TIDMHOC
RNS Number : 7176H
Hochschild Mining PLC
18 March 2015
___________________________________________________________________________
18 March 2015
Hochschild Mining plc
Preliminary Results for the twelve months ended 31 December
2014
Inmaculada Advanced Project update
-- Overall project 90% complete
-- Plant construction 90% complete; contractor on track to commission
plant in Q2 2015
-- Key underground development plan ahead of schedule - almost 200,000
tonnes of development mineral ready for processing
-- 2015 production target of 6-7 million silver equivalent ounces
Financial Results highlights(1)
-- Net revenue of $493.0 million (2013: $622.2 million)
-- Adjusted EBITDA of $135.6 million (2013: $201.0 million)(2)
-- Earnings per share of $(0.15) (2013: $(0.15))
-- Cash balance of $116.0 million as at 31 December 2014
-- $75 million of short term lines drawn in 2015
Operational highlights
-- Full year production of 22.2 million attributable silver equivalent
ounces exceeding 21.0 million target
-- Main operation all-in sustaining costs per silver equivalent ounce
fell by 6% to $17.4 in 2014, exceeding guidance of 0-5% reduction(3)
-- Core operation mine plans revised to deliver profitable ounces
in lower precious metal price environment
2015 Outlook
-- Attributable production target of 24.0 million silver equivalent ounces
-- All-in sustaining costs expected to be $15-16 per silver equivalent ounce
-- Operational expenditure of $45 million
-- Remaining Inmaculada construction expenditure of $72 million
$000, pre-exceptional unless stated Year ended Year ended % change
31 Dec 2014 31 Dec 2013
------------------------------------------------------------- ------------- ------------- ---------
Attributable silver production (koz) 16,187 16,639 (3)
Attributable gold production (koz) 101 127 (20)
Net Revenue(4) 492,951 622,158 (21)
Adjusted EBITDA 135,586 200,979 (33)
(Loss)/profit from continuing operations (56,689) (42,103) (35)
(Loss)/profit from continuing operations (post-exceptional) (70,831) (128,677) 45
Earnings per share ($ pre-exceptional) (0.15) (0.15) -
Earnings per share ($ post-exceptional) (0.19) (0.36) 47
------------------------------------------------------------- ------------- ------------- ---------
Commenting on the results, Eduardo Hochschild, Chairman,
said:
"In 2014, Hochschild continued to make good progress with our
flagship low cost Inmaculada project, delivered further significant
savings from our successful cashflow optimisation programme and
skilfully managed our balance sheet despite ongoing commodity
market weakness. With the Inmaculada commissioning process
commencing soon, I am confident that completion and ramp-up of this
exciting addition to our operating base will be delivered in the
next few months and that we can look forward to a strong
improvement in the Company prospects in the second half of
2015."
_______________________________________________________________________________________
A presentation will be held for analysts & investors at
9.30am (UK time) on Wednesday 18 March 2015 at the offices of
J.P.Morgan, 60 Victoria Embankment, London, EC4Y 0JP
For a live webcast of the presentation please visit our
website:
www.hochschildmining.com
To join the event via conference call, please see dial in
details below:
UK: +44(0)20 3427 1908 (Please quote confirmation code
9667033)
_______________________________________________________________________________________
Enquiries:
Hochschild Mining plc
Charles Gordon +44 (0)20 7907 2934
Head of Investor Relations
Hudson Sandler
Charlie Jack +44 (0)207 796 4133
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 over 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.
CHAIRMAN'S STATEMENT
Throughout another year of weak commodity markets, we have
executed a consistent strategy and I am delighted that we are now
so close to the completion of Inmaculada, our next mine in Peru.
Our management team has skilfully navigated its way through a
continuing decline in silver prices whilst keeping the organisation
competitive, allocating capital to project construction and
maintaining our financial flexibility.
Following our acquisition of the remaining stake in Inmaculada
in 2013, I remain confident about not only the plant commissioning
and mine ramp-up in just a few weeks from now, but also the
considerable potential within the mine's surrounding area. I
believe that there is scope over the coming years to transform our
Inmaculada land package into a world class mining district and
provide Hochschild with low cost growth for many years to come and
significantly beyond the originally envisaged mine life. In
addition, the Arcata deposit still has strong geological potential
and we continue to assess a variety of attractive exploration and
partnership opportunities. I believe that the competitive
advantages we have from our long regional experience, our strong
local business relationships as well as long-standing partnerships
with key local suppliers will allow us to develop our assets in a
cost effective manner. Across the Americas, Hochschild has
accumulated a number of highly prospective early stage projects
which will provide a growth platform for years to come.
The speed and success of our cashflow optimisation programme,
which has exceeded our initial expectations, has been vital in our
drive to ensure our Company operates profitably in underlying
commodity markets that unfortunately have not yet recovered after
the initial steep declines in mid 2013. Indeed with the silver
price once again reaching its lowest level since 2010, some
necessary mine plan adjustments were made to our Peruvian assets
which will ensure their viability in 2015 and especially during the
key final stages of the Inmaculada project construction. We have
also recently put in place further hedging for a portion of our
Peruvian production for the year, which will provide us with a
degree of cashflow stability in 2015.
Despite another highly creditable performance operationally,
Hochschild's 2014 earnings remain in negative territory principally
due to higher interest costs resulting from the inaugural senior
notes issue in January 2014 which we expect to be offset once the
Inmaculada project is complete. The Board therefore proposes not to
reinstate the full year dividend whilst the cash position is still
restricted by project capital expenditure. We remain committed to
the long term principle of delivering shareholder returns and the
Board intends to again reassess the position once the Company
returns to profitability.
Operating Responsibly
Our commitment to safety remains steadfast and one that we are
not willing to compromise and I am therefore delighted to report
that for the first time since our listing in 2006, we have been
able to achieve our on-going objective of Zero Fatalities in the
year. This is a true testament to all our teams who have
collectively worked to improve the safety culture across the
Company and of course, to our workers themselves. Being a
'Responsible Operator' sits at the core of our business strategy
and as showcased in the 2014 Sustainability Report, through the
diverse range of initiatives we have undertaken during the year. In
addition to building upon our successes with the Travelling Doctor
programme, where we have extended its reach and the range of
services offered, and the award-winning Digital Chalhuanca project,
we have worked with the communities close to the Inmaculada project
to establish business networks dealing in locally grown produce as
a means of promoting sustainable economic development. Looking at
our commitment to the environment, I am proud to report that our
main operations have been re-certified as compliant with the ISO
14001 international standard, acknowledging the integrity of our
environmental management systems.
Board
It is in these challenging times for the industry that the need
for strong leadership is of paramount importance and, for this
reason, I wish to commend our dedicated management team for their
ongoing efforts and my fellow directors for their continued support
during the year. Whilst mindful of the benefits of refreshing the
composition of the Board, I consider the need for stability in this
key transitionary period as being as crucial as ever. I am,
therefore, also grateful to our directors for agreeing to delay the
implementation of our Non-Executive succession plan.
The continued operating challenges prompted the Board to review
its contribution to the Cashflow Optimisation Programme resulting
in a further reduction in Board remuneration. This reflects an
acknowledgment of the sacrifices made by colleagues across the
business and the impact on shareholders from the volatile price
environment.
After discussions with the Board, I took the decision to assume
a Non-Executive role, as announced at the end of last year. Despite
this recent change, I remain resolutely committed to the business
as we position ourselves to optimise the delivery of value to all
of our stakeholders.
Outlook
It remains challenging to predict the short term direction of
precious metal markets although we retain our belief that the
strong underlying fundamentals will reassert themselves. However,
the Board is reassured that considerable steps have been taken to
ensure the Company's resilience in a low price environment but also
to capitalise on an upturn when it happens with low cost, value
accretive growth.
Eduardo Hochschild
Chairman
17 March 2015
CHIEF EXECUTIVE OFFICER'S STATEMENT
Hochschild's key strategic aims for 2014 have been to advance
our flagship Inmaculada project to its final stages, to continue to
drive our successful cashflow optimisation programme and finally,
to manage the Company's finances through what was always expected
to be a challenging transitional phase. These objectives have been
achieved despite further silver price weakness during 2014, a trend
that has now extended to the majority of commodity markets.
Growth
The importance of the low cost Inmaculada mine for the future
competitiveness of the Company was emphasised throughout the year
whilst good progress was made at the project. The plant contractor,
Graña y Montero, commenced work on the plant in early April and in
spite of a few delays, plant completion has now reached 90%.
Excellent progress has also been made in other key deliverables
including the completion of the camp, connection to the national
grid and all procurement and infrastructure targets achieved. We
remain confident that the commissioning date in Q2 will be
achieved. The key area of underground mine development has
progressed well and consequently a substantial ore stockpile will
be available for processing on completion of the plant, ensuring
our production guidance from the mine in 2015 of six to seven
million silver equivalent ounces remains in place.
Cost Savings
Throughout 2014, Hochschild has continued to make substantial
progress in improving the cost position of its current mines as
well as of the Company as a whole. Initiatives have encompassed all
business areas including administration, exploration and most
importantly at the operational level where we have achieved further
efficiencies in supply chain management and commercial negotiations
as well as significant working capital improvements. Both the
Peruvian operations have been optimised with the focus now on
accessible ore. This has reduced sustaining capital expenditure for
2015 and has resulted in a reduction in plant throughput at both
sites with the Company focusing on the production of profitable
ounces. Whilst the overall efficiency drive has necessitated
further headcount reductions, the Company's all-in sustaining cost
target for 2015 of between $15 and $16 per silver equivalent ounce
represents a significant reduction and demonstrates the potential
upside of our flexible strategy. Beyond 2015, it is essential to
the ongoing competitiveness of the current Peruvian mines that
further operational efficiencies are achieved and that the
brownfield exploration programme continues to find additional high
quality resources.
Financing
With the Company allocating significant growth capital
expenditure to Inmaculada in a volatile precious metal environment,
focused management of our financial position has been crucial. We
began the year with our inaugural senior note offering raising
approximately $350 million to finance the previous year's
International Minerals acquisition and continued to demonstrate
sufficient financial flexibility to fund the remaining Inmaculada
expenditure as well as repaying the $115 million convertible bond
in October. Liquidity has been further enhanced with a $100 million
medium term credit facility secured late in the year. We also took
advantage of short periods of price improvement to hedge almost 30%
of our 2014 production in order to realise a degree of cashflow
certainty during the year. We believe that such a strategy will
remain appropriate during commissioning and ramp up of the new mine
as we transition to lower cost production.
2014 overview
Despite our own ongoing programme of costs savings across the
organisation, our current operations responded well, exceeding the
forecast production target by almost 6% and delivering 22.2 million
attributable silver equivalent ounces. Arcata in Peru and San Jose
in Argentina both enjoyed robust years with their combined
contribution lifting by 3% versus 2013 whilst the adjustment in
production at Pallancata reflected the continuing move to thinner
veins. We were also able to deliver a better than expected final
production result from the Ares mine which was suspended in
June.
Financial results for 2014 reflected the effect of a near 15%
fall in the average price achieved of silver despite some relief
provided by the hedges taken out during the year. Pre-exceptional
EBITDA was $135.5 million as a result of the aggressive plan to
reduce costs and expenses designed to offset the lower revenues.
The increase in the annual finance costs is primarily related to
the bond issued in January 2014 to complete the acquisition of
Inmaculada and Pallancata minorities and consequently the Company
expects that, once the new mine commences production and starts
generating cashflow, this charge will be largely absorbed.
Pre-exceptional EPS was (0.15) cents per share. The cash balance at
the end of 2014 was $116 million although an additional $75 million
of short term lines have been drawn down in early 2015.
Outlook
Production for 2015 is expected to increase to 24 million
attributable silver equivalent ounces which takes into account
between six and seven million ounces from Inmaculada. Costs are
expected to fall substantially although a portion of the capital
expenditure savings is non-recurring beyond 2015. The Company has
also continued its policy of protecting cashflows during the
Inmaculada construction by hedging a further six million silver
ounces for 2015 at $17.75 per ounce on top of the 38,000 gold
ounces already hedged at $1,300 per ounce.
In 2015, the focus of expenditure will remain firmly on
completing and ramping up Inmaculada, brownfield exploration at our
current operations and a drilling campaign at the Corina project in
Peru. Whilst exploration-led growth remains an important part of
Hochschild's long term strategy, the cashflow optimisation
programme has led to significant reductions in our exploration
initiatives especially at our greenfield projects, which we expect
to resume once prices recover.
2014 has proved to be another challenging year for the Company
and the management team is, once again, encouraged by the committed
attitude shown by all our employees. We look forward to the
commissioning of our new mine and expect to see the Company in a
stronger position by the end of 2015. We are confident that
Inmaculada will not only become our flagship low cost producer but,
with the strong upside potential at the deposit, will represent an
important engine of growth for the long term.
Ignacio Bustamante
Chief Executive Officer
17 March 2015
OPERATING REVIEW
2014 Highlights
-- Full year production of 22.2 million attributable silver
equivalent ounces achieved, exceeding guidance
-- Main operation all-in sustaining costs reduced by 6% in 2014
to $17.4 per silver equivalent ounce
-- Core operation mine plans revised to deliver profitable
ounces in lower precious metal price environment
-- Strong progress at Inmaculada Advanced Project with plant commissioning set for Q2 2015
CURRENT OPERATIONS
Production
In 2014, Hochschild has once again successfully exceeded its
full year production target, delivering attributable production of
22.2 million silver equivalent ounces, including 16.2 million
ounces of silver and 101 thousand ounces of gold. Hochschild's
production target for 2015 is 24.0 million attributable silver
equivalent ounces. The increase is mainly explained by the
inclusion of between six to seven million ounces from the
Inmaculada project offsetting the reduced contribution from the
current operations in Peru following the revision of mine
plans.
In order to reduce operating expenditure and ensure that all the
Company's mines can deliver profitable ounces in 2015, the mine
plans of the Arcata and Pallancata operations have been optimised
to maximise cash generation with the operational focus expected to
be on accessible ore areas requiring reduced capital expenditure
with cut-off grades reflecting the current weaker metal price
environment. Plant throughput is expected to be reduced to 1,500
tonnes per day at Arcata and 1,800 tonnes per day at Pallancata,
with the San Jose operation in Argentina continuing at its current
level.
Costs
The Company's all-in sustaining costs at its main operations
were reduced by 6% in 2014 to $17.4 per ounce driven by operational
initiatives resulting from the cashflow optimisation programme, an
ongoing decrease in industry cost inflation and grade improvements
particularly at Arcata.(5) Unit cost per tonne at the main Peruvian
operations was at $77.3 (2013: $74.2) with key factors being
narrower veins at Pallancata and the absence of material from the
low cost Macarena waste damn deposit at Arcata. In Argentina, unit
cost per tonne was reduced by 6% to $197.8 (2013: $210.0). Please
see page 16 of the Financial Review for further details on
costs.
The emphasis on profitable ounces at all operations with reduced
levels of sustainable capital expenditure for 2015 is expected to
have a positive effect on the Company's overall costs with the
all-in sustaining cost for the Company now expected to be reduced
to between $15 to $16 per ounce in 2015.
Main operations: Arcata (Peru)
The 100% owned Arcata underground operation is located in the
Department of Arequipa in southern Peru. It commenced production in
1964.
Arcata summary Year ended Year ended % change
31 Dec 2014 31 Dec 2013
------------------------------- ------------------ ------------------ ---------
Ore production (tonnes) 701,947 900,861 (22)
Average silver grade (g/t) 286 217 32
Average gold grade (g/t) 0.85 0.74 15
Silver produced (koz) 5,827 4,984 17
Gold produced (koz) 16.89 16.83 -
Silver equivalent produced
(koz) 6,841 5,994 14
Silver sold (koz) 5,621 4,924 14
Gold sold (koz) 15.66 15.95 (2)
Unit cost ($/t) 89.1 81.3 10
Total cash cost ($/oz Ag
co-product)(6) 12.6 12.7 (1)
All-in sustaining cost ($/oz) 17.7 20.9 (15)
------------------------------- ------------------ ------------------ ---------
Production and sales
Full year silver equivalent production at Arcata was 6.8 million
ounces, a very creditable 14% improvement on the 2013 result (6.0
million ounces) and was principally driven by a planned move to
higher grade areas of the mine. Tonnage fell following the
depletion of the Macarena Waste Dam deposit by the end of the first
half of the year.
Table Showing Contribution from Macarena Waste Dam Deposit
12 mths 2014 12 mths 2013
------------------------------- ------------- -------------
Total
Tonnage 701,947 900,861
Average head grade gold (g/t) 0.85 0.74
Average head grade silver
(g/t) 286 217
------------------------------- ------------- -------------
Macarena
Tonnage 38,366 290,226
Average head grade gold (g/t) 0.25 0.29
Average head grade silver
(g/t) 63 88
Stopes and Developments
Tonnage 663,581 610,635
Average head grade gold (g/t) 0.89 0.95
Average head grade silver
(g/t) 299 278
------------------------------- ------------- -------------
Costs
In 2014, the unit cost at Arcata of $89.1 per tonne was up 10%
versus 2013 with the overall effects of the ongoing cost savings
initiatives offset by the planned depletion in the processing of
the low cost Macarena material. However, all-in sustaining costs
fell by 15% to $17.7 per silver equivalent ounce (2013: $20.9 per
ounce) due to a decline in sustaining capex resulting from cashflow
optimisation programme initiatives as well as better grades.
Brownfield exploration
In 2014, a total of 20,868 metres of drilling was carried out at
Arcata. In the first half of the year, a detailed surface mapping
and sampling campaign was completed covering a total of 1,330 ha.
In addition, a drilling campaign with the aim of adding new
resources was carried out at the property.
In 2015, a 17,440 metre exploration and drilling programme at
Arcata will focus on inferred resource exploration at surface over
Tunel 3 and Tunel 4 and underground resource exploration at the
Lucero and Norte Sur veins.
Pallancata: Peru
The 100% owned Pallancata silver/gold property is located in the
Department of Ayacucho in southern Peru, approximately 160
kilometres from the Arcata operation. Pallancata commenced
production in 2007 and up until December 2013 was a joint venture,
in which Hochschild held a controlling interest of 60% with
International Minerals Corporation ("IMZ"). Following the purchase
of IMZ, Hochschild now owns 100% of the operation. Ore from
Pallancata is transported 22 kilometres to the Selene plant for
processing.
Pallancata summary Year ended Year ended % change
31 Dec 2014 31 Dec 2013
------------------------------- ------------------ ------------------ ---------
Ore production (tonnes) 1,051,068 1,088,712 (3)
Average silver grade (g/t) 238 264 (10)
Average gold grade (g/t) 1.03 1.13 (9)
Silver produced (koz) 6,527 7,628 (14)
Gold produced (koz) 24.34 27.83 (13)
Silver equivalent produced
(koz) 7,988 9,298 (14)
Silver sold (koz) 6,502 7,567 (14)
Gold sold (koz) 24.02 26.67 (10)
Unit cost ($/t) 69.3 68.3 1
Total cash cost ($/oz Ag
co-product) 11.0 10.3 7
All-in sustaining cost ($/oz) 16.7 16.7 -
------------------------------- ------------------ ------------------ ---------
Production and sales
At Pallancata, as a result of the Company's adjustment of mine
plans to ensure the extraction of profitable ounces, as detailed in
the November 2014 Operational Update, tonnage in the fourth quarter
was moved downwards with grades increasing. For the full year,
Pallancata produced 8.0 million silver equivalent ounces (2013: 9.3
million ounces) with the fall in the second half reflecting the
scheduled move to thinner veins in the mix.
Costs
Cost per tonne at Pallancata were $69.3 per tonne in 2014 (2013:
$68.3 per tonne). As at Arcata, costs were positively impacted by
the cashflow optimisation programme although the impact was offset
by a higher proportion of mineral extracted using conventional
methods due to narrower veins. All-in sustaining costs however,
were flat versus 2013 at $16.7 per silver equivalent ounce.
Brownfield exploration
During the first half of 2014, the exploration programme focused
on mapping and sampling a total of 1,200 ha. New surface structures
have also been recognised and drilling was carried out at two vein
systems. 10,466 metres of drilling was completed on potential areas
with further mapping campaigns also carried out over an area of
686ha.
In 2015, a 19,100 metre exploration and drilling programme at
Pallancata will focus on inferred resource exploration at surface
and also geological mapping of the west and south side of the
district for new target definition.
San Jose: Argentina
The San Jose silver/gold mine is located in Argentina, in the
province of Santa Cruz, 1,750 kilometres south-southwest of Buenos
Aires. San Jose commenced production in 2007 and is a joint venture
with McEwen Mining Inc (formerly Minera Andes Inc.). Hochschild
holds a controlling interest of 51% in the mine and is the mine
operator.
San Jose summary(*) Year ended Year ended % change
31 Dec 2014 31 Dec 2013
------------------------------- ----------------- ----------------- ---------
Ore production (tonnes) 571,017 536,937 6
Average silver grade (g/t) 404 425 (5)
Average gold grade (g/t) 5.77 6.42 (10)
Silver produced (koz) 6,469 6,357 2
Gold produced (koz) 94.16 98.83 (5)
Silver equivalent produced
(koz) 12,119 12,286 (1)
Silver sold (koz) 6,316 6,278 1
Gold sold (koz) 91.28 94.76 (4)
Unit cost ($/t) 197.8 210.0 (6)
Total cash cost ($/oz Ag
co-product) 12.1 13.4 (10)
All-in sustaining cost ($/oz) 17.8 19.0 (6)
------------------------------- ----------------- ----------------- ---------
(*) The Company has a 51% interest in San Jose
Production and sales
In 2014, San Jose again proved to be a very consistent performer
with increased tonnage offsetting lower grades and resulting in
almost unchanged year-on-year production of 12.1 million silver
equivalent ounces (2013: 12.3 million ounces).
Costs
At San Jose, unit cost per tonne decreased by 6% versus 2013 to
$197.8. This was mainly due to the impact of the cash optimisation.
All-in sustaining costs were reduced by 6% versus the same period
of 2013 with cash optimisation initiatives helping to reduce
sustaining and development capital expenditure.
Brownfield exploration
In 2014, a 5,263 metre potential drilling campaign was focused
on the definition of new veins. The team had already completed
detailed surface mapping and sampling over the Los Pinos vein and
identified another structure, Los Pinitos. In addition, mapping
work identified additional corridors for subsequent drilling
campaigns to focus on whilst further structures were identified in
the north east and to the west.
In 2015, a drilling program over Los Pinos and Los Pinitos is
planned - subject to obtaining environmental permits. A review and
interpretation of the ground magnetic and electrical data collected
on the property in the last 5 years is scheduled along with surface
geology work to identify new drill targets for 2016.
Other operations
Ares: Peru
The Ares mine, which commenced production in 1998, is a 100%
owned operation located approximately 25 kilometres from
Hochschild's Arcata mine in southern Peru.
Ares summary Year ended Year ended % change
31 Dec 2014 31 Dec 2013
---------------------------- ------------------ ------------------ ------------------
Ore production (tonnes) 167,331 329,095 (49)
Average silver grade
(g/t) 110 82 34
Average gold grade
(g/t) 2.34 2.39 (2)
Silver produced (koz) 534 757 (29)
Gold produced (koz) 11.63 23.40 (50)
Silver equivalent produced
(koz) 1,232 2,162 (43)
Silver sold (koz) 540 761 (29)
Gold sold (koz) 11.45 23.25 (51)
---------------------------- ------------------ ------------------ ------------------
Production and sales
The Company's Ares mine in Peru was suspended in the second
quarter of 2014 with total production for the first half and for
the year as whole being a better-than-expected 1.2 million silver
equivalent ounces (2013: 2.2 million ounces)
Brownfield exploration
Following the 2014 programme of geological mapping, a 2,500
metre drilling campaign is scheduled for 2015, subject to receiving
the requisite exploration permits.
PROJECT REVIEW
Hochschild's portfolio currently includes one Advanced Project,
Inmaculada and three Growth Projects, Crespo, Azuca and Volcan. The
continuing weakness of the precious metal markets following the
initial price declines in 2013 has led to the current focus on
Hochschild's flagship Inmaculada project. The acquisition of IMZ,
completed in December 2013, gave the Company 100% of this project
which is expected to contribute, after a ramp-up period,
approximately 12 million silver equivalent ounces per annum on
average with the start of plant commissioning due in the second
quarter of 2015.
The strategy with regards to Crespo, Azuca and Volcan was
revised in late 2013 with work on these deposits remaining on hold
throughout 2014. Despite the prioritisation of Inmaculada, all
three projects remain an important component of the company's
portfolio of development assets. It is management's intention that
in the event that precious metals markets show sustained
improvement, this would allow the Company to assess capital
re-allocation to these assets and potentially re-initiate
development.
Inmaculada
Inmaculada is a 20,000 hectare gold-silver project located in
the Company's existing operational cluster in southern Peru and is
100% owned and controlled by Hochschild, following the acquisition
of the remaining 40% from IMZ stake in December 2013.
The EPC contractor Graña y Montero continued construction of the
plant throughout the year. Later in 2014, concrete foundations for
the plant's SAG mill were found to not meet contractual technical
specifications and were therefore re-built which, along with other
delays in the project including slower than expected on-site
recruitment, resulted in the commissioning date of the plant being
rescheduled for Q2 2015. However, as a result of excellent progress
being made by the Hochschild team in the originally envisaged
bottleneck area of mine development, it has been possible to ensure
that a stockpile of just over 260,000 tonnes will be available for
processing on completion of the plant. Consequently, the Company
confirms that the overall production forecast of 6-7 million silver
equivalent ounces for 2015 remains in place.
Procurement of all main equipment was completed during the first
half and by the end of the year, other key deliverables such as
connection to the national grid, infrastructural and engineering
requirements and relevant permitting were complete. Construction
also commenced in the third quarter on the tailings dam,
warehouses, laboratories and workshops as well as work on the paste
backfill plant. In addition, a total of 15,406 metres of tunnelling
and 2,445 metres of raise boring have been carried out to date at
the project.
Construction capital expenditure at the project to date is $348
million with the remaining construction capital expenditure for
2015 expected to be $72 million bringing the total to $420
million.
Toward the middle of the year, mapping was carried out at the
Puquiopata (to the North East of Inmaculada) and Huarmapata veins
as well a re-logging of the Angela vein system in order to optimise
the geological model.
In addition to exploration at the Inmaculada land package, a
project was started to explore the overall properties available
between the Pallancata mine and Inmaculada. Following a mapping
programme in the Palca area further to the North East of
Inmaculada, in August two anomalous zones were identified, Palca 1
and Palca 2. At Palca 1, six promising vein structures have been
selected amongst others in a corridor of almost five kilometres
with work at Palca 2 starting later on in the year. In addition,
geochemical results have shown gold and silver presence at surface.
The exploration team's resulting interpretation has allowed them to
define the Palca corridor which continues to the North West into an
area called Cochaloma, which is part of the Pallancata concession,
where there are similar structures to Palca.
EXPLORATION REVIEW
In 2014, investment in exploration totalled $20.4 million and
was split between exploration work at the Company's existing
operations, the Inmaculada Advanced Project and greenfield
opportunities in Peru and Mexico. As part of Hochschild's ongoing
cashflow optimisation programme, the Company reduced its 2014
exploration budget with the main focus continuing to be on
brownfield exploration. Exploration work at the core operations was
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 were focused on identifying
new potential high grade areas.
Hochschild's greenfield strategy for 2014 was focused on only
the most promising prospects, specifically in Peru and Mexico.
In 2015, exploration activity will be primarily focused on
brownfield exploration in order to maintain or improve the resource
base. As a direct consequence of the continued low price
environment, the level of greenfield exploration and appraisal of
acquisition/joint venture opportunities has been significantly
reduced.
Mexico
Pachuca
In the first half of the year, at the Pachuca project in Mexico,
the joint venture with Solitario Exploration & Royalty Corp,
focused on the northwestern extension of the historical vein mining
district. The 2014 plan included 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 was transferred back to Solitario.
Riverside Joint Venture
In the first half of the year, the exploration team accepted two
targets generated by Riverside, the joint venture partners in the
western Sonora in Mexico. The projects were Bohemia and Cajon and
whereas Bohemia exhibited mineralised veins, orogenic type
mineralisation was observed at Cajon with highly frequent small
mineralised veins off a detachment fault. 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 also concluded and a drilling campaign will be
performed in 2015.
During the fourth quarter, the Company decided to close its
exploration office in Chihuahua and focus on financing and
supporting Riverside from the head office. The venture continues to
explore new opportunities in this prolific, low-cost mineral
district.
Peru
During the year, the Company's exploration efforts in Peru
focused on optimising the existing portfolio and reviewing any
industry opportunities. One of these was 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. Company
community relations teams are currently negotiating access
agreements that would allow the Company to drill in late 2015,
subject to government permit approvals.
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)
$000 unless otherwise indicated Year ended Year ended % change
31 Dec 2014 31 Dec 2013
------------------------------------------------------------- ------------- ------------- ---------
Net Revenue(7) 492,951 622,158 (21)
Attributable silver production (koz) 16,187 13,588 19
Attributable gold production (koz) 101 116 (13)
Cash costs ($/oz Ag co-product(8) 11.9 12.3 (3)
Cash costs ($/oz Au co-product) 847 748 13
Total all-in sustaining costs ($/oz) 18.2 19.9 (9)
Main operation all-in sustaining costs ($/oz) 17.4 18.6 (6)
Adjusted EBITDA(9) 135,586 200,979 (35)
(Loss)/profit from continuing operations (56,689) (42,103) (33)
(Loss)/profit from continuing operations (post exceptional) (70,831) (128,677) 45
Earnings per share (pre exceptional) (0.15) (0.15) -
Earnings per share (post exceptional) (0.19) (0.36) 47
Cash flow from operating activities(10) 93,779 64,674 45
------------------------------------------------------------- ------------- ------------- ---------
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 18% to $540.9
million in 2014 (2013: $658.2 million) primarily driven by another
substantial fall in precious metal prices.
Silver
Gross revenue from silver decreased 17% in 2014 to $358.2
million (2013: $432.6 million) as a result of lower prices as well
as a 3% decrease in the total amount of silver ounces sold to
18,981 koz (2013:19,555 koz).
Gold
Gross revenue from gold decreased 19% in 2014 to $182.7 million
(2013: $225.6 million) as a result of a 4% fall in the average
price received although mostly due to a 15% decline in gold sales -
the total amount of gold ounces sold in 2014 at 142.8 koz (2013:
168.6 koz).
Gross average realised sales prices
The following table provides figures for average realised prices
and ounces sold for 2014 and 2013:
Average realised prices Year ended Year ended
31 Dec 2014 31 Dec 2013
----------------------------------- ------------- -------------
Silver ounces sold (koz) 18,981 19,555
Avg. realised silver price ($/oz) 18.87 22.12
Gold ounces sold (koz) 142.77 168.56
Avg. realised gold price ($/oz) 1,279 1,338
----------------------------------- ------------- -------------
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 2014, the
Group recorded commercial discounts of $48.1 million (2013: $36.1
million). This increase is explained by the decision to sell the
majority of production from Arcata as concentrate due to improved
commercial terms. The ratio of commercial discounts to gross
revenue in 2014 increased to 9% (2013: 6%).
Net revenue
Net revenue decreased by 21% to $493.0 million (2013: $622.2
million), comprising silver revenue of $320.8 million and gold
revenue of $172.0 million. In 2014 silver accounted for 65% and
gold 35% of the Company's consolidated net revenue with no change
from the 2013 split.
Revenue by mine
$000 unless otherwise indicated Year ended Year ended % change
31 Dec 2014 31 Dec 2013
--------------------------------- ------------- ------------- ---------
Silver revenue
Arcata 103,963 115,522 (10)
Ares 10,896 17,712 (38)
Pallancata 129,042 163,394 (21)
San Jose 114,276 135,291 (16)
Moris 30 650 (95)
Commercial discounts (37,369) (27,050) (38)
Net silver revenue 320,838 405,519 (21)
Gold revenue
Arcata 20,040 22,271 (10)
Ares 14,993 32,650 (54)
Pallancata 31,984 35,189 (9)
San Jose 115,211 123,905 (7)
Moris 441 11,597 (96)
Commercial discounts (10,713) (9,036) 19
Net gold revenue 171,956 216,576 (21)
--------------------------------- ------------- ------------- ---------
Other revenue(11) 157 63 (149)
--------------------------------- ------------- ------------- ---------
Net revenue 492,951 622,158 (21)
--------------------------------- ------------- ------------- ---------
Costs
Total pre-exceptional cost of sales decreased 13% to $404.6
million in 2014 (2013: $466.8 million). The direct production cost
decreased by 15% in 2014, to $265.6 million (2013: $311.7 million)
mainly due to the positive effects on operating costs of the
Company's ongoing cash optimisation programme and lower tonnage
treated at the Ares mine. Depreciation in 2014 was $126.0 million
(2013: $144.1 million) with the decrease mainly due to lower
tonnage and the lower cost of the conversion of resources into
reserves. Other items, which principally includes the costs
associated with stoppages in Argentina, was $4.4 million in 2014
(2013: $7.0 million) with change in inventories at $8.6 million in
2014 (2013: $3.9 million).
$000 Year ended Year ended % Change
31 Dec 2014 31 Dec 2013
---------------------------------- ------------- ------------- ---------
Direct production cost excluding
depreciation 265,637 311,699 (15)
Depreciation in production cost 125,955 144,137 (13)
Other items 4,406 7,004 (37)
Change in inventories 8,641 3,926 120
---------------------------------- ------------- ------------- ---------
Pre-exceptional cost of sales 404,639 466,766 (13)
---------------------------------- ------------- ------------- ---------
Unit cost per tonne
The Company reported unit cost per tonne at its main operations
of $106.6 in 2014, slightly up on 2013 (2013: $103.2). For further
explanation on the increase in unit cost per tonne please refer to
page 7 of the Operating Review.
Unit cost per tonne by operation (including royalties)(12) :
Operating unit ($/tonne) Year ended Year ended % change
31 Dec 2014 31 Dec 2013
-------------------------- ------------- -------------- ---------
Main operations 106.6 103.2 3
Peru 77.3 74.2 4
Arcata 89.1 81.3 10
Pallancata 69.3 68.3 1
-------------------------- ------------- -------------- ---------
Argentina
San Jose 197.8 210.0 (6)
-------------------------- ------------- -------------- ---------
Others
Ares 119.3 128.3 (7)
-------------------------- ------------- -------------- ---------
Total 107.4 106.1 1
-------------------------- ------------- -------------- ---------
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(13) :
$000 unless otherwise indicated Year ended Year ended % change
31 Dec 2014 31 Dec 2013
----------------------------------- ------------- ------------- ---------------------------
Group cash cost 353,736 387,686 (9)
----------------------------------- ------------- ------------- ---------------------------
(+) Cost of sales 404,639 466,766 (13)
(-) Depreciation and amortisation
in cost of sales (128,480) (144,923) 11
(+) Selling expenses 28,697 28,785 -
(+) Commercial deductions 48,880 37,058 32
Gold 10,752 9,065 19
Silver 38,128 27,993 36
----------------------------------- ------------- ------------- ---------------------------
Revenue 492,951 622,158 (21)
----------------------------------- ------------- ------------- ---------------------------
Gold 171,956 216,576 (21)
Silver 320,838 405,519 (21)
Others 157 63 149
----------------------------------- ------------- ------------- ---------------------------
Ounces Sold
----------------------------------- ------------- ------------- ---------------------------
Gold 142.8 168.6 (15)
Silver 18,981 19,555 (3)
----------------------------------- ------------- ------------- ---------------------------
Group Cash Cost ($/oz)
----------------------------------- ------------- ------------- ---------------------------
Co product Au 864 801 8
Co product Ag 12.1 12.9 (6)
By product Au (38) (272) 86
By product Ag 9.0 8.3 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(14)
Year ended 31 Dec 2014
$000 unless otherwise Arcata Pallancata San José Main Operations Other Corporate Total
indicated Operations & Others
-------------------------- ---------- ------------ ------------- --------------- ------------ --------- -------
(+) Production cost
excluding
depreciation(15) 62,644 71,742 110,089 244,475 17,853 - 262,328
(+) Other items in cost
of sales 1,301 834 1,724 3,859 546 - 4,406
(+) Operating and
exploration capex
for units 28,867 34,657 51,350 114,874 1,613 116,487
(+) Brownfield
exploration expenses 2,038 1,728 1,003 4,769 42 3,232 8,043
(+) Administrative
expenses (excl
depreciation and before
exceptional
items) 5,266 7,317 8,270 20,853 362 20,049 41,263
(+) Royalties - 1,370 - 1,370 241 - 1,611
-------------------------- ---------- ------------ ------------- --------------- ------------ --------- -------
Sub-Total 100,116 117,648 172,436 390,200 19,044 24,894 434,138
-------------------------- ---------- ------------ ------------- --------------- ------------ --------- -------
Ounces produced (Ag Eq
oz) 6,841 7,988 12,119 26,947 1,232 - 28,179
-------------------------- ---------- ------------ ------------- --------------- ------------ --------- -------
Sub-total ($/oz) 14.6 14.7 14.2 14.5 15.5 - 15.4
-------------------------- ---------- ------------ ------------- --------------- ------------ --------- -------
(+) Commercial
deductions 18,016 13,666 17,198 48,880 - - 48,880
(+) Selling expenses 1,987 1,995 24,648 28,630 67 - 28,697
-------------------------- ---------- ------------ ------------- --------------- ------------ --------- -------
Sub-total 20,003 15,661 41,846 77,510 67 - 77,577
-------------------------- ---------- ------------ ------------- --------------- ------------ --------- -------
Ounces sold (Ag Eq oz) 6,560 7,944 11,793 26,297 1,250 - 27,547
-------------------------- ---------- ------------ ------------- --------------- ------------ --------- -------
Sub-total ($/oz) 3.0 2.0 3.5 2.9 0.1 - 2.8
-------------------------- ---------- ------------ ------------- --------------- ------------ --------- -------
All-in sustaining costs
($/oz Ag
Eq) 17.7 16.7 17.8 17.4 15.5 - 18.2
-------------------------- ---------- ------------ ------------- --------------- ------------ --------- -------
Year ended 31 Dec 2013
$000 unless otherwise Arcata Pallancata San José Main Operations Other Corporate Total
indicated Operations & Others
-------------------------------- ------- ---------- ------------- --------------- ----------- --------- -------
(+) Production cost excluding
depreciation 72,706 75,321 112,764 260,791 50,908 - 311,699
(+) Other items in cost of
sales -638 571 7,074 7,007 (3) - 7,004
(+) Operating and exploration
capex
for units 43,255 44,356 56,502 144,113 4,715 2,510 151,338
(+) Brownfield exploration
expenses 2,052 2,149 1,795 5,996 581 3,201 9,778
(+) Administrative expenses
(excl
depreciation and before
exceptional
items) 6,469 11,472 8,589 26,530 2,983 22,274 51,787
(+) Royalties - 1,822 - 1,822 522 - 2,344
-------------------------------- ------- ---------- ------------- --------------- ----------- --------- -------
Sub-Total 123,844 135,691 186,724 446,259 59,706 27,985 533,950
-------------------------------- ------- ---------- ------------- --------------- ----------- --------- -------
Ounces produced (Ag Eq oz) 5,994 9,298 12,286 27,578 2,689 - 30,267
-------------------------------- ------- ---------- ------------- --------------- ----------- --------- -------
Sub-total ($/oz) 20.7 14.6 15.2 16.2 22.2 - 17.6
-------------------------------- ------- ---------- ------------- --------------- ----------- --------- -------
(+) Commercial deductions 920 16,788 19,335 37,043 15 - 37,058
(+) Selling expenses 325 2,369 25,899 28,593 192 - 28,785
-------------------------------- ------- ---------- ------------- --------------- ----------- --------- -------
Sub-total 1,245 19,157 45,234 65,636 207 - 65,843
-------------------------------- ------- ---------- ------------- --------------- ----------- --------- -------
Ounces sold (Ag Eq oz) 5,881 9,167 11,963 27,011 2,658 - 29,669
-------------------------------- ------- ---------- ------------- --------------- ----------- --------- -------
Sub-total ($/oz) 0.2 2.1 3.8 2.4 0.1 - 2.2
-------------------------------- ------- ---------- ------------- --------------- ----------- --------- -------
All-in sustaining costs ($/oz
Ag
Eq) 20.9 16.7 19.0 18.6 22.3 - 19.9
-------------------------------- ------- ---------- ------------- --------------- ----------- --------- -------
Administrative expenses
Administrative expenses before exceptional items decreased by
20% to $43.3 million (2013: $54.4 million) primarily due to the
continuing impact of the cashflow optimisation programme.
Post-exceptional administrative expenses in 2014 totalled $46.1
million (2013: $56.8 million).
Exploration expenses
In 2014, pre-exceptional exploration expenses, decreased by 60%
to $17.3 million (2013: $42.9 million). Post-exceptional
exploration expenses in 2014 totaled $18.1 million (2013: $46.3
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 2014, the Company capitalised $1.5 million relating to
brownfield exploration compared to $1.7 million in 2013, bringing
the total investment in exploration for 2014 to $18.8 million
(2013: $44.6 million). In addition, $1.6 million was invested in
the Company's Advanced and Growth Projects.
Selling expenses
Selling expenses were flat versus 2013at $28.7 million (2013:
$28.8 million) due to lower prices impacting the export tax in
Argentina, partially offset by higher production of concentrates in
Arcata. Selling expenses mainly consist of export duties at San
Jose (export duties in Argentina are levied at 10% of revenue for
concentrate and 5% of revenue for dore) and logistic costs for the
sale of concentrate.
Other income/expenses
Other income before exceptional items was $4.1 million (2013:
$4.0 million). Other expenses before exceptional items reached
$17.5 million (2013: $15.6 million) mainly due to an increase in
mine closure provisions of $9.1 million (2013: $5.5 million) and
the new reserves tax in Argentina of $3.5 million (2013: $2.5
million).
Adjusted EBITDA
Adjusted EBITDA decreased by 33% over the period to $135.6
million (2013 restated: $201.0 million) driven primarily by
significantly lower silver prices.
Adjusted EBITDA is calculated as profit from continuing
operations before exceptional items, net finance costs and income
tax plus non-cash items (depreciation and changes in mine closure
provisions) and exploration expenses other than personnel and other
exploration related fixed expenses.
$000 unless otherwise indicated Year ended Year ended % change
31 Dec 2014 31 Dec 2013
----------------------------------------------------------------------------- ------------- ------------- ---------
Profit from continuing operations before exceptional items, net finance
cost, foreign exchange
loss and income tax (14,374) 17,730 (181)
Operating margin - 3% -
Depreciation and amortisation in cost of sales 128,480 144,923 (11)
Depreciation and amortisation in administrative expenses 2,072 2,638 (21)
Exploration expenses 17,254 42,871 (60)
Personnel and other exploration related fixed expenses (6,934) (12,699) 45
Other non cash expenses(16) 9,088 5,516 65
----------------------------------------------------------------------------- ------------- ------------- ---------
Adjusted EBITDA 135,586 200,979 (33)
----------------------------------------------------------------------------- ------------- ------------- ---------
Adjusted EBITDA margin 28% 32%
----------------------------------------------------------------------------- ------------- ------------- ---------
Finance income
Finance income before exceptional items of $2.2 million reduced
from 2013 ($10.7 million) mainly due to substantially lower
interest received on deposits and liquidity funds ($5.2 million) as
well as lower dividends received from Gold Resource Corporation
($3.0 million).
Finance costs
Finance costs before exceptional items increased from $11.7
million in 2013 to $33.1 million in 2014, 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 $5.0 million
(2013: $19.8 million loss) as a result of exposures in currencies
other than the functional currency principally the Peruvian Nuevo
Sol and Argentinean Peso, both of which depreciated in the year
against the US Dollar.
Income tax
The Company's pre-exceptional income tax was $6.5 million (2013:
$45.0 million). The reduction is mainly explained by lower metal
prices reflected in a reduced pre-exceptional loss before income
tax ($(50.2) million in 2014 compared to $2.9 million
pre-exceptional profit before tax in 2013).
Exceptional items
Exceptional items in 2014 totalled $(14.1) million after tax
(2013: $(86.6) million). The tables below detail the exceptional
items excluding the exceptional tax effect that amounted to $3.8
million (2013: $35.9 million).
Exceptional items in 2014 comprise the following items:
2014 positive exceptional items:
Main items $000 Description of main items
--------------- ------ ---------------------------------------------------------------------------------------------
Other income 1,643 Reversal of impairment of San Felipe property
Finance income 4,061 Gain on the sale of GRC shares ($2.6 million), Chaparral Gold shares ($0.8 million), Mirasol
shares ($0.6 million) and others
--------------- ------ ---------------------------------------------------------------------------------------------
2014 negative exceptional items:
Main items $000 Description of main items
------------------------ -------- ----------------------------------------------------------------------------------
Cost of sales (6,065) Termination benefits ($4.8 million) and temporary stoppages at Arcata ($1.2
million)
Administrative Expenses (2,752) Termination benefits ($2.8 million)
Exploration Expenses (886) Termination benefits ($0.9 million)
Other expenses (4,498) Property, plant & equipment write-off ($1.5 million) and loss on the sale of the
Moris operation
in Mexico ($3.0 million)
Finance cost (9,491) The impairment of investments in Pembrook ($6.0 million) and other minor
investments ($0.2
million), transaction costs on the syndicated loan ($3.3 million)
------------------------ -------- ----------------------------------------------------------------------------------
Cash flow & balance sheet review
Cash flow:
$000 unless otherwise Year ended Year ended Change
indicated 31 Dec 2014 31 Dec 2013
------------------------------- ------------- ------------- ----------
Net cash generated from
operating activities 93,779 64,674 29,105
Net cash used in investing
activities (263,007) (218,113) (44,894)
Cash flows generated/(used)
in financing activities 5,039 99,830 (94,791)
------------------------------- ------------- ------------- ----------
Net (decrease)/increase
in cash and cash equivalents
during the period (164,189) (53,609) (110,580)
------------------------------- ------------- ------------- ----------
Operating cash flow increased from $64.7 million in 2013 to
$93.8 million in 2014, mainly due to a significant improvement of
working capital and the implementation of the cash optimisation
plan, partially offset by lower prices. Net cash used in investing
activities increased to $(263.0) million in 2014 from $(218.1)
million in 2013 mainly due to higher pre-operating capex incurred
at the Inmaculada project in 2014. Finally, cash generated from
financing activities decreased to $5.0 million from $99.8 million
in 2013, primarily as a result of the proceeds from the issuance of
the unsecured notes ($350.0 million) and the Scotiabank Credit
Facility ($100.0 million), partially offset by the repayment of the
bridge loan facility ($270.0 million), Convertible Bond ($114.9
million) and reduction of short term borrowings ($30.0 million). As
a result, total cash generated decreased from $(53.6) million in
2013 to $(164.2) million in 2014 ($110.6 million difference).
Working capital
$000 unless otherwise indicated Year ended Year ended
31 Dec 2014 31 Dec 2013
-------------------------------------------- ------------- -------------
Trade and other receivables 173,526 179,868
Inventories 58,417 69,556
Net other financial assets / (liabilities) 2,809 (2,294)
Net income tax receivable / (payable) 20,467 20,842
Trade and other payables and provisions (226,603) (208,618)
-------------------------------------------- ------------- -------------
Working Capital 28,616 59,354
-------------------------------------------- ------------- -------------
The Group's working capital position decreased to $28.6 million
in 2014 from $59.4 million in 2013. This was primarily explained by
higher trade and other payables and provisions ($(18.0) million)
and by lower inventories ($(11.1) million). Also, net other
financial assets increased to $2.8 million in 2014 from $(2.3)
million in 2013 principally due to gains from hedge agreements
Net cash
$000 unless otherwise indicated Year ended Year ended
31 Dec 2014 31 Dec 2013
--------------------------------- ------------- -------------
Cash and cash equivalents 115,999 286,435
Long term borrowings (440,834) -
Short term borrowings(17) (27,882) (435,925)
--------------------------------- ------------- -------------
Net cash/(debt) (352,717) (149,490)
--------------------------------- ------------- -------------
The Group reported net cash position was $(352.7) million as at
31 December 2014 (2013: $149.5 million). The change was mainly
driven by cash used to build the Inmaculada Project ($198 million
capex in 2014).
Capital expenditure(18)
$000 unless otherwise indicated Year ended Year ended
31 Dec 2014 31 Dec 2013
--------------------------------- ------------- -------------
Arcata 28,867 43,255
Ares - 3,783
Selene 497 1,364
Pallancata 34,160 42,992
San Jose 51,350 56,502
Moris - 932
Operations 114,874 148,828
--------------------------------- ------------- -------------
Inmaculada 198,112 98,614
Crespo 4,206 21,469
Volcan 1,463 4,312
Azuca 853 4,741
Other 1,613 3,614
--------------------------------- ------------- -------------
Total 321,121 281,578
--------------------------------- ------------- -------------
2014 capital expenditure of $321.1 million (2013: $281.6
million) mainly composed of operational capex of $114.9 million and
Inmaculada capital expenditure of $198.1 million.
Forward looking Statements
This announcement contains certain forward looking statements,
including such statements within the meaning of Section 27A of the
US Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. In particular, such
forward looking statements may relate to matters such as the
business, strategy, investments, production, major projects and
their contribution to expected production and other plans of
Hochschild Mining plc and its current goals, assumptions and
expectations relating to its future financial condition,
performance and results.
Forward-looking statements include, without limitation,
statements typically containing words such as "intends", "expects",
"anticipates", "targets", "plans", "estimates" and words of similar
import. By their nature, forward looking statements involve risks
and uncertainties because they relate to events and depend on
circumstances that will or may occur in the future. Actual results,
performance or achievements of Hochschild Mining plc may be
materially different from any future results, performance or
achievements expressed or implied by such forward looking
statements. Factors that could cause or contribute to differences
between the actual results, performance or achievements of
Hochschild Mining plc and current expectations include, but are not
limited to, legislative, fiscal and regulatory developments,
competitive conditions, technological developments, exchange rate
fluctuations and general economic conditions. Past performance is
no guide to future performance and persons needing advice should
consult an independent financial adviser.
The forward looking statements reflect knowledge and information
available at the date of preparation of this announcement. Except
as required by the Listing Rules and applicable law, Hochschild
Mining plc does not undertake any obligation to update or change
any forward looking statements to reflect events occurring after
the date of this announcement. Nothing in this announcement should
be construed as a profit forecast.
Statement of Directors' responsibilities
The Directors confirm that to the best of their knowledge:
- the financial statements, prepared in accordance with the
applicable set of accounting standards, give a true and fair view
of the assets, liabilities, financial position and profit or loss
of the Company and the undertakings included in the consolidation
taken as a whole; and
- the Management report includes a fair review of the
development and performance of the business and the position of the
Company and the undertakings included in the consolidation taken as
a whole, together with a description of the principal risks and
uncertainties that they face.
Consolidated income statement
For the year ended 31 December 2014
Year ended 31 December Year ended 31 December
2014 2013
------------------------------------ ------------------------------------
Before Exceptional Before Exceptional
exceptional items exceptional items
items (note Total items (note Total
Notes US$000 11) US$000 US$000 US$000 11) US$000 US$000
-------------------- ----- ------------ ----------- --------- ------------ ----------- ---------
Continuing
operations
-------------------- ----- ------------ ----------- --------- ------------ ----------- ---------
Revenue 3,5 492,951 - 492,951 622,158 - 622,158
--------------------- ----- ------------ ----------- --------- ------------ ----------- ---------
Cost of sales 6 (404,639) (6,065) (410,704) (466,766) (2,466) (469,232)
--------------------- ----- ------------ ----------- --------- ------------ ----------- ---------
Gross profit 88,312 (6,065) 82,247 155,392 (2,466) 152,926
--------------------- ----- ------------ ----------- --------- ------------ ----------- ---------
Administrative
expenses 7 (43,335) (2,752) (46,087) (54,425) (2,351) (56,776)
--------------------- ----- ------------ ----------- --------- ------------ ----------- ---------
Exploration expenses 8 (17,254) (886) (18,140) (42,871) (3,456) (46,327)
--------------------- ----- ------------ ----------- --------- ------------ ----------- ---------
Selling expenses 9 (28,697) - (28,697) (28,785) - (28,785)
--------------------- ----- ------------ ----------- --------- ------------ ----------- ---------
Other income 4,112 - 4,112 3,974 2,442 6,416
--------------------- ----- ------------ ----------- --------- ------------ ----------- ---------
Other expenses 12 (17,512) (2,963) (20,475) (15,555) - (15,555)
--------------------- ----- ------------ ----------- --------- ------------ ----------- ---------
Impairment and
write-off
of assets net - 109 109 - (90,671) (90,671)
--------------------- ----- ------------ ----------- --------- ------------ ----------- ---------
(Loss)/profit from
continuing
operations before
net
finance
income/(cost),
foreign exchange
loss
and income tax (14,374) (12,557) (26,931) 17,730 (96,502) (78,772)
--------------------- ----- ------------ ----------- --------- ------------ ----------- ---------
Share of post-tax
profit
of associates
accounted
for under equity
method 19 - - - 5,921 - 5,921
--------------------- ----- ------------ ----------- --------- ------------ ----------- ---------
Finance income 13 2,215 4,061 6,276 10,675 2,417 13,092
--------------------- ----- ------------ ----------- --------- ------------ ----------- ---------
Gain on transfer from
investment accounted
for
under the equity
method
to
available-for-sale
financial assets - - - - 107,942 107,942
--------------------- ----- ------------ ----------- --------- ------------ ----------- ---------
Finance costs 13 (33,074) (9,491) (42,565) (11,697) (136,353) (148,050)
--------------------- ----- ------------ ----------- --------- ------------ ----------- ---------
Foreign exchange loss (4,990) - (4,990) (19,753) - (19,753)
--------------------- ----- ------------ ----------- --------- ------------ ----------- ---------
(Loss)/profit from
continuing
operations before
income
tax (50,223) (17,987) (68,210) 2,876 (122,496) (119,620)
--------------------- ----- ------------ ----------- --------- ------------ ----------- ---------
Income tax
(expense)/benefit 14 (6,466) 3,845 (2,621) (44,979) 35,922 (9,057)
--------------------- ----- ------------ ----------- --------- ------------ ----------- ---------
Loss for the year
from
continuing
operations (56,689) (14,142) (70,831) (42,103) (86,574) (128,677)
--------------------- ----- ------------ ----------- --------- ------------ ----------- ---------
Attributable to:
-------------------- ----- ------------ ----------- --------- ------------ ----------- ---------
Equity shareholders
of
the Company (54,963) (13,914) (68,877) (50,345) (72,738) (123,083)
--------------------- ----- ------------ ----------- --------- ------------ ----------- ---------
Non-controlling
interests (1,726) (228) (1,954) 8,242 (13,836) (5,594)
--------------------- ----- ------------ ----------- --------- ------------ ----------- ---------
(56,689) (14,142) (70,831) (42,103) (86,574) (128,677)
----- ------------ ----------- --------- ------------ ----------- ---------
Basic and diluted
loss
per ordinary share
from
continuing
operations
for the year
(expressed
in US dollars per
share) 15 (0.15) (0.04) (0.19) (0.15) (0.21) (0.36)
--------------------- ----- ------------ ----------- --------- ------------ ----------- ---------
Consolidated statement of comprehensive income
For the year ended 31 December 2014
Year ended
31 December
-------------------
2014 2013
Notes US$000 US$000
----------------------------------------------------- ----- -------- ---------
Loss for the year (70,831) (128,677)
------------------------------------------------------ ----- -------- ---------
Other comprehensive income to be reclassified
to profit or loss in subsequent periods:
----------------------------------------------------- ----- -------- ---------
Exchange differences on translating foreign
operations (1,716) (842)
------------------------------------------------------ ----- -------- ---------
Change in fair value of available-for-sale financial
assets 20 (3,106) (125,932)
------------------------------------------------------ ----- -------- ---------
Recycling of the loss on available-for-sale
financial assets 2,096 130,286
------------------------------------------------------ ----- -------- ---------
Change in fair value of cash flow hedges 18,945 -
------------------------------------------------------ ----- -------- ---------
Recycling of the gain on cash flow hedges (14,603) -
------------------------------------------------------ ----- -------- ---------
Deferred income tax relating to components of
other comprehensive income 14 (1,216) -
------------------------------------------------------ ----- -------- ---------
Other comprehensive gain for the period, net
of tax 400 3,512
------------------------------------------------------ ----- -------- ---------
Total comprehensive expense for the year (70,431) (125,165)
------------------------------------------------------ ----- -------- ---------
Total comprehensive expense attributable to:
----------------------------------------------------- ----- -------- ---------
Equity shareholders of the Company (68,477) (119,571)
------------------------------------------------------ ----- -------- ---------
Non-controlling interests (1,954) (5,594)
------------------------------------------------------ ----- -------- ---------
(70,431) (125,165)
----- -------- ---------
Consolidated statement of financial position
As at 31 December 2014
As at As at
31 December 31 December
2014 2013
Notes US$000 US$000
-------------------------------------------------- ----- ------------ ------------
ASSETS
-------------------------------------------------- ----- ------------ ------------
Non-current assets
-------------------------------------------------- ----- ------------ ------------
Property, plant and equipment 16 1,0576,310 873,477
--------------------------------------------------- ----- ------------ ------------
Evaluation and exploration assets 17 2207,290 204,643
--------------------------------------------------- ----- ------------ ------------
Intangible assets 18 42,815 43,683
--------------------------------------------------- ----- ------------ ------------
Available-for-sale financial assets 20 455 51,658
--------------------------------------------------- ----- ------------ ------------
Trade and other receivables 21 6,488 12,128
--------------------------------------------------- ----- ------------ ------------
Deferred income tax assets 1,574 2,416
--------------------------------------------------- ----- ------------ ------------
1,334,932 1,188,005
----- ------------ ------------
Current assets
-------------------------------------------------- ----- ------------ ------------
Inventories 22 58,417 69,556
--------------------------------------------------- ----- ------------ ------------
Trade and other receivables 21 167,038 167,740
--------------------------------------------------- ----- ------------ ------------
Income tax receivable 25,584 22,156
--------------------------------------------------- ----- ------------ ------------
Other financial assets 23 4,342 -
--------------------------------------------------- ----- ------------ ------------
Cash and cash equivalents 24 115,999 286,435
--------------------------------------------------- ----- ------------ ------------
371,380 545,887
----- ------------ ------------
Total assets 1,706,312 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 (217,335) (211,143)
--------------------------------------------------- ----- ------------ ------------
Retained earnings 451,047 511,492
--------------------------------------------------- ----- ------------ ------------
799,224 865,861
----- ------------ ------------
Non-controlling interests 95,160 104,375
--------------------------------------------------- ----- ------------ ------------
Total equity 894,384 970,236
--------------------------------------------------- ----- ------------ ------------
Non-current liabilities
-------------------------------------------------- ----- ------------ ------------
Trade and other payables 26 92 174
--------------------------------------------------- ----- ------------ ------------
Borrowings 27 440,834 -
--------------------------------------------------- ----- ------------ ------------
Provisions 28 111,751 79,649
--------------------------------------------------- ----- ------------ ------------
Deferred income 25 25,000 22,000
--------------------------------------------------- ----- ------------ ------------
Deferred income tax liabilities 84,959 93,505
--------------------------------------------------- ----- ------------ ------------
662,636 195,328
----- ------------ ------------
Current liabilities
-------------------------------------------------- ----- ------------ ------------
Trade and other payables 26 111,890 119,222
--------------------------------------------------- ----- ------------ ------------
Other financial liabilities 23 1,533 2,294
--------------------------------------------------- ----- ------------ ------------
Borrowings 27 27,882 435,925
--------------------------------------------------- ----- ------------ ------------
Provisions 28 2,870 9,573
--------------------------------------------------- ----- ------------ ------------
Income tax payable 5,117 1,314
--------------------------------------------------- ----- ------------ ------------
149,292 568,328
----- ------------ ------------
Total liabilities 811,928 763,656
--------------------------------------------------- ----- ------------ ------------
Total equity and liabilities 1,706,312 1,733,892
--------------------------------------------------- ----- ------------ ------------
These financial statements were approved by the Board of
Directors on 17 March 2015 and signed on its behalf by:
Ignacio Bustamante
Chief Executive Officer
17 March 2015
Consolidated statement of cash flows
For the year ended 31 December 2014
Year ended
31 December
--------------------
2014 2013
Notes US$000 US$000
---------------------------------------------------- ----- --------- ---------
Cash flows from operating activities
---------------------------------------------------- ----- --------- ---------
Cash generated from operations 129,993 116,084
----------------------------------------------------- ----- --------- ---------
Interest received 1,931 6,236
----------------------------------------------------- ----- --------- ---------
Interest paid (25,585) (10,292)
----------------------------------------------------- ----- --------- ---------
Payment of mine closure costs 28 (5,524) (4,781)
----------------------------------------------------- ----- --------- ---------
Income tax paid (7,036) (42,573)
----------------------------------------------------- ----- --------- ---------
Net cash generated from operating activities 84,810 64,674
----------------------------------------------------- ----- --------- ---------
Cash flows from investing activities
---------------------------------------------------- ----- --------- ---------
Purchase of property, plant and equipment (309,033) (248,335)
----------------------------------------------------- ----- --------- ---------
Purchase of evaluation and exploration assets (6,071) (10,781)
----------------------------------------------------- ----- --------- ---------
Purchase of intangibles (281) (1,625)
----------------------------------------------------- ----- --------- ---------
Acquisition of subsidiary 4(b) - (14,615)
----------------------------------------------------- ----- --------- ---------
Dividends received 494 2,423
----------------------------------------------------- ----- --------- ---------
Dividends received from associates - 3,385
----------------------------------------------------- ----- --------- ---------
Proceeds from deferred income 25 3,223 17,593
----------------------------------------------------- ----- --------- ---------
Proceeds from sale of available-for-sale financial
assets 48,097 33,498
----------------------------------------------------- ----- --------- ---------
Proceeds from sale of property, plant and equipment 564 344
----------------------------------------------------- ----- --------- ---------
Net cash used in investing activities (263,007) (218,113)
----------------------------------------------------- ----- --------- ---------
Cash flows from financing activities
---------------------------------------------------- ----- --------- ---------
Proceeds of borrowings 482,393 440,010
----------------------------------------------------- ----- --------- ---------
Repayment of borrowings (458,132) (116,701)
----------------------------------------------------- ----- --------- ---------
Transaction costs of borrowings (9,166) (9,145)
----------------------------------------------------- ----- --------- ---------
Acquisition of non-controlling interest - (272,127)
----------------------------------------------------- ----- --------- ---------
Proceeds from issue of ordinary shares - 71,916
----------------------------------------------------- ----- --------- ---------
Dividends paid 29 (10,056) (18,503)
----------------------------------------------------- ----- --------- ---------
Capital contribution from non-controlling interests - 4,380
----------------------------------------------------- ----- --------- ---------
Cash flows generated in financing activities 5,039 99,830
----------------------------------------------------- ----- --------- ---------
Net decrease in cash and cash equivalents during
the year (164,189) (53,609)
----------------------------------------------------- ----- --------- ---------
Exchange difference (6,247) (18,900)
----------------------------------------------------- ----- --------- ---------
Cash and cash equivalents at beginning of year 286,435 358,944
----------------------------------------------------- ----- --------- ---------
Cash and cash equivalents at end of year 24 115,999 286,435
----------------------------------------------------- ----- --------- ---------
Consolidated statement of changes in equity
For the year 31 December 2014
Other reserves
------------------ ---------- -----------------------------------------------------
Capital
and
Unrealised reserves
gain/ attributable
(loss) Unrealised Bond to
on gain/ equity Share- shareholders
Equity available-for-sale (loss) component Cumulative based Total of
share Share Treasury financial on (note translation Merger payment Other Retained the Non-controlling Total
capital premium shares assets hedges 25(b)) adjustment reserve reserve reserves earnings Parent interests equity
Notes US$000 US$000 US$000 US$000 US$000 US$000 US$000 US$000 US$000 US$000 US$000 US$000 US$000 US$000
---------------- ----- ------- ------- -------- ------------------ ---------- --------- ----------- --------- ------- --------- --------- ------------ --------------- ---------
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)/income - - - 4,354 - - (842) - - 3,512 - 3,512 - 3,512
----------------- ----- ------- ------- -------- ------------------ ---------- --------- ----------- --------- ------- --------- --------- ------------ --------------- ---------
Loss for
the year - - - - - - - - - - (123,083) (123,083) (5,594) (128,677)
----------------- ----- ------- ------- -------- ------------------ ---------- --------- ----------- --------- ------- --------- --------- ------------ --------------- ---------
Total
comprehensive
income/(loss)
for 2013 - - - 4,354 - - (842) - - 3,512 (123,083) (119,571) (5,594) (125,165)
----------------- ----- ------- ------- -------- ------------------ ---------- --------- ----------- --------- ------- --------- --------- ------------ --------------- ---------
Capital
contribution
from
non-controlling
interest - - - - - - - - - - - - 4,380 4,380
----------------- ----- ------- ------- -------- ------------------ ---------- --------- ----------- --------- ------- --------- --------- ------------ --------------- ---------
Purchase
of shares
from
non-controlling
interest 4(a) - - - - - - - - - - (135,368) (135,368) (148,185) (283,553)
----------------- ----- ------- ------- -------- ------------------ ---------- --------- ----------- --------- ------- --------- --------- ------------ --------------- ---------
Issuance
of shares 11,752 93 - - - - - 60,071 - 60,071 - 71,916 - 71,916
----------------- ----- ------- ------- -------- ------------------ ---------- --------- ----------- --------- ------- --------- --------- ------------ --------------- ---------
Transfer
to retained
earnings - - - - - - - (60,071) - (60,071) 60,071 - - -
----------------- ----- ------- ------- -------- ------------------ ---------- --------- ----------- --------- ------- --------- --------- ------------ --------------- ---------
CEO LTIP - - - - - - - - 291 291 - 291 - 291
----------------- ----- ------- ------- -------- ------------------ ---------- --------- ----------- --------- ------- --------- --------- ------------ --------------- ---------
Expiration
of dividends - - - - - - - - - - - - (38) (38)
----------------- ----- ------- ------- -------- ------------------ ---------- --------- ----------- --------- ------- --------- --------- ------------ --------------- ---------
Dividends 29 - - - - - - - - - - (10,139) (10,139) - (10,139)
----------------- ----- ------- ------- -------- ------------------ ---------- --------- ----------- --------- ------- --------- --------- ------------ --------------- ---------
Dividends
declared
to
non-controlling
interests 29 - - - - - - - - - - - - (10,706) (10,706)
----------------- ----- ------- ------- -------- ------------------ ---------- --------- ----------- --------- ------- --------- --------- ------------ --------------- ---------
Balance
at
31 December
2013 170,389 396,021 (898) 1,024 - 8,432 (11,289) (210,046) 736 (211,143) 511,492 865,861 104,375 970,236
----------------- ----- ------- ------- -------- ------------------ ---------- --------- ----------- --------- ------- --------- --------- ------------ --------------- ---------
Other
comprehensive
(loss)/income - - - (1,010) 3,126 - (1,716) - - 400 - 400 - 400
----------------- ----- ------- ------- -------- ------------------ ---------- --------- ----------- --------- ------- --------- --------- ------------ --------------- ---------
Loss for
the year - - - - - - - - - - (68,877) (68,877) (1,954) (70,831)
----------------- ----- ------- ------- -------- ------------------ ---------- --------- ----------- --------- ------- --------- --------- ------------ --------------- ---------
Total
comprehensive
income/(loss)
for 2014 - - - (1,010) 3,126 - (1,716) - - 400 (68,877) (68,477) (1,954) (70,431)
----------------- ----- ------- ------- -------- ------------------ ---------- --------- ----------- --------- ------- --------- --------- ------------ --------------- ---------
Transfer
to retained
earnings - - - - - (8,432) - - - (8,432) 8,432 - - -
----------------- ----- ------- ------- -------- ------------------ ---------- --------- ----------- --------- ------- --------- --------- ------------ --------------- ---------
Deferred
bonus plan - - - - - - - - 1,230 1230 - 1,230 - 1,230
----------------- ----- ------- ------- -------- ------------------ ---------- --------- ----------- --------- ------- --------- --------- ------------ --------------- ---------
CEO LTIP - - - - - - - - 610 610 - 610 - 610
----------------- ----- ------- ------- -------- ------------------ ---------- --------- ----------- --------- ------- --------- --------- ------------ --------------- ---------
Dividends
declared
to
non-controlling
interests 29 - - - - - - - - - - - - (7,261) (7,261)
----------------- ----- ------- ------- -------- ------------------ ---------- --------- ----------- --------- ------- --------- --------- ------------ --------------- ---------
Balance
at
31 December
2014 170,389 396,021 (898) 14 3,126 - (13,005) (210,046) 2,576 (217,335) 451,047 799,224 95,160 894,384
----------------- ----- ------- ------- -------- ------------------ ---------- --------- ----------- --------- ------- --------- --------- ------------ --------------- ---------
1 Notes to the consolidated financial statements
For the year ended 31 December 2014
The financial information for the year ended 31 December 2014
and 2013 contained in this document does not constitute statutory
accounts as defined in section 435 of the Companies Act 2006. The
financial information for the years ended 31 December 2014 and 2013
have been extracted from the consolidated financial statements of
Hochschild Mining plc for the year ended 31 December 2014 which
have been approved by the directors on 17 March 2015 and will be
delivered to the Registrar of Companies in due course. The
auditor's report on those financial statements was unqualified and
did not contain a statement under section 498 of the Companies Act
2006.
2 Significant accounting policies
The accounting policies adopted in the preparation of the
consolidated financial statements are consistent with those applied
in the preparation of the consolidated financial statement for the
year ended 31 December 2013, except for the adoption of the
following relevant standards and interpretations:
-- IFRIC Interpretation 21 Levies (IFRIC 21), applicable to
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. This application of this interpretation has
had 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 to 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 any of
its derivatives during the current period,
-- 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 application of
amendments have had 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 adoption of this new
standard has had 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 adoption of this new standard has had 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, its adoption has had no impact on the
Group's financial position or performance. The Group has made all
additional disclosures required by this standard in respect of the
financial information of its material non-controlling interest in
Minera Santa Cruz S.A.
-- 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 application of this amendment has
had no impact on the Group's financial position or performance.
-- IAS 36 'Impairment of Assets' - recoverable amount
disclosures, applicable for annual periods 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
application of this amendment has had no impact on the Group's
financial position or performance, but has affected its impairment
disclosures.
3 Segment reporting
The Group's activities are principally related to mining
operations which involve the exploration, production and sale of
gold and silver. Products are subject to the same risks and returns
and are sold through the same distribution channels. The Group
undertakes a number of activities solely to support mining
operations including power generation and services. Transfer prices
between segments are set on an arm's length basis in a manner
similar to that used for third parties. Segment revenue, segment
expense and segment results include transfers between segments at
market prices. Those transfers are eliminated on consolidation.
For internal reporting purposes, management takes decisions and
assesses the performance of the Group through consideration of the
following reporting segments:
-- Operating unit - Ares, which generates revenue from the sale
of gold and silver
-- Operating unit - Arcata, which generates revenue from the
sale of gold, silver, dore and concentrate
-- Operating unit - Pallancata, which generates revenue from the
sale of concentrate
-- Operating unit - San Jose, which generates revenue from the
sale of gold, silver, concentrate and dore
-- Operating unit - Moris, which generated revenue from the sale
of gold and silver, disclosed as a segment until 31 December 2013.
Minas Santa María de Moris, S.A. de C.V., which held the Moris
operating unit, was sold to a third party on 28 February 2014 (note
4(c)). Accordingly, this operation did not meet the quantitative
thresholds to be a separate reportable segment in 2014 and has been
included in 'Other'. The comparative segment information has been
restated to conform with these changes.
-- Pre operating unit - Inmaculada, which will generate revenue
from the sale of gold and silver is now considered as a segment due
to the significant investment in the construction of the mine .
Accordingly, the comparative segment information has been restated
to reflect this change.
-- Exploration, which explores and evaluates areas of interest
in brownfield and greenfield sites with the aim of extending the
life-of-mine of existing operations and to assess the feasibility
of new mines. The exploration segment includes costs charged to the
profit and loss and capitalised as assets.
-- Other - includes the profit or loss generated by Empresa de
Transmisión Callalli S.A.C. (a power transmission company), HMX,
S.A. de C.V. (a service company in Mexico), Empresa de Transmisión
Aymaraes S.A.C. (a power transmission company), the Selene mine,
that closed in 2009 and which, as a consequence not considered to
be a reportable segment, and the Moris mine, sold on 28 February
2014, and consequently not considered a reportable segment for
2014.
The Group's administration, financing, other activities
(including other income and expense), and income taxes are managed
at a corporate level and are not allocated to operating
segments.
Segment information is consistent with the accounting policies
adopted by the Group. Management evaluates the financial
information based on International Financial Reporting Standards
(IFRS) as adopted for use in the European Union.
The Group measures the performance of its operating units by the
segment profit or loss that comprises gross profit, selling
expenses and exploration expenses.
Segment assets include items that could be allocated directly to
the segment.
(a) Reportable segment information
Adjustment
San and
Ares Arcata Pallancata Jose Inmaculada Other(1) eliminations Total
US$000 US$000 US$000 US$000 US$000 ExplorationUS$000 US$000 US$000 US$000
---------------- ------ -------- ---------- -------- ---------- ----------------- -------- ------------ ---------
Year ended
31 December
2014
---------------- ------ -------- ---------- -------- ---------- ----------------- -------- ------------ ---------
Revenue from
external
customers 25,889 106,061 147,360 213,013 - - 628 - 492,951
----------------- ------ -------- ---------- -------- ---------- ----------------- -------- ------------ ---------
Inter segment
revenue - - - - - - 2,857 (2,857) -
----------------- ------ -------- ---------- -------- ---------- ----------------- -------- ------------ ---------
Total revenue 25,889 106,061 147,360 213,013 - - 3,485 (2,857) 492,951
----------------- ------ -------- ---------- -------- ---------- ----------------- -------- ------------ ---------
Segment
profit/(loss) (437) 5,054 20,894 28,429 - (18,662) 884 (752) 35,410
----------------- ------ -------- ---------- -------- ---------- ----------------- -------- ------------ ---------
Others(2) (103,620)
----------------- ------ -------- ---------- -------- ---------- ----------------- -------- ------------ ---------
Loss from
continuing
operations
before
income tax (68,210)
----------------- ------ -------- ---------- -------- ---------- ----------------- -------- ------------ ---------
Other segment
information
---------------- ------ -------- ---------- -------- ---------- ----------------- -------- ------------ ---------
Depreciation(3) (418) (31,348) (48,008) (46,820) (7,558) (930) (2,596) - (137,678)
----------------- ------ -------- ---------- -------- ---------- ----------------- -------- ------------ ---------
Amortisation - - - (1,181) - (458) - - (1,639)
----------------- ------ -------- ---------- -------- ---------- ----------------- -------- ------------ ---------
Impairment and
write-off of
assets net (6) (499) (31) (717) (85) 1,580 (133) - 109
----------------- ------ -------- ---------- -------- ---------- ----------------- -------- ------------ ---------
Assets
---------------- ------ -------- ---------- -------- ---------- ----------------- -------- ------------ ---------
Capital
expenditure (10) 28,867 34,160 51,350 193,445 6,522 6,787 - 321,121
----------------- ------ -------- ---------- -------- ---------- ----------------- -------- ------------ ---------
Current assets 6,740 27,993 21,174 66,995 5,877 35 2,421 - 131,235
----------------- ------ -------- ---------- -------- ---------- ----------------- -------- ------------ ---------
Other non-current
assets 832 143,524 112,365 223,295 497,771 277,827 70,799 - 1,326,415
----------------- ------ -------- ---------- -------- ---------- ----------------- -------- ------------ ---------
Total segment
assets 7,572 171,517 133,539 290,290 503,648 277,864 73,220 - 1,457,650
----------------- ------ -------- ---------- -------- ---------- ----------------- -------- ------------ ---------
Not reportable
assets(4) - - - - - - 248,662 - 248,662
----------------- ------ -------- ---------- -------- ---------- ----------------- -------- ------------ ---------
Total assets 7,572 171,517 133,539 290,290 503,648 277,864 321,882 - 1,706,312
----------------- ------ -------- ---------- -------- ---------- ----------------- -------- ------------ ---------
1 'Other' revenue primarily relates to revenues earned by HMX
S.A. de C.V. for services provided to the Moris mine, and the
Mexican exploration activities, and revenue for the sale of gold
and silver generated by the Moris mine.
2 Comprised of administrative expenses of US$46,087,000, other
income of US$4,112,000, other expenses of US$20,475,000, gain on
the reversal of impairment net of write-off of assets of
US$109,000, finance income of US$6,276,000, finance expense of
US$42,565,000, and foreign exchange loss of US$4,990,000.
3 Includes US$967,000 and US$7,558,000 of depreciation
capitalised in the Crespo and the Inmaculada projects
respectively.
4 Not reportable assets are comprised of available-for-sale
financial assets of US$455,000, other receivables of
US$100,708,000, income tax receivable of US$25,584,000, deferred
income tax assets of US$1,574,000, other financial assets of
US$4,342,000 and cash and cash equivalents of US$115,999,000.
3 Segment reporting (continued)
(a) Reportable segment information
Adjustment
San and
Ares Arcata Pallancata Jose Inmaculada Exploration Other(1) eliminations Total
US$000 US$000 US$000 US$000 US$000 US$000 US$000 US$000 US$000
---------------- ------- -------- ---------- -------- ---------- ----------- -------- ------------ ---------
Year ended
31 December
2013
---------------- ------- -------- ---------- -------- ---------- ----------- -------- ------------ ---------
Revenue from
external
customers 50,362 136,968 181,795 240,723 - - 12,310 - 622,158
----------------- ------- -------- ---------- -------- ---------- ----------- -------- ------------ ---------
Inter segment
revenue - - - - - - 8,796 (8,796) -
----------------- ------- -------- ---------- -------- ---------- ----------- -------- ------------ ---------
Total revenue 50,362 136,968 181,795 240,723 - - 21,106 (8,796) 622,158
----------------- ------- -------- ---------- -------- ---------- ----------- -------- ------------ ---------
Segment
profit/(loss) (3,515) 31,710 49,357 44,142 - (50,894) 5,467 1,547 77,814
----------------- ------- -------- ---------- -------- ---------- ----------- -------- ------------ ---------
Others(2) (197,434)
----------------- ------- -------- ---------- -------- ---------- ----------- -------- ------------ ---------
Profit from
continuing
operations
before
income tax (119,620)
----------------- ------- -------- ---------- -------- ---------- ----------- -------- ------------ ---------
Other segment
information
---------------- ------- -------- ---------- -------- ---------- ----------- -------- ------------ ---------
Depreciation(3) (8,723) (31,044) (50,222) (52,790) (1,158) (769) (4,908) - (149,614)
----------------- ------- -------- ---------- -------- ---------- ----------- -------- ------------ ---------
Amortisation - - - (1,300) - (441) - - (1,741)
----------------- ------- -------- ---------- -------- ---------- ----------- -------- ------------ ---------
Impairment and
write-off of
assets net (3,791) (115) (271) (41,382) (2) (45,109) (1) - (90,671)
----------------- ------- -------- ---------- -------- ---------- ----------- -------- ------------ ---------
Assets
---------------- ------- -------- ---------- -------- ---------- ----------- -------- ------------ ---------
Capital
expenditure 3,783 43,255 42,992 56,502 89,120 30,551 15,375 - 281,578
----------------- ------- -------- ---------- -------- ---------- ----------- -------- ------------ ---------
Current assets 13,211 14,009 31,563 73,844 1,421 453 4,757 - 139,258
----------------- ------- -------- ---------- -------- ---------- ----------- -------- ------------ ---------
Other non-current
assets 1,328 142,618 122,058 217,344 297,311 284,802 56,342 - 1,121,803
----------------- ------- -------- ---------- -------- ---------- ----------- -------- ------------ ---------
Total segment
assets 14,539 156,627 153,621 291,188 298,732 285,255 61,099 - 1,261,061
----------------- ------- -------- ---------- -------- ---------- ----------- -------- ------------ ---------
Not reportable
assets(4) - - - - - - 472,831 - 472,831
----------------- ------- -------- ---------- -------- ---------- ----------- -------- ------------ ---------
Total assets 14,539 156,627 153,621 291,188 298,732 285,255 533,930 - 1,733,892
----------------- ------- -------- ---------- -------- ---------- ----------- -------- ------------ ---------
1 'Other' revenue primarily relates to revenues earned by Minas
Santa Maria de Moris, S.A. de C.V., generated by the sale of gold
and silver and HMX S.A. de C.V. for services provided to the Moris
mine, and the Mexican exploration activities.
2 Comprised of administrative expenses of US$56,776,000, other
income of US$6,416,000, other expenses of US$15,555,000, impairment
and write-off of assets of US$90,671,000, share of gains of
associates and joint ventures of US$5,921,000, gain on transfer
from onvestments accounted under the equity method to
available-for-sale financial assets of US$107,942,000, finance
income of US$13,092,000, finance expense of US$148,050,000, and
foreign exchange loss of US$19,753,000.
3 Includes US$28,000, US$613,000 and US$1,158,000 of
depreciation capitalised in San Jose mine unit, the Crespo project
and the Inmaculada project respectively.
4 Not reportable assets are comprised of available-for-sale
financial assets of US$51,658,000, other receivables of
US$110,166,000, income tax receivable of US$22,156,000, deferred
income tax assets of US$2,416,000 and cash and cash equivalents of
US$286,435,000.
3 Segment reporting (continued)
(b) Geographical information
The revenue for the period based on the country in which the
customer is located is as follows:
Year ended
31 December
----------------
2014 2013
US$000 US$000
------------------ ------- -------
External customer
------------------ ------- -------
USA 96,427 148,201
------------------- ------- -------
Peru 178,217 91,781
------------------- ------- -------
Canada 36,421 53,664
------------------- ------- -------
Germany 10,987 4,901
------------------- ------- -------
Switzerland 45,020 149,452
------------------- ------- -------
United Kingdom 2,450 38,697
------------------- ------- -------
Korea 121,868 135,100
------------------- ------- -------
Japan 1,561 362
------------------- ------- -------
Total 492,951 622,158
------------------- ------- -------
Inter-segment
------------------ ------- -------
Peru 1,804 3,122
------------------- ------- -------
Mexico 1,053 5,674
------------------- ------- -------
Total 495,808 630,954
------------------- ------- -------
In the periods set out below, certain customers accounted for
greater than 10% of the Group's total revenues as detailed
in the following table:
Year ended 31 December
2014 Year ended 31 December 2013
-------------------------------------- --------------------------------
US$000 % Revenue Segment US$000 % Revenue Segment
------------------- ------- --------- ------------------ ------- --------- ------------
Pallancata
Arcata, Pallancata and
LS Nikko 121,868 25% and San Jose 135,100 22% San Jose
-------------------- ------- --------- ------------------ ------- --------- ------------
Glencore Perú Arcata and
S.A.C. 114,192 23% Pallancata 35,188 6% Pallancata
-------------------- ------- --------- ------------------ ------- --------- ------------
Ares, Arcata
and
Argor Heraus 45,045 9% San Jose 105,730 17% San Jose
-------------------- ------- --------- ------------------ ------- --------- ------------
Johnson Matthey Ares, Arcata
Inc. 26,850 5% Ares, Arcata 70,547 11% and Others
-------------------- ------- --------- ------------------ ------- --------- ------------
3 Segment reporting (continued)
Non-current assets, excluding financial instruments and income
tax assets, were allocated based on the geographical area where the
assets are located as follows:
As at 31 December
--------------------
2014 2013
US$000 US$000
------------------------------------ --------- ---------
Peru 942,411 746,211
------------------------------------- --------- ---------
Argentina 223,295 217,415
------------------------------------- --------- ---------
Mexico 41,944 40,591
------------------------------------- --------- ---------
Chile 118,765 117,466
------------------------------------- --------- ---------
United Kingdom - 120
------------------------------------- --------- ---------
Total non-current segment assets 1,326,415 1,121,803
------------------------------------- --------- ---------
Available-for-sale financial assets 455 51,658
------------------------------------- --------- ---------
Trade and other receivables 6,488 12,128
------------------------------------- --------- ---------
Deferred income tax assets 1,574 2,416
------------------------------------- --------- ---------
Total non-current assets 1,334,932 1,188,005
------------------------------------- --------- ---------
4 Acquisitions and disposals
(a) Acquisition of Non-controlling interest
Minera Suyamarca S.A.C.
In October 2013, Hochschild Mining entered into a binding
agreement to acquire the 40% interest held by International
Minerals Corporation ("IMZ") in Minera Suyamarca S.A.C., which
holds the Pallancata mine and Inmaculada Advanced Project in Peru
(the "Peruvian Assets"). Prior to the Acquisition, Hochschild held
a 60% interest in the Peruvian Assets.
IMZ is also the 100% owner of Minera Oro Vega S.A.C. and Minera
Qorihuayta S.A.C., all registered in Peru.
In compliance with the Group's accounting policy, the difference
between the consideration paid and the carrying value of the
non-controlling interest at the acquisition date has been
recognised in retained earnings as follows:
US$000
--------------------------------------------------- ---------
Cash and cash equivalents (US$2.38 per share) (271,036)
---------------------------------------------------- ---------
Cash and cash equivalents (transaction costs paid) (1,091)
---------------------------------------------------- ---------
Transaction costs pending of payment (4,264)
---------------------------------------------------- ---------
Available-for-sale financial assets (note 20) (8,939)
---------------------------------------------------- ---------
Net assets received from Minera Oro Vega S.A.C 1,777
---------------------------------------------------- ---------
Total consideration (283,553)
---------------------------------------------------- ---------
Non-controlling interest 148,185
---------------------------------------------------- ---------
Retained earnings (135,368)
---------------------------------------------------- ---------
(b) Acquisition of assets
Andina Minerals Inc
On 20 February 2013 the Group completed the acquisition of
Andina Minerals Inc.
Andina's principal asset, the 100% owned Volcan project,
includes the Volcan area, located in Chile.
At 31 December 2012, the Group had paid US$90,156,869, for
112,124,252 common shares of Andina, representing an 81.4% interest
on a fully diluted basis (86.7% on a basic basis). As a result of
the acquisition, the Group incurred directly attributable
transaction costs of US$11,441,742. The Group recognised a
liability of US$13,787,427 in respect of the Group's commitment to
acquire 17,146,835 remaining shares as at 31 December 2012.
Based on the Group's ownership interest as at 31 December 2012,
the Group was deemed to have control over Andina and therefore
consolidated it as a subsidiary undertaking from that date. The
transaction was recognised as an asset acquisition, and the fair
value of the net assets acquired was US$115,388,000.
The outstanding balance at 31 December 2012 of US$13,787,427 was
paid between January 2013 (US$4,268,605) and February 2013
(US$9,518,822).The total consideration was settled in cash.
(c) Sale of subsidiary
Minas Santa María de Moris, S.A. de C.V.
On 28 February 2014 the Group sold its 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") for consideration with a fair value of nil. The
terms of the transaction stipulate that:
-- the Group was entitled to a 1% net smelter return over the
Moris concessions once production reaches 50,000 ounces of gold
equivalent following the sale; and
-- EDR and APE would assume all costs associated with the mine
and plant rehabilitation obligations.
The carrying value of the net assets disposed was:
US$000
------------------------------ -------
Property, plant and equipment 13
------------------------------- -------
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
------------------------------- -------
The transaction resulted in a loss of US$2,963,000.
5 Revenue
Year ended
31 December
----------------
2014 2013
US$000 US$000
-------------------------- ------- -------
Gold (from dore bars) 62,911 112,855
--------------------------- ------- -------
Silver (from dore bars) 67,418 179,773
--------------------------- ------- -------
Gold (from concentrate) 109,045 103,721
--------------------------- ------- -------
Silver (from concentrate) 253,420 225,746
--------------------------- ------- -------
Services 157 63
--------------------------- ------- -------
Total 492,951 622,158
--------------------------- ------- -------
Included within revenue is a loss of US$16,518,000 relating to
provisional pricing adjustments representing the change in the fair
value of embedded derivatives (2013: loss of US$29,867,000) arising
on sales of concentrates and dore (refer to footnote 2 of note
23).
The realised gain on gold and silver swaps sales contracts in
the period recognised within revenue was US$14,603,000
(gold: US$2,451,000, silver: US$12,152,000) (2013: US$Nil).
6 Cost of sales
Included in cost of sales are:
Year ended
31 December
----------------
2014 2013
US$000 US$000
------------------------------------------------- ------- -------
Depreciation and amortisation 128,720 146,918
-------------------------------------------------- ------- -------
Personnel expenses (note 10) 114,322 124,834
-------------------------------------------------- ------- -------
Mining royalty (note 31) 6,581 8,293
-------------------------------------------------- ------- -------
Change in products in process and finished goods 8,641 3,926
-------------------------------------------------- ------- -------
7 Administrative expenses
Year ended
31 December
----------------
2014 2013
US$000 US$000
----------------------------------------- ------- -------
Personnel expenses (note 10 and 11) 24,206 28,445
------------------------------------------ ------- -------
Professional fees 3,846 5,553
------------------------------------------ ------- -------
Social and community welfare expenses(1) 1,943 3,216
------------------------------------------ ------- -------
Lease rentals 1,442 1,925
------------------------------------------ ------- -------
Travel expenses 865 1,342
------------------------------------------ ------- -------
Communications 579 834
------------------------------------------ ------- -------
Indirect taxes 2,678 3,044
------------------------------------------ ------- -------
Depreciation and amortisation 2,072 2,638
------------------------------------------ ------- -------
Technology and systems 718 1,092
------------------------------------------ ------- -------
Security 951 1,083
------------------------------------------ ------- -------
Supplies 188 243
------------------------------------------ ------- -------
Other 6,599 7,361
------------------------------------------ ------- -------
Total 46,087 56,776
------------------------------------------ ------- -------
1 Represents amounts expended by the Group on social and
community welfare activities surrounding its mining units.
8 Exploration expenses
Year ended
31 December
----------------
2014 2013
US$000 US$000
------------------------------ ------- -------
Mine site exploration(1)
------------------------------ ------- -------
Arcata 2,038 2,052
------------------------------- ------- -------
Ares 42 452
------------------------------- ------- -------
Selene 58 -
------------------------------- ------- -------
Sipan - 600
------------------------------- ------- -------
Pallancata 1,728 2,149
------------------------------- ------- -------
San Jose 1,003 1,795
------------------------------- ------- -------
Moris - 129
------------------------------- ------- -------
4,869 7,177
------- -------
Prospects(2)
------------------------------ ------- -------
Peru 788 1,459
------------------------------- ------- -------
Argentina 73 294
------------------------------- ------- -------
Mexico 195 3,504
------------------------------- ------- -------
Chile 237 12,696
------------------------------- ------- -------
1,293 17,953
------- -------
Generative(3)
------------------------------ ------- -------
Peru 1,180 3,502
------------------------------- ------- -------
Argentina 11 53
------------------------------- ------- -------
Mexico 2,588 1,157
------------------------------- ------- -------
Chile 379 330
------------------------------- ------- -------
4,158 5,042
------- -------
Personnel (note 10 and 11(1)) 7,412 12,302
------------------------------- ------- -------
Others 408 3,853
------------------------------- ------- -------
Total 18,140 46,327
------------------------------- ------- -------
1 Mine-site exploration is performed with the purpose of
identifying potential minerals within an existing mine-site, with
the goal of maintaining or extending
the mine's life.
2 Prospects expenditure relates to detailed geological
evaluations in order to determine zones which have mineralisation
potential that is economically viable
for exploration. Exploration expenses are generally incurred in
the following areas: mapping, sampling, geophysics, identification
of local targets and
reconnaissance drilling.
3 Generative expenditure is very early stage exploration
expenditure related to the basic evaluation of the region to
identify prospects areas that have the geological conditions
necessary to contain mineral deposits. Related activities include
regional and field reconnaissance, satellite images, compilation of
public information and identification of exploration targets.
The following table lists the liabilities (generally payables)
outstanding at the year-end, which relate to the exploration
activities of Group companies engaged only in exploration.
Liabilities related to exploration activities incurred by Group
operating companies are not included since it is not practicable to
separate the liabilities related to the exploration activities of
these companies from their operating liabilities.
Cash flows on exploration activities are as follows:
As at 31 December
-------------------
2014 2013
US$000 US$000
--------- --------- --------
Payments 3,362 23,441
---------- --------- --------
9 Selling expenses
Year ended
31 December
----------------
2014 2013
US$000 US$000
--------------------------------------------------------- ------- -------
Transportation of dore, concentrate and maritime freight 6,020 4,256
---------------------------------------------------------- ------- -------
Sales commissions 429 1,050
---------------------------------------------------------- ------- -------
Personnel expenses (note 10) 249 210
---------------------------------------------------------- ------- -------
Warehouse services 2,930 3,256
---------------------------------------------------------- ------- -------
Taxes 15,609 16,596
---------------------------------------------------------- ------- -------
Other 3,460 3,417
---------------------------------------------------------- ------- -------
Total 28,697 28,785
---------------------------------------------------------- ------- -------
10 Personnel expenses(1)
Year ended
31 December
----------------
2014 2013
US$000 US$000
--------------------------- ------- -------
Salaries and wages 115,770 128,225
---------------------------- ------- -------
Workers' profit sharing (34) (737)
---------------------------- ------- -------
Other legal contributions 22,168 24,641
---------------------------- ------- -------
Statutory holiday payments 7,074 7,860
---------------------------- ------- -------
Long Term Incentive Plan (657) (1,127)
---------------------------- ------- -------
Termination benefits 11,570 10,487
---------------------------- ------- -------
Other 1,805 6,584
---------------------------- ------- -------
Total 157,696 175,933
---------------------------- ------- -------
1 Personnel expenses are distributed in cost of sales,
administrative expenses, exploration expenses, selling expenses,
other expenses and capitalised as property plant and equipment
amounting to US$114,322,000 (2013: US$124,834,000), US$24,206,000
(2013: US$28,445,000), US$7,412,000 (2013: US$12,302,000),
US$249,000 (2013: US$210,000), US$1,642,000 (2013: US$nil) and
US$9,865,000 (2013: US$10,142,000) respectively.
Average number of employees for 2014 and 2013 were as
follows:
As at 31 December
-------------------
2014 2013
--------------- --------- --------
Peru 2,852 3,226
---------------- --------- --------
Argentina 1,179 1,227
---------------- --------- --------
Mexico 19 122
---------------- --------- --------
Chile 11 38
---------------- --------- --------
United Kingdom 9 12
---------------- --------- --------
Total 4,070 4,625
---------------- --------- --------
11 Pre-tax exceptional items
Exceptional items are those significant 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 facilitate comparison with prior
years.
Year ended Year ended
31 December 31 December
2014 2013
US$000 US$000
-------------------------------------------------------- ------------ ------------
Cost of sales
-------------------------------------------------------- ------------ ------------
Termination benefits(1) (1,327) (2,466)
--------------------------------------------------------- ------------ ------------
Termination benefits Ares mine unit(2) (3,511) -
--------------------------------------------------------- ------------ ------------
Work stoppage at Arcata mine unit (1,227) -
--------------------------------------------------------- ------------ ------------
Total (6,065) (2,466)
--------------------------------------------------------- ------------ ------------
Administrative expenses
-------------------------------------------------------- ------------ ------------
Termination benefits(1) (2,752) (2,351)
--------------------------------------------------------- ------------ ------------
Total (2,752) (2,351)
--------------------------------------------------------- ------------ ------------
Exploration expenses
-------------------------------------------------------- ------------ ------------
Termination benefits(1) (886) (3,456)
--------------------------------------------------------- ------------ ------------
Total (886) (3,456)
--------------------------------------------------------- ------------ ------------
Other income
-------------------------------------------------------- ------------ ------------
Gain on sale of property, plant and equipment - 2,442
--------------------------------------------------------- ------------ ------------
Total - 2,442
--------------------------------------------------------- ------------ ------------
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) (1,534) (105,071)
--------------------------------------------------------- ------------ ------------
Reversal of impairment of assets(5) 1,643 14,400
--------------------------------------------------------- ------------ ------------
Total 109 (90,671)
--------------------------------------------------------- ------------ ------------
Finance income
-------------------------------------------------------- ------------ ------------
Gain on sale of available-for-sale financial assets(6) 4,061 -
--------------------------------------------------------- ------------ ------------
Gain from changes in the fair value of financial
instruments(7) - 2,417
--------------------------------------------------------- ------------ ------------
Total 4,061 2,417
--------------------------------------------------------- ------------ ------------
Gain on transfer from investment accounted under
the equity method to available-for-sale
financial assets(8) - 107,942
--------------------------------------------------------- ------------ ------------
Total - 107,942
--------------------------------------------------------- ------------ ------------
Finance costs
-------------------------------------------------------- ------------ ------------
Amortisation of transaction costs on secure bank
loans(9) (3,336) (1,072)
--------------------------------------------------------- ------------ ------------
Transaction costs on bank loans(10) - (2,577)
--------------------------------------------------------- ------------ ------------
Loss from changes in the fair value of financial
instruments(11) (6,155) (124,899)
--------------------------------------------------------- ------------ ------------
Loss on sale of available-for-sale financial assets(12) - (7,805)
--------------------------------------------------------- ------------ ------------
Total (9,491) (136,353)
--------------------------------------------------------- ------------ ------------
1 Termination benefits paid to workers following the
restructuring plan approved by management, amounting to
US$4,965,000 (2013:US$8,273,000).
2 Termination benefits generated in connection with the
suspension of the Ares mine unit.
3 Loss generated by the sale of the Group's interest in Moris
(refer to note 4(c)).
4 As at 31 December 2014 corresponds to the write-off of assets
of US$1,534,000. As at 31 December 2013 corresponds to the
impairment of the San José mine unit of US$40,869,000, the Azuca
project of US$30,290,000, the Crespo project of US$29,150,000 and
the Ares unit of US$3,771,000, and to the write-off of assets of
US$991,000.
5 Corresponds to a reversal of previously recorded impairment at
the San Felipe property of US$1,643,000 (2013: US$14,400,000) (note
17)
6 Corresponds to the gain on sale of the Group's holding in Gold
Resource Corp ('GRC') of US$2,642,000, Chaparral Gold of
US$842,000, Mirasol Resources Ltd of US$556,000 and Northern
Superior Resources Inc of US$21,000.
7 Corresponds to the recycling of the unrealised gain generated
by the shares of International Minerals Corporation, at the time of
acquisition (refer to note 4(a)).
8 Gain on the reclassification of GRC shares from an investment
accounted for under the equity method to an available-for-sale
financial asset of US$107,942,000 as a result of the Company
ceasing to have the ability to exercise significant influence
(refer to note 19).
9 Corresponds to the attributable issue cost of the syndicated
loan granted to Compañía Minera Ares S.A.C. (note 27), disclosed as
an exceptional item
as a significant one-off expense.
10 Corresponds to the write-off of transaction costs related to
bank facilities never drawn by Minera Suyamarca S.A.C.
11 As at 31 December 2014 corresponds to the impairment of the
investments in Pembrook Mining Corp of US$6,000,000, Brionor
Resources of US$54,000, Revelo Resources Corp (formerly Iron Creek
Capital Corp) of US$53,000, Northern Superior Resources Inc of
US$45,000 and Empire Petroleum Corp of US$3,000. As at 31 December
2013 corresponds to the impairment of investments in Gold Resource
Corp. of US$105,298,000, International Minerals of US$12,920,000,
Pembrook Mining Corp. of US$5,745,000, Mariana Resources Ltd. of
US$281,000, Northern Superior Resources Inc. of US$422,000, Iron
Creek Capital Corp. of US$207,000, Empire Petroleum Corp. of
US$22,000 and Brionor Resources of US$4,000.
12 Corresponds to the loss on sale of part of the Group's
holding in GRC of US$7,805,000. The Group sold 3,375,000 and
1,800,000 GRC shares on 11 July 2013 and 12 December 2013,
respectively.
12 Other expenses before exceptional items
Year ended Year ended
31 December 31 December
2014 2013
------------ ------------
Before Before
exceptional exceptional
items items
US$000 US$000
---------------------------------------------------- ------------ ------------
Increase of provision for mine closure (note 28(4)) 9,088 5,516
----------------------------------------------------- ------------ ------------
Tax on mining reserves in Argentina (note 31) 3,453 2,453
----------------------------------------------------- ------------ ------------
Contingencies 1,680 845
----------------------------------------------------- ------------ ------------
Other 3,291 6,741
----------------------------------------------------- ------------ ------------
Total 17,512 15,555
----------------------------------------------------- ------------ ------------
13 Finance income and finance costs before exceptional items
Year ended Year ended
31 December 31 December
2014 2013
------------ ------------
Before Before
exceptional exceptional
items items
US$000 US$000
------------------------------------------------- ------------ ------------
Finance income
------------------------------------------------- ------------ ------------
Interest on deposits and liquidity funds 1,567 6,751
-------------------------------------------------- ------------ ------------
Interest income 1,567 6,751
-------------------------------------------------- ------------ ------------
Dividends 525 3,551
-------------------------------------------------- ------------ ------------
Other 123 373
-------------------------------------------------- ------------ ------------
Total 2,215 10,675
-------------------------------------------------- ------------ ------------
Finance costs
------------------------------------------------- ------------ ------------
Interest on secured bank loans (note 27) (5,027) (4,633)
-------------------------------------------------- ------------ ------------
Interest on convertible bond (note 27) (5,364) (4,594)
-------------------------------------------------- ------------ ------------
Interest on bond (note 27) (20,302) -
-------------------------------------------------- ------------ ------------
Interest expense (30,693) (9,227)
-------------------------------------------------- ------------ ------------
Unwind of discount rate (1,865) (1,267)
-------------------------------------------------- ------------ ------------
Loss from changes in the fair value of financial
instruments (90) (220)
-------------------------------------------------- ------------ ------------
Other (426) (983)
-------------------------------------------------- ------------ ------------
Total (33,074) (11,697)
-------------------------------------------------- ------------ ------------
14 Income tax expense
Year ended 31 December Year ended 31 December
2014 2013
---------------------------------- ----------------------------------
Before Before
exceptional Exceptional exceptional Exceptional
items items Total items items Total
US$000 US$000 US$000 US$000 US$000 US$000
------------------------------ ------------ ----------- ------- ------------ ----------- -------
Current corporate income
tax from
continuing operations
------------------------------ ------------ ----------- ------- ------------ ----------- -------
Current corporate income
tax charge 10,082 (251) 9,831 10,971 (752) 10,219
------------------------------- ------------ ----------- ------- ------------ ----------- -------
Current mining royalty charge
(note 31) 1,611 - 1,611 2,344 - 2,344
------------------------------- ------------ ----------- ------- ------------ ----------- -------
Current special mining tax
charge (note 31) 375 - 375 905 - 905
------------------------------- ------------ ----------- ------- ------------ ----------- -------
Withholding taxes (343) - (343) (641) - (641)
------------------------------- ------------ ----------- ------- ------------ ----------- -------
11,725 (251) 11,474 13,579 (752) 12,827
------------ ----------- ------- ------------ ----------- -------
Deferred taxation
------------------------------ ------------ ----------- ------- ------------ ----------- -------
Origination and reversal
of temporary differences
from continuing operations (457) (3,851) (4,308) 31,400 (35,170) (3,770)
------------------------------- ------------ ----------- ------- ------------ ----------- -------
Effect of change in tax rate (4,802) 257 (4,545) - - -
------------------------------- ------------ ----------- ------- ------------ ----------- -------
(5,259) (3,594) (8,853) 31,400 (35,170) (3,770)
------------ ----------- ------- ------------ ----------- -------
Total taxation charge in
the income statement 6,466 (3,845) 2,621 44,979 (35,922) 9,057
------------------------------- ------------ ----------- ------- ------------ ----------- -------
The weighted average statutory income tax rate was 28.7% for
2014 and 28.5% for 2013. This is calculated as the average of the
statutory tax rates applicable in the countries in which the Group
operates, weighted by the profit/(loss) before tax of the Group
companies in their respective countries as included in the
consolidated financial statements.
The change in the weighted average statutory income tax rate is
due to a change in the weighting of profit/(loss) before tax in the
various jurisdictions in which the Group operates.
On December 2014, the Peruvian government approved a gradually
reduction in the Income tax rate, applicable since 2015 year.
The tax related to items charged or credited to equity is as
follows:
As at 31 December
-------------------
2014 2013
US$000 US$000
--------------------------------------------------------- --------- --------
Deferred taxation:
--------------------------------------------------------- --------- --------
Deferred income tax relating to fair value gains on
cash flow hedges 1,216 -
---------------------------------------------------------- --------- --------
Total tax charge in the statement of other comprehensive
income 1,216 -
---------------------------------------------------------- --------- --------
The total taxation charge on the Group's profit before tax
differs from the theoretical amount that would arise using the
weighted average tax rate applicable to the consolidated profits of
the Group companies as follows:
As at 31 December
-------------------
2014 2013
US$000 US$000
------------------------------------------------------ -------- ---------
Loss from continuing operations before income tax (68,210) (119,620)
------------------------------------------------------- -------- ---------
At average statutory income tax rate of 28.7% (2013:
28.5%) (19,547) (34,140)
------------------------------------------------------- -------- ---------
Expenses not deductible for tax purposes 3,058 2,685
------------------------------------------------------- -------- ---------
Non-taxable income(1) (851) (1,366)
------------------------------------------------------- -------- ---------
Non-taxable share of gains of associates - (1,377)
------------------------------------------------------- -------- ---------
Deferred tax recognised on special investment regime (780) (4,246)
------------------------------------------------------- -------- ---------
Movement in unrecognised deferred tax 6,700 13,048
------------------------------------------------------- -------- ---------
Change in statutory income tax rate (4,545) -
------------------------------------------------------- -------- ---------
Withholding tax (343) (641)
------------------------------------------------------- -------- ---------
Special mining tax and mining royalty(2) 1,986 3,249
------------------------------------------------------- -------- ---------
Foreign exchange rate effect(3) 14,473 30,366
------------------------------------------------------- -------- ---------
Other 2,470 1,479
------------------------------------------------------- -------- ---------
At average effective income tax rate of -3.8% (2013:
-11.8%) 2,621 9,057
------------------------------------------------------- -------- ---------
Taxation charge attributable to continuing operations 2,621 9,057
------------------------------------------------------- -------- ---------
Total taxation charge in the income statement 2,621 9,057
------------------------------------------------------- -------- ---------
1 Mainly corresponds to the gain on sale of Gold Resource Corp
shares (2013: Mainly corresponds to dividends received from Gold
Resource Corp. and International Minerals Corporation).2
2 Corresponds to the impact of a mining royalty and special
mining tax in Peru (note 31).
3 Mainly corresponds to the foreign exchange effect of
converting tax bases and monetary items from local currency to the
functional currency.
15 Basic and diluted (loss)/earnings per share
Earnings per share ('EPS') is calculated by dividing
profit/(loss) for the year attributable to equity shareholders of
the Company by the weighted average number of ordinary shares
issued during the year.
The Company has dilutive potential ordinary shares.
As at 31 December 2014 and 2013, EPS has been calculated as
follows:
As at 31 December
-------------------
2014 2013
-------------------------------------------------- --------- --------
Basic loss per share from continuing operations
-------------------------------------------------- --------- --------
Before exceptional items (US$) (0.15) (0.15)
--------------------------------------------------- --------- --------
Exceptional items (US$) (0.04) (0.21)
--------------------------------------------------- --------- --------
Total for the year and from continuing operations
(US$) (0.19) (0.36)
--------------------------------------------------- --------- --------
Diluted loss per share from continuing operations
-------------------------------------------------- --------- --------
Before exceptional items (US$) (0.15) (0.15)
--------------------------------------------------- --------- --------
Exceptional items (US$) (0.04) (0.21)
--------------------------------------------------- --------- --------
Total for the year and from continuing operations
(US$) (0.19) (0.36)
--------------------------------------------------- --------- --------
Net loss from continuing operations before exceptional items and
attributable to equity holders of the parent is derived
as follows:
As at 31 December
-------------------
2014 2013
----------------------------------------------------------- -------- ---------
Loss attributable to equity holders of the parent
- continuing operations (US$000) (68,877) (123,083)
------------------------------------------------------------ -------- ---------
Exceptional items after tax - attributable to equity
holders of the parent (US$000) 13,914 72,738
------------------------------------------------------------ -------- ---------
Loss from continuing operations before exceptional
items attributable to equity holders
of the parent (US$000) (54,963) (50,345)
------------------------------------------------------------ -------- ---------
Diluted loss from continuing operations before exceptional
items attributable to equity
holders of the parent (US$000) (54,963) (50,345)
------------------------------------------------------------ -------- ---------
The following reflects the share data used in the basic and
diluted loss per share computations:
As at 31 December
-------------------
2014 2013
----------------------------------------------------------- --------- --------
Basic weighted average number of ordinary shares in
issue (thousands) 366,975 345,225
------------------------------------------------------------ --------- --------
Dilutive potential ordinary shares related to convertible
bond (thousands)(1) - -
----------------------------------------------------------- --------- --------
Dilutive potential ordinary shares related to contingently
issuable shares (thousands)(1) - -
----------------------------------------------------------- --------- --------
Diluted weighted average number of ordinary shares
in issue and dilutive potential
ordinary shares (thousands) 366,975 345,225
------------------------------------------------------------ --------- --------
1 The potential ordinary shares related to the convertible bond
and the contingently issuable shares under the Enhanced Long Term
Incentive Plan and Restricted Share Plan have not been included in
the calculation of diluted EPS for 2014 and 2013 as they have an
antidilutive effect.
16 Property, plant and equipment
Mining
properties Construction
and Mine in progress
development Land Plant closure and capital
costs(2) and buildings and equipment Vehicles asset advances Total
US$000 US$000 US$000 US$000 US$000 US$000 US$000
------------- ------------- ------------- ------------- -------- -------- ------------ ---------
Year ended 31
December
2014
------------- ------------- ------------- ------------- -------- -------- ------------ ---------
Cost
------------- ------------- ------------- ------------- -------- -------- ------------ ---------
At 1 January
2014 869,780 220,083 371,079 6,511 74,362 136,383 1,678,198
-------------- ------------- ------------- ------------- -------- -------- ------------ ---------
Additions 136,742 1,913 20,281 46 - 157,192 316,174
-------------- ------------- ------------- ------------- -------- -------- ------------ ---------
Change in
discount rate - - - - 4,357 - 4,357
-------------- ------------- ------------- ------------- -------- -------- ------------ ---------
Change in mine
closure
estimate - - - - 18,741 - 18,741
-------------- ------------- ------------- ------------- -------- -------- ------------ ---------
Disposals - (178) (2,657) (309) - (61) (3,205)
-------------- ------------- ------------- ------------- -------- -------- ------------ ---------
Write-offs (114) (276) (3,943) (308) - - (4,641)
-------------- ------------- ------------- ------------- -------- -------- ------------ ---------
Disposal of
subsidiary
(note 4(c)) (11,015) (7,851) (6,972) (355) (1,247) - (27,440)
-------------- ------------- ------------- ------------- -------- -------- ------------ ---------
Transfers and
other
movements(1) 4,384 43,480 11,254 445 - (56,206) 3,357
-------------- ------------- ------------- ------------- -------- -------- ------------ ---------
At 31 December
2014 999,777 257,171 389,042 6,030 96,213 237,308 1,985,541
-------------- ------------- ------------- ------------- -------- -------- ------------ ---------
Accumulated
depreciation
and
impairment
------------- ------------- ------------- ------------- -------- -------- ------------ ---------
At 1 January
2014 452,777 120,923 175,453 3,645 48,425 3,498 804,721
-------------- ------------- ------------- ------------- -------- -------- ------------ ---------
Depreciation
for the
year 84,928 19,836 29,854 752 2,308 - 137,678
-------------- ------------- ------------- ------------- -------- -------- ------------ ---------
Disposals - (178) (2,385) (256) - - (2,819)
-------------- ------------- ------------- ------------- -------- -------- ------------ ---------
Write-offs (51) (184) (2,677) (195) - - (3,107)
-------------- ------------- ------------- ------------- -------- -------- ------------ ---------
Disposal of
subsidiary
(note 4(c)) (11,015) (7,851) (6,969) (345) (1,247) - (27,427)
-------------- ------------- ------------- ------------- -------- -------- ------------ ---------
Transfers and
other
movements(1) 185 2,092 (66) 62 - (2,088) 185
-------------- ------------- ------------- ------------- -------- -------- ------------ ---------
At 31 December
2014 526,824 134,638 193,210 3,663 49,486 1,410 909,231
-------------- ------------- ------------- ------------- -------- -------- ------------ ---------
Net book
amount at 31
December 2014 472,953 122,533 195,832 2,367 46,727 235,898 1,076,310
-------------- ------------- ------------- ------------- -------- -------- ------------ ---------
The carrying value of plant and equipment held under finance
leases at 31 December 2014 was US$Nil (2013: US$539,627). Additions
during
the year included US$Nil (2013: US$Nil) of plant and equipment
under finance leases. Leased assets are pledged as security for the
related finance lease.
There were borrowing costs capitalised in property, plant and
equipment amounting to US$9,904,000 (2013:US$5,736,000). The
capitalisation rate used was 8.83% (2013: 9.45%).
1 Net of transfers and other movements of US$3,172,000 were
transferred from evaluation and exploration assets.
2 Mining properties and development costs related to Azuca,
Crespo, Inmaculada and Volcan projects are not currently being
depreciated.
At the end of 2014, given the continued challenging environment
for the mining sector, the Group carried out an impairment review
of all of its operating mines (Arcata, Pallancata, and San Jose),
its Advanced Project (Inmaculada), and its growth projects (Crespo,
Azuca, and Volcan). As a result of this review, no impairment
charges were identified.
The recoverable values of these CGUs were determined using a
fair value less costs of disposal (FVLCD) methodology. FVLCD was
determined using a combination of level 2 and level 3 inputs to
construct a discounted cash flow model to estimate the amount that
would be paid by a willing third party in an arm's length
transaction. The key assumptions on which management has based its
determination of fair value less costs of disposal, and the
associated recoverable values calculated are presented below.
Gold and silver prices
$ per oz. 2015 2016 2017 2018 Long-term
---------- ----- ----- ----- ----- ---------
Gold 1,266 1,288 1,288 1,325 1,300
---------- ----- ----- ----- ----- ---------
Silver 19.4 20.1 21.3 21.8 20.0
Other key assumptions
Arcata Pallancata San Jose Inmaculada Crespo Azuca Volcan
--------------- ------ ---------- -------- ---------- ------ ------- --------
Discount
rate 5.1% 5.1% 12.8% 6.1% 6.6% n/a n/a
--------------- ------ ---------- -------- ---------- ------ ------- --------
Value per
in-situ ounce n/a n/a n/a n/a n/a 0.56(1) 18.00(1)
--------------- ------ ---------- -------- ---------- ------ ------- --------
1 With respect to the Azuca and Volcan growth projects, given
their early stage, the Group applied a value in-situ methodology,
which applies a realisable 'enterprise value' to unprocessed
mineral resources. The methodology is used to determine the fair
value less costs of disposal of the Azuca and Volcan CGUs, which
includes the water permits held by the Group. The enterprise value
used in the calculation performed at 31 December 2014 was US$18.00
per gold equivalent ounce of resources (Volcan) and $0.56 per
silver equivalent ounce of resources (Azuca). The enterprise value
figures are based on observable external market information.
Sensitivity analysis
Other than as disclosed below, management believes that no
reasonably possible change in any of the key assumptions above
would cause the carrying value of any of its cash generating units
to exceed its recoverable amount.
The estimated recoverable amounts of the following of the
Group's CGUs are equal to, or not materially greater than, their
carrying values; consequently, any adverse change in the following
key assumptions would, in isolation, cause an impairment loss to be
recognised:
Approximate impairment Arcata Pallancata Inmaculada San Jose Crespo Azuca
resulting from the following
changes (US$000)
------------------------------ -------- ---------- ---------- -------- -------- -------
Prices (10% decrease) (52,000) (47,000) (98,000) (84,000) (21,000) n/a
------------------------------ -------- ---------- ---------- -------- -------- -------
Discount rate (3% increase) (9,000) (3,000) (59,000) (18,000) (16,000) n/a
------------------------------ -------- ---------- ---------- -------- -------- -------
Production costs (10%
increase) (25,000) (20,000) (5,000) (41,000) (10,000) n/a
------------------------------ -------- ---------- ---------- -------- -------- -------
Value per in-situ ounce
(10% decrease) n/a n/a n/a (3,000)
------------------------------ -------- ---------- ---------- -------- -------- -------
Current carrying value Arcata Pallancata Inmaculada San Jose Crespo Azuca
of CGU, net of deferred
tax (US$000)
------------------------- ------- ---------- ---------- -------- ------ ------
31 December 2014 135,356 108,388 464,355 171,977 64,877 39,288
------------------------- ------- ---------- ---------- -------- ------ ------
16 Property, plant and equipment (continued)
Mining
properties Construction
and Mine in progress
development Land Plant closure and capital
costs and buildings and equipment Vehicles asset advances Total
US$000 US$000 US$000 US$000 US$000 US$000 US$000
-------------- ------------ ------------- ------------- -------- -------- ------------ ---------
Year ended 31
December
2013
-------------- ------------ ------------- ------------- -------- -------- ------------ ---------
Cost
-------------- ------------ ------------- ------------- -------- -------- ------------ ---------
At 1 January
2013 540,324 179,940 313,457 5,360 67,356 119,381 1,225,818
--------------- ------------ ------------- ------------- -------- -------- ------------ ---------
Additions 141,504 2,823 49,700 323 - 73,421 267,771
--------------- ------------ ------------- ------------- -------- -------- ------------ ---------
Change in
discount rate - - - - (1,481) - (1,481)
--------------- ------------ ------------- ------------- -------- -------- ------------ ---------
Change in mine
closure
estimate - - - - 8,487 - 8,487
--------------- ------------ ------------- ------------- -------- -------- ------------ ---------
Disposals - - (724) (43) - - (767)
--------------- ------------ ------------- ------------- -------- -------- ------------ ---------
Write-offs (321) (57) (7,089) (150) - - (7,617)
--------------- ------------ ------------- ------------- -------- -------- ------------ ---------
Transfers and
other
movements (50) 37,377 15,611 1,021 - (56,419) (2,460)
--------------- ------------ ------------- ------------- -------- -------- ------------ ---------
Transfers from
evaluation
and
exploration
assets 188,323 - - - - - 188,323
--------------- ------------ ------------- ------------- -------- -------- ------------ ---------
Foreign
exchange - - 124 - - - 124
--------------- ------------ ------------- ------------- -------- -------- ------------ ---------
At 31 December
2013 869,780 220,083 371,079 6,511 74,362 136,383 1,678,198
--------------- ------------ ------------- ------------- -------- -------- ------------ ---------
Accumulated
depreciation
and impairment
-------------- ------------ ------------- ------------- -------- -------- ------------ ---------
At 1 January
2013 306,443 87,679 146,823 2,574 44,808 936 589,263
--------------- ------------ ------------- ------------- -------- -------- ------------ ---------
Depreciation
for the
year 96,862 20,377 29,316 989 2,070 - 149,614
--------------- ------------ ------------- ------------- -------- -------- ------------ ---------
Disposals - - (351) (14) - - (365)
--------------- ------------ ------------- ------------- -------- -------- ------------ ---------
Write-offs (41) (9) (5,567) (110) - - (5,727)
--------------- ------------ ------------- ------------- -------- -------- ------------ ---------
Impairment(1) 42,080 5,883 8,520 204 1,547 3,899 62,133
--------------- ------------ ------------- ------------- -------- -------- ------------ ---------
Transfers from
evaluation
and
exploration
assets 7,418 - - - - - 7,418
--------------- ------------ ------------- ------------- -------- -------- ------------ ---------
Transfers and
other
movements 15 6,993 (3,350) 2 - (1,337) 2,323
--------------- ------------ ------------- ------------- -------- -------- ------------ ---------
Foreign
exchange - - 62 - - - 62
--------------- ------------ ------------- ------------- -------- -------- ------------ ---------
At 31 December
2013 452,777 120,923 175,453 3,645 48,425 3,498 804,721
--------------- ------------ ------------- ------------- -------- -------- ------------ ---------
Net book amount
at 31
December 2013 417,003 99,160 195,626 2,866 25,937 132,885 873,477
--------------- ------------ ------------- ------------- -------- -------- ------------ ---------
1 In 2013, the Group recorded an impairment of US$450,000 with
respect to the Azuca project, US$22,535,000 with respect to the
Crespo project, US$35,377,000 with respect to the San Jose mine
unit and US$3,771,000 with respect to the Ares mine unit. These
impairment charges arose primarily as a result of decreases in the
prices of silver and gold and were determined using the fair value
less costs to dispose (FVLCD) methodology. FVLCD was determined
using a combination of level 2 and level 3 inputs to construct a
discounted cash flow model to estimate the amount that would be
paid by a willing third party in an arm's length transaction. The
key assumptions on which management has based its determination of
fair value less costs of disposal include: forecast commodity
prices, discount rates, production volumes, production costs, and
required capital expenditures. Where applicable, the post-tax
discount rates used in the measurement of the fair value less costs
of disposal were: Azuca: 5.1%, Crespo: 6.8%, San Jose: 11.7%. Any
variation in these key assumptions would either result in further
impairment or a reduction of the impairment. The recoverable amount
of Azuca, Crespo and San Jose was US$28,285,000, US$50,005,000 and
US$154,214,000 respectively.
17 Evaluation and exploration assets
Azuca Crespo Inmaculada San Felipe Volcan Others Total
US$000 US$000 US$000 US$000 US$000 US$000 US$000
------------------------------ ------- -------- ---------- ---------- ------- -------- ---------
Cost
------------------------------ ------- -------- ---------- ---------- ------- -------- ---------
Balance at 1 January
2013 70,804 67,615 116,762 55,950 86,301 41,172 438,604
------------------------------- ------- -------- ---------- ---------- ------- -------- ---------
Additions 4,736 179 965 - 4,300 2,006 12,186
------------------------------- ------- -------- ---------- ---------- ------- -------- ---------
Foreign exchange - (512) - - - - (512)
------------------------------- ------- -------- ---------- ---------- ------- -------- ---------
Write-off - - - - (26) (4) (30)
------------------------------- ------- -------- ---------- ---------- ------- -------- ---------
Transfers to property,
plant and equipment - (38,106) (117,727) - - (32,490) (188,323)
------------------------------- ------- -------- ---------- ---------- ------- -------- ---------
Balance at 31 December
2013 75,540 29,176 - 55,950 90,575 10,684 261,925
------------------------------- ------- -------- ---------- ---------- ------- -------- ---------
Additions 821 779 - 1,463 1,603 4,666
------------------------------- ------- -------- ---------- ---------- ------- -------- ---------
Transfers from/(to)
property plant and equipment 3,593 (3,620) (92) - (3) (3,730) (3,852)
------------------------------- ------- -------- ---------- ---------- ------- -------- ---------
Balance at 31 December
2014 79,954 25,556 687 55,950 92,035 8,557 262,739
------------------------------- ------- -------- ---------- ---------- ------- -------- ---------
Accumulated impairment
------------------------------ ------- -------- ---------- ---------- ------- -------- ---------
Balance at 1 January
2013 22 9,904 - 30,950 - 1,171 42,047
------------------------------- ------- -------- ---------- ---------- ------- -------- ---------
Impairment(1) 29,840 5,507 - (14,400) - 1,706 22,653
------------------------------- ------- -------- ---------- ---------- ------- -------- ---------
Transfers to property,
plant and equipment - (6,281) - - - (1,137) (7,418)
------------------------------- ------- -------- ---------- ---------- ------- -------- ---------
Balance at 31 December
2013 29,862 9,130 - 16,550 - 1,740 57,282
------------------------------- ------- -------- ---------- ---------- ------- -------- ---------
Impairment(1) - - - (1,643) - - (1,643)
------------------------------- ------- -------- ---------- ---------- ------- -------- ---------
Transfers from/(to)
property, plant and
equipment 3,430 (3,620) - - - - (190)
------------------------------- ------- -------- ---------- ---------- ------- -------- ---------
Balance at 31 December
2014 33,292 5,510 - 14,907 - 1,740 55,449
------------------------------- ------- -------- ---------- ---------- ------- -------- ---------
Net book value as at
31 December 2013 45,678 20,046 - 39,400 90,575 8,944 204,643
------------------------------- ------- -------- ---------- ---------- ------- -------- ---------
Net book value as at
31 December 2014 46,662 20,046 687 41,043 92,035 6,817 207,290
------------------------------- ------- -------- ---------- ---------- ------- -------- ---------
There were no borrowing costs capitalised in evaluation and
exploration assets.
1 In 2014, the group partially reversed the impairment of the
San Felipe project of US$1,643,000. In 2013, the Group recorded an
impairment with respect to the Azuca project of US$29,840,000 , the
Crespo project of US$5,507,000 and the San Jose mine unit of
US$1,706,000, and partially reversed the impairment of the San
Felipe project of US$14,400,000 (refer to note 17).
18 Intangible assets
Transmission Water Software Legal
Goodwill line(1) permits(2) licences rights(3) Total
US$000 US$000 US$000 US$000 US$000 US$000
--------------------------------- -------- ------------ ------------ --------- ---------- -------
Cost
--------------------------------- -------- ------------ ------------ --------- ---------- -------
Balance at 1 January 2013 2,091 22,157 26,583 1,337 - 52,168
---------------------------------- -------- ------------ ------------ --------- ---------- -------
Additions - - - - 1,621 1,621
---------------------------------- -------- ------------ ------------ --------- ---------- -------
Transfer - - - 11 4,783 4,794
---------------------------------- -------- ------------ ------------ --------- ---------- -------
Balance at 31 December 2013 2,091 22,157 26,583 1,348 6,404 58,583
---------------------------------- -------- ------------ ------------ --------- ---------- -------
Additions - - - 4 277 281
---------------------------------- -------- ------------ ------------ --------- ---------- -------
Transfer - - - 421 - 421
---------------------------------- -------- ------------ ------------ --------- ---------- -------
Balance at 31 December 2014 2,091 22,157 26,583 1,773 6,681 59,285
---------------------------------- -------- ------------ ------------ --------- ---------- -------
Accumulated amortisation and
impairment
--------------------------------- -------- ------------ ------------ --------- ---------- -------
Balance at 1 January 2013 - 7,138 - 1,127 - 8,265
---------------------------------- -------- ------------ ------------ --------- ---------- -------
Amortisation for the year(4) - 1,213 - 87 441 1,741
---------------------------------- -------- ------------ ------------ --------- ---------- -------
Impairment of the period(5) 2,091 1,671 - 24 1,108 4,894
---------------------------------- -------- ------------ ------------ --------- ---------- -------
Balance at 31 December 2013 2,091 10,022 - 1,238 1,549 14,900
---------------------------------- -------- ------------ ------------ --------- ---------- -------
Amortisation for the year(4) - 1,102 - 79 458 1,639
---------------------------------- -------- ------------ ------------ --------- ---------- -------
Transfer - - - (69) - (69)
---------------------------------- -------- ------------ ------------ --------- ---------- -------
Balance at 31 December 2014 2,091 11,124 - 1,248 2,007 16,470
---------------------------------- -------- ------------ ------------ --------- ---------- -------
Net book value as at 31 December
2013 - 12,135 26,583 110 4,855 43,683
---------------------------------- -------- ------------ ------------ --------- ---------- -------
Net book value as at 31 December
2014 - 11,033 26,583 525 4,674 42,815
---------------------------------- -------- ------------ ------------ --------- ---------- -------
1 The transmission line is amortised using the units of
production method. At 31 December 2014 the remaining amortisation
period is approximately 10 years.
2 Corresponds to the acquisition of water permits of Andina
Minerals Group ("Andina") (refer to note 4(b)). They have an
indefinite life according to Chilean law.
3 Legal rights correspond to expenditures required to give the
Group the right to use a property for the surface exploration work,
development and production. At 31 December 2014 the remaining
amortisation period is 12 years.
4 The amortisation for the period is included in cost of sales
and administrative expenses in the income statement.
5 In 2013 the Group recorded an impairment in relation to all of
the goodwill of US$2,091,000 and other intangibles of US$1,695,000
related to the San Jose mine unit, and US$1,108,000 related to the
Crespo project (refer to note 16).
The carrying amount of water permits is reviewed annually to
determine whether it is in excess of its recoverable amount.
(a) Goodwill:
The calculation of fair value less cost of disposal is most
sensitive to the following assumptions:
-- Commodity prices - Commodity prices of gold and silver are
based on prices considered in the Group's 2013 forecast and
external market consensus forecasts. The prices considered in the
2013 impairment tests were:
Year 2013 2014 2015 2016 2017 2018 2019 2020-2024
-------------- ------- ------- ------- ------- ------- ------- ------- ---------
2013 - Gold
- US$/oz 1,343.9 1,405.9 1,379.3 1,319.3 1,272.1 1,272.1 1,272.1 1,272.1
--------------- ------- ------- ------- ------- ------- ------- ------- ---------
2013 - Silver
- US$/oz 21.2 25.0 23.5 20.7 22.3 22.3 22.3 22.3
--------------- ------- ------- ------- ------- ------- ------- ------- ---------
-- Estimation of reserves and resources - Reserves and resources
are based on management's estimates using appropriate exploration
and evaluation techniques;
-- Production volumes and grades - Tonnage produced was
estimated at plant capacity with 12 days of maintenance per
year;
-- Capital expenditure - The cash flows for each mining unit
include capital expenditures to maintain the mine and to convert
resources to reserves;
-- Operating costs - Costs are based on historical information
from previous years and current mining conditions;
-- Discount rates - The cash flows are discounted at real
pre-tax rates that reflect the current market assessments of the
time value of money and the risks specific to the cash-generating
unit. These rates are based on the weighted average cost of capital
specific to each cash-generating unit. The post-tax discount rate
used in the 2013 impairment test was 11.7%.
The period approved by management to project the cash flows was
10 years.
(b) Water permits:
In the case of the water permits the Group applied a value in
situ methodology, which applies a realisable 'enterprise value' to
unprocessed mineral resources. The methodology is used to determine
the fair value less costs of disposal of the Volcan cash-generating
unit, which includes the water permits held by the Group. The
enterprise value used in the calculation performed at 31 December
2014 was US$18.00 per gold equivalent ounce of resources (2013:
US$13.60).
The enterprise value figures are based on observable external
market information.
Headroom for the 2014 impairment test was US$53,185,000 (2013:
US$14,172,000).
19 Investments accounted under equity method
Gold Resource Corp.
The Group has an interest in Gold Resource Corp.("GRC"), which
is involved in the exploration for and production of gold and
silver in Mexico.
On 27 March 2013 equity accounting for the investment was
discontinued as a result of developments during the period which
resulted in the Group concluding that it no longer had the ability
to influence significantly that company's strategic, operational
and financial direction. Accordingly, the investment in GRC was
reclassified as an available-for-sale financial asset. As of 27
March 2013 the Group had a 27.77% interest in GRC. In the period
prior to reclassification, the Group's share of the profit and
total comprehensive income of GRC was US$5,921,000. A portion of
the Group's interest in GRC was disposed of in 2013 following the
reclassification to an available-for-sale financial asset.
The Group disposed of its available-for-sale investment in GRC
during 2014 (note 20).
20 Available-for-sale financial assets
Year ended
31 December
-------------------
2014 2013
US$000 US$000
-------------------------------------------------- -------- ---------
Beginning balance 51,658 30,609
--------------------------------------------------- -------- ---------
Additions(1) - 1,119
--------------------------------------------------- -------- ---------
Reclassification from investments accounted under
the equity method(2) - 189,418
--------------------------------------------------- -------- ---------
Fair value change recorded in equity (3,106) (125,932)
--------------------------------------------------- -------- ---------
Disposals(3) (48,097) (33,498)
--------------------------------------------------- -------- ---------
Other(4) - (10,058)
--------------------------------------------------- -------- ---------
Ending balance 455 51,658
--------------------------------------------------- -------- ---------
1 In 2013 represents 3,755,746 shares of Chaparral Gold Corp.
received as a result of the Group's 3.2% original interest in
International Minerals Corporation ("IMZ") (refer to note 4(a))
2 Reclassification of the Group's Gold Resource Corp. shares
from an associate accounted for under the equity method to an
available-for-sale financial asset on 27 March 2013. Equity
accounting of the investment was discontinued as a result of
developments during the period which resulted in the Group
concluding that it no longer had the ability to influence
significantly that company's strategic, operational and financial
direction. Consequently, the asset is recognised as an
available-for-sale asset at fair value.
3 Sale of 9,451,874 shares of Gold Resource Corp., 3,334,000
shares of Norther Superior Resources Inc., 3,755,746 shares of
Chaparral Gold Corp., and 500,000 shares of Mirasol Resources Ltd.
(2013: Sale of 3,375,000 and 1,800,000 shares of Gold Resource Corp
on 11 July 2013 and 12 December 2013 respectively).
4 In connection with the acquisition of the non-controlling
interest of Minera Suyamarca S.A.C. the Group disposed of its
3,755,746 ordinary shares of IMZ and received 3,755,746 class A
shares of IMZ, which was recognised as an investment in a
subsidiary and consequently eliminated on consolidation (refer to
note 4(a))
20 Available-for-sale financial assets (continued)
Available-for-sale financial assets include the following:
Year ended
31 December
----------------
2014 2013
US$000 US$000
---------------------------------------------- ------- -------
Equity securities - quoted Canadian companies 216 2,030
----------------------------------------------- ------- -------
Equity securities - quoted US companies(1) 12 42,883
----------------------------------------------- ------- -------
Equity securities - quoted British companies 227 745
----------------------------------------------- ------- -------
Equity securities - unquoted(2) - 6,000
----------------------------------------------- ------- -------
Total 455 51,658
----------------------------------------------- ------- -------
1 Includes Gold Resource Corp shares of US$Nil (2013:
US$42,817,000l).
2 Includes Pembrook Mining Corp and ECI Exploration and Mining
Inc. shares.
The fair value of the listed shares is determined by reference
to published price quotations in an active market.
The investments in unlisted shares (Pembrook Mining Corp. and
ECI Exploration and Mining Inc.) were recognised at cost less any
recognised impairment losses given that there is not an active
market for these investments. The investments in ECI Exploration
and Mining Inc. and Pembrook Mining Corp. are fully impaired as at
31 December 2014 (2013: impairment of US$5,745,000).
Available-for-sale financial assets are denominated in the
following currencies:
2014 2013
US$000 US$000
----------------- ------- -------
Canadian dollars 216 8,030
------------------ ------- -------
US dollars 12 42,883
------------------ ------- -------
Pounds sterling 227 745
------------------ ------- -------
Total 455 51,658
------------------ ------- -------
21 Trade and other receivables
As at 31 December
------------------------------------------
2014 2013
-------------------- --------------------
Non-current Current Non-current Current
US$000 US$000 US$000 US$000
------------------------------------------- ----------- ------- ----------- -------
Trade receivables - 72,818 - 69,702
-------------------------------------------- ----------- ------- ----------- -------
Advances to suppliers - 5,347 - 22,667
-------------------------------------------- ----------- ------- ----------- -------
Duties recoverable from exports of Minera
Santa Cruz 2,016 6,000 5,776 -
-------------------------------------------- ----------- ------- ----------- -------
Receivables from related parties - 45 - 111
-------------------------------------------- ----------- ------- ----------- -------
Loans to employees 1,192 748 2,030 909
-------------------------------------------- ----------- ------- ----------- -------
Interest receivable - 78 - 600
-------------------------------------------- ----------- ------- ----------- -------
Receivable from Kaupthing, Singer and
Friedlander Bank - 264 - 294
-------------------------------------------- ----------- ------- ----------- -------
Other(1) 2,186 15,939 2,638 19,115
-------------------------------------------- ----------- ------- ----------- -------
Provision for impairment(2) - (5,136) - (5,084)
-------------------------------------------- ----------- ------- ----------- -------
Financial assets classified as receivables 5,394 96,103 10,444 108,314
-------------------------------------------- ----------- ------- ----------- -------
Prepaid expenses 389 11,336 755 11,602
-------------------------------------------- ----------- ------- ----------- -------
Value Added Tax (VAT)(3) 705 59,599 929 47,824
-------------------------------------------- ----------- ------- ----------- -------
Total 6,488 167,038 12,128 167,740
-------------------------------------------- ----------- ------- ----------- -------
The fair values of trade and other receivables approximate their
book value.
1 Mainly corresponds to account receivables from contratists for
the sale of supplies of US$9,763,000 (2013: US$6,870,000), a tax
claim related to the withholding tax on the GRC dividends received
of US$1,447,000 (2013: US$2,724,000), other tax claims of
US$2,767,000 (2013: US$1,835,000).
2 Includes the provision for impairment of trade receivable from
a customer in Peru of US$1,108,000 (2013: US$1,108,000), the
impairment of deposits in Kaupthing, Singer and Friedlander of
US$264,000 (2013: US$294,000) and other receivables of US$3,764,000
(2013: US$3,682,000) that mainly relates to an exploration project
that would be recovered through an ownership interest if it
succeeds.
3 This includes an amount of US$19,583,000 (2013: US$17,807,000)
of VAT receivable related to the San Jose project that will be
recovered through future
sales of gold and silver by Minera Santa Cruz S.A. It also
includes the VAT of Minera Suyamarca of US$Nil (2013:
US$10,639,000), Compañía Minera Ares S.A.C. of US$35,026,000 (2013:
US$11,005,000) and Minas Santa María de Moris of US$Nil (2013:
US$3,108,000). The VAT is valued at its recoverable amount.
Movements in the provision for impairment of receivables:
Individually
impaired
US$000
----------------------------- ------------
At 1 January 2013 3,819
------------------------------ ------------
Provided for during the year 1,485
------------------------------ ------------
Released during the year (220)
------------------------------ ------------
At 31 December 2013 5,084
------------------------------ ------------
Provided for during the year 110
------------------------------ ------------
Released during the year (58)
------------------------------ ------------
At 31 December 2014 5,136
------------------------------ ------------
As at 31 December, the ageing analysis of financial assets
classified as receivables net of impairment is as follows:
Past due but not impaired
------------------------------------------------
Neither
past Less 91 to
due nor than 30 to 61 to 120 Over
Total impaired 30 days 60 days 90 days days 120 days
Year US$000 US$000 US$000 US$000 US$000 US$000 US$000
----- ------- --------- -------- -------- -------- ------- ---------
2014 101,497 101,497 - - - - -
------ ------- --------- -------- -------- -------- ------- ---------
2013 118,758 118,758 - - - - -
------ ------- --------- -------- -------- -------- ------- ---------
22 Inventories
As at 31 December
-------------------
2014 2013
US$000 US$000
--------------------------------------- --------- --------
Finished goods 7,147 7,871
---------------------------------------- --------- --------
Products in process 13,326 21,246
---------------------------------------- --------- --------
Raw materials - 2
---------------------------------------- --------- --------
Supplies and spare parts 42,404 47,118
---------------------------------------- --------- --------
62,877 76,237
--------- --------
Provision for obsolescence of supplies (4,460) (6,681)
---------------------------------------- --------- --------
Total 58,417 69,556
---------------------------------------- --------- --------
Finished goods include ounces of gold and silver, dore and
concentrate.
Products in process include dore, concentrate and stockpile.
Dore is an alloy containing a variable mixture of silver, gold
and minor impurities. The Group either sells dore bars as a
finished product or if it is commercially advantageous to do so,
delivers the bars for refining into gold and silver ounces which
are then sold. In the latter scenario, the dore bars are classified
as products in process. The amount of dore on hand at 31 December
2014 included in products in process is US$1,405,000 (2013:
US$697,000).
Concentrate is a product containing sulphides with a variable
content of base and precious metals and is sold to smelters, but in
addition could be used as a product in process to produce dore.
As part of the Group's short-term financing policies, it
acquires pre-shipment loans which are guaranteed by the sales
contracts.
The amount of expense recognised in profit and loss related to
the consumption of inventory of supplies, spare parts and raw
materials is US$75,066,000 (2013: US$94,235,000).
Movements in the provision for obsolescence comprise an increase
in the provision of US$192,000 (2013: US$1,832,000) and the
reversal of US$1,137,000 relating to the sale of supplies and spare
parts, that had been provided for (2013: US$Nil).
The amount of income relating to the reversal of the inventory
provision is US$Nil (2013: US$90,000).
23 Other financial assets and liabilities
As at 31 December
-------------------
2014 2013
US$000 US$000
------------------------------------------------------ --------- --------
Other financial assets
------------------------------------------------------ --------- --------
Swap contracts(1) 4,342 -
------------------------------------------------------- --------- --------
Derivative instruments in designated hedge accounting
relationships 4,342 -
------------------------------------------------------- --------- --------
Other financial liabilities
------------------------------------------------------ --------- --------
Embedded derivatives(2) 1,533 2,294
------------------------------------------------------- --------- --------
Total financial liabilities at fair value through
profit or loss 1,533 2,294
------------------------------------------------------- --------- --------
1 Corresponds to the fair value of the unsettled commodity
forward contract signed in 19 August 2014 with JP Morgan to hedge
the sale of 38,000 ounces of gold at US$1300 per ounce, during the
period from January to December 2015.
2 Sales of concentrate and certain gold and silver volumes are
provisionally priced at the time the sale is recorded. The price is
then adjusted after an agreed period of time (usually linked to the
length of time it takes for the smelter to refine and sell the
concentrate or for the refiner to process the dore into gold and
silver), with the Group either paying or receiving the difference
between the provisional price and the final price. This price
exposure is considered to be an embedded derivative in accordance
with IAS 39 'Financial Instruments: Recognition and Measurement'.
The gain or loss that arises on the fair value of the embedded
derivative is recorded in 'Revenue' (refer to note 5).
24 Cash and cash equivalents
As at 31 December
-------------------
2014 2013
US$000 US$000
------------------------------------------------------- --------- --------
Cash at bank 293 454
-------------------------------------------------------- --------- --------
Liquidity funds(1) 935 8,751
-------------------------------------------------------- --------- --------
Current demand deposit accounts(2) 76,850 62,259
-------------------------------------------------------- --------- --------
Time deposits(3) 37,921 214,971
-------------------------------------------------------- --------- --------
Cash and cash equivalents considered for the statement
of cash flows(4) 115,999 286,435
-------------------------------------------------------- --------- --------
The fair value of cash and cash equivalents approximates their
book value. The Group does not have undrawn borrowing facilities
available in the future for operating activities or capital
commitments.
1 The liquidity funds are mainly invested in certificates of
deposit, commercial papers and floating rate notes with a weighted
average maturity of 10 days as at 31 December 2014 (2013: average
of 8 days).
2 Relates to bank accounts which are freely available and bear
interest.
3 These deposits have an average maturity of 2 days (2013:
Average of 27 days).
4 Funds deposited in Argentinean institutions are effectively
restricted for transfer to other countries and are invested
locally. Included within cash and cash equivalents at 31 December
2014 is US$14,233,000 (2013: US$29,112,000), which is not readily
available for use in subsidiaries outside of Argentina.
25 Deferred income
On 3 August 2011, Hochschild entered into an agreement with
Impulsora Minera Santa Cruz ("IMSC") whereby IMSC acquired the
right to explore the San Felipe properties and an option to
purchase the related concessions. Under the terms of this agreement
the Group has received the following non-refundable payments to
date:
As at 31 December
-------------------
2014 2013
US$000 US$000
-------------------- --------- --------
San Felipe contract 25,000 22,000
--------------------- --------- --------
These payments reduce the total consideration IMSC will be
required to pay upon exercise of the option on December 2016, and
constitute an advance of the final purchase price, rather than an
option premium, as such, they were recorded as deferred income.
26 Trade and other payables
As at 31 December
------------------------------------------
2014 2013
-------------------- --------------------
Non-current Current Non-current Current
US$000 US$000 US$000 US$000
------------------------------------ ----------- ------- ----------- -------
Trade payables(1) - 64,458 - 73,339
------------------------------------- ----------- ------- ----------- -------
Salaries and wages payable(2) - 23,890 - 18,620
------------------------------------- ----------- ------- ----------- -------
Dividends payable - 1,789 - 4,584
------------------------------------- ----------- ------- ----------- -------
Taxes and contributions - 11,441 - 8,264
------------------------------------- ----------- ------- ----------- -------
Guarantee deposits - 7,327 - 7,266
------------------------------------- ----------- ------- ----------- -------
Mining royalty (note 31) - 951 - 840
------------------------------------- ----------- ------- ----------- -------
Accounts payable to related parties - 11 - 16
------------------------------------- ----------- ------- ----------- -------
Other 92 2,023 174 6,293
------------------------------------- ----------- ------- ----------- -------
Total 92 111,890 174 119,222
------------------------------------- ----------- ------- ----------- -------
The fair value of trade and other payables approximate their
book values.
1 Trade payables relate mainly to the acquisition of materials,
supplies and contractors' services. These payables do not accrue
interest and no guarantees have been granted.
2 Salaries and wages payable were as follows:
2014 2013
US$000 US$000
----------------------------------- ------- -------
Remuneration payable 23,890 17,885
------------------------------------ ------- -------
Board members' remuneration - 152
------------------------------------ ------- -------
Executive Long Term Incentive Plan - 583
------------------------------------ ------- -------
Total 23,890 18,620
------------------------------------ ------- -------
27 Borrowings
As at 31 December
----------------------------------------------------------------
2014 2013
------------------------------- -------------------------------
Effective Effective
interest Non-current Current interest Non-current Current
rate US$000 US$000 rate US$000 US$000
-------------------------------------------------------- --------- ----------- ------- --------- ----------- -------
Bond payable (a) 8.48% 342,043 13,457 - - -
--------------------------------------------------------- --------- ----------- ------- --------- ----------- -------
Secured bank loans (b)
-------------------------------------------------------- --------- ----------- ------- --------- ----------- -------
* Pre-shipment loans in Minera Santa Cruz (note 22) - - 13,843 - - 24,122
--------------------------------------------------------- --------- ----------- ------- --------- ----------- -------
* Pre-shipment loans in Minera Suyamarca S.A.C.(note
22) - - - - - 30,053
--------------------------------------------------------- --------- ----------- ------- --------- ----------- -------
* Syndicated loan - - - 25.26% - 265,877
--------------------------------------------------------- --------- ----------- ------- --------- ----------- -------
* Medium-term bank loan 3.47% 98,791 582 - - -
--------------------------------------------------------- --------- ----------- ------- --------- ----------- -------
Convertible bond payable
(c) - - - 8.26% - 115,873
--------------------------------------------------------- --------- ----------- ------- --------- ----------- -------
Total 440,834 27,882 - 435,925
--------------------------------------------------------- --------- ----------- ------- --------- ----------- -------
(a) Bond payable
On 23 January 2014 the Group issued US$ 350,000,000 7.75% Senior
Unsecured Notes of Compañía Minera Ares S.A.C. guaranteed by
Hochschild Mining plc and Hochschild Mining (Argentina) Corporation
S.A.The interest will be paid semiannually, commencing 23 July 2014
until maturity in 23 January 2021. The balance at 31 December 2014
is comprised the carrying value of US$355,500,000 determined in
accordance with the effective interest method.
The following options could be taken before the maturity:
Optional Redemption with Proceeds of Equity Offerings: Up to 35%
at 107.750% prior to January 23, 2017
Optional Redemption with Make-Whole Premium: At any time prior
to January 23, 2018, the issuer may redeem all or part of the
notes, at a price equal to 100% of the outstanding principal amount
of the notes plus accrued and unpaid interest and additional
amounts, if any, to the redemption date, plus a "make-whole"
premium at Treasury Rate + 50 bps.
Optional Redemption without Make-Whole Premium: The issuer may
redeem all or part of the notes on or after January 23, 2018 at the
redemption prices specified below plus accrued and unpaid interest
and additional amounts, if any, to the redemption date
On or after:
2018, price 103.875%
2019, price 101.938%
2020, price 100%
Optional Redemption Upon Tax Event: 100% of the outstanding
principal amount plus accrued and unpaid interest and additional
amounts, if any.
Change of Control Offer: 101% of principal amount plus accrued
and unpaid interest.
(b) Secured bank loans:
Syndicated loan:
Loan facility with a syndicate of lenders with Bank of America
acting as the Administrative Agent. Total secured term loan
facility of US$340,000,000, of which $270,000,000 was drawn with an
effective interest rate of 25.26% and was guaranteed by a group of
subsidiaries headed by Hochschild Mining plc. The balance at 31
December 2013 is comprised the carrying value of US$265,877,000
determined in accordance with the effective interest method. This
loan was repaid on 23 January 2014.
Medium-term bank loan:
Credit agreement of US$ 100,000,000 with Scotiabank Peru S.A.A.
acting as Lead Arranger and The Bank of Nova Scotia and Corpbanca
as lenders. The borrower is Compañía Minera Ares SAC and the loan
is guaranteed by Hochschild Mining plc. The loan has an interest
rate of LIBOR + 2.6% payable quarterly. The first principal
repayment is scheduled for July 2016, with subsequent payments
quarterly thereafter until maturity in April 2019. The carrying
value at 31 December 2014 of US$99,373,000 was determined in
accordance with the effective interest method.
(c) Convertible bond payable
Relates to the placement of US$115,000,000 of senior unsecured
convertible bonds, due 2014, which were convertible into ordinary
shares of Hochschild Mining plc. The Group settled the convertible
bonds in cash upon their maturity in October 2014. The bonds had a
coupon of 5.75% per annum payable semi-annually on 28 January and
28 July of each year.
Upon initial recognition, the convertible bonds were recorded at
a value of US$ 103,827,000, representing a principal
of US$115,000,000 less transaction costs of US$2,741,000 and the
bond equity component of $8,432,000.
The convertible bonds were repaid on 16 October 2014.
The maturity of non-current borrowings is as follows:
As at 31 December
-------------------
2014 2013
US$000 US$000
---------------------- --------- --------
Between 1 and 2 years 16,660 -
----------------------- --------- --------
Between 2 and 5 years 82,131 -
----------------------- --------- --------
Over 5 years 342,043 -
----------------------- --------- --------
Total 440,834 -
----------------------- --------- --------
The carrying amount of current borrowings differs their fair
value only with respect to differences arising under the effective
interest rate calculations described above. The carrying amount and
fair value of the non--current borrowings are as follows:
Carrying amount Fair value
as at 31 December as at 31 December
-------------------- --------------------
2014 2013 2014 2013
US$000 US$000 US$000 US$000
------------------- --------- --------- --------- ---------
Secured bank loans 98,791 - 99,083 -
-------------------- --------- --------- --------- ---------
Bond payable 342,043 - 348,250 -
-------------------- --------- --------- --------- ---------
Total 440,834 - 447,333 -
-------------------- --------- --------- --------- ---------
The fair value of secured bank loans was determined by
discounting the remaining principal and interest payments at the
three month U.S. LIBOR rate plus 1 percent. The U.S. LIBOR rate is
a Level 1 input. In the case of the bond payable, the fair value
was determined with reference to the quoted price of these bonds in
an active market, another Level 1 input.
28 Provisions
Provision Workers' Long Term
for mine profit Incentive
closure(1) sharing(2) Plan(3) Other Total
US$000 US$000 US$000 US$000 US$000
------------------------- ----------- ----------- ---------- ------- --------
At 1 January 2013 74,214 18,549 6,027 4,448 103,238
-------------------------- ----------- ----------- ---------- ------- --------
Additions - - - 1,171 1,171
-------------------------- ----------- ----------- ---------- ------- --------
Accretion 224 - - - 224
-------------------------- ----------- ----------- ---------- ------- --------
Change in discount rate (1,481) - - - (1,481)
-------------------------- ----------- ----------- ---------- ------- --------
Change in estimates 14,005(4) (427) (2,960) - 10,618
-------------------------- ----------- ----------- ---------- ------- --------
Payments (4,781) (17,645) (651) (83) (23,160)
-------------------------- ----------- ----------- ---------- ------- --------
Amounts transferred to
payables - - (537) - (537)
-------------------------- ----------- ----------- ---------- ------- --------
Foreign exchange (32) (103) - (716) (851)
-------------------------- ----------- ----------- ---------- ------- --------
At 31 December 2013 82,149 374 1,879 4,820 89,222
-------------------------- ----------- ----------- ---------- ------- --------
Less current portion (6,311) (374) - (2,888) (9,573)
-------------------------- ----------- ----------- ---------- ------- --------
Non-current portion 75,838 - 1,879 1,932 79,649
-------------------------- ----------- ----------- ---------- ------- --------
At 1 January 2014 82,149 374 1,879 4,820 89,222
-------------------------- ----------- ----------- ---------- ------- --------
Additions - - - 1,680 1,680
-------------------------- ----------- ----------- ---------- ------- --------
Accretion 242 - - - 242
-------------------------- ----------- ----------- ---------- ------- --------
Change in discount rate 4,357 - - - 4,357
-------------------------- ----------- ----------- ---------- ------- --------
Change in estimates 27,829(4) - (1,285) 26,544
-------------------------- ----------- ----------- ---------- ------- --------
Payments (5,524) (374) - (260) (6,158)
-------------------------- ----------- ----------- ---------- ------- --------
Sale of subsidiary (note
4(c)) (1,266) - - - (1,266)
-------------------------- ----------- ----------- ---------- ------- --------
At 31 December 2014 107,787 - 594 6,240 114,621
-------------------------- ----------- ----------- ---------- ------- --------
Less current portion - - - (2,870) (2,870)
-------------------------- ----------- ----------- ---------- ------- --------
Non-current portion 107,787 - 594 3,370 111,751
-------------------------- ----------- ----------- ---------- ------- --------
1 The provision represents the discounted values of the
estimated cost to decommission and rehabilitate the mines at the
expected date of closure of each of the mines. The present value of
the provision has been calculated using a real pre-tax annual
discount rate, based on a US Treasury bond of an appropriate tenure
adjusted for the impact of quantitative easing as at 31 December
2014 and 2013 respectively, and the cash flows have been adjusted
to reflect the risk attached to these cash flows. Uncertainties on
the timing for use of this provision include changes in the future
that could impact the time of closing the mines, as new resources
and reserves are discovered. The discount rate used was 0.02%
(2013: 0.29% to 0.56%).
2 Corresponds to the legal and voluntary workers' profit sharing
of the Group. Legal workers' profit sharing represents 8% of
taxable income of Peruvian companies. Voluntary workers' profit
sharing is determined by the Group taking into account the market
conditions of employment. The balance of the provision as at 31
December 2014 is: (i) Legal US$Nil (2013: US$374,000), (ii)
Voluntary US$Nil (2013: US$Nil).
3 Corresponds to the provision related to awards granted under
the Long Term Incentive Plan to designated personnel of the Group.
Includes the following benefits: (i) 2014 awards, granted in March
2014, payable in March 2017 (Ii) 2013 awards, granted in March
2013, payable in March 2016. Only employees who remain in the
Group's employment on the vesting date will be entitled to a cash
payment, subject to exceptions approved by the Remuneration
Committee of the Board. The provision represents the discounted
values of the estimated cost of the long-term employee benefit. In
2014 there is change to the provision and corresponding expense of
US$-1,285,000 (2013: US$-2,960,000) that is disclosed under
administrative expenses US$-1,064,000 (2013: US$-1,698,000),
exploration expenses US$-221,000 (2013: US$-244,000) and
capitalised as evaluation and exploration expenses US$Nil (2013:
US$-1,018,000). The amount of US$537,000 corresponds to the
Exploration Incentive Plan award and was transferred to salary and
wages payable as the performance period ended on 31 December 2012
(note 25(2)).
4 Based on the 2014 and 2013 internal review of mine
rehabilitation budgets, an increase of US$27,829,000 (2013:
US$14,005,000) was recognised, of which US$9,088,000 (2013:
US$5,516,000) related to project already closed and has therefore
been recognised directly in the income statement.
29 Dividends paid and proposed
2014 2013
US$000 US$000
--------------------------------------------------------- ------- -------
Declared and paid during the year
--------------------------------------------------------- ------- -------
Equity dividends on ordinary shares:
--------------------------------------------------------- ------- -------
Final dividend for 2013: US$Nil (2012: US$0.03) - 10,139
---------------------------------------------------------- ------- -------
Interim dividend for 2014: US$Nil (2013: US$Nil) - -
--------------------------------------------------------- ------- -------
Dividends declared to non-controlling interests: US$0.04
and US$Nil (2013: US$0.03 and 0.05) 5,542 6,197
---------------------------------------------------------- ------- -------
Dividends declared and paid 5,542 16,336
---------------------------------------------------------- ------- -------
Dividends declared to non-controlling interests: US$0.04
(2013: US$0.03) 1,719 4,509
---------------------------------------------------------- ------- -------
Dividends declared and not paid 1,719 4,509
---------------------------------------------------------- ------- -------
Total dividends declared 7,261 20,845
---------------------------------------------------------- ------- -------
Final dividend for 2014: US$Nil (2013: US$Nil) - -
---------------------------------------------------------- ------- -------
Dividends per share
The Directors of the Company are not recommending a dividend in
respect of the year ended 31 December 2014 and
31 December 2013.
30 Related-party balances and transactions
(a) Related-party accounts receivable and payable
The Group had the following related-party balances and
transactions during the years ended 31 December 2014 and 2013. The
related parties are companies owned or controlled by the main
shareholder of the parent company, joint ventures or
associates.
Accounts receivable Accounts payable
as at 31 December as at 31 December
--------------------- --------------------
2014 2013 2014 2013
US$000 US$000 US$000 US$000
------------------------------- ---------- --------- --------- ---------
Current related party balances
------------------------------- ---------- --------- --------- ---------
Cementos Pacasmayo S.A.A. 45 111 49 16
-------------------------------- ---------- --------- --------- ---------
Total 45 111 49 16
-------------------------------- ---------- --------- --------- ---------
As at 31 December 2014 and 2013, all other accounts are, or
were, non-interest bearing.
No security has been granted or guarantees given by the Group in
respect of these related party balances.
Principal transactions between affiliates are as follows:
Year ended
----------------
2014 2013
US$000 US$000
------------------------------------------------------- ------- -------
Income
------------------------------------------------------- ------- -------
Dividend recognised for Gold Resource Corp. investment
(note 19) - 2,633
-------------------------------------------------------- ------- -------
Expenses
------------------------------------------------------- ------- -------
Expense recognised for the rental paid to Cementos
Pacasmayo S.A.A. (185) (164)
-------------------------------------------------------- ------- -------
Transactions between the Group and these companies are on an
arm's length basis.
(b) Compensation of key management personnel of the Group
As at 31 December
-------------------
Compensation of key management personnel (including 2014 2013
Directors) US$000 US$000
---------------------------------------------------- --------- --------
Short-term employee benefits 5,369 5,781
----------------------------------------------------- --------- --------
Termination benefits - 77
----------------------------------------------------- --------- --------
Long Term Incentive Plan 679 (434)
----------------------------------------------------- --------- --------
Workers' profit sharing -
---------------------------------------------------- --------- --------
Others 1
----------------------------------------------------- --------- --------
Total compensation paid to key management personnel 6,048 5,425
----------------------------------------------------- --------- --------
This amount includes the remuneration paid to the Directors of
the parent company of the Group of US$4,005,780 (2013
US$4,410,956), out of which US$160,462 (2013: US$193,831) relates
to pension payments.
(c) Participation in placing by Inversiones Pacasmayo S.A. ("IP
SA")
IP SA, a company controlled by Eduardo Hochschild, participated
in a placing of the Company's Ordinary Shares ("Shares") in October
2013 by subscribing for 16,905,066 Shares at a price of 155p per
Share.
31 Mining royalties
Peru
In accordance with Peruvian legislation, owners of mining
concessions must pay a mining royalty for the exploitation of
metallic and non-metallic resources. Mining royalties have been
calculated with rates ranging from 1% to 3% of the value of mineral
concentrate or equivalent sold, based on quoted market prices.
In October 2011 changes came into effect for mining companies,
with the following features:
a) Introduction of a Special Mining Tax ('SMT'), levied on
mining companies at the stage of exploiting mineral resources. The
additional tax is calculated by applying a progressive scale of
rates ranging from 2% to 8.4%, of the quarterly operating
profit.
b) Modification of the mining royalty calculation, which
consists of applying a progressive scale of rates ranging from 1%
to 12%, of the quarterly operating profit. The former royalty was
calculated on the basis of monthly sales value of mineral
concentrates.
The SMT and modified mining royalty are accounted for as an
income tax in accordance with IAS 12.
c) For companies that have mining projects benefiting from tax
stability regimes, mining royalties are calculated and recorded as
they were previously, applying an additional new special charge on
mining that is calculated using progressive scale rates, ranging
from 4% to 13.12% of quarterly operating profit.
d) In the case of the Arcata mine unit, the company quit the tax
stability agreement, but has mantained the agreement for the mining
royalties, such that the Arcata unit, is liable for the new SMT but
the mining royalties remain payable at the same rate as they were,
before the modification in 2011.
As at 31 December 2014, the amount payable as under the former
mining royalty (for the Arcata mining unit), the new mining royalty
(for the Ares and Pallancata mining units), and the SMT amounted to
US$395,000 (2013: US$389,000), US$266,000 (2013: US$629,000), and
US$Nil (2013: US$148,000) respectively. The former mining royalty
is recorded as 'Trade and other payables', and the new mining
royalty and SMT as 'Income tax payable' in the Statement of
Financial Position. The amount recorded in the income statement was
US$1,279,000 (2013: US$1,784,000) representing the former mining
royalty, classified as cost of sales, US$1,611,000 (2013:
US$2,344,000) of new mining royalty and US$375,000 (2013:
US$905,000) of SMT, both classified as income tax.
Argentina
In accordance with Argentinian legislation, Provinces (being the
legal owners of the mineral resources) are entitled to request
royalties from mine operators. For San Jose, the mining royalty was
originally fixed at 1.85% of the pit-head value of the production
where the final product is dore and 2.55% where the final product
is mineral concentrate or precipitates. In October 2012 a new
provincial law was passed, which increased the mining royalty
applicable to dore and concentrate to 3% of the pit-head value.
Since November 2012 Minera Santa Cruz S.A. has been paying and
expensing the increased 3% royalty although it has filed an
administrative claim against the new law. As at 31 December 2014,
the amount payable as mining royalties amounted to US$556,000
(2013: US$451,000). The amount recorded in the income statement was
US$5,302,000 (2013: as cost of sales of US$6,509,000).
On 13 June 2013, the congress of the Province of Santa Cruz
passed Law No. 3318, which created a tax on mining reserves.
Accordingly, the owners of mining concessions located in the
Province of Santa Cruz must pay a tax on mining reserves at a rate
of 1%, calculated at the end of each year and determined according
to the international price of metals at that date. According to
these regulations, the tax applies only on "proved reserves" and
certain deductions (related to the production cost) apply. Minera
Santa Cruz S.A. (a subsidiary of Hochschild Mining plc) is affected
by this tax. On 20 December 2013, Minera Santa Cruz S.A. filed
before the Argentine Supreme Court a legal claim against the tax on
mining reserves. Such legal claim challenges the legality of the
tax on mining reserves arguing its unconstitutionality on the
grounds that it violates the Federal Mining Policy created by
national law No. 24.196. As at 31 December 2014, the amount payable
as tax on mining reserves was US$4,088,000 (2013: US$1,381,000)
recorded as 'Trade and other payables'. The amount recorded in the
income statement was US$3,453,000 (2013: US$2,453,000) as other
expenses.
32 Subsequent events
(a) On 20 January 2015, the group signed a commodity swap
contract with JPMorgan Chase Bank, National Association, London
Branch to hedge 6,000,000 ounces of silver at a price of US$17.75
per ounce from 21 January 2015 to
31 December 2015.
(b) On 9 and 13 January 2015, and 11 and 12 February 2015 the
Group drew down US$75,000,000 of its short-term credit lines in
Peru. US$50,000,000 will mature in December 2015 and US$25,000,000
will mature in February 2016. The average annual interest rate is
1.56%.
Profit by operation(1)
(Segment report reconciliation) as at 31 December 2014
Consolidation
adjustment
Company (US$000) Ares Arcata Pallancata Inmaculada San Jose and others Total/HOC
-------------------------------- -------- -------- ---------- ---------- --------- ------------- ---------
Revenue 25,889 106,061 147,360 - 213,013 628 492,951
Cost of sales (Pre
consolidation) (26,259) (99,020) (124,471) - (159,936) (1,018) (410,704)
-------------------------------- -------- -------- ---------- ---------- --------- ------------- ---------
Consolidation adjustment (2) (245) 303 - - (56) -
Cost of sales (Post
consolidation) (26,257) (98,775) (124,774) - (159,936) (962) (410,704)
Production cost
excluding depreciation (17,853) (62,644) (71,742) (3,309) (110,089) - (265,637)
Depreciation in production
cost (438) (31,398) (48,963) - (45,156) - (125,955)
Other items (4,142) (3,065) (1,540) - (1,724) - (10,471)
Change in inventories (3,824) (1,668) (2,529) 3,309 (2,967) (962) (8,641)
-------------------------------- -------- -------- ---------- ---------- --------- ------------- ---------
Gross profit (370) 7,041 22,889 - 53,077 (390) 82,247
-------------------------------- -------- -------- ---------- ---------- --------- ------------- ---------
Administrative expenses - - - - - (46,087) (46,087)
Exploration expenses - - - - - (18,140) (18,140)
Selling expenses (67) (1,987) (1,995) - (24,648) - (28,697)
Other income/expenses - - - - - (16,363) (16,363)
-------------------------------- -------- -------- ---------- ---------- --------- ------------- ---------
Operating profit before
impairment (437) 5,054 20,894 - 28,429 (80,980) (27,040)
-------------------------------- -------- -------- ---------- ---------- --------- ------------- ---------
Impairment of assets - - - - - 109 109
Finance income - - - - - 6,276 6,276
Finance costs - - - - - (42,565) (42,565)
FX loss - - - - - (4,990) (4,990)
-------------------------------- -------- -------- ---------- ---------- --------- ------------- ---------
Profit/(loss) from continuing
operations before income
tax (437) 5,054 20,894 - 28,429 (122,150) (68,210)
-------------------------------- -------- -------- ---------- ---------- --------- ------------- ---------
Income tax - - - - - (1,928) (1,928)
-------------------------------- -------- -------- ---------- ---------- --------- ------------- ---------
Profit/(loss) for the year
from continuing operations (437) 5,054 20,894 - 28,429 (124,078) (70,138)
-------------------------------- -------- -------- ---------- ---------- --------- ------------- ---------
1 On a post exceptional basis.
RESERVES AND RESOURCES
Ore reserves and mineral resources estimates
Hochschild Mining plc reports its mineral resources and reserves
estimates in accordance with the Australasian Code for Reporting of
Exploration Results, Mineral Resources and Ore Reserves 2004
edition ("the JORC Code"). This establishes minimum standards,
recommendations and guidelines for the public reporting of
exploration results and mineral resources and reserves estimates.
In doing so it emphasises the importance of principles of
transparency, materiality and confidence. The information on ore
reserves and mineral resources on pages 65 to 69 were prepared by
or under the supervision of Competent Persons (as defined in the
JORC Code). Competent Persons are required to have sufficient
relevant experience and understanding of the style of
mineralisation, types of deposits and mining methods in the area of
activity for which they are qualified as a Competent Person under
the JORC Code. The Competent Person must sign off their respective
estimates of the original mineral resource and ore reserve
statements for the various operations and consent to the inclusion
of that information in this report, as well as the form and context
in which it appears.
Hochschild Mining plc employs its own Competent Person who has
audited all the estimates set out in this report. Hochschild Mining
Group companies are subject to a comprehensive programme of audits
which aim to provide assurance in respect of ore reserve and
mineral resource estimates. These audits are conducted by Competent
Persons provided by independent consultants. The frequency and
depth of an audit depends on the risks and/or uncertainties
associated with that particular ore reserve and mineral resource,
the overall value thereof and the time that has lapsed since the
previous independent third-party audit.
The JORC Code requires the use of reasonable economic
assumptions. These include long-term commodity price forecasts
(which, in the Group's case, are prepared by ex-house specialists
largely using estimates of future supply and demand and long-term
economic outlooks).
Ore reserve estimates are dynamic and are influenced by changing
economic conditions, technical issues, environmental regulations
and any other relevant new information and therefore these can vary
from year-to-year. Mineral resource estimates can also change and
tend to be influenced mostly by new information pertaining to the
understanding of the deposit and secondly the conversion to ore
reserves.
The estimates of ore reserves and mineral resources are shown as
at 31 December 2014, unless otherwise stated. Mineral resources
that are reported include those mineral resources that have been
modified to produce ore reserves. All tonnage and grade information
has been rounded to reflect the relative uncertainty in the
estimates; there may therefore be small differences. The prices
used for the reserves calculation were: Au Price: US$1,200 per
ounce and Ag Price: US$20 per ounce.
ATTRIBUTABLE METAL RESERVES AS AT 31 DECEMBER 2014
Proved
and probable Ag Au Ag Au Ag Eq
Reserve category (t) (g/t) (g/t) (moz) (koz) (moz)
---------------------- ------------- ------- ------ ------ ------- ------
MAIN OPERATIONS(1)
---------------------- ------------- ------- ------ ------ ------- ------
Arcata
---------------------- ------------- ------- ------ ------ ------- ------
Proved 782,317 341 1.0 8.6 24.7 10.1
----------------------- ------------- ------- ------ ------ ------- ------
Probable 1,307,744 308 1.0 12.9 43.1 15.5
----------------------- ------------- ------- ------ ------ ------- ------
Total 2,090,061 320 1.0 21.5 67.9 25.6
----------------------- ------------- ------- ------ ------ ------- ------
Pallancata
---------------------- ------------- ------- ------ ------ ------- ------
Proved 903,257 261 1.4 7.6 39.5 9.9
----------------------- ------------- ------- ------ ------ ------- ------
Probable 834,331 250 1.2 6.7 33.3 8.7
----------------------- ------------- ------- ------ ------ ------- ------
Total 1,737,588 256 1.3 14.3 72.8 18.7
----------------------- ------------- ------- ------ ------ ------- ------
San Jose
---------------------- ------------- ------- ------ ------ ------- ------
Proved 624,370 520 7.2 10.4 143.6 19.1
----------------------- ------------- ------- ------ ------ ------- ------
Probable 360,949 365 6.1 4.2 70.7 8.5
----------------------- ------------- ------- ------ ------ ------- ------
Total 985,319 463 6.8 14.7 214.2 27.5
----------------------- ------------- ------- ------ ------ ------- ------
Main operations total
---------------------- ------------- ------- ------ ------ ------- ------
Proved 2,309,944 358 2.8 26.6 207.9 39.1
----------------------- ------------- ------- ------ ------ ------- ------
Probable 2,503,025 297 1.8 23.9 147.1 32.7
----------------------- ------------- ------- ------ ------ ------- ------
Total 4,812,968 326 2.3 50.5 354.9 71.8
----------------------- ------------- ------- ------ ------ ------- ------
ADVANCED PROJECTS
---------------------- ------------- ------- ------ ------ ------- ------
Inmaculada(2)
---------------------- ------------- ------- ------ ------ ------- ------
Proved 3,840,000 106 3.4 13.1 424.7 38.6
----------------------- ------------- ------- ------ ------ ------- ------
Probable 3,960,000 134 3.3 17.0 424.5 42.5
----------------------- ------------- ------- ------ ------ ------- ------
Total 7,800,000 120 3.4 30.1 849.2 81.1
----------------------- ------------- ------- ------ ------ ------- ------
Group total
---------------------- ------------- ------- ------ ------ ------- ------
Proved 6,149,944 201 3.2 39.7 632.6 77.7
----------------------- ------------- ------- ------ ------ ------- ------
Probable 6,463,025 197 2.8 40.9 571.6 75.2
----------------------- ------------- ------- ------ ------ ------- ------
TOTAL 12,612,968 199 3.0 80.6 1,204.1 152.9
----------------------- ------------- ------- ------ ------ ------- ------
Note: Where reserves are attributable to a joint venture
partner, reserve figures reflect the Company's ownership only.
Includes discounts for ore loss and dilution.
1 Main operations were audited by P&E Consulting.
2 Inmaculada reserves as published in the Feasibility Study
released on 11 January 2012. Prices used for reserves calculation:
Au: $1,100/oz and Ag: $18/oz.
ATTRIBUTABLE METAL RESOURCES AS AT 31 DECEMBER 2014
Ag Ag
Resource Tonnes Ag Au Zn Pb Cu Eq Ag Eq Zn Pb Cu
category (t) (g/t) (g/t) (%) (%) (%) (g/t) (moz) Au (koz) (moz) (kt) (kt) (kt)
---------------- ----------- ----- ----- --- --- --- ----- ----- -------- ----- ---- ---- ----
MAIN OPERATIONS
---------------- ----------- ----- ----- --- --- --- ----- ----- -------- ----- ---- ---- ----
Arcata
---------------- ----------- ----- ----- --- --- --- ----- ----- -------- ----- ---- ---- ----
Measured 1,566,470 467 1.40 - - - 551 23.5 70.4 27.8 - - -
----------------- ----------- ----- ----- --- --- --- ----- ----- -------- ----- ---- ---- ----
Indicated 2,375,166 381 1.31 - - - 459 29.1 100.3 35.1 - - -
----------------- ----------- ----- ----- --- --- --- ----- ----- -------- ----- ---- ---- ----
Total 3,941,636 415 1.35 - - - 496 52.6 170.7 62.8 - - -
----------------- ----------- ----- ----- --- --- --- ----- ----- -------- ----- ---- ---- ----
Inferred 3,572,309 322 1.29 - - - 399 37.0 148.2 45.9 - - -
----------------- ----------- ----- ----- --- --- --- ----- ----- -------- ----- ---- ---- ----
Pallancata
---------------- ----------- ----- ----- --- --- --- ----- ----- -------- ----- ---- ---- ----
Measured 2,669,327 348 1.66 - - - 447 29.9 142.2 38.4 - - -
----------------- ----------- ----- ----- --- --- --- ----- ----- -------- ----- ---- ---- ----
Indicated 1,268,572 287 1.37 - - - 370 11.7 56.1 15.1 - - -
----------------- ----------- ----- ----- --- --- --- ----- ----- -------- ----- ---- ---- ----
Total 3,937,899 328 1.57 - - - 422 41.6 198.3 53.5 - - -
----------------- ----------- ----- ----- --- --- --- ----- ----- -------- ----- ---- ---- ----
Inferred 2,560,082 263 1.12 - - - 330 21.7 92.0 27.2 - - -
----------------- ----------- ----- ----- --- --- --- ----- ----- -------- ----- ---- ---- ----
San Jose
---------------- ----------- ----- ----- --- --- --- ----- ----- -------- ----- ---- ---- ----
Measured 958,979 589 8.19 - - - 1,081 18.2 252.5 33.3 - - -
----------------- ----------- ----- ----- --- --- --- ----- ----- -------- ----- ---- ---- ----
Indicated 1,384,056 390 5.83 - - - 740 17.4 259.3 32.9 - - -
----------------- ----------- ----- ----- --- --- --- ----- ----- -------- ----- ---- ---- ----
Total 2,343,035 472 6.79 - - - 879 35.5 511.8 66.2 - - -
----------------- ----------- ----- ----- --- --- --- ----- ----- -------- ----- ---- ---- ----
Inferred 887,930 380 6.21 - - - 753 10.8 177.4 21.5 - - -
----------------- ----------- ----- ----- --- --- --- ----- ----- -------- ----- ---- ---- ----
Main operations
total
---------------- ----------- ----- ----- --- --- --- ----- ----- -------- ----- ---- ---- ----
Measured 5,194,776 428 2.78 - - - 596 71.6 465.1 99.5 - - -
----------------- ----------- ----- ----- --- --- --- ----- ----- -------- ----- ---- ---- ----
Indicated 5,027,794 360 2.57 - - - 514 58.1 415.7 83.1 - - -
----------------- ----------- ----- ----- --- --- --- ----- ----- -------- ----- ---- ---- ----
Total 10,222,570 395 2.68 - - - 555 129.7 880.8 182.6 - - -
----------------- ----------- ----- ----- --- --- --- ----- ----- -------- ----- ---- ---- ----
Inferred 7,020,321 308 1.85 - - - 419 69.5 417.7 94.5 - - -
----------------- ----------- ----- ----- --- --- --- ----- ----- -------- ----- ---- ---- ----
ADVANCED/GROWTH
PROJECTS
---------------- ----------- ----- ----- --- --- --- ----- ----- -------- ----- ---- ---- ----
Inmaculada(1)
---------------- ----------- ----- ----- --- --- --- ----- ----- -------- ----- ---- ---- ----
Measured 3,283,431 128 4.10 - - - 374 13.5 432.8 39.4 - - -
----------------- ----------- ----- ----- --- --- --- ----- ----- -------- ----- ---- ---- ----
Indicated 3,782,818 159 4.05 - - - 402 19.3 492.3 48.9 - - -
----------------- ----------- ----- ----- --- --- --- ----- ----- -------- ----- ---- ---- ----
Total 7,066,249 144 4.07 - - - 389 32.8 925.1 88.3 - - -
----------------- ----------- ----- ----- --- --- --- ----- ----- -------- ----- ---- ---- ----
Inferred 4,937,776 152 3.91 - - - 387 24.2 620.0 61.4 - - -
----------------- ----------- ----- ----- --- --- --- ----- ----- -------- ----- ---- ---- ----
Crespo(2)
---------------- ----------- ----- ----- --- --- --- ----- ----- -------- ----- ---- ---- ----
Measured 5,211,058 47 0.47 - - - 75 7.9 78.6 12.6 - - -
----------------- ----------- ----- ----- --- --- --- ----- ----- -------- ----- ---- ---- ----
Indicated 17,298,228 38 0.40 - - - 62 21.0 222.5 34.3 - - -
----------------- ----------- ----- ----- --- --- --- ----- ----- -------- ----- ---- ---- ----
Total 22,509,286 40 0.42 - - - 65 28.8 301.0 46.9 - - -
----------------- ----------- ----- ----- --- --- --- ----- ----- -------- ----- ---- ---- ----
Inferred 775,429 46 0.57 - - - 80 1.1 14.2 2.0 - - -
----------------- ----------- ----- ----- --- --- --- ----- ----- -------- ----- ---- ---- ----
Azuca
---------------- ----------- ----- ----- --- --- --- ----- ----- -------- ----- ---- ---- ----
Measured 190,602 244 0.77 - - - 290 1.5 4.7 1.8 - - -
----------------- ----------- ----- ----- --- --- --- ----- ----- -------- ----- ---- ---- ----
Indicated 6,858,594 187 0.77 - - - 233 41.2 168.8 51.3 - - -
----------------- ----------- ----- ----- --- --- --- ----- ----- -------- ----- ---- ---- ----
Total 7,049,197 188 0.77 - - - 234 42.7 173.5 53.1 - - -
----------------- ----------- ----- ----- --- --- --- ----- ----- -------- ----- ---- ---- ----
Inferred 6,946,341 170 0.89 - - - 223 37.9 199.5 49.9 - - -
----------------- ----------- ----- ----- --- --- --- ----- ----- -------- ----- ---- ---- ----
Volcan(3)
---------------- ----------- ----- ----- --- --- --- ----- ----- -------- ----- ---- ---- ----
Measured 105,918,000 -.- 0.738 - - - 44 -.- 2,511.0 150.7 - - -
----------------- ----------- ----- ----- --- --- --- ----- ----- -------- ----- ---- ---- ----
Indicated 283,763,000 -.- 0.698 - - - 42 -.- 6,367.0 382.0 - - -
----------------- ----------- ----- ----- --- --- --- ----- ----- -------- ----- ---- ---- ----
Total 389,681,000 -.- 0.709 - - - 43 -.- 8,878.0 532.7 - - -
----------------- ----------- ----- ----- --- --- --- ----- ----- -------- ----- ---- ---- ----
Inferred 41,553,000 -.- 0.502 - - - 30 -.- 671.0 40.3 - - -
----------------- ----------- ----- ----- --- --- --- ----- ----- -------- ----- ---- ---- ----
Advanced/Growth
Projects
total
---------------- ----------- ----- ----- --- --- --- ----- ----- -------- ----- ---- ---- ----
Measured 114,603,091 6 0.82 - - - 56 22.9 3,027.1 204.5 - - -
----------------- ----------- ----- ----- --- --- --- ----- ----- -------- ----- ---- ---- ----
Indicated 311,702,641 8 0.72 - - - 52 81.5 7,250.6 516.5 - - -
----------------- ----------- ----- ----- --- --- --- ----- ----- -------- ----- ---- ---- ----
Total 426,305,732 8 0.75 - - - 53 104.3 10,277.6 721.0 - - -
----------------- ----------- ----- ----- --- --- --- ----- ----- -------- ----- ---- ---- ----
Inferred 54,212,547 36 0.86 - - - 88 63.2 1,504.7 153.5 - - -
----------------- ----------- ----- ----- --- --- --- ----- ----- -------- ----- ---- ---- ----
1 Inmaculada resources as published in the Feasibility Study
released on 11 January 2012. Prices used for resources calculation:
Au: $1,100/oz and Ag: $18/oz.
ATTRIBUTABLE METAL RESOURCES AS AT 31 DECEMBER 2014
(CONTINUED)
Ag Ag
Resource Tonnes Ag Au Zn Pb Cu Eq Ag Eq Zn Pb Cu
category (t) (g/t) (g/t) (%) (%) (%) (g/t) (moz) Au (koz) (moz) (kt) (kt) (kt)
-------------- ----------- ----- ----- ---- ---- ---- ----- ----- -------- ----- ----- ---- -----
OTHER PROJECTS
-------------- ----------- ----- ----- ---- ---- ---- ----- ----- -------- ----- ----- ---- -----
Jasperoide(4)
-------------- ----------- ----- ----- ---- ---- ---- ----- ----- -------- ----- ----- ---- -----
Measured - - 0.00 - - 0.00 0 - 0.0 0.0 - - 0.0
--------------- ----------- ----- ----- ---- ---- ---- ----- ----- -------- ----- ----- ---- -----
Indicated - - 0.00 - - 0.00 0 - 0.0 0.0 - - 0.0
--------------- ----------- ----- ----- ---- ---- ---- ----- ----- -------- ----- ----- ---- -----
Total - - 0.00 - - 0.00 0 - 0.0 0.0 - - 0.0
--------------- ----------- ----- ----- ---- ---- ---- ----- ----- -------- ----- ----- ---- -----
Inferred 12,187,270 - 0.32 - - 1.32 147 - 126.8 57.6 - - 161.2
--------------- ----------- ----- ----- ---- ---- ---- ----- ----- -------- ----- ----- ---- -----
San Felipe
-------------- ----------- ----- ----- ---- ---- ---- ----- ----- -------- ----- ----- ---- -----
Measured 1,393,716 69 0.02 7.12 3.10 0.39 315 3.1 0.9 14.1 99.3 43.1 5.5
--------------- ----------- ----- ----- ---- ---- ---- ----- ----- -------- ----- ----- ---- -----
Indicated 1,354,261 82 0.06 6.14 2.73 0.31 295 3.6 2.4 12.9 83.2 37.0 4.2
--------------- ----------- ----- ----- ---- ---- ---- ----- ----- -------- ----- ----- ---- -----
Total 2,747,977 76 0.04 6.64 2.92 0.35 305 6.7 3.3 27.0 182.4 80.1 9.7
--------------- ----------- ----- ----- ---- ---- ---- ----- ----- -------- ----- ----- ---- -----
Inferred 1,257,731 84 0.05 6.18 2.26 0.19 283 3.4 1.9 11.5 77.8 28.5 2.3
--------------- ----------- ----- ----- ---- ---- ---- ----- ----- -------- ----- ----- ---- -----
Other projects
total
-------------- ----------- ----- ----- ---- ---- ---- ----- ----- -------- ----- ----- ---- -----
Measured 1,393,716 69 0.02 7.12 3.10 0.39 315 3.1 0.9 14.1 99.3 43.1 5.5
--------------- ----------- ----- ----- ---- ---- ---- ----- ----- -------- ----- ----- ---- -----
Indicated 1,354,261 82 0.06 6.14 2.73 0.31 295 3.6 2.4 12.9 83.2 37.0 4.2
--------------- ----------- ----- ----- ---- ---- ---- ----- ----- -------- ----- ----- ---- -----
Total 2,747,977 76 0.04 6.64 2.92 0.35 305 6.7 3.3 27.0 182.4 80.1 9.7
--------------- ----------- ----- ----- ---- ---- ---- ----- ----- -------- ----- ----- ---- -----
Inferred 13,445,001 8 0.30 0.58 0.21 1.22 160 3.4 128.6 69.0 77.8 28.5 163.6
--------------- ----------- ----- ----- ---- ---- ---- ----- ----- -------- ----- ----- ---- -----
GRAND TOTAL
-------------- ----------- ----- ----- ---- ---- ---- ----- ----- -------- ----- ----- ---- -----
Measured 121,191,583 25 0.90 0.08 0.04 0.00 82 97.5 3,493.1 318.1 99.3 43.1 5.5
--------------- ----------- ----- ----- ---- ---- ---- ----- ----- -------- ----- ----- ---- -----
Indicated 318,084,696 14 0.75 0.03 0.01 0.00 60 143.2 7,668.7 612.4 83.2 37.0 4.2
--------------- ----------- ----- ----- ---- ---- ---- ----- ----- -------- ----- ----- ---- -----
Total 439,276,279 17 0.79 0.04 0.02 0.00 66 240.7 11,161.8 930.5 182.4 80.1 9.7
--------------- ----------- ----- ----- ---- ---- ---- ----- ----- -------- ----- ----- ---- -----
Inferred 74,677,869 57 0.85 0.10 0.04 0.22 132 136.1 2,051.0 317.1 77.8 28.5 163.6
--------------- ----------- ----- ----- ---- ---- ---- ----- ----- -------- ----- ----- ---- -----
2 Prices used for resources calculation: Au: $1,200/oz and Ag:
$20/oz.
3 Resources reported in the NI 43-101 Technical Report published
by Andina Minerals, January 2011. Price used for resources
calculation: Au: $950/oz.
4 The silver equivalent grade (147 g/t Ag Eq) has being
calculated applying the following ratios, Cu/Ag=96.38 and
Au/Ag=60
CHANGE IN TOTAL RESERVES AND RESOURCES
Ag equivalent
content December December Net
(million ounces) Category 2014 Production(1) Movements(2) 2014 difference % change
----------------- --------- -------- ------------- ------------ -------- ------------- --------
Arcata Resource 99.4 - 9.2 108.7 9.2 9.3
------------------ ---------- -------- ------------- ------------ -------- ------------- --------
Reserve 23.5 7.6 9.7 25.6 2.1 8.8
---------- -------- ------------- ------------ -------- ------------- --------
Pallancata Resource 109.7 - (29.0) 80.7 (29.0) (26.5)
------------------ ---------- -------- ------------- ------------ -------- ------------- --------
Reserve 29.0 10.1 (0.3) 18.7 (10.4) (35.8)
---------- -------- ------------- ------------ -------- ------------- --------
San Jose Resource 188.9 - (16.9) 172.0 (16.9) (8.9)
------------------ ---------- -------- ------------- ------------ -------- ------------- --------
Reserve 54.6 13.8 13.1 54.0 (0.6) (1.2)
---------- -------- ------------- ------------ -------- ------------- --------
Main operations
total Resource 398.0 - (36.7) 361.4 (36.7) (9.2)
------------------ ---------- -------- ------------- ------------ -------- ------------- --------
Reserve 107.2 31.5 22.5 98.2 (9.0) (8.4)
---------- -------- ------------- ------------ -------- ------------- --------
Inmaculada Resource 149.7 - - 149.7 - -
------------------ ---------- -------- ------------- ------------ -------- ------------- --------
Reserve 81.1 - - 81.1 - -
---------- -------- ------------- ------------ -------- ------------- --------
Crespo Resource 48.9 - - 48.9 - -
------------------ ---------- -------- ------------- ------------ -------- ------------- --------
Reserve - - - - - -
----------------- --------- -------- ------------- ------------ -------- ------------- --------
Azuca Resource 103.0 - - 103.0 - -
------------------ ---------- -------- ------------- ------------ -------- ------------- --------
Reserve - - - - - -
----------------- --------- -------- ------------- ------------ -------- ------------- --------
Volcan Resource 572.9 - - 572.9 - -
------------------ ---------- -------- ------------- ------------ -------- ------------- --------
Reserve - - - - - -
----------------- --------- -------- ------------- ------------ -------- ------------- --------
Advanced/Growth
Projects
total Resource 874.5 - - 874.5 - -
------------------ ---------- -------- ------------- ------------ -------- ------------- --------
Reserve 81.1 - - 81.1 - -
---------- -------- ------------- ------------ -------- ------------- --------
Jasperoide Resource 57.6 - - 57.6 - -
------------------ ---------- -------- ------------- ------------ -------- ------------- --------
Reserve - - - - - -
----------------- --------- -------- ------------- ------------ -------- ------------- --------
San Felipe Resource 38.5 - - 38.5 - -
------------------ ---------- -------- ------------- ------------ -------- ------------- --------
Reserve - - - - - -
----------------- --------- -------- ------------- ------------ -------- ------------- --------
Other projects
total Resource 96.0 - - 96.0 - -
------------------ ---------- -------- ------------- ------------ -------- ------------- --------
Reserve - - - - - -
----------------- --------- -------- ------------- ------------ -------- ------------- --------
Total Resource 1,368.5 - (36.7) 1,331.9 (36.7) (2.7)
------------------ ---------- -------- ------------- ------------ -------- ------------- --------
Reserve 188.3 31.5 22.5 179.3 (9.0) (4.8)
---------- -------- ------------- ------------ -------- ------------- --------
1 Depletion: reduction in reserves based on ore delivered to the
mine plant.
2 Variation in reserves and resources due mainly to mine site
exploration but also to price changes.
CHANGE IN ATTRIBUTABLE RESERVES AND RESOURCES
Percentage
attributable December December
Ag equivalent content December 2013 2014
(million ounces) Category 2013 Att.(1) Att.(1) Net difference % change
------------------------- --------- ------------- -------- -------- -------------- --------
Arcata Resource 100% 99.4 108.7 9.2 9.3
-------------------------- ---------- ------------- -------- -------- -------------- --------
Reserve 23.5 25.6 2.1 8.8
---------- ------------- -------- -------- -------------- --------
Pallancata Resource 100% 109.7 80.7 (29.0) (26.5)
-------------------------- ---------- ------------- -------- -------- -------------- --------
Reserve 29.0 18.7 (10.3) (35.5)
---------- ------------- -------- -------- -------------- --------
San Jose Resource 51% 96.3 87.7 (8.6) (8.9)
-------------------------- ---------- ------------- -------- -------- -------------- --------
Reserve 27.9 27.5 (0.3) (1.1)
---------- ------------- -------- -------- -------------- --------
Main operations total Resource 305.5 277.1 (28.4) (9.3)
-------------------------- ---------- ------------- -------- -------- -------------- --------
Reserve 80.4 71.8 (8.6) (10.7)
---------- ------------- -------- -------- -------------- --------
Inmaculada Resource 100% 149.7 149.7 - -
-------------------------- ---------- ------------- -------- -------- -------------- --------
Reserve 81.1 81.1 - -
---------- ------------- -------- -------- -------------- --------
Crespo Resource 100% 48.9 48.9 - -
-------------------------- ---------- ------------- -------- -------- -------------- --------
Reserve - - - -
------------------------- --------- ------------- -------- -------- -------------- --------
Azuca Resource 100% 103.0 103.0 - -
-------------------------- ---------- ------------- -------- -------- -------------- --------
Reserve - - - -
------------------------- --------- ------------- -------- -------- -------------- --------
Volcan Resource 100% 572.9 572.9 - -
-------------------------- ---------- ------------- -------- -------- -------------- --------
Reserve - - - -
------------------------- --------- ------------- -------- -------- -------------- --------
Advanced/Growth Projects
total Resource 874.5 874.5 - -
-------------------------- ---------- ------------- -------- -------- -------------- --------
Reserve 81.1 81.1 - -
---------- ------------------------ ------------- -------- -------- -------------- --------
Jasperoide Resource 100% 57.6 57.6 - -
-------------------------- ---------- ------------- -------- -------- -------------- --------
Reserve - - - -
------------------------- --------- ------------- -------- -------- -------------- --------
San Felipe Resource 100% 38.5 38.5 - -
-------------------------- ---------- ------------- -------- -------- -------------- --------
Reserve - - - -
------------------------- --------- ------------- -------- -------- -------------- --------
Other projects total Resource 96.0 96.0 - -
-------------------------- ---------- ------------- -------- -------- -------------- --------
Reserve - - - -
------------------------- --------- ------------- -------- -------- -------------- --------
Total Resource 1,276.0 1,247.6 (28.4) (2.2)
-------------------------- ---------- ------------- -------- -------- -------------- --------
Reserve 161.5 152.9 (8.7) (5.4)
---------- ------------------------ ------------- -------- -------- -------------- --------
1 Attributable reserves and resources based on the Group's
percentage ownership of its joint venture projects.
2 The Company increased its holding in the Inmaculada project to
100% in 2013.
PRODUCTION
TOTAL GROUP PRODUCTION
Year ended Year ended % change
31 December 31 December
2014 2013
------------------------------ ------------ ------------- --------
Silver production (koz) 19,357 19,754 (2)
Gold production (koz) 147.03 175.22 (16)
Total silver equivalent (koz) 28,179 30,267 (7)
Total gold equivalent (koz) 469.65 504.45 (7)
Silver sold (koz) 18,981 19,555 (3)
Gold sold (koz) 142.77 168.56 (15)
------------------------------ ------------ ------------- --------
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 now-sold Moris
operation.
ATTRIBUTABLE GROUP PRODUCTION
Year ended Year ended % change
31 December 31 December
2014 2013
-------------------------------- ------------ ------------- --------
Silver production (koz) 16,187 16,639 (3)
Gold production (koz) 100.89 126.80 (20)
Attrib. silver equivalent (koz) 22,241 24,247 (8)
Attrib. gold equivalent (koz) 370.68 404.11 (8)
-------------------------------- ------------ ------------- --------
Attributable production for Q4 2014 and Full Year 2014 includes
100% of all production from Arcata, Pallancata and Ares and 51%
from San Jose. Comparatives for 2013 have been restated to include
100% of production from Pallancata and also include production from
the now-sold Moris operation.
2014 PRODUCTION BY MINE
ARCATA
Year ended Year ended % change
31 December 31 December
Product 2014 2013
--------------------------------- ----------------- ----------------- ----------------
Ore production (tonnes) 701,947 900,861 (22)
Average silver grade (g/t) 286 217 32
Average gold grade (g/t) 0.85 0.74 15
Silver produced (koz) 5,827 4,984 17
Gold produced (koz) 16.89 16.83 -
Silver equivalent produced (koz) 6,841 5,994 14
Silver sold (koz) 5,621 4,924 14
Gold sold (koz) 15.66 15.95 (2)
--------------------------------- ----------------- ----------------- ----------------
ARES
Year ended Year ended % change
31 December 31 December
Product 2014 2013
--------------------------------- ----------------- ----------------- --------
Ore production (tonnes) 167,331 329,095 (49)
Average silver grade (g/t) 110 82 34
Average gold grade (g/t) 2.34 2.39 (2)
Silver produced (koz) 534 757 (29)
Gold produced (koz) 11.63 23.40 (50)
Silver equivalent produced (koz) 1,232 2,162 (43)
Silver sold (koz)(1) 540 761 (29)
Gold sold (koz)(2) 11.45 23.25 (51)
--------------------------------- ----------------- ----------------- --------
PALLANCATA
Year ended Year ended % change
31 December 31 December
Product 2014 2013
--------------------------------- ----------------- ----------------- --------
Ore production (tonnes) 1,051,068 1,088,712 (3)
Average silver grade (g/t) 238 264 (10)
Average gold grade (g/t) 1.03 1.13 (9)
Silver produced (koz) 6,527 7,628 (14)
Gold produced (koz) 24.34 27.83 (13)
Silver equivalent produced (koz) 7,988 9,298 (14)
Silver sold (koz) 6,502 7,567 (14)
Gold sold (koz) 24.02 26.67 (10)
--------------------------------- ----------------- ----------------- --------
SAN JOSE
Year ended Year ended % change
31 December 31 December
Product 2014 2013
--------------------------------- ---------------- ---------------- ---------
Ore production (tonnes) 571,017 536,937 6
Average silver grade (g/t) 404 425 (5)
Average gold grade (g/t) 5.77 6.42 (10)
Silver produced (koz) 6,469 6,357 2
Gold produced (koz) 94.16 98.83 (5)
Silver equivalent produced (koz) 12,119 12,286 (1)
Silver sold (koz) 6,316 6,278 1
Gold sold (koz) 91.28 94.76 (4)
--------------------------------- ---------------- ---------------- ---------
The Company has a 51% interest in San Jose.
GLOSSARY
Ag
Silver
Adjusted EBITDA
Adjusted EBITDA is calculated as profit from continuing operations
before exceptional items, net finance costs and income tax plus non-cash
expenses (depreciation and changes in mine closure provision) and
exploration expenses other than personnel and other exploration related
fixed expenses.
All-in sustaining costs (AISC)
All-in sustaining cash cost per silver equivalent ounce is a non
IFRS measure. It is calculated before exceptional items includes
cost of sales less depreciation and change in inventories, administrative
expenses, brownfield exploration, operating capex and royalties divided
by silver equivalent ounces produced using a ratio of 60:1 (Au/Ag).
Also includes commercial discounts and selling expenses divided by
silver equivalent ounces sold using a ratio of 60:1 (Au/Ag).
Au
Gold
Attributable after tax profit
Profit for the year before dividends attributable to the equity shareholders
of Hochschild Mining plc from continuing operations before exceptional
items and after minority interest.
Average head grade
Average ore grade fed into the mill
Board
The Board of Directors of the Company
Company
Hochschild Mining plc
CSR
Corporate social responsibility
Cu
Copper
Directors
The Directors of the Company
DNV
Det Norske Veritas is an independent foundation with the purpose
of safeguarding life, property, and the environment
Dore
Dore bullion is an impure alloy of gold and silver and is generally
the final product of mining and processing; the dore bullion will
be transported to be refined to high purity metal
Dollar or $
United States dollars
Effective Tax Rate
Income tax expense as a percentage of profit from continuing operations
before income tax
EPS
The per-share (using the weighted average number of shares outstanding
for the period) profit available to equity shareholders of the Company
from continuing operations after exceptional items
eq
equivalent
Exceptional item
Events that are significant and which, due to their nature or the
expected infrequency of the events giving rise to them, need to be
disclosed separately
g/t
Grammes per tonne
GAAP
Generally Accepted Accounting Principles
Group
Hochschild Mining plc and subsidiary undertakings
IAS
International Accounting Standards
IASB
International Accounting Standards Board
IFRS
International Financial Reporting Standards
JV
Joint venture
koz
Thousand ounces
kt
Thousand tonnes
ktpa
Thousand tonnes per annum
Listing or IPO (Initial Public Offering) or Global Offer
The listing of the Company's Ordinary Shares on the London Stock
Exchange on 8 November 2006
LTI
Lost Time Injury, meaning an occupational injury or illness that
results in days away from work
LTIFR
Lost Time Injury Frequency Rate = LTI x 1,000,000/hours worked
moz
Million ounces
Ordinary Shares
Ordinary Shares of 25p each in the Company
Pb
Lead
Spot or spot price
The purchase price of a commodity at the current price, normally
this is at a discount to the long-term contract price
t
tonne
tpa
tonnes per annum
tpd
tonnes per day
Zn
Zinc
SHAREHOLDER INFORMATION
Annual General Meeting ('AGM')
The AGM will be held at 9:30am on 15 May 2015 at the offices of
Linklaters LLP, One Silk Street, London, EC2Y 8HQ.
Company website
Hochschild Mining plc Interim and Annual Reports and results
announcements are available via the internet on our website at
www.hochschildmining.com. Shareholders can also access the latest
information about the Company and press announcements as they are
released, together with details of future events and how to obtain
further information.
Registrars
The Registrars can be contacted as follows for information about
the AGM, shareholdings, dividends and to report changes in personal
details:
- By post
Capita Registrars, The Registry, 34 Beckenham Road, Beckenham,
Kent BR3 4TU
- By telephone
If calling from the UK: 0871 664 0300 (Calls cost 10p per minute
plus network extras, lines are open 8.30am - 5.30pm Mon to Fri) If
calling from overseas: +44 20 8639 3399
- By fax
+44 (0)1484 600 911
Investor relations
For investor enquiries please contact: Charles Gordon, by
writing to the London Office address (see below), by phone on 020
3714 9042 or by email at charles.gordon@hocplc.com.
Financial calendar
Annual General Meeting 15 May 2015
Half-yearly results announced 19 August 2015
London Office and Registered Office address
23 Hanover Square
London
W1S 1JB
United Kingdom
Company Secretary
R D Bhasin
(1) On a pre-exceptional basis
(2) Adjusted EBITDA is calculated as profit from continuing
operations before exceptional items, net finance costs, foreign
exchange loss and income tax plus depreciation, and exploration
expenses other than personnel and other exploration related fixed
expenses and other non-cash expenses
(3) 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).
(4) Revenue presented in the financial statements is disclosed
as net revenue (in the Financial Review it is calculated as gross
revenue less commercial discounts)
(5) 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).
(6) Cash costs are calculated to include cost of sales,
treatment charges, and selling expenses before exceptional items
less depreciation included in cost of sales.
(7) Revenue presented in the financial statements is disclosed
as net revenue (in this Financial Review it is calculated as gross
revenue less commercial discounts.
(8) 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.
(9) Adjusted EBITDA is calculated as profit from continuing
operations before exceptional items, net finance costs, foreign
exchange loss and income tax plus depreciation, and exploration
expenses other than personnel and other exploration related fixed
expenses and other non-cash expenses
(10) 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.
(11) Other revenue includes revenue from (i) the sale of energy
in Peru and, (ii) administrative services in Mexico.
(12) Unit cost per tonne is calculated by dividing mine and
geology costs by extracted tonnage and plant and other costs by
treated tonnage.
(13) Cash costs are calculated to include cost of sales,
treatment charges, and selling expenses before exceptional items
less depreciation included in cost of sales.
(14) 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).
(15) Production cost excluding depreciation does not include
capitalised costs of Inmaculada of $3.3 million
(16) In 2014, Adjusted EBITDA has been presented before the
effect of significant non-cash expenses related to changes in mine
closure provisions for those mines which have already closed as
these were material. The 2013 Adjusted EBITDA has been restated for
comparability with the current presentation.
(17) Includes pre-shipment loans and short term interest
payables.
(18) 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
FR EAFDXFFSSEAF
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