TIDMHOC
RNS Number : 8156X
Hochschild Mining PLC
15 August 2018
________________________________________________________________________________
15 August 2018
Hochschild Mining plc
Interim Results for the six months ended 30 June 2018
2018 Interim Results Highlights
-- Revenue of $372.3 million (H1 2017: $340.8 million)[1]
-- Adjusted EBITDA of $161.9 million (H1 2017: $136.0
million)([2])
-- Pre-exceptional profit before income tax of $54.9 million (H1
2017: $28.9 million)
-- Post-exceptional profit before income tax of $38.6 million
(H1 2017: $38.9 million)
-- Adjusted basic earnings per share of $0.05 (H1 2017:
$0.03)[3]
-- Cash and cash equivalent balance of $141.7 million as at 30
June 2018 (31 December 2017: $257.0 million)
-- Net debt of $67.3 million as at 30 June 2018 (31 December
2017: $102.8 million)
-- Interim dividend up 42% at 1.965 cents per share totalling
$10.0 million (H1 2017: 1.38 cents per share totalling $7.0
million)
Exploration programme delivering exciting results
-- Inmaculada drilling programme has added 800,000 gold or 59.2
million silver equivalent ounces of inferred resources
year-to-date
o Further update in Q4 2018
-- Encouraging results being delivered at Arcata - mine
developments being prioritised over inferred resource additions
-- San Jose drilling set to restart in September after poor
seasonal weather conditions
-- Good progress on permitting for 2019 drilling programme at
Pallancata
H1 2018 operational delivery in line with guidance
-- All-in sustaining costs from operations of $11.9 per silver
or $880 per gold equivalent ounce (H1 2017: $12.0 per silver or
$892 per gold equivalent ounce)
-- Production of 19.9 million attributable silver or 268,237
attributable gold equivalent ounces (H1 2017: 17.9 million
attributable silver or 242,208 attributable gold equivalent
ounces)([4])
-- Inmaculada AISC per gold equivalent ounce of $615 (H1 2017:
$651)
-- Record production of 138,427 gold equivalent ounces at
Inmaculada (H1 2017: 115,547 ounces)
H2 2018 Outlook
-- On track to deliver attributable production target of 38.0
million silver equivalent ounces for 2018 (514,000 gold equivalent
ounces)
-- All-in sustaining costs for 2018 expected to be in line with
$13.0-13.4 per silver equivalent ounce ($960-$990 per gold
equivalent ounce) target
$000 unless stated Six months to 30 June 2018 Six months to 30 June 2017 % change
--------------------------- ---------------------------
Attributable silver production (koz) 9,674 8,938 8
Attributable gold production (koz) 138 121 14
Revenue 372,328 340,796 9
Adjusted EBITDA 161,906 135,996 19
Profit from continuing operations
(pre-exceptional) 22,242 18,246 22
Profit from continuing operations
(post-exceptional) 10,718 27,543 (61)
Basic earnings per share (pre-exceptional) $ 0.05 0.03 67
Basic earnings per share (post-exceptional) $ 0.03 0.05 (40)
------------------------------------------------- --------------------------- --------------------------- ---------
Ignacio Bustamante, Chief Executive Officer said:
"Hochschild Mining has delivered a strong first half performance
with record production at Inmaculada and a very solid performance
on the costs front leaving us on track to achieve our 2018 targets.
Our brownfield programme has started to generate some exciting
results with the key achievement of the addition of 800,000 gold
equivalent ounces (59.2 million silver equivalent ounces) of
resources at Inmaculada as well as good progress at Arcata. We have
also been able to advance our debt repayment programme with the
refinancing and repayment of our bond to put the Company in a
strong financial position to execute the brownfield plan and growth
strategy.
Safety
In my statement that accompanied the 2017 Full Year Results, I
discussed the establishment of our Safety Culture Transformation
Plan (Plan) which is a tailored, multi-faceted programme that
includes a number of initiatives to reinforce our safety-first
culture. Amidst this Company-wide effort, I am deeply saddened to
report that two accidents occurred during the first half of 2018
which claimed the lives of three workers. In keeping with Company
practice, detailed investigations were carried out and resulting
recommendations have been incorporated into the Plan. These
incidents serve to highlight the importance of our continuous
efforts to prioritise safety in order to create a zero-harm working
environment and I am therefore encouraged to report that in H1
2018, there have been significant reductions in the Lost Time
Injury Frequency Rate and the number of high potential safety
events when compared to the same period of 2017.
Operations
Hochschild's mines enjoyed a record half of production with
Inmaculada and Pallancata demonstrating particularly strong results
as the Company's output rose to 19.9 million silver equivalent
ounces (268,237 gold equivalent ounces). Thies represents an 11%
improvement on the first half of last year and puts us on track to
meet our full year target of 38 million silver equivalent ounces
(514,000 gold equivalent ounces). Inmaculada's output of 138,427
gold equivalent ounces was characterised by strong grades and
boosted by inventory in process at the beginning of the year
leaving the mine well ahead of the run rate to meet its forecasted
235,000 ounces. All-in sustaining costs at $615 per gold equivalent
ounce were low reflecting the good operational performance but also
some second-half phasing of capital expenditure which we expect
will raise the number to the forecast full year levels ($700-$750
per gold equivalent ounce).
At Pallancata, better grades from developments, ancillary veins
and from the new Pablo vein (currently in its ramp-up phase) have
increased production and lowered costs allowing the operation to
deliver 4.2 million silver equivalent ounces at an all-in
sustaining cost of 12.0 per silver equivalent ounce. Finally, both
San Jose and Arcata's output was in line with expectations in the
first half with San Jose's unit costs helped by the significant
Argentine peso devaluation (offsetting high local inflation),
whilst Arcata remained in a transitional phase emphasising the need
for our current brownfield programme to deliver high quality
accessible new resources.
Exploration
The key achievement of our 2018 brownfield plan to date has been
the successful start of the comprehensive exploration programme at
Inmaculada. The Company has begun by drilling an area to the south
east of the Angela vein and has confirmed the presence of a
considerable number of structures including the Millet, Divina and
Lola veins, all in close proximity to the current mine
infrastructure. So far, approximately 800,000 gold equivalent
ounces (59.2 million silver equivalent ounces) of inferred
resources have been added, a highly encouraging result which
confirms the strong early potential in this district. The current
campaign is continuing with at least 10,000 metres still to be
drilled in 2018 and we expect to provide a further update in the
fourth quarter. In addition, several targets have been already
identified to form the basis of the 2019 programme.
At Arcata, encouraging results have been achieved so far this
year with drilling to the north of current mining infrastructure
and we have therefore decided to prioritise underground development
over inferred resource additions with the aim of rapid
incorporation into the mine plan and an improvement in the mine's
output and economic results. At San Jose, some positive drilling
results were achieved close to the current deposit before severe
winter weather disrupted the programme whilst at Pallancata, good
progress has been made in permitting to prepare for the 2019 plan,
which includes a number of highly promising targets to the south of
the current mine.
Financial results
Production and the gold price achieved in the first half both
increased versus H1 2017 and were offset only by a lower silver
price and therefore revenue rose by 8% to $372 million (H1 2017:
$341 million). This together with a small reduction achieved in the
operational all-in sustaining cost to $11.9 per silver equivalent
ounce (H1 2017: $12.0 per ounce) has led to Adjusted EBITDA rising
in the period to $162 million (H1 2017: $136 million). Despite the
increased tax charge and foreign exchange loss offsetting the
effects of the reduction in interest costs, pre-exceptional
earnings per share increased to $0.05 whilst the payment of the
premium of $11 million to redeem the senior notes in January along
with the payment reversal of capitalised bond issuance costs (both
treated as exceptional) led to post-exceptional earnings per share
of $0.03.
Financial position
Our balance sheet is now the strongest it has been in over four
years with the repayment of our bonds in January and the
refinancing of a portion of that debt at much lower rates. The
first half cashflow from operations also continued to be strong
with our net debt position falling still further. Cash and cash
equivalents stood at approximately $142 million at the end of June
leading to a net debt position of $67 million (31 December 2017:
$102.8 million) and a ratio of net debt to annual Adjusted EBITDA
currently at 0.21x.
Outlook
Precious metal prices are currently nearing the bottom of their
recent trading range. However, Hochschild's operational performance
combined with a strong balance sheet, exciting early results from
our brownfield programme, a significant recent devaluation in the
Argentine peso and no current hedges in place leave us in a
beneficial position. The Board has declared an interim dividend of
1.965 cents per share ($10 million) reflecting the ongoing progress
in our long term growth strategy as well as the positive steps made
in the year-to-date."
________________________________________________________________________________
A live conference call & audio webcast will be held at
2.30pm (London time) on Wednesday 15 August 2018 for analysts and
investors. For a live webcast of the presentation please click on
the link below:
https://edge.media-server.com/m6/p/2kg5v937
Conference call dial in details:
UK: +44 (0)330 336 9125 (Please use the following confirmation
code: 2785932).
A recording of the conference call will be available for one
week following its conclusion, accessible from the following
telephone number:
UK: +44 (0)20 7660 0134(Passcode: 2785932)
The On Demand version of the webcast will be available within
two hours after the end of the presentation and is accessible using
the same webcast link.
________________________________________________________________________________
Enquiries:
Hochschild Mining plc
Charles Gordon +44 (0)20 3709 3264
Head of Investor Relations
Hudson Sandler
Charlie Jack +44 (0)207 796 4133
Public Relations
________________________________________________________________________________
OPERATING REVIEW
OPERATIONS
Note: silver/gold equivalent production figures assume a
gold/silver ratio of 74:1.
Production
In H1 2017, Hochschild delivered a new record half of
attributable production with 268,237 gold equivalent ounces or 19.9
million silver equivalent ounces primarily driven by significant
increases at Inmaculada and Pallancata, as well as another
consistent result from the 51% owned San Jose mine.
TOTAL GROUP PRODUCTION
Six months to Six months to % change
30 June 2018 30 June 2017
-------------- ---------------
Silver production
(koz) 11,135 10,429 7
Gold production
(koz) 160.47 144.27 11
Total silver equivalent
(koz) 23,010 21,105 9
Total gold equivalent
(koz) 310.94 285.21 9
Silver sold (koz) 11,067 10,508 5
Gold sold (koz) 158.01 143.42 10
------------------------- -------------- --------------- ---------
Total production includes 100% of all production, including
production attributable to Hochschild's joint venture partner at
San Jose.
ATTRIBUTABLE GROUP PRODUCTION
Six months to Six months to % change
30 June 2018 30 June 2017
-------------- ---------------
Silver production
(koz) 9,674 8,938 8
Gold production
(koz) 137.51 121.43 13
Silver equivalent
(koz) 19,850 17,923 11
Gold equivalent
(koz) 268.24 242.21 11
------------------- -------------- --------------- ---------
Attributable production includes 100% of all production from
Arcata, Inmaculada, Pallancata and 51% from San Jose.
Costs
All-in sustaining costs from operations in H1 2018 was $881 per
gold equivalent ounce or $11.9 per silver equivalent ounce (H1
2017: $888 per gold equivalent ounce or $12.0 per silver equivalent
ounce), driven by Inmaculada's 6% half-on-half decline in addition
to a better than expected result from Pallancata.
The Company is maintaining its guidance of all-in sustaining
cost from operations in 2018 at between $960 and $990 per gold
equivalent ounce (or $13.0 and $13.4 per silver equivalent ounce).
Inmaculada's costs are expected to rise in the second half due to
increased development capital expenditure following a successful
first half of exploration. At Pallancata, the ramp-up to full
production of the Pablo vein will increase tonnage but will process
lower grades which will raise all-in sustaining costs slightly to
the forecasted levels.
Inmaculada (Peru)
The 100% owned Inmaculada gold/silver underground operation is
located in the Department of Ayacucho in southern Peru. It
commenced commissioning in June 2015.
Inmaculada summary Six months Six months % change
to to
30 June 2018 30 June 2017
------------------ ---------------
Ore production (tonnes) 670,713 614,352 9
Average silver grade (g/t) 153 142 8
Average gold grade (g/t) 4.58 4.04 13
Silver produced (koz) 3,115 2,644 18
Gold produced (koz) 96.33 79.82 21
Silver equivalent produced
(koz) 10,244 8,550 20
Gold equivalent produced
(koz) 138.43 115.55 20
Silver sold (koz) 3,108 2,642 18
Gold sold (koz) 95.35 78.32 22
Unit cost ($/t) 83.5 84.8 (2)
Total cash cost ($/oz Ag
co-product) 5.7 6.6 (14)
All-in sustaining cost ($/oz
Au Eq) 615 651 (6)
------------------------------ ------------------ --------------- ---------
Production
Inmaculada produced 138,427 gold equivalent ounces in the first
half, a 20% improvement on H1 2017 (115,547 gold equivalent
ounces), driven by better than expected grades and a contribution
from inventory in process from Q4 2017.
Costs
All-in sustaining costs were lower than forecast at $615 per
gold equivalent ounce (H1 2017: $651 per ounce) mostly due to the
impact of higher grades as well as the effect of the inventory in
process (mentioned above). However, in the second half, costs are
expected to normalise with capital expenditure increasing to access
the new veins.
Pallancata (Peru)
The 100% owned Pallancata silver/gold property is located in the
Department of Ayacucho in southern Peru. Pallancata commenced
production in 2007. Ore from Pallancata is transported 22
kilometres to the Selene plant for processing.
Pallancata summary Six months Six months % change
to to
30 June 2018 30 June 2017
-------------- ---------------
Ore production (tonnes) 285,568 192,744 48
Average silver grade (g/t) 399 440 (9)
Average gold grade (g/t) 1.47 1.82 (19)
Silver produced (koz) 3,278 2,439 34
Gold produced (koz) 11.86 9.79 21
Silver equivalent produced
(koz) 4,155 3,163 31
Gold equivalent produced
(koz) 56.15 42.75 31
Silver sold (koz) 3,256 2,437 34
Gold sold (koz) 11.58 9.72 19
Unit cost ($/t) 101.9 106.3 (4)
Total cash cost ($/oz Ag
co-product) 8.1 8.4 (4)
All-in sustaining cost ($/oz) 12.0 10.9 10
------------------------------- -------------- --------------- ---------
Production
Current mining operations at Pallancata saw average grades from
the mix of material from the Pablo vein, mine developments and
ancillary veins continuing to be better than planned in the first
half. This is expected to be only a temporary effect and will not
continue once Pablo is fully ramped up. The operation produced 4.2
million silver equivalent ounces (H1 2017: 3.2 million ounces).
The ramp up of tonnage from Pablo continued in the first half
although a small delay in the installation of the ventilation
systems resulted in tonnage reaching approximately 1,900 tonnes per
day by the end of June, slightly lower than the forecast 2,200
tonnes per day. The Company expects to achieve a run-rate of around
2,800 tonnes per day in the fourth quarter.
Costs
All-in sustaining costs at Pallancata in the first half were
$12.0 per silver equivalent ounce (H1 2017: $10.9 per ounce). This
better-than-expected result was due to higher grades from the mix
of material from the Pablo vein, developments and ancillary veins,
as mentioned above. All-in sustaining cost for the full year is
still expected to be between $13.0 to $13.5 per silver equivalent
ounce with the lower grade Pablo vein scheduled to ramp up to full
production of 2,800 tonnes per day in the fourth quarter.
San Jose (Argentina)
The San Jose silver/gold mine is located in Argentina, in the
province of Santa Cruz, 1,750 kilometres south-southwest of Buenos
Aires. San Jose commenced production in 2007 and is a joint venture
with McEwen Mining Inc. Hochschild holds a controlling interest of
51% in the mine and is the mine operator.
San Jose summary Six months Six months % change
to to
30 June 2018 30 June 2017
-------------- ---------------
Ore production (tonnes) 264,341 250,396 6
Average silver grade (g/t) 407 436 (7)
Average gold grade (g/t) 6.34 6.60 (4)
Silver produced (koz) 2,982 3,044 (2)
Gold produced (koz) 46.86 46.62 1
Silver equivalent produced
(koz) 6,450 6,494 (1)
Gold equivalent produced
(koz) 87.16 87.75 (1)
Silver sold (koz) 2,955 3,168 (7)
Gold sold (koz) 46.00 47.43 (3)
Unit cost ($/t) 241.6 251.6 (4)
Total cash cost ($/oz Ag
co-product) 10.6 11.0 (4)
All-in sustaining cost ($/oz) 15.0 14.4 4
------------------------------- -------------- --------------- ---------
Production
San Jose has once again experienced a steady half with tonnage
slightly higher than the corresponding period of 2017 but this was
partially offset by lower grades resulting in production of 6.5
million silver equivalent ounces, in line with the same period of
2017 (H1 2017: 6.5 million ounces).
Work on the $14 million hydraulic backfill project has
progressed steadily in the first half although poor seasonal
weather conditions have recently affected deliveries of materials
and equipment. Testing of the completed pumping process is
scheduled for August with full operation due in October.
Costs
All-in sustaining costs were $15.0 per silver equivalent ounce
(H1 2017: $14.4 per ounce) with the increase versus last year due
to ongoing high cost inflation in Argentina in addition to
seasonally lower grades and the backfill project. These were
partially offset by increased tonnage. Overall 2018 all-in
sustaining costs are still expected to be between $14.0 to $14.5
per silver equivalent ounce with the full effects of the recent
accelerating devaluation of the Argentinian peso already reducing
unit costs.
Arcata (Peru)
The 100% owned Arcata underground operation is located in the
Department of Arequipa in southern Peru. It commenced production in
1964.
Arcata summary Six months Six months % change
to to
30 June 2018 30 June 2017
-------------- ---------------
Ore production (tonnes) 188,522 261,643 (28)
Average silver grade (g/t) 326 309 6
Average gold grade (g/t) 1.01 1.09 (7)
Silver produced (koz) 1,760 2,303 (24)
Gold produced (koz) 5.42 8.04 (33)
Silver equivalent produced
(koz) 2,161 2,898 (25)
Gold equivalent produced
(koz) 29.21 39.16 (25)
Silver sold (koz) 1,748 2,261 (23)
Gold sold (koz) 5.08 7.94 (36)
Unit cost ($/t) 146.1 119.7 22
Total cash cost ($/oz Ag
co-product) 14.7 14.1 4
All-in sustaining cost ($/oz) 19.3 17.6 10
------------------------------- -------------- --------------- ---------
Production
Tonnage and grades at Arcata remained consistent throughout the
first half of the year with the focus still on improving the cost
position and increasing the quality of resources through the 2018
exploration programme, as well as other efficiency and productivity
measures. Total production for the half was 2.2 million silver
equivalent ounces, which places the mine on track to meet the 2018
forecast of just over 4 million ounces.
Costs
In H1 2018, Arcata's all-in sustaining costs were $19.3 per
silver equivalent ounce (H1 2017: $17.6 per ounce) reflecting the
reduced tonnage versus this time last year as well as the higher
than expected investment in the mine's exploration in the first
half due to the good progress made with the drilling programme.
EXPLORATION
Inmaculada
Hochschild has continued the comprehensive surface drilling
programme begun in November 2017 with the campaign focusing on the
area to the East of the Angela vein. Almost 28,000 metres of mostly
resource drilling has been carried out and initial inferred
resources have been achieved. Selected results are listed
below:
Vein Results
Millet MIL-17-008: 5.1m @ 1.8g/t Au & 72g/t
Ag
MIL-17-010: 9.9m @ 2.0g/t Au & 61g/t
Ag
MIL-18-013: 5.0m @ 6.7g/t Au & 43g/t
Ag
MIL-18-014: 14.3m @ 4.0g/t Au & 205g/t
Ag
MIL-18-015: 8.0m @ 1.3g/t Au & 75g/t
Ag
MIL-18-015: 3.1m @ 2.0g/t Au & 127g/t
Ag
MIL-18-018: 7.8m @ 2.6g/t Au & 37g/t
Ag
MIL-18-018: 4.2m @ 3.9g/t Au & 27g/t
Ag
MIL-18-019: 7.7m @ 1.8g/t Au & 78g/t
Ag
MIL-18-019: 3.8m @ 3.2g/t Au & 108g/t
Ag
MIL-18-024: 7.0m @ 2.4g/t Au & 135g/t
Ag
MIL-18-028: 3.1m @ 1.8g/t Au & 64g/t
Ag
MIL-18-029: 3.9m @ 1.8g/t Au & 121g/t
Ag
MIL-18-030: 4.8m @ 1.7g/t Au & 80g/t
Ag
----------------------------------------
Vero MIL-17-010: 9.3m @ 3.3g/t Au & 24g/t
Ag
----------------------------------------
Divina LOL-18-003: 12.0m @ 6.2g/t Au & 46g/t
Ag
LOL-18-004: 3.0m @ 3.7g/t Au & 23g/t
Ag
LOL-18-005: 2.2m @ 4.2g/t Au & 5g/t Ag
LOL-18-006: 7.0m @ 2.3g/t Au & 28g/t
Ag
LOL-18-008: 3.7m @ 2.2g/t Au & 66g/t
Ag
LOL-18-010: 3.8m @ 2.3g/t Au & 53g/t
Ag
LOL-18-014: 2.9m @ 1.9g/t Au & 256g/t
Ag
LOL-18-014: 8.7m @ 1.3g/t Au & 93g/t
Ag
LOL-18-014: 9.3m @ 3.1g/t Au & 258g/t
Ag
----------------------------------------
Lola LOL-18-005: 8.8m @ 5.1g/t Au & 356g/t
Ag
LOL-18-006: 3.3m @ 1.8g/t Au & 55g/t
Ag
LOL-18-008: 4.0m @ 4.1g/t Au & 82g/t
Ag
----------------------------------------
Lizina LOL-18-006: 6.2m @ 2.9g/t Au & 16g/t
Ag
LOL-18-011: 1.0m @ 8.6g/t Au & 135g/t
Ag
----------------------------------------
Olinda LOL-18-001: 2.2m @ 2.7g/t Au & 225g/t
Ag
----------------------------------------
Veronica MIL-18-028: 3.5m @ 2.0g/t Au & 91g/t
Ag
----------------------------------------
Resources (unaudited) from the above zones are estimates using
metal price assumptions of $1,200 for gold and $16.5 per ounce for
silver. So far, approximately 59.2 million silver equivalent ounces
(800,000 gold equivalent ounces) of the Inferred category have been
added to the Inmaculada resource base (see below table), all of
which are close to the existing Inmaculada infrastructure with good
widths and therefore represent significant low cost additions to
the future Inmaculada mine plan.
Inferred Resources[5]
Vein Tonnes Avg. width Ag (g/t) Au (g/t) Ag Eq (g/t) Ag Eq (moz)
(t) (m)
---------- ----------- --------- --------- ------------
Millet 2,480,626 10.11 79 3.25 319 25.5
------------ ---------- ----------- --------- --------- ------------ ------------
Divina 1,783,759 8.24 81 2.79 288 16.5
------------ ---------- ----------- --------- --------- ------------ ------------
Lola 567,083 2.56 71 2.62 265 4.8
------------ ---------- ----------- --------- --------- ------------ ------------
Veronica 537,548 6.04 82 3.76 360 6.2
------------ ---------- ----------- --------- --------- ------------ ------------
Lizina 333,685 2.89 49 2.90 264 2.8
------------ ---------- ----------- --------- --------- ------------ ------------
Alessandra 244,573 1.66 121 2.56 310 2.4
------------ ---------- ----------- --------- --------- ------------ ------------
Olga 127,910 1.78 94 1.76 225 0.9
------------ ---------- ----------- --------- --------- ------------ ------------
Total 6,075,185 7.58 79 3.02 303 59.2
------------ ---------- ----------- --------- --------- ------------ ------------
The programme is continuing in Q3 and 10,000m of drilling is
planned for the Millet West, Divina West and Misterio structures
with a further update on resources expected in the fourth
quarter.
Arcata
At Arcata, an underground drilling programme for the year has
been focused on areas close to the existing mine infrastructure
with potential to be rapidly incorporated into the short-term
Arcata mine plan. Such resources are being prioritised over
inferred resource incorporation. Just over 13,000 metres of
resource drilling was carried out in the Ruby 2, Ruby 3, Cristina,
Rosalia, Pablito East, Veta X and Fryda veins whilst almost 9,000
metres of potential drilling was executed in the Tunel 4, Barbara,
Tres Reyes, Silvia and Anomaly North structures. Selected results
are listed below:
Vein Results
Cristina DDH-267-ST-18: 1.1m @ 1.3g/t Au & 454g/t
Ag
DDH-286-EX-18: 4.4m @ 0.4g/t Au & 145g/t
Ag
--------------------------------------------
Cristina Techo DDH-279-ST-18: 1.0m @ 2.0g/t Au & 547g/t
Ag
--------------------------------------------
Fryda DDH-267-ST-18: 1.2m @ 0.9g/t Au & 300g/t
Ag
--------------------------------------------
Pablito DDH-239-DI-18: 1.0m @ 2.4g/t Au & 819g/t
Ag
DDH-267-ST-18: 1.2m @ 3.6g/t Au & 1,535g/t
Ag
DDH-279-ST-18: 1.4m @ 6.9g/t Au & 2,852g/t
Ag
--------------------------------------------
Pamela DDH-286-EX-18: 1.3m @ 0.8g/t Au & 269g/t
Ag
--------------------------------------------
Rosalita DDH-290-EX-18: 0.7m @ 1.2g/t Au & 372g/t
Ag
--------------------------------------------
Ruby 2 DDH-217-DI-18: 1.2m @ 0.7g/t Au & 236g/t
Ag
DDH-231-DI-18: 1.2m @ 0.7g/t Au & 317g/t
Ag
DDH-248-DI-18: 1.0m @ 2.3g/t Au & 1,003g/t
Ag
DDH-276-DI-18: 1.2m @ 1.4g/t Au & 547g/t
Ag
--------------------------------------------
Ruby 3 DDH-212-DI-18: 1.3m @ 0.7g/t Au & 396g/t
Ag
--------------------------------------------
Vein X DDH-285-ST-18: 4.6m @ 3.0g/t Au & 2,714g/t
Ag
DDH-255-DI-18: 3.2m @ 1.3g/t Au & 447g/t
Ag
--------------------------------------------
In the third quarter, the programme will focus on 7,000m of
drilling at the Ruby 2, Ruby 3 and Pamela (New) structures.
Pallancata
Approximately 1,000m of potential underground drilling was
carried out in Pablo Sur structures with the campaign in this area
continuing into the third quarter. Much of the focus for 2018 is
currently on securing exploration permits for potential 2019
campaigns for the Pallancata East area, for the Cochaloma
structures to the south east and for highly promising areas further
to the south with good progress made to date.
San Jose
At San Jose, resources are expected to be added from the ongoing
drilling campaign close to the mine infrastructure particularly
from the Ayelen S.E., Molle and Odin veins. Almost 7,000 metres of
drilling was executed before the winter weather disrupted progress.
The targets were the Maia and Guadalupe structures in the south of
the deposit. The team was also in the middle of executing a
potential drilling campaign to the North West at the Aguas Vivas
zone before the weather disruption. Selected results from the first
half are provided below:
Vein Results
Ayelen S.E. extension SJD-1708: 2.4m @ 8.7g/t Au & 652g/t Ag
SJD-1711: 4.9m @ 6.7g/t Au & 151g/t Ag
----------------------------------------
Odin SJM-351: 1.1m @ 5.6g/t Au & 739g/t Ag
----------------------------------------
Perla SJM-351: 0.3m @ 1.9g/t Au & 149g/t Ag
----------------------------------------
Molle SJM-351: 2.6m @ 1.6g/t Au & 320g/t Ag
----------------------------------------
S.Odin SJD-1737: 2.4m @ 6.8g/t Au & 778g/t Ag
----------------------------------------
Guadalupe SJD-1737: 1.5m @ 5.4g/t Au & 525g/t Ag
SJD-1725: 2.8m @ 6.0g/t Au & 13g/t Ag
----------------------------------------
Aguas Vivas SJD-1703: 0.4m @ 0.3g/t Au, 7g/t Ag,
1.3% Pb & 2.8% Zn
SJD-1704: 1.4m @ 0.5g/t Au, 32g/t Ag,
2.5% Pb & 1.6% Zn
SJD-1704: 0.6m @ 3.4g/t Au, 14g/t Ag,
1.0% Pb & 0.6% Zn
SJD-1704: 1.2m @ 2.3g/t Au, 13g/t Ag,
0.2% Pb & 0.3% Zn
SJD-1705: 0.4m @ 0.2g/t Au, 3g/t Ag,
1.8% Pb & 3.5% Zn
SJD-1705: 0.3m @ 0.3g/t Au, 12g/t Ag,
1.6% Pb & 1.7% Zn
----------------------------------------
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 7% to
$386.4 million in H1 2018 (H1 2017: $359.5 million) due to an
increase in sales of silver and gold in line with the increased
production versus the same period of last year as well as a rise in
the average gold price received.[6]
Silver
Gross revenue was flat in H1 2018 at $179.5 million (H1 2017:
$180.1 million). The increase in the total amount of silver ounces
sold to 11,067 koz (H1 2017:10,508 koz), which was driven by
increases at Pallancata and Inmaculada, was offset by a decline at
Arcata as well as a 5% decline in the average silver price received
(see below).
Gold
Gross revenue from gold in H1 2018 increased to $206.9 million
(H1 2017: $179.4 million) due to a 5% increase in the gold price
received as well as a 10% rise in the total amount of gold ounces
sold in H1 2018. The increase was due to higher production but also
inventory in process relating to the prior year that was sold in
2018.
Gross average realised sales prices
The following table provides figures for average realised prices
(before the deduction of commercial discounts) and ounces sold for
H1 2018 and H1 2017:
Average realised prices Six months to Six months to
30 June 2018 30 June 2017
-------------- --------------
Silver ounces sold (koz) 11,067 10,508
Avg. realised silver price
($/oz) 16.2 17.1
Gold ounces sold (koz) 158.01 143.42
Avg. realised gold price ($/oz) 1,309 1,251
--------------------------------- -------------- --------------
Commercial discounts
Commercial discounts refer to refinery treatment charges,
refining fees and payable deductions for processing concentrate,
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 H1 2018, the Group recorded
commercial discounts of $14.2 million (H1 2017: $18.9 million) with
the decrease explained by the lower production from the
concentrate-only Arcata mine. The ratio of commercial discounts to
gross revenue in H1 2018 was 4% (H1 2017: 5%).
Net revenue
Net revenue was $372.3 million (H1 2017 $340.8 million),
comprising net gold revenue of $203.4 million (H1 2017: $174.6
million) and net silver revenue of $168.8 million (H1 2017: $166.0
million). In H1 2018, gold accounted for 55% and silver 45% of the
Company's consolidated net revenue (H1 2017: gold 51% and silver
49%) with the increase in the gold contribution due to an increase
in sales from the Inmaculada mine and the rise in the average gold
price received.
Revenue by mine[7]
$000 Six months to 30 June 2018 Six months to 30 June 2017 % change
--------------------------- ---------------------------
Silver revenue
Arcata 28,550 39,146 (27)
Inmaculada 50,242 44,880 12
Pallancata 52,537 40,928 28
San Jose 48,186 55,134 (13)
Commercial discounts (10,746) (14,078) (24)
Net silver revenue 168,769 166,010 2
Gold revenue
Arcata 6,668 10,088 (34)
Inmaculada 125,432 97,016 29
Pallancata 14,962 12,179 23
San Jose 59,792 60,091 -
Commercial discounts (3,499) (4,784) (27)
Net gold revenue 203,355 174,590 16
---------------------- --------------------------- --------------------------- ---------
Other revenue 197 196 1
---------------------- --------------------------- --------------------------- ---------
Net revenue 372,328 340,796 9
---------------------- --------------------------- --------------------------- ---------
Costs
Total cost of sales was $267.3 million in H1 2018 (H1 2017:
$261.2 million). The direct production cost excluding depreciation
was higher at $174.0 million (H1 2017: $157.2 million) in line with
higher production volumes mainly due to the ramp up of the Pablo
vein at Pallancata. Despite the production increases, the
depreciation in production cost slightly decreased to $82.9 million
(H1 2017: $83.8 million). Other items, which principally includes
stoppage costs and personnel related provisions, declined to $0.9
million in H1 2018 (H1 2017: $2.6 million). Change in inventories
was $ 9.4 million in H1 2018 (H1 2017: $17.6 million) due to a
decrease in products in process and finished goods.
$000 Six months Six months % Change
to 30 June to 30 June
2018 2017
------------ ------------
Direct production cost excluding
depreciation 173,967 157,237 11
Depreciation in production cost 82,949 83,803 (1)
Other items 939 2,557 (63)
Change in inventories 9,404 17,601 (47)
---------------------------------- ------------ ------------ ---------
Pre-exceptional cost of sales 267,259 261,198 2
---------------------------------- ------------ ------------ ---------
Unit cost per tonne
The Company reported unit cost per tonne at its operations of
$124.5 per tonne in H1 2018, a 3% decrease versus H1 2017 ($127.8
per tonne) due to increased mined tonnage at Pallancata and the
depreciation of the Argentine peso offsetting the decline in
tonnage at Arcata.
Unit cost per tonne by operation (including royalties)[8]:
Operating unit ($/tonne) Six months Six months % change
to 30 June to 30 June
2018 2017
------------ ------------
Peru 98.7 98.1 1
Arcata 146.1 119.7 22
Inmaculada 83.5 84.8 (2)
Pallancata 101.9 106.3 (4)
-------------------------- ------------ ------------ ---------
Argentina
San Jose 241.6 251.6 (4)
-------------------------- ------------ ------------ ---------
Total 124.5 127.8 (3)
-------------------------- ------------ ------------ ---------
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]:
$000 unless otherwise indicated Six months Six months % change
to 30 June to 30 June
2018 2017
------------ ------------
Group cash cost 199,140 196,415 1
----------------------------------- ------------ ------------ ---------
(+) Cost of sales 267,259 261,198 2
(-) Depreciation and amortisation
in cost of sales (86,579) (90,184) (4)
(+) Selling expenses 2,504 5,194 (52)
(+) Commercial deductions[10] 15,956 20,207 (21)
Gold 3,595 4,943 (27)
Silver 12,361 15,264 (19)
----------------------------------- ------------ ------------ ---------
Revenue 372,328 340,796 9
----------------------------------- ------------ ------------ ---------
Gold 203,355 174,590 16
Silver 168,769 166,010 2
Others 204 196 4
----------------------------------- ------------ ------------ ---------
Ounces sold
----------------------------------- ------------ ------------ ---------
Gold 158.0 143.4 10
Silver 11,067 10,508 5
----------------------------------- ------------ ------------ ---------
Group cash cost ($/oz)
----------------------------------- ------------ ------------ ---------
Co product Au 689 702 (2)
Co product Ag 8.2 9.1 (10)
By product Au 114 106 8
By product Ag (0.7) 1.6 (144)
----------------------------------- ------------ ------------ ---------
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
Six months to 30 June 2018
$000 unless otherwise Arcata Inmaculada Pallancata San José Main operations Corporate Total
indicated & others
------ ---------- ---------- ------------- --------------- ---------
(+) Production cost excluding
depreciation 28,011 55,146 30,526 63,024 176,707 - 176,707
(+) Other items in cost
of sales - - - 939 939 - 939
(+) Operating and exploration
capex for units 7,328 24,551 12,453 20,414 64,746 30 64,776
(+) Brownfield exploration
expenses 1,126 314 645 1,962 4,047 1,340 5,387
(+) Administrative expenses
(excl depreciation) 302 1,726 617 3,540 6,184 14,764 20,948
(+) Royalties and special
mining tax[11] - 1,755 627 - 2,383 1,771 4,154
-------------------------------- ------ ---------- ---------- ------------- --------------- --------- -------
Sub-total 36,767 83,492 44,868 89,879 255,006 17,905 272,911
-------------------------------- ------ ---------- ---------- ------------- --------------- --------- -------
Au ounces produced 5,418 96,329 11,862 46,859 160,468 - 160,468
Ag ounces produced (000s) 1,760 3,115 3,728 2,982 11,135 - 11,135
Ounces produced (Ag Eq
000s oz) 2,161 10,244 4,155 6,450 23,010 - 23,010
-------------------------------- ------ ---------- ---------- ------------- --------------- --------- -------
Sub-total ($/oz Ag Eq) 17.0 8.2 10.8 13.9 11.1 - 11.9
-------------------------------- ------ ---------- ---------- ------------- --------------- --------- -------
(+) Commercial deductions 4,493 1,442 4,709 5,312 15,956 - 15,956
(+) Selling expenses 465 252 376 1,411 2,504 - 2,504
-------------------------------- ------ ---------- ---------- ------------- --------------- --------- -------
Sub-total 4,958 1,694 5,085 6,723 18,460 - 18,460
-------------------------------- ------ ---------- ---------- ------------- --------------- --------- -------
Au ounces sold 5,080 95,354 11,582 45,997 158,013 - 158,013
Ag ounces sold (000s) 1,748 3,108 3,256 2,955 11,067 - 11,067
Ounces sold (Ag Eq 000s
oz) 2,124 10,164 4,113 6,359 22,760 - 22,760
-------------------------------- ------ ---------- ---------- ------------- --------------- --------- -------
Sub-total ($/oz Ag Eq) 2.3 0.2 1.2 1.1 0.8 - 0.8
-------------------------------- ------ ---------- ---------- ------------- --------------- --------- -------
All-in sustaining costs
($/oz Ag Eq) 19.3 8.3 12.0 15.0 11.9 12.7
-------------------------------- ------ ---------- ---------- ------------- --------------- --------- -------
All-in sustaining costs
($/oz Au Eq)[12] 1,432 615 891 1,109 880 - 938
-------------------------------- ------ ---------- ---------- ------------- --------------- --------- -------
Six months to 30 June 2017
$000 unless Arcata Inmaculada Pallancata San José Main Corporate Total
otherwise operations & others
indicated
------------ ------------- ------------- -------------- -------------- ---------
(+) Production cost
excluding
depreciation 30,557 47,753 18,519 60,408 157,237 - 157,237
(+) Other items in
cost
of sales - - 1,461 1,096 2,557 - 2,557
(+) Operating and
exploration
capex for units 9,346 22,246 8,412 16,333 56,337 30 56,367
(+) Brownfield
exploration
expenses 1,156 145 414 2,044 3,759 2,118 5,877
(+) Administrative
expenses
(excl depreciation) 469 1,639 565 4,387 7,060 18,139 25,199
(+) Royalties and
special
mining tax - 1,444 498 - 1,941 969 2,910
---------------------- ------------ ------------- ------------- -------------- -------------- --------- -------
Sub-total 41,528 73,227 29,868 84,268 228,891 21,256 250,147
---------------------- ------------ ------------- ------------- -------------- -------------- --------- -------
Au ounces produced 8,042 79,820 9,794 46,618 144,273 - 144,273
Ag ounces produced
(000s) 2,303 2,644 2,439 3,044 10,429 - 10,429
Ounces produced (Ag
Eq
000s oz) 2,898 8,550 3,163 6,494 21,105 - 21,105
---------------------- ------------ ------------- ------------- -------------- -------------- --------- -------
Sub-total ($/oz Ag
Eq) 14.3 8.6 9.4 13.0 10.8 - 11.9
---------------------- ------------ ------------- ------------- -------------- -------------- --------- -------
(+) Commercial
deductions 8,604 1,078 4,211 6,314 20,207 - 20,207
(+) Selling expenses 850 522 507 3,315 5,194 - 5,194
---------------------- ------------ ------------- ------------- -------------- -------------- --------- -------
Sub-total 9,454 1,600 4,718 9,629 25,401 - 25,401
---------------------- ------------ ------------- ------------- -------------- -------------- --------- -------
Au ounces sold 7,944 78,323 9,718 47,433 143,418 - 143,418
Ag ounces sold
(000s) 2,261 2,642 2,437 3,168 10,508 - 10,508
Ounces sold (Ag Eq
000s
oz) 2,849 8,438 3,156 6,678 21,121 - 21,121
---------------------- ------------ ------------- ------------- -------------- -------------- --------- -------
Sub-total ($/oz Ag
Eq) 3.3 0.2 1.5 1.4 1.2 - 1.2
---------------------- ------------ ------------- ------------- -------------- -------------- --------- -------
All-in sustaining
costs
($/oz Ag Eq) 17.6 8.8 10.9 14.4 12.0 - 13.1
---------------------- ------------ ------------- ------------- -------------- -------------- --------- -------
All-in sustaining
costs
($/oz Au Eq) 1,306 648 809 1,067 892 - 966
---------------------- ------------ ------------- ------------- -------------- -------------- --------- -------
Administrative expenses
Administrative expenses before exceptional items decreased by
17% to $21.7 million (H1 2017: $26.0 million) primarily due to a
decrease in personnel expenses.
Exploration expenses
In H1 2018, exploration expenses increased to $13.0 million (H1
2017: $7.1 million) in line with the overall rise in the Company's
investment in brownfield and greenfield exploration. In addition,
the Group capitalises part of its brownfield exploration, which
mostly relates to costs incurred converting potential resource to
the Inferred or Measured and Indicated category. In H1 2018, the
Company capitalised $4.9 million relating to brownfield exploration
compared to $1.9 million in H1 2017, bringing the total investment
in exploration for H1 2018 to $17.9 million (H1 2017: $9.0
million).
Selling expenses
Selling expenses decreased by 52% versus H1 2017 to $2.5 million
(H1 2017: $5.2 million) due to the reallocation of transportation
costs of $2.7 million to pre-exceptional cost of sales (direct
production cost excluding depreciation).
Other income/expenses
Other income before exceptional items was lower at $4.9 million
(H1 2017: $5.2 million).
Other expenses before exceptional items were higher at $7.9
million (H1 2017: $6.2 million) mainly due to termination benefits
of $1.3 million related to Arcata's restructuring programme.
Adjusted EBITDA
Adjusted EBITDA increased by 19% to $161.9 million (H1 2017:
$136.0 million) primarily due to the rise in production and
partially offset by an increase in exploration expenses.
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 Six months to 30 June 2018 Six months to 30 June 2017 % change
--------------------------- ---------------------------
Profit from continuing operations before
exceptional items, net finance cost, foreign
exchange
(loss)/gain and income tax 64,628 40,055 61
Depreciation and amortisation in cost of sales 86,579 90,184 (4)
Depreciation and amortisation in administrative
expenses 743 806 (8)
Exploration expenses 13,048 7,122 83
Personnel and other exploration related fixed
expenses (2,786) (2,567) 9
Other non-cash income, net [13] (306) 396 (177)
------------------------------------------------- --------------------------- --------------------------- ---------
Adjusted EBITDA 161,906 135,996 19
------------------------------------------------- --------------------------- --------------------------- ---------
Adjusted EBITDA margin 43% 40%
------------------------------------------------- --------------------------- --------------------------- ---------
Finance income
Finance income before exceptional items of $1.1 million
decreased from H1 2017 ($2.7 million) primarily due to the impact
of a one-off gain from the discount of tax credits in Argentina
($1.9 million) in H1 2017.
Finance costs
Finance costs before exceptional items decreased from $13.3
million in H1 2017 to $6.5 million in H1 2018, principally due to
the reduction of the interest rate from 7.75% (Senior Notes) to a
2.64% average (short and medium term loan rates) resulting from the
repayment of the Company's Senior Notes. In addition, the gross
debt was reduced from $353.8 million ($294.8 million of Senior
Notes and $59.0 million of short term debt) to $207.5 million
(medium-term loan of $100.0 million and short-term debt of $107.5
million).
Foreign exchange (losses)/gains
The Group recognised a foreign exchange loss of $4.3 million (H1
2017: $0.5 million loss) as a result of exposures in currencies
other than the functional currency - primarily the Argentinean
peso.
Income tax
The Company's pre-exceptional income tax charge was $32.7
million (H1 2017: $10.7 million). The substantial increase in the
charge is mainly explained by the Company's increase in
profitability in the period. In addition, the increase is also due
to the negative income tax impact of $8 million resulting from
converting local currency tax basis at a higher FX rate in
Argentina thus reducing future tax shields in dollar terms.
Exceptional items
Exceptional items in H1 2018 totalled an $11.5 million loss
after tax (H1 2017: $9.3 million gain after tax). Exceptional items
principally included the payment of the premium of $11.4 million to
redeem early the Senior Notes and the reversal of capitalised bond
issuance costs of $4.9 million.
In addition to these items, the exceptional tax effect was a
$4.8 million tax gain (H1 2017: $1.7 million tax charge).
Cash flow and balance sheet review
Cash flow:
$000 Six months Six months Change
to 30 June to 30 June
2018 2017
------------ ------------
Net cash generated from operating
activities 117,176 80,495 36,681
Net cash used in investing
activities (64,050) (45,427) (18,623)
Cash flows used in financing
activities (164,639) (30,617) (134,022)
----------------------------------- ------------ ------------ ----------
Net increase in cash and cash
equivalents during the period (111,513) 4,451 (115,964)
----------------------------------- ------------ ------------ ----------
Operating cash flow increased from $80.5 million in H1 2017 to
$117.2 million in H1 2018 mainly due to higher EBITDA.
Net cash used in investing activities increased to $64.1 million
in H1 2018 from $45.4 million in H1 2017 mainly due to the
construction of the hydraulic backfill plant in Argentina, the
development of the Pablo vein at Pallancata and higher capitalised
exploration.
Finally, cash used in financing activities increased to $164.6
million from $30.6 million in H1 2017, primarily due the repayment
of the Company's Senior Notes ($294.8 million) and $1.5 million of
short term debt in Argentina. This was partially offset by new
loans of $150.0 million raised to repurchase the Senior Notes. In
addition, $10 million of dividends were paid to Hochschild Mining
plc shareholders and $7.2 million to McEwen Mining
shareholders.
As a result, total cash flows resulted in a net decrease of
$111.5 million from an increase of $4.5 million in H1 2017
($(116.0) million difference).
Working capital
$000 As at 30 June 2018 As at 31 December 2017
-------------------
Trade and other receivables 81,824 88,553
Inventories 45,997 56,678
Other financial assets/(liability) 385 2,591
Income tax receivable/(payable) 12,970 15,442
Trade and other payables (104,270) (117,860)
Provisions (106,948) (110,310)
------------------------------------ ------------------- -----------------------
Working capital (70,042) (64,906)
------------------------------------ ------------------- -----------------------
The Group's working capital position improved by $(5.1) million
from $(64.9) million to a $(70.0) million in H1 2018. The key
drivers were: lower inventories of ($10.7) million due to a
reduction in products in process; and lower trade and other
receivables of $(6.8) million resulting from an improvement in
commercial terms. Other positive contributions came from: the
reduction in Other financial assets/(liability) of $(2.2) million
resulting from the embedded derivative associated with provisional
pricing; and the reduction in the Income tax receivable of ($2.5)
million. These positive changes were partially offset by a
temporary decrease in trade and other payables of $(13.6) million
and a decrease in provisions ($3.4 million).
Net debt
$000 unless otherwise indicated As at 30 June As at 31 December
2018 2017
--------------
Cash and cash equivalents 141,679 256,988
Long term borrowings (100,000) (291,955)
Short term borrowings[14] (108,960) (67,863)
--------------------------------- -------------- ------------------
Net debt (67,281) (102,830)
--------------------------------- -------------- ------------------
The Group reported net debt position was $67.3 million as at 30
June 2018 (31 December 2017: $102.8 million). The reduction in H1
2018 includes the operating cash generated during the period and
the net effect of: the repayment of the Company's Senior Notes of
$294.8 million; the repayment of short term debt of $1.5 million in
Argentina and the new loans raised to purchase the Senior Notes (a
short-term loan with Nova Scotia Bank of $50.0 million and a medium
term loan with Nova Scotia Bank and Citibank of $100.0
million).
Capital expenditure([15])
$000 Six months to Six months to
30 June 2018 30 June 2017
--------------
Arcata 7,328 9,346
Pallancata 12,453 8,412
San Jose 21,279 17,493
Inmaculada 24,551 22,246
------------ -------------- --------------
Operations 64,792 57,464
Other 1,645 1,265
------------ -------------- --------------
Total 67,256 58,762
------------ -------------- --------------
H1 2018 capital expenditure of $67.3 million (H1 2017: $58.8
million) mainly comprised of operational capex of $64.8 million (H1
2017: $57.5 million) with the small increase versus H1 2017
comprising increases in capital expenditure at Inmaculada
(capitalised exploration), Pallancata (development of the Pablo
vein) and San Jose (the hydraulic backfill project) partially
offset by a decrease at Arcata.
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.
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.
RISKS
The principal risks and uncertainties facing the Company in
respect of the year ended 31 December 2017 are set out in detail in
the Risk Management & Viability section of the 2017 Annual
Report and in Note 36 to the 2017 Consolidated Financial
Statements.
The key risks disclosed in the 2017 Annual Report (available at
www.hochschildmining.com) are categorised as:
o Financial risks comprising commodity price risk;
o Operational risks including the risks associated with
operational performance, business interruption, information
security and cybersecurity, exploration & reserve and resource
replacement and personnel risks;
o Macro-economic risks which include political, legal and
regulatory risks; and
o Sustainability risks including risks associated with health
and safety, environmental and community relations.
These risks continue to apply to the Company in respect of the
remaining six months of the financial year.
RELATED PARTY TRANSACTIONS
There were no significant related parties transactions during
the six month period ended 30 June 2018.
GOING CONCERN
The Company's business activities, together with the factors
likely to affect future development, performance and position are
set out in the Operating Review on pages 4 to 8. The financial
position of the Company, its cash flow and liquidity position are
described in the Financial Review on pages 9 to 14.
The Directors believe that the financial resources available at
the date of the issue of these condensed interim financial
statements are sufficient for the Company to manage its business
risks successfully.
The Company's forecasts and projections, taking into account
reasonably possible changes in operational performance and in
particular the price of gold and silver, and other mitigating
actions described in the Risks section above, show that there are
reasonable expectations that the Company will be able to operate on
funds currently held and those generated internally, for the
foreseeable future.
After making enquiries and considering the above, the Directors
have a reasonable expectation that the Company has adequate
resources to continue in operational existence for the foreseeable
future and consider the going concern basis of accounting to be
appropriate. As a result they continue to adopt the going concern
basis of accounting in preparing the condensed interim financial
statements.
STATEMENT OF DIRECTORS' RESPONSIBILITIES
The Directors confirm that, to the best of their knowledge, the
interim condensed consolidated financial statements have been
prepared in accordance with IAS 34 "Interim Financial Reporting" as
adopted by the European Union and that the interim management
report includes a fair review of the information required by
Disclosure Guidance and Transparency Rules 4.2.7R and 4.2.8R.
A list of current Directors and their functions is maintained on
the Company's website.
For and on behalf of the Board
Ignacio Bustamante
Chief Executive Officer
14 August 2018
INDEPENT REVIEW REPORT TO HOCHSCHILD MINING PLC
Introduction
We have been engaged by Hochschild Mining plc (the 'Company') to
review the condensed set of financial statements in the half-yearly
financial report for the six months ended 30 June 2018 which
comprises the Interim condensed consolidated income statement, the
Interim condensed consolidated statement of comprehensive income,
the Interim condensed consolidated statement of financial position,
the Interim condensed consolidated statement of cash flows, the
Interim condensed consolidated statement of changes in equity and
the related notes 1 to 20. We have read the other information
contained in the half yearly financial report and considered
whether it contains any apparent misstatements or material
inconsistencies with the information in the condensed set of
financial statements.
This report is made solely to the company in accordance with
guidance contained in International Standard on Review Engagements
2410 (UK and Ireland) "Review of Interim Financial Information
Performed by the Independent Auditor of the Entity" issued by the
Auditing Practices Board. To the fullest extent permitted by law,
we do not accept or assume responsibility to anyone other than the
company, for our work, for this report, or for the conclusions we
have formed.
Directors' Responsibilities
The half-yearly financial report is the responsibility of, and
has been approved by, the directors. The directors are responsible
for preparing the half-yearly financial report in accordance with
the Disclosure and Transparency Rules of the United Kingdom's
Financial Conduct Authority.
As disclosed in note 2, the annual financial statements of the
Group are prepared in accordance with International Financial
Reporting Standards as adopted by the European Union. The condensed
set of financial statements included in this half-yearly financial
report has been prepared in accordance with International
Accounting Standard 34, "Interim Financial Reporting", as adopted
by the European Union.
Our Responsibility
Our responsibility is to express to the Company a conclusion on
the condensed set of financial statements in the half-yearly
financial report based on our review.
Scope of Review
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410, "Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity" issued by the Auditing Practices Board for use in
the United Kingdom. A review of interim financial information
consists of making enquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other
review procedures. A review is substantially less in scope than an
audit conducted in accordance with International Standards on
Auditing (UK and Ireland) and consequently does not enable us to
obtain assurance that we would become aware of all significant
matters that might be identified in an audit. Accordingly, we do
not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the half-yearly financial report for the six months ended 30
June 2017 is not prepared, in all material respects, in accordance
with International Accounting Standard 34 as adopted by the
European Union and the Disclosure and Transparency Rules of the
United Kingdom's Financial Conduct Authority.
Ernst & Young LLP
London
14 August 2018
Interim condensed consolidated income statement
Six-months ended Six-months ended
Notes 30 June 2018 (Unaudited) 30 June 2017 (Unaudited)
----- ------------------------------------- -----------------------------------
Exceptional Exceptional
Before items Before items
exceptional (Note exceptional (Note
items 7) Total items 7) Total
US$000 US$000 US$000 US$000 US$000 US$000
----------- ----------- --------- ----------- ----------- ---------
Continuing operations
Revenue 4 372,328 - 372,328 340,796 - 340,796
Cost of sales 5 (267,259) - (267,259) (261,198) - (261,198)
----------- ----------- --------- ----------- ----------- ---------
Gross profit 105,069 - 105,069 79,598 - 79,598
Administrative expenses (21,691) - (21,691) (26,004) - (26,004)
Exploration expenses (13,048) - (13,048) (7,122) - (7,122)
Selling expenses (2,504) - (2,504) (5,194) - (5,194)
Other income 6 4,949 - 4,949 5,186 - 5,186
Other expenses (7,946) - (7,946) (6,188) - (6,188)
(Impairment)/impairment
reversal and write-off
of non-financial assets,
net (201) - (201) (221) 10,952 10,731
Profit from continuing
operations before
net finance
income/(cost),
foreign exchange loss
and income tax 64,628 - 64,628 40,055 10,952 51,007
Finance income 8 1,088 - 1,088 2,700 - 2,700
Finance costs 8 (6,482) (16,346) (22,828) (13,288) - (13,288)
Foreign exchange loss (4,334) - (4,334) (547) - (547)
----------- ----------- --------- ----------- ----------- ---------
Profit from continuing
operations before
income tax 54,900 (16,346) 38,554 28,920 10,952 39,872
Income tax expense 9 (32,658) 4,822 (27,836) (10,674) (1,655) (12,329)
----------- ----------- --------- ----------- ----------- ---------
Profit for the period
from continuing
operations 22,242 (11,524) 10,718 18,246 9,297 27,543
Attributable to:
Equity shareholders
of the Company 24,438 (11,524) 12,914 14,064 9,297 23,361
Non-controlling interests (2,196) - (2,196) 4,182 - 4,182
----------- ----------- --------- ----------- ----------- ---------
22,242 (11,524) 10,718 18,246 9,297 27,543
=========== =========== ========= =========== =========== =========
Basic earnings per
ordinary share from
continuing operations
and for the period
(expressed in U.S.
dollars per share) 0.05 (0.02) 0.03 0.03 0.02 0.05
=========== =========== ========= =========== =========== =========
Diluted earnings per
ordinary share from
continuing operations
and for the period
(expressed in U.S.
dollars per share) 0.05 (0.02) 0.03 0.03 0.02 0.05
=========== =========== ========= =========== =========== =========
Interim condensed consolidated statement of comprehensive
income
Six-months ended
Note 30 June
----- ----------------------------------
2018 (Unaudited) 2017 (Unaudited)
US$000 US$000
---------------- ----------------
Profit for the period 10,718 27,543
Other comprehensive income to be reclassified
to profit or loss in subsequent periods:
Exchange differences on translating foreign
operations 39 90
Change in fair value of financial assets
at fair value through OCI (1,647) -
Change in fair value of available-for-sale
financial assets - (415)
Other comprehensive loss for the period,
net of tax (1,608) (325)
---------------- ----------------
Total comprehensive income for the period 9,110 27,218
---------------- ----------------
Total comprehensive income attributable
to:
Equity shareholders of the Company 11,306 23,036
Non-controlling interests (2,196) 4,182
---------------- ----------------
9,110 27,218
================ ================
Interim condensed consolidated statement of financial
position
As at 30 As at 31
June December
2018 2017
(Unaudited)
Notes US$000 US$000
----- ------------- ----------
ASSETS
Non-current assets
Property, plant and equipment 10 868,505 895,666
Evaluation and exploration assets 11 153,402 147,399
Intangible assets 25,402 24,544
Financial assets at fair value to
OCI 4,703 -
Available-for-sale financial assets - 6,264
Trade and other receivables 6,203 7,487
Other financial assets 12 385 1,333
Deferred income tax assets 14 2,719 2,400
1,061,319 1,085,093
------------- ----------
Current assets
Inventories 45,997 56,678
Trade and other receivables 13 75,621 81,066
Income tax receivable 17,995 21,241
Other financial assets 12 - 1,258
Cash and cash equivalents 15 141,679 256,988
------------- ----------
281,292 417,231
------------- ----------
Total assets 1,342,611 1,502,324
============= ==========
EQUITY AND LIABILITIES
Capital and reserves attributable
to shareholders of the Parent
Equity share capital 18 224,878 224,315
Share premium 18 438,041 438,041
Treasury shares - (140)
Other reserves (220,410) (217,061)
Retained earnings 290,582 286,356
------------- ----------
733,091 731,511
Non-controlling interests 78,158 90,177
Total equity 811,249 821,688
------------- ----------
Non-current liabilities
Trade and other payables 940 1,081
Borrowings 16 100,000 291,955
Provisions 96,431 104,107
Deferred income 17 31,171 30,409
Deferred income tax liabilities 14 74,588 56,040
------------- ----------
303,130 483,592
------------- ----------
Current liabilities
Trade and other payables 103,330 116,779
Borrowings 16 108,960 67,863
Provisions 10,517 6,203
Deferred income 17 400 400
Income tax payable 5,025 5,799
------------- ----------
228,232 197,044
------------- ----------
Total liabilities 531,362 680,636
------------- ----------
Total equity and liabilities 1,342,611 1,502,324
============= ==========
Interim condensed consolidated statement of cash flows
Six-months ended
30 June
----------------------------------
2018 (Unaudited) 2017 (Unaudited)
Notes US$000 US$000
----- ---------------- ----------------
Cash flows from operating activities
Cash generated from operations 21 141,411 110,153
Interest received 1,343 451
Interest paid 16 (24,751) (11,992)
Payment of mine closure costs (1,422) (1,899)
Income tax (paid)/received 595 (16,218)
---------------- ----------------
Net cash generated from operating
activities 117,176 80,495
---------------- ----------------
Cash flows from investing activities
Purchase of property, plant and equipment (57,120) (49,019)
Purchase of evaluation and exploration
assets (6,003) (2,552)
Purchase of intangibles (1,897) (8)
Purchase of financial assets at fair
value to OCI (120) -
Proceeds from sale of other assets - 1,556
Proceeds from deferred income 1,000 4,000
Proceeds from sale of financial assets
at fair value to OCI 32 -
Proceeds from sale of property, plant
and equipment 10 58 596
Net cash used in investing activities (64,050) (45,427)
---------------- ----------------
Cash flows from financing activities
Proceeds from borrowings 16 157,500 10,500
Repayment of borrowings 16 (303,775) (29,000)
Purchase of treasury shares (579) -
Dividends paid to shareholders (10,000) (6,997)
Dividends paid to non-controlling
interests 19 (7,785) (5,120)
Cash flows used in financing activities (164,639) (30,617)
---------------- ----------------
Net (decrease)/increase in cash and
cash equivalents during the period (111,513) 4,451
Impact of foreign exchange (3,796) 67
Cash and cash equivalents at beginning
of period 256,988 139,979
---------------- ----------------
Cash and cash equivalents at end
of period 15 141,679 144,497
================ ================
Interim condensed consolidated statement of changes in
equity
Other reserves
Unrealised
gain/(loss)
on Capital
Unrealised financial and reserves
gain/(loss) assets attributable
on at fair to
Equity available-for-sale value Cumulative Share-based Total shareholders
share Share Treasury financial through translation Merger payment other Retained of the Non-controlling Total
capital premium shares assets OCI adjustment reserve reserve reserves earnings Parent interests equity
Note 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
2018 224,315 438,041 (140) - (937) (13,712) (210,046) 7,634 (217,061) 286,356 731,511 90,177 821,688
------- ------- --------- ------------------ ----------- ----------- --------- ----------- --------- -------- ------------ ----------------- --------
Other
comprehensive
gain/(loss) - - - - (1,633) 39 - - (1,594) (14) (1,608) - (1,608)
Profit/(loss) for
the period - - - - - - - - - 12,914 12,914 (2,196) 10,718
--------- ------------------ ----------- ----------- -----------
Total
comprehensive
(loss)/income
for
the period - - - - (1,633) 39 - - (1,594) 12,900 11,306 (2,196) 9,110
Dividends 19 - - - - - - - - - (10,000) (10,000) - (10,000)
Dividends
declared
to
non-controlling
interests 19 - - - - - - - - - - - (9,823) (9,823)
Treasury shares - - (579) - - - - - - - (579) - (579)
Share-based
payments - - - - - - - 853 853 - 853 - 853
Exercise of share
options 18 563 - 719 - - - - (2,608) (2,608) 1,326 - - -
-----------
Balance at 30
June
2018 (unaudited) 224,878 438,041 - - (2,570) (13,673) (210,046) 5,879 (220,410) 290,582 733,091 78,158 811,249
======= ======= ========= ================== =========== =========== ========= =========== ========= ======== ============ ================= ========
Balance at 1
January
2017 224,315 438,041 (426) 740 - (13,851) (210,046) 5,869 (217,288) 258,269 702,911 90,442 793,353
------- ------- --------- ------------------ ----------- ----------- --------- ----------- --------- -------- ------------ ----------------- --------
Other
comprehensive
gain/(loss) - - - (415) - 90 - - (325) - (325) - (325)
Profit for the
period - - - - - - - - - 23,361 23,361 4,182 27,543
--------- ------------------ ----------- ----------- -----------
Total
comprehensive
(loss)/income
for
the period - - - (415) - 90 - - (325) 23,361 23,036 4,182 27,218
Dividends 19 - - - - - - - - - (6,997) (6,997) - (6,997)
Dividends
declared
to
non-controlling
interests 19 - - - - - - - - - - - (8,066) (8,066)
Share-based
payments 541 541 760 1,301 - 1,301
Exercise of share
options 18 - - 286 - - - - (48) (48) (238) - - -
------- ------- --------- ------------------ ----------- ----------- --------- ----------- --------- -------- ------------ ----------------- --------
Balance at 30
June
2017 (unaudited) 224,315 438,041 (140) 325 - (13,761) (210,046) 6,362 (217,120) 275,155 720,251 86,558 806,809
======= ======= ========= ================== =========== =========== ========= =========== ========= ======== ============ ================= ========
Notes to the interim condensed consolidated financial
statement
1 Corporate Information
Hochschild Mining plc (hereinafter the "Company" and together
with its subsidiaries, the "Group") is a public limited company
incorporated on 11 April 2006 under the Companies Act 1985 as a
limited company and registered in England and Wales with registered
number 05777693. The Company's registered office is located at 17
Cavendish Square, London W1G 0PH, United Kingdom. Its ordinary
shares are traded on the London Stock Exchange.
The Group's principal business is the mining, processing and
sale of silver and gold. The Group has three operating mines
(Arcata, Pallancata and Inmaculada) located in Southern Peru, and
one operating mine (San Jose) located in Argentina. The Group also
has a portfolio of projects located across Peru, Argentina, Mexico
and Chile at various stages of development.
These interim condensed consolidated financial statements were
approved for issue on behalf of the Board of Directors on 14 August
2018.
2 Significant Accounting Policies
(a) Basis of preparation
These interim condensed consolidated financial statements set
out the Group's financial position as at 30 June 2018 and 31
December 2017 and its financial performance and cash flows for the
six months ended 30 June 2018 and 30 June 2017.
They have been prepared in accordance with IAS 34 Interim
Financial Reporting in accordance with International Financial
Reporting Standards ('IFRS') as adopted by the European Union.
Accordingly, the interim condensed consolidated financial
statements do not include all the information required for full
annual financial statements and therefore, should be read in
conjunction with the Group's 2017 annual consolidated financial
statements as published in the 2017 Annual Report.
The interim condensed consolidated financial statements do not
constitute statutory accounts as defined in the Companies Act 2006.
The financial information for the full year is based on the
statutory accounts for the financial year ended 31 December 2017. A
copy of the statutory accounts for that year, which were prepared
in accordance with IFRS as adopted by the European Union has been
delivered to the Registrar of Companies. The auditor's report under
section 495 of the Companies Act 2006 in relation to those accounts
was unmodified and did not include a reference to any matters to
which the auditor drew attention by way of emphasis without
qualifying the report and did not contain a statement under s498(2)
or s498(3) of the Companies Act 2006.
The impact of the seasonality or cyclicality of operations is
not regarded as significant on the interim condensed consolidated
financial statements.
The interim condensed consolidated financial statements are
presented in US dollars ($) and all monetary amounts are rounded to
the nearest thousand ($000) except when otherwise indicated.
(b) Changes in accounting policies and disclosures
The accounting policies adopted in the preparation of the
interim condensed consolidated financial statements are consistent
with those followed in the preparation of the Group's annual
consolidated financial statements for the year ended 31 December
2017, except for the adoption of new standards and interpretations
effective for the Group from 1 January 2018, which have not had a
material impact on the annual consolidated financial statements or
the interim condensed consolidated financial statements of the
Group. The Group has not early adopted any other standard,
interpretation or amendment that has been issued but is not yet
effective.
New international financial reporting standards adopted:
-- IFRS 15 Revenue from Contracts with Customers.
The Group adopted the new standard from 1 January 2018 applying
the simplified transition method and modified retrospective
approach, under which comparative financial information is not
restated. The standard did not have a material effect on the
Group's financial statements as at 1 January 2018 and so no
transition adjustment has been made.
The main change identified in the application of IFRS 15 is set
below:
- Impact of shipping terms: The Group sells a portion of its
production on CIF Incoterms and therefore the Group is responsible
for shipping services after the date at which control of the gold
and silver passes to the customer. Under IAS 18, these shipping
services are currently not considered to be part of the revenue
transaction and thus the Group has disclosed them as selling
expenses. However, under IFRS 15 the group has reclassified the
portion of those selling expenses relating to transport of gold and
silver from the Group's production plants to the ports to cost of
sales. The amount reclassified during the period is
US$2,740,000.
-- IFRS 9 Financial Instruments.
The Group adopted the new standard from 1 January 2018. The main
changes identifies in the application of IFRS 8 are set below:
- Classification and measurement of the embedded derivatives
arising from sales: Under IFRS 9, the embedded derivative is no
longer separated from the host contract and therefore the
revaluation of provisionally priced contracts are disclosed within
the receivable of the host contract in "trade and other
receivables". Trade receivables at 30 June 2018 are netted of the
negative effect of embedded derivatives of US$2,990,000.
- Available-for sale financial assets: The equity instruments
that are currently classified as available-for-sale financial
assets satisfy the conditions for classification as at fair value
through other comprehensive income (FVOCI) and therefore there is
no impact in classification. Under IFRS 9 gains and losses
accumulated in other comprehensive income are not recycled to the
income statement.
-Impairment: The new impairment model requires the recognition
of impairment provisions based on expected credit losses (ECL). The
Group applied the simplified approach and record lifetime expected
losses on all trade receivables. However, given the short term
nature of the Groups receivables, there is not significant impact
in the financial statements.
New international standards issued but not yet effective.
-- IFRS 16 Leases, applicable for annual periods beginning on or
after 1 January 2019.
The Group is yet to estimate the impact of the new rules on the
Group's financial statements.
(c) Going concern
After making enquiries, the Directors have a reasonable
expectation that the Group has adequate resources to continue in
operational existence for the foreseeable future. This is
considering reasonably possible changes in operational performance
and in particular the price of gold and silver, and other
mitigating actions. Accordingly, they continue to adopt the going
concern basis in preparing the condensed set of financial
statements. For further detail refer to the detailed discussion of
the assumptions outlined in the Going Concern section of the
announcement.
3 Segment reporting
The following tables present revenue and profit/(loss)
information for the Group's operating segments for the six months
ended 30 June 2018 and 2017 and asset information as at 30 June
2018 and 31 December 2017 respectively:
Six months Adjustments
ended 30 June San and
2018 Arcata Pallancata Jose Inmaculada Exploration Other eliminations Total
(unaudited) US$000 US$000 US$000 US$000 US$000 US$000 US$000 US$000
-------------- ------- ---------- ------- ---------- ----------- ------- ------------ ---------
Revenue from
external customers 30,732 62,790 102,935 175,674 - 197 - 372,328
Inter segment
revenue - - - - - 1,092 (1,092) -
Total revenue 30,732 62,790 102,935 175,674 - 1,289 (1,092) 372,328
------- ---------- ------- ---------- ----------- ------- ------------ ---------
Segment
profit/(loss) (1,305) 19,082 13,315 72,840 (13,048) 4,054 (5,421) 89,517
Others(1) (50,963)
---------
Profit from
continuing
operations
before income
tax 38,554
---------
As at 30 June
2018
(unaudited)
Assets
Capital expenditure 7,328 11,634 21,279 24,551 1,488 976 - 67,256
Current assets 7.906 20,220 33,342 15,049 8 2,715 - 79,240
Other non-current
assets 8,709 88,623 178,418 521,504 195,676 54,379 - 1,047,309
------- ---------- ------- ---------- ----------- ------- ------------ ---------
Total segment
assets 16,615 108,843 211,760 536,553 195,684 57,094 - 1,126,549
Not reportable
assets(2) - - - - - 216,062 - 216,062
------- ---------- ------- ---------- ----------- ------- ------------ ---------
Total assets 16,615 108,843 211,760 536,553 195,684 273,156 - 1,342,611
------- ---------- ------- ---------- ----------- ------- ------------ ---------
1 Comprised of administrative expenses of US$21,691,000, other
income of US$4,949,000, other expenses of US$7,946,000, write off
of assets of US$201,000, finance income of US$1,088,000, finance
costs of US$22,828,000 and foreign exchange loss of
US$4,334,000.
2 Not reportable assets are comprised of other financial assets
of US$385,000, financial assets at fair value through OCI of
US$4,703,000, other receivables of US$48,581,000, income tax
receivable of US$17,995,000, deferred income tax assets of
US$2,719,000, and cash and cash equivalents of US$141,679,000.
Six months Adjustments
ended 30 June San and
2017 Arcata Pallancata Jose Inmaculada Exploration Other eliminations Total
(unaudited) US$000 US$000 US$000 US$000 US$000 US$000 US$000 US$000
-------------- ------- ---------- ------- ---------- ----------- ------- ------------ ---------
Revenue from
external
customers 40,630 48,896 109,178 141,896 - 196 - 340,796
Inter segment
revenue - - - - - 862 (862) -
Total revenue 40,630 48,896 109,178 141,896 - 1,058 (862) 340,796
------- ---------- ------- ---------- ----------- ------- ------------ ---------
Segment
profit/(loss) (1,132) 20,329 18,355 37,715 (7,122) (937) 74 67,282
Others(1) (27,410)
---------
Profit from
continuing
operations
before income
tax 39,872
---------
As at 31
December
2017
Assets
Capital
expenditure 17,557 18,906 36,288 52,903 2,026 868 - 128,548
Current assets 5,483 21,699 47,398 22,707 30 2,570 - 99,887
Other
non-current
assets 5,859 91,065 182,138 535,840 194,777 57,930 - 1,067,609
------- ---------- ------- ---------- ----------- ------- ------------ ---------
Total segment
assets 11,342 112,764 229,536 558,547 194,807 60,500 - 1,167,496
Not reportable
assets(2) - - - - - 334,828 - 334,828
------- ---------- ------- ---------- ----------- ------- ------------ ---------
Total assets 11,342 112,764 229,536 558,547 194,807 395,328 - 1,502,324
------- ---------- ------- ---------- ----------- ------- ------------ ---------
1 Comprised of administrative expenses of US$26,004,000, other
income of US$5,186,000, other expenses of US$6,188,000, write off
of assets of US$221,000, impairment of assets of US$26,281,000,
reversal of impairment of assets of US$37,233,000, finance income
of US$2,700,000, finance costs of US$13,288,000 and foreign
exchange loss of US$547,000.
2 Not reportable assets are comprised of available-for-sale
financial assets of US$6,264,000, other receivables of
US$45,344,000, other financial assets of US$2,591,000, income tax
receivable of US$21,241,000, deferred income tax assets of
US$2,400,000 and cash and cash equivalents of US$256,988,000.
4 Revenue
Six-months ended
30 June
----------------------------------
2018 (Unaudited) 2017 (Unaudited)
US$000 US$000
---------------- ----------------
Gold (from dore bars) 154,804 124,230
Silver (from dore bars) 73,819 69,824
Gold (from concentrate) 48,551 50,360
Silver (from concentrate) 94,950 96,186
Other minerals 7 -
Services 197 196
372,328 340,796
================ ================
Included within revenue is a loss of US$4,248,000 relating to
provisional pricing adjustments representing the change in the fair
value of embedded derivatives (2017: loss of US$1,046,000) arising
on sales of concentrates and dore.
5 Cost of sales before exceptional items
Included in cost of sales are:
Six-months ended
30 June
----------------------------------
2018 (Unaudited) 2017 (Unaudited)
US$000 US$000
---------------- ----------------
Depreciation and amortisation in cost of sales1 86,579 90,184
Personnel expenses 61,901 61,615
Mining royalty 3,094 3,113
Change in products in process and finished goods 9,404 17,601
---------------- ----------------
1 The depreciation and amortisation in production cost is
US$82,949,000 (2017: US$83,803,000).
6 Other income before exceptional items
Included in other income are:
Six-months ended
30 June
----------------------------------
2018 (Unaudited) 2017 (Unaudited)
US$000 US$000
---------------- ----------------
Export credit 956 587
Logistic services 1,997 1,808
Gain on sale of other assets - 1,556
Decrease on mine closure provision 507 -
Others 1,489 1,235
---------------- ----------------
4,949 5,186
---------------- ----------------
7 Exceptional items
Exceptional items relate to:
Six-months ended
30 June
----------------------------------
2018 (Unaudited) 2017 (Unaudited)
US$000 US$000
---------------- ----------------
(Impairment)/impairment reversal and write-off of
non-financial assets, net
Impairment of assets(3) - (26,281)
Reversal of impairment of assets(3) - 37,233
Total - 10,952
Finance cost
Expenses related to the repayment of the bond(1) (16,346) -
Total (16,346) -
---------------- ----------------
Income tax expense
Income tax credit/(charge)(2 and 4) 4,822 (1,655)
---------------- ----------------
Total 4,822 (1,655)
---------------- ----------------
The exceptional items for the period ended 30 June 2018 are as
follows:
1. Corresponds to the premium and other finance expenses related
to the redemption of Compañia Minera Ares' ("CMA") bond (refer to
note 16 (2)).
2. Corresponds to the current tax credit generated by the
premium and other finance expenses related to the redemption of
CMA's bond.
For the six months period ended 30 June 2017, the exceptional
items are as follows:
3. Corresponds to the impairment of the Arcata mine unit of
US$26,281,000, and the reversal of impairment related to the
Pallancata mine unit of US$31,892,000 and the San Felipe project of
US$5,341,000.
4. Corresponds to the deferred tax charge generated by the
reversal on impairment of the Pallancata mine unit, net by the
impairment of the Arcata mine unit.
8 Finance income and finance cost before exceptional items
The Group recognised the following finance income and finance
costs before exceptional items:
Six-months ended
30 June
----------------------------------
2018 (Unaudited) 2017 (Unaudited)
US$000 US$000
---------------- ----------------
Finance income:
Interest on deposits and liquidity funds 991 420
Interest on loans 59 74
Gain on discount of other receivables(1) - 1,940
Gain on discount of deferred income 38 203
Others - 63
---------------- ----------------
Total 1,088 2,700
---------------- ----------------
Finance cost:
Interest on bank loans (2,335) (70)
Interest on bond (1,487) (12,132)
Other interest (473) (537)
---------------- ----------------
Total interest expense (4,295) (12,739)
---------------- ----------------
Unwind of discount rate (771) (184)
Loss from changes in the fair value of financial
instruments (946) -
Others (470) (365)
---------------- ----------------
Total (6,482) (13,288)
---------------- ----------------
1. Mainly corresponds to the gain on discount of tax credits in Argentina.
Finance costs above are presented net of borrowing costs
capitalised in property, plant and equipment amounting to US$Nil
(2017: US$100,000).
9 Income tax expense
Six-months ended
30 June
----------------------------------
2018 (Unaudited) 2017 (Unaudited)
US$000 US$000
---------------- ----------------
Current tax
Current income tax expense 5,453 5,501
Current mining royalty charge 2,383 1,941
Current special mining tax charge 1,771 969
Withholding taxes - -
---------------- ----------------
Total 9,607 8,411
---------------- ----------------
Deferred tax
Origination and reversal of temporary differences 18,229 3,918
---------------- ----------------
Total 18,229 3,918
---------------- ----------------
Total taxation charge in the income statement 27,836 12,329
================ ================
The pre-exceptional tax charge for the period was US$32,658,000
(2017: US$10,674,000).
The effective tax rate for corporate income tax for the six
months ended 30 June 2018 is 61.4% (30 June 2017: 23.6%), compared
to the weighted average statutory tax rate of 31.2%, and 72.2%
including the mining royalty and the special mining tax (30 June
2017: 32.1% and 30.9% including the mining royalty and the special
mining tax).
Increase in the effective tax rate from 23.6% to 61.4% is mainly
explained by the foreign exchange effect in tax bases due to the
devaluation of the Argentinian peso. As of 30 June 2018, the effect
was a loss of US$8,733,000 (2017: gain of US$1,813,000).
10 Property, plant and equipment
During the six months ended 30 June 2018, the Group acquired and
developed assets with a cost of US$59,356,000 (30 June 2017:
US$56,202,000). The additions for the six months ended 30 June 2018
relate to:
Total additions
of
Other property property
Mining properties plant and plant and
and development equipment equipment
US$000 US$000 US$000
----------------- --------------- ---------------
San Jose 11,590 9,634 21,224
Pallancata 9,650 1,983 11,633
Inmaculada 16,185 2,949 19,134
Arcata 5,642 325 5,967
Crespo 422 - 422
Others - 976 976
----------------- --------------- ---------------
43,489 15,867 59,356
================= =============== ===============
Assets with a net book value of US$20,000 were disposed of by
the Group during the six month period ended 30 June 2018 (30 June
2017: US$674,000) resulting in a net gain on disposal of US$38,000
(30 June 2017: loss of US$78,000).
For the six months ended 30 June 2018, the depreciation charge
on property, plant and equipment was US$83,908,000 (30 June 2017:
US$85,293,000).
There are no indicators of impairment for the six months ended
30 June 2018.
Impairment test as at 30 June 2017:
-- Management determined there were triggers of impairment in
the Arcata mine unit as it has experienced difficulties to replace
production with incremental resources and to convert resources into
reserves. An impairment test was carried out resulting in an
impairment charge of US$26,281,000 (US$25,344,000 in property,
plant and equipment and US$937,000 and evaluation and exploration
assets).
-- In the case of the Pallancata mine unit, there was an
improvement in terms of tonnage and grades of its resources and
reserves due to the Pablo vein. An impairment test was carried out
resulting in an impairment reversal of US$31,892,000 (US$31,509,000
in property, plant and equipment and US$383,000 and evaluation and
exploration assets).
-- In addition, as a result of the proceeds received in the
period, management evaluated the value of the San Felipe Project,
recognising an impairment reversal of US$5,341,000 (all in
evaluation and exploration assets) (refer to notes 7, 11 and
16).
The recoverable values of these CGUs were determined using a
fair value less costs of disposal (FVLCD) methodology. FVLCD was
determined using a combination of level 2 and level 3 inputs to
construct a discounted cash flow model to estimate the amount that
would be paid by a willing third party in an arm's length
transaction. With respect to the San Felipe CGU, given the early
stage of the project, to determine the FVLCD, the Group applied a
value in-situ methodology which applies a realisable 'enterprise
value' to unprocessed mineral resources. The enterprise value used
is based on observable external market information.
The key assumptions on which management has based its
determination of FVLCD and the associated recoverable values
calculated are gold and silver prices, production costs, the
discount rate and the value per in-situ regarding the San Felipe
project. Gold and silver prices used, discount rate applied and
value per in-situ per zinc equivalent tonne are presented
below.
Gold and silver prices
US$ per oz. 2017 2018 2019 2020 Long-term
------------ ----- ----- ----- ----- ---------
Gold 1,250 1,295 1,300 1,300 1,300
------------ ----- ----- ----- ----- ---------
Silver 18 19 19 19 20
------------ ----- ----- ----- ----- ---------
Other key assumptions
Arcata Pallancata San Felipe
-------------------------------------------- ------ ---------- ----------
Discount rate (post tax) 5.4% 5.4% n/a
-------------------------------------------- ------ ---------- ----------
Value per in-situ per zinc equivalent tonne
(US$) n/a n/a 17.92
-------------------------------------------- ------ ---------- ----------
Current carrying value of CGU, net of deferred Arcata Pallancata San Felipe
tax (US$000)
----------------------------------------------- ------ ---------- ----------
30 June 2017 21,871 91,357 4,662
----------------------------------------------- ------ ---------- ----------
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 Arcata Pallancata San Felipe
following changes (US$000)
------------------------------------------ -------- ---------- ----------
Prices (10% decrease) (19,068) - n/a
------------------------------------------ -------- ---------- ----------
Post tax discount rate (3% increase) (889) - n/a
------------------------------------------ -------- ---------- ----------
Production costs (10% increase) (12,480) - n/a
------------------------------------------ -------- ---------- ----------
Value per in-situ tonne (10% decrease) n/a n/a (1,145)
------------------------------------------ -------- ---------- ----------
11 Evaluation and exploration assets
During the six months ended 30 June 2018, the Group capitalised
evaluation and exploration costs of US$6,003,000 (30 June 2017:
US$2,552,000). The additions correspond to the following
properties:
US$000
------
Inmaculada 3,520
Arcata 1,361
Volcan 448
Others 674
6,003
======
There were no transfers from evaluation and exploration assets
to property, plant and equipment during the period (2017:
US$nil).
At 30 June 2017, the Group has recorded an impairment charge
with respect to evaluation and exploration assets of the Arcata
mine unit of US$937,000, and a reversal of impairment with respect
to the Pallancata mine unit of US$383,000 and the San Felipe
project of US$5,341,000. The FVLCD calculation is detailed in note
10.
12 Other financial assets
As at As at
31 December
30 June 2018 2017
(unaudited)
US$000 US$000
------------- ------------
Other financial assets
Warrants 385 1,333
Embedded derivatives(1) - 1,258
------------- ------------
Other financial assets 385 2,591
------------- ------------
1 Sales of concentrate and certain gold and silver volumes are
provisionally priced at the time the sale is recorded (note 13). As
a result of adopted IFRS 15, as at 30 June 2018 the balance is
presented within trade receivables.
13 Financial instruments
Fair value hierarchy
The Group uses the following hierarchy for determining and
disclosing the fair value of financial instruments by valuation
technique:
Level 1: quoted (unadjusted) prices in active markets for
identical assets or liabilities.
Level 2: other techniques for which all inputs which have a
significant effect on the recorded fair value are observable,
either directly or indirectly.
Level 3: techniques which use inputs which have a significant
effect on the recorded fair value that are not based on observable
market data.
At 30 June 2018 and 31 December 2017, the Group held the
following financial instruments measured at fair value:
As at 30
June 2018
(unaudited) Level 1 Level 2 Level 3
US$000 US$000 US$000 US$000
------------- -------- -------- --------
Assets measured at fair value
Equity shares 3,418 3,418 - -
Warrants (note 12) 385 385 - -
Trade and other receivables 75,621 - - 75,621
79,424 3,803 - 75,621
------------- -------- -------- --------
As at 31
December Level 1 Level 2 Level 3
2017 US$000 US$000 US$000 US$000
Assets measured at fair value
Equity shares 5,683 5,683 - -
Warrants (note 12) 1,333 1,333 - -
Embedded derivatives (note 12) 1,258 - - 1,258
------------- -------- -------- --------
8,274 7,016 - 1,258
------------- -------- -------- --------
During the six months ended 30 June 2018 and the year ended 31
December 2017, there were no transfers between these levels.
The reconciliation of the financial instruments categorised as
Level 3 is as follows:
As at 30
June As at
31 December
2018 2017
(unaudited)
US$000 US$000
------------- -------------
Beginning balance 81,066 (1,726)
Net change in trade and other receivable (1,197) -
Changes in fair value (3,302) 2,160
Realised embedded derivatives during the period (946) 824
------------- -------------
Ending balance 75,621 1,258
------------- -------------
Valuation techniques:
Level 3: Embedded derivatives and equity shares
Embedded derivatives: Sales of concentrate and certain gold and
silver volumes are provisionally priced at the time the sale is
recorded. The price is then adjusted after an agreed period of time
(usually linked to the length of time it takes for the smelter to
refine and sell the concentrate or for the refiner to process the
dore into gold and silver), with the Group either paying or
receiving the difference between the provisional price and the
final price. This price exposure is considered to be an embedded
derivative and in accordance of IFRS 9, will no longer be separated
from the host contract and therefore the revaluation of
provisionally priced contracts are disclosed within the receivable
of the host contract in "trade and other receivables. The gain or
loss that arises on the fair value of the embedded derivative is
recorded in 'Revenue' (note 4). The selling price of metals can be
reliably measured as these are actively traded on international
exchanges but the estimated metal content is a non-observable input
to this valuation.
14 Deferred income tax assets and liabilities
The changes in the net deferred income tax assets/(liabilities)
are as follows:
As at 30
June As at
31 December
2018 2017
(unaudited)
US$000 US$000
------------- -------------
Beginning of the period (53,640) (64,944)
Income statement (charge)/credit (18,229) 11,304
End of the period (71,869) (53,640)
============= =============
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 amounts after offset, as presented on the face of the
Statement of financial position, are as follows:
As at 30
June As at
31 December
2018 2017
(unaudited)
US$000 US$000
------------- -------------
Deferred income tax assets 2,719 2,400
Deferred income tax liabilities (74,588) (56,040)
Net deferred income tax assets/(liabilities) (71,869) (53,640)
============= =============
The variance during the period is mainly explained by the
foreign exchange effect of the devaluation of the Argentinian
peso.
15 Cash and cash equivalents
As at 30
June As at
31 December
2018 2017
(unaudited)
US$000 US$000
------------- -------------
Cash at bank 379 335
Liquidity funds(1) - 2,869
Current demand deposit accounts(2) 49,162 61,612
Time deposits(3) 92,138 192,172
------------- -------------
Cash and cash equivalents 141,679 256,988
============= =============
1 The liquidity funds are mainly invested in certificate of
deposits, commercial papers and floating rate notes with a weighted
average maturity of 29 days as at 31 December 2017: 29 days.
2 Relates to bank accounts which are readily accessible to the
Group and bear interest.
3 These deposits have an average maturity of 14 days (as at 31
December 2017: 32 days).
16 Borrowings
The movement in borrowings during the six month period to 30
June 2018 is as follows:
As at 30
As at 1 June 2018
January Additions Repayments Reclassifications (Unaudited)
2018 US$000 US$000 US$000 US$000 US$000
------------- ---------- ----------- ------------------ -------------
Current
Bank loans(1) 59,084 59,835 (9,959) - 108,960
Bond payable(2) 8,779 17,833 (23,792) (2,820) -
67,863 77,668 (33,751) (2,820) 108,960
Non-current
Bank loans(1) - 100,000 - - 100,000
Bond payable(2) 291,955 - (294,775) 2,820 -
291,955 100,000 (294,775) 2,820 100,000
------------- ---------- ----------- ------------------ -------------
Accrued interest: (8,863) (20,168) 24,751 2,820 (1,460)
------------- ---------- ----------- ------------------ -------------
Before accrued interest 350,955 157,500 (303,775) 2,820 207,500
------------- ---------- ----------- ------------------ -------------
1 Relates to pre-shipment loans for a total amount of
US$7,561,000 (2017: US$9,043,000) which are credit lines given by
banks to meet payment obligations arising from the exports of the
Group. In addition the balance at 30 June 2018 includes
US$201,399,000 credit lines with the BBVA Bank, Nova Scotia Bank
and Citibank.
2 Relates to the issuance of US$350,000,000 7.75% Senior
Unsecured Notes on 23 January 2014, fully redeemed on 23 January
2018. The Group repaid capital of US$294,775,000, plus interest of
US$11,423,000, premium of US$11,423,000 and their corresponding
withholding tax of US$946,000. The charge in profit and loss during
the period is US$17,833,000, of which US$1,487,000 corresponds to
the interest and its corresponding withholding tax generated in the
period, and the balance of US$16,346,000, recognised as an
exceptional item, includes the premium of US$11,423,000, its
corresponding withholding tax of US$473,000 and the recognition of
capitalised expenses related to obtaining the bond of
US$4,450,000.
The carrying amount of current borrowings approximates their
fair value. The carrying amount and fair value of the non--current
borrowings are as follows:
Carrying amount Fair value
-------------------------- --------------------------
As at 30
June 2018
As at 30
June 2018
(Unaudited) (Unaudited)
As at 31 As at 31
December December
US$000 2017 US$000 US$000 2017 US$000
------------- ------------ ------------ ------------ ------------
Bank loans 100,000 - 95,570 -
Bond payable - 291,955 - 306,566
------------- ------------ ------------ ------------ ------------
Total 100,000 291,955 95,570 306,566
------------- ------------ ------------ ------------ ------------
17 Deferred income
As at
30 June 2018 As at
(unaudited) 31 December
US$000 2017 US$000
------------- -------------
San Felipe contract(1) 30,396 29,396
El Mosquito contract(2) 1,175 1,413
------------- -------------
31,571 30,809
Less current balance (400) (400)
------------- -------------
Non-current balance 31,171 30,409
============= =============
1 On 3 August 2011, the Group entered into an agreement with
Impulsora Minera Santa Cruz ("IMSC") whereby IMSC acquired (a) the
right to explore the San Felipe properties and (b) an option to
purchase the related concessions (the "2011 Agreement"). Under the
terms of the 2011 Agreement the Group has received US$29,396,000 as
non-refundable payments as at 31 December 2017.
These payments will reduce the total consideration that IMSC
will be required to pay upon exercise of the option and constitute
an advance of the final purchase price (rather than an option
premium) and, as such, have been recorded as deferred income.
On 30 November 2016, IMSC renegotiated certain terms of the 2011
Agreement including an extension of the validity of the agreement
to 1 December 2017. In exchange for this extension, the Group
received, on 9 March 2017, 13,415,000 ordinary shares of Santa Cruz
Silver Mining ("SCSM") quoted on the Toronto Stock Exchange, at a
unit price of CAD 0.28 amounting to CAD 3,756,000 (equivalent to
US$2,780,000). The amount received included valued added tax of
US$384,000 and part consideration of US$2,396,000 which has been
recognised as deferred income.
On 28 February 2017, the Group signed a new option agreement
with IMSC for the San Felipe properties (the "2017 Agreement") for
total consideration of US$10,000,000. An initial payment of
US$2,000,000 was received in cash on 7 March 2017 (the "Initial
Payment").
In March 2017, IMSC assigned its interest in the 2017 Agreement
to Americas Silver Corporation ('ASC').
On 29 November 2017 the Group, IMSC and ASC signed an amendment
to the 2017 Agreement so as to extend the period over which the
option to purchase San Felipe could be exercised (to 15 December
2018)..
In addition to the Initial Payment, the Group collected
US$500,000 on 1 January 2018, US$500,000 on 1 April 2018 and
US$1,000,000 on 16 July 2018 (all exclusive of value added
tax).
2 On 25 April 2017 the Group signed a five year option agreement
with Minas Argentinas S.A. ("MASA") giving MASA the right to
explore and the option to purchase the Mosquito property, located
in Argentina. The Group received in cash US$2,000,000, recognising
US$1,175,000 as deferred income at 30 June 2018 (31 December 2017
US$1,413,000).
18 Equity
Share capital and share premium
The movement in share capital of the Company from 31 December
2017 to 30 June 2018 is as follows:
Number of
ordinary Share capital Share premium
shares US$000 US$000
----------------------------------- ----------- ------------- -------------
Shares issued as at 1 January 2018 507,232,310 224,315 438,041
Shares issued as at 30 June 2018 508,893,115 224,878 438,041
----------------------------------- ----------- ------------- -------------
At 30 June 2018 and 31 December 2017 all issued shares with a
par value of 25 pence each were fully paid (30 June 2018: weighted
average of US$0.442 per share, 31 December 2017: weighted average
of US$0.442 per share).
On 2 January 2018 the Group issued 1,660,805 ordinary shares
under the Restricted Share Plan, to certain employees of the Group,
including the CEO.
On 20 March 2018, 40,383 Treasury shares (31 December 2017:
40,383) with a value of US$84,000 (31 December 2017: US$286,000)
(being the cost incurred to acquire the shares) were transferred to
the CEO of the Group with respect to the Deferred Bonus Plan
benefit.
On 5 April 2018, the Group purchased 205,400 shares for a total
consideration of GBP414,000 (equivalent to US$579,000).
On 5 April 2018, 232,172 Treasury shares with a value of
US$635,000 (being the cost incurred to acquire the shares) were
transferred to the CEO of the Group with respect to the Enhanced
Long term Incentive Plan.
At 30 June 2018 the balance of Treasury shares is 42 (31
December 2017: 67,197) ordinary shares with a value of US$115 (31
December 2017: US$140,000).
19 Dividends paid and declared
Dividends declared and paid to non-controlling interests in the
six months ended 30 June 2018 were US$9,823,000 (30 June 2017:
US$8,066,000) and US$7,785,000 (30 June 2017: US$5,120,000)
respectively.
A final dividend for 2017 of US$10,000,000 was paid in the six
months ended 30 June 2018 (30 June 2017: US$6,997,000). The
Directors of the Company have declared an interim dividend in
respect of the six months ended 30 June 2018 of US$1.965 cents per
share (totalling US$10,000,000) (30 June 2017: US$6,999,000) which
will be paid to shareholders on 20 September 2018 to those
shareholders appearing on the register on 31 August 2018. These
financial statements do not reflect this dividend payable.
20 Related party transactions
There were no significant related parties transactions during
the six month period ended 30 June 2018.
21 Notes to the statement of cash flows
Six- months ended
30 June
----------------------------
2018 2017
(Unaudited) (Unaudited)
US$000 US$000
------------- -------------
Reconciliation of gain/(loss) for the period to
net cash generated from operating activities
Profit for the period 10,718 27,543
Adjustments to reconcile Group loss to net cash
inflows from operating activities
Depreciation 82,649 83,721
Amortisation of intangibles 1,039 888
Write-off of assets (net) 201 221
Impairment of assets - 26,281
Reversal of impairment of assets - (37,233)
Loss/(gain) on sale of property, plant and equipment (38) 78
Provision for obsolescence of supplies 519 289
Finance income (1,088) (2,700)
Finance costs 22,828 13,288
Income tax expense 27,836 12,329
Other 4,274 (75)
Increase/(decrease) of cash flows from operations
due to changes in assets and liabilities
Trade and other receivables (2,352) (31,917)
Income tax receivable - (750)
Other financial assets and liabilities 2,207 1,046
Inventories 10,163 13,847
Trade and other payables (18,390) (870)
Provisions 845 4,167
------------- -------------
Cash generated from operations 141,411 110,153
------------- -------------
22 Subsequent events
On 30 July 2018 the Group signed a short term loan with BBVA
Bank of US$50,000,000 (2.7%) due on 27 July 2019. The proceeds were
employed to repay the short term loan with Nova Scotia Bank of
US$50,000,000 on 30 July 2018.
Profit by operation(1)
(Segment report reconciliation) as at 30 June 2018
Consolidation
adjustment
Company (US$000) Arcata Pallancata San Jose Inmaculada and others Total/HOC
-------------------------------------- -------- ---------- -------- ---------- ------------- ---------
Revenue 30,732 62,790 102,935 175,674 197 372,328
Cost of sales (pre-consolidation) (31,171) (42,893) (86,516) (102,375) (4,304) (267,259)
--------------------------------------- -------- ---------- -------- ---------- ------------- ---------
Consolidation adjustment (295) (958) (1,693) (1,358) 4,304 -
Cost of sales (post-consolidation) (31,466) (43,851) (88,209) (103,733) - (267,259)
Production cost excluding
Depreciation (27,610) (30,087) (61,331) (54,939) - (173,967)
Depreciation in
production
cost (4,485) (15,681) (23,283) (39,500) - (82,949)
Other items - - (939) - - (939)
Change in inventories 629 1,917 (2,656) (9,294) - (9,404)
--------------------------------------- -------- ---------- -------- ---------- ------------- ---------
Gross profit (439) 19,897 16,419 73,299 (4,107) 105,069
--------------------------------------- -------- ---------- -------- ---------- ------------- ---------
Administrative expenses - - - - (21,691) (21,691)
Exploration expenses - - - - (13,048) (13,048)
Selling expenses (866) (815) (3,104) (459) 2,740 (2,504)
Other income/(expenses) - - - - (2,997) (2,997)
--------------------------------------- -------- ---------- -------- ---------- ------------- ---------
Operating profit/(loss) before
impairment (1,305) 19,082 13,315 72,840 (39,103) 64,829
--------------------------------------- -------- ---------- -------- ---------- ------------- ---------
(Impairment)/impairment reversal
and write-off of non-financial
assets - - - - (201) (201)
Finance income - - - - 1,088 1,088
Finance costs - - - - (22,828) (22,828)
Foreign exchange - - - - (4,334) (4,334)
--------------------------------------- -------- ---------- -------- ---------- ------------- ---------
Profit/(loss) from continuing
operations before income
tax (1,305) 19,082 13,315 72,840 (65,378) 38,554
--------------------------------------- -------- ---------- -------- ---------- ------------- ---------
Income tax - - - - (27,836) (27,836)
--------------------------------------- -------- ---------- -------- ---------- ------------- ---------
Profit/(loss) for the period
from continuing operations (1,305) 19,082 13,315 72,840 (93,214) 10,718
--------------------------------------- -------- ---------- -------- ---------- ------------- ---------
1 On a post exceptional basis.
SHAREHOLDER INFORMATION
Company website
Hochschild Mining plc Interim and Annual Reports and results
announcements are available via the internet on our website at
www.hochschildmining.com. Shareholders can also access the latest
information about the Company and press announcements as they are
released, together with details of future events and how to obtain
further information.
Registrars
The Registrars can be contacted as follows for information about
the AGM, shareholdings, dividends and to report changes in
personal details:
BY POST
Link Asset Services, The Registry, 34 Beckenham Road, Beckenham,
Kent BR3 4TU.
BY TELEPHONE
If calling from the UK: 0371 664 0300 (calls cost 12p per minute
plus your phone company's access charge. Lines are open
9.00am-5.30pm Mon to Fri excluding public holidays in England and
Wales).
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 4 September 2018 in respect of the 2018 interim
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 2018 interim dividend,
a dividend mandate form, also available from the Company's
registrars, should be completed and returned to the registrars by 4
September 2018. 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 2018
Ex-dividend date 30 August
Record date 31 August
Deadline for return of currency election forms 4 September
Payment date 20 September
----------------------------------------------- -------------
17 Cavendish Square
London
W1G 0PH
Registered in England and Wales with Company Number 5777693
[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/(gain) and income tax plus depreciation, and
exploration expenses other than personnel and other exploration
related fixed expenses and other non-cash (income)/expenses
[3]On a pre-exceptional basis
[4]All equivalent figures assume the average gold/silver ratio
of 74:1
[5]Based on a cut-off grade of 135g/t silver equivalent for
Millet and Divina veins and 169g/t for the remaining veins
[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]Calculated using a gold silver ratio of 74:1
[13]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
[14]Includes pre-shipment loans and short term interest
payables
[15]Includes additions in property, plant and equipment and
evaluation and exploration assets (confirmation of resources) and
excludes increases in the expected closure costs of mine asset
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
IR GMGMRLDKGRZM
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