TIDMHOC
RNS Number : 4084U
Hochschild Mining PLC
18 January 2017
__________________________________________________________________________________
18 January 2017
Production Report for the 12 months ended 31 December 2016
Ignacio Bustamante, Chief Executive Officer said:
"We are pleased that we have achieved a historic production
record for the Company whilst exceeding our annual production
targets and maintaining our guidance on full year costs. This
result includes a successful first full year contribution from our
flagship low cost Inmaculada mine as well as Arcata's strongest
performance for six years. In addition, we maintained our focus on
debt reduction and used excess cash flow to materially reduce our
leverage ratio, beyond the guidance provided for the year.
In 2017, we will continue our focus on cost effective organic
growth with the start of production from the new Pablo vein as well
as an increase in brownfield drilling as part of our recently
announced exploration programme. We are also targeting a fifth
consecutive year of production increases and, despite the rise in
brownfield investment, cost control at all our mines will remain a
priority."
Operational highlights
-- Record full year attributable production in 2016(1)
o 17.3 million ounces of silver
o 246.1 thousand ounces of gold
o 35.5 million silver equivalent ounces, up 31% versus 2015
(27.0 million ounces)
o 479.6 thousand gold equivalent ounces (2015: 365.4 thousand
ounces)
-- Inmaculada's first full year of production exceeded original
forecast
o 163 thousand ounces of gold
o 4.9 million ounces of silver
o 229 thousand gold equivalent ounces
o 16.9 million silver equivalent ounces
-- 2016 all-in sustaining costs per silver equivalent ounce on
track to meet $11.0-11.5 guidance
Strengthening financial position
-- Total cash of approximately $140 million as at 31 December
2016 ($84 million as at 31 December 2015)
-- $127 million of debt repaid in 2016
-- Net debt of approximately $183 million as at 31 December 2016
($366 million as at 31 December 2015)
-- Current Net Debt/LTM EBITDA of approximately 0.55x as of 31
December 2016
2017 guidance
-- Record attributable production target of 37.0 million silver
equivalent ounces (500 thousand gold equivalent ounces) exceeding
previous guidance of 35.0 million ounces
-- All-in sustaining costs now expected to be $12.2-12.7 per
silver equivalent ounce due increased brownfield exploration
investment and forecast Pablo expenditure
o Sustained control of underlying costs: Excluding the improved
investment in brownfield exploration and one-off Pablo investments,
all-in sustaining costs would be $11.5-12.0
o Inmaculada costs expected to be $9.0-9.5 per silver equivalent
ounce
-- Total sustaining and development capital expenditure expected
to be approximately $120-130 million including $20 million to
develop Pablo vein and its surrounding infrastructure
__________________________________________________________________________________
A conference call will be held at 2.00pm (London time) on
Wednesday 18 January 2017 for analysts and investors.
Dial in details as follows:
International Dial in: +44 (0) 20 3139 4830
UK Toll-Free Number: +44(0) 808 237 0030
Pin: 84813687#
A recording of the conference call will be available for one
week following its conclusion, accessible from the following
telephone number:
International: +44 (0) 20 3426 2807
UK Toll Free: +44(0) 808 237 0026
Pin: 681591#
_________________________________________________________________________________
Overview
In Q4 2016, the Company delivered attributable production of
116.6 thousand gold equivalent ounces or 8.6 million silver
equivalent ounces. This comprised of 4.1 million ounces of silver
and 61.6 thousand ounces of gold. The total production for 2016 was
a record 479.6 thousand gold equivalent ounces or 35.5 million
silver equivalent ounces. This comprised 17.3 million ounces of
silver and 246.1 thousand ounces of gold.
The Company reiterates that its all-in sustaining costs per
silver equivalent ounce for 2016 is expected to be between $11.0
and $11.5.
TOTAL GROUP PRODUCTION
Q4 2016 Q3 2016 Q4 2015 12 mths 12 mths
2016 2015
------------------- -------- -------- -------- -------- --------
Silver production
(koz) 4,910 5,908 5,322 20,562 18,037
Gold production
(koz) 74.29 78.91 82.87 292.63 213.37
Total silver
equivalent
(koz) 10,407 11,747 11,454 42,217 33,827
Total gold
equivalent
(koz) 140.63 158.75 154.78 570.50 457.12
Silver sold
(koz) 4,996 6,011 5,866 21,091 17,263
Gold sold
(koz) 75.02 77.85 96.61 298.96 187.39
------------------- -------- -------- -------- -------- --------
Total production includes 100% of all production, including
production attributable to Hochschild's joint venture partner at
San Jose.
ATTRIBUTABLE GROUP PRODUCTION
Q4 2016 Q3 2016 Q4 2015 12 mths 12 mths
2016 2015
------------------- -------- -------- -------- -------- --------
Silver production
(koz) 4,075 4,999 4,345 17,284 14,752
Gold production
(koz) 61.57 66.38 68.44 246.08 166.02
Silver equivalent
(koz) 8,631 9,911 9,410 35,493 27,037
Gold equivalent
(koz) 116.64 133.94 127.16 479.64 365.37
------------------- -------- -------- -------- -------- --------
Attributable production includes 100% of all production from
Arcata, Inmaculada, Pallancata and 51% from San Jose.
Production
Inmaculada
Product Q4 2016 Q3 2016 Q4 2015 12 mths 12 mths
2016 2015
------------------- -------- -------- -------- ---------- --------
Ore production
(tonnes treated) 344,199 343,247 329,925 1,306,606 659,737
Average grade
silver (g/t) 134 132 118 133 115
Average grade
gold (g/t) 4.26 4.09 4.57 4.21 4.36
Silver produced
(koz) 1,220 1,318 1,084 4,908 2,055
Gold produced
(koz) 41.03 42.48 45.11 162.71 84.64
Silver equivalent
(koz) 4,256 4,461 4,423 16,948 8,318
Gold equivalent
(koz) 57.51 60.29 59.76 229.03 112.41
Silver sold
(koz) 1,266 1,270 1,546 5,004 1,638
Gold sold (koz) 41.93 40.66 63.87 164.75 67.51
------------------- -------- -------- -------- ---------- --------
The Inmaculada flagship operation delivered another consistent
quarter with gold production at 41,030 ounces and silver production
of 1.2 million ounces (gold equivalent production of 58 thousand
ounces) with grade and tonnage remaining strong throughout the
period. Inmaculada has delivered a very successful first full year
with production reaching a better than expected 229 thousand gold
equivalent ounces (16.9 million silver equivalent ounces).
Arcata
Product Q4 2016 Q3 2016 Q4 2015 12 mths 12 mths
2016 2015
------------------- -------- -------- -------- -------- --------
Ore production
(tonnes treated) 170,128 173,784 184,994 677,309 648,051
Average grade
silver (g/t) 344 348 288 337 323
Average grade
gold (g/t) 1.21 1.30 1.03 1.24 0.99
Silver produced
(koz) 1,669 1,705 1,453 6,343 5,613
Gold produced
(koz) 5.85 6.33 4.58 22.54 15.67
Silver equivalent
(koz) 2,101 2,174 1,792 8,011 6,772
Gold equivalent
(koz) 28.40 29.37 24.21 108.26 91.52
Silver sold
(koz) 1,673 1,751 1,798 6,346 5,653
Gold sold (koz) 5.65 6.26 5.30 22.04 15.29
------------------- -------- -------- -------- -------- --------
At Arcata, silver production in the fourth quarter was 1.7
million ounces with gold production of 5,850 ounces which resulted
in silver equivalent production of 2.1 million ounces, a 17%
improvement on the corresponding period of 2015 (Q4 2015: 1.8
million ounces). Tonnage and grades have been strong throughout the
year in addition to better than expected silver recoveries. Overall
in 2016, Arcata delivered its best year since 2010 with 8.0 million
silver equivalent ounces produced, an 18% improvement on 2015
(2015: 6.8 million ounces).
Pallancata
Product Q4 2016 Q3 2016 Q4 2015 12 mths 12 mths
2016 2015
------------------- -------- -------- -------- -------- --------
Ore production
(tonnes treated) 26,881 82,147 107,320 244,765 522,431
Average grade
silver (g/t) 414 438 272 381 259
Average grade
gold (g/t) 1.98 1.98 1.40 1.86 1.28
Silver produced
(koz) 317 1,030 791 2,620 3,664
Gold produced
(koz) 1.47 4.54 3.74 12.37 16.42
Silver equivalent
(koz) 426 1,365 1,068 3,536 4,879
Gold equivalent
(koz) 5.75 18.45 14.43 47.78 65.94
Silver sold
(koz) 322 1,023 918 2,660 3,632
Gold sold (koz) 1.45 4.46 4.27 12.41 15.80
------------------- -------- -------- -------- -------- --------
At Pallancata, production in Q4 was 317,000 ounces of silver and
1,470 ounces of gold bringing the silver equivalent total to
426,000 ounces. The significant reduction versus the third quarter
was due to the previously announced road blockade by members of a
local community which has halted output since early November 2016.
Discussions with relevant parties, which have been facilitated by
the Government, remain ongoing. Overall the mine produced 3.5
million silver equivalent ounces in 2016 reflecting a transitional
year before the introduction of commercial production from the
Pablo vein in 2017.
San Jose (the Company has a 51% interest in San Jose)
Product Q4 2016 Q3 2016 Q4 2015 12 mths 12 mths
2016 2015
------------------- -------- -------- -------- -------- --------
Ore production
(tonnes treated) 146,892 140,366 154,642 536,024 532,488
Average grade
silver (g/t) 418 469 453 444 448
Average grade
gold (g/t) 6.32 6.44 6.63 6.28 6.36
Silver produced
(koz) 1,704 1,855 1,994 6,691 6,706
Gold produced
(koz) 25.95 25.57 29.44 95.01 96.64
Silver equivalent
(koz) 3,624 3,747 4,172 13,721 13,857
Gold equivalent
(koz) 48.97 50.64 56.38 185.42 187.25
Silver sold
(koz) 1,734 1,967 1,604 7,081 6,340
Gold sold (koz) 26.00 26.47 23.17 99.76 88.79
------------------- -------- -------- -------- -------- --------
San Jose has again proved to be a solid performer in the fourth
quarter with production of 3.6 million silver equivalent ounces as
increased tonnage mostly offset lower grades. Overall, the
operation has enjoyed another successful year with production of
6.7 million ounces of silver and 95 thousand ounces of gold
resulting in silver equivalent production of 13.7 million ounces in
line with the 2015 result (13.9 million ounces).
In November 2015, the Argentinean government restored the right
to receive a rebate from goods exported through Patagonian ports
(previously cancelled in 2009) and was applicable to Hochschild at
a rate of approximately 9% of the FOB value of its exports.
However, in the fourth quarter of 2016 the benefit has once again
been cancelled.
Average realisable prices and sales
Average realisable precious metal prices in Q4 2016 (which are
reported before the deduction of commercial discounts and include
the effects of the existing hedging agreements) were $1,139/ounce
for gold and $15.0/ounce for silver (Q4 2015: $1,116/ounce for gold
and $15.0/ounce for silver). These average prices, which are lower
than the average for the period, reflect the final adjustment of
preliminary sales of concentrate, previously recognised at the time
of shipping at higher spot prices.
For 2016 as a whole, average realisable precious metal prices
were $1,216/ounce for gold and $17.1/ounce for silver (2015:
$1,159/ounce for gold and $16.0/ounce for silver), in line with
average market prices for the period.
Brownfield exploration
Exploration continued at Pablo in the fourth quarter with
results expected to be disclosed at the Annual Results in
March.
At Arcata, 3,445m of potential drilling was carried out at the
extension of Tunel 4, Macarena and Roxana veins whilst at San Jose
3,214m of potential drill holes were executed at the Cerro Colorado
hill with results pending.
Financial position
Total cash was approximately $140 million as at 31 December 2016
resulting in net debt of approximately $183 million.
Outlook
The overall production target for 2017 is 37.0 million silver
equivalent ounces or 500 thousand gold equivalent ounces, which
consists of:
2017 Production split
Operation 2017 Silver equivalent production
(m oz approximate)
------------ ----------------------------------
Inmaculada 17
------------ ----------------------------------
Arcata 7
------------ ----------------------------------
Pallancata 6
------------ ----------------------------------
San Jose 7
------------ ----------------------------------
The all-in sustaining cost per silver equivalent ounce in 2017
is expected to be between $12.2 and $12.7 which includes the
previously announced increased budget for brownfield exploration as
well as further expenditure on the development of the Pablo vein.
Excluding the increased investment in resource growth as well as
the one-off investment in Pablo infrastructure, the all-in
sustaining cost forecast is between $11.5 and $12.0 per silver
equivalent ounce.
2017 AISC split
Operation 2017 AISC ($/oz 2017 AISC ($/oz
silver equivalent) silver equivalent)
Excluding growth
investment
----------- -------------------- --------------------
Inmaculada 9.5-10.0 9.0-9.5
----------- -------------------- --------------------
Arcata 15.3-15.8 14.5-15.0
----------- -------------------- --------------------
Pallancata 14.2-14.7 12.5-13.0
----------- -------------------- --------------------
San Jose 12.8-13.3 12.5-13.0
----------- -------------------- --------------------
The overall capital expenditure budget for 2017 is approximately
$120-130 million allocated to sustaining and development
expenditure and includes a $15 million investment in the expansion
of the Inmaculada tailings dam as well as expenditure on the
development of the Pablo vein ($20 million).
2017 Capital expenditure split
Operation 2017 Sustaining & development capital
expenditure ($m)
------------ --------------------------------------
Inmaculada 45-50
------------ --------------------------------------
Arcata 20
------------ --------------------------------------
Pallancata 20-25
------------ --------------------------------------
San Jose 35
------------ --------------------------------------
__________________________________________________________________________________
Enquiries:
Hochschild Mining plc
Charles Gordon +44 (0)20 3709 3264
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 four underground epithermal vein mines, three located in
southern Peru and one in southern Argentina. Hochschild also has
numerous long-term projects throughout the Americas.
__________________________________________________________________________________
Forward looking statements
This announcement may contain forward looking statements. By
their nature, forward looking statements involve risks and
uncertainties because they relate to events and depend on
circumstances that will or may occur in the future. Actual results,
performance or achievements of Hochschild Mining plc may, for
various reasons, be materially different from any future results,
performance or achievements expressed or implied by such forward
looking statements.
The forward looking statements reflect knowledge and information
available at the date of preparation of this announcement. Except
as required by the Listing Rules and applicable law, the Board of
Hochschild Mining plc does not undertake any obligation to update
or change any forward looking statements to reflect events
occurring after the date of this announcement. Nothing in this
announcement should be construed as a profit forecast.
This announcement contains information which prior to its
release could be considered inside information.
- ends -
(1) All equivalent figures assume a gold/silver ratio of
74x.
This information is provided by RNS
The company news service from the London Stock Exchange
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