metres were drilled at San Jose. Mapping of the
Los Pinos vein, over an area of 3,500 ha, has been completed.
Geophysics studies over three lines in the El Retiro zone totalled
4.5 km with several epithermal veins found.
Ares
Geological mapping over an area of 4,300 ha surrounding the now
closed Ares mine was completed and included areas such as
Vizcacuto, Machucocha, Lola and Karina. Two drilling campaigns
totalling 5,500 metres are expected to begin in the fourth
quarter.
Advanced Project
Inmaculada
At the Inmaculada project, the EPC contractor Graña y Montero
continued construction of the plant in the third quarter and
currently has reached 57% completion. Although some delays remain
at the plant site itself, the substantial progress made by the
Hochschild team in the area of mine development, the key potential
bottleneck, is expected to ensure that a significant stockpile will
be available for processing on completion of the plant.
Consequently, the overall production forecast of 6-7 million silver
equivalent ounces for 2015 is not expected to be impacted.
A total of 13,709 metres of tunnelling and 2,445 metres of raise
boring have been carried out to date at the project. In addition,
construction started in early September on the warehouses,
laboratories and workshops whilst work on the paste backfill plant
commenced in early October.
During September 2014, relogging of the Angela vein system was
completed and will be used to generate a new geological model. In
addition, a project has started in order to review the properties
available between the Pallancata mine and the Inmaculada project.
Six structures have been selected - Escandalosa, Vanessa,
Alejandra, Prometida Escondida and Rafaela. Mapping has already
been carried out as well as some geochemical studies with results
at Prometida, Alejandra, Escondida and Rafaela showing
anomalies.
Exploration pipeline
Highlights of the exploration programme during the period are
provided below.
Mexico
Riverside JV
Two targets, Bohemia and Cajon, were proposed by Riverside, our
JV partners in the western Sonora in Mexico. However sampling at
Bohemia did not show continuity in the mineralisation displaying
poor gold values and consequently work at the target was halted.
Trenching at Cajon has already concluded and a drilling campaign
will be performed in 2015.
The JV will present a new project, Glor, which is located to the
north west of the El Chanate mine owned by AuRico Gold which
exhibits similar geology.
Peru
During Q3 2014, the Company's exploration work in Peru focused
on reviewing new opportunities that have become available as a
result of the weakness in the mining industry. One of these relates
to the Corina project owned by Lara Exploration which is located
15-20 km from the Selene plant. The agreement includes the grant of
an option to Hochschild entitling the Company to acquire 100% of
the project over four years. Besides this, the exploration team is
evaluating a number of properties including the Ibel prospect.
Financial position
The Company's financial position remains robust, with total cash
of approximately $180 million as at 30 September 2014. On 21
October, Hochschild announced that following maturity of its 5.75
per cent senior unsecured convertible bonds on 20 October 2014, all
outstanding convertible bonds have been redeemed. As a result, the
principal amount of $114.9 million has been repaid in full,
financed from existing cash resources.
In early October, Hochschild successfully secured a $100 million
medium term loan facility at LIBOR +2.6% with Scotiabank Peru. This
facility has not yet been drawn down.
During Q3 2014, the Company sold the final tranche of its
holding in Gold Resource Corporation totalling 6.3 million shares
for a net consideration of $32.7 million in line with its policy of
monetising non-core investments.
Outlook
The Company is on track to achieve its full year production
target of 21.0 million attributable silver equivalent ounces. With
the original cash optimisation programme already delivering
approximately $270 million of savings, the Company has identified
approximately $50 million of further initiatives for 2015, again
focused on administration, operations and exploration savings.
The Company confirms that all-in sustaining costs per silver
equivalent ounce are on track to fall by 0-5% in 2014.
_________________________________________________________________________________
Enquiries:
Hochschild Mining plc
Charles Gordon +44 (0)20 3714 9040
Head of Investor Relations
RLM Finsbury
Charles O'Brien +44 (0)20 7251 3801
Public Relations
____________________________________________________________________________________
About Hochschild Mining plc
Hochschild Mining plc is a leading precious metals company
listed on the London Stock Exchange (HOCM.L / HOC LN) with a
primary focus on the exploration, mining, processing and sale of
silver and gold. Hochschild has almost fifty years' experience in
the mining of precious metal epithermal vein deposits and currently
operates three underground epithermal vein mines, two located in
southern Peru and one in southern Argentina. Hochschild also has
numerous long-term projects throughout the Americas.
PRODUCTION & SALES INFORMATION*
TOTAL GROUP PRODUCTION
Q3 Q2 Q3 YTD YTD
2014 2014 2013 2014 2013
------------------------- ------- ------- ------------ ------- -------
Silver production
(koz) 4,298 4,992 5,180 14,282 14,279
Gold production (koz) 32.34 38.67 45.02 109.31 131.42
Total silver equivalent
(koz) 6,239 7,312 7,881 20,840 22,164
Total gold equivalent
(koz) 103.98 121.87 131.36 347.34 369.40
Silver sold (koz) 3,659 4,974 4,660 13,745 13,813
Gold sold (koz) 26.47 38.18 41.43 102.77 125.00
------------------------- ------- ------- ------------ ------- -------
Total production includes 100% of all production, including
production attributable to Hochschild's joint venture partner at
San Jose as well as production in 2013 from the recently-sold Moris
operation.
ATTRIBUTABLE GROUP PRODUCTION
Q3 Q2 Q3 YTD YTD
2014 2014 2013 2014 2013
----------------------- ------- ------- ------- ------- -------
Silver production
(koz) 3,546 4,255 4,353 12,072 12,017
Gold production (koz) 21.06 27.92 32.47 76.52 95.99
Silver equivalent
(koz) 4,810 5,930 6,301 16,663 17,777
Gold equivalent (koz) 80.17 98.83 105.01 277.72 296.28
----------------------- ------- ------- ------- ------- -------
Attributable production for Q2 2014 and H1 2014 includes 100% of
all production from Arcata, Pallancata and Ares and 51% from San
Jose. Comparatives from 2013 for Pallancata have been restated to
100% of production and also include production from the
recently-sold Moris operation.
QUARTERLY PRODUCTION BY MINE
ARCATA
Product Q3 Q2 Q3 YTD YTD
2014 2014 2013 2014 2013
---------------------------- -------- -------- -------- -------- --------
Ore production (tonnes
treated) 149,888 171,334 229,462 515,461 656,736
Average grade silver
(g/t) 319 277 231 278 207
Average grade gold
(g/t) 0.90 0.85 0.76 0.84 0.72
Silver produced (koz) 1,353 1,321 1,355 4,248 3,647
Gold produced (koz) 3.74 3.96 4.62 12.50 12.51
Silver equivalent produced
(koz) 1,578 1,559 1,633 4,998 4,397
Silver sold (koz) 1,124 1,293 1,188 4,070 3,520
Gold sold (koz) 3.02 3.66 3.70 11.60 11.52
---------------------------- -------- -------- -------- -------- --------
ARES
Product Q3 Q2 Q3 YTD YTD
2014 2014 2013 2014 2013
---------------------------- ------- ------- ------- -------- --------
Ore production (tonnes
treated) - 89,853 87,665 167,331 237,493
Average grade silver
(g/t) - 114 96 110 80
Average grade gold
(g/t) - 2.26 2.58 2.34 2.54
Silver produced (koz) 8 282 235 534 563
Gold produced (koz) 0.17 5.73 6.66 11.63 18.50
Silver equivalent produced
(koz) 19 626 635 1,232 1,673
Silver sold (koz) 6 325 213 524 547
Gold sold (koz) 0.45 6.68 6.01 11.45 17.98
---------------------------- ------- ------- ------- -------- --------
PALLANCATA
Product Q3 Q2 Q3 YTD YTD
2014 2014 2013 2014 2013
---------------------------- -------- -------- -------- -------- --------
Ore production (tonnes
treated) 271,074 269,213 273,147 794,769 796,972
Average grade silver
(g/t) 199 269 264 242 257
Average grade gold
(g/t) 0.89 1.19 1.12 1.04 1.12
Silver produced (koz) 1,402 1,885 1,896 4,990 5,430
Gold produced (koz) 5.41 7.05 6.76 18.25 20.86
Silver equivalent produced
(koz) 1,727 2,307 2,302 6,085 6,682
Silver sold (koz) 1,381 1,844 1,599 4,996 5,189
Gold sold (koz) 5.11 6.88 5.49 18.22 19.16
---------------------------- -------- -------- -------- -------- --------
Comparatives from 2013 for Pallancata have been restated to 100%
of production.
SAN JOSE
Product Q3 Q2 Q3 YTD YTD
2014 2014 2013 2014 2013
---------------------------- -------- -------- -------- -------- --------
Ore production (tonnes
treated) 141,666 142,074 131,592 418,329 380,787
Average grade silver
(g/t) 388 378 446 386 435
Average grade gold
(g/t) 5.66 5.45 6.59 5.62 6.57
Silver produced (koz) 1,535 1,504 1,689 4,510 4,616
Gold produced (koz) 23.02 21.94 25.61 66.93 72.30
Silver equivalent produced
(koz) 2,916 2,820 3,226 8,526 8,953
Silver sold (koz) 1,150 1,511 1,656 4,154 4,536
Gold sold (koz) 17.89 20.95 24.71 61.15 69.50
---------------------------- -------- -------- -------- -------- --------
The Company has a 51% interest in San Jose.
*Silver equivalent production assumes a gold/silver ratio of
60:1
Forward looking statements
This announcement may contain forward looking statements. By
their nature, forward looking statements involve risks and
uncertainties because they relate to events and depend on
circumstances that will or may occur in the future. Actual results,
performance or achievements of Hochschild Mining plc may, for
various reasons, be materially different from any future results,
performance or achievements expressed or implied by such forward
looking statements.
The forward looking statements reflect knowledge and information
available at the date of preparation of this announcement. Except
as required by the Listing Rules and applicable law, the Board of
Hochschild Mining plc does not undertake any obligation to update
or change any forward looking statements to reflect events
occurring after the date of this announcement. Nothing in this
announcement should be construed as a profit forecast.
- ends -
[1]Please note that in line with industry-wide standards, all
mineralised intersections in this release are quoted as calculated
true widths.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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