TIDMHOC
RNS Number : 8048Y
Hochschild Mining PLC
08 March 2017
________________________________________________________________________________
8 March 2017
Hochschild Mining plc
Preliminary Results for the twelve months ended 31 December
2016
Strong financial performance and cash generation
-- Revenue of $688.2 million (2015: $469.1 million)(1)
-- Adjusted EBITDA of $329.0 million (2015: $138.8
million)(2)
-- Profit before income tax of $108.3 million (2015: $256.2
million loss)
-- Adjusted basic earnings per share of $0.11 (2015: $0.14
loss)
-- Cash and cash equivalent balance of $140.0 million as at 31
December 2016 (2015: $84.0 million)
-- Net debt of $187.4 million as at 31 December 2016 (2015:
$350.5 million)
-- $127.4 million of debt repaid in 2016(3)
-- Net debt/Adjusted EBITDA of 0.57x as at 31 December 2016
(2015: 2.5x)
-- Further $25 million of short term debt repaid in February
2017
-- Final proposed dividend of 1.38 cents per share ($7.0
million)
2016 operational delivery exceeding guidance
-- 2016 AISC per silver equivalent ounce from operations reduced
by 13% to $11.2 (2015: $12.9) beating original guidance of
$12.0-13.0(4)
-- Inmaculada AISC per silver equivalent ounce at $8.7
-- Full year production of 35.5 million attributable silver
equivalent ounces, exceeding guidance(5)
-- Inmaculada mine produced 16.9 million silver equivalent
ounces
-- Brownfield exploration plan ongoing - potential to extend
life of mine ("LOM") and deliver additional low cost growth
-- Pablo resources at Pallancata now increased to 40.4 million
silver equivalent ounces (2015: 22.7 million)
o Resource grade up 44% to 529 silver equivalent grams per tonne
(2015: 368 grams per tonne)
-- Promising drill targets identified at all operations
2017 Outlook
-- Record attributable production target of 37.0 million silver
equivalent ounces
-- AISC expected to be $12.2-12.7 per silver equivalent
ounce
-- Inmaculada AISC 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 the Pablo vein and its surrounding infrastructure
$000 unless stated Year ended 31 Dec 2016 Year ended 31 Dec 2015 % change
--------------------------------------------------------- ----------------------- ----------------------- ---------
Attributable silver production (koz) 17,284 14,752 17
Attributable gold production (koz) 246 166 48
Revenue 688,242 469,146 47
Adjusted EBITDA 329,014 138,837 137
Profit/(loss) from continuing operations
(pre-exceptional) 69,306 (66,399) 204
Profit/(loss) from continuing operations
(post-exceptional) 62,862 (239,657) 126
Basic earnings per share (pre-exceptional) $ 0.11 (0.14) 179
Basic earnings per share (post-exceptional) $ 0.09 (0.52) 117
--------------------------------------------------------- ----------------------- ----------------------- ---------
Commenting on the results, Ignacio Bustamante, CEO, said:
"We have delivered an impressive improvement in our annual
results driven by a first full year from our flagship Inmaculada
mine, a strong overall cost performance and a more favourable
pricing environment. Our financial performance has allowed us to
significantly reduce leverage and at the same time reward
shareholders for their support with a return to dividends during
the year. In 2017, a further increase in output is expected with
the new Pablo vein starting production and continued investment in
our brownfield exploration strategy."
________________________________________________________________________________
A presentation will be held for analysts and investors at 9.30am
(UK time) on Wednesday 8 March 2017 at the offices of Hudson
Sandler, 29 Cloth Fair, London, EC1A 7NN
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:
+44(0)20 3427 1908 (Please quote confirmation code 1901017)
________________________________________________________________________________
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
________________________________________________________________________________
Non-IFRS Financial Performance Measures
The Company has included certain non-IFRS measures in this news
release. The Company believes that these measures, in addition to
conventional measures prepared in accordance with IFRS, provide
investors an improved ability to evaluate the underlying
performance of the Company. The non-IFRS measures are intended to
provide additional information and should not be considered in
isolation or as a substitute for measures of performance prepared
in accordance with IFRS. These measures do not have any
standardised meaning prescribed under IFRS, and therefore may not
be comparable to other issuers.
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.
CHAIRMAN'S STATEMENT
Hochschild Mining has come a long way in the decade since our
listing on the London Stock Exchange. We have successfully
navigated a volatile industry environment with several phases of
international expansion, internal restructuring, mine construction
and delivered consistently on annual production targets and low
cost organic growth while maintaining a constant focus on our
duties as a responsible operator. This has placed the Company in an
ideal position to continue to generate long term value for all
stakeholders. Over the last few years we have maintained a
consistent strategy and in 2016 I was pleased that, as a signal of
its ongoing success, the Board was able to reinstate the interim
dividend in August and now can also announce a proposed final
dividend payout of $7 million.
Operationally, 2016 was characterised by a strong first full
year from our top-tier Inmaculada operation in Peru. There were
also improved contributions from Arcata - its best since 2010 - and
from our Argentinian mine, San Jose, reflecting a much more
promising economic environment in the country. In line with the
production growth, cost reduction continued for a fourth straight
year and together with a supportive precious metal price
environment, the Company generated strong cashflow throughout the
year. Consequently, the Company has been able to follow through
decisively on our promise to reduce leverage by repaying $127
million of debt during the year and building up a healthy cash
balance. We are now in an increasingly solid financial position to
manage our remaining debt profile whilst giving management the
flexibility to invest in further organic growth options and
continue to return capital to shareholders.
Hochschild has always aimed to invest in mineralised districts
with the possibility to grow over time and in this regard we are
excited by the potential of our portfolio. The discovery and
subsequent resource growth of our new Pablo vein district at
Pallancata demonstrates our ability to reinvigorate existing
operations, at a low cost through local exploration. We believe
that there are significant further opportunities to capitalise on
latent processing capacity at our plants as well as to extend the
lives of our mines and expand their capacity. The Board is
confident that the ambitious exploration programme announced in the
third quarter will deliver substantial low cost resources and
provide the Company with further growth optionality in the years to
come.
Precious metal prices once again experienced periods of
volatility in 2016 although both silver and gold did rise to levels
not seen since 2013 thereby providing the Company with an
unanticipated boost to already strong cashflow generation. However,
the subsequent sharp decline in prices at the end of the year
illustrated the ongoing unpredictability of our markets and
consequently I am encouraged by the Company's continuing emphasis
on cost control and debt repayment.
Sustainability
Despite the progress made in 2016 as the third consecutive year
without any fatalities, it is with huge regret that an accident at
the Inmaculada mine early in 2017 resulted in two deaths. On behalf
of the Board, I would like to convey our deepest condolences to the
families of the victims involved. The accident serves as a reminder
of the high level of risks emanating from mining operations in
general. I would like to thank those across the Group whose efforts
are focused on making our operations a safe place to work and to
whom I pledge the Board's unequivocal support in the belief that
every accident is avoidable.
With regards to our environmental efforts, I am pleased to
report that the Group continued to improve its environmental
performance and maintained its corporate ISO 14001 certification.
Furthermore, as part of our ongoing focus on aligning remuneration
with our strategic goals, a new environmental scorecard has been
adopted, performance against which bonus entitlements will be
calculated for senior management over and above the usual
operational and financial metrics.
Our relations with local communities are of the utmost
importance and we dedicate significant resources in recognition of
the social licence granted to us. Details on the varied programmes
that the Group has run focusing on our core themes of education,
health and socio-economic development can be found in our
Sustainability Report and online.
Board
I wish to thank the employees across the business and my fellow
Board members for their dedication and support over the year. At
the Board level, the stabilised operating environment during the
year led to the resumption of our Non-Executive succession plan and
I was delighted that we were able to announce the appointment, in
November, of Eileen Kamerick and, from the start of this year,
Sanjay Sarma. Each brings a varied skill set to the board table and
we look forward to our future board discussions. It leaves me to
pay special thanks, on behalf of the Board, to Roberto Dañino and
Nigel Moore who have served as Directors since the IPO in 2006 and
will be retiring at the forthcoming AGM. Their contribution over
the past decade has been invaluable and we wish them the very best
for the future.
Outlook
The Company is determined to retain emphasis on our low cost
organic growth strategy and the ongoing repayment of debt
particularly given the already unpredictable nature of 2017 so far.
We are confident in the sizeable potential shown in the areas
surrounding our operations as well as our team's ability to bring
early stage projects through the pipeline and combined with an
embedded cost control culture, the prospects for further
shareholder return are very strong.
Eduardo Hochschild, Chairman
7 March 2017
CHIEF EXECUTIVE OFFICER'S STATEMENT
2016 has proved to be a watershed year for the Company. We are
now fully benefitting from the results of our growth and cost
focused strategy with a consistent record of operational excellence
driving significantly improved cashflows, reduced leverage and
increased shareholder returns. Furthermore, our exploration team is
working on a variety of opportunities for securing additional low
cost growth in the areas surrounding our mines which we believe
will allow for capacity improvements and life-of-mine extensions at
our operations.
Operations
A consistent delivery of annual production targets has become a
trademark for our Company and 2016 was no exception. We produced a
record 35.5 million attributable silver equivalent ounces, an 11%
improvement on our original 32 million ounce target with
Inmaculada's output at almost 17 million ounces (229 million gold
equivalent ounces). In its first full year, the all-in sustaining
cost at this world class operation was a highly competitive $8.7
per silver equivalent ounce ($644 per gold equivalent ounce) which
resulted from robust operational delivery. We also saw a successful
year at Arcata, which produced just over 8 million ounces at a cost
of $13.7 per silver equivalent ounce. At San Jose, continuing
operational consistency combined with a vastly improved fiscal
environment in Argentina led to an 18% reduction in AISC and
strongly improved cashflow generation. The renewed Pallancata mine
experienced a transitional year as we prepare to move production to
low cost feed from the new Pablo vein district during 2017. We have
maintained our focus on cost control at all operations and the
resulting 13% reduction in overall all-in sustaining costs to $11.2
per silver equivalent ounce demonstrates the effectiveness of our
policies. As a management team, we are committed to ensuring a safe
working environment and we will redouble our efforts in the area of
safety in light of the tragic accident at Inmaculada earlier this
year.
Exploration
In September, following a number of years of prospective work by
our brownfield team, we announced the launch of a new long-term
exploration programme with the expectation of not only replacing
our production but materially improving our reserves and resources
by 2020. We are confident that this key organic growth strategy can
deliver further low cost growth through the potential to fill our
existing spare plant capacity as well as increase our visible
resource life-of-mine. Part of the programme focuses on the Pablo
vein at Pallancata and, in 2016, we successfully increased the
quality and quantity of resources with the discovery of the high
grade Pablo Piso structures. Total resources from this new vein
system have now increased to 40 million silver equivalent ounces
from 23 million a year ago. In addition, in order to ensure a high
future conversion of our resources to reserves, we have made the
prudent decision to exclude material in our deposits that has a low
probability of being mined. This has reduced our overall
operational resources by almost 15% but represents a more robust
approach to classification.
Financial position
The proactive management of our balance sheet in order to
de-risk the Company has been a clear aim during the construction
and subsequent first 18 months of operation at Inmaculada from its
commissioning. The strong cashflow from the operations has ensured
that in 2016 we made considerable further progress in reducing our
debt position. $127 million of short to medium term lines were
repaid and we still ended the year with a healthy cash and cash
equivalents position of $140 million. In 2017, our aim is to
continue to strengthen the financial position in anticipation of
the Company's option to redeem some or all of the remaining Senior
Notes from January 2018 and thereby reduce our financing costs. It
is worth adding that currently, we no longer have any hedging
agreements in place.
Financial results
As mentioned above, our average price achieved improved in 2016,
by 5% for gold and by 6% for silver and consequently when combined
with the 25% production increase, revenue rose strongly, by 47% in
2016 to $688 million (2015: $469 million). The improved cost
performance led to Adjusted EBITDA of $329 million (2015: $139
million), an increase of 137% versus 2015, reflecting a year of
higher margin contribution from Inmaculada. This strong cashflow
generation has finally offset the finance costs arising from our
2014 bond issue and adjusted earnings per share therefore rose to
$0.11 per share from a loss of $(0.14) per share. We ended the year
with net debt of $187 million (2015: $351 million) which translates
to a leverage ratio of 0.57x (2015: 2.5x), significantly below
guidance for the year.
Outlook
Overall, 2017 is expected to be another record year for the
Company with attributable production set to rise to 37 million
silver equivalent ounces (or 500,000 gold equivalent ounces) driven
by another 17 million ounces from Inmaculada and a first
contribution from our highly prospective new Pablo vein at
Pallancata with production there expected to be second-half
weighted. The all-in sustaining cost per silver equivalent ounce is
forecast to be between $12.2 to $12.7 which reflects a stable
underlying unit cost and includes an increased investment in
brownfield growth as well as a tailings dam expansion at Inmaculada
and the initial infrastructure for the development of Pablo.
2016 has represented the consolidation of our organic growth
strategy and it is thanks to the efforts of not only our management
team but all our employees that we have been able to execute so
efficiently. We can look forward to a fifth year of increased
production in 2017, further strengthening of our balance sheet and
the potential for additional upside from our enhanced brownfield
exploration plan.
Ignacio Bustamante, Chief Executive Officer
7 March 2017
OPERATING REVIEW
OPERATIONS
Note: silver/gold equivalent production figures assume a
gold/silver ratio of 74:1.
Production
In 2016 Hochschild once again exceeded its full year production
target, delivering attributable production of 35.5 million silver
equivalent ounces, including 17.3 million ounces of silver and
246.1 thousand ounces of gold. The overall production target for
2017 is 37.0 million silver equivalent ounces, which consists of 17
million ounces from Inmaculada, approximately 7 million
attributable ounces from the 51% owned San Jose operation and also
from Arcata with the balance of 6 million ounces from
Pallancata.
Total group production
Year ended 31 Dec Year ended 31 Dec
2016 2015
------------------------- ------------------ ------------------
Silver production
(koz) 20,562 18,037
Gold production
(koz) 292.63 213.37
Total silver equivalent
(koz) 42,217 33,827
Total gold equivalent
(koz) 570.50 457.12
Silver sold (koz) 21,091 17,263
Gold sold (koz) 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
Year ended 31 Dec Year ended 31 Dec
2016 2015
------------------- ------------------ ------------------
Silver production
(koz) 17,284 14,752
Gold production
(koz) 246.08 166.02
Silver equivalent
(koz) 35,493 27,037
Gold equivalent
(koz) 479.64 365.37
------------------- ------------------ ------------------
Attributable production includes 100% of all production from
Arcata, Inmaculada, Pallancata and 51% from San Jose.
Costs
The Company's all-in sustaining cost was reduced by 13% in 2016
to $11.2 per silver equivalent ounce driven by Inmaculada's very
competitive $8.7 per silver equivalent ounce ($644 per gold
equivalent ounce). A full year of production at Inmaculada, better
than expected grades and operational initiatives contributed to the
reduction. Please see page 11 of the Financial Review for further
details on costs.
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 $12.0 per silver
equivalent ounce.
2017 AISC forecast split
Operation 2017 AISC ($/oz 2017 AISC ($/oz
silver equivalent) silver equivalent)
Excluding growth
investment
----------- -------------------- --------------------
Inmaculada 9.5-10.0 9.0-9.5
Arcata 15.3-15.8 14.5-15.0
Pallancata 14.2-14.7 12.5-13.0
San Jose 12.8-13.3 12.5-13.0
----------- -------------------- --------------------
Inmaculada (Peru)
The 100% owned Inmaculada gold/silver underground operation is
located in the Department of Ayacucho in southern Peru. It
commenced commissioning in June 2015.
Inmaculada summary Year ended Year ended % change
31 Dec 2016 31 Dec 2015
-------------------------- ------------- ------------- ---------
Ore production (tonnes) 1,306,606 659,737 98
Average silver grade
(g/t) 133 115 16
Average gold grade
(g/t) 4.21 4.36 (3)
Silver produced (koz) 4,908 2,055 139
Gold produced (koz) 162.71 84.64 92
Silver equivalent
produced (koz) 16,948 8,318 104
Gold equivalent produced
(koz) 229.03 112.41 104
Silver sold (koz) 5,004 1,638 205
Gold sold (koz) 164.75 67.51 144
Unit cost ($/t) 64.4 63.3 2
Total cash cost ($/oz
Ag co-product) 5.2 4.6 13
All-in sustaining
cost ($/oz) 8.7 7.3 19
-------------------------- ------------- ------------- ---------
Production
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)
consisting of 162.7 thousand ounces of gold and 4.9 million ounces
of silver. Throughout the year, grades and silver recoveries
achieved were better than expected in the original mine plan in
addition to higher tonnage per day being processed through the
plant (3,850 tonnes versus 3,500 tonnes per day).
Costs
The all-in sustaining costs were better than expected in the
original plan at $8.7 per silver equivalent ounce. This was driven
by higher production resulting from stronger gold grades as well as
operational efficiencies versus plan. AISC in 2017 is expected to
be between $9.5 and $10.0 per silver equivalent ounce reflecting
lower gold grades and a $15 million investment in the expansion of
the tailings dam.
Arcata (Peru)
The 100% owned Arcata underground operation is located in the
Department of Arequipa in southern Peru. It commenced production in
1964.
Arcata summary Year ended Year ended % change
31 Dec 2016 31 Dec 2015
-------------------------- ------------- ------------- ---------
Ore production (tonnes) 677,309 648,051 5
Average silver grade
(g/t) 337 323 4
Average gold grade
(g/t) 1.24 0.99 25
Silver produced (koz) 6,343 5,613 13
Gold produced (koz) 22.54 15.67 44
Silver equivalent
produced (koz) 8,011 6,772 18
Gold equivalent produced
(koz) 108.26 91.52 18
Silver sold (koz) 6,346 5,653 12
Gold sold (koz) 22.04 15.29 44
Unit cost ($/t) 101.1 109.1 (7)
Total cash cost ($/oz
Ag co-product) 11.0 11.7 (6)
All-in sustaining
cost ($/oz) 13.7 14.3 (4)
-------------------------- ------------- ------------- ---------
Production
In 2016, Arcata delivered its best year since 2010 with 8.0
million silver equivalent ounces produced consisting of 6.3 million
ounces of silver and 22.5 thousand ounces of gold. This represents
an 18% improvement on 2015 (2015: 6.8 million ounces) with tonnage
and grades strong throughout the year as well as better than
expected silver recoveries.
Costs
In 2016, all-in sustaining costs fell by 4% to $13.7 per silver
equivalent ounce (2015: $14.3 per ounce) substantially below the
original 2016 forecast of $14.5 due to better than expected tonnage
and grades resulting from the success of the Company's brownfield
exploration programme.
Pallancata (Peru)
The 100% owned Pallancata silver/gold property is located in the
Department of Ayacucho in southern Peru. Pallancata commenced
production in 2007. Ore from Pallancata is transported 22
kilometres to the Selene plant for processing.
Pallancata summary Year ended Year ended % change
31 Dec 2016 31 Dec 2015
-------------------------- ------------- ------------- ---------
Ore production (tonnes) 244,765 522,431 (53)
Average silver grade
(g/t) 381 259 47
Average gold grade
(g/t) 1.86 1.28 45
Silver produced (koz) 2,620 3,664 (28)
Gold produced (koz) 12.37 16.42 (25)
Silver equivalent
produced (koz) 3,536 4,879 (28)
Gold equivalent produced
(koz) 47.78 65.93 (28)
Silver sold (koz) 2,660 3,632 (27)
Gold sold (koz) 12.41 15.80 (21)
Unit cost ($/t) 131.0 98.9 32
Total cash cost ($/oz
Ag co-product) 12.4 12.5 (1)
All-in sustaining
cost ($/oz) 16.3 15.7 4
-------------------------- ------------- ------------- ---------
Production
The Pallancata mine produced 3.5 million silver equivalent
ounces in 2016 (2015: 4.9 million ounces) comprising 2.6 million
ounces of silver and 12.4 thousand ounces of gold. This result
reflected a transitional year before the introduction of commercial
production from the new Pablo vein in 2017.
During the fourth quarter, there was a reduction in the mine's
output due to a road blockade by members of a local community which
halted production from early November 2016. The dispute was
subsequently resolved with production re-commencing on 25 January
2017.
Costs
All-in sustaining costs at Pallancata were $16.3 per silver
equivalent ounce (2015: $15.7 per ounce). The moderate increase
versus 2015 was due to capital invested in developing the access
and infrastructure for Pablo as well as the effects of stoppage
causing a significant fall in tonnage affecting unit costs. This
was partially offset by increased grades and operational
efficiencies. Costs are expected to fall substantially in 2017 when
the Pablo vein begins production.
San Jose (Argentina)
The San Jose silver/gold mine is located in Argentina, in the
province of Santa Cruz, 1,750 kilometres south-southwest of Buenos
Aires. San Jose commenced production in 2007 and is a joint venture
with McEwen Mining Inc. Hochschild holds a controlling interest of
51% in the mine and is the mine operator.
San Jose summary(*) Year ended Year ended % change
31 Dec 2016 31 Dec 2015
-------------------------- ------------- ------------- ---------
Ore production (tonnes) 536,024 532,488 1
Average silver grade
(g/t) 444 448 (1)
Average gold grade
(g/t) 6.28 6.36 (1)
Silver produced (koz) 6,691 6,706 -
Gold produced (koz) 95.01 96.64 (2)
Silver equivalent
produced (koz) 13,721 13,857 (1)
Gold equivalent produced
(koz) 185.42 187.26 (1)
Silver sold (koz) 7,081 6,340 12
Gold sold (koz) 99.76 88.79 12
Unit cost ($/t) 202.4 210.4 (4)
Total cash cost ($/oz
Ag co-product) 9.7 10.8 (10)
All-in sustaining
cost ($/oz) 11.5 14.1 (18)
-------------------------- ------------- ------------- ---------
(*) The Company has a 51% interest in San Jose
Production
San Jose has again proved to be a solid performer with
production of 13.7 million silver equivalent ounces consisting of
6.7 million ounces of silver and 95 thousand ounces of gold. This
was in line with the 2015 result (13.9 million ounces) with a
moderate increase in tonnage offsetting slightly lower grades.
Costs
At San Jose, all-in sustaining costs were reduced by 18% to
$11.5 per silver equivalent ounce (2015: $14.1 per ounce) mainly
driven by the significant fiscal changes in Argentina in the first
half of the year. These included the elimination of export taxes
and the restoration of the Patagonian port rebate (see below).
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 was once again
cancelled.
RESERVES AND RESOURCES
Total reserves and resources for core operations remained
strong, reducing slightly to 183 million and 476 million silver
equivalent ounces respectively driven by:
The reduction in the silver price assumption used for cutting
both reserves and resources from $20.0 per ounce as at 31 December
2015 to $16.5 per ounce as at 31 December 2016 while maintaining
the gold price assumption at $1,200 per ounce. The resulting impact
in reserves and resources has been a small decrease, as previously
anticipated in the sensitivity table published in the 2015
Preliminary Results statement.
In addition, the Group chose to eliminate resources with a low
probability of conversion into reserves at Arcata, San Jose and the
existing Pallancata veins. The reduction was mostly from inferred
resources with low grades and resources located far from existing
mine infrastructure. At Pallancata, the adjustment affects mineral
from bridges and pillars in the original Pallancata vein where
extraction would impact the stability of the mine structure.
Resources at Inmaculada and at the Pablo vein have not been
affected.
The decrease was partially offset by the addition of resources
from the Pablo vein at Pallancata which is now over 40 million
ounces with silver equivalent grade improving significantly to 529
silver equivalent grams per tonne.
These adjustments do not affect the Group's mine plans, future
production or cost guidance. The Group believes that it will
improve conversion ratios from resources into reserves and ensure a
high quality resource base.
EXPLORATION
In September 2016, the Company announced details of a new
five-year brownfield exploration plan. Significant brownfield
potential has been identified which is expected to extend LOM at
all operations and deliver additional low cost growth.
Inmaculada
In 2016, historical drill results were reviewed by the
brownfield team and targets for 2017 were defined. The 2017
programme includes approximately 50,000 metres of resource drilling
in the east of the deposit at the Millet and Olinda structures
which is expected to start towards the end of the second quarter,
subject to obtaining the requisite permits. In addition, 7,200
metres of potential drilling is planned to start in March 2017 in
the east and also at the Puquiopata area.
Arcata
At Arcata, 8,166 metres were drilled during the year to test
North-South structures in the central area of the mine as well as
in the Tunel 4 zone, Roxana and Macarena veins in order to extend
existing structures and identify new ones. Some highlights are
presented below:
Vein Results
----------------- -------------------------
Ramal Marion Sur DDH-941-GE16:1.2m @ 1.8
g/t Au & 576 g/t Ag
DDH-943-GE16:1.2m @ 4.1
g/t Au & 2,157 g/t Ag
----------------- -------------------------
Tunel 4 DDH-912-GE16:1.8m @ 1.1
g/t Au & 205 g/t Ag
DDH-939-LM16:1.3m @ 3.6
g/t Au & 2,655 g/t Ag
----------------- -------------------------
In 2017, almost 45,000 metres of resource drilling is planned
mostly in the first half of the year with the focus on the
Paralelas, Tunels 2,3 and 4 and Ramal Mario Sur veins whilst 13,000
metres of potential drilling is planned in the second half of 2017
at the Alexia, Macarena East, Tunel 2,3 and 4, Tres Reyes, Luisa
and Marciano structures.
Pallancata
During 2016, drilling was carried out at the new Pablo vein in
Pallancata. The results confirmed the presence of several
extensional vein sets adjacent to the main Pablo structure - Pablo
Pisos (now renamed). In addition, the Company has identified an
area in Pablo Piso that hosts higher grade mineralisation. Total
inferred resources from the Pablo and associated structures have
now reached 40.4 million silver equivalent ounces which is a 78%
increase on the December 2015 figure and demonstrates the
significant potential already discovered in the Pablo vein
system.
Drill results in the Pablo Area
Vein Results
---------------- ------------------------------
Pablo Piso DLYU-A109: 0.9m @ 0.3g/t Au
& 183g/t Ag
DLPP-A07: 4.1m @ 1.4g/t Au &
483g/t Ag
DLPP-A11: 1.2m @ 0.1g/t Au &
52g/t Ag
DLPP-A09: 1.0m @ 0.1g/t Au &
32g/t Ag
DLPP-A05: 6.4m @ 1.1g/t Au &
322g/t Ag
DLPP-A10: 0.9m @ 0.3g/t Au &
125g/t Ag
DLPP-A06: 3.7m @ 2.6g/t Au &
813g/t Ag
DLPP-A08: 0.9m @ 1.3g/t Au &
246g/t Ag
DLPP-A12: 1.2m @ 7.4g/t Au &
2,282g/t Ag
DLPP-A16: 2.7m @ 1.0g/t Au &
356g/t Ag
---------------- ------------------------------
Andres DLPP-A07: 0.7m @ 0.7g/t Au &
(Pablo Piso 1) 211g/t Ag
DLPP-A05: 0.9m @ 0.2g/t Au &
79g/t Ag
DLPP-A06: 0.8m @ 0.4g/t Au &
126g/t Ag
DLPP-A04: 0.7m @ 0.1g/t Au &
44g/t Ag
DLPP-A12: 0.9m @ 1.2g/t Au &
547g/t Ag
DLPP-A01: 0.9m @ 1.0g/t Au &
177g/t Ag
DLPP-A18: 1.0m @ 5.3g/t Au &
1,652g/t Ag
DLPP-A16: 5.1m @ 1.2g/t Au &
408g/t Ag
---------------- ------------------------------
Tomas DLEP-A04: 0.8m @ 0.3g/t Au &
(Pablo Piso 2) 71g/t Ag
DLEP-A12: 0.8m @ 2.6g/t Au &
652g/t Ag
DLEP-A01: 0.6m @ 0.2g/t Au &
51g/t Ag
DLEP-A16: 0.7m @ 0.5g/t Au &
184g/t Ag
DLPP-A15: 1.0m @ 0.4g/t Au &
111g/t Ag
DLPP-A18: 0.6m @ 1.9g/t Au &
600g/t Ag
DLPP-A14: 1.3m @ 0.7g/t Au &
179g/t Ag
DLPP-A13: 0.8m @ 0.3g/t Au &
156g/t Ag
---------------- ------------------------------
Simon DLNE-A04: 0.9m @ 1.7g/t Au &
(Pablo Piso 3) 569g/t Ag
DLPP-A04: 0.9m @ 11.7g/t Au
& 2,253g/t Ag
DLPP-A12: 0.6m @ 1.8g/t Au &
491g/t Ag
DLPP-A01: 0.8m @ 2.4g/t Au &
721g/t Ag
DLPP-A15: 0.8m @ 0.7g/t Au &
172g/t Ag
DLPP-A18: 0.6m @ 3.6g/t Au &
481g/t Ag
DLPP-A14: 2.7m @ 0.9g/t Au &
220g/t Ag
---------------- ------------------------------
Pedro DLPP-A01: 1.0m @ 0.6g/t Au &
(Pablo Piso 4) 207g/t Ag
DLPP-A14: 0.7m @ 0.5g/t Au &
149g/t Ag
---------------- ------------------------------
Juan DLPP-A01: 0.6m @ 0.2g/t Au &
(Pablo Piso 5) 65g/t Ag
DLPP-A17: 0.7m @ 0.0g/t Au &
13g/t Ag
DLPP-A14: 0.8m @ 0.3g/t Au &
101g/t Ag
---------------- ------------------------------
In 2017, potential drilling will focus on the Pablo and
Yanacochita-Farallon areas.
San Jose
At San Jose 1,240m was drilled in the fourth quarter mainly in
the Aguas Vivas area with the programme continuing into 2017. In
addition in 2017, 20,800 metres of drilling is also planned in the
Platifero, Clara and Saavedra Norte structures.
FINANCIAL REVIEW
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 increased by 47% to
$722.0 million in 2016 (2015: $492.5 million) driven by a
significant increase in sales resulting from the first full year of
production from the Company's Inmaculada mine as well as a rise in
precious metal prices. (6)
Silver
Gross revenue from silver increased by 30% in 2016 to $358.7
million (2015: $275.3 million) as a result of a 22% increase in the
total amount of silver ounces sold to 21,091 koz (2015:17,263 koz)
driven by the first full year contribution from Inmaculada as well
as increased sales from Arcata and San Jose. In addition, silver
revenue also benefited from a 6% increase in the average silver
price received.
Gold
Gross revenue from gold increased 67% in 2016 to $363.4 million
(2015: $217.2 million) as a result of a 60% rise in the total
amount of gold ounces sold in 2016 (299.0 koz) as well as a 5%
increase in the average gold price received. The increase in gold
sales came from the first full year of output from the
predominantly gold-producing Inmaculada operation.
Gross average realised sales prices
The following table provides figures for average realised prices
(which are reported before the deduction of commercial discounts
and include the effects of the hedging agreements in place during
the year) and ounces sold for 2016 and 2015:
Average realised prices Year ended Year ended
31 Dec 2016 31 Dec 2015
---------------------------- ------------- -------------
Silver ounces sold (koz) 21,091 17,263
Avg. realised silver price
($/oz) 17.0 16.0
Gold ounces sold (koz) 298.96 187.39
Avg. realised gold price
($/oz) 1,215 1,159
---------------------------- ------------- -------------
Commercial discounts
Commercial discounts refer to refinery treatment charges,
refining fees and payable deductions for processing concentrates,
and are deducted 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 2016, the Group recorded
commercial discounts of $34.1 million (2015: $23.6 million). The
increase is explained by the higher production and the decision to
switch the production of Arcata back to concentrate as opposed to
the previous year when most was sold as dore. The ratio of
commercial discounts to gross revenue in 2016 was 5% (2015:
5%).
Net revenue
Net revenue increased by 47% to $688.2 million (2015 $469.1
million), comprising net gold revenue of $354.4 million and net
silver revenue of $333.5 million. In 2016, gold accounted for 51%
and silver 49% of the Company's consolidated net revenue (2015:
gold 45% and silver 55%) with the increase in the gold contribution
due to a full year of sales from the predominantly-gold Inmaculada
mine.
Revenue by mine(7)
$000 Year ended 31 Dec 2016 Year ended 31 Dec 2015 % change
---------------------- ----------------------- ----------------------- ---------
Silver revenue
Arcata 106,206 93,445 14
Inmaculada 83,642 25,223 232
Pallancata 44,500 59,803 (26)
San Jose 124,316 96,837 28
Commercial discounts (25,139) (16,929) 48
Net silver revenue 333,525 258,379 29
Gold revenue
Arcata 25,717 19,124 34
Inmaculada 196,466 77,080 155
Pallancata 14,994 19,929 (25)
San Jose 126,174 101,046 25
Commercial discounts (8,993) (6,688) 34
Net gold revenue 354,358 210,491 68
---------------------- ----------------------- ----------------------- ---------
Other revenue 359 276 30
---------------------- ----------------------- ----------------------- ---------
Net revenue 688,242 469,146 47
---------------------- ----------------------- ----------------------- ---------
Costs
Total cost of sales was $487.7 million in 2016 (2015: $403.7
million). The direct production cost excluding depreciation was
higher at $293.8 million (2015: $265.1 million) due to the first
full year of Inmaculada. Depreciation in 2016 was $185.7 million
(2015: $139.5 million) with the increase due to Inmaculada's
depreciation of assets. Other items, which principally includes
personnel related provisions, was $1.8 million in 2016 (2015: $9.3
million). Change in inventories was $6.5 million in 2016 (2015:
($10.3 million)).
$000 Year ended Year ended % Change
31 Dec 31 Dec
2016 2015
---------------------------- ----------- ----------- ---------
Direct production cost
excluding depreciation 293,810 265,107 11
Depreciation in production
cost 185,655 139,533 33
Other items 1,750 9,272 (81)
Change in inventories 6,487 (10,255) 163
---------------------------- ----------- ----------- ---------
Pre-exceptional cost of
sales 487,702 403,657 21
---------------------------- ----------- ----------- ---------
Unit cost per tonne
The Company reported unit cost per tonne at its operations of
$106.2 per tonne in 2016, a 10% decrease versus 2015 ($118.4 per
tonne).
Unit cost per tonne by operation (including royalties)(8) :
Operating unit ($/tonne) Year ended Year ended % change
31 Dec 31 Dec
2016 2015
-------------------------- ----------- ----------- ---------
Peru 83.2 90.7 (8)
Arcata 101.1 109.1 (7)
Inmaculada 64.4 63.3 2
Pallancata 131.0 98.9 32
-------------------------- ----------- ----------- ---------
Argentina
San Jose 202.4 210.4 (4)
-------------------------- ----------- ----------- ---------
Total 106.2 118.4 (10)
-------------------------- ----------- ----------- ---------
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(9)
$000 unless otherwise indicated Year ended Year ended % change
Dec 2016 31 Dec
2015
----------------------------------- ----------- ----------- ---------
Group cash cost 358,800 313,939 14
----------------------------------- ----------- ----------- ---------
(+) Cost of sales 487,702 403,657 21
(-) Depreciation and amortisation
in cost of sales (180,317) (135,645) 33
(+) Selling expenses 14,175 21,729 (35)
(+) Commercial deductions(10) 37,240 24,198 54
Gold 11,486 6,714 71
Silver 25,754 17,484 47
----------------------------------- ----------- ----------- ---------
Revenue 688,242 469,146 47
----------------------------------- ----------- ----------- ---------
Gold 354,358 210,491 68
Silver 333,525 258,379 29
Others 359 276 30
----------------------------------- ----------- ----------- ---------
Ounces sold
----------------------------------- ----------- ----------- ---------
Gold 298.9 187.4 59
Silver 21,091 17,263 22
----------------------------------- ----------- ----------- ---------
Group cash cost ($/oz)
----------------------------------- ----------- ----------- ---------
Co product Au 618 752 (18)
Co product Ag 8.2 10.0 (18)
By product Au (2) 203 (101)
By product Ag (0.3) 5.6 (105)
----------------------------------- ----------- ----------- ---------
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
Year ended 31 Dec 2016
$000 unless otherwise indicated Arcata Inmaculada Pallancata San Main Corporate Total
José operations & others
----------------------------------- ------ ---------- ---------- ---------- ----------- --------- --------
(+) Production cost excluding
depreciation 68,155 83,796 33,650 108,209 293,810 - 293,810
(+) Other items in cost of
sales 462 506 241 541 1,750 - 1,750
(+) Operating and exploration
capex for units 20,819 54,199 16,130 32,670 123,818 255 124,073
(+) Brownfield exploration
expenses 1,305 1 733 1691 3,730 2,806 6,536
(+) Administrative expenses
(excl depreciation and before
exceptional items) 1,441 3,420 674 8,180 13,715 32,932 46,647
(+) Royalties and special mining
tax(11) 3,243 639 3,882 3,869 7,751
----------------------------------- ------ ---------- ---------- ---------- ----------- --------- --------
Sub-total 92,182 145,165 52,067 151,291 440,705 39,862 480,567
----------------------------------- ------ ---------- ---------- ---------- ----------- --------- --------
Au ounces produced 22,541 162,710 12,374 95,006 292,631 - 292,631
Ag ounces produced (000s) 6,343 4,908 2,620 6,691 20,562 - 20,562
Ounces produced (Ag Eq 000s
oz) 8,011 16,948 3,536 13,721 42,216 - 42,216
----------------------------------- ------ ---------- ---------- ---------- ----------- --------- --------
Sub-total ($/oz Ag Eq) 11.5 8.6 14.7 11.0 10.4 - 11.4
----------------------------------- ------ ---------- ---------- ---------- ----------- --------- --------
(+) Commercial deductions 15,383 1,650 5,038 15,169 37,240 - 37,240
(+) Selling expenses 1,973 1,130 721 10,351 14,175 - 14,175
----------------------------------- ------ ---------- ---------- ---------- ----------- --------- --------
(-) Export credits - - - (19,029) (19,029) (19,029)
----------------------------------- ------ ---------- ---------- ---------- ----------- --------- --------
Sub-total 17,356 2,780 5,759 6,491 32,386 - 32,386
----------------------------------- ------ ---------- ---------- ---------- ----------- --------- --------
Au ounces sold 22,043 164,754 12,407 99,761 298,965 - 298,965
Ag ounces sold (000s) 6,346 5,004 2,660 7,081 21,091 - 21,091
Ounces sold (Ag Eq 000s oz) 7,977 17,196 3,578 14,463 43,214 - 43,214
----------------------------------- ------ ---------- ---------- ---------- ----------- --------- --------
Sub-total ($/oz Ag Eq) 2.2 0.2 1.6 0.4 0.7 - 0.7
----------------------------------- ------ ---------- ---------- ---------- ----------- --------- --------
All-in sustaining costs ($/oz
Ag Eq) 13.7 8.7 16.3 11.5 11.2 - 12.1
----------------------------------- ------ ---------- ---------- ---------- ----------- --------- --------
Year ended 31 Dec 2015
$000 unless otherwise indicated Arcata Inmaculada Pallancata San Main Corporate Total
José operations & others
----------------------------------- ------ ---------- ---------- ---------- ----------- --------- -------
(+) Production cost excluding
depreciation 71,128 32,765 51,599 108,101 263,593 - 263,593
(+) Other items in cost of
sales 2,133 1,544 1,610 5,499 10,786 - 10,786
(+) Operating and exploration
capex for units 14,600 13,704 10,683 38,451 77,438 1,193 78,631
(+) Brownfield exploration
expenses 62 6 2,457 1,463 3,988 1,990 5,978
(+) Administrative expenses
(excl depreciation and before
exceptional items) 2,641 2,515 1,796 7,095 14,047 22,569 36,616
(+) Royalties and special mining
tax(11) - 1,037 741 - 1,778 - 1,778
----------------------------------- ------ ---------- ---------- ---------- ----------- --------- -------
Sub-total 90,564 51,571 68,886 160,609 371,630 25,752 397,382
----------------------------------- ------ ---------- ---------- ---------- ----------- --------- -------
Au ounces produced 15,670 72,226 16,419 96,638 200,953 200,953
Ag ounces produced (000s) 5,613 1,746 3,664 6,706 17,729 - 17,729
Ounces produced (Ag Eq 000s
oz) 6,772 7,090 4,879 13,857 32,598 - 32,598
----------------------------------- ------ ---------- ---------- ---------- ----------- --------- -------
Sub-total ($/oz Ag Eq) 13.4 7.3 14.1 11.6 11.4 - 12.2
----------------------------------- ------ ---------- ---------- ---------- ----------- --------- -------
(+) Commercial deductions 5,144 4 6,687 12,363 24,198 - 24,198
(+) Selling expenses 962 12 1,048 19,707 21,729 - 21,729
----------------------------------- ------ ---------- ---------- ---------- ----------- --------- -------
Sub-total 6,106 16 7,735 32,070 45,927 - 45,927
----------------------------------- ------ ---------- ---------- ---------- ----------- --------- -------
Au ounces sold 15,289 67,513 15,795 88,793 187,390 - 187,390
Ag ounces sold (000s) 5,653 1,638 3,632 6,340 17,263 - 17,263
Ounces sold (Ag Eq 000s oz) 6,784 6,634 4,801 12,910 31,129 - 31,129
----------------------------------- ------ ---------- ---------- ---------- ----------- --------- -------
Sub-total ($/oz Ag Eq) 0.9 0.0 1.6 2.5 1.5 - 1.5
----------------------------------- ------ ---------- ---------- ---------- ----------- --------- -------
All-in sustaining costs ($/oz
Ag Eq) 14.3 7.3 15.7 14.1 12.9 - 13.7
----------------------------------- ------ ---------- ---------- ---------- ----------- --------- -------
Administrative expenses
Administrative expenses before exceptional items increased by
26% to $48.0 million (2015: $38.1 million) primarily due to
increased personnel expenses.
Exploration expenses
In 2016, exploration expenses were flat at $9.2 million (2015:
$9.3 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 2016, the Company capitalised $1.3 million
relating to brownfield exploration compared to $2.6 million in
2015, bringing the total investment in exploration for 2016 to
$10.5 million (2015: $11.8 million).
Selling expenses
Selling expenses decreased by 35% versus 2015 to $14.2 million
(2015: $21.7 million) mainly due to the elimination of export
duties at San Jose. Selling expenses in 2016 consisted mainly of
logistic costs for the sale of concentrate in addition to
approximately 1.5 months of export duties on concentrate until its
elimination on 12 February 2016. Previously, export duties in
Argentina were levied at 10% of revenue for concentrate and 5% of
revenue for dore.
Other income/expenses
Other income before exceptional items was $33.1 million (2015:
$8.0 million). This mainly consisted of income from the Patagonian
port benefit ($16.9 million) reintroduced towards the end of 2015,
incremental revenue from logistic services provided to third
parties and a reduction in mine closure provisions ($6.3
million).
Other expenses before exceptional items were reduced to $13.9
million (2015: $15.3 million).
Adjusted EBITDA
Adjusted EBITDA increased by 137% over the period to $329.0
million (2015: $138.8 million) driven primarily by the significant
effect of a full year's contribution from the low cost Inmaculada
mine as well as higher metal 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 31 Dec 2016 Year ended 31 Dec 2015 % change
--------------------------------------------------------- ----------------------- ----------------------- ---------
Profit from continuing operations before exceptional
items, net finance cost, foreign exchange
loss and income tax 148,188 (10,886) 1,461
Depreciation and amortisation in cost of sales 180,317 135,645 33
Depreciation and amortisation in administrative expenses 1,331 1,534 (13)
Exploration expenses 9,193 9,255 (1)
Personnel and other exploration related fixed expenses (3,947) (4,301) 8
Other non cash (income)/ expenses(12) (6,068) 7,590 (180)
--------------------------------------------------------- ----------------------- ----------------------- ---------
Adjusted EBITDA 329,014 138,837 137
--------------------------------------------------------- ----------------------- ----------------------- ---------
Adjusted EBITDA margin 48% 30%
--------------------------------------------------------- ----------------------- ----------------------- ---------
Finance income
Finance income before exceptional items of $1.1 million reduced
slightly from 2015 ($1.9 million) and mainly includes interest
received on deposits.
Finance costs
Finance costs before exceptional items decreased from $31.4
million in 2015 to $30.5 million in 2016, principally due to the
reduction of interest resulting from the repayment of $50.0 million
of the medium term loan, $57.5 million of short-term loans and
$20.0 million of the amounts owed to Graña y Montero. In 2015,
interest expenses were net of amounts capitalised during the
construction of Inmaculada in line with IFRS.
Foreign exchange losses
The Group recognised a foreign exchange loss of $1.8 million
(2015: $5.6 million loss) as a result of exposures in currencies
other than the functional currency specifically the Peruvian Nuevo
Sol and Argentinean Peso.
Income tax
The Company's pre-exceptional income tax charge was $47.6
million (2015: $20.4 million). The substantial increase in the
charge is explained by the Company's significant increase in
profitability in the period, as well as an increase in the mining
royalties paid in Peru, the level of which is based on the
operating margin achieved by the Company's Peruvian operations.
Exceptional items
Exceptional items in 2016 totalled a $6.4 million loss after tax
(2015: $173.3 million loss). Exceptional items principally
included: a penalty payment for changing the energy supplier at
Arcata ($4.3 million) which will result in energy cost savings; a
$2.7 million gain on the reversal of the mining reserve tax in
Argentina (eliminated by the Argentine Government) in addition to
the reversal of the associated interest on the reserve tax ($1.0
million); costs related to the stoppage at Pallancata ($2.5
million); costs related to improvements to the Ares tailings dam
($2.2 million); write-off of a now uncontested fee payable to a
local authority of $1.8 million; and a property, plant and
equipment ("PP&E" )write-off of $1.6 million.
These items excluded the exceptional tax effect that amounted to
a $2.2 million tax charge (2015: $36.9 million tax credit).
Cash flow and balance sheet review
Cash flow:
$000 Year ended Year ended Change
31 Dec 31 Dec
2016 2015
-------------------------------- ----------- ----------- ----------
Net cash generated
from operating activities 316,073 133,256 182,817
Net cash used in investing
activities (127,364) (223,319) 95,955
Cash flows (used in)/generated
in financing activities (132,165) 61,027 (193,192)
-------------------------------- ----------- ----------- ----------
Net increase/(decrease
in cash and cash equivalents)
during the year 56,544 (29,036) 85,580
-------------------------------- ----------- ----------- ----------
Operating cash flow increased from $133.3 million in 2015 to
$316.1 million in 2016, mainly due to the maiden full year cash
contribution from the Inmaculada mine in addition to higher prices.
Net cash used in investing activities decreased to $127.4 million
in 2016 from $223.3 million in 2015 mainly due to the completion of
the Inmaculada mine in the middle of 2015. Finally, cash from
financing activities changed to $132.2 million used in the year
from $61.0 million generated in 2015, primarily due to the $107.4
million of debt repayment in 2016 versus the raising of short term
debt in Peru in 2015 ($75.0 million). As a result, total cash flows
resulted in a net increase of $56.5 million from a net decrease of
$29.0 million in 2015 ($85.5 million difference).
Working capital
$000 Year ended 31 Dec 2016 Year ended 31 Dec 2015
----------------------------------------- ----------------------- -----------------------
Trade and other receivables 93,837 135,014
Inventories 57,056 70,286
Other financial (liability)/assets (1,726) 20,126
Income tax (payable)/receivable (9,025) 17,628
Trade and other payables and provisions (211,277) (249,788)
----------------------------------------- ----------------------- -----------------------
Working capital (71,135) (6,734)
----------------------------------------- ----------------------- -----------------------
The Group's movement in the working capital position improved by
$64.4 million to a $71.1 million reduction in 2016 from a $6.7
million reduction in 2015. This was primarily explained by: lower
trade and other receivables ($41.2 million) mainly due to VAT
recoveries of $22.0 million and a reduction in trade receivables of
$25.0 million; positive movement in other financial
(liability)/assets of $21.9 million from an asset position in 2015
(explained by hedging contracts), to a liability position in 2016
resulting from the embedded derivative associated with provisional
pricing; and lower inventories ($13.2 million). These effects were
partially offset by lower trade and other payables and provisions
($38.5 million) mainly resulting from the payment of amounts owed
to Graña y Montero.
Net debt
$000 unless otherwise indicated Year ended Year ended
31 Dec 2016 31 Dec 2015
--------------------------------- ------------- -------------
Cash and cash equivalents 139,979 84,017
Long term borrowings (291,073) (339,778)
Short term borrowings(13) (36,312) (94,760)
--------------------------------- ------------- -------------
Net debt (187,406) (350,521)
--------------------------------- ------------- -------------
The Group reported net debt position was $187.4 million as at 31
December 2016 (2015: $350.5 million). The reduction in 2016
includes the net effect of: the prepayment of the Scotiabank medium
term loan ($50 million); the repayment of short-term loans ($57.4
million) and; the operating cash generated mainly in
Inmaculada.
Capital expenditure(14)
$000 Year ended Year ended
31 Dec 2016 31 Dec 2015
---------------- ------------- -------------
Arcata 20,819 14,600
Ares 16 25
Selene 25 139
Pallancata 16,105 10,683
San Jose 35,311 38,451
Inmaculada(15) 54,199 166,336
Operations 126,475 230,234
---------------- ------------- -------------
Crespo 2,982 2,842
Volcan 691 958
Azuca 1,237 211
Other 260 3,914
---------------- ------------- -------------
Total 131,645 238,159
---------------- ------------- -------------
2016 capital expenditure of $131.6 million (2015: $238.2
million) mainly comprised of operational capex of $126.5 million
(2015: $230.2 million) with the reduction due to the inclusion in
2015 of a portion of Inmaculada project capital expenditure.
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 2016
Year ended 31 Year ended 31
December 2016 December 2015
------------------------------------ ------------------------------------
Exceptional Exceptional
Before items Before items
exceptional (note exceptional (note
items 11) Total items 11) Total
Notes US$000 US$000 US$000 US$000 US$000 US$000
-------------------- ----- ------------ ----------- --------- ------------ ----------- ---------
Continuing
operations
-------------------- ----- ------------ ----------- --------- ------------ ----------- ---------
Revenue 3,5 688,242 - 688,242 469,146 - 469,146
--------------------- ----- ------------ ----------- --------- ------------ ----------- ---------
Cost of sales 6 (487,702) - (487,702) (403,657) (1,514) (405,171)
--------------------- ----- ------------ ----------- --------- ------------ ----------- ---------
Gross profit 200,540 - 200,540 65,489 (1,514) 63,975
--------------------- ----- ------------ ----------- --------- ------------ ----------- ---------
Administrative
expenses 7 (47,979) - (47,979) (38,148) - (38,148)
--------------------- ----- ------------ ----------- --------- ------------ ----------- ---------
Exploration expenses 8 (9,193) - (9,193) (9,255) - (9,255)
--------------------- ----- ------------ ----------- --------- ------------ ----------- ---------
Selling expenses 9 (14,175) - (14,175) (21,729) - (21,729)
--------------------- ----- ------------ ----------- --------- ------------ ----------- ---------
Other income 12 33,131 2,667 35,798 8,021 - 8,021
--------------------- ----- ------------ ----------- --------- ------------ ----------- ---------
Other expenses 12 (13,858) (10,675) (24,533) (15,264) - (15,264)
--------------------- ----- ------------ ----------- --------- ------------ ----------- ---------
Impairment and
write-off
of non-current
assets 11 (278) (1,634) (1,912) - (207,146) (207,146)
--------------------- ----- ------------ ----------- --------- ------------ ----------- ---------
Profit/(loss) from
continuing
operations
before net finance
income/(cost),
foreign
exchange loss and
income tax 148,188 (9,642) 138,546 (10,886) (208,660) (219,546)
--------------------- ----- ------------ ----------- --------- ------------ ----------- ---------
Finance income 13 1,100 974 2,074 1,898 - 1,898
--------------------- ----- ------------ ----------- --------- ------------ ----------- ---------
Finance costs 13 (30,541) - (30,541) (31,414) (1,486) (32,900)
--------------------- ----- ------------ ----------- --------- ------------ ----------- ---------
Foreign exchange
loss (1,800) - (1,800) (5,627) - (5,627)
--------------------- ----- ------------ ----------- --------- ------------ ----------- ---------
Profit/(loss) from
continuing
operations before
income tax 116,947 (8,668) 108,279 (46,029) (210,146) (256,175)
--------------------- ----- ------------ ----------- --------- ------------ ----------- ---------
Income tax
(expense)/benefit 14 (47,641) 2,224 (45,417) (20,370) 36,888 16,518
--------------------- ----- ------------ ----------- --------- ------------ ----------- ---------
Profit/(loss) for
the year from
continuing
operations 69,306 (6,444) 62,862 (66,399) (173,258) (239,657)
--------------------- ----- ------------ ----------- --------- ------------ ----------- ---------
Attributable to:
-------------------- ----- ------------ ----------- --------- ------------ ----------- ---------
Equity shareholders
of the Company 53,154 (7,604) 45,550 (61,852) (172,758) (234,610)
--------------------- ----- ------------ ----------- --------- ------------ ----------- ---------
Non-controlling
interests 16,152 1,160 17,312 (4,547) (500) (5,047)
--------------------- ----- ------------ ----------- --------- ------------ ----------- ---------
69,306 (6,444) 62,862 (66,399) (173,258) (239,657)
----- ------------ ----------- --------- ------------ ----------- ---------
Basic earnings/(loss)
per ordinary share
from continuing
operations for the
year (expressed
in US dollars per
share) 15 0.11 (0.02) 0.09 (0.14) (0.38) (0.52)
--------------------- ----- ------------ ----------- --------- ------------ ----------- ---------
Diluted
earnings/(loss)
per ordinary share
from continuing
operations for the
year (expressed
in US dollars per
share) 15 0.10 (0.01) 0.09 (0.14) (0.38) (0.52)
--------------------- ----- ------------ ----------- --------- ------------ ----------- ---------
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the year ended 31 December 2016
Year ended
31 December
-------------------
2016 2015
Notes US$000 US$000
-------------------------------------------- ----- -------- ---------
Profit/(loss) for the year 62,862 (239,657)
--------------------------------------------- ----- -------- ---------
Other comprehensive income to be
reclassified to profit or loss in
subsequent periods:
-------------------------------------------- ----- -------- ---------
Exchange differences on translating
foreign operations (249) (597)
--------------------------------------------- ----- -------- ---------
Change in fair value of available-for-sale
financial assets 19 774 (86)
--------------------------------------------- ----- -------- ---------
Recycling of the loss on available-for-sale
financial assets (66) 104
--------------------------------------------- ----- -------- ---------
Change in fair value of cash flow
hedges (39,989) 35,887
--------------------------------------------- ----- -------- ---------
Recycling of the loss/(gain) on cash
flow hedges 18,722 (18,962)
--------------------------------------------- ----- -------- ---------
Deferred income tax relating to components
of other comprehensive income 14 5,955 (4,739)
--------------------------------------------- ----- -------- ---------
Other comprehensive (loss)/gain for
the year, net of tax (14,853) 11,607
--------------------------------------------- ----- -------- ---------
Total comprehensive income/(expense)
for the year 48,009 (228,050)
--------------------------------------------- ----- -------- ---------
Total comprehensive income/(expense)
attributable to:
-------------------------------------------- ----- -------- ---------
Equity shareholders of the Company 30,697 (223,003)
--------------------------------------------- ----- -------- ---------
Non-controlling interests 17,312 (5,047)
--------------------------------------------- ----- -------- ---------
48,009 (228,050)
----- -------- ---------
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at 31 December 2016
As at As at
31 31
December December
2016 2015
Notes US$000 US$000
------------------------------------ ----- --------- ---------
ASSETS
------------------------------------ ----- --------- ---------
Non-current assets
------------------------------------ ----- --------- ---------
Property, plant and equipment 16 975,483 1,045,516
------------------------------------- ----- --------- ---------
Evaluation and exploration assets 17 138,985 138,171
------------------------------------- ----- --------- ---------
Intangible assets 18 26,379 27,981
------------------------------------- ----- --------- ---------
Available-for-sale financial assets 19 991 366
------------------------------------- ----- --------- ---------
Trade and other receivables 20 25,717 10,187
------------------------------------- ----- --------- ---------
Income tax receivable - 47
------------------------------------- ----- --------- ---------
Deferred income tax assets 27 1,027 -
------------------------------------- ----- --------- ---------
1,168,582 1,222,268
----- --------- ---------
Current assets
------------------------------------ ----- --------- ---------
Inventories 21 57,056 70,286
------------------------------------- ----- --------- ---------
Trade and other receivables 20 68,120 124,827
------------------------------------- ----- --------- ---------
Income tax receivable 20,988 20,384
------------------------------------- ----- --------- ---------
Other financial assets - 21,267
------------------------------------- ----- --------- ---------
Cash and cash equivalents 22 139,979 84,017
------------------------------------- ----- --------- ---------
286,143 320,781
----- --------- ---------
Total assets 1,454,725 1,543,049
------------------------------------- ----- --------- ---------
EQUITY AND LIABILITIES
------------------------------------ ----- --------- ---------
Capital and reserves attributable
to shareholders of the Parent
------------------------------------ ----- --------- ---------
Equity share capital 224,315 223,805
------------------------------------- ----- --------- ---------
Share premium 438,041 438,041
------------------------------------- ----- --------- ---------
Treasury shares (426) (898)
------------------------------------- ----- --------- ---------
Other reserves (217,288) (203,649)
------------------------------------- ----- --------- ---------
Retained earnings 258,269 218,093
------------------------------------- ----- --------- ---------
702,911 675,392
----- --------- ---------
Non-controlling interests 90,442 90,113
------------------------------------- ----- --------- ---------
Total equity 793,353 765,505
------------------------------------- ----- --------- ---------
Non-current liabilities
------------------------------------ ----- --------- ---------
Trade and other payables 24 1,266 20,379
------------------------------------- ----- --------- ---------
Borrowings 25 291,073 339,778
------------------------------------- ----- --------- ---------
Provisions 26 106,121 121,402
------------------------------------- ----- --------- ---------
Deferred income 23 25,000 25,000
------------------------------------- ----- --------- ---------
Deferred income tax liabilities 27 65,971 64,274
------------------------------------- ----- --------- ---------
489,431 570,833
----- --------- ---------
Current liabilities
------------------------------------ ----- --------- ---------
Trade and other payables 24 98,484 101,892
------------------------------------- ----- --------- ---------
Other financial liabilities 1,726 1,141
------------------------------------- ----- --------- ---------
Borrowings 25 36,312 94,760
------------------------------------- ----- --------- ---------
Provisions 26 5,406 6,115
------------------------------------- ----- --------- ---------
Income tax payable 30,013 2,803
------------------------------------- ----- --------- ---------
171,941 206,711
----- --------- ---------
Total liabilities 661,372 777,544
------------------------------------- ----- --------- ---------
Total equity and liabilities 1,454,725 1,543,049
------------------------------------- ----- --------- ---------
These financial statements were approved by the Board of
Directors on 7 March 2017 and signed on its behalf by:
Ignacio Bustamante, Chief Executive Officer
7 March 2017
CONSOLIDATED STATEMENT OF CASH FLOWS
For the year ended 31 December 2016
Year ended
31 December
--------------------
2016 2015
Notes US$000 US$000
------------------------------------------ ----- --------- ---------
Cash flows from operating activities
------------------------------------------ ----- --------- ---------
Cash generated from operations 345,856 166,234
------------------------------------------- ----- --------- ---------
Interest received 860 726
------------------------------------------- ----- --------- ---------
Interest paid (27,074) (36,445)
------------------------------------------- ----- --------- ---------
Payment of mine closure costs 26 (3,355) (2,538)
------------------------------------------- ----- --------- ---------
Income tax (paid)/received, net (214) 5,279
------------------------------------------- ----- --------- ---------
Net cash generated from operating
activities 316,073 133,256
------------------------------------------- ----- --------- ---------
Cash flows from investing activities
------------------------------------------ ----- --------- ---------
Purchase of property, plant and equipment (126,495) (216,188)
------------------------------------------- ----- --------- ---------
Purchase of evaluation and exploration
assets 17 (3,478) (6,861)
------------------------------------------- ----- --------- ---------
Purchase of intangibles 18 (14) (612)
------------------------------------------- ----- --------- ---------
Net proceeds from sale of subsidiary 4 807 -
------------------------------------------- ----- --------- ---------
Proceeds from sale of available-for-sale
financial assets 19 149 3
------------------------------------------- ----- --------- ---------
Proceeds from sale of other assets 12 1,550 -
------------------------------------------- ----- --------- ---------
Proceeds from sale of property, plant
and equipment 117 339
------------------------------------------- ----- --------- ---------
Net cash used in investing activities (127,364) (223,319)
------------------------------------------- ----- --------- ---------
Cash flows from financing activities
------------------------------------------ ----- --------- ---------
Proceeds of borrowings 70,000 175,948
------------------------------------------- ----- --------- ---------
Repayment of borrowings (177,431) (209,173)
------------------------------------------- ----- --------- ---------
Dividends paid to non-controlling
interests 28 (17,736) (964)
------------------------------------------- ----- --------- ---------
Dividends paid 28 (6,998) -
------------------------------------------- ----- --------- ---------
Proceeds from issue of ordinary shares - 95,216
------------------------------------------- ----- --------- ---------
Cash flows (used in)/generated from
financing activities (132,165) 61,027
------------------------------------------- ----- --------- ---------
Net increase/(decrease) in cash and
cash equivalents during the year 56,544 (29,036)
------------------------------------------- ----- --------- ---------
Exchange difference (582) (2,946)
------------------------------------------- ----- --------- ---------
Cash and cash equivalents at beginning
of year 84,017 115,999
------------------------------------------- ----- --------- ---------
Cash and cash equivalents at end
of year 22 139,979 84,017
------------------------------------------- ----- --------- ---------
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year 31 December 2016
Other reserves
--------------------------------------------------------------------------
Capital
and
reserves
Unrealised attributable
gain Unrealised to
on gain/ Share- shareholders
Equity available-for-sale (loss) Cumulative based Total of
share Share Treasury financial on translation Merger payment other Retained the Non-controlling Total
capital premium shares assets hedges 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
----------------- ----- ------- ------- -------- ------------------ ---------- ----------- --------- ------- --------- --------- ------------ --------------- -----------
Balance at
1 January
2015 170,389 396,021 (898) 14 3,126 (13,005) (210,046) 2,576 (217,335) 451,047 799,224 95,160 894,384
------------------ ----- ------- ------- -------- ------------------ ---------- ----------- --------- ------- --------- --------- ------------ --------------- -----------
Other
comprehensive
income/(expense) - - - 18 12,186 (597) - - 11,607 - 11,607 - 11,607
------------------ ----- ------- ------- -------- ------------------ ---------- ----------- --------- ------- --------- --------- ------------ --------------- -----------
Loss for
the year - - - - - - - - - (234,610) (234,610) (5,047) (239,657)
------------------ ----- ------- ------- -------- ------------------ ---------- ----------- --------- ------- --------- --------- ------------ --------------- -----------
Total
comprehensive
income/(expense)
for the
year - - - 18 12,186 (597) - - 11,607 (234,610) (223,003) (5,047) (228,050)
------------------ ----- ------- ------- -------- ------------------ ---------- ----------- --------- ------- --------- --------- ------------ --------------- -----------
Exercise
of share
options 220 - - - - - - (1,560) (1,560) 1,340 - - -
------------------ ----- ------- ------- -------- ------------------ ---------- ----------- --------- ------- --------- --------- ------------ --------------- -----------
Issuance
of shares 53,196 46,812 - - - - - - - - 100,008 - 100,008
------------------ ----- ------- ------- -------- ------------------ ---------- ----------- --------- ------- --------- --------- ------------ --------------- -----------
Transaction
costs related
to issuance
of shares - (4,792) - - - - - - - - (4,792) - (4,792)
------------------ ----- ------- ------- -------- ------------------ ---------- ----------- --------- ------- --------- --------- ------------ --------------- -----------
Share -based
payments - - - - - - - 3,639 3,639 316 3,955 - 3,955
------------------ ----- ------- ------- -------- ------------------ ---------- ----------- --------- ------- --------- --------- ------------ --------------- -----------
Balance at
31 December
2015 223,805 438,041 (898) 32 15,312 (13,602) (210,046) 4,655 (203,649) 218,093 675,392 90,113 765,505
------------------ ----- ------- ------- -------- ------------------ ---------- ----------- --------- ------- --------- --------- ------------ --------------- -----------
Other
comprehensive
income/(expense) - - - 708 (15,312) (249) - - (14,853) - (14,853) - (14,853)
------------------ ----- ------- ------- -------- ------------------ ---------- ----------- --------- ------- --------- --------- ------------ --------------- -----------
Profit for
the year - - - - - - - - - 45,550 45,550 17,312 62,862
------------------ ----- ------- ------- -------- ------------------ ---------- ----------- --------- ------- --------- --------- ------------ --------------- -----------
Total
comprehensive
income/(expense)
for the
year - - - 708 (15,312) (249) - - (14,853) 45,550 30,697 17,312 48,009
------------------ ----- ------- ------- -------- ------------------ ---------- ----------- --------- ------- --------- --------- ------------ --------------- -----------
Exercise
of share
options 510 - 472 - - - - (2,223) (2,223) 1,241 - - -
------------------ ----- ------- ------- -------- ------------------ ---------- ----------- --------- ------- --------- --------- ------------ --------------- -----------
Dividends 28 - - - - - - - - - (6,998) (6,998) - (6,998)
------------------ ----- ------- ------- -------- ------------------ ---------- ----------- --------- ------- --------- --------- ------------ --------------- -----------
Dividends
to non -
controlling
interests 28 - - - - - - - - - - - (16,983) (16,983)
------------------ ----- ------- ------- -------- ------------------ ---------- ----------- --------- ------- --------- --------- ------------ --------------- -----------
Share-based
payments - - - - - - 3,437 3,437 383 3,820 - 3,820
------------------ ----- ------- ------- -------- ------------------ ---------- ----------- --------- ------- --------- --------- ------------ --------------- -----------
Balance at
31 December
2016 224,315 438,041 (426) 740 - (13,851) (210,046) 5,869 (217,288) 258,269 702,911 90,442 793,353
------------------ ----- ------- ------- -------- ------------------ ---------- ----------- --------- ------- --------- --------- ------------ --------------- -----------
1 Notes to the consolidated financial statements
For the year ended 31 December 2016
The financial information for the year ended 31 December 2016
and 2015 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 2016 and 2015
have been extracted from the consolidated financial statements of
Hochschild Mining plc for the year ended 31 December 2016 which
have been approved by the directors on 7 March 2017 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
Basis of preparation
Having considered financial forecasts and projections which take
into account (i) possible changes in commodity price scenarios; and
(ii) the contingency measures that could be taken to alleviate
pressure on the balance sheet in the event of a fall in prices, the
Directors have a reasonable expectation that the Group have
adequate resources, including access to contingent resources, that
would see it continue in operational existence for the foreseeable
future. Thus they continue to adopt the going concern basis of
accounting.
Changes in accounting policy and disclosures
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 2015. Amendments to standards and
interpretations which came into force during the year did not have
a significant impact on the Group's financial statements.
Standards, interpretations and amendments to existing standards
that are not yet effective and have not been previously adopted by
the Group
Certain new standards, amendments and interpretations to
existing standards have been published and are mandatory for the
Group's accounting periods beginning on or after 1 January 2017 or
later periods but which the Group has not previously adopted. Those
that are applicable to the Group are as follows:
-- IFRS 15 Revenue from Contracts with Customers, applicable for
annual periods beginning on or after 1 January 2018.
-- This standard outlines the principles an entity must apply to
measure and recognise revenue. The Group is planning to apply the
standard when it became mandatory, analysing all the variables
during the first quarter of 2017, including the method of
implementation and the restatement of the previous year financial
information. IFRS 15 is not expected to have a significant effect
on the financial statements.
-- IFRS 9 Financial Instruments, applicable for annual periods
beginning on or after 1 January 2018. IFRS 9 is the replacement of
IAS 39 Financial Instruments: Recognition and Measurement. The
standard includes requirements for recognition and measurement,
impairment, derecognition and general hedge accounting. IFRS 9
should be applied retrospectively in accordance with IAS 8
Accounting Policies, Changes in Accounting Estimates and Errors,
subject to certain exemptions and exceptions. The Group do not
anticipate a significant effect over the financial statements.
-- IFRS 16 Leases, applicable for annual periods beginning on or
after 1 January 2019. IFRS 16 specifies how an IFRS reporter will
recognise, measure, present and disclose leases. The standard
provides a single lessee accounting model, requiring lessees to
recognise assets and liabilities for all leases unless the lease
term is 12 months or less or the underlying asset has a low value.
Lessors continue to classify leases as operating or finance, with
IFRS 16's approach to lessor accounting substantially unchanged
from its predecessor, IAS 17.The Group is analysing the adoption of
this new standard and expected not to have a significant impact on
the Group's financial position or performance.
-- IAS 7 Statement of cash flows, applicable for annual periods
beginning on or after 1 January 2017. The amendments require
entities to provide disclosures about changes in their liabilities
arising from financing activities, including both changes arising
from cash flows and non-cash changes. The adoption of these
amendments would not have impact on the Group's financial position
or performance.
-- IAS 12 Income Taxes, applicable for annual periods beginning
on or after 1 January 2017. The amendments clarify the accounting
for deferred tax assets for unrealised losses on debt instruments
measured at fair value. Entities are required to apply the
amendments retrospectively. The adoption of these rules would not
have impact on the Group's financial position or performance.
-- IFRS 2 Classification and Measurement of Share-based Payment
Transactions - Amendments to IFRS 2, applicable for annual periods
beginning on or after 1 January 2018.
The amendments are related to the classification and measurement
of share-based payment transactions and it does not require to
restate prior periods. The adoption of these amendments would not
have impact on the Group's financial position or performance.
The Group is analysing the effect of the standards and plans to
adopt the new standard on the required effective date.
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 similar 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 units - Arcata and San Jose, which generate revenue
from the sale of gold, silver, dore and concentrate.
-- Operating unit - Pallancata, which generates revenue from the sale of concentrate.
-- Operating unit - Inmaculada, which generates revenue from the sale of gold, silver and dore.
-- 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, absorbed
by Empresa de Transmisión Aymaraes S.A.C.on 1 June 2016), Empresa
de Transmisión Aymaraes S.A.C. (a power transmission company), Ares
unit, and the Selene plant (used to process some of the Group's
production).
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
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
---------------- -------- ---------- -------- ---------- ----------- -------- ------------ ---------
Year ended
31 December
2016
---------------- -------- ---------- -------- ---------- ----------- -------- ------------ ---------
Revenue from
external
customers 117,358 54,456 235,961 280,108 - 359 - 688,242
----------------- -------- ---------- -------- ---------- ----------- -------- ------------ ---------
Inter segment
revenue - - - - - 2,062 (2,062) -
----------------- -------- ---------- -------- ---------- ----------- -------- ------------ ---------
Total revenue 117,358 54,456 235,961 280,108 - 2,421 (2,062) 688,242
----------------- -------- ---------- -------- ---------- ----------- -------- ------------ ---------
Segment
profit/(loss) 22,924 11,284 57,259 97,595 (9,155) (2,273) (462) 177,172
----------------- -------- ---------- -------- ---------- ----------- -------- ------------ ---------
Others(2) (68,893)
----------------- -------- ---------- -------- ---------- ----------- -------- ------------ ---------
Profit from
continuing
operations
before
income tax 108,279
----------------- -------- ---------- -------- ---------- ----------- -------- ------------ ---------
Other segment
information
---------------- -------- ---------- -------- ---------- ----------- -------- ------------ ---------
Depreciation(3) (22,196) (10,606) (53,012) (98,243) (1,834) (4,877) - (190,768)
----------------- -------- ---------- -------- ---------- ----------- -------- ------------ ---------
Amortisation - - (1,060) - (462) (138) - (1,660)
----------------- -------- ---------- -------- ---------- ----------- -------- ------------ ---------
Impairment
and write-off
of assets (87) (885) (278) (414) (2) (246) - (1,912)
----------------- -------- ---------- -------- ---------- ----------- -------- ------------ ---------
Assets
---------------- -------- ---------- -------- ---------- ----------- -------- ------------ ---------
Capital
expenditure 20,819 16,105 35,311 54,199 4,910 301 - 131,645
----------------- -------- ---------- -------- ---------- ----------- -------- ------------ ---------
Current assets 6,721 7,017 53,299 22,899 30 3,911 - 93,877
----------------- -------- ---------- -------- ---------- ----------- -------- ------------ ---------
Other non-current
assets 48,843 55,380 196,056 589,666 185,825 65,077 - 1,140,847
----------------- -------- ---------- -------- ---------- ----------- -------- ------------ ---------
Total segment
assets 55,564 62,397 249,355 612,565 185,855 68,988 - 1,234,724
----------------- -------- ---------- -------- ---------- ----------- -------- ------------ ---------
Not reportable
assets(4) - - - - - 220,001 - 220,001
----------------- -------- ---------- -------- ---------- ----------- -------- ------------ ---------
Total assets 55,564 62,397 249,355 612,565 185,855 288,989 - 1,454,725
----------------- -------- ---------- -------- ---------- ----------- -------- ------------ ---------
1 Other revenue relates to revenues earned by Empresa de
Transmisión Callalli S.A.C.and Empresa de Transmisión Aymaraes
S.A.C.
2 Comprised of administrative expenses of US$47,979,000, other
income of US$35,798,000, other expenses of US$24,533,000,
impairment and write-off of assets of US$1,912,000, finance income
of US$2,074,000, finance expense of US$30,541,000, and foreign
exchange loss of US$1,800,000.
3 Includes depreciation capitalised in the Crespo project
(US$2,215,000), San Jose unit (US$2,640,000), Arcata unit
(US$117,000) and the Pallancata unit (US$3,000).
4 Not reportable assets are comprised of available-for-sale
financial assets of US$991,000, other receivables of US$57,016,000,
income tax receivable of US$20,988,000, deferred income tax asset
of US$1,027,000 and cash and cash equivalents of
US$139,979,000.
Adjustment
San and
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
---------------- -------- ---------- -------- ---------- ----------- -------- ------------ ---------
Year ended
31 December
2015
---------------- -------- ---------- -------- ---------- ----------- -------- ------------ ---------
Revenue from
external
customers 107,425 73,045 186,097 102,303 - 276 - 469,146
----------------- -------- ---------- -------- ---------- ----------- -------- ------------ ---------
Inter segment
revenue - - - - - 2,437 (2,437) -
----------------- -------- ---------- -------- ---------- ----------- -------- ------------ ---------
Total revenue 107,425 73,045 186,097 102,303 - 2,713 (2,437) 469,146
----------------- -------- ---------- -------- ---------- ----------- -------- ------------ ---------
Segment
profit/(loss) (1,340) (17,002) 13,297 49,759 (10,710) 384 (1,397) 32,991
----------------- -------- ---------- -------- ---------- ----------- -------- ------------ ---------
Others(2) (289,166)
----------------- -------- ---------- -------- ---------- ----------- -------- ------------ ---------
Loss from
continuing
operations
before
income tax (256,175)
----------------- -------- ---------- -------- ---------- ----------- -------- ------------ ---------
Other segment
information
---------------- -------- ---------- -------- ---------- ----------- -------- ------------ ---------
Depreciation(3) (33,506) (35,415) (45,286) (32,093) (1,496) (2,816) - (150,612)
----------------- -------- ---------- -------- ---------- ----------- -------- ------------ ---------
Amortisation - - (1,013) - (457) (34) - (1,504)
----------------- -------- ---------- -------- ---------- ----------- -------- ------------ ---------
Impairment
and write-off
of assets,
net (72,718) (39,245) (57) - (95,113) (13) - (207,146)
----------------- -------- ---------- -------- ---------- ----------- -------- ------------ ---------
Assets
---------------- -------- ---------- -------- ---------- ----------- -------- ------------ ---------
Capital
expenditure 14,600 10,683 38,451 166,336 4,011 4,078 - 238,159
----------------- -------- ---------- -------- ---------- ----------- -------- ------------ ---------
Current assets 17,456 13,818 63,941 31,958 30 5,435 - 132,638
----------------- -------- ---------- -------- ---------- ----------- -------- ------------ ---------
Other non-current
assets 53,458 50,591 220,307 633,169 181,662 72,481 - 1,211,668
----------------- -------- ---------- -------- ---------- ----------- -------- ------------ ---------
Total segment
assets 70,914 64,409 284,248 665,127 181,692 77,916 - 1,344,306
----------------- -------- ---------- -------- ---------- ----------- -------- ------------ ---------
Not reportable
assets(4) - - - - - 198,743 - 198,743
----------------- -------- ---------- -------- ---------- ----------- -------- ------------ ---------
Total assets 70,914 64,409 284,248 665,127 181,692 276,659 - 1,543,049
----------------- -------- ---------- -------- ---------- ----------- -------- ------------ ---------
1 'Other' revenue relates to revenues earned by Empresa de
Transmisión Callalli S.A.C.and Empresa de Transmisión Aymaraes
S.A.C.
2 Comprised of administrative expenses of US$38,148,000, other
income of US$8,021,000, other expenses of US$15,264,000, impairment
and write-off of assets of US$207,146,000, finance income of
US$1,898,000, finance expense of US$32,900,000, and foreign
exchange loss of US$5,627,000.
3 Includes US$1,793,000 and US$6,077,000 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$366,000, other receivables of US$72,662,000,
income tax receivable of US$20,431,000, other financial assets of
US$21,267,000 and cash and cash equivalents of US$84,017,000.
(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
----------------
2016 2015
US$000 US$000
------------------- ------- -------
External customer
------------------- ------- -------
USA 225,073 229,229
-------------------- ------- -------
Peru 78,248 63,328
-------------------- ------- -------
Canada 181,569 58,154
-------------------- ------- -------
Germany 4,506 7,428
-------------------- ------- -------
Switzerland 89,838 12,174
-------------------- ------- -------
United Kingdom (1) (1,689) 17,273
-------------------- ------- -------
Korea 92,769 81,580
-------------------- ------- -------
Bulgaria 16,334 -
-------------------- ------- -------
Japan 1,594 (20)
-------------------- ------- -------
Total 688,242 469,146
-------------------- ------- -------
Inter-segment
------------------- ------- -------
Peru 2,062 2,437
-------------------- ------- -------
Total 690,304 471,583
-------------------- ------- -------
1 Corresponds to the realised loss on the silver zero cost
collar contract with JP Morgan Chase Bank, National Association,
London Branch, settled on 30 December 2016 (2015: Corresponds to
the realised gain on the gold and silver swap contracts with JP
Morgan Chase Bank, National Association, London Brach, settled on
30 and 31 December 2015 respectively) (refer to note 5).
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 Year ended 31 December
2016 2015
------------------------------- -------------------------------
US$000 % Revenue Segment US$000 % Revenue Segment
---------------- ------- --------- ----------- ------- --------- -----------
Asahi Refining Arcata and Arcata and
Canada Ltd. 160,312 23% Inmaculada 34,362 7% Inmaculada
----------------- ------- --------- ----------- ------- --------- -----------
Arcata, Arcata,
Inmaculada Inmaculada
Republic Metals and San and San
Corporation 103,405 15% Jose 106,339 23% Jose
----------------- ------- --------- ----------- ------- --------- -----------
Auramet Trading Arcata and Arcata and
Llc. 97,616 14% Inmaculada 14,781 3% Inmaculada
----------------- ------- --------- ----------- ------- --------- -----------
Pallancata Pallancata
and San and San
LS Nikko 92,769 14% Jose 81,580 17% Jose
----------------- ------- --------- ----------- ------- --------- -----------
Non-current assets, excluding financial instruments and deferred
income tax assets, were allocated to the geographical areas in
which the assets are located as follows:
As at 31
December
--------------------
2016 2015
US$000 US$000
------------------------------------ --------- ---------
Peru 850,605 897,824
------------------------------------- --------- ---------
Argentina 196,056 220,307
------------------------------------- --------- ---------
Mexico 30,990 31,005
------------------------------------- --------- ---------
Chile 63,196 62,532
------------------------------------- --------- ---------
Total non-current segment assets 1,140,847 1,211,668
------------------------------------- --------- ---------
Available-for-sale financial assets 991 366
------------------------------------- --------- ---------
Trade and other receivables 25,717 10,187
------------------------------------- --------- ---------
Income tax receivable - 47
------------------------------------- --------- ---------
Deferred income tax assets 1,027 -
------------------------------------- --------- ---------
Total non-current assets 1,168,582 1,222,268
------------------------------------- --------- ---------
4 Disposals of subsidiaries
HMX S.A. de C.V.
On 22 February 2016 the Group sold its Mexican subsidiary HMX
S.A. de C.V. to Sergio Salinas and Servicios de Integración Fiscal
S.A. de C.V., for nil consideration. The carrying value of the net
assets disposed was US$60,000 and the transaction resulted in a
loss of US$60,000.
Asociación Sumac Tarpuy
On 17 May 2016 the Group transferred all its rights over its
non-for-profit subsidiary Asociación Sumac Tarpuy to Inversiones
ASPI S.A. ("ASPI"), recognising a gain on disposal of US$811,000.
The gain on disposal was determined as follows:
US$000
--------------------------------- ------
Cash consideration 1,100
---------------------------------- ------
Assets and liabilities disposed:
--------------------------------- ------
Cash and cash equivalents 293
---------------------------------- ------
Other payables (4)
---------------------------------- ------
Net assets disposed 289
---------------------------------- ------
Gain on disposal 811
---------------------------------- ------
US$000
---------------------------------------------------- --------
Net cash inflow arising on disposal
---------------------------------------------------- --------
Consideration received in cash and cash equivalents 1,100
----------------------------------------------------- --------
Less: cash and cash equivalents disposed
of: (293)
----------------------------------------------------- --------
807
--------
5 Revenue
Year ended
31 December
----------------
2016 2015
US$000 US$000
-------------------------- ------- -------
Gold (from dore bars) 263,010 142,077
--------------------------- ------- -------
Silver (from dore bars) 177,450 142,397
--------------------------- ------- -------
Gold (from concentrate) 91,348 68,414
--------------------------- ------- -------
Silver (from concentrate) 156,075 115,982
--------------------------- ------- -------
Services 359 276
--------------------------- ------- -------
Total 688,242 469,146
--------------------------- ------- -------
Included within revenue is a loss of US$6,667,000 relating to
provisional pricing adjustments representing the change in the fair
value of embedded derivatives (2015: loss of US$7,275,000) arising
on sales of concentrates and dore.
Revenue is disclosed net of commercial deductions of $37,240,000
(2015: $24,198,000) split between gold $11,486,000 (2015:
$6,714,000) and silver $25,754,000 (2015: 17,484,000).
The realised loss on gold and silver swaps and zero cost collar
contracts in the period recognised within revenue was US$18,722,000
(gold: US$10,030,000, silver: US$8,692,000) (2015: gain of
US$18,962,000, gold: US$7,012,000, silver: US$11,950,000).
6 Cost of sales
Included in cost of sales are:
Year ended
31 December
-----------------
2016 2015
US$000 US$000
-------------------------------------------- ------- --------
Depreciation and amortisation in production
costs(1) 185,655 139,533
--------------------------------------------- ------- --------
Personnel expenses (notes 10 and 11) 103,130 107,823
--------------------------------------------- ------- --------
Mining royalty (note 30) 7,506 5,968
--------------------------------------------- ------- --------
Change in products in process and finished
goods 6,487 (10,255)
--------------------------------------------- ------- --------
1 The depreciation and amortisation in cost of sales and
inventory is US$180,317,000 (2015: US$135,645,000) and US$5,338,000
(2015: US$3,888,000) respectively.
7 Administrative expenses
Year ended
31 December
----------------
2016 2015
US$000 US$000
----------------------------------------- ------- -------
Personnel expenses (note 10) 33,028 22,427
------------------------------------------ ------- -------
Professional fees 3,075 3,095
------------------------------------------ ------- -------
Social and community welfare expenses(1) 384 597
------------------------------------------ ------- -------
Lease rentals 1,455 1,415
------------------------------------------ ------- -------
Travel expenses 598 576
------------------------------------------ ------- -------
Communications 438 560
------------------------------------------ ------- -------
Indirect taxes 2,057 2,147
------------------------------------------ ------- -------
Depreciation and amortisation 1,798 1,534
------------------------------------------ ------- -------
Technology and systems 678 745
------------------------------------------ ------- -------
Security 656 790
------------------------------------------ ------- -------
Supplies 109 134
------------------------------------------ ------- -------
Other (2) 3,703 4,128
------------------------------------------ ------- -------
Total 47,979 38,148
------------------------------------------ ------- -------
1 Represents amounts expended by the Group on social and
community welfare activities surrounding its mining units.
2 Predominatly related to third party services of US$972,000
(2015: US$962,000), technical services of US$533,000 (2015:
US$423,000), repair and maintenance of US$492,000 (2015: US$527,000
and impairment of receivables of US$312,000 (2015: US$209,000).
8 Exploration expenses
Year ended
31 December
----------------
2016 2015
US$000 US$000
------------------------- ------- -------
Mine site exploration(1)
------------------------- ------- -------
Arcata 1,305 62
-------------------------- ------- -------
Ares 297 50
-------------------------- ------- -------
Inmaculada 1 6
-------------------------- ------- -------
Pallancata 733 2,457
-------------------------- ------- -------
San Jose 1,691 1,463
-------------------------- ------- -------
4,027 4,038
------- -------
Prospects(2)
------------------------- ------- -------
Peru 316 303
-------------------------- ------- -------
Argentina 11 43
-------------------------- ------- -------
Chile 26 71
-------------------------- ------- -------
353 417
------- -------
Generative(3)
------------------------- ------- -------
Peru 866 499
-------------------------- ------- -------
866 499
------- -------
Personnel (notes 10) 3,476 2,967
-------------------------- ------- -------
Others 471 1,334
-------------------------- ------- -------
Total 9,193 9,255
-------------------------- ------- -------
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 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 Group determines the cash flows which relate to the
exploration activities of the companies engaged only in
exploration. 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 outflows on exploration activities were US$1,168,000 in
2016 (2015: US$1,190,000).
9 Selling expenses
Year ended
31 December
----------------
2016 2015
US$000 US$000
---------------------------------------- ------- -------
Transportation of dore, concentrate and
maritime freight 5,410 3,548
----------------------------------------- ------- -------
Sales commissions 84 200
----------------------------------------- ------- -------
Personnel expenses (note 10) 254 254
----------------------------------------- ------- -------
Warehouse services 1,861 1,610
----------------------------------------- ------- -------
Taxes(1) 1,495 12,994
----------------------------------------- ------- -------
Other 5,071 3,123
----------------------------------------- ------- -------
Total 14,175 21,729
----------------------------------------- ------- -------
1 The export taxes over dore and concentrates in Argentina were
reduced to zero percent on 18 December 2015 and 12 February 2016
respectively.
10 Personnel expenses(1)
Year ended
31 December
----------------
2016 2015
US$000 US$000
--------------------------- ------- -------
Salaries and wages 98,741 103,433
---------------------------- ------- -------
Workers' profit sharing(2) - -
--------------------------- ------- -------
Other legal contributions 20,552 20,735
---------------------------- ------- -------
Statutory holiday payments 6,361 6,534
---------------------------- ------- -------
Long Term Incentive Plan 10,528 1,013
---------------------------- ------- -------
Restricted share plan 3,181 2,843
---------------------------- ------- -------
Termination benefits 2,577 3,623
---------------------------- ------- -------
Other 1,951 1,584
---------------------------- ------- -------
Total 143,891 139,765
---------------------------- ------- -------
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$103,130,000 (2015: US$107,823,000), US$33,028,000
(2015: US$22,427,000), US$3,476,000 (2015: US$2,967,000),
US$254,000 (2015: US$254,000), US$2,406,000 (2015: US$1,218,000)
and US$1,597,000 (2015: US$5,076,000) respectively.
2 As there is a taxable loss in Compañía Minera Ares S.A.C., and
worker's profit sharing is calculated over the taxable income of
each year of companies in Peru, there is no provision during 2016
and 2015 periods.
Average number of employees for 2016 and 2015 were as
follows:
Year ended
31 December
--------------
2016 2015
--------------- ------ ------
Peru 2,825 2,575
---------------- ------ ------
Argentina 1,125 1,129
---------------- ------ ------
Chile 3 3
---------------- ------ ------
United Kingdom 11 10
---------------- ------ ------
Total 3,964 3,717
---------------- ------ ------
11 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. Unless stated, exceptional items do not correspond to a
reporting segment of the Group.
Year Year
ended ended
31 31
December December
2016 2015
US$000 US$000
------------------------------------------------- --------- ---------
Cost of sales
------------------------------------------------- --------- ---------
Termination benefits(1) - (1,514)
-------------------------------------------------- --------- ---------
Total - (1,514)
-------------------------------------------------- --------- ---------
Other income
------------------------------------------------- --------- ---------
Reversal of reserves tax(2) 2,667 -
-------------------------------------------------- --------- ---------
Total 2,667 -
-------------------------------------------------- --------- ---------
Other expenses -
------------------------------------------------- --------- ---------
Work stoppage at Pallancata mine unit(3) (2,474) -
-------------------------------------------------- --------- ---------
Penalty for termination of agreement(4) (4,254) -
-------------------------------------------------- --------- ---------
Damage of tailing dump in Ares mine unit(5) (2,150) -
-------------------------------------------------- --------- ---------
Provision for impairment of other receivables(6) (1,797) -
-------------------------------------------------- --------- ---------
Total (10,675) -
-------------------------------------------------- --------- ---------
Impairment and write-off of non-current
assets
------------------------------------------------- --------- ---------
Impairment and write-off of non-current
assets(7) (1,634) (207,146)
-------------------------------------------------- --------- ---------
Total (1,634) (207,146)
-------------------------------------------------- --------- ---------
Finance income
------------------------------------------------- --------- ---------
Reversal of interests on reserves tax(2) 974 -
-------------------------------------------------- --------- ---------
Total 974 -
-------------------------------------------------- --------- ---------
Finance costs
------------------------------------------------- --------- ---------
Interest on disputed tax charges(8) - (1,486)
-------------------------------------------------- --------- ---------
Total - (1,486)
-------------------------------------------------- --------- ---------
Income tax benefit(9) 2,224 36,888
-------------------------------------------------- --------- ---------
Total 2,224 36,888
-------------------------------------------------- --------- ---------
1 Termination benefits in 2015 paid to workers following the
cashflow optimisation programme approved by management, amounting
to US$1,514,000, corresponding to the San José reporting
segment.
2 Corresponds to the reversal of the reserves tax liability
recorded in previous periods and their associated interests as a
result of the settlement agreed between Minera Santa Cruz S.A.C.
and the Fiscal Authority in Argentina.
3 From 16 November 2016 until the end of the year, due to
actions by the communities surrounding the Pallancata mine unit,
the extracting and treatment operations were temporarily suspended.
At 31 December 2016 the fixed indirect costs related to abnormal
decrease in production from the work stoppage amounted to
US$2,474,000, corresponding to the Pallancata reporting
segment.
4 Penalty for early termination of the energy supply contract
between Compañia Minera Ares S.A.C. and SDF Energia.
5 A section of the Ares tailings dam lateral walls showed
unusual decay. A comprehensive study was conducted to determine
long-term stability and the conclusion was that certain areas
needed to be repaired. This failure was not anticipated and
required works aimed at repairing and reinforcing the walls and
ensure the long term sustainability of the dam had to be conducted.
The expenditure incurred was not part of our mine closure provision
and reflects an unexpected, one-off event.
6 Provision for impairment of the account receivable with a
third party due to the uncertainty surrounding the outcome of the
legal dispute and hence its recoverability.
7 As at 31 December 2016 corresponds to the write-off of
non-current assets of Compañia Minera Ares S.A.C. of US$1,634,000
arising from events falling outside the entity's ordinary
activities. The charge was generated by the change of the
exploitation method in the Pallancata mine unit, from mechanised to
conventional. As at 31 December 2015 corresponds to the impairment
of the Pallancata mine unit of US$39,026,000, the Arcata mine unit
of US$72,424,000, the Crespo project of US$14,350,000, the Azuca
project of US$12,766,000, the Volcan project of US$57,070,000 and
the San Felipe project of US$10,927,000, and to the write-off of
non-current assets of US$583,000.
8 Interest on overdue tax charges owed by the Group following a
change in circumstances surrounding a tax dispute with the Peruvian
tax authority, resulting in the exposure now being assessed as
'probable', rather than 'possible'.
9 Mainly corresponds to the current tax credit arising from the
costs of the work stoppage at Pallancata mine unit, the penalty for
early termination of agreement in Compañia Minera Ares S.A.C., the
costs incurred due to the damage of tailing dump in Ares mine unit
and the reversal of reserves tax in Argentina (US$1,212,000) and
the deferred tax credit arising from the write-off of non-current
assets and the account receivable (US$1,012,000). For the period
ended December 2015, primarily related to the deferred tax benefit
arising from the impairment recorded.
12 Other income and other expenses before exceptional items
Year Year
ended ended
31 31
December December
2016 2015
------------ ------------
Before Before
exceptional exceptional
items items
US$000 US$000
--------------------------------------------- ------------ ------------
Other Income
--------------------------------------------- ------------ ------------
Decrease in provision for mine closure
(note 26(3)) 6,346 -
---------------------------------------------- ------------ ------------
Export credits 19,029 2,743
---------------------------------------------- ------------ ------------
Lease rentals 391 443
---------------------------------------------- ------------ ------------
Gain on sale of other assets(1) 1,550 -
---------------------------------------------- ------------ ------------
Gain on sale of subsidiaries (refer
to note 4) 751 -
---------------------------------------------- ------------ ------------
Logistic services 4,288 3,699
---------------------------------------------- ------------ ------------
Other 776 1,136
---------------------------------------------- ------------ ------------
Total 33,131 8,021
---------------------------------------------- ------------ ------------
Other expenses
--------------------------------------------- ------------ ------------
Increase in provision for mine closure
(note 26(3)) - (7,590)
---------------------------------------------- ------------ ------------
Tax on mining reserves in Argentina
(note 30) - (441)
---------------------------------------------- ------------ ------------
Provision of obsolescence of supplies (2,162) (1,046)
---------------------------------------------- ------------ ------------
Contingencies (570) (108)
---------------------------------------------- ------------ ------------
Donations (refer to note 29) (1,000) -
---------------------------------------------- ------------ ------------
Write off of value added tax (1,208) (795)
---------------------------------------------- ------------ ------------
Corporate social responsibility contribution
in Argentina(2) (3,146) -
---------------------------------------------- ------------ ------------
Other (3) (5,772) (5,284)
---------------------------------------------- ------------ ------------
Total (13,858) (15,264)
---------------------------------------------- ------------ ------------
1 Corresponds to a gain in Compañía Minera Arcata S.A. generated
by the sale of a royalty purchase agreement signed with Minera
Bateas S.A.C. to Lemuria Royalties Corp.
2 Relates to a new contribution in Argentina to the Santa Cruz
province, effective since January 2016 and calculated as a
proportion of sales.
3 Mainly corresponds to the expenses in Ares mine unit of
US$1,910,000 (2015: US$2,308,000), concessions of US$1,210,000
(2015: US$447,000) and rentals of US$440,000 (2015: US$333,000)
13 Finance income and finance costs before exceptional items
Year Year
ended ended
31 31
December December
2016 2015
------------ ------------
Before Before
exceptional exceptional
items items
US$000 US$000
------------------------------------------ ------------ ------------
Finance income
------------------------------------------ ------------ ------------
Interest on deposits and liquidity funds 1,011 648
------------------------------------------- ------------ ------------
Interest income 1,011 648
------------------------------------------- ------------ ------------
Gain on repurchase of bonds - 856
------------------------------------------- ------------ ------------
Other 89 394
------------------------------------------- ------------ ------------
Total 1,100 1,898
------------------------------------------- ------------ ------------
Finance costs
------------------------------------------ ------------ ------------
Interest on secured bank loans (note
25) (2,602) (5,842)
------------------------------------------- ------------ ------------
Other interest (1,106) (1,657)
------------------------------------------- ------------ ------------
Interest on bond (note 25) (23,925) (22,096)
------------------------------------------- ------------ ------------
Interest expense (27,633) (29,595)
------------------------------------------- ------------ ------------
Unwind of discount on mine rehabilitation (46) (69)
------------------------------------------- ------------ ------------
Loss on discount of other receivables (2,257) (436)
------------------------------------------- ------------ ------------
Loss from changes in the fair value
of financial instruments - (116)
------------------------------------------- ------------ ------------
Other (605) (1,198)
------------------------------------------- ------------ ------------
Total (30,541) (31,414)
------------------------------------------- ------------ ------------
14 Income tax expense
Year ended 31 Year ended 31
December 2016 December 2015
---------------------------------- -----------------------------------
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 31,701 (1,212) 30,489 5,200 (259) 4,941
-------------------------------- ------------ ----------- ------- ------------ ----------- --------
Current mining royalty
charge (note 30) 3,882 - 3,882 1,778 - 1,778
-------------------------------- ------------ ----------- ------- ------------ ----------- --------
Current special mining
tax charge (note 30) 3,869 - 3,869 755 - 755
-------------------------------- ------------ ----------- ------- ------------ ----------- --------
Withholding taxes 552 - 552 (142) - (142)
-------------------------------- ------------ ----------- ------- ------------ ----------- --------
40,004 (1,212) 38,792 7,591 (259) 7,332
------------ ----------- ------- ------------ ----------- --------
Deferred taxation
------------------------------- ------------ ----------- ------- ------------ ----------- --------
Origination and reversal
of temporary differences
from continuing operations
(note 27) 6,364 (961) 5,403 12,637 (36,629) (23,992)
-------------------------------- ------------ ----------- ------- ------------ ----------- --------
Effect of change in
tax rate(1) 1,273 (51) 1,222 142 - 142
-------------------------------- ------------ ----------- ------- ------------ ----------- --------
7,637 (1,012) 6,625 12,779 (36,629) (23,850)
------------ ----------- ------- ------------ ----------- --------
Total taxation charge/(credit)
in the income statement 47,641 (2,224) 45,417 20,370 (36,888) (16,518)
-------------------------------- ------------ ----------- ------- ------------ ----------- --------
1 In December 2016, the Peruvian government approved an increase
of the statutory income tax rate, from its current level of 28% to
29.5% with effect from the 1 January 2017
The weighted average statutory income tax rate was 30.1% for
2016 and 25.4% for 2015. 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.
The tax related to items charged or credited to equity is as
follows:
As at 31
December
----------------
2016 2015
US$000 US$000
------------------------------------------- ------- -------
Deferred taxation:
------------------------------------------- ------- -------
Deferred income tax relating to fair
value (losses)/ gains on cash flow hedges (5,955) 4,739
-------------------------------------------- ------- -------
Total tax (credit)/charge in the statement
of other comprehensive income (5,955) 4,739
-------------------------------------------- ------- -------
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
------------------
2016 2015
US$000 US$000
---------------------------------------------- ------- ---------
Profit/(loss) from continuing operations
before income tax 108,279 (256,175)
----------------------------------------------- ------- ---------
At average statutory income tax rate
of 30.1% (2015: 25.4%) 32,570 (65,017)
----------------------------------------------- ------- ---------
Expenses not deductible for tax purposes 1,051 1,040
----------------------------------------------- ------- ---------
Deferred tax recognised on special investment
regime (1,715) (691)
----------------------------------------------- ------- ---------
Movement in unrecognised deferred tax(1) 2,705 16,565
----------------------------------------------- ------- ---------
Change in statutory income tax rate(2) 1,222 142
----------------------------------------------- ------- ---------
Withholding tax 552 (142)
----------------------------------------------- ------- ---------
Special mining tax and mining royalty(3) 7,751 2,533
----------------------------------------------- ------- ---------
Derecognition of deferred tax asset 316 1,251
----------------------------------------------- ------- ---------
Foreign exchange rate effect(4) 2,383 24,964
----------------------------------------------- ------- ---------
Other (1,418) 2,837
----------------------------------------------- ------- ---------
At average effective income tax rate
of 41.9% (2015: 6.4%) 45,417 (16,518)
----------------------------------------------- ------- ---------
Taxation charge/(credit) attributable
to continuing operations 45,417 (16,518)
----------------------------------------------- ------- ---------
Total taxation charge/(credit) in the
income statement 45,417 (16,518)
----------------------------------------------- ------- ---------
1 Includes the income tax credit on mine closure provision of
US$1,925,000 (2015: includes the effect of the impairment of Volcan
and San Felipe projects of US$11,414,000 and US$3,278,000
respectively).
2 In December 2016, the Peruvian government approved an increase
of the statutory income tax rate, from its current level of 28% to
29.5% with effect from the 1 January 2017.
3 Corresponds to the impact of a mining royalty and special mining tax in Peru (note 30).
4 Mainly corresponds to the foreign exchange effect of
converting tax bases and monetary items from local currency to the
functional currency.
15 Basic and diluted earnings per share
Earnings per share ('EPS') is calculated by dividing
profit/(loss) for the year attributable to equity shareholders of
the Company by the weighted average number of ordinary shares
issued during the year.
The Company has dilutive potential ordinary shares.
As a result of the rights issue being at a discounted price, the
number of ordinary shares outstanding has increased due to the
bonus element resulting in the calculation of basic and diluted
earnings per share for all periods presented having been adjusted
retrospectively.
As at 31 December 2016 and 2015, EPS has been calculated as
follows:
As at 31
December
--------------
2016 2015
--------------------------------------- ------ ------
Basic earnings/(loss) per share from
continuing operations
--------------------------------------- ------ ------
Before exceptional items (US$) 0.11 (0.14)
---------------------------------------- ------ ------
Exceptional items (US$) (0.02) (0.38)
---------------------------------------- ------ ------
Total for the year and from continuing
operations (US$) 0.09 (0.52)
---------------------------------------- ------ ------
Diluted earnings/(loss) per share from
continuing operations
--------------------------------------- ------ ------
Before exceptional items (US$) 0.10 (0.14)
---------------------------------------- ------ ------
Exceptional items (US$) (0.01) (0.38)
---------------------------------------- ------ ------
Total for the year and from continuing
operations (US$) 0.09 (0.52)
---------------------------------------- ------ ------
Profit/(loss) from continuing operations before exceptional
items and attributable to equity holders of the parent is derived
as follows:
As at 31
December
-----------------
2016 2015
----------------------------------------------- ------ ---------
Profit/(loss) attributable to equity
holders of the parent - continuing operations
(US$000) 45,550 (234,610)
------------------------------------------------ ------ ---------
Exceptional items after tax - attributable
to equity holders of the parent (US$000) 7,604 172,758
------------------------------------------------ ------ ---------
Profit/(loss) from continuing operations
before exceptional items attributable
to equity holders
of the parent (US$000) 53,154 (61,852)
------------------------------------------------ ------ ---------
Profit/(loss) from continuing operations
before exceptional items attributable
to equity
holders of the parent for the purpose
of diluted earnings per share (US$000) 53,154 (61,852)
------------------------------------------------ ------ ---------
The following reflects the share data used in the basic and
diluted earnings/(loss) per share computations:
As at 31
December
----------------
2016 2015
---------------------------------------------- ------- -------
Basic weighted average number of ordinary
shares in issue (thousands) 505,521 449,511
----------------------------------------------- ------- -------
Effect of dilutive potential ordinary
shares related to contingently issuable
shares (thousands)1 9,435 -
----------------------------------------------- ------- -------
Weighted average number of ordinary shares
in issue for the purpose of diluted earnings
per share (thousands) 514,956 449,511
----------------------------------------------- ------- -------
1 The potential ordinary shares related to 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 2015 as they had an antidilutive effect.
16 Property, plant and equipment
Mining Construction
properties in progress
and Land Plant Mine and
development and and closure capital
costs(1) buildings equipment Vehicles asset advances Total
US$000 US$000 US$000 US$000 US$000 US$000 US$000
-------------------- ------------ ---------- ---------- -------- -------- ------------ ---------
Year ended 31
December 2016
-------------------- ------------ ---------- ---------- -------- -------- ------------ ---------
Cost
-------------------- ------------ ---------- ---------- -------- -------- ------------ ---------
At 1 January 2016 1,097,107 472,093 480,747 6,151 103,386 62,392 2,221,876
--------------------- ------------ ---------- ---------- -------- -------- ------------ ---------
Additions 80,565 6,695 15,379 - - 25,514 128,153
--------------------- ------------ ---------- ---------- -------- -------- ------------ ---------
Change in discount
rate - - - - (2,367) - (2,367)
--------------------- ------------ ---------- ---------- -------- -------- ------------ ---------
Change in mine
closure estimate - - - - (5,629) - (5,629)
--------------------- ------------ ---------- ---------- -------- -------- ------------ ---------
Disposals - - (3,420) (298) - (56) (3,774)
--------------------- ------------ ---------- ---------- -------- -------- ------------ ---------
Write-offs - - (8,500) (85) - - (8,585)
--------------------- ------------ ---------- ---------- -------- -------- ------------ ---------
Transfer to
intangibles - - - - - (44) (44)
--------------------- ------------ ---------- ---------- -------- -------- ------------ ---------
Transfers and
other movements(2) 3,232 9,698 52,723 442 - (62,863) 3,232
--------------------- ------------ ---------- ---------- -------- -------- ------------ ---------
At 31 December
2016 1,180,904 488,486 536,929 6,210 95,390 24,943 2,332,862
--------------------- ------------ ---------- ---------- -------- -------- ------------ ---------
Accumulated
depreciation
and impairment
-------------------- ------------ ---------- ---------- -------- -------- ------------ ---------
At 1 January 2016 678,547 179,036 253,388 4,447 59,790 1,152 1,176,360
--------------------- ------------ ---------- ---------- -------- -------- ------------ ---------
Depreciation for
the year 112,526 39,243 33,921 462 4,616 - 190,768
--------------------- ------------ ---------- ---------- -------- -------- ------------ ---------
Disposals - - (3,361) (283) - - (3,644)
--------------------- ------------ ---------- ---------- -------- -------- ------------ ---------
Write-offs - - (6,591) (82) - - (6,673)
--------------------- ------------ ---------- ---------- -------- -------- ------------ ---------
Transfers and
other movements(2) 568 (156) 335 10 74 (263) 568
--------------------- ------------ ---------- ---------- -------- -------- ------------ ---------
At 31 December
2016 791,641 218,123 277,692 4,554 64,480 889 1,357,379
--------------------- ------------ ---------- ---------- -------- -------- ------------ ---------
Net book amount
at 31 December
2016 389,263 270,363 259,237 1,656 30,910 24,054 975,483
--------------------- ------------ ---------- ---------- -------- -------- ------------ ---------
There were borrowing costs capitalised in property, plant and
equipment amounting to US$825,000 (2015: US$8,252,000). The
capitalisation rate used was 7.23% (2015: 6.79%).
1 Mining properties and development costs related to Crespo
projects (2016: US$27,321,000, 2015: US$24,797,000) are not
currently being depreciated.
2 Net of transfers and other movements of US$2,664,000 were
transferred from evaluation and exploration assets (note 17).
At the end of 2015, given the continued challenging environment
for the mining sector, the Group carried out an impairment review
of all of its operating mines (Arcata, Pallancata, Inmaculada and
San Jose), and its growth projects (Crespo, Azuca, San Felipe and
Volcan). As a result of this review the Group recognised an
impairment charge in the Pallancata mine unit of US$39,026,000, the
Arcata mine unit of US$72,424,000, the Crespo project of
US$14,350,000, the Azuca project of US$12,766,000, San Felipe
project of US$10,927,000 and the Vocan project of US$57,070,000.
The impairment recognised in property plant and equipment was
US$118,653,000, in evaluation and exploration assets was
US$74,550,000 and in intangibles was US$13,360,000 (refer to note
17 and 18).
The recoverable values of these CGUs were determined using a
fair value less costs of disposal (FVLCD) methodology. FVLCD was
determined using a combination of level 2 and level 3 inputs to
construct a discounted cash flow model to estimate the amount that
would be paid by a willing third party in an arm's length
transaction. The key assumptions on which management has based its
determination of FVLCD, and the associated recoverable values
calculated are presented below.
Gold and silver prices
US$ per oz. 2016 2017 2018 2019 Long-term
------------ ----- ----- ----- ----- ---------
Gold 1,175 1,200 1,213 1,240 1,224
------------- ----- ----- ----- ----- ---------
Silver 16 17 18 19 18
------------- ----- ----- ----- ----- ---------
Other key assumptions
Arcata Pallancata San Inmaculada Crespo Azuca San Volcan
Jose Felipe
-------------------- ------ ---------- ----- ---------- ------ ----- ------- ------
Discount rate (post
tax) 6.3% 6.3% 9.7% 6.3% 7.8% n/a n/a n/a
--------------------- ------ ---------- ----- ---------- ------ ----- ------- ------
Value per in-situ
ounce (per tonne
in the case
of San Felipe)
(US$) n/a n/a n/a n/a n/a 0.25 16.21 6.55
--------------------- ------ ---------- ----- ---------- ------ ----- ------- ------
1 With respect to the Azuca, Volcan and San Felipe 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,
Volcan which includes the water permits held by the Group, and San
Felipe CGUs. The enterprise value used in the calculation performed
at 31 December 2015 was US$6.55 per gold equivalent ounce of
resources (Volcan), US$0.25 per silver equivalent ounce of
resources (Azuca) and US$16.21 per zinc equivalent tonne of
resources (San Felipe).
The enterprise value figures are based on observable external
market information.
Current carrying Arcata Pallancata San Inmaculada Crespo Azuca San Volcan
value of CGU, net Jose Felipe
of deferred tax
(US$000)
------------------- ------ ---------- ------- ---------- ------ ------ ------- ------
31 December 2015 42,956 49,331 160,055 587,208 46,275 26,102 4,218 62,512
-------------------- ------ ---------- ------- ---------- ------ ------ ------- ------
Crespo, Azuca and San Felipe projects correspond to the
exploration segment.
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
resulting from the
following changes San San
(US$000) Arcata Pallancata Jose Inmaculada Crespo Azuca Felipe Volcan
-------------------- -------- ---------- -------- ---------- -------- ------- ------- -------
Prices (10% decrease) (42,956) (14,892) (89,961) (86,439) (16,308) n/a n/a n/a
--------------------- -------- ---------- -------- ---------- -------- ------- ------- -------
Post tax discount
rate (3% increase) (5,354) (3,525) (28,570) (50,812) (12,348) n/a n/a n/a
--------------------- -------- ---------- -------- ---------- -------- ------- ------- -------
Production costs
(10% increase) (42,956) (8,082) (48,914) (20,495) (7,397) n/a n/a n/a
--------------------- -------- ---------- -------- ---------- -------- ------- ------- -------
Value per in-situ
ounce (per tonne
in the case of San
Felipe) (10%
decrease) n/a n/a n/a n/a n/a (2,610) (422) (6,251)
--------------------- -------- ---------- -------- ---------- -------- ------- ------- -------
Mining Construction
properties in progress
and Land Plant Mine and
development and and closure capital
costs buildings equipment Vehicles asset advances Total
US$000 US$000 US$000 US$000 US$000 US$000 US$000
-------------------- ------------ ---------- ---------- -------- -------- ------------ ---------
Year ended 31
December 2015
-------------------- ------------ ---------- ---------- -------- -------- ------------ ---------
Cost
-------------------- ------------ ---------- ---------- -------- -------- ------------ ---------
At 1 January 2015 999,777 257,171 389,042 6,030 96,213 237,308 1,985,541
--------------------- ------------ ---------- ---------- -------- -------- ------------ ---------
Additions 91,862 632 31,455 - - 106,737 230,686
--------------------- ------------ ---------- ---------- -------- -------- ------------ ---------
Change in discount
rate - - - - (755) - (755)
--------------------- ------------ ---------- ---------- -------- -------- ------------ ---------
Change in mine
closure estimate - - - - 7,928 - 7,928
--------------------- ------------ ---------- ---------- -------- -------- ------------ ---------
Disposals - (195) (952) (196) - - (1,343)
--------------------- ------------ ---------- ---------- -------- -------- ------------ ---------
Write-offs (2,382) (118) (5) (2,505)
--------------------- ------------ ---------- ---------- -------- -------- ------------ ---------
Transfer from
intangibles 582 - - - - - 582
--------------------- ------------ ---------- ---------- -------- -------- ------------ ---------
Transfers and
other movements(1) 4,886 214,485 63,584 435 - (281,648) 1,742
--------------------- ------------ ---------- ---------- -------- -------- ------------ ---------
At 31 December
2015 1,097,107 472,093 480,747 6,151 103,386 62,392 2,221,876
--------------------- ------------ ---------- ---------- -------- -------- ------------ ---------
Accumulated
depreciation
and impairment
-------------------- ------------ ---------- ---------- -------- -------- ------------ ---------
At 1 January 2015 526,824 134,638 193,210 3,663 49,486 1,410 909,231
--------------------- ------------ ---------- ---------- -------- -------- ------------ ---------
Depreciation for
the year 91,129 23,333 32,053 913 3,184 - 150,612
--------------------- ------------ ---------- ---------- -------- -------- ------------ ---------
Disposals - (179) (223) (124) - - (526)
--------------------- ------------ ---------- ---------- -------- -------- ------------ ---------
Impairment 60,259 20,752 30,451 71 7,120 - 118,653
--------------------- ------------ ---------- ---------- -------- -------- ------------ ---------
Write-offs - - (1,839) (83) - - (1,922)
--------------------- ------------ ---------- ---------- -------- -------- ------------ ---------
Transfers and
other movements(1) 335 492 (264) 7 - (258) 312
--------------------- ------------ ---------- ---------- -------- -------- ------------ ---------
At 31 December
2015 678,547 179,036 253,388 4,447 59,790 1,152 1,176,360
--------------------- ------------ ---------- ---------- -------- -------- ------------ ---------
Net book amount
at 31 December
2015 418,560 293,057 227,359 1,704 43,596 61,240 1,045,516
--------------------- ------------ ---------- ---------- -------- -------- ------------ ---------
1 Net of transfers and other movements of US$1,430,000 were
transferred from evaluation and exploration assets.
17 Evaluation and exploration assets
San Volcan
Azuca Crespo Felipe US$000 Others Total
US$000 US$000 US$000 US$000 US$000
----------------------- ------- ------- ------- ------- ------- -------
Cost
----------------------- ------- ------- ------- ------- ------- -------
Balance at 1 January
2015 79,954 25,556 55,950 92,035 9,244 262,739
------------------------ ------- ------- ------- ------- ------- -------
Additions 211 224 - 958 5,468 6,861
------------------------ ------- ------- ------- ------- ------- -------
Transfers to property,
plant and equipment - - - - (1,742) (1,742)
------------------------ ------- ------- ------- ------- ------- -------
Balance at 31 December
2015 80,165 25,780 55,950 92,993 12,970 267,858
------------------------ ------- ------- ------- ------- ------- -------
Additions 1,237 251 - 691 1,299 3,478
------------------------ ------- ------- ------- ------- ------- -------
Transfers to property
plant and equipment - - - - (3,232) (3,232)
------------------------ ------- ------- ------- ------- ------- -------
Balance at 31 December
2016 81,402 26,031 55,950 93,684 11,037 268,104
------------------------ ------- ------- ------- ------- ------- -------
Accumulated impairment
----------------------- ------- ------- ------- ------- ------- -------
Balance at 1 January
2015 33,292 5,510 14,907 - 1,740 55,449
------------------------ ------- ------- ------- ------- ------- -------
Impairment(1) 12,584 4,368 10,927 44,381 2,290 74,550
------------------------ ------- ------- ------- ------- ------- -------
Transfers to property,
plant and equipment - - - - (312) (312)
------------------------ ------- ------- ------- ------- ------- -------
Balance at 31 December
2015 45,876 9,878 25,834 44,381 3,718 129,687
------------------------ ------- ------- ------- ------- ------- -------
Transfers to property,
plant and equipment - - - - (568) (568)
------------------------ ------- ------- ------- ------- ------- -------
Balance at 31 December
2016 45,876 9,878 25,834 44,381 3,150 129,119
------------------------ ------- ------- ------- ------- ------- -------
Net book value as
at 31 December 2015 34,289 15,902 30,116 48,612 9,252 138,171
------------------------ ------- ------- ------- ------- ------- -------
Net book value as
at 31 December 2016 35,526 16,153 30,116 49,303 7,887 138,985
------------------------ ------- ------- ------- ------- ------- -------
There were no borrowing costs capitalised in evaluation and
exploration assets.
1 In 2015 the Group recognised an impairment charge of
US$74,550,000, mainly related to the Volcan project (refer to note
16). The FVLCD calculation is detailed in note 16.
18 Intangible assets
Transmission Water Software Legal
line(1) permits(2) licences rights(3) Total
US$000 US$000 US$000 US$000 US$000
------------------------- ------------ ------------ --------- ---------- -------
Cost
------------------------- ------------ ------------ --------- ---------- -------
Balance at 1 January
2015 22,157 26,583 1,773 6,681 57,194
-------------------------- ------------ ------------ --------- ---------- -------
Additions - - 25 587 612
-------------------------- ------------ ------------ --------- ---------- -------
Transfer - - - (582) (582)
-------------------------- ------------ ------------ --------- ---------- -------
Balance at 31 December
2015 22,157 26,583 1,798 6,686 57,224
-------------------------- ------------ ------------ --------- ---------- -------
Additions - - 14 - 14
-------------------------- ------------ ------------ --------- ---------- -------
Transfer - - 44 - 44
-------------------------- ------------ ------------ --------- ---------- -------
Balance at 31 December
2016 22,157 26,583 1,856 6,686 57,282
-------------------------- ------------ ------------ --------- ---------- -------
Accumulated amortisation
and impairment
------------------------- ------------ ------------ --------- ---------- -------
Balance at 1 January
2015 11,124 - 1,248 2,007 14,379
-------------------------- ------------ ------------ --------- ---------- -------
Amortisation for the
year(4) 946 - 67 491 1,504
-------------------------- ------------ ------------ --------- ---------- -------
Impairment(5) - 12,686 - 674 13,360
-------------------------- ------------ ------------ --------- ---------- -------
Balance at 31 December
2015 12,070 12,686 1,315 3,172 29,243
-------------------------- ------------ ------------ --------- ---------- -------
Amortisation for the
year(4) 1,004 - 56 600 1,660
-------------------------- ------------ ------------ --------- ---------- -------
Balance at 31 December
2016 13,074 12,686 1,371 3,772 30,903
-------------------------- ------------ ------------ --------- ---------- -------
Net book value as at
31 December 2015 10,087 13,897 483 3,514 27,981
-------------------------- ------------ ------------ --------- ---------- -------
Net book value as at
31 December 2016 9,083 13,897 485 2,914 26,379
-------------------------- ------------ ------------ --------- ---------- -------
1 The transmission line is amortised using the units of
production method. At 31 December 2016 the remaining amortisation
period is approximately 9 years.
2 Corresponds to the acquisition of water permits of Andina
Minerals Group ("Andina"). They have an indefinite life according
to Chilean law. 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 2016 was US$6.90 (2015: US$6.55) per gold equivalent ounce
of resources. The enterprise value figures are based on observable
external market information.
3 Legal rights correspond to expenditures required to give the
Group the right to use a property for the surface exploration work,
development and production. At 31 December 2016 the remaining
amortisation period is from 8 to 20 years.
4 The amortisation for the period is included in cost of sales
and administrative expenses in the income statement.
5 Correspond to the impairment of the Crespo and Volcan projects (refer to note 16).
The carrying amount of the Volcan CGU, which includes the water
permits, is reviewed annually to determine whether it is in excess
of its recoverable amount.
Key assumptions
2016 2015
------------------------------------------------- ------ ------
Risk adjusted value per in-situ (gold equivalent
ounce) US$ 6.90 6.55
-------------------------------------------------- ------ ------
(US$000) 2016 2015
------------------------------------------------- ------ ------
Current carrying value of Volcan CGU 63,187 62,512
-------------------------------------------------- ------ ------
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 exceed its recoverable amount.
The estimated recoverable amount is not materially greater than
its carrying value; consequently, a change in the value in situ
assumption could cause an impairment loss or reversal of impairment
to be recognised in 2016:
Approximate impairment resulting from the
following changes (US$000) 2016 2015
-------------------------------------------------- ------- -------
Risk adjusted value per in-situ (gold equivalent)
ounces (10% decrease) (3,896) (6,251)
--------------------------------------------------- ------- -------
19 Available-for-sale financial assets
Year ended
31 December
----------------
2016 2015
US$000 US$000
------------------------------------- ------- -------
Beginning balance 366 455
-------------------------------------- ------- -------
Fair value change recorded in equity 774 (86)
-------------------------------------- ------- -------
Disposals (149) (3)
-------------------------------------- ------- -------
Ending balance 991 366
-------------------------------------- ------- -------
The fair value of the listed shares is determined by reference
to published price quotations in an active market.
The carrying value of available for sale financial assets relate
only to listed shares. All unlisted investments (Pembrook Mining
Corp. and ECI Exploration and Mining Inc.) are recognised at cost
less any recognised impairment loss as there is no active market
for these investments. These investments are fully impaired as at
31 December 2015 and 2016.
20 Trade and other receivables
As at 31 December
------------------------------------------
2016 2015
-------------------- --------------------
Non-current Current Non-current Current
US$000 US$000 US$000 US$000
---------------------------------- ----------- ------- ----------- -------
Trade receivables - 36,821 - 62,352
----------------------------------- ----------- ------- ----------- -------
Advances to suppliers - 2,458 - 6,567
----------------------------------- ----------- ------- ----------- -------
Duties recoverable from exports
of Minera Santa Cruz (1) 19,065 - 4,698 -
----------------------------------- ----------- ------- ----------- -------
Receivables from related parties
(note 29(a)) - 71 - 11
----------------------------------- ----------- ------- ----------- -------
Loans to employees 856 230 991 149
----------------------------------- ----------- ------- ----------- -------
Interest receivable - 151 - 36
----------------------------------- ----------- ------- ----------- -------
Receivable from Kaupthing, Singer
and Friedlander Bank - 198 - 252
----------------------------------- ----------- ------- ----------- -------
Other(2) 2,188 10,205 1,567 13,518
----------------------------------- ----------- ------- ----------- -------
Provision for impairment(3) - (6,342) - (5,327)
----------------------------------- ----------- ------- ----------- -------
Assets classified as receivables 22,109 43,792 7,256 77,558
----------------------------------- ----------- ------- ----------- -------
Prepaid expenses 44 2,590 60 1,157
----------------------------------- ----------- ------- ----------- -------
Value Added Tax (VAT)(4) 3,564 21,738 2,871 46,112
----------------------------------- ----------- ------- ----------- -------
Total 25,717 68,120 10,187 124,827
----------------------------------- ----------- ------- ----------- -------
The fair values of trade and other receivables approximate their
book value.
1 Relates to export benefits through Port Patagonico and silver
refunds in Minera Santa Cruz, discounted over 24 months (2015: 24
months) at a rate of 6.39% (2015: 5.72%) for dollar denominated
accounts and 23.31% (2015: 28.90%) for Argentinian pesos. The loss
on discount is recognised within finance costs.
2 Mainly corresponds to account receivables from contractors for
the sale of supplies of US$3,968,000 (2015: US$4,791,000), and
other tax claims of US$5,333,000 (2015: US$2,840,000).
3 Includes the provision for impairment of trade receivable from
a customer in Peru of US$1,043,000 (2015: US$1,108,000), the
impairment of deposits in Kaupthing, Singer and Friedlander of
US$198,000 (2014: US$252,000), the impairment of the account
receivable from a third party of US$1,797,000 and other receivables
of US$3,304,000 (2014: US$3,967,000) that mainly relates to an
exploration project that would be recovered through an ownership
interest if it succeeds.
4 Primarily relates to US$16,030,000 (2015: US$13,078,000) of
VAT receivable related to the San Jose project that will be
recovered through future sales of gold and silver and also through
the sale of these credits to third parties by Minera Santa Cruz
S.A. It also includes the VAT of Compañía Minera Ares S.A.C. of
US$4,776,000 (2015: US$32,086,000) and Empresa de Transmisión
Aymaraes S.A.C. of US$3,665,000 (2015: US$2,909,000). The VAT is
valued at its recoverable amount.
Movements in the provision for impairment of receivables:
Individually
impaired
US$000
----------------------------- ------------
At 1 January 2015 5,136
------------------------------ ------------
Provided for during the year 446
------------------------------ ------------
Released during the year (255)
------------------------------ ------------
At 31 December 2015 5,327
------------------------------ ------------
Provided for during the year 2,061
------------------------------ ------------
Released during the year (1,046)
------------------------------ ------------
At 31 December 2016 6,342
------------------------------ ------------
As at 31 December 2016 and 2015, none of the financial assets
classified as receivables (net of impairment) were past due.
21 Inventories
As at 31
December
----------------
2016 2015
US$000 US$000
--------------------------------------- ------- -------
Finished goods valued at cost 3,515 14,120
---------------------------------------- ------- -------
Finished goods at net realisable value - 1,856
---------------------------------------- ------- -------
Products in process valued at cost 20,727 13,632
---------------------------------------- ------- -------
Products in process at net realisable
value - 1,121
---------------------------------------- ------- -------
Raw materials 33 -
---------------------------------------- ------- -------
Supplies and spare parts 40,241 44,855
---------------------------------------- ------- -------
64,516 75,584
------- -------
Provision for obsolescence of supplies (7,460) (5,298)
---------------------------------------- ------- -------
Total 57,056 70,286
---------------------------------------- ------- -------
Finished goods include ounces of gold and silver, dore and
concentrate. Products in process include stockpiles and
precipitates.
The Group either sells dore bars as a finished product or if it
is commercially advantageous to do so, delivers the bars for
refining into gold
and silver ounces which are then sold. In the latter scenario,
the dore bars are classified as products in process. The amount of
dore on hand at 31 December 2016 included in products in process is
US$nil (2015: US$3,827,000).
Concentrate 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$86,754,000 (2015: US$78,525,000).
Movements in the provision for obsolescence comprise an increase
in the provision of US$2,162,000 (2015: US$1,046,000) and the
reversal
of US$nil relating to the sale of supplies and spare parts, that
had been provided for (2015: US$nil).
22 Cash and cash equivalents
As at 31
December
----------------
2016 2015
US$000 US$000
------------------------------------- ------- -------
Cash at bank 353 368
-------------------------------------- ------- -------
Liquidity funds(1) 203 337
-------------------------------------- ------- -------
Current demand deposit accounts(2) 68,643 47,717
-------------------------------------- ------- -------
Time deposits(3) 70,780 35,595
-------------------------------------- ------- -------
Cash and cash equivalents considered
for the statement of cash flows(4) 139,979 84,017
-------------------------------------- ------- -------
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 16 days as at 31 December 2016 (2015: average
of 14 days).
2 Relates to bank accounts which are freely available and bear
interest.
3 These deposits have an average maturity of 3 days (2015:
Average of 2 days).
4 As at 31 December 2015 funds deposited in Argentinean
institutions were effectively restricted for transfer to other
countries and were invested locally. Included within cash and cash
equivalents at 31 December 2015 was US$11,696,000, which was not
readily available for use in subsidiaries outside of Argentina.
23 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
----------------
2016 2015
US$000 US$000
-------------------- ------- -------
San Felipe contract 25,000 25,000
--------------------- ------- -------
These payments reduce the total consideration IMSC will be
required to pay upon exercise of the option by 1 December 2017, and
constitute an advance of the final purchase price, rather than an
option premium, as such, they were recorded as deferred income. On
30 November 2016, IMSC renegotiated terms of the agreement,
extending the validity of the agreement to 1 December 2017.
24 Trade and other payables
As at 31 December
------------------------------------------
2016 2015
-------------------- --------------------
Non-current Current Non-current Current
US$000 US$000 US$000 US$000
------------------------------ ----------- ------- ----------- -------
Trade payables(1) - 55,381 - 58,655
------------------------------- ----------- ------- ----------- -------
Salaries and wages payable(2) - 28,500 - 20,278
------------------------------- ----------- ------- ----------- -------
Dividends payable - 75 - 826
------------------------------- ----------- ------- ----------- -------
Taxes and contributions 43 4,962 57 9,605
------------------------------- ----------- ------- ----------- -------
Guarantee deposits - 5,073 - 7,163
------------------------------- ----------- ------- ----------- -------
Mining royalty (note 30) - 679 - 796
------------------------------- ----------- ------- ----------- -------
Accounts payable to related
parties (note 29) - 94 - 40
------------------------------- ----------- ------- ----------- -------
Account payable to Graña
& Montero(3) - - 20,322 -
------------------------------- ----------- ------- ----------- -------
Other 1,223 3,720 - 4,529
------------------------------- ----------- ------- ----------- -------
Total 1,266 98,484 20,379 101,892
------------------------------- ----------- ------- ----------- -------
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 relates to remuneration payable.
There were Board members remuneration payable of US$2,000 (2015:
US$nil) and long term incentive plan payable of US$6,279,000 (2015:
US$nil) at 31 December 2016.
3 Related to the construction of Inmaculada mine unit. Included
the principal of US$20,000,000 plus interest calculated at a 5%
interest rate. The payment of the amount owing was to be made in
four instalments every six months starting in September 2017. This
amount, together with the related interest of US$1,080,000, was
fully repaid on 29 September 2016.
25 Borrowings
As at 31 December
----------------------------------------------------------------
2016 2015
------------------------------- -------------------------------
Effective Effective
interest Non-current Current interest Non-current Current
rate US$000 US$000 rate US$000 US$000
-------------------------------------------------------- --------- ----------- ------- --------- ----------- -------
Bond payable (a) 8.56% 291,073 8,778 8.56% 290,230 8,777
--------------------------------------------------------- --------- ----------- ------- --------- ----------- -------
Secured bank loans
(b)
-------------------------------------------------------- --------- ----------- ------- --------- ----------- -------
2.70%
* Pre-shipment loans in Minera Santa Cruz (note 21) to 3.00% - 2,524 29.64% - 10,554
--------------------------------------------------------- --------- ----------- ------- --------- ----------- -------
* Medium-term bank loan - - - 3.82% 49,548 229
--------------------------------------------------------- --------- ----------- ------- --------- ----------- -------
0.70%
* Short-term bank loans 0.65% - 25,010 to 1.35% - 75,200
--------------------------------------------------------- --------- ----------- ------- --------- ----------- -------
Total 291,073 36,312 339,778 94,760
--------------------------------------------------------- --------- ----------- ------- --------- ----------- -------
(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 is paid semi-annually, until maturity in 23
January 2021. During November and December 2015, the Group
repurchased bonds amounting to US$55,225,000 for US$54,369,000,
giving rise to a gain on repurchase of US$856,000 (see note 13).
The balance at 31 December 2016 comprises the carrying value,
including accrued interest payable, of US$299,851,000 (2015:
US$299,007,000) determined in accordance with the effective
interest method.
The following options could be taken before the maturity:
-- Optional Redemption with Make-Whole Premium: At any time
prior to 23 January 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 23 January 2018
at
the redemption prices specified plus accrued and unpaid interest
and additional amounts, if any, to the redemption date. The
Make
Whole Premium requires repayment of 103.875%, 101.938% or 100%
of the outstanding principal balance if exercised in 2018, 2019
or 2020 respectively.
-- 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:
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 S.A.C. and the
loan is guaranteed by Hochschild Mining plc. The loan has an
interest rate of LIBOR + 2.6% payable quarterly. On November 2015,
the Group paid US$50,000,000 of principal and modified the schedule
of repayments, starting on 30 March 2018 until maturity on 30
December 2019. On July 2016, the Group paid the remaining principal
amount of US$50,000,000. The carrying value including accrued
interest payable at 31 December 2016 of US$nil (2015:
US$49,777,000) was determined in accordance with the effective
interest method.
Short-term bank loans:
Two credit agreements signed by Compañía Minera Ares S.A.C. with
BBVA Continental. The loans have an interest rate of 0.65% (2015:
from 0.70% to 1.35%). The carrying value including accrued interest
payable at 31 December 2016 is US$25,010,000 (2015: US$75,200,000).
The due date of both loans is 7 February 2017.
The movement of short-term bank loans during the 2016 period is
as follows:
As at 1 As at 31
January December
2016 Additions Repayments 2016
US$000 US$000 US$000 US$000
------------------- --------- ---------- ----------- ----------
Short term
bank loans 75,000 55,000 (105,000) 25,000
-------------------- --------- ---------- ----------- ----------
Accrued interests 200 608 (798) 10
--------------------
Total 75,200 55,608 (105,798) 25,010
--------------------
The maturity of non-current borrowings is as follows:
As at 31
December
----------------
2016 2015
US$000 US$000
---------------------- ------- -------
Between 1 and 2 years - -
---------------------- ------- -------
Between 2 and 5 years 291,073 49,548
----------------------- ------- -------
Over 5 years - 290,230
----------------------- ------- -------
Total 291,073 339,778
----------------------- ------- -------
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 as at 31
December December
---------------- ----------------
2016 2015 2016 2015
US$000 US$000 US$000 US$000
------------------- ------- ------- ------- -------
Secured bank loans - 49,548 - 48,223
-------------------- ------- ------- ------- -------
Bond payable 291,073 290,230 318,062 274,878
-------------------- ------- ------- ------- -------
Total 291,073 339,778 318,062 323,101
-------------------- ------- ------- ------- -------
The fair value of secured bank loans as at 31 December 2015 was
determined by discounting the remaining principal and interest
payments at the three month U.S. LIBOR rate plus 2.6%. 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.
26 Provisions
Long
Term
Provision Incentive
for mine closure1 Plan2 Other Total
US$000 US$000 US$000 US$000
------------------ ---------- ------- --------
At 1 January 2015 107,787 594 6,240 114,621
------------------------- ------------------ ---------- ------- --------
Additions - 544 108 652
------------------------- ------------------ ---------- ------- --------
Accretion 69 - - 69
------------------------- ------------------ ---------- ------- --------
Change in discount rate (755) - - (755)
------------------------- ------------------ ---------- ------- --------
Change in estimates 15,5173 (175) - 15,342
------------------------- ------------------ ---------- ------- --------
Foreign exchange effect - - 126 126
------------------------- ------------------ ---------- ------- --------
Payments (2,538) - - (2,538)
------------------------- ------------------ ---------- ------- --------
At 31 December 2015 120,080 963 6,474 127,517
------------------------- ------------------ ---------- ------- --------
Less current portion 2,000 - 4,115 6,115
------------------------- ------------------ ---------- ------- --------
Non-current portion 118,080 963 2,359 121,402
------------------------- ------------------ ---------- ------- --------
At 1 January 2016 120,080 963 6,474 127,517
------------------------- ------------------ ---------- ------- --------
Additions - 9,965 570 10,535
------------------------- ------------------ ---------- ------- --------
Accretion 46 - - 46
------------------------- ------------------ ---------- ------- --------
Change in discount rate (2,367) - - (2,367)
------------------------- ------------------ ---------- ------- --------
Change in estimates (11,975)3 - - (11,975)
------------------------- ------------------ ---------- ------- --------
Foreign exchange effect - - (547) (547)
------------------------- ------------------ ---------- ------- --------
Transfer to trade and
other payables - (6,279) (2,048) (8,327)
------------------------- ------------------ ---------- ------- --------
Payments (3,355) - - (3,355)
------------------------- ------------------ ---------- ------- --------
At 31 December 2016 102,429 4,649 4,449 111,527
------------------------- ------------------ ---------- ------- --------
Less: current portion 3,580 - 1,826 5,406
------------------------- ------------------ ---------- ------- --------
Non-current portion 98,849 4,649 2,623 106,121
------------------------- ------------------ ---------- ------- --------
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
2016 and 2015 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 0.25%
(2015: 0.07%). Expected cash flows will be over a period from two
to nine years.
2 Corresponds to the provision related to awards granted under
the Long Term Incentive Plan ('LTIP') to designated personnel of
the Group. Includes the following benefits: (i) 2016 awards,
granted in March 2016, payable in March 2019 (ii) 2015 awards,
granted in March 2015, payable in March 2018. 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 percentage of the award
granted is determined 70% by the Company's TSR ranking relative to
a tailored peer group of mining companies, and 30% by the Company's
TSR ranking relative to a peer group of FTSE 350 companies. The
liability for the LTIP is measured, initially and at the end of
each reporting period until settled, at the fair value of the
awards, by applying the Monte Carlo pricing model, taking into
account the terms and conditions on which the awards were granted,
and the extent to which the employees have rendered services to
date. Changes to the provision of US$9,965,000 (2015: US$369,000)
have been recorded as administrative expenses US$9,298,000 (2015:
US$372,000) and exploration expenses US$667,000 (2015: US$-3,000
credit).
The following tables list the inputs to the Monte Carlo model
used for the LTIPs as at 31 December 2015 and 2016,
respectively:
LTIP 2014 LTIP 2015 LTIP 2016
------------------------- ------------ ------------ ------------ ------------
31 December 31 December 31 December 31 December 31 December 31 December
For the period 2016 2015 2016 2015 2016 2015
ended US$000 US$000 US$000 US$000 US$000 US$000
-------------------- ----------- ----------- ------------ ------------ ------------ ------------
Dividend yield
(%) - 0.00 0.49 0.00 0.49 -
--------------------- ----------- ----------- ------------ ------------ ------------ ------------
Expected volatility
(%) - 3.47 3.89 3.47 3.89 -
--------------------- ----------- ----------- ------------ ------------ ------------ ------------
Risk-free interest
rate (%) - 0.38 0.12 0.74 0.12 -
--------------------- ----------- ----------- ------------ ------------ ------------ ------------
Expected life
(years) - 1 1 2 2 -
--------------------- ----------- ----------- ------------ ------------ ------------ ------------
Weighted average
share price (pence
GBP) - 146.03 100.68 100.68 63.49 -
--------------------- ----------- ----------- ------------ ------------ ------------ ------------
The expected volatility reflects the assumption that the
historical volatility over a period similar to the life of the
awards and is indicative of future trends, which may not
necessarily be the actual outcome.
3 Based on the 2016 internal and external review of mine
rehabilitation estimates, the provision for mine closure decreased
by US$11,975,000. The net decrease mainly corresponds to the Arcata
mine unit of US$6,648,000, the Ares mine unit of US$1,622,000, the
Selene mine unit of US$698,000, the Pallancata mine unit of
US$447,000 and the San José mine unit of US$4,166,000, net of the
increase in Inmaculada mine unit of US$1,651,000. US$2,320,000
related to mines already closed and US$4,026,000 related to the
Arcata mine unit which reduction of the estimated costs exceeded
the carrying value of the mine asset. Therefore, both effects have
been recognised as a credit directly in the income statement. In
2015, the internal review of mine rehabilitation budgets determined
a recognition of an increase of US$15,517,000. The net increase
mainly corresponds to the Arcata mine unit of US$1,746,000, the
Inmaculada mine unit of US$1,133,000, the Selene mine unit of
US$922,000, the Crespo project of US$116,000, the San José mine
unit of US$5,071,000 and the Sipan mine unit of US$6,750,000 net of
the decrease in Pallancata mine unit of US$171,000 of which
US$7,590,000 related to mines already closed has been recognised
directly in the income statement.
27 Deferred income tax
The changes in the net deferred income tax assets/(liabilities)
are as follows:
As at 31
December
------------------
2016 2015
US$000 US$000
---------------------------------------------- -------- --------
Beginning of the year (64,274) (83,385)
----------------------------------------------- -------- --------
Income statement (credit)/charge (note
14) (6,625) 23,850
----------------------------------------------- -------- --------
Deferred income tax arising on net unrealised
gains on cash flow hedges recognised
in equity (note 14) 5,955 (4,739)
----------------------------------------------- -------- --------
End of the year (64,944) (64,274)
----------------------------------------------- -------- --------
Deferred income tax assets and liabilities are offset when there
is a legally enforceable right to offset current tax assets
against
current tax liabilities and when the deferred income tax assets
and liabilities relate to the same fiscal authority.
The movement in deferred income tax assets and liabilities
before offset during the year is as follows:
Differences
in
cost
of Mine Financial
PP&E development instruments Others Total
US$000 US$000 US$000 US$000 US$000
--------------------------------- ----------- ------------ ------------ ------- --------
Deferred income tax liabilities
--------------------------------- ----------- ------------ ------------ ------- --------
At 1 January 2015 41,917 79,981 3,325 2,174 127,397
---------------------------------- ----------- ------------ ------------ ------- --------
Income statement (credit)/charge 6,050 (19,874) - 2,588 (11,236)
---------------------------------- ----------- ------------ ------------ ------- --------
Deferred income tax arising
on net unrealised gains
on cash flow hedges recognised
in equity - - 4,739 - 4,739
---------------------------------- ----------- ------------ ------------ ------- --------
At 31 December 2015 47,967 60,107 8,064 4,762 120,900
---------------------------------- ----------- ------------ ------------ ------- --------
Income statement (credit)/charge (6,319) 8,235 - (1,938) (22)
---------------------------------- ----------- ------------ ------------ ------- --------
Deferred income tax arising
on net unrealised gains
on cash flow hedges recognised
in equity - - (5,955) - (5,955)
---------------------------------- ----------- ------------ ------------ ------- --------
Transfer - - (2,109) - (2,109)
---------------------------------- ----------- ------------ ------------ ------- --------
At 31 December 2016 41,648 68,342 - 2,824 112,814
---------------------------------- ----------- ------------ ------------ ------- --------
Differences
in Provision
cost for
of mine Tax Financial
PP&E closure losses Mine instruments Others Total
US$000 US$000 US$000 developmentUS$000 US$000 US$000 US$000
------------------ ----------- --------- -------- ----------------- ------------ ------- -------
Deferred income
tax assets
------------------ ----------- --------- -------- ----------------- ------------ ------- -------
At 1 January 2015 9,547 14,535 8,551 697 2,262 8,420 44,012
------------------- ----------- --------- -------- ----------------- ------------ ------- -------
Income statement
credit/(charge) (1,685) 8,318 8,263 257 (9) (2,530) 12,614
------------------- ----------- --------- -------- ----------------- ------------ ------- -------
At 31 December
2015 7,862 22,853 16,814 954 2,253 5,890 56,626
------------------- ----------- --------- -------- ----------------- ------------ ------- -------
Income statement
credit/(charge) 8,463 (3,319) (15,868) (42) 160 3,959 (6,647)
------------------- ----------- --------- -------- ----------------- ------------ ------- -------
Transfer - - - - (2,109) - (2,109)
------------------- ----------- --------- -------- ----------------- ------------ ------- -------
At 31 December
2016 16,325 19,534 946 912 304 9,849 47,870
------------------- ----------- --------- -------- ----------------- ------------ ------- -------
The amounts after offset, as presented on the face of the
Statement of Financial Position, are as follows:
As at 31
December
------------------
2016 2015
US$000 US$000
-------------------------------- -------- --------
Deferred income tax assets 1,027 -
--------------------------------- -------- --------
Deferred income tax liabilities (65,971) (64,274)
--------------------------------- -------- --------
Tax losses expire in the following years:
As at 31
December
----------------
2016 2015
US$000 US$000
------------------------ ------- -------
Unrecognised
------------------------ ------- -------
Expire in one year 2,268 1,075
------------------------- ------- -------
Expire in two years 3,231 2,733
------------------------- ------- -------
Expire in three years 4,594 3,903
------------------------- ------- -------
Expire in four years 2,295 3,978
------------------------- ------- -------
Expire after four years 111,630 109,315
------------------------- ------- -------
124,018 121,004
------- -------
Other unrecognised deferred income tax assets comprise (gross
amounts):
As at 31
December
----------------
2016 2015
US$000 US$000
------------------------------ ------- -------
Provision for mine closure(1) 54,197 66,577
------------------------------- ------- -------
Impairments of assets(2) 14,692 14,692
------------------------------- ------- -------
1 This relates to provision for mine closure expenditure which
is expected to be incurred in periods in which taxable profits are
not expected against which the expenditure can be offset.
2 Related to the impairment of San Felipe and Volcan project
(note 17).
Unrecognised deferred tax liability on retained earnings
At 31 December 2016, there was no recognised deferred tax
liability (2015: nil) for taxes that would be payable on the
unremitted earnings of certain of the Group's subsidiaries as the
intention is that these amounts are permanently reinvested.
28 Dividends
2016 2015
US$000 US$000
--------------------------------------------- ------- -------
Dividends paid and proposed during the
year
--------------------------------------------- ------- -------
Equity dividends on ordinary shares:
--------------------------------------------- ------- -------
Final dividend for 2015: nil US cents
per share (2014: nil US cents per share) - -
--------------------------------------------- ------- -------
Interim dividend for 2016: 1.38 US cents
per share (2015: nil US cents per share) 6,998 -
---------------------------------------------- ------- -------
Total dividends paid on ordinary shares 6,998 -
---------------------------------------------- ------- -------
Proposed dividends on ordinary shares:
--------------------------------------------- ------- -------
Final dividend for 2016: 1.38 US cents
per share (2015: nil US cents per share) 7,000 -
---------------------------------------------- ------- -------
Dividends paid to non-controlling interests:
US$0.10 per share (2015: US$nil per share) 16,983 -
---------------------------------------------- ------- -------
Dividends paid to non-controlling interest
related to 2014 and previous periods 753 964
---------------------------------------------- ------- -------
Total dividends paid to non-controlling
interests 17,736 964
---------------------------------------------- ------- -------
Dividends per share
The interim dividends paid in September 2016 were US$6,998,398
(1.38 US cents per share). A proposed dividend in respect of the
year ending 31 December 2016 of 1.38 US cents per share, amounting
to a total dividend of US$7,000,000, is subject to approval at the
Annual General Meeting on 11 May 2017 and are not recognised as a
liability as at 31 December 2016.
29 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 2016 and 2015. The
related parties are companies owned or controlled by the main
shareholder of the parent company or associates.
Accounts Accounts
receivable payable
as at 31 as at 31
December December
---------------- ----------------
2016 2015 2016 2015
US$000 US$000 US$000 US$000
------------------------------- ------- ------- ------- -------
Current related party balances
------------------------------- ------- ------- ------- -------
Cementos Pacasmayo S.A.A.(1) 71 11 94 40
-------------------------------- ------- ------- ------- -------
Total 71 11 94 40
-------------------------------- ------- ------- ------- -------
1 The account receivable relates to reimbursement of expenses
paid by the Group on behalf of Cementos Pacasmayo S.A.A. The
account payable relates to the payment of rentals.
As at 31 December 2016 and 2015, all 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
----------------
2016 2015
US$000 US$000
------------------------------------------ ------- -------
Income
------------------------------------------ ------- -------
Gain on sale of Asociacion Sumac Tarpuy
to Inversiones ASPI S.A. 811 -
------------------------------------------- ------- -------
Expenses
------------------------------------------ ------- -------
Donation to the Universidad de Ingenieria
y Tecnologia "UTEC" (1,000) -
------------------------------------------- ------- -------
Expense recognised for the rental paid
to Cementos Pacasmayo S.A.A. (200) (285)
------------------------------------------- ------- -------
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 2016 2015
(including Directors) US$000 US$000
------------------------------------------ ------- -------
Short-term employee benefits 5,459 5,613
------------------------------------------- ------- -------
Long Term Incentive Plan, Deferred Bonus
Plan and Restricted Share Plan 6,622 2,641
------------------------------------------- ------- -------
Total compensation paid to key management
personnel 12,081 8,254
------------------------------------------- ------- -------
This amount includes the remuneration paid to the Directors of
the Parent Company of the Group of US$5,487,769 (2015:
US$4,155,759).
(c) Participation in rights issue by Pelham Investment
Corporation ("Pelham") and Inversiones ASPI SA ("ASPI")
As at the record date of the rights issue, Eduardo Hochschild
held his investment in the Company through Pelham. Following
receipt of its entitlement under the rights issue, Pelham
transferred, for nil consideration, its nil paid rights in respect
of 74,745,101 new ordinary shares to ASPI an entity that is also
under the control of Eduardo Hochschild. Under the terms of an
irrevocable undertaking signed between Pelham, ASPI and the
Company, it was agreed that:
(i) ASPI would, among other things, subscribe for at least
68,887,508 new ordinary shares at an issue price of 47 pence per
new ordinary share (the "Subscription Commitment"); and
(ii) the Company would, among other things, pay ASPI a fee of 1%
of the Subscription Commitment of approximately US$500,000.
30 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 "Income Taxes".
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 left the tax
stability agreement, but has maintained 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 2016, the amount payable as under the former
mining royalty (for the Arcata mining unit), the new mining royalty
(for the Ares, Pallancata and Inmaculada mining units), and the SMT
amounted to US$170,000 (2015: US$272,000), US$769,000 (2015:
US$1,080,000), and US$737,000 (2015: US$745,000) 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$1,759,000 (2015: US$1,205,000) representing the
former mining royalty, classified as cost of sales, US$3,882,000
(2015: US$1,778,000) of new mining royalty and US$3,869,000 (2015:
US$755,000) 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 collect
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. As at 31 December 2016, the
amount payable as mining royalties amounted to US$509,000 (2015:
US$524,000). The amount recorded in the income statement as cost of
sales was US$5,747,000 (2015: US$4,763,000).
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 were requires to 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 applicable regulations, the tax applied
only on "proved reserves" and certain deductions (related to the
production cost) applied Minera Santa Cruz S.A. (a subsidiary of
Hochschild Mining plc) was 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 challenged the legality of the tax on mining reserves arguing
its unconstitutionality on the grounds that it violated the Federal
Mining Policy created by national law No. 24.196. Additionally, on
2 November 2015, Minera Santa Cruz S.A. filed a precautionary
measure under which it requested the Argentine Supreme Court to
order the Province of Santa Cruz not to claim to Minera Santa Cruz
S.A. the payment of any amount related to the tax on mining
reserves until a final decision on the constitutionality of the tax
is rendered. The precautionary measure was granted on 9 December
2015, furthermore no tax was paid during 2015. The tax on mining
reserves was eliminated on 30 December 2015. On 1 March 2016 Minera
Santa Cruz S.A. and the Province of Santa Cruz entered into an
agreement under which each party agreed not to make to the other
party any claim related to the tax on mining reserves.
Consequently, the amount payable as at 31 December 2015 as tax on
mining reserves of US$4,054,000, which was presented as 'Trade and
other payables', have been written back and credited to the income
statement within other income (US$2,667,000) and financial income
(US$974,000) (see footnote 3 of note 11). The expense recognised as
other expenses in the year ended 31 December 2015 with respect to
this tax amounted to US$441,000 (note 12).
31 Subsequent events
a) On 7 February 2017, US$25,000,000 of short term debt was
repaid.
b) The Group received a letter of intent dated 26 January 2017
outlining a proposed transaction between Americas Silver
Corporation and Santacruz Mining Ltd (IMSC). Following this letter,
the Group signed the following agreements which supersede all
previous contracts:
On 20 February 2017, the Group and IMSC signed a new agreement
pursuant to which IMSC will acquire properties comprising the El
Gachi project (part of San Felipe) for a total consideration of
US$500,000 which is due on 31 March 2017.
On 28 February 2017, the Group signed a new option agreement
with IMSC for the remaining San Felipe properties amounting to
US$10,000,000. An initial payment of US$2,000,000 was due to the
Group on 7 March 2017. The IMSC option expires on 1 December
2017.
On 2 March 2017 it was announced that IMSC had entered into an
agreement with Americas Silver Corporation to assign 100% of its
interest in the San Felipe Project.
Profit by operation(1)
(Segment report reconciliation) as at 31 December 2016
Consolidation
San adjustment
Company (US$000) Arcata Pallancata Inmaculada Jose and others Total/HOC
----------------------------- -------- ---------- ---------- --------- ------------- ---------
Revenue 117,358 54,456 280,108 235,961 359 688,242
Cost of sales (Pre
consolidation) (92,461) (42,451) (181,383) (168,351) (3,056) (487,702)
----------------------------- -------- ---------- ---------- --------- ------------- ---------
Consolidation adjustment (132) 600 2,499 89 (3,056) -
Cost of sales (Post
consolidation) (92,329) (43,051) (183,882) (168,440) - (487,702)
Production cost
excluding depreciation (68,155) (33,650) (83,796) (108,209) - (293,810)
Depreciation in production
cost (22,083) (10,989) (101,207) (51,376) - (186,655)
Other items (462) (241) (506) (541) - (1,750)
Change in inventories (1,629) 1, 829 1,627 (8,314) - (6,487)
----------------------------- -------- ---------- ---------- --------- ------------- ---------
Gross profit 24,897 12,005 98,725 67,610 (2,697) 200,540
----------------------------- -------- ---------- ---------- --------- ------------- ---------
Administrative expenses - - - - (47,979) (47,979)
Exploration expenses - - - - (9,193) (9,193)
Selling expenses (1,973) (721) (1,130) (10,351) - (14,175)
Other income/expenses - - - - 11,265 11,265
----------------------------- -------- ---------- ---------- --------- ------------- ---------
Operating profit
before impairment 22,924 11,284 97,595 57,259 (48,604) 140,458
----------------------------- -------- ---------- ---------- --------- ------------- ---------
Impairment of assets - - - - (1,912) (1,912)
Finance income - - - - 2,074 2,074
Finance costs - - - - (30,541) (30,541)
FX loss - - - - (1,800) (1,800)
----------------------------- -------- ---------- ---------- --------- ------------- ---------
Profit/(loss) from
continuing operations
before income tax 22,924 11,284 97,595 57,259 (80,783) 108,279
----------------------------- -------- ---------- ---------- --------- ------------- ---------
Income tax - - - - (45,417) (45,417)
----------------------------- -------- ---------- ---------- --------- ------------- ---------
Profit/(loss) for
the year from continuing
operations 22,924 11,284 97,595 57,259 (126,200) 62,862
----------------------------- -------- ---------- ---------- --------- ------------- ---------
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 43 to 45 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 2016, 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$16.5 per ounce.
ATTRIBUTABLE METAL RESERVES AS AT 31 DECEMBER 2016
Proved
and probable Ag Au Ag Au Ag Eq
Reserve category (t) (g/t) (g/t) (moz) (koz) (moz)
----------------- ------------- ------- ------ ------ ------- ------
OPERATIONS(1)
----------------- ------------- ------- ------ ------ ------- ------
Arcata
----------------- ------------- ------- ------ ------ ------- ------
Proved 479,515 371 1.1 5.7 17.3 7.0
------------------ ------------- ------- ------ ------ ------- ------
Probable 811,996 327 1.1 8.5 29.7 10.7
------------------ ------------- ------- ------ ------ ------- ------
Total 1,291,511 343 1.1 14.3 47.0 17.7
------------------ ------------- ------- ------ ------ ------- ------
Inmaculada
----------------- ------------- ------- ------ ------ ------- ------
Proved 3,254,366 144 3.9 15.1 412.7 45.7
------------------ ------------- ------- ------ ------ ------- ------
Probable 2,568,907 182 4.7 15.0 388.9 43.8
------------------ ------------- ------- ------ ------ ------- ------
Total 5,823,274 161 4.3 30.1 801.6 89.4
------------------ ------------- ------- ------ ------ ------- ------
Pallancata
----------------- ------------- ------- ------ ------ ------- ------
Proved 632,793 477 2.0 9.7 40.8 12.7
------------------ ------------- ------- ------ ------ ------- ------
Probable 371,752 331 1.4 4.0 17.2 5.2
------------------ ------------- ------- ------ ------ ------- ------
Total 1,004,545 423 1.8 13.7 58.0 18.0
------------------ ------------- ------- ------ ------ ------- ------
San Jose
----------------- ------------- ------- ------ ------ ------- ------
Proved 593,089 502 7.3 9.6 139.9 19.9
------------------ ------------- ------- ------ ------ ------- ------
Probable 333,455 401 6.6 4.3 70.4 9.5
------------------ ------------- ------- ------ ------ ------- ------
Total 926,544 465 7.1 13.9 210.4 29.4
------------------ ------------- ------- ------ ------ ------- ------
Proved 4,959,763 252 3.8 40.1 610.7 85.3
------------------ ------------- ------- ------ ------ ------- ------
Probable 4,086,111 242 3.9 31.8 506.2 69.2
------------------ ------------- ------- ------ ------ ------- ------
TOTAL 9,045,874 247 3.8 71.9 1,116.9 154.5
------------------ ------------- ------- ------ ------ ------- ------
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 Operations were audited by P&E Consulting.
.
ATTRIBUTABLE METAL RESOURCES AS AT 31 DECEMBER 2016(1)
Ag Ag
Resource Tonnes Ag Au Zn Pb Cu Eq Ag Au Eq Zn Pb Cu
category (t) (g/t) (g/t) (%) (%) (%) (g/t) (moz) (koz) (moz) (kt) (kt) (kt)
------------ ----------- ----- ----- ---- ---- ---- ----- ----- -------- ------- ----- ---- -----
OPERATIONS
------------ ----------- ----- ----- ---- ---- ---- ----- ----- -------- ------- ----- ---- -----
Arcata
------------ ----------- ----- ----- ---- ---- ---- ----- ----- -------- ------- ----- ---- -----
Measured 1,109,214 414 1.25 - - - 506 14.8 44.7 18.1 - - -
------------- ----------- ----- ----- ---- ---- ---- ----- ----- -------- ------- ----- ---- -----
Indicated 1,942,187 385 1.29 - - - 481 24.0 80.7 30.0 - - -
------------- ----------- ----- ----- ---- ---- ---- ----- ----- -------- ------- ----- ---- -----
Total 3,051,401 395 1.28 - - - 490 38.8 125.4 48.1 - - -
------------- ----------- ----- ----- ---- ---- ---- ----- ----- -------- ------- ----- ---- -----
Inferred 4,030,857 341 1.25 - - - 433 44.1 162.1 56.1 - - -
------------- ----------- ----- ----- ---- ---- ---- ----- ----- -------- ------- ----- ---- -----
Inmaculada
------------ ----------- ----- ----- ---- ---- ---- ----- ----- -------- ------- ----- ---- -----
Measured 2,977,597 178 4.83 - - - 535 17.0 462.7 51.2 - - -
------------- ----------- ----- ----- ---- ---- ---- ----- ----- -------- ------- ----- ---- -----
Indicated 2,635,187 219 5.58 - - - 632 18.6 473.0 53.6 - - -
------------- ----------- ----- ----- ---- ---- ---- ----- ----- -------- ------- ----- ---- -----
Total 5,612,784 197 5.19 - - - 581 35.6 935.7 104.8 - - -
------------- ----------- ----- ----- ---- ---- ---- ----- ----- -------- ------- ----- ---- -----
Inferred 3,165,478 133 3.37 - - - 383 13.6 343.3 39.0 - - -
------------- ----------- ----- ----- ---- ---- ---- ----- ----- -------- ------- ----- ---- -----
Pallancata
------------ ----------- ----- ----- ---- ---- ---- ----- ----- -------- ------- ----- ---- -----
Measured 1,052,621 453 1.92 - - - 596 15.3 65.1 20.2 - - -
------------- ----------- ----- ----- ---- ---- ---- ----- ----- -------- ------- ----- ---- -----
Indicated 693,465 332 1.45 - - - 439 7.4 32.4 9.8 - - -
------------- ----------- ----- ----- ---- ---- ---- ----- ----- -------- ------- ----- ---- -----
Total 1,746,086 405 1.74 - - - 534 22.7 97.5 30.0 - - -
------------- ----------- ----- ----- ---- ---- ---- ----- ----- -------- ------- ----- ---- -----
Inferred 3,637,800 357 1.37 - - - 459 41.8 160.7 53.7 - - -
------------- ----------- ----- ----- ---- ---- ---- ----- ----- -------- ------- ----- ---- -----
San Jose
------------ ----------- ----- ----- ---- ---- ---- ----- ----- -------- ------- ----- ---- -----
Measured 840,329 564 8.20 - - - 1,171 15.2 221.6 31.6 - - -
------------- ----------- ----- ----- ---- ---- ---- ----- ----- -------- ------- ----- ---- -----
Indicated 964,641 404 6.26 - - - 867 12.5 194.1 26.9 - - -
------------- ----------- ----- ----- ---- ---- ---- ----- ----- -------- ------- ----- ---- -----
Total 1,804,970 479 7.16 - - - 1,009 27.8 415.7 58.5 - - -
------------- ----------- ----- ----- ---- ---- ---- ----- ----- -------- ------- ----- ---- -----
Inferred 529,566 404 6.40 - - - 878 6.9 109.0 14.9 - - -
------------- ----------- ----- ----- ---- ---- ---- ----- ----- -------- ------- ----- ---- -----
GROWTH
PROJECTS
------------ ----------- ----- ----- ---- ---- ---- ----- ----- -------- ------- ----- ---- -----
Crespo
------------ ----------- ----- ----- ---- ---- ---- ----- ----- -------- ------- ----- ---- -----
Measured 5,211,058 47 0.47 - - - 82 7.9 78.6 13.7 - - -
------------- ----------- ----- ----- ---- ---- ---- ----- ----- -------- ------- ----- ---- -----
Indicated 17,298,228 38 0.40 - - - 67 21.0 222.5 37.4 - - -
------------- ----------- ----- ----- ---- ---- ---- ----- ----- -------- ------- ----- ---- -----
Total 22,509,286 40 0.42 - - - 71 28.8 301.0 51.1 - - -
------------- ----------- ----- ----- ---- ---- ---- ----- ----- -------- ------- ----- ---- -----
Inferred 775,429 46 0.57 - - - 88 1.1 14.2 2.2 - - -
------------- ----------- ----- ----- ---- ---- ---- ----- ----- -------- ------- ----- ---- -----
Azuca
------------ ----------- ----- ----- ---- ---- ---- ----- ----- -------- ------- ----- ---- -----
Measured 190,602 244 0.77 - - - 301 1.5 4.7 1.8 - - -
------------- ----------- ----- ----- ---- ---- ---- ----- ----- -------- ------- ----- ---- -----
Indicated 6,858,594 187 0.77 - - - 243 41.2 168.8 53.7 - - -
------------- ----------- ----- ----- ---- ---- ---- ----- ----- -------- ------- ----- ---- -----
Total 7,049,197 188 0.77 - - - 245 42.7 173.5 55.5 - - -
------------- ----------- ----- ----- ---- ---- ---- ----- ----- -------- ------- ----- ---- -----
Inferred 6,946,341 170 0.89 - - - 236 37.9 199.5 52.7 - - -
------------- ----------- ----- ----- ---- ---- ---- ----- ----- -------- ------- ----- ---- -----
Volcan
------------ ----------- ----- ----- ---- ---- ---- ----- ----- -------- ------- ----- ---- -----
Measured 105,918,000 - 0.738 - - - 55 - 2,513.1 186.0 - - -
------------- ----------- ----- ----- ---- ---- ---- ----- ----- -------- ------- ----- ---- -----
Indicated 283,763,000 - 0.698 - - - 52 - 6,368.0 471.2 - - -
------------- ----------- ----- ----- ---- ---- ---- ----- ----- -------- ------- ----- ---- -----
Total 389,681,000 - 0.709 - - - 52 - 8,882.7 657.3 - - -
------------- ----------- ----- ----- ---- ---- ---- ----- ----- -------- ------- ----- ---- -----
Inferred 41,553,000 - 0.502 - - - 37 - 670.7 49.6 - - -
------------- ----------- ----- ----- ---- ---- ---- ----- ----- -------- ------- ----- ---- -----
OTHER
PROJECTS(2)
------------ ----------- ----- ----- ---- ---- ---- ----- ----- -------- ------- ----- ---- -----
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 118,693,138 20 0.89 0.08 0.04 0.00 88 74.8 3,391.5 336.8 99.3 43.1 5.5
------------- ----------- ----- ----- ---- ---- ---- ----- ----- -------- ------- ----- ---- -----
Indicated 315,509,563 13 0.74 0.03 0.01 0.00 69 128.3 7,541.9 695.5 83.2 37.0 4.2
------------- ----------- ----- ----- ---- ---- ---- ----- ----- -------- ------- ----- ---- -----
Total 434,202,700 15 0.78 0.04 0.02 0.00 74 203.1 10,934.9 1,032.3 182.4 80.1 9.7
------------- ----------- ----- ----- ---- ---- ---- ----- ----- -------- ------- ----- ---- -----
Inferred 74,083,472 62 0.75 0.10 0.04 0.22 142 148.9 1,788.0 337.3 77.8 28.5 163.6
------------- ----------- ----- ----- ---- ---- ---- ----- ----- -------- ------- ----- ---- -----
1 Prices used for resources calculation: Au: $1,200/oz and Ag:
$16.5/oz.
2 Includes the Jasperoide copper project and the San Felipe
zinc/silver project. 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 ATTRIBUTABLE RESERVES AND RESOURCES
Percentage
Ag equivalent attributable December December
content (million December 2015 2016 Net
ounces) Category 2016 Att.(1) Att.(1) difference % change
------------------ --------- ------------- -------- -------- ----------- --------
Arcata Resource 100% 122.3 104.2 (18.1) (14.8%)
------------------- ---------- ------------- -------- -------- ----------- --------
Reserve 20.1 17.7 (2.3) (11.5%)
---------- ------------- -------- -------- ----------- --------
Inmaculada Resource 100% 159.1 143.8 (15.3) (9.6%)
------------------- ---------- ------------- -------- -------- ----------- --------
Reserve 104.2 89.4 (14.8) (14.2%)
---------- ------------- -------- -------- ----------- --------
Pallancata Resource 100% 102.3 83.6 (18.7) (18.3%)
------------------- ---------- ------------- -------- -------- ----------- --------
Reserve 14.9 18.0 3.1 20.9%
---------- ------------- -------- -------- ----------- --------
San Jose Resource 51% 92.8 73.5 (19.4) (20.9%)
------------------- ---------- ------------- -------- -------- ----------- --------
Reserve 31.2 29.4 (1.8) (5.7%)
---------- ------------- -------- -------- ----------- --------
Crespo Resource 100% 53.3 53.3 - -
------------------- ---------- ------------- -------- -------- ----------- --------
Reserve - - - -
------------------ --------- ------------- -------- -------- ----------- --------
Azuca Resource 100% 108.2 108.2 - -
------------------- ---------- ------------- -------- -------- ----------- --------
Reserve - - - -
------------------ --------- ------------- -------- -------- ----------- --------
Volcan Resource 100% 706.9 706.9 - -
------------------- ---------- ------------- -------- -------- ----------- --------
Reserve - - - -
------------------ --------- ------------- -------- -------- ----------- --------
Reserve - - - -
------------------ --------- ------------- -------- -------- ----------- --------
Other projects
total Resource 100% 96.0 96.0 - -
------------------- ---------- ------------- -------- -------- ----------- --------
Reserve - - - -
------------------ --------- ------------- -------- -------- ----------- --------
Total Resource 1,441.1 1,369.6 (71.5) (5.0%)
------------------- ---------- ------------- -------- -------- ----------- --------
Reserve 170.4 154.5 (15.8) (9.3%)
---------- ----------------- ------------- -------- -------- ----------- --------
1 Attributable reserves and resources based on the Group's
percentage ownership of its joint venture projects.
SHAREHOLDER INFORMATION
Company website
Hochschild Mining plc Interim and Annual Reports and results
announcements are available via the internet on our website at
www.hochschildmining.com. Shareholders can also access the latest
information about the Company and press announcements as they are
released, together with details of future events and how to obtain
further information.
Registrars
The Registrars can be contacted as follows for information about
the AGM, shareholdings, and dividends and to report changes in
personal details:
BY POST
Capita Asset Services, The Registry, 34 Beckenham Road,
Beckenham, Kent BR3 4TU.
BY TELEPHONE
If calling from the UK: 0371 664 0300 (Calls charged at the
standard geographic rate and will vary by provider. Lines are open
8.30am-5.30pm Mon to Fri).
If calling from overseas: +44 371 664 0300 (Calls charged at the
applicable international rate).
Currency option and dividend mandate
Shareholders wishing to receive their dividend in US dollars
should contact the Company's registrars to request a currency
election form. This form should be completed and returned to the
registrars by 28 April 2017 in respect of the 2016 final
dividend.
The Company's registrars can also arrange for the dividend to be
paid directly into a shareholder's UK bank account. To take
advantage of this facility in respect of the 2016 final dividend, a
dividend mandate form, also available from the Company's
registrars, should be completed and returned to the registrars by
28 April 2017. This arrangement is only available in respect of
dividends paid in UK pounds sterling. Shareholders who have already
completed one or both of these forms need take no further
action.
Financial Calendar
Dividend dates 2017
----------------------------------------------- ---------
Ex-dividend date 20 April
Record date 21 April
Deadline for return of currency election forms 28 April
Payment date 17 May
----------------------------------------------- ---------
17 Cavendish Square
London
W1G 0PH
United Kingdom
(1) Revenue presented in the financial statements is disclosed
as net revenue and is calculated as gross revenue less commercial
discounts plus services revenue
(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 (income)/expenses
(3) Includes gross debt repayments of $177.4 million and $20
million paid to Graña y Montero (Inmaculada EPC contractor) offset
by $70 million of refinanced short-term borrowings
(4) All-in sustaining cost per (AISC) silver equivalent ounce:
Calculated before exceptional items and 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 gold/silver ratio of
74:1
(5) All equivalent figures assume the average gold/silver ratio
of 74:1
(6) Includes revenue from services
(7) Reconciliation of gross revenue by mine to Group net
revenue
(8) Unit cost per tonne is calculated by dividing mine and
treatment production costs (excluding depreciation) by extracted
and treated tonnage respectively
(9) Cash costs are calculated to include cost of sales,
treatment charges, and selling expenses before exceptional items
less depreciation included in cost of sales
(10) Includes commercial discounts (from the sales of
concentrate) and commercial discounts from the sale of dore
(11) Royalties arising from revised royalty tax schemes
introduced in 2011 and included in income tax line
(12) Adjusted EBITDA has been presented before the effect of
significant non-cash (income)/expenses related to changes in mine
closure provisions and the write-off of property, plant and
equipment
(13) Includes pre-shipment loans and short term interest
payables
(14) 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
(15) Inmaculada was accounted for as a project in H1 2015 and
therefore the 2015 capital expenditure figure includes project
expenditure
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR LFFFFVFIDIID
(END) Dow Jones Newswires
March 08, 2017 02:01 ET (07:01 GMT)
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