TIDMHOC
RNS Number : 9498I
Hochschild Mining PLC
14 August 2019
_____________________________________________________________________________________
14 August 2019
Interim Results for the six months ended 30 June 2019
Financial highlights
-- Revenue of $354.5 million (H1 2018: $372.3 million)([1])
-- Adjusted EBITDA of $153.7 million (H1 2018: $161.9
million)([2])
-- Pre-exceptional profit before income tax of $41.5 million (H1
2018: $54.9 million)
-- Post-exceptional profit before income tax of $29.5 million
(H1 2018: $38.6 million)
-- Adjusted basic earnings per share of $0.04 (H1 2018:
$0.05)([3])
-- Cash and cash equivalent balance of $95.4 million as at 30
June 2019 (31 December 2018: $79.7 million)
-- Gross debt of $157.8 million as at 30 June 2019 (31 December
2018: $157.1 million)
-- Net debt of $62.4 million as at 30 June 2019 (31 December
2018: $77.4 million)
-- Interim dividend of 2.0 cents per share totalling $10.2
million (H1 2018: 1.965 cents per share totalling $10.0
million)
H1 2019 operational delivery
-- All-in sustaining costs (AISC) from operations of $921 per
gold equivalent ounce (H1 2018: $909 per ounce) or $11.4 per silver
equivalent ounce (H1 2018: $11.2 per ounce)[4]
-- 2nd highest half-year of attributable production in
Hochschild's history: 245,325 gold equivalent ounces or 19.9
million silver equivalent ounces (H1 2018: 256,939 gold equivalent
ounces or 20.8 million silver equivalent ounces)
-- Record production of 135,033 gold equivalent ounces at
Inmaculada (H1 2018: 134,789 ounces)
Exploration highlights
-- Several new veins discovered to the west of Angela at
Inmaculada
-- Infill drilling ongoing at Inmaculada - Millet grade already
increasing
-- Drilling started at Palca zone
-- New programmes scheduled for H2 at Cochaloma, Pablo Sur and
Corina
H2 2019 outlook([5])
-- On track to deliver overall 2019 production target of 457,000
gold equivalent ounces (37.0 million silver equivalent ounces)
-- 2019 all-in sustaining costs on track to meet $960-$1,000 per
gold equivalent ounce guidance ($11.8-12.3 per silver equivalent
ounce)
$000 unless stated Six months to 30 June 2019 Six months to 30 June 2018 % change
--------------------------- ---------------------------
Attributable silver production (koz) 8,687 9,674 (10)
Attributable gold production (koz) 138 138 -
Revenue 354,450 372,328 (5)
Adjusted EBITDA 153,734 161,906 (5)
Profit from continuing operations
(pre-exceptional) 25,085 22,242 13
Profit from continuing operations
(post-exceptional) 16,661 10,718 55
Basic earnings per share (pre-exceptional) $ 0.04 0.05 (20)
Basic earnings per share (post-exceptional) $ 0.03 0.03 -
------------------------------------------------- --------------------------- --------------------------- ---------
IGNACIO BUSTAMANTE, CHIEF EXECUTIVE OFFICER SAID:
"Hochschild has delivered another strong first half operational
performance with the second highest level of production in our
history and solid cost control leaving us firmly on track to meet
our 2019 goals. In parallel, we are in the middle of another busy
period of brownfield exploration with new veins discovered at
Inmaculada and the first campaign at the Palca zone already
underway whilst further programmes are due in the second half at
all our operations as well as in new areas such as Corina,
Cochaloma and Pablo Sur. Healthy cashflow generation has continued
to strengthen our balance sheet and we are therefore in a good
position to execute our brownfield and greenfield strategy in
addition to assessing acquisitions and investing in our innovation
programme.
Safety
I am delighted to report that our Safety Culture Transformation
Plan which was launched in 2017 is continuing to deliver positive
results. This wide-ranging programme, which encompasses frequent
training sessions at all levels and enhancements to our risk
management systems, has undoubtedly contributed to the longest
continuous period in our corporate history in which there have been
zero lost time accidents - over 120 days. This is reflected in our
safety frequency index for the first half of 0.51 (H1 2018: 2.1)
which is the lowest of any six-month period since 2007. We will
continue to implement decisively the Transformation Plan to
underline our commitment to safety first.
Operations
Hochschild's output in the first half of 2019 was 245,325 gold
equivalent ounces (19.9 million silver equivalent ounces) almost
matching our record in H1 2018 (256,939 gold equivalent ounces) and
this was achieved despite the absence of the Arcata mine which was
placed on temporary care and maintenance in February 2019. This
result was mainly due to consistent performance from all our mines
and leaves us in a strong position to meet our full-year target of
457,000 gold equivalent ounces or 37.0 million silver equivalent
ounces. Inmaculada delivered a record half-year production of
135,033 gold equivalent ounces (H1 2018: 134,789 ounces) driven by
better than expected grades and also boosted by inventory in
process at the beginning of the year leaving the mine well ahead of
the run rate to meet its forecasted 241,000 gold equivalent ounces.
All-in sustaining costs at $726 per gold equivalent ounce were
lower than guidance reflecting the good operational performance of
the mine. However, with ore grades normalising in the second half,
we reiterate our full year cost guidance of $790-$830 per gold
equivalent ounce.
At Pallancata, we have now shifted production over to the much
wider Pablo vein and consequently output improved by almost 16%
versus H1 2018 to 4.9 million silver equivalent ounces (H1 2018:
4.2 million ounces) with the mine's all-in sustaining cost at a
competitive $12.3 per silver equivalent ounce (H1 2018: $11.7 per
ounce). In Argentina, better than expected grades led to the
reliable San Jose operation increasing production by 5% in the
first half to 7.1 million silver equivalent ounces (H1 2018: 6.8
million ounces) with costs in line with expectations at $14.4 per
silver equivalent ounce (H1 2018: $14.0 per ounce).
Exploration
The 2019 brownfield programme is underway and includes drilling
in and around the Angela vein at Inmaculada with current results
identifying new structures to the west which we expect to yield
substantial additional resources. Furthermore, we are confident
that infill drilling being carried out at the new veins discovered
in 2018 will improve grade consistency. We have also begun a
surface drill programme to the north-west of Inmaculada at the
Palca zone, with early results demonstrating mineralisation and a
significant number of further targets to be drilled in the second
half. During this period, we can also look forward to campaigns at
Cochaloma to the south-west, at Pablo Sur close to where we are
currently mining and at the promising Corina zone to the north of
the Selene plant, where we have already begun a 3,500 metre
drilling programme. Finally, at San Jose we have carried out
further exploration of the polymetallic Aguas Vivas deposit in the
north-west and will focus in the second half on structures to the
south of the San Jose mine and magnetometry work on the area near
to Newmont Goldcorp's Cerro Negro deposit.
Financial results
Total Group production was moderately lower versus H1 2018 and
with a 7% fall in the average silver price achieved only partially
offset by a 2% rise in the gold price achieved, revenue reduced
slightly to $354.5 million (H1 2018: $372.3 million). All-in
sustaining costs were lower than expected at $11.4 per silver
equivalent ounce (H1 2018: $11.2 per ounce) but the budgeted rise
in exploration expenses and also in selling expenses (resulting
from the reintroduction of export taxes in Argentina in Q3 2018)
has led to Adjusted EBITDA of $153.7 million (H1 2018: $161.9
million). These increases in expenses were not fully offset by
falling interest costs and a reduced tax charge and therefore
pre-exceptional earnings per share were moderately lower at $0.04
(H1 2018: $0.05). Post-exceptional earnings per share was held
steady at $0.03 (H1 2018: $0.03) mainly due to the payment of the
premium of $11.4 million to redeem the senior notes in H1 2018
being offset by this year's exceptional costs of $11.9 million
associated with the temporary closure of the Arcata mine in
February 2019.
Financial position
Our balance sheet remains in a strong position with cash and
cash equivalents of approximately $95.4 million at the end of June
(31 December 2018: $79.7 million) and gross debt of $157.8 million
(31 December 2018: $157.1 million). In July 2019, we were able to
refinance $150.0 million of short term debt with local Peruvian
banks resulting in a significant reduction in the average borrowing
rate from 3.1% to 2%.
Outlook
In mid-June, the gold price started to rise significantly on the
back of global uncertainty and a fall in the US dollar and reached
levels not seen in six years. Silver also rose in July and
therefore we expect the Company's second half cashflow generation
to be healthy provided the price strength is maintained. However,
we are also confident that Hochschild's ongoing solid operational
performance, disciplined cost control and a strong balance sheet
leave us in an advantageous position to execute a busy second half
of brownfield and greenfield activity and continue to assess value
accretive acquisitions. The Board is pleased to declare an interim
dividend of 2.0 cents per share ($10.2 million) which reflects the
ongoing successful strategic and operational performance."
_______________________________________________________________________________________
A live conference call & audio webcast will be held at
2.30pm (London time) on Wednesday 14 August 2019 for analysts and
investors.
For a live webcast of the presentation please click on the link
below:
https://webcasting.brrmedia.co.uk/broadcast/5cb0a5b9eb566331974d6a39
Conference call dial in details:
UK: +44 (0)330 336 9125 (Please use the following confirmation
code: 6706139).
_______________________________________________________________________________________
Enquiries:
Hochschild Mining PLC
Charles Gordon +44 (0)20 3709 3264
Head of Investor Relations
Hudson Sandler
Charlie Jack +44 (0)207 796 4133
Public Relations
_______________________________________________________________________________________
Non-IFRS Financial Performance Measures
The Company has included certain non-IFRS measures in this news
release. The Company believes that these measures, in addition to
conventional measures prepared in accordance with IFRS, provide
investors an improved ability to evaluate the underlying
performance of the Company. The non-IFRS measures are intended to
provide additional information and should not be considered in
isolation or as a substitute for measures of performance prepared
in accordance with IFRS. These measures do not have any
standardised meaning prescribed under IFRS, and therefore may not
be comparable to other issuers.
About Hochschild Mining PLC:
Hochschild Mining PLC is a leading precious metals company
listed on the London Stock Exchange (HOCM.L / HOC LN) with a
primary focus on the exploration, mining, processing and sale of
silver and gold. Hochschild has over fifty years' experience in the
mining of precious metal epithermal vein deposits and currently
operates three underground epithermal vein mines, two located in
southern Peru and one in southern Argentina. Hochschild also has
numerous long-term projects throughout the Americas.
OPERATING REVIEW
OPERATIONS
Note: silver/gold equivalent production figures assume a
gold/silver ratio of 81:1.
Production
In H1 2019, Hochschild produced 245,325 gold equivalent ounces
or 19.9 million silver equivalent ounces, the second highest in the
Company's history. This was mainly due to solid performances from
all the Company's mines especially at Inmaculada, where better than
expected grades helped to deliver a record half-year of
production.
Total group production
Six months to Six months to
30 June 2019 30 June 2018
---------------
Silver production
(koz) 10,237 11,135
Gold production (koz) 162.16 160.47
Total silver equivalent
(koz) 23,371 24,133
Total gold equivalent
(koz) 288.53 297.94
Silver sold (koz) 10,221 11,067
Gold sold (koz) 160.25 158.01
------------------------- --------------- --------------
Total production includes 100% of all production, including
production attributable to Hochschild's minority shareholder at San
Jose.
Attributable group production
Six months to Six months to
30 June 2019 30 June 2018
---------------
Silver production
(koz) 8,687 9,674
Gold production (koz) 138.08 137.51
Silver equivalent
(koz) 19,871 20,812
Gold equivalent (koz) 245.33 256.94
----------------------- --------------- --------------
Attributable production includes 100% of all production from
Arcata, Inmaculada, Pallancata and 51% from San Jose.
Costs
All-in sustaining cost from operations in H1 2019 was $921 per
gold equivalent ounce or $11.4 per silver equivalent ounce (H1
2018: $909 per gold equivalent ounce or $11.2 per silver equivalent
ounce). The Company is maintaining its guidance of all-in
sustaining cost from operations in 2019 at between $960 and $1,000
per gold equivalent ounce (or $11.8 and $12.3 per silver equivalent
ounce). Inmaculada's costs are expected to rise in the second half
due to timing in the execution of sustaining and development
capital expenditure and lower production.
Inmaculada
The 100% owned Inmaculada gold/silver underground operation is
located in the Department of Ayacucho in southern Peru. It
commenced operations in June 2015.
Inmaculada summary Six months Six months % change
to to
30 June 2019 30 June 2018
--------------- --------------
Ore production (tonnes) 670,487 670,713 -
Average silver grade (g/t) 157 153 3
Average gold grade (g/t) 4.62 4.58 1
Silver produced (koz) 2,950 3,115 (5)
Gold produced (koz) 98.61 96.33 2
Silver equivalent produced
(koz) 10,938 10,918 -
Gold equivalent produced
(koz) 135.03 134.79 -
Silver sold (koz) 2,942 3,108 (5)
Gold sold (koz) 97.48 95.35 2
Unit cost ($/t) 90.8 83.5 9
Total cash cost ($/oz Au
co-product) 480 466 3
All-in sustaining cost ($/oz
Au Eq) 726 631 15
------------------------------ --------------- -------------- ---------
Production
In the first half of 2019, Inmaculada produced 135,033 gold
equivalent ounces, in line with the same period of 2018 (134,789
gold equivalent ounces), with the solid result reflecting steady
tonnage, strong grades and a contribution from products in process
from Q4 2018.
Costs
All-in sustaining costs were lower than expectations at $726 per
gold equivalent ounce (H1 2018: $631 per ounce). This was mostly
due to the impact of higher than expected grades as well as the
effect of the inventory in process (mentioned above). However, in
the second half, costs are expected to normalise with sustaining
and development capital expenditure scheduled to increase. Costs
rose versus H1 2018 due to increased mine development costs to
access the new vein discoveries and reduced low cost mineral from
mine developments.
Pallancata
The 100% owned Pallancata silver/gold property is located in the
Department of Ayacucho in southern Peru. Pallancata commenced
production in 2007. Ore from Pallancata is transported 22km to the
Selene plant for processing.
Pallancata summary Six months Six months % change
to to
30 June 2019 30 June 2018
--------------- --------------
Ore production (tonnes) 472,294 285,568 65
Average silver grade (g/t) 284 399 (29)
Average gold grade (g/t) 1.01 1.47 (31)
Silver produced (koz) 3,812 3,278 16
Gold produced (koz) 13.44 11.86 13
Silver equivalent produced
(koz) 4,901 4,238 16
Gold equivalent produced
(koz) 60.51 52.33 16
Silver sold (koz) 3,768 3,256 16
Gold sold (koz) 13.20 11.58 14
Unit cost ($/t) 80.9 101.9 (21)
Total cash cost ($/oz Ag
co-product) 8.6 8.0 8
All-in sustaining cost ($/oz
Ag Eq) 12.3 11.7 5
------------------------------ --------------- -------------- ---------
Production
Pallancata's output in H1 2019 was 4.9 million silver equivalent
ounces, a 16% improvement on the corresponding period of 2018 (H1
2018: 4.2 million ounces), reflecting full production from the
wider but lower grade Pablo vein.
Costs
All-in sustaining costs were better than guidance at $12.3 per
silver equivalent ounce (H1 2018: $11.7 per ounce), mainly due to
capital expenditure being second half weighted in 2019. The AISC
figure increased versus H1 2018, as expected, in line with the full
production from the wider, but lower-grade Pablo vein.
San Jose
The San Jose silver/gold mine is located in Argentina, in the
province of Santa Cruz, 1,750km south west of Buenos Aires. San
Jose commenced production in 2007. Hochschild holds a controlling
interest of 51% in the mine and is the mine operator. The remaining
49% is owned by the minority interest, McEwen Mining Inc.
San Jose summary Six months Six months % change
to to
30 June 2019 30 June 2018
--------------- --------------
Ore production (tonnes) 251,753 264,341 (5)
Average silver grade (g/t) 446 407 10
Average gold grade (g/t) 6.89 6.34 9
Silver produced (koz) 3,162 2,982 6
Gold produced (koz) 49.14 46.86 5
Silver equivalent produced
(koz) 7,143 6,778 5
Gold equivalent produced
(koz) 88.18 83.68 5
Silver sold (koz) 3,189 2,955 8
Gold sold (koz) 48.89 46.00 6
Unit cost ($/t) 229.2 241.6 (5)
Total cash cost ($/oz Ag
co-product) 9.3 10.6 (12)
All-in sustaining cost ($/oz
Ag Eq) 14.4 14.0 3
------------------------------ --------------- -------------- ---------
Production
First half total production at San Jose was 7.1 million silver
equivalent ounces, ahead of the same period of 2018 (H1 2018: 6.8
million ounces) due to better than expected grades.
Costs
All-in sustaining costs were $14.4 per silver equivalent ounce
(H1 2018: $14.0 per ounce) with the increase versus the same period
of last year due to the reintroduction of export taxes, local
inflation and slightly reduced treated tonnage partially offset by
the devaluation of the Argentinian peso and higher gold and silver
grades.
Arcata
The 100% owned Arcata underground operation is located in the
Department of Arequipa in southern Peru. It commenced production in
1964. In February 2019, Hochschild suspended operations at Arcata
and placed it on temporary care and maintenance.
Arcata summary Six months Six months % change
to to
30 June 2019 30 June 2018
--------------- --------------
Ore production (tonnes) 37,049 188,522 (80)
Average silver grade (g/t) 298 326 9
Average gold grade (g/t) 0.94 1.01 (7)
Silver produced (koz) 311 1,760 (82)
Gold produced (koz) 0.97 5.42 (82)
Silver equivalent produced
(koz) 390 2,199 (82)
Gold equivalent produced
(koz) 4.81 27.15 (82)
Silver sold (koz) 322 1,748 (82)
Gold sold (koz) 0.67 5.08 (87)
Unit cost ($/t) 184.5 146.1 26
Total cash cost ($/oz Ag
co-product) 20.5 14.7 39
All-in sustaining cost ($/oz
Ag Eq) 22.4 18.8 19
------------------------------ --------------- -------------- ---------
Production
Production at Arcata in the first half was 0.4 million silver
equivalent ounces (H1 2018: 2.2 million ounces).
EXPLORATION
Inmaculada
In the first half of 2019, almost 8,500m of potential resource
drilling was carried out at the newly-discovered Susana Beatriz,
Facundo and Salvador structures to the west of the Angela vein.
Also, 9,172m of resource drilling was executed at the Angela and
the newly discovered PIlar vein.
Vein Results (potential resource drilling)
Salvador ANG-19-012: 2.1m @ 41.0g/t Au & 480g/t
Ag
------------------------------------------
Susana Beatriz ANE-19-010: 4.2m @ 2.9g/t Au & 280g/t Ag
IMM-19-001: 1.5m @ 8.1g/t Au & 114g/t Ag
IMM-19-002: 2.5m @ 2.5g/t Au & 105g/t Ag
------------------------------------------
Lady IMS-19-003: 1.1m @ 6.3g/t Au & 58g/t Ag
------------------------------------------
Facundo HUA-19-001: 3.1m @ 6.0g/t Au & 136g/t Ag
------------------------------------------
M.Mamani MM-19-001: 1.0m @ 2.2g/t Au & 155g/t Ag
------------------------------------------
Vein Results (resource drilling)
Salvador ANE-19-010: 0.8m @ 16.7g/t Au & 349g/t
Ag
ANE-19-011: 0.8m @ 20.7g/t Au & 667g/t
Ag
ANE-19-013: 0.8m @ 5.9g/t Au & 399g/t Ag
IMM-19-001: 1.1m @ 31.9g/t Au & 5,053g/t
Ag
IMM-19-007: 0.6m @ 3.6g/t Au & 98g/t Ag
------------------------------------------
Pilar ANG-18-023: 0.5m @ 5.0g/t Au & 236g/t Ag
ANG-19-011A: 2.3m @ 7.4g/t Au & 250g/t
Ag
ANG-19-012: 2.2m @ 41.0g/t Au & 480g/t
Ag
IMM-19-001: 1.1m @ 31.9g/t Au & 5,053g/t
Ag
IMM-19-003: 1.9m @ 1.4g/t Au & 110g/t Ag
IMM-19-008: 1.5m @ 3.7g/t Au & 203g/t Ag
IMM-19-011: 3.1m @ 4.4g/t Au & 192g/t Ag
IMM-19-014: 11.0m @ 18.2g/t Au & 773g/t
Ag
HUA-19-003: 1.4m @ 19.4g/t Au & 438g/t
Ag
------------------------------------------
Infill drilling commenced in the first half targeting the Millet
vein which was discovered in 2018. Results to date have already
increased the resource grade by over 20% with results below:
Vein Results (infill drilling)
Millet MIL-19-001: 0.9m @ 1.7g/t Au & 80g/t Ag
MIL-19-002: 4.5m @ 2.6g/t Au & 204g/t Ag
MIL-19-003: 2.8m @ 3.6g/t Au & 153g/t Ag
MIL-19-004: 1.3m @ 0.9g/t Au & 42g/t Ag
MIL-19-005: 0.9m @ 3.2g/t Au & 25g/t Ag
MIL-19-006: 4.2m @ 0.8g/t Au & 67g/t Ag
MIL-19-007: 2.7m @ 7.0g/t Au & 129g/t Ag
MIL-19-008: 1.5m @ 2.5g/t Au & 139g/t Ag
MIL-19-009: 2.0m @ 4.8g/t Au & 557g/t Ag
MIL-19-010: 5.0m @ 3.3g/t Au & 104g/t Ag
MIL-19-011: 0.9m @ 2.0g/t Au & 37g/t Ag
MIL-19-012: 6.8m @ 2.4g/t Au & 81g/t Ag
MIL-19-013: 1.2m @ 1.3g/t Au & 8g/t Ag
MIL-19-014: 2.0m @ 3.8g/t Au & 342g/t Ag
MIL-19-015: 1.2m @ 0.9g/t Au & 97g/t Ag
MIL-19-016: 5.9m @ 1.9g/t Au & 88g/t Ag
MIL-19-017: 1.4m @ 2.0g/t Au & 344g/t Ag
MIL-19-018: 1.2m @ 1.4g/t Au & 30g/t Ag
MIL-19-019: 4.6m @ 1.3g/t Au & 67g/t Ag
MIL-19-020: 1.2m @ 0.2g/t Au & 52g/t Ag
MIL-19-021: 2.6m @ 9.4g/t Au & 184g/t Ag
MIL-19-022: 4.0m @ 1.2g/t Au & 61g/t Ag
MIL-19-023: 3.5m @ 3.1g/t Au & 208g/t Ag
MIL-19-024: 1.0m @ 2.8g/t Au & 213g/t Ag
MIL-19-025: 5.8m @ 2.9g/t Au & 174g/t Ag
MIL-19-026: 6.2m @ 2.1g/t Au & 167g/t Ag
MIL-19-027: 5.1m @ 2.7g/t Au & 264g/t Ag
MIL-19-028: 3.0m @ 2.7g/t Au & 162g/t Ag
MIL-19-029: 4.0m @ 2.9g/t Au & 470g/t Ag
MIL-19-030: 0.7m @ 1.4g/t Au & 67g/t Ag
MIL-19-031: 2.3m @ 1.6g/t Au & 113g/t Ag
MIL-19-032: 2.5m @ 1.7g/t Au & 133g/t Ag
MIL-19-033: 3.3m @ 3.0g/t Au & 14g/t Ag
MIL-19-034: 1.4m @ 0.7g/t Au & 41g/t Ag
MIL-19-035: 3.0m @ 2.7g/t Au & 77g/t Ag
MIL-19-036: 2.3m @ 2.1g/t Au & 71g/t Ag
MIL-19-037: 2.8m @ 4.5g/t Au & 509g/t Ag
MIL-19-038: 1.0m @ 1.0g/t Au & 93g/t Ag
MIL-19-039: 0.8m @ 0.9g/t Au & 68g/t Ag
MIL-19-040: 3.5m @ 3.0g/t Au & 111g/t Ag
MIL-19-041: 0.6m @ 0.2g/t Au & 347g/t Ag
------------------------------------------
The drilling programme in the second half will focus mainly on
7,000m of resource drilling with the main targets of the Susana
Beatriz, Salvador, Facundo, Laidy and Rosy veins. It will also
include 1,200m of potential drilling in the Rosy and Lady
structures. In addition, infill drilling will continue at the
Millet, Divina and other veins discovered in 2018 with completion
scheduled for early in the fourth quarter.
Pallancata
At Pallancata, 817m of potential resources were drilled from the
Mariel and Pablo veins with results pending from the Mariel
target.
Vein Results (potential resource drilling)
Pablo DLEP-A49: 3.4m @ 1.4g/t Au & 553g/t Ag
---------------------------------------
Drilling in the Pablo Sur area is scheduled for the second half
along with the programme at Cochaloma to the south. Superficial
work has also been completed at the Huachuilca target to the north
of the Selene plant and drilling is expected for the fourth
quarter.
Palca
The Palca drilling programme started late in the half with
potential resource drilling in the Roxana, Santa Beatriz and
Prometida structures. Early results confirm mineralisation with
200m of depth. The key result was obtained from the Prometida
vein.
Vein Results (potential resource drilling)
Roxana PLC-195-001: 1.8m @ 1.0g/t Au & 27g/t Ag
PLC-195-004: 0.8m @ 1.0g/t Au & 33g/t Ag
------------------------------------------
Santa Beatriz PLC-195-001: 1.2m @ 0.7g/t Au & 13g/t Ag
------------------------------------------
Prometida PLC-195-006: 2.9m @ 5.0g/t Au & 35g/t Ag
------------------------------------------
For the second half, 3,810m of drilling is scheduled for the
Blanca, Alejandra, Rafaela, Escondida, Escandalosa and Kimberly
targets.
San Jose
At San Jose, potential drilling was executed at the Aguas Vivas
system as well as at the Pluma 19 structure, the south-east Kospi
projection and East and West Antonella. The intercepted structures
at Aguas Vivas correspond to an intermediate sulphidation system
with associated grades of zinc and lead.
Vein Results (potential resource drilling)
Aguas Vivas SJD-1627: 3.0m @ 0.1g/t Au, 43/t Ag, 0.2%
Cu, 8.2% Pb & 5.5% Zn
SJD-1686: 1.1m @ 3.6g/t Au, 85g/t Ag, 0.1%
Cu, 19.0% Pb & 10.3% Zn
SJD-1703: 1.4m @ 0.2g/t Au, 55g/t Ag, 0.6%
Pb & 1.9% Zn
SJD-1720: 0.8m @ 2.4g/t Au, 9g/t Ag
SJD-1851: 3.4m @ 0.3g/t Au, 44g/t Ag, 1.2%
Cu, 4.6% Pb & 6.4% Zn
SJD-1853: 1.1m @ 0.4g/t Au, 98g/t Ag, 1.6%
Cu, 5.3% Pb & 4.2% Zn
SJD-1855: 2.8m @ 0.9g/t Au, 9g/t Ag, 0.2%
Cu, 0.7% Pb & 1.4% Zn
SJD-1857: 0.9m @ 1.6g/t Au, 18g/t Ag, 0.1%
Cu, 2.7% Pb & 2.2% Zn
SJD-1865: 1.3m @ 0.4g/t Au, 12g/t Ag, 0.2%
Cu, 2.1% Pb & 3.9% Zn
SJD-1870: 1.1m @ 5.0g/t Au, 64g/t Ag, 0.4%
Cu, 2.3% Pb & 3.9% Zn
--------------------------------------------
Antonella SJM-429: 3.9m @ 8.1g/t Au & 239/t Ag
--------------------------------------------
During the second half, the programme will focus on the
Antonella structure and on the south-east Kospi projection. Also, a
magnetometry study will be performed on the extension of Cerro
Negro structures covering a total area of 14.3km(2) .
Arcata
At Arcata, a Titan geophysical programme and geological mapping
for new targets has concluded and a drilling plan is scheduled for
the third quarter of 2019.
Corina
During the half, final permits were obtained for the drilling
programme planned for the Corina zone, approximately 15km to the
north-east of the Selene plant. A 2,700m drilling campaign has
recently commenced with results expected later in the year.
GREENFIELD AND BUSINESS DEVELOPMENT
Hochschild's strategy with regards to its greenfield exploration
programme is to maintain and drill a balanced portfolio of
early-stage to advanced opportunities using a combination of
earn-in joint ventures, private placements with junior exploration
companies and the staking of properties. To date, options have been
secured on properties across the Americas including: the Snip mine
in Canada owned by Skeena Resources; the Agni and Indra projects in
Chile owned by Mirasol Resources; the Ferguson Mountain and Mars
projects in Nevada owned by Renaissance Gold; the BP, Bellview and
Horsethief projects in Nevada owned by Alianza Gold and the
Stateline vein district in Nevada optioned from KA Gold.
A 2,000m Reverse Circulation (RC) drilling programme has already
started at Ferguson Mountain whilst at the nearby Mars project, a
2,500m RC campaign is due for later in August as is a similar
programme at the Agni-Indra projects. At Snip, the aim is to drill
a further 9,000m by the year end.
Finally, the Company has also secured an option on the Condor
project located in Arequipa (Peru) close to the Arcata operation
with permitting and access rights currently being progressed.
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
periods.
Revenue
Gross revenue[6]
Gross revenue from continuing operations decreased by 5% to
$366.5 million in H1 2019 (H1 2018: $386.4 million) due to a fall
in the average realised silver price and in ounces sold of silver
in line with reduced production. These effects were marginally
offset by an increase in the realised gold price.
Gold
Gross revenue from gold in H1 2019 increased slightly to $213.0
million (H1 2018: $206.9 million) due to a small increase in the
average realised gold price.
Silver
Gross revenue fell in H1 2019 to $153.5 million (H1 2018: $179.5
million) due to a 7% decline in the average silver price received
as well as a reduction in the amount of silver ounces sold. This
was mostly as a result of the absence of material production from
the predominantly silver-producing Arcata mine, which was placed on
care and maintenance in February 2019.
Gross average realised sales prices
The following table provides figures for average realised prices
(before the deduction of commercial discounts) and ounces sold for
H1 2019 and H1 2018:
Average realised prices Six months Six months
to to
30 June 30 June
2019 2018
----------- -----------
Silver ounces sold (koz) 10,221 11,067
Avg. realised silver price ($/oz) 15.0 16.2
Gold ounces sold (koz) 160.25 158.01
Avg. realised gold price ($/oz) 1,329 1,309
----------------------------------- ----------- -----------
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 2019, the Group recorded
commercial discounts of $12.1 million (H1 2018: $14.2 million) with
the decrease explained by the significant reduction in production
from the concentrate-only Arcata mine. The ratio of commercial
discounts to gross revenue in H1 2019 was 3% (H1 2018: 4%).
Net revenue[7]
Net revenue was $354.5 million (H1 2018: $372.3 million),
comprising net gold revenue of $209.4 million (H1 2018: $203.4
million) and net silver revenue of $144.9 million (H1 2018: $168.8
million). In H1 2019, gold accounted for 59% and silver for 41% of
the Company's consolidated net revenue (H1 2018: gold 55% and
silver 45%).
Revenue by mine[8]
$000 Six months to Six months to % change
30 June 2019 30 June 2018
-------------- --------------
Silver revenue
Arcata 4,970 28,550 (83)
Inmaculada 43,359 50,242 (14)
Pallancata 57,114 52,537 9
San Jose 48,087 48,186 -
Commercial discounts (8,618) (10,746) (20)
Net silver revenue 144,912 168,769 (14)
Gold revenue
Arcata 889 6,668 (87)
Inmaculada 127,315 125,432 2
Pallancata 18,275 14,962 22
San Jose 66,483 59,792 11
Commercial discounts (3,524) (3,499) 1
Net gold revenue 209,438 203,355 3
---------------------- -------------- -------------- ---------
Other revenue 100 204 (51)
---------------------- -------------- -------------- ---------
Net revenue[9] 354,450 372,328 (5)
---------------------- -------------- -------------- ---------
Costs
Total cost of sales was $252.8 million in H1 2019 (H1 2018:
$267.3 million). The direct production cost excluding depreciation
was lower at $158.4 million (H1 2018: $174.0 million) mainly due to
the reduced production costs from Arcata which was placed on care
and maintenance in early 2019 as well as costs savings at San Jose
due to the ongoing devaluation of the Argentinian peso. This was
partially offset by higher costs due to increased production
volumes at Pallancata (ramp-up of the Pablo vein). Depreciation in
production cost increased to $90.4 million (H1 2018: $82.9 million)
due to higher extracted volumes at Pallancata partially offset by
the increased life-of-mine at Inmaculada. Other items, which
principally includes personnel-related provisions and stoppage
costs (at San Jose) was relatively flat at $1.1 million in H1 2019
(H1 2018: $0.9 million). Change in inventories was $2.9 million in
H1 2019 (H1 2018: $9.4 million) due to a reduction in products in
process and finished goods.
$000 Six months Six months % change
to to
30 June 2019 30 June 2018
-------------- --------------
Direct production cost excluding
depreciation 158,444 173,967 (9)
Depreciation in production cost 90,371 82,949 9
Other items 1,135 939 21
Change in inventories 2,881 9,404 (69)
---------------------------------- -------------- -------------- ---------
Cost of sales 252,831 267,259 (5)
---------------------------------- -------------- -------------- ---------
Unit cost per tonne
The Company reported unit cost per tonne at its operations of
$114.7 per tonne in H1 2019, a 8% decrease versus H1 2018 ($124.5
per tonne) due to good cost control, increased mined tonnage at
Pallancata and the depreciation of the Argentine peso more than
offsetting inflation in Argentina.
Unit cost per tonne by operation (including royalties)[10]:
Operating unit ($/tonne) Six months Six months % change
to to
30 June 2019 30 June 2018
-------------- --------------
Peru[11] 86.6 98.7 (12)
Inmaculada 90.8 83.5 9
Pallancata 80.9 101.9 (21)
-------------------------- -------------- -------------- ---------
Arcata 184.5 146.1 26
-------------------------- -------------- -------------- ---------
Argentina
San Jose 229.2 241.6 (5)
-------------------------- -------------- -------------- ---------
Total 114.7 124.5 (8)
-------------------------- -------------- -------------- ---------
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[12]:
$000 unless otherwise indicated Six months Six months % change
to to
30 June 2019 30 June 2018
-------------- --------------
Group cash cost 185,735 199,140 (7)
----------------------------------- -------------- -------------- ---------
(+) Cost of sales 252,831 267,259 (5)
(-) Depreciation and amortisation
in cost of sales (91,322) (86,579) 5
(+) Selling expenses 10,480 2,504 319
(+) Commercial deductions[13] 13,746 15,956 (14)
Gold 3,636 3,595 1
Silver 10,110 12,361 (18)
----------------------------------- -------------- -------------- ---------
Revenue 354,450 372,328 (5)
----------------------------------- -------------- -------------- ---------
Gold 209,438 203,355 3
Silver 144,912 168,769 (14)
Others 100 204 (51)
----------------------------------- -------------- -------------- ---------
Ounces sold
----------------------------------- -------------- -------------- ---------
Gold 160.2 158.0 1
Silver 10,221 11,067 (8)
----------------------------------- -------------- -------------- ---------
Group cash cost ($/oz)
----------------------------------- -------------- -------------- ---------
Co product Au 685 689 (1)
Co product Ag 7.4 8.2 (10)
By product Au 192 114 68
By product Ag (2.7) (0.7) 286
----------------------------------- -------------- -------------- ---------
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 2019
$000 unless otherwise Inmaculada Pallancata San Main Arcata Corporate Total
indicated José operations &
others
----------- ----------- ----------- ------------ ------- ----------
(+) Production cost
excluding depreciation 58,598 36,603 56,430 151,631 6,813 - 158,444
(+) Other items in cost
of sales 278 290 567 1,135 - - 1,135
(+) Operating and exploration
capex for units 31,025 14,456 21,527 67,008 48 1,258 68,314
(+) Brownfield exploration
expenses 3,110 1,483 5,404 9,997 795 2,180 12,972
(+) Administrative expenses
(excl depreciation) 1,651 675 3,247 5,573 49 16,353 21,975
(+) Royalties and special
mining tax[14] 1,714 701 - 2,414 51 1,132 3,597
-------------------------------- ----------- ----------- ----------- ------------ ------- ---------- --------
Sub-total 96,376 54,208 87,175 237,758 7,756 20,923 266,437
-------------------------------- ----------- ----------- ----------- ------------ ------- ---------- --------
Au ounces produced 98,608 13,444 49,137 161,188 966 - 162,155
Ag ounces produced (000s) 2,950 3,812 3,162 9,925 311 - 10,237
Ounces produced (Ag
Eq 000s oz) 10,938 4,901 7,143 22,982 390 - 23,371
-------------------------------- ----------- ----------- ----------- ------------ ------- ---------- --------
Sub-total ($/oz Ag Eq) 8.8 11.1 12.2 10.3 19.9 - 11.4
-------------------------------- ----------- ----------- ----------- ------------ ------- ---------- --------
(+) Commercial deductions 1,358 5,596 6,016 12,970 776 - 13,746
(+) Selling expenses 315 474 9,545 10,334 146 - 10,480
-------------------------------- ----------- ----------- ----------- ------------ ------- ---------- --------
Sub-total 1,673 6,070 15,561 22,304 922 - 24,226
-------------------------------- ----------- ----------- ----------- ------------ ------- ---------- --------
Au ounces sold 97,484 13,200 48,891 159,575 674 - 160,248
Ag ounces sold (000s) 2,942 3,768 3,189 9,899 322 - 10,221
Ounces sold (Ag Eq 000s
oz) 10,838 4,837 7,150 22,824 377 - 23,201
-------------------------------- ----------- ----------- ----------- ------------ ------- ---------- --------
Sub-total ($/oz Ag Eq) 0.2 1.3 2.2 1.0 2.4 - 1.0
-------------------------------- ----------- ----------- ----------- ------------ ------- ---------- --------
All-in sustaining costs
($/oz Ag Eq) 9.0 12.3 14.4 11.4 22.4 - 12.4
-------------------------------- ----------- ----------- ----------- ------------ ------- ---------- --------
All-in sustaining costs
($/oz Au Eq)[15] 726 997 1,165 921 1,811 - 1,008
-------------------------------- ----------- ----------- ----------- ------------ ------- ---------- --------
Six months to 30 June 2018
$000 unless otherwise Arcata Inmaculada Pallancata San Main Corporate Total
indicated José operations &
others
------- ----------- ----------- ----------- ------------ ----------
(+) Production cost
excluding depreciation 27,610 54,939 30,087 61,331 173,967 - 173,967
(+) Other items in cost
of sales - - - 939 939 - 939
(+) Operating and exploration
capex for units 7,328 24,551 12,453 20,414 64,746 30 64,776
(+) Brownfield exploration
expenses 1,126 314 645 1,962 4,047 1,340 5,387
(+) Administrative expenses
(excl depreciation) 302 1,726 617 3,540 6,184 14,764 20,948
(+) Royalties and special
mining tax - 1,755 627 - 2,383 1,771 4,154
-------------------------------- ------- ----------- ----------- ----------- ------------ ---------- --------
Sub-total 36,366 83,285 44,429 88,186 252,266 17,905 270,171
-------------------------------- ------- ----------- ----------- ----------- ------------ ---------- --------
Au ounces produced 5,418 96,329 11,862 46,859 160,468 - 160,468
Ag ounces produced (000s) 1,760 3,115 3,728 2,982 11,135 - 11,135
Ounces produced (Ag
Eq 000s oz) 2,199 10,918 4,238 6,778 24,133 - 24,133
-------------------------------- ------- ----------- ----------- ----------- ------------ ---------- --------
Sub-total ($/oz Ag Eq) 16.5 7.6 10.5 13.0 10.5 - 11.2
-------------------------------- ------- ----------- ----------- ----------- ------------ ---------- --------
(+) 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) 2,160 10,832 4,194 6,680 23,866 - 23,866
-------------------------------- ------- ----------- ----------- ----------- ------------ ---------- --------
Sub-total ($/oz Ag Eq) 2.3 0.2 1.2 1.0 0.8 - 0.8
-------------------------------- ------- ----------- ----------- ----------- ------------ ---------- --------
All-in sustaining costs
($/oz Ag Eq) 18.8 7.8 11.7 14.0 11.2 12.0
-------------------------------- ------- ----------- ----------- ----------- ------------ ---------- --------
All-in sustaining costs
($/oz Au Eq) 1,525 631 947 1,135 909 - 969
-------------------------------- ------- ----------- ----------- ----------- ------------ ---------- --------
Administrative expenses
Administrative expenses increased by 6% to $23.0 million (H1
2018: $21.7 million) primarily due to higher personnel costs and
the increase in innovation-related expenses.
Exploration expenses
In H1 2019, exploration expenses increased to $18.6 million (H1
2018: $13.0 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 resources to
the Inferred or Measured and Indicated categories. In H1 2019, the
Company capitalised $2.4 million relating to brownfield exploration
compared to $4.9 million in H1 2018, bringing the total investment
in exploration for H1 2019 to $20.9 million (H1 2018: $18.0
million).
Selling expenses
Selling expenses increased to $10.5 million (H1 2018: $2.5
million) principally due to the reintroduction of export taxes in
Argentina from September 2018 ($8.1 million).
Other income/expenses
Other income was lower at $4.5 million (H1 2018: $4.9 million)
mainly due to a reduction in export credits in Argentina partially
offset by higher income from logistics services.
Other expenses before exceptional items were slightly higher at
$8.8 million (H1 2018: $7.9 million) mainly due to an increase in
mine closure provisions.
Adjusted EBITDA
Adjusted EBITDA decreased by 5% to $153.7 million (H1 2018:
$161.9 million) primarily due to the 7% fall in the average silver
price and the reintroduction of export taxes in Argentina in
September 2018.
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 Six months to % change
30 June 2019 30 June 2018
-------------- --------------
Profit from continuing operations before exceptional items, net finance
cost, foreign exchange
(loss)/gain and income tax 44,693 64,628 (31)
Depreciation and amortisation in cost of sales 91,322 86,579 5
Depreciation and amortisation in administrative expenses 1,167 743 57
Exploration expenses 18,552 13,048 42
Personnel and other exploration related fixed expenses (3,087) (2,786) 11
Other non-cash income, net [16] 1,087 (306) (455)
--------------------------------------------------------------------------- -------------- -------------- ---------
Adjusted EBITDA 153,734 161,906 (5)
--------------------------------------------------------------------------- -------------- -------------- ---------
Adjusted EBITDA margin 43% 43%
--------------------------------------------------------------------------- -------------- -------------- ---------
Finance income
Finance income before exceptional items was $1.4 million (H1
2018: $1.1 million) with the main reason for the small increase in
H1 2019 being the lower gain on discount of tax credits in
Argentina ($0.5 million).
Finance costs
Finance costs before exceptional items decreased from $6.5
million in H1 2018 to $3.5 million in H1 2019, principally due to
the reduction in the interest payments resulting from the repayment
of the Company's Senior Notes in H1 2018.
Foreign exchange losses
The Group recognised a foreign exchange loss of $1.1 million (H1
2018: $4.3 million loss) as a result of exposures in currencies
other than the functional currency - the Argentinean peso which
again significantly depreciated in H1 2019 and the Peruvian sol
which appreciated during the period.
Income tax
The Company's pre-exceptional income tax charge was $16.4
million (H1 2018: $32.7 million). The substantial decrease in the
charge is explained by the Company's decrease in profitability in
the period and the impact of local currency devaluation in
Argentina and Peru in H1 2018.
The effective tax rate (pre-exceptional) for the period was
39.5% (H1 2018: 59.5%), compared to the weighted average statutory
tax rate of 30.5% (H1 2018: 31.2%). The increase is explained by
royalties and the Special Mining Tax resulting in a charge of $3.6
million (H1 2018: $4.1 million), increasing the rate by 8.7% (H1
2018: 7.6%).
In H1 2019, there was no material impact from local currency
devaluation. In H1 2018, the impact was $8.7 million, increasing
the rate further by 15.9%.
Exceptional items
Exceptional items in H1 2019 totalled an $8.4 million loss after
tax (H1 2018: $11.5 million loss after tax). Exceptional items
included the payment of termination benefits due to the
restructuring process generated by the temporary suspension of
operations at the Arcata mine unit ($11.9 million) partially offset
by the associated exceptional tax effect. H1 2018 included the
premium and other financial expenses related to the repayment of
the Compañia Minera Ares bond in January 2018 (US$16.3 million),
partially offset by the exceptional tax effect.
Cash flow and balance sheet review
Cash flow:
$000 Six months Six months Change
to to
30 June 2019 30 June 2018
-------------- --------------
Net cash generated from operating
activities 100,500 117,176 (16,676)
Net cash used in investing activities (70,281) (64,050) (6,231)
Cash flows used in financing activities (13,796) (164,639) 150,843
----------------------------------------- -------------- -------------- ---------
Net increase/(decrease) in cash and
cash equivalents during the period 16,423 (111,513) 127,936
----------------------------------------- -------------- -------------- ---------
Net cash generated from operating activities decreased from
$117.2 million in H1 2018 to $100.5 million in H1 2019 mainly due
to lower Adjusted EBITDA of $153.7 million (H1 2018: $161.9
million) and higher exploration expenses of $18.6 million (H1 2018:
$13.0 million).
Net cash used in investing activities increased to $70.3 million
in H1 2019 from $64.1 million in H1 2018 mainly due to higher
operational capex and in particular mine development at the new
veins found at Inmaculada.
Cash used in financing activities fell to $13.8 million in H1
2019 from $164.6 million in H1 2018, mainly as due to the effect of
the net repayment of borrowings of $146.3 million in H1 2018, and
the payment of lease liabilities of $1.3 million in H1 2019, and
lower payment of dividends to non-controlling interests of $5.6
million. In H1 2018, debt restructuring consisted of the repayment
of the Company's Senior Notes ($294.8 million) and $3.0 million of
short term debt in Argentina. This was partially offset by new
short-term loans of $100.0 million which were secured to repurchase
the Senior Notes. In both periods, the Company paid $10 million of
dividends to its own shareholders and also to McEwen Mining ($2.2
million in H1 2019 and $7.8 million in H1 2018).
Working capital
$000 As at As at
30 June 2019 31 December 2018
--------------
Trade and other receivables 102,951 84,187
Inventories 49,776 58,035
Other financial assets 47 47
Income tax receivable/(payable), net 13,507 17,462
Trade and other payables (122,013) (126,262)
Provisions (102,722) (97,793)
-------------------------------------- -------------- ------------------
Working capital (58,454) (64,324)
-------------------------------------- -------------- ------------------
The Group's working capital position in H1 2019 increased by
$5.9 million from $(64.3) million to $(58.5) million. The key
drivers of the increase were: higher trade receivables of $18.8
million and lower trade payables of $4.2 million. These effects
were partially offset by higher provisions of $4.9 million, lower
inventories of $8.3 million and lower income tax receivable of $4.0
million.
Net debt
$000 unless otherwise indicated As at As at
30 June 2019 31 December 2018
--------------
Cash and cash equivalents 95,443 79,704
Long term borrowings - (50,000)
Short term borrowings[17] (157,820) (107,067)
--------------------------------- -------------- ------------------
Net debt (62,377) (77,363)
--------------------------------- -------------- ------------------
The Group's reported net debt position was $62.4 million as at
30 June 2019 (31 December 2018: $77.4 million). The decrease in net
debt is mainly a result of the net cash generation in the period.
The Company's total debt position remained similar in both
periods.
Capital expenditure([18])
$000 Six months to Six months to
30 June 2019 30 June 2018
--------------
Arcata 48 7,328
Pallancata 14,456 12,453
San Jose 22,553 21,279
Inmaculada 31,025 24,551
------------ -------------- --------------
Operations 68,082 65,611
Other 2,749 1,645
------------ -------------- --------------
Total 70,831 67,256
------------ -------------- --------------
H1 2019 capital expenditure of $70.8 million (H1 2018: $67.3
million) mainly comprised of operational capex of $68.1 million (H1
2018: $65.6 million) with the small increase versus H1 2018
resulting from increased capex at Inmaculada and Pallancata due to
a rise in new mine developments partially offset by the almost
total capex reduction at Arcata which was placed on temporary care
and maintenance in February 2019.
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 2018 are set out in detail in
the Risk Management & Viability section of the 2018 Annual
Report and in Note 35 to the 2018 Consolidated Financial
Statements.
The key risks disclosed in the 2018 Annual Report (available at
www.hochschildmining.com) are categorised as:
o Financial risks comprising commodity price risk and commercial
counterparty 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 2019.
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. The financial position of the
Company, its cash flow and liquidity position are described in the
Financial Review.
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. In doing so, the Company makes assumptions on
the expected renewal of facilities where it is considered highly
probable.
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
13 August 2019
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 2019 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 23. 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 Guidance 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 2019 is not prepared, in all material respects, in accordance
with International Accounting Standard 34 as adopted by the
European Union and the Disclosure Guidance and Transparency Rules
of the United Kingdom's Financial Conduct Authority.
Ernst & Young LLP
London
13 August 2019
Interim condensed consolidated income statement
Six-months ended Six-months ended
Notes 30 June 2019 (Unaudited) 30 June 2018 (Unaudited)
----- ------------------------------------- ----------------------------------
Exceptional Exceptional
Before items Before items
exceptional (Note exceptional (Note
items 9) Total items 9) Total
US$000 US$000 US$000 US$000 US$000 US$000
----------- ------------ --------- ----------- ----------- ------
Continuing
operations
Revenue 4 354,450 - 354,450 372,328 - 372,328
Cost of sales 5 (252,831) - (252,831) (267,259) - (267,259)
----------- ----------- --------- ----------- ----------- ---------
Gross profit 101,619 - 101,619 105,069 - 105,069
Administrative
expenses (23,021) - (23,021) (21,691) - (21,691)
Exploration
expenses 6 (18,552) - (18,552) (13,048) - (13,048)
Selling expenses 7 (10,480) - (10,480) (2,504) - (2,504)
Other income 8 4,471 - 4,471 4,949 - 4,949
Other expenses 8 (8,827) (11,949) (20,776) (7,946) - (7,946)
Write-off of
non-financial
assets (517) - (517) (201) - (201)
Profit/(loss) from
continuing
operations
before net finance
income/(cost),
foreign
exchange loss and
income tax 44,693 (11,949) 32,744 64,628 - 64,628
Finance income 10 1,424 - 1,424 1,088 - 1,088
Finance costs 10 (3,504) - (3,504) (6,482) (16,346) (22,828)
Foreign exchange
loss (1,146) - (1,146) (4,334) - (4,334)
----------- ----------- --------- ----------- ----------- ---------
Profit/(loss) from
continuing
operations
before income tax 41,467 (11,949) 29,518 54,900 (16,346) 38,554
Income tax
(expense)/benefit 11 (16,382) 3,525 (12,857) (32,658) 4,822 (27,836)
----------- ----------- --------- ----------- ----------- ---------
Profit/(loss) for
the period from
continuing
operations 25,085 (8,424) 16,661 22,242 (11,524) 10,718
Attributable to:
Equity shareholders
of the Company 22,319 (8,424) 13,895 24,438 (11,524) 12,914
Non-controlling
interests 2,766 - 2,766 (2,196) - (2,196)
----------- ----------- --------- ----------- ----------- ---------
25,085 (8,424) 16,661 22,242 (11,524) 10,718
=========== =========== ========= =========== =========== =========
Basic earnings per
ordinary share
from
continuing
operations
and for the period
(expressed in U.S.
dollars per share) 0.04 (0.01) 0.03 0.05 (0.02 ) 0.03
=========== =========== ========= =========== =========== =========
Diluted earnings
per
ordinary share
from
continuing
operations
and for the period
(expressed in U.S.
dollars per share) 0.04 (0.01) 0.03 0.05 (0.02) 0.03
=========== =========== ========= =========== =========== =========
Interim condensed consolidated statement of comprehensive
income
Six-months ended
30 June
----------------------------------
2019 (Unaudited) 2018 (Unaudited)
US$000 US$000
---------------- ----------------
Profit for the period 16,661 10,718
Other comprehensive income that may be
reclassified to profit or loss in subsequent
periods; net of tax:
Exchange differences on translating foreign
operations (17) 39
Sub total (17) 39
Other comprehensive income that will
not be reclassified to profit or loss
in subsequent periods; net of tax
Net gain/(loss) on equity instruments
at fair value through other comprehensive
income 1,484 (1,647)
Sub total 1,484 (1,647)
Other comprehensive profit/(loss) for
the period, net of tax 1,467 (1,608)
---------------- ----------------
Total comprehensive income for the period 18,128 9,110
---------------- ----------------
Total comprehensive income attributable
to:
Equity shareholders of the Company 15,362 11,306
Non-controlling interests 2,766 (2,196)
---------------- ----------------
18,128 9,110
================ ================
Interim condensed consolidated statement of financial
position
As at 30 As at 31
June December
2019 2018
(Unaudited)
Notes US$000 US$000
----- ------------- ----------
ASSETS
Non-current assets
Property, plant and equipment 12 834,444 849,172
Evaluation and exploration assets 13 159,095 155,241
Intangible assets 23,298 24,363
Financial assets at fair value through
OCI 7,459 5,296
Trade and other receivables 4,584 5,451
Other financial assets 14 47 47
Deferred income tax assets 15 1,680 1,504
1,030,607 1,041,074
------------- ----------
Current assets
Inventories 49,776 58,035
Trade and other receivables 98,367 78,736
Income tax receivable 16,880 20,733
Cash and cash equivalents 16 95,443 79,704
------------- ----------
260,466 237,208
------------- ----------
Total assets 1,291,073 1,278,282
============= ==========
EQUITY AND LIABILITIES
Capital and reserves attributable
to shareholders of the Parent
Equity share capital 19 225,409 225,409
Share premium 19 438,041 438,041
Other reserves (219,602) (223,156)
Retained earnings 281,438 278,995
------------- ----------
725,286 719,289
Non-controlling interests 73,769 71,003
Total equity 799,055 790,292
------------- ----------
Non-current liabilities
Trade and other payables 3,427 787
Borrowings 17 - 50,000
Provisions 96,688 94,640
Deferred income 18 32,536 31,966
Deferred income tax liabilities 15 73,154 71,231
------------- ----------
205,805 248,624
------------- ----------
Current liabilities
Trade and other payables 118,586 125,475
Borrowings 17 157,820 107,067
Provisions 6,034 3,153
Deferred income 18 400 400
Income tax payable 3,373 3,271
------------- ----------
286,213 239,366
------------- ----------
Total liabilities 492,018 487,990
------------- ----------
Total equity and liabilities 1,291,073 1,278,282
============= ==========
Interim condensed consolidated statement of cash flows
Six-months ended
30 June
----------------------------------
2019 (Unaudited) 2018 (Unaudited)
Notes US$000 US$000
----- ---------------- ----------------
Cash flows from operating activities
Cash generated from operations 22 105,310 141,411
Interest received 785 1,343
Interest paid 17 (1,598) (24,751)
Payment of mine closure costs (1,386) (1,422)
Income tax (paid)/received (2,611) 595
---------------- ----------------
Net cash generated from operating
activities 100,500 117,176
---------------- ----------------
Cash flows from investing activities
Purchase of property, plant and equipment (67,231) (57,120)
Purchase of evaluation and exploration
assets (3,854) (6,003)
Purchase of intangibles (2) (1,897)
Purchase of financial assets at fair
value to OCI 14 (500) (120)
Proceeds from deferred income 18 750 1,000
Proceeds from sale of financial assets
at fair value to OCI 424 32
Proceeds from sale of property, plant
and equipment 12 132 58
Net cash used in investing activities (70,281) (64,050)
---------------- ----------------
Cash flows from financing activities
Proceeds from borrowings 17 63,500 157,500
Repayment of borrowings 17 (63,500) (303,775)
Purchase of treasury shares 19 (309) (579)
Payment of lease liabilities 2(b) (1,275) -
Dividends paid to shareholders 20 (10,002) (10,000)
Dividends paid to non-controlling
interests 20 (2,210) (7,785)
Cash flows used in financing activities (13,796) (164,639)
---------------- ----------------
Net increase/(decrease) in cash and
cash equivalents during the period 16,423 (111,513)
Impact of foreign exchange (684) (3,796)
Cash and cash equivalents at beginning
of period 79,704 256,988
---------------- ----------------
Cash and cash equivalents at end
of period 16 95,443 141,679
================ ================
Interim condensed consolidated statement of changes in
equity
Other reserves
Fair
value Capital
reserve and
of reserves
financial attributable
assets to
at fair shareholders
Equity value Cumulative Share-based Total of
share Share Treasury Dividends through translation Merger payment other Retained the Non-controlling Total
capital premium shares expired 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
2019 225,409 438,041 62 (4,324) (13,708) (210,046) 4,860 (223,156) 278,995 719,289 71,003 790,292
------- ------- --------- --------- --------- ----------- --------- ----------- --------- -------- ------------ --------------- --------
Other
comprehensive
income/(expense) - - - - 1,484 (17) - - 1,467 - - - 1,467
Profit for the
period - - - - - - - - - 13,895 13,895 2,766 16,661
--------- --------- --------- ----------- -----------
Total
comprehensive
income/(loss) for
the period - - - - 1,484 (17) - - 1,467 13,895 15,362 2,766 18,128
Sale of financial
assets at fair
value through OCI - - - - 1,656 - - - 1,656 (1,656) - - -
Dividends 20 - - - - - - - - - (10,002) (10,002) - (10,002)
Treasury shares - - (309) - - - - - - - (309) - (309)
Share-based
payments 19 - - - - - - - 946 946 - 946 - 946
Exercise of share
options 19 - - 309 - - - - (515) (515) 206 - - -
---------
Balance at 30 June
2019 (Unaudited) 225,409 438,041 - 62 (1,184) (13,725) (210,046) 5,291 (219,602) 281,438 725,286 73,769 799,055
======= ======= ========= ========= ========= =========== ========= =========== ========= ======== ============ =============== ========
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
income/(expense) - - - - (1,647) 39 - - (1,608) - (1,608) - (1,608)
Profit/(loss) for
the period - - - - - - - - - 12,914 12,914 (2,196) 10,718
--------- --------- --------- ----------- -----------
Total
comprehensive
(loss)/income for
the period - - - - (1,647) 39 - - (1,608) 12,914 11,306 (2,196) 9,110
Sale of financial
assets at fair
value through OCI - - - - 14 - - - 14 (14) - - -
Dividends 20 - - - - - - - - - (10,000) (10,000) - (10,000)
Dividends declared
to
non-controlling
interests 20 - - - - - - - - - - - (9,823) (9,823)
Treasury shares - - (579) - - - - - - - (579) - (579)
Share-based
payments 19 - - - - - - - 853 853 - 853 - 853
Exercise of share
options 19 563 - 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
======= ======= ========= ========= ========= =========== ========= =========== ========= ======== ============ =============== ========
Notes to the interim condensed consolidated financial
statements
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 gold and silver. The Group has two operating mines
(Pallancata and Inmaculada) located in Southern Peru, and one
operating mine (San Jose) located in Argentina. During the first
quarter of 2019 the Arcata mine unit, located in Peru, ceased
operations. The Group also has a portfolio of projects located
across Peru, Argentina and Chile and the United States of America
at various stages of development.
These interim condensed consolidated financial statements were
approved for issue on behalf of the Board of Directors on 13 August
2019.
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 2019 and 31
December 2018 and its financial performance and cash flows for the
six months ended 30 June 2019 and 30 June 2018.
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 2018 annual consolidated financial
statements as published in the 2018 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 2018. 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
2018, except for the adoption of new standards and interpretations
effective for the Group from 1 January 2019. The Group applies, for
the first time, IFRS 16 Leases. As required by IAS 34, the nature
and effect of these changes are disclosed below. Other amendments
and interpretations apply for the first time in 2019, but do not
have an impact on 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 16 Leases, applicable for annual periods beginning on or after 1 January 2019.
IFRS 16 specifies how an IFRS reporter will recognise, measure,
present and disclose leases. The standard provides a single lessee
accounting model, including the exemptions to recognise assets and
liabilities for all leases unless the lease term is 12 months or
less or when the underlying asset has a low value. Lease costs will
be recognised in the income statement over the lease term in the
form of depreciation on the right of use asset and finance charges
representing the unwinding of the discount on the lease liability.
Lessors continue to classify leases as operating or finance, with
IFRS 16's approach to lessor accounting substantially unchanged
from its predecessor, IAS 17.
The Group has adopted IFRS 16, Leases from 1 January 2019 but
has not restated comparatives for the 2018 reporting period, as
permitted under the specific transitional provisions in the
standard ("modified retrospective approach, alternative 2"). The
adjustments arising from the new leasing rules are therefore
recognised in the opening balance sheet on 1 January 2019.
On adoption of IFRS 16, the Group recognised lease liabilities
in relation to leases which had previously been classified as
'operating leases' under the principles of IAS 17 Leases. These
liabilities were measured at the present value of the remaining
lease payments, discounted using the incremental borrowing rate as
of 1 January 2019. The weighted average lessee's incremental
borrowing rate applied to the lease liabilities on 1 January 2019
was 4.12% for contracts denominated in US dollars. Contracts in
other currencies are not material.
The associated right-of-use assets were measured at the amount
equal to the lease liability, therefore there was no adjustment to
retained earnings on adoption.
In applying IFRS 16 for the first time, the Group has used the
following practical expedients permitted by the standard:
- The use of a single discount rate to a portfolio of leases
with reasonably similar characteristics.
- The accounting for operating leases with a remaining lease
term of less than 12 months as at 1 January 2019 as short-term
leases,
From 1 January 2019, leases are recognised as a right-of-use
asset and a corresponding liability at the date at which the leased
asset is available for use by the group. Each lease payment is
allocated between the liability and finance cost. The finance cost
is charged to profit or loss over the lease period so as to produce
a constant periodic rate of interest on the remaining balance of
the liability for each period. The right-of-use asset is
depreciated over the shorter of the asset's useful life and the
lease term on a straightline basis.
The lease payments are discounted using the interest rate
implicit in the lease. If that rate cannot be determined, the
lessee's incremental borrowing rate is used, being the rate that
the lessee would have to pay to borrow the funds necessary to
obtain an asset of similar value in a similar economic environment
with similar terms and conditions.
Right-of-use assets are measured at cost comprising the
following:
-- The amount of the initial measurement of lease liability
-- Any lease payments made at or before the commencement date
less any lease incentives received
-- Any initial direct costs, and
-- Restoration costs.
Payments associated with short-term leases and leases of
low-value assets are recognised on a straight line basis as an
expense in profit or loss. Short-term leases are leases with a
lease term of 12 months or less.
New accounting policies as a result of implementing IFRS 16:
Right-of-use assets
The Group recognises right-of-use assets at the commencement
date of the lease (i.e., the date the underlying asset is available
for use). Right-of-use assets are measured at cost, less any
accumulated depreciation and impairment losses, and adjusted for
any remeasurement of lease liabilities. The cost of right-of-use
assets includes the amount of lease liabilities recognised, initial
direct costs incurred, and lease payments made at or before the
commencement date less any lease incentives received. The
right-of-use asset is depreciated over the shorter of the asset's
useful life and the lease term on a straightline basis.
Right-of-use assets are subject to impairment.
Lease liabilities
At the commencement date of the lease, the Group recognises
lease liabilities measured at the present value of lease payments
to be made over the lease term. The lease payments include fixed
payments (including in-substance fixed payments) less any lease
incentives receivable, and amounts expected to be paid under
residual value guarantees. The lease payments also include the
exercise price of a purchase option reasonably certain to be
exercised by the Group and payments of penalties for terminating a
lease, if the lease term reflects the Group exercising the option
to terminate. The variable lease payments are recognised as expense
in the period on which the event or condition that triggers the
payment occurs.
In calculating the present value of lease payments, the Group
uses the incremental borrowing rate at the lease commencement date
if the interest rate implicit in the lease is not readily
determinable. After the commencement date, the amount of lease
liabilities is increased to reflect the accretion of interest and
reduced for the lease payments made. In addition, the carrying
amount of lease liabilities is remeasured if there is a
modification, a change in the lease term, a change in the
in-substance fixed lease payments or a change in the assessment to
purchase the underlying asset.
Short-term leases and leases of low-value assets
The Group applies the short-term lease recognition exemption to
its short-term leases of machinery and equipment (i.e., those
leases that have a lease term of 12 months or less from the
commencement date and do not contain a purchase option). It also
applies the lease of low-value assets recognition exemption to
leases of office equipment that are considered of low value (i.e.,
below US$5,000). Lease payments on short-term leases and leases of
low-value assets are recognised as expense on a straight-line basis
over the lease term.
The resulting lease liability as of 1 January 2019 was
determined as follows:
(Unaudited)
US$000
-------------
Operating lease commitments as at 31 December 2018 8,027
Discounted using the lessee's incremental borrowing
rate of at the date of initial application 7,923
(Less): short-term leases recognised on a straight-line
basis as expense (730)
(Less): low-value leases recognised on a straight-line
basis as expense (1,474)
(Less): other adjustments (244)
-------------
Lease liability recognised as at 1 January 2019 5,475
-------------
(Less): current portion (2,619)
-------------
Non-current portion 2,856
-------------
The effect of adoption IFRS 16 is as follows:
Right-of-use
assets vehicles Lease liabilities
(Unaudited)(1) (Unaudited)(2)
US$000 US$000
---------------- -----------------
Recognised on transition as at 1 January
2019 5,475 (5,475)
Depreciation expense (1,314) -
Disposals (534) 534
Additions 184 (184)
Interests expense(3) - (95)
Payments - 1,275
---------------- -----------------
Balance at 30 June 2019 3,811 (3,945)
================ =================
1 Included in the Interim condensed consolidated statement of
financial position in the line of "Property, plant and
equipment".
2 Included in the Interim condensed consolidated statement of
financial position in the line of "Trade and other payables"
(Current: US$1,279,000, Non-current: US$2,666,000).
3 Included in the Interim condensed consolidated income
statement in the line of "Finance costs".
-- IFRIC 23 Uncertainty over income tax treatments, applicable
for annual periods beginning on or after 1 January 2019.
IFRIC 23 clarifies the accounting for uncertainties in income
taxes. This interpretation is applied to the determination of
taxable profit (tax loss), tax bases, unused tax losses, unused tax
credits and tax rates, when there is uncertainty over income tax
treatments under IAS 12. The Interpretation specifically addresses
the following:
-- Whether an entity considers uncertain tax treatments
separately;
-- The assumptions an entity makes about the examination of tax
treatments by taxation authorities;
-- How an entity determines taxable profit (tax loss), tax
bases, unused tax losses, unused tax credits and tax rates; and
-- How an entity considers changes in facts and
circumstances
The Group applied the interpretation from its effective date,
and do not have impacts on the financial statements as the Group's
current treatment is in line with the requirements of the
interpretation.
(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. 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 2019 and 2018 and asset information as at 30 June
2019 and 31 December 2018 respectively:
Six months Adjustments
ended 30 June San and
2019 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 5,083 69,793 108,800 170,674 - 100 - 354,450
Inter segment
revenue - - - - - 3,009 (3,009) -
Total revenue 5,083 69,793 108,800 170,674 - 3,109 (3,009) 354,450
--------- ------------ ------- ---------- --------------- ------- ------------ -------------
Segment
profit/(loss) (2,021) 5,830 19,944 65,494 (18,707) 4,412 (2,365) 72,587
Others(1) (43,069)
-------------
Profit from
continuing
operations
before income
tax 29,518
-------------
As at 30 June
2019
(Unaudited)
Assets
Capital
expenditure 48 13,758 22,553 31,025 1,486 1,961 - 70,831
Current assets 2,559 26,785 38,823 19,551 7 3,518 - 91,243
Other
non-current
assets 6,569 77,073 172,271 512,140 197,561 51,223 - 1,016,837
--------- ------------ ------- ---------- --------------- ------- ------------ -------------
Total segment
assets 9,128 103,858 211,094 531,691 197,568 54,741 - 1,108,080
Not reportable
assets(2) - - - - - 182,993 - 182,993
--------- ------------ ------- ---------- --------------- ------- ------------ -------------
Total assets 9,128 103,858 211,094 531,691 197,568 237,734 - 1,291,073
--------- ------------ ------- ---------- --------------- ------- ------------ -------------
1 Comprised of administrative expenses of US$23,021,000, other
income of US$4,471,000, other expenses of US$20,776,000, write off
of assets of US$517,000, finance income of US$1,424,000, finance
costs of US$3,504,000 and foreign exchange loss of
US$1,146,000.
2 Not reportable assets are comprised of other financial assets
of US$47,000, financial assets at fair value through OCI of
US$7,459,000, other receivables of US$61,484,000, income tax
receivable of US$16,880,000, deferred income tax assets of
US$1,680,000, and cash and cash equivalents of US$95,443,000.
Six months Adjustments
ended San and
30 June 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 31
December
2018
(Unaudited)
-------------- ------- ---------- ------- ---------- ----------- ------- ------------ ---------
Assets
Capital
expenditure 526 27,079 44,632 57,678 1,856 2,634 - 134,405
Current assets 5,155 27,076 40,220 27,479 7 3,299 - 103,236
Other
non-current
assets 6,395 84,449 172,726 517,321 195,975 51,910 - 1,028,776
Total segment
assets 11,550 111,525 212,946 544,800 195,982 55,209 - 1,132,012
------- ---------- ------- ---------- ----------- ------- ------------ ---------
Not reportable
assets(2) - - - - - 146,270 - 146,270
------- ---------- ------- ---------- ----------- ------- ------------ ---------
Total assets 11,550 111,525 212,946 544,800 195,982 201,479 - 1,278,282
------- ---------- ------- ---------- ----------- ------- ------------ ---------
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 financial assets at
fair value through OCI of US$5,296,000, other receivables of
US$38,986,000, other financial assets of US$47,000, income tax
receivable of US$20,733,000, deferred income tax assets of
US$1,504,000, and cash and cash equivalents of US$79,704,000.
4 Revenue
Six-months ended 30
June
----------------------------------
2019 (Unaudited) 2018 (Unaudited)
US$000 US$000
---------------- ----------------
Gold (from dore bars) 154,141 154,804
Silver (from dore bars) 62,824 73,819
Gold (from concentrate) 55,297 48,551
Silver (from concentrate) 82,088 94,950
Other 100 204
354,450 372,328
================ ================
Included within revenue is a gain of US$2,017,000 (2018: loss of
US$4,382,000) relating to provisional pricing adjustments arising
on sales of concentrates and dore, contributed by provisional
pricing loss of US$678,000 (2018: loss of US$2,449,000) from silver
concentrates and US$2,999,000 gain (2018: loss of US$1,710,000)
from gold concentrates, US$339,000 loss (2018: loss of US$63,000)
from silver dore and US$35,000 gain (2018: loss of US$160,000) from
gold dore resulting in total revenue from customers in the amount
of US$352,433,000 (2018: US$376,710,000).
Included within revenue is a transaction price of US$3,444,000
(2018: US$2,540,000) related to the shipping services provided by
the Group to the customers arising on sale of concentrates of
US$2,650,000, gold: US$1,244,000, silver: US$1,406,000 and dore
ofUS$794,000, gold: US$460,000, silver: US$334,000 (2018:
concentrates of US$1,762,000, gold: US$803,000, silver: US$959,000
and dore of US$778,000, gold: US$431,000, silver: US$347,000).
5 Cost of sales before exceptional items
Included in cost of sales are:
Six-months ended 30
June
----------------------------------
2019 (Unaudited) 2018 (Unaudited)
US$000 US$000
---------------- ----------------
Depreciation and amortisation in cost of sales1 91,322 86,579
Personnel expenses 51,071 61,901
Mining royalty 2,797 3,094
Change in products in process and finished
goods 2,881 9,404
---------------- ----------------
1 The depreciation and amortisation in production cost is US$90,371,000 (2018: US$82,949,000).
6 Exploration expenses
Six months ended 30
June
----------------------------------
2019 (Unaudited) 2018 (Unaudited)
US$000 US$000
---------------- ----------------
Mine site exploration1
Arcata 795 1,126
Ares 241 108
Inmaculada 3,110 314
Pallancata 1,483 645
San Jose 5,404 1,962
---------------- ----------------
11,033 4,155
---------------- ----------------
Prospects2
Peru 277 311
USA 2,293 1,867
Chile 431 530
---------------- ----------------
3,001 2,708
---------------- ----------------
Generative3
Peru 1,249 3,390
USA - 9
---------------- ----------------
1,249 3,399
---------------- ----------------
Personnel 2,886 2,613
Depreciation right-of-use 182 -
Others 201 173
---------------- ----------------
Total 18,552 13,048
---------------- ----------------
1 Mine-site exploration is performed with the purpose of
identifying potential minerals within an existing mine-site, with
the goal of maintaining or extending the mine's life.
2 Prospects expenditure relates to detailed geological
evaluations in order to determine zones which have mineralisation
potential that is economically viable for exploration. Exploration
expenses are generally incurred in the following areas: mapping,
sampling, geophysics, identification of local targets and
reconnaissance drilling.
3 Generative expenditure is early stage exploration expenditure
related to the basic evaluation of the region to identify prospects
areas that have the geological conditions necessary to contain
mineral deposits. Related activities include regional and field
reconnaissance, satellite images, compilation of public information
and identification of exploration targets.
The increase in exploration expenses is mainly explained by the
work performed at the mine units trying to identify new possible
ore targets.
7 Selling expenses
Six-months ended 30
June
----------------------------------
2019 (Unaudited) 2018 (Unaudited)
US$000 US$000
---------------- ----------------
Personnel expenses 260 146
Warehouse services 799 1,081
Taxes1 8,086 -
Other 1,335 1,277
---------------- ----------------
Total 10,480 2,504
---------------- ----------------
1 Corresponds to the export duties in Argentina applicable since September 2018.
8 Other income and expenses before exceptional items
Six-months ended 30
June
----------------------------------
2019 (Unaudited) 2018 (Unaudited)
US$000 US$000
---------------- ----------------
Other income
Export credit - 956
Logistic services 2,448 1,997
Gain on recovery of expenses 596 783
Income related to the San Felipe agreement
(refer to note 18) 600 -
Decrease in provision for mine closure - 507
Others 827 706
---------------- ----------------
4,471 4,949
---------------- ----------------
Other expenses
Increase in provision for mine closure (570) -
Provision of obsolescence of supplies (55) (519)
Contingencies - (394)
Corporate social responsibility contribution
in Argentina (1,417) (1,471)
Care and maintenance expenses of Ares mine
unit (2,346) (2,891)
Termination benefits at Arcata mine unit - (1,324)
Care and maintenance expenses of Arcata mine
unit (2,920) -
Others (1,519) (1,347)
---------------- ----------------
(8,827) (7,946)
---------------- ----------------
9 Exceptional items
Exceptional items relate to:
Six-months ended 30
June
----------------------------------
2019 (Unaudited) 2018 (Unaudited)
US$000 US$000
---------------- ------------------
Other expense
Restructuring of Arcata mine unit(1) (11,949) -
Total (11,949) -
Finance cost
Expenses related to the repayment of the bond(3) - (16,346)
Total - (16,346)
---------------- ----------------
Income tax expense
Income tax credit(2 and 4) 3,525 4,822
---------------- ----------------
Total 3,525 4,822
---------------- ----------------
The exceptional items for the period ended 30 June 2019
correspond to:
1 The termination benefits of 845 employees resulting from the
restructuring process generated as the Arcata mine unit was placed
on care and maintenance.
2 The current tax credit generated by the termination benefits
arising from the restructuring process of the Arcata mine unit.
For the six months period ended 30 June 2018, the exceptional
items correspond to:
1 The premium and other finance expenses related to the
repayment of the Compañia Minera Ares ("CMA") bond in January
2018.
2 The current tax credit generated by the premium and other
finance expenses related to the repayment of the CMA bond.
10 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
----------------------------------
2019 (Unaudited) 2018 (Unaudited)
US$000 US$000
---------------- ----------------
Finance income:
Interest on deposits and liquidity funds 749 991
Interest on loans 63 59
Gain on discount of other receivables(1) 525 -
Gain on discount of deferred income 19 38
Others 68 -
---------------- ----------------
Total 1,424 1,088
---------------- ----------------
Finance cost:
Interest on bank loans (2,351) (2,335)
Interest on bond - (1,487)
Other interest (202) (473)
---------------- ----------------
Total interest expense (2,553) (4,295)
---------------- ----------------
Unwind of discount rate (284) (113)
Loss on discount of other receivables(1) - (658)
Loss from changes in the fair value of financial
instruments - (946)
Others(2) (667) (470)
---------------- ----------------
Total (3,504) (6,482)
---------------- ----------------
1 Mainly corresponds to the gain/(loss) on discount of tax credits in Argentina.
2 Includes the effect of the discount of the lease liabilities
related to IFRS 16 (refer to note 2(b)).
11 Income tax expense
Six-months ended 30
June
----------------------------------
2019 (Unaudited) 2018 (Unaudited)
US$000 US$000
---------------- ----------------
Current tax
Current income tax expense 7,512 5,453
Current mining royalty charge 2,466 2,383
Current special mining tax charge 1,132 1,771
Total 11,110 9,607
---------------- ----------------
Deferred tax
Origination and reversal of temporary differences 1,747 18,229
---------------- ----------------
Total 1,747 18,229
---------------- ----------------
Total taxation charge in the income statement 12,857 27,836
================ ================
The pre-exceptional tax charge for the period was US$16,382,000
(2018: US$32,658,000).
The weighted average statutory income tax rate was 30.5% for
2019 and 31.2% for 2018. This is calculated as the average of the
statutory tax rates applicable in the countries in which the Group
operates, weighted by the profit/(loss) before tax of the Group
companies in their respective countries as included in the
consolidated financial statements.
The change in the weighted average statutory income tax rate is
due to a change in the weighting of profit/(loss) before tax in the
various jurisdictions in which the Group operates.
The effective tax rate for corporate income tax before foreign
exchange effect for the six months ended 30 June 2019 is 32.9% (30
June 2018: 38.8%), compared to the corporate income tax and mining
royalties before foreign exchange effect of 45.0% (30 June 2018:
49.5%) and the total taxation charge in the income statement of
43.6% (30 June 2018: 72.2%).
12 Property, plant and equipment
During the six months ended 30 June 2019, the Group acquired and
developed assets with a cost of US$66,975,000 (30 June 2018:
US$59,356,000). The additions for the six months ended 30 June 2019
relate to:
Total additions
Other property of property
Mining properties plant and plant and
and development equipment equipment
(Unaudited) (Unaudited) (Unaudited)
US$000 US$000 US$000
----------------- --------------- ---------------
San Jose 11,835 10,716 22,551
Pallancata 11,845 1,844 13,689
Inmaculada 24,596 4,106 28,702
Others 24 2,009 2,033
----------------- --------------- ---------------
48,300 18,675 66,975
================= =============== ===============
Assets with a net book value of US$130,000 were disposed of by
the Group during the six month period ended 30 June 2019 (30 June
2018: US$20,000) resulting in a net gain on disposal of US$2,000
(30 June 2018: gain of US$38,000).
For the six months ended 30 June 2019, the depreciation charge
on property, plant and equipment was US$89,661,000 (30 June 2018:
US$83,908,000).
There are no indicators of impairment for the six months ended
30 June 2019 and 30 June 2018.
The effect of the application of IFRS 16 is disclosed in note
2(b).
13 Evaluation and exploration assets
During the six months ended 30 June 2019, the Group capitalised
evaluation and exploration costs of US$3,854,000 (30 June 2018:
US$6,003,000). The additions correspond to the following
properties:
Unaudited
US$000
---------
Inmaculada 2,323
Azuca 553
Crespo 448
Volcan 461
Others 69
3,854
=========
There were no transfers from evaluation and exploration assets
to property, plant and equipment during the period (2018:
US$nil).
14 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 2019 and 31 December 2018, the Group held the
following financial instruments measured at fair value:
As at 30
June 2019
(Unaudited) Level 1 Level 2 Level 3
US$000 US$000 US$000 US$000
------------- -------- -------- --------
Assets measured at fair
value
Equity shares 7,459 5,011 - 2,448
Warrants 47 47 - -
Trade receivables 41,067 - - 41,067
48,973 5,058 - 43,915
------------- -------- -------- --------
As at 31 December Level 1 Level 2 Level 3
2018 US$000 US$000 US$000 US$000
Assets measured at fair
value
Equity shares 5,296 2,110 - 3,186
Warrants 47 47 - -
Trade and other receivables 45,201 - - 45,201
------------------ -------- -------- --------
50,544 2,157 - 48,387
------------------ -------- -------- --------
During the six months ended 30 June 2019 there were transfers
between level 3 to level 1. During the year ended 31 December 2018,
there were no transfers between these levels.
The reconciliation of the financial instruments categorised as
Level 3 is as follows:
Trade receivables
Unlisted subject to
equity shares price adjustments
US$000 US$000
-------------- ------------------
Balance at 1 January 2018 581 43,201
Acquisition 2,120 -
Fair value adjustment recognised through OCI 485 -
Net change in trade receivables from goods sold - (2,305)
Changes in fair value of price adjustments - (5,646)
Realised price adjustments during the period - 9,943
-------------- ------------------
Balance at 31 December 2018 3,186 45,201
Acquisition 500 -
Fair value adjustment recognised through OCI 37 -
Listing of shares (1,275) -
Net change in trade receivables from goods sold - (2,202)
Changes in fair value of price adjustments - 2,017
Realised price adjustments during the period - (3,549)
-------------- ------------------
Balance at 30 June 2019 (Unaudited) 2,448 41,467
-------------- ------------------
The fair value of non-listed equity investments is determined
based on financial information available of the companies and they
are categorised as level 3.
15 Deferred income tax assets and liabilities
The changes in the net deferred income tax assets/(liabilities)
are as follows:
As at As at
30 June 31 December
2019 2018
(Unaudited)
US$000 US$000
------------- ------------
Beginning of the period (69,727) (53,640)
Income statement charge (1,747) (16,087)
End of the period/year (71,474) (69,727)
============= ============
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 As at
30 June 31 December
2019 2018
(Unaudited)
US$000 US$000
------------- ------------
Deferred income tax assets 1,680 1,504
Deferred income tax liabilities (73,154) (71,231)
Net deferred income tax liabilities (71,474) (69,727)
============= ============
16 Cash and cash equivalents
As at As at
30 June 31 December
2019 2018
(Unaudited)
US$000 US$000
------------- ------------
Cash at bank 324 366
Current demand deposit accounts(1) 31,339 43,095
Time deposits(2) 63,780 36,243
------------- ------------
Cash and cash equivalents 95,443 79,704
============= ============
1 Relates to bank accounts which are readily accessible to the Group and bear interest.
2 These deposits have an average maturity of 8 days (as at 31 December 2018: 14 days).
17 Borrowings
The movement in borrowings during the six month period to 30
June 2019 is as follows:
As at 30
As at 1 June 2019
January Additions Repayments (Unaudited)
2019 US$000 US$000 US$000 US$000
------------- ---------- ----------- -------------
Current
Bank loans(1) 107,067 65,851 (15,098) 157,820
107,067 65,851 (15,098) 157,820
Non-current
Bank loans(1) 50,000 - (50,000) -
50,000 - (50,000) -
------------- ---------- ----------- -------------
Accrued interest: (1,067) (2,351) 1,598 (1,820)
------------- ---------- ----------- -------------
Before accrued interest 156,000 63,500 (63,500) 156,000
------------- ---------- ----------- -------------
1 Relates to pre-shipment loans for a total amount of
US$6,036,000 (2018: US$6,047,000) 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 2019 includes
US$151,784,000 of loans with the BBVA Bank and Scotia Bank.
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 2019
As at 30
June 2019
(Unaudited) (Unaudited)
As at 31 As at 31
December December
US$000 2018 US$000 US$000 2018 US$000
----------- ------------ ------------ ------------ ------------
Bank loans - 50,000 - 47,353
Total - 50,000 - 47,353
---------------- ------------ ------------ ------------ ------------
18 Deferred income
As at As at
31 December
30 June 2019 2018
(Unaudited) US$000 US$000
-------------------- -------------
San Felipe contract(1) 32,146 31,396
El Mosquito contract 790 970
-------------------- -------------
32,936 32,366
Less current balance (400) (400)
-------------------- -------------
Non-current balance 32,536 31,966
==================== =============
1 On 3 August 2011, the Group entered into an agreement with
Impulsora Minera Santa Cruz ("IMSC") whereby IMSC acquired the
right to explore the San Felipe properties and an option to
purchase the related concessions. Under the terms of this agreement
the Group has received US$32,146,000 as non-refundable payments at
30 June 2019 (2018: US$31,396,000).
On 15 December 2018, the option to sell the San Felipe property
to Americas Silver Corporation (as IMSC's assignee) was extended to
15 December 2020. In consideration for the deferral of a cash
payment, the Group received 452,200 ASC common shares on 18 January
2019 at an issue price equal to US$600,000, that was recognised as
other income.
During 2018 the Group collected US$2,000,000 (January
2018:US$500,000, April 2018: US$500,000 and July 2018:
US$1,000,000).
During 2019 the Group has collected US$750,000.
19 Equity
Share capital and share premium
The movement in share capital of the Company from 31 December
2018 to 30 June 2019 is as follows:
Number of
ordinary Share capital Share premium
shares US$000 US$000
----------------------------------- ----------- ------------- -------------
Shares issued as at 1 January 2019 510,553,920 225,409 438,041
Shares issued as at 30 June 2019 510,553,920 225,409 438,041
------------------------------------ ----------- ------------- -------------
At 30 June 2019 and 31 December 2018 all issued shares with a
par value of 25 pence each were fully paid (30 June 2019: weighted
average of US$0.441 per share, 31 December 2018: weighted average
of US$0.441 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 with a value of
US$84,000 (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.
On 31 December 2018 the Group issued 1,660,805 ordinary shares,
under the Restricted Share Plan, to certain employees of the
Group.
On 21 March 2019, the Group purchased 115,640 shares for a total
consideration of GBP236,000 (equivalent to US$309,000).
On 22 March 2019, 115,682 Treasury shares with a value of
US$309,000 (being the cost incurred to acquire the shares) were
transferred to the CEO of the Group with respect to the Enhanced
Long term Incentive Plan.
At 30 June 2019 the balance of Treasury shares is nil (31
December 2018: 42) ordinary shares with a value of US$nil (31
December 2018: US$115).
20 Dividends paid and declared
Dividends declared to non-controlling interests in the six
months ended 30 June 2019 were US$nil (30 June 2018: US$9,823,000).
Dividends paid to non-controlling interests in the six months ended
30 June 2019 were US$2,210,000 (30 June 2018: US$7,785,000).
Final dividends for 2018 of US$10,002,000 were declared in the
six months ended 30 June 2019 (30 June 2018: US$10,000,000). The
Directors of the Company declared an interim dividend in respect of
the six months ended 30 June 2019 of US$2.00 cents per share
(totalling US$10,200,000) (30 June 2018: US$10,000,000) which will
be paid to shareholders on 19 September 2019 to those shareholders
appearing on the register on 30 August 2019. These financial
statements do not reflect this dividend payable.
21 Related party transactions
There were no significant related party transactions during the
six months period ended 30 June 2019.
22 Notes to the statement of cash flows
Six- months ended 30
June
--------------------------------
2019 2018
(Unaudited) (Unaudited)
US$000 US$000
------------- -------------
Reconciliation of profit for the period to
net cash generated from operating activities
Profit for the period 16,661 10,718
Adjustments to reconcile Group profit to net
cash inflows from operating activities
Depreciation 90,599 82,649
Amortisation of intangibles 1,121 1,039
Write-off of non-financial assets 517 201
Gain on sale of property, plant and equipment (2) (38)
Provision for obsolescence of supplies 55 519
Finance income (1,424) (1,088)
Finance costs 3,504 22,828
Income tax expense 12,857 27,836
Other 2,624 4,274
Increase/(decrease) of cash flows from operations
due to changes in assets and liabilities
Trade and other receivables (23,927) (2,352)
Other financial assets and liabilities - 2,207
Inventories 5,846 10,163
Trade and other payables (5,079) (18,390)
Provisions 1,958 845
------------- -------------
Cash generated from operations 105,310 141,411
------------- -------------
23 Subsequent events
a) On 1 July 2019 the Group signed two short term loans of
US$50,000,000 each with Scotiabank del Perú, with an interest rate
of 2.00%. The proceeds were employed to repay the two loans of
US$50,000,000 each with the same institution.
b) On 1 July 2019 the Group signed a short term loan of
US$50,000,000 with Banco de Credito del Peru with an annual
interest rate of 2.06%. The proceeds were employed to repay the
loan of US$50,000,000 with the BBVA Bank.
Profit by operation(1)
(Segment report reconciliation) as at 30 June 2019
(Unaudited)
Consolidation
adjustment
Company (US$000) Arcata Pallancata San Jose Inmaculada and others Total/HOC
--------------------------------------- ------- ---------- -------- ---------- ------------- ---------
Revenue 5,083 69,793 108,800 170,674 100 354,450
Cost of sales (pre-consolidation) (6,958) (63,489) (79,311) (104,865) 1,792 (252,831)
---------------------------------------- ------- ---------- -------- ---------- ------------- ---------
Consolidation adjustment (86) (879) - (827) 1,792 -
Cost of sales (post-consolidation) (6,872) (62,610) (79,311) (104,038) - (252,831)
Production cost excluding
depreciation (6,813) (36,603) (56,430) (58,598) - (158,444)
Depreciation in
production
cost (49) (25,619) (23,520) (41,183) - (90,371)
Other items - (290) (567) (278) - (1,135)
Change in
inventories (10) (98) 1,206 (3,979) - (2,881)
---------------------------------------- ------- ---------- -------- ---------- ------------- ---------
Gross profit (1,875) 6,304 29,489 65,809 1,892 101,619
---------------------------------------- ------- ---------- -------- ---------- ------------- ---------
Administrative expenses - - - - (23,021) (23,021)
Exploration expenses - - - - (18,552) (18,552)
Selling expenses (146) (474) (9,545) (315) - (10,480)
Other income/(expenses) - - - - (16,305) (16,305)
---------------------------------------- ------- ---------- -------- ---------- ------------- ---------
Operating profit/(loss) before
impairment (2,021) 5,830 19,944 65,494 (55,986) 33,261
---------------------------------------- ------- ---------- -------- ---------- ------------- ---------
Write-off of non-financial
assets - - - - (517) (517)
Finance income - - - - 1,424 1,424
Finance costs - - - - (3,504) (3,504)
Foreign exchange - - - - (1,146) (1,146)
---------------------------------------- ------- ---------- -------- ---------- ------------- ---------
Profit/(loss) from continuing
operations before income
tax (2,021) 5,830 19,944 65,494 (59,729) 29,518
---------------------------------------- ------- ---------- -------- ---------- ------------- ---------
Income tax - - - - (12,857) (12,857)
---------------------------------------- ------- ---------- -------- ---------- ------------- ---------
Profit/(loss) for the period
from continuing operations (2,021) 5,830 19,944 65,494 (72,586) 16,661
---------------------------------------- ------- ---------- -------- ---------- ------------- ---------
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 5 September 2019 in respect of the 2019 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 2019 interim dividend,
a dividend mandate form, also available from the Company's
registrars, should be completed and returned to the registrars by 5
September 2019. 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 2019
Ex-dividend date 29 August
Record date 30 August
Deadline for return of currency election forms 5 September
Payment date 19 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]) Refer to page 12 of the Financial Review for a definition
of Adjusted EBITDA
([2]) On a pre-exceptional basis
[4]All-in sustaining cost (AISC) per silver equivalent ounce:
Calculated before exceptional items and includes cost of sales less
depreciation in production cost and change in inventories,
administrative expenses, brownfield exploration, operating and
exploration capex and royalties (presented with income tax) divided
by silver equivalent ounces produced, plus commercial deductions
and selling expenses divided by silver equivalent ounces sold using
a gold/silver ratio of 81:1. The Arcata operation is excluded from
the calculation of the AISC from operations in H1 2019.
[5]All equivalent figures assume the average gold/silver ratio
of 81:1.
[6]Includes revenue from services
[7]Included within revenue is a gain of US$2,017,000 (2018: loss
of US$4,382,000) comprising net gold gain of US$3,034,000 (2018:
net loss of US$1,870,000) and net silver loss of US$1,017,000
(2018: net loss of US$2,512,000) relating to provisional pricing
adjustments arising on sales of concentrates and dore. Also
[8]Reconciliation of gross revenue by mine to Group net
revenue
[9]Included within revenue is a transaction price of
US$3,444,000 (2018: US$2,540,000) related to the shipping services
provided by the Group to the customers arising on sale of
concentrates of US$2,650,000, gold: US$1,244,000, silver:
US$1,406,000 and dore of US$794,000, gold: US$460,000, silver:
US$334,000 (2018: concentrates of US$1,762,000, gold: US$803,000,
silver: US$959,000 and dore of US$778,000, gold: US$431,000,
silver: US$347,000).
[10]Unit cost per tonne is calculated by dividing mine and
treatment production costs (excluding depreciation) by extracted
and treated tonnage respectively
[11]Unit cost per tonne for Peru do not include the Arcata mine
in H1 2019
[12]Cash costs are calculated to include cost of sales,
treatment charges, and selling expenses before exceptional items
less depreciation included in cost of sales
[13]Includes commercial discounts (from the sales of
concentrate) and commercial discounts from the sale of dore
[14]Royalties arising from revised royalty tax schemes
introduced in 2011 and included in income tax line
[15]Calculated using a gold silver ratio of 81:1
[16]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
[17]Includes pre-shipment loans and short term interest
payables
[18]Includes additions in property, plant and equipment and
evaluation and exploration assets (confirmation of resources) and
excludes increases in the expected closure costs of mine asset
This information is provided by RNS, the 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
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