TIDMHOC
RNS Number : 4096D
Hochschild Mining PLC
19 February 2020
_____________________________________________________________________________________
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19 February 2020
Preliminary Results for the year ended 31 December 2019
Robust 2019 financial performance
-- Revenue up 7% at $755.7 million (2018: $704.3 million)
([1])
-- Adjusted EBITDA up 28% at $343.3 million (2018: $268.0
million) ([2])
-- Profit before income tax (pre-exceptional) up 89% at $103.4
million (2018: $54.7 million)
-- Profit before income tax (post-exceptional) up 100% at $76.8
million (2018: $38.4 million)
-- Basic earnings per share (pre-exceptional) up 80% at $0.09
(2018: $0.05)
-- Basic earnings per share (post-exceptional) up 100% to $0.06
(2018: $0.03)
-- Cash and cash equivalent balance of $166.4 million as at 31
December 2019 (2018: $79.7 million)
-- Net debt reduced by 57% to $33.2 million as at 31 December
2019 (2018 $77.4 million)
-- Final proposed dividend up 19% at 2.335 cents per share
($12.0 million) bringing the full-year total dividend to $22.2
million (2018: $20.0 million)
Strong 2019 operational delivery [3]
-- All-in sustaining costs (AISC) from operations down to $965
per gold equivalent ounce (2018: $973) or $11.9 per silver
equivalent ounce (2018: $12.0) comfortably in line with full year
cost guidance of $960-$1,000 per gold equivalent ounce or
$11.8-12.3 per silver equivalent ounce [4]
-- Full year attributable production of 477,400 gold equivalent
ounces (38.7 million silver equivalent ounces) exceeding full year
attributable production guidance of 457,000 gold equivalent ounces
(37.0 million silver equivalent ounces)
-- Record production at Inmaculada up 6% to 260,126 gold
equivalent ounces (2018: 244,445 ounces)
-- Record production at San Jose up 10% to 15.4 million silver
equivalent ounces (2018: 14.0 million ounces)
-- Inmaculada brownfield drilling programme added further 46
million silver or 0.5 million gold equivalent ounces of inferred
resources in 2019 (calculated using a gold/silver ratio of 86:1) at
a grade of 475 grams per tonne silver equivalent
-- Permits received for key Pablo Sur and Cochaloma exploration
targets close to Pallancata with drilling campaign already started
at Pablo Sur
2020 outlook ([5])
-- Attributable production target of 422,000 gold equivalent
ounces (36.0 million silver equivalent ounces)
-- Total sustaining and development capital expenditure expected
to be approximately $115-130 million including $22 million
expansion of tailings storage facility (TSF) at Inmaculada
-- AISC from operations expected to be $1,040-$1,080 per gold
equivalent ounce ($12.1-12.5 per silver equivalent ounce)
-- AISC from operations excluding Inmaculada TSF expansion
expected to be $1,000-$1,040 per gold equivalent ounce ($11.6-12.0
per silver equivalent ounce)
-- 2020 brownfield exploration budget expected to be $36 million
with greenfield and advanced project budget set at an additional $8
million
$000 unless stated Year ended Year ended % change
31 Dec 2019 31 Dec 2018
------------- -------------
Attributable silver production (koz) 16,808 19,700 (15)
Attributable gold production (koz) 270 260 4
Revenue 755,676 704,290 7
Adjusted EBITDA 343,332 268,010 28
Profit from continuing operations (pre-exceptional) 60,083 18,225 230
Profit from continuing operations (post-exceptional) 41,439 6,701 518
Basic earnings per share (pre-exceptional) $ 0.09 0.05 80
Basic earnings per share (post-exceptional) $ 0.06 0.03 100
------------------------------------------------------ ------------- ------------- ---------
________________________________________________________________________________________
Ignacio Bustamante, Chief Executive Officer said:
"In 2019, we have delivered some strong financial results which
reflect another robust year of production including records at two
of our operations and good cost control. Improved precious metals
prices in the second half of the year combined with strong free
cashflow generation saw us reduce leverage further and finish the
year with net debt at $33 million. We have again discovered a
significant amount of resource additions at Inmaculada and
anticipate another year of ambitious exploration with exciting
drill targets at all our current operations and projects throughout
our entire southern Peru cluster. In addition, we can look forward
to progressing our portfolio of greenfield opportunities and
strategic alliances."
________________________________________________________________________________________
A presentation will be held for analysts and investors at 9.30am
(UK time) on Wednesday 19 February 2020 at the offices of Hudson
Sandler,
25 Charterhouse Square, London, EC1M 6AE
The presentation and a link to the live audio webcast of the
presentation can be found at the Hochschild website:
www.hochschildmining.com
To join the event via conference call, please see dial in
details below:
UK: +44 (0)330 336 9411 (Please quote confirmation code
1877935)
________________________________________________________________________________________
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.
CHAIRMAN'S STATEMENT
2019 was another busy year for Hochschild Mining and I believe
we have delivered further strong progress. Our team continued to
drive a responsible and innovative mining strategy that aims to
combine world class operational performance with exploration-led
growth in a safe and environmentally friendly manner. In this
regard, I am pleased to report that our delivery in these key areas
has been very encouraging. Upholding the Company's high standards
is not only critical to our operational success, but to our
reputation with our communities, host governments and investors. I
also believe that we are continuing to create a stimulating,
inclusive and forward-thinking workplace environment where our
people can grow their careers and develop new skills and
expertise.
2019 was a year in which the efforts of the management team in
the design and implementation of our Safety Culture Transformation
Plan bore fruit. I am delighted to report that we had our safest
year on record. Our key indicators, the accident frequency index
and accident severity index were at their lowest and saw year-on
year reductions of 40% and 94% respectively. The wide-ranging
transformation plan which, in addition to incorporating the
traditional elements of training and internal communications, also
saw technology play a key role in monitoring day-to-day activities
and the safe transportation of our personnel.
The Group has performed well with regards to environmental
management, exceeding our target ECO Score for the year. It is also
a matter of pride that I can report that the ECO Score itself has
won an international award for its innovative approach to
sustainability, raising environmental awareness across the entire
organisation and its potential application to other industries.
Moreover, following on from the successful Safety Culture
Transformation Plan, we intend to launch a similar initiative
recognising our responsibilities with regards to the
environment.
Our people are crucial to our success and therefore it is
incumbent on the Board and management to attract and retain a
diverse pipeline of talent. An internal study revealed that
although Hochschild's gender diversity is better than the average
among our peers in Peru, it is a stark fact that women remain
significantly under-represented. In order to tackle this imbalance,
a working group has been established and an action plan has been
developed to achieve the Group's target of increasing workforce
diversity. Further details on this and all of the activities
mentioned above can be found in the Sustainability section of the
2019 Annual Report.
Turning to our operations, we delivered a strong year of
production despite the decision to place our Arcata mine on
temporary care and maintenance in the first quarter. We saw record
performances at Inmaculada and San Jose and we were able to once
again meet our cost targets. Furthermore, with precious metal
prices recovering significantly in the second half of the year, our
business generated strong free cashflow allowing us to strengthen
our balance sheet, further invest in our exploration initiatives
and add value accretive projects to our portfolio. Towards the end
of the year, we also augmented our strong financial position by
refinancing our existing $150 million of short-term debt with a new
$200 million five year loan at a highly competitive rate.
Brownfield exploration remains the focus for our Company and we
made good progress in the year with substantial resource additions
at Inmaculada and encouraging results at the Palca and Corina zones
close to our Pallancata mine. In addition, although there were some
delays in the permitting process in Peru for our exciting Cochaloma
and Pablo Sur targets, we did receive the requisite approvals in
January 2020 and can now look forward to an early start to this
year's programme at these two sites. We are confident that there
remains a wide array of promising targets, not only surrounding all
our operations but also at our early stage projects and at former
operations such as Arcata, Ares and Selene. Many of these are
expected to be drilled during 2020 and 2021.
Technology is all pervasive and can help drive efficiencies,
improve performance and provide insights on a wide range of
activities at Hochschild. In the last few years, we have
implemented a plan to build a more progressive organisation which
drives innovation and also looks to capitalise on our existing
skillsets. For example, we have made substantial progress in 2019
with the implementation of our mine digitalisation programme as
well as the introduction of our Innova platform across the Group to
facilitate efficiency ideas. But in the last few years, we have
also aimed to leverage off the talent and experience within the
Company and explore the potential for investment in other minerals
where we believe we can create shareholder value and where the
future demand characteristics are strong. I believe that the
acquisition of the unique Biolantanidos rare earth deposit in Chile
in October is a key example of this. It brings the Company
optionality in an exciting market that benefits from a more
technological and environmentally friendly world.
Outlook
2019 was a strong year for precious metals, particularly gold,
which was driven by declining U.S. interest rates and heightening
geopolitical and global trade risk and represented the largest
annual year-end gain since 2010. This was almost matched by silver
which rose by around 15%. Such a supportive environment has
reinforced our belief in our long-term strategy: a central focus on
low cost brownfield exploration; selective greenfield initiatives
across the Americas; further development of our numerous early
stage projects; and a targeted approach to acquisitions.
Consequently, in light of such a solid strategic and financial
position the Board is pleased to recommend a final dividend of
2.335 cents per share ($12 million).
The Company will continue to be governed by a financially
disciplined approach, emphasising a high quality portfolio and
managing risk in a way that protects value, while our assets will
be supported by operational practices that meet the highest safety
and environmental standards. Finally, I would like to thank all of
Hochschild's people, who work with such determination and give
their very best to contribute to making Hochschild a success.
Eduardo Hochschild, Chairman
18 February 2020
CHIEF EXECUTIVE OFFICER'S STATEMENT
I am pleased to report that 2019 was another year of achievement
for Hochschild. Our safety performance was considerably improved
and our environmental performance delivered another robust year,
which helped create strong operational reliability leading to solid
production, precise cost control and impressive cashflow
generation. Our exploration programme was again a key focus and we
made encouraging steps in our aim to add low cost resources and to
deliver long-term growth opportunities. We believe that our
portfolio is well positioned to further transform our business and
deliver value and returns for our shareholders.
Operations
Hochschild's operational results were once again able to surpass
forecasts, producing 477,400 gold equivalent ounces (38.7 million
silver equivalent ounces) which improved on our 2019 target of
457,000 ounces (37.0 million silver equivalent ounces). This
represented only a 5% reduction versus 2018 (2018: 503,640 gold
equivalent ounces or 40.8 silver equivalent ounces) despite the
decision to place our Arcata mine on temporary care-and-maintenance
in the first quarter and included record production results from
both Inmaculada and San Jose. All-in sustaining costs were in line
with expectations at $11.9 per silver equivalent ounce ($965 per
gold equivalent ounce). Inmaculada was again the cornerstone with
production of 260,126 gold equivalent ounces at $798 per gold
equivalent ounce whilst San Jose delivered another strong year with
production of 15.4 million silver equivalent ounces at $13.8 per
silver equivalent ounce. This was achieved despite a complex
economic environment in Argentina. At Pallancata, production was
broadly similar to 2018 at 9.4 million silver equivalent ounces
(2018: 9.6 million ounces) at a cost of $13.5 per silver equivalent
ounce.
Exploration
Our ambitious brownfield exploration programme continued in 2019
with the key highlight being the 46 million silver equivalent
ounces of additional resources discovered at Inmaculada close to
the Angela vein and at approximately 456 grams per tonne silver
equivalent. Furthermore, we also carried out a comprehensive infill
drilling programme on the veins discovered in 2018. At San Jose, we
have continued to evaluate the Aguas Vivas polymetallic deposit to
the north west of existing operations as well as preparing to drill
the Telken zone which we believe could form the extension to veins
from Newmont's Cerro Negro mine in the south. Long hole drilling
also started towards the end of the year close to the mine as well
as our first use of Titan geophysics in the area. At Pallancata,
drilling campaigns commenced at Palca to the south east and Corina
to the north. Encouraging mineralisation was found in both zones
with further campaigns scheduled in 2020. We experienced delays in
receiving exploration permits for two other key targets close to
the operation, Pablo Sur and Cochaloma, and have finally received
them in early 2020. As a result, we have reduced production at
Pallancata for 2020 in order to extend its life of mine and
recalibrate our exploration to production cycle as well as
recognising an impairment of $14.7 million.
Business Development
Our team worked on a number of business development initiatives
which balanced early stage opportunities including greenfield
drilling and project options with the focus on stable jurisdictions
in the Americas. In this regard, we carried out selective drilling
campaigns in Chile, Canada and the United States. Results from the
Corina deposit in Peru were encouraging, and, towards the end of
the year, we saw some notable drill holes at the Snip mine in
Canada from our partner, Skeena Resources. Further preparatory work
has also been carried out at our existing near term projects
including Arcata, Ares, Azuca, Crespo and Condor and an exciting
drill campaign is scheduled for 2020 and 2021 at a number of these
sites across southern Peru subject to the receipt of the relevant
exploration permits.
In October, we announced the acquisition of the remaining 94% of
the Biolantanidos rare earth deposit in Chile for $56 million. We
believe that this acquisition in an attractive mining jurisdiction
provides unique optionality for our shareholders and was the direct
result of an extensive long-term effort to identify commodities
with very strong growth characteristics. The project consists of
ionic clay resources, similar to those found in China, but very
different from most other rock-based rare earth projects worldwide.
The process is environmentally friendly with no requirements for
the use of explosives, no tailings dams and no potentially harmful
chemicals. Capital and operational expenditure is projected to be
low and we are also excited by the strong geological upside
potential. Although Hochschild remains focused on precious metals,
this diversification gives us a unique deposit in a key industry
with expected exponential growth. We intend to deliver a revised
feasibility study in 2021 and will thereafter decide on the
appropriate path to development to maximise value for
shareholders.
Financial position
We have continued to strengthen our balance sheet through the
year with strong free cashflow especially in the second half and in
December with the refinancing of our $150 million short term debt
with a new $200 million five year loan at Libor + 1.15%. We ended
the year with a strong cash balance of $166 million (2018: $80
million) and net debt therefore fell to $33.2 million (2018: $77.4
million).
Financial results
The average gold price received in 2019 was 12% higher than the
previous year with the silver price rising 8% and therefore,
combined with a rise in gold sales, revenue increased by 7% to $756
million (2018: $704 million). The operational all-in sustaining
cost of $11.9 per silver equivalent ounce (2018: $12.0 per ounce)
was at the better end of forecasts and reflected ongoing cost
efficiencies offset by a budgeted increase in exploration expenses
investment as well as selling expenses due to the export taxes in
Argentina. The combination of the revenue increase and tight cost
control led to Adjusted EBITDA rising strongly by 28% to $343
million (2018: $268 million) with Profit from continuing operations
before income tax increasing by 79% to $103.4 million (2018: $54.7
million). Adjusted earnings per share was higher at $0.09 per share
(2018: $0.05 per share) resulting from the higher profitability and
lower interest costs and partially offset by the above-mentioned
increase in selling expenses and a rise in mine closure provisions
for our former operations at Ares and Sipan ($13.6 million).
Outlook
We expect attributable production in 2020 of 422,000 gold
equivalent ounces (36 million silver equivalent ounces) assuming
the silver to gold ratio of 86:1 (the average ratio for 2019). This
will be driven by: 252,000 gold equivalent ounces from Inmaculada;
a contribution of 14.5 million silver equivalent ounces from San
Jose; and 7.2 million ounces from Pallancata. All-in sustaining
costs for operations are expected at between $1,040 to $1,080 per
gold equivalent ounce ($12.1 to $12.5 per silver equivalent ounce).
This forecast includes a $22 million investment to expand the
tailings storage facility at Inmaculada. Excluding this project,
all-in sustaining costs for operations are expected at between
$1,000 to $1,040 per gold equivalent ounce ($11.6 to $12.0 per
silver equivalent ounce).
The budget for brownfield exploration has increased to
approximately $36 million with the greenfield and advanced project
budget set at approximately $8 million plus approximately $7
million for advancing the Biolantanidos project. We are also
furthering our innovation drive to aid in the delivery of upside in
our operations and projects. Finally, we recognise that the
management of environmental, social and governance ("ESG") issues
is of increasing significance to investors and stakeholders in
general, particularly for those operating in the resources sector.
This year, we will embark on a process of enhancing our level of
ESG reporting and, in particular, in relation to the Company's
environmental and social performance.
Although the year has started with relatively high precious
metal prices, cost control continues to be a top priority. Our 2020
brownfield programme has already begun at Pablo Sur and we look
forward to further results from another ambitious year of
exploration both around our existing operations and further afield.
I firmly believe that we have set a good course for the future with
a focus on low cost growth and a determination to further increase
the life-of mine across the Group. All the elements of our strategy
will be targeted on delivering sustainable long-term value to those
most closely interested in our Company: our shareholders, our
communities and our people.
Ignacio Bustamante, Chief Executive Officer
18 February 2020
OPERATING REVIEW
OPERATIONS
Note: 2019 and 2018 (restated) equivalent figures calculated
using the previous Company gold/silver ratio of 81x. All 2020
forecasts assume the average gold/silver ratio for 2019 of 86x.
Production
In 2019, Hochschild's attributable production was 38.7 million
silver equivalent ounces (477,400 gold equivalent ounces) exceeding
its full year guidance of 37.0 million attributable silver
equivalent ounces (457,000 gold equivalent ounces). This comprised
269,892 ounces of gold and 16.8 million ounces of silver. This was
mostly due to record years at Inmaculada and San Jose offsetting
the decision to place the Arcata mine on care and maintenance in
early 2019. The overall attributable production target for 2020 is
422,000 gold equivalent ounces or 36.0 million silver equivalent
ounces.
Total 2019 group production
Year ended Year ended
31 Dec 2019 31 Dec 2018
-------------
Silver production
(koz) 20,163 22,720
Gold production (koz) 321.58 307.77
Total silver equivalent
(koz) 46,210 47,650
Total gold equivalent
(koz) 570.50 588.27
Silver sold (koz) 20,062 22,687
Gold sold (koz) 317.52 304.51
------------------------- ------------- -------------
Total production includes 100% of all production, including
production attributable to Hochschild's minority shareholder at San
Jose.
Attributable 2019 group production
Year ended Year ended
31 Dec 2019 31 Dec 2018
-------------
Silver production
(koz) 16,808 19,700
Gold production (koz) 269.89 260.44
Silver equivalent
(koz) 38,669 40,795
Gold equivalent (koz) 477.40 503.64
----------------------- ------------- -------------
Attributable production includes 100% of all production from
Arcata, Inmaculada, Pallancata and 51% from San Jose.
2020 Production forecast split
Operation Gold production (oz approximate) Silver production (m
oz approximate)
---------------------------------
Inmaculada 181,400 6.1
Pallancata 19,300 5.5
San Jose (100%) 93,300 6.5
Total 294,000 18.1
----------------- --------------------------------- ---------------------
Costs
All-in sustaining cost from operations in 2019 was $965 per gold
equivalent ounce or $11.9 per silver equivalent ounce (2018: $973
per gold equivalent ounce or $12.0 per silver equivalent ounce), in
line with guidance of between $960 and $1,000 per gold equivalent
ounce or $11.8 and 12.3 per silver equivalent ounce. This was
driven by Inmaculada's competitive $798 per gold equivalent ounce
(2018: $751 per ounce) in addition to a solid result from
Pallancata ($13.5 per silver equivalent ounce). Please see page 13
of the Financial Review for further details on costs.
The all-in sustaining cost from operations in 2020 is expected
to be between $1,040 and $1,080 per gold equivalent ounce (or $12.1
and $12.5 per silver equivalent ounce), which includes a $22
million project to expand the tailings storage facility at
Inmaculada.
2020 AISC forecast split
Operation AISC
($/oz)
Inmaculada 930-960 Au Eq
Pallancata 13.5-13.9 Ag Eq
San Jose 13.4-13.8 Ag Eq
----------- ----------------
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 Year ended Year ended % change
31 Dec 2019 31 Dec 2018
------------- -------------
Ore production (tonnes) 1,338,569 1,323,525 1
Average silver grade (g/t) 163 150 9
Average gold grade (g/t) 4.71 4.36 8
Silver produced (koz) 5,747 5,690 1
Gold produced (koz) 189.18 174.20 9
Silver equivalent produced
(koz) 21,070 19,800 6
Gold equivalent produced
(koz) 260.13 244.45 6
Silver sold (koz) 5,732 5,676 1
Gold sold (koz) 188.59 172.40 9
Unit cost ($/t) 93.3 84.7 10
Total cash cost ($/oz Au
co-product) 504 481 5
All-in sustaining cost ($/oz
Au Eq) 798 751 6
------------------------------ ------------- ------------- ---------
Production
Inmaculada has delivered record gold equivalent production of
260,126 ounces in 2019, a 6% improvement on 2018 (2018: 244,445
ounces) with the key factors being better than forecast extracted
grades and steady tonnage.
Costs
All-in sustaining costs were $798 per gold equivalent ounce
(2018: $751 per ounce), at the better end of guidance of between
$790 and $830 per gold equivalent ounce. The impact of higher than
expected grades and cost efficiencies was more than offset by
increased mine development and infill drilling capex to access the
vein discoveries from 2018.
Pallancata
The 100% owned Pallancata silver/gold property is located in the
Department of Ayacucho in southern Peru. Pallancata commenced
production in 2007. Ore from Pallancata is transported 22
kilometres to the Selene plant for processing.
Pallancata summary Year ended Year ended % change
31 Dec 2019 31 Dec 2018
------------- -------------
Ore production (tonnes) 915,877 717,652 28
Average silver grade (g/t) 278 362 (23)
Average gold grade (g/t) 1.01 1.30 (22)
Silver produced (koz) 7,259 7,449 (3)
Gold produced (koz) 25.95 26.40 (2)
Silver equivalent produced
(koz) 9,361 9,588 (2)
Gold equivalent produced
(koz) 115.57 118.37 (2)
Silver sold (koz) 7,161 7,439 (4)
Gold sold (koz) 25.45 26.23 (3)
Unit cost ($/t) 83.8 93.6 (10)
Total cash cost ($/oz Ag
co-product) 9.6 8.1 19
All-in sustaining cost ($/oz
Ag Eq) 13.5 11.9 13
------------------------------ ------------- ------------- ---------
Production
Pallancata's production for the year was 9.4 million silver
equivalent ounces, broadly in line with the 2018 result (2018: 9.6
million ounces) and reflecting a full year of production from wider
(and therefore higher tonnage) but lower grade veins.
Costs
All-in sustaining costs were $13.5 per silver equivalent ounce
(2018: $11.9per ounce), at the better end of guidance of between
$13.5 and $14.0 per silver equivalent ounce. The increase versus
2018 reflected a full year of production from the above-mentioned
wider, but lower-grade veins.
San Jose
The San Jose silver/gold mine is located in Argentina, in the
province of Santa Cruz, 1,750 kilometres south west of Buenos
Aires. San Jose commenced production in 2007. Hochschild holds a
controlling interest of 51% and is the mine operator. The remaining
49% is owned by McEwen Mining Inc.
San Jose summary Year ended Year ended % change
31 Dec 2019 31 Dec 2018
------------- -------------
Ore production (tonnes) 544,165 556,185 (2)
Average silver grade (g/t) 443 397 12
Average gold grade (g/t) 6.81 6.20 10
Silver produced (koz) 6,846 6,165 11
Gold produced (koz) 105.48 96.60 9
Silver equivalent produced
(koz) 15,390 13,989 10
Gold equivalent produced
(koz) 190.00 172.70 10
Silver sold (koz) 6,846 6,175 11
Gold sold (koz) 102.82 96.60 7
Unit cost ($/t) 219.2 218.6 -
Total cash cost ($/oz Ag
co-product) 9.6 10.1 (5)
All-in sustaining cost ($/oz
Ag Eq) 13.8 13.8 -
------------------------------ ------------- ------------- ---------
Production
San Jose's overall total for 2019 was a record 15.4 million
silver equivalent ounces (2018: 14.0 million ounces), an impressive
10% increase versus 2018 mostly due to better than expected
grades.
Costs
All-in sustaining costs were $13.8 per silver equivalent ounce
(2018: $13.8 per ounce) in line with 2018 with the devaluation of
the Argentinian peso and higher gold and silver grades being offset
by the reintroduction of export taxes and local inflation.
Arcata
The 100% owned Arcata underground operation is located in the
Department of Arequipa in southern Peru. It commenced production in
1964.
Arcata summary Year ended Year ended % change
31 Dec 2019 31 Dec 2018
------------- -------------
Ore production (tonnes) 37,049 373,106 (90)
Average silver grade (g/t) 298 321 (7)
Average gold grade (g/t) 0.94 0.99 (5)
Silver produced (koz) 311 3,416 (91)
Gold produced (koz) 0.97 10.57 (91)
Silver equivalent produced
(koz) 390 4,273 (91)
Gold equivalent produced
(koz) 4.81 52.75 (91)
Silver sold (koz) 323 3,397 (90)
Gold sold (koz) 0.66 9.93 (93)
Unit cost ($/t) 182.2 167.7 9
Total cash cost ($/oz Ag
co-product) 20.2 16.9 20
All-in sustaining cost ($/oz
Ag Eq) 22.8 19.2 19
------------------------------ ------------- ------------- ---------
Production
On 13 February 2019, Hochschild announced the suspension of
operations at Arcata with the mine subsequently placed on temporary
care and maintenance. Production for the full year equalled Q1 2019
at 0.4 million silver equivalent ounces.
EXPLORATION
Inmaculada
During 2019, almost 8,500m of potential resource drilling was
carried out at the newly-discovered Susana Beatriz, Juliana and
Salvador structures to the west of the Angela vein. Thereafter
resource drilling commenced in the area and also included work at
other structures including Angela, Pilar, Noelia, Dora, Jose and
the Sandra veins. Over 35,000m of drilling was executed with the
result that approximately 535,000 gold equivalent ounces (46
million silver equivalent ounces) of inferred resources were added
to Inmaculada's resource base in 2019 at a grade of approximately
475 grams per tonne silver equivalent. Selected intercepts are
detailed below:
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
------------------------------------------
Juliana 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
ANE-19-020: 1.6m @ 3.0g/t Au & 370g/t Ag
ANE-19-021: 1.4m @ 7.1g/t Au & 318g/t Ag
ANE-19-022: 3.0m @ 2.0g/t Au & 165g/t Ag
ANE-19-025: 1.2m @ 2.8g/t Au & 133g/t Ag
ANE-19-027: 0.8m @ 3.6g/t Au & 192g/t Ag
ANE-19-028: 0.9m @ 7.8g/t Au & 357g/t Ag
ANE-19-029: 0.9m @ 267g/t Au & 1,783g/t
Ag
ANE-19-031: 0.8m @ 5.5g/t Au & 700g/t Ag
ANE-19-032: 1.6m @ 8.4g/t Au & 509g/t Ag
ANE-19-035: 0.8m @ 29.6g/t Au & 794g/t
Ag
ANE-19-037: 1.5m @ 2.7g/t Au & 120g/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
IMM-19-025: 1.4m @ 5.0g/t Au & 261g/t Ag
IMM-19-032: 1.0m @ 2.2g/t Au & 168g/t Ag
HUA-19-005: 2.2m @ 7.7g/t Au & 335g/t Ag
HUA-19-006: 1.0m @ 8.4g/t Au & 534g/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 @ 4.1g/t Au & 176g/t Ag
IMM-19-014: 5.8m @ 17.7g/t Au & 751g/t
Ag
IMM-19-015: 1.4m @ 5.4g/t Au & 254g/t Ag
IMM-19-016: 1.0m @ 4.9g/t Au & 52g/t Ag
IMM-19-017: 2.1m @ 4.2g/t Au & 253g/t Ag
IMM-19-020: 1.1m @ 23.1g/t Au & 268g/t
Ag
IMM-19-025: 2.1m @ 6.2g/t Au & 271g/t Ag
IMM-19-026: 1.8m @ 7.2g/t Au & 279g/t Ag
IMM-19-028: 1.1m @ 1.9g/t Au & 69g/t Ag
IMM-19-029: 1.0m @ 1.8g/t Au & 87g/t Ag
IMM-19-032: 1.5m @ 2.5g/t Au & 250g/t Ag
HUA-19-003: 1.4m @ 19.4g/t Au & 438g/t
Ag
HUA-19-005: 1.3m @ 4.2g/t Au & 169g/t Ag
HUA-19-007: 1.7m @ 3.1g/t Au & 180g/t Ag
HUA-19-008: 0.8m @ 3.6g/t Au & 150g/t Ag
------------------------------------------
Juliana HUA-19-002: 1.1m @ 3.7g/t Au & 78g/t Ag
HUA-19-002: 5.2m @ 5.1g/t Au & 88g/t Ag
------------------------------------------
Noelia HUA-19-005: 1.3m @ 2.7g/t Au & 109g/t Ag
ANE-19-020: 1.5m @ 16.8g/t Au & 1,843g/t
Ag
ANE-19-021: 1.1m @ 3.3g/t Au & 101g/t Ag
IMM-19-017: 1.0m @ 1.1g/t Au & 73g/t Ag
IMM-19-025: 1.9m @ 13.6g/t Au & 682g/t
Ag
HUA-19-005: 1.1m @ 12.2g/t Au & 300g/t
Ag
------------------------------------------
Rosa ROS-19-001: 3.2m @ 3.5g/t Au & 43g/t Ag
ROS-19-002: 1.0m @ 2.5g/t Au & 122g/t Ag
------------------------------------------
Susana Beatriz ANE-19-020: 3.8m @ 4.3g/t Au & 340g/t Ag
ANE-19-021: 3.6m @ 3.1g/t Au & 142g/t Ag
ANE-19-022: 8.5m @ 3.6g/t Au & 188g/t Ag
ANE-19-023: 1.2m @ 3.3g/t Au & 372g/t Ag
ANE-19-025: 3.0m @ 5.6g/t Au & 386g/t Ag
ANE-19-029: 1.8m @ 2.7g/t Au & 219g/t Ag
ANE-19-030: 2.3m @ 3.1g/t Au & 253g/t Ag
ANE-19-037: 2.2m @ 1.7g/t Au & 136g/t Ag
HUA-19-005: 3.1m @ 8.6g/t Au & 333g/t Ag
HUA-19-006: 1.3m @ 3.3g/t Au & 272g/t Ag
HUA-19-007: 1.5m @ 3.7g/t Au & 102g/t Ag
HUA-19-008: 1.6m @ 3.3g/t Au & 122g/t Ag
IMM-19-011: 1.0m @ 13.0g/t Au & 553g/t
Ag
IMM-19-017: 0.9m @ 4.0g/t Au & 263g/t Ag
IMM-19-024: 1.0m @ 1.3g/t Au & 31g/t Ag
------------------------------------------
Angela Sur IMS-19-008: 1.2m @ 1.5g/t Au & 121g/t Ag
IMS-19-010: 1.5m @ 1.6g/t Au & 191g/t Ag
------------------------------------------
Angela extension ANE-19-029: 1.3m @ 266.5g/t Au & 1,783g/t
Ag
------------------------------------------
Dora IMM-19-025: 1.5m @ 13.6g/t Au & 682g/t
Ag
IMM-19-026: 3.0m @ 7.2g/t Au & 279g/t Ag
IMM-19-030: 0.9m @ 6.9g/t Au & 231g/t Ag
SP-19-0223: 1.5m @ 9.6g/t Au & 351g/t Ag
SP-19-0238: 0.9m @ 6.0g/t Au & 235g/t Ag
------------------------------------------
Jose MIL-19-033: 3.5m @ 2.6g/t Au & 12g/t Ag
MIL-19-040: 1.6m @ 10.7g/t Au & 135g/t
Ag
MIL-19-047: 5.7m @ 3.8g/t Au & 119g/t Ag
MIL-19-050: 1.6m @ 4.2g/t Au & 7g/t Ag
MIL-19-052: 1.5m @ 2.3g/t Au & 40g/t Ag
MIL-19-053: 0.9m @ 3.0g/t Au & 259g/t Ag
MIL-19-058: 2.0m @ 4.3g/t Au & 146g/t Ag
MIL-19-062: 0.6m @ 6.2g/t Au & 781g/t Ag
MIL-19-063: 1.8m @ 3.8g/t Au & 191g/t Ag
MIL-19-071: 0.9m @ 3.3g/t Au & 115g/t Ag
MIL-19-083: 1.4m @ 3.8g/t Au & 97g/t Ag
MIL-19-086: 3.7m @ 2.4g/t Au & 55g/t Ag
------------------------------------------
Sandra MIL-19-042: 0.8m @ 3.9g/t Au & 151g/t Ag
MIL-19-059: 3.6m @ 1.3g/t Au & 62g/t Ag
MIL-19-060: 13.2m @ 3.0g/t Au & 148g/t
Ag
MIL-19-068: 1.5m @ 5.5g/t Au & 235g/t Ag
MIL-19-074: 1.2m @ 8.0g/t Au & 155g/t Ag
MIL-19-077: 1.8m @ 2.2g/t Au & 81g/t Ag
MIL-19-079: 1.3m @ 8.0g/t Au & 349g/t Ag
MIL-19-084: 1.6m @ 3.1g/t Au & 54g/t Ag
MIL-19-088: 3.1m @ 5.7g/t Au & 323g/t Ag
MIL-19-090: 1.4m @ 2.5g/t Au & 178g/t Ag
------------------------------------------
Map of current Inmaculada veins
Infill drilling commenced in the first half of the year
targeting the key Millet vein, which was discovered in 2018 with
further campaigns also targeting the Divina, Keyla, Angela and
Susana Beatriz veins. Infill drilling across the entire known
Millet vein has now increased the resource grade by 15% from the
December 2018 figure of 367 silver equivalent grams per tonne to
424 grams per tonne. Total contained ounces have also risen from
57.0 to 60.6 million silver equivalent ounces whilst tonnage has
reduced.
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
MIL-19-043: 12.5m @ 3.8g/t Au & 394g/t
Ag
MIL-19-044: 2.4m @ 6.5g/t Au & 720g/t Ag
MIL-19-045: 10.5m @ 7.8g/t Au & 622g/t
Ag
MIL-19-046: 14.0m @ 3.8g/t Au & 44g/t Ag
MIL-19-047: 12.5m @ 4.9g/t Au & 311g/t
Ag
MIL-19-048: 3.2m @ 9.8g/t Au & 374g/t Ag
MIL-19-049: 1.4m @ 4.0g/t Au & 188g/t Ag
MIL-19-051: 5.8m @ 3.8g/t Au & 138g/t Ag
MIL-19-053: 9.2m @ 4.1g/t Au & 88g/t Ag
MIL-19-056: 1.2m @ 8.2g/t Au & 804g/t Ag
MIL-19-059: 10.5m @ 3.4g/t Au & 127g/t
Ag
MIL-19-060: 4.4m @ 11.0g/t Au & 432g/t
Ag
MIL-19-062: 1.6m @ 3.9g/t Au & 199g/t Ag
MIL-19-072: 12.5m @ 4.5g/t Au & 51g/t Ag
MIL-19-075: 2.5m @ 4.4g/t Au & 122g/t Ag
MIL-19-080: 1.3m @ 3.5g/t Au & 263g/t Ag
MIL-19-082: 3.3m @ 66.0g/t Au & 835g/t
Ag
MIL-19-088: 6.6m @ 4.7g/t Au & 184g/t Ag
MIL-19-093: 3.1m @ 4.3g/t Au & 108g/t Ag
MIL-19-096: 2.0m @ 5.9g/t Au & 79g/t Ag
MIL-19-098: 9.9m @ 7.1g/t Au & 106g/t Ag
------------------------------------------
Divina DIV-19-027: 6.8m @ 6.3g/t Au & 347g/t Ag
DIV-19-029: 0.8m @ 5.0g/t Au & 406g/t Ag
DIV-19-030: 8.4m @ 1.4g/t Au & 72g/t Ag
DIV-19-031: 3.4m @ 1.7g/t Au & 72g/t Ag
DIV-19-032: 4.2m @ 3.6g/t Au & 104g/t Ag
DIV-19-033: 1.0m @ 7.5g/t Au & 153g/t Ag
DIV-19-034: 7.4m @ 4.1g/t Au & 96g/t Ag
------------------------------------------
Alesandra MIL-19-074: 7.3m @ 4.5g/t Au & 166g/t Ag
MIL-19-077: 8.2m @ 3.4g/t Au & 189g/t Ag
MIL-19-088: 0.8m @ 7.0g/t Au & 261g/t Ag
SP-19-0284: 0.8m @ 12.8g/t Au & 25g/t Ag
------------------------------------------
Veronica MIL-19-042: 1.8m @ 4.7g/t Au & 350g/t Ag
MIL-19-045: 2.0m @ 21.3g/t Au & 2,373g/t
Ag
MIL-19-049: 1.3m @ 4.0g/t Au & 188g/t Ag
MIL-19-053: 0.8m @ 8.6g/t Au & 55g/t Ag
MIL-19-066: 0.8m @ 3.9g/t Au & 222g/t Ag
MIL-19-082: 1.0m @ 5.4g/t Au & 10g/t Ag
MIL-19-090: 2.2m @ 2.1g/t Au & 233g/t Ag
MIL-19-096: 1.7m @ 3.8g/t Au & 113g/t Ag
MIL-19-102: 0.9m @ 5.1g/t Au & 15g/t Ag
------------------------------------------
Current plans for infill drilling are for a 110,000m programme
from January to July in the Millet west, Divina, Susana Beatriz,
Salvador, Dora, Pilar, Barbara, Veronica, Lola, Lizina and Keyla
veins.
Pallancata
At Pallancata, almost 10,000m of potential and resource drilling
was executed in the year using conventional surface and underground
horizontal drilling towards the Pablo, Marco, Mariel, Alizze,
Royropata, Mercedes and additional as-yet-unnamed veins, all close
to current operations. Results towards the end of the year
indicated the continuation of the Rina 4 vein to the north-east.
Also, in the Marco and Pablo vein zones, a further 2,400m of
resource drilling was executed in the Juan, Simon and Andres
structures with economic intercepts indicating new resources in
this area. A Titan geophysical programme was also completed in Q4
to define targets for the 2020 programme.
Vein Results (potential resource drilling)
Pablo DLEP-A49: 3.4m @ 1.4g/t Au & 553g/t Ag
------------------------------------------
Ramal Mariana DLMA-A27: 0.7m @ 1.0g/t Au & 172g/t Ag
------------------------------------------
Marco DLMARC-A03: 0.8m @ 0.7g/t Au & 297g/t Ag
DLMARC-A05: 1.0m @ 0.7g/t Au & 245g/t Ag
DLMARC-A06: 1.2m @ 1.0g/t Au & 331g/t Ag
DLMARC-A07: 1.7m @ 1.0g/t Au & 381g/t Ag
DLMARC-A10: 1.1m @ 0.5g/t Au & 161g/t Ag
------------------------------------------
Pedro DLEP-A43: 0.7m @ 1.4g/t Au & 283g/t Ag
DLEP-A44: 1.2m @ 1.7g/t Au & 485g/t Ag
------------------------------------------
Ramal Pablo DLEP-A43: 3.7m @ 1.9g/t Au & 111g/t Ag
------------------------------------------
Rina DLVC-A61: 0.8m @ 1.0g/t Au & 425g/t Ag
------------------------------------------
Simon DLMARC-A17: 2.4m @ 1.2/t Au & 366g/t Ag
------------------------------------------
Following a delay, in January 2020, the Peruvian government
granted the requisite permits for surface drilling to begin at the
Pablo Sur and Cochaloma zones close to Pallancata. Later in January
2020, a 4,500m potential drilling programme started at Pablo Sur
whilst a 2,000m programme is also set for Cochaloma.
Palca
The Palca drilling programme started late in the first half of
the year with potential resource drilling in the Roxana, Santa
Beatriz and Prometida structures and continued with 6,874m of
drilling in the third quarter in the Roxana, Santa Beatriz,
Prometida, Alejandra, Escondida and Kimberly structures testing
continuity to a depth of 300m. Results confirmed mineralisation
with 200m of depth. The brownfield team is continuing with efforts
to interpret the geology of the Palca zone including the optimum
levels of mineralisation and the orientation of the vein
structures. The next drilling campaign is scheduled for the second
quarter of 2020.
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
PLC-195-009: 3.5m @ 0.4g/t Au & 13g/t Ag
------------------------------------------
Prometida PLC-195-006: 2.9m @ 5.0g/t Au & 35g/t Ag
------------------------------------------
Escondida PLC-195-025: 1.9m @ 4.7g/t Au & 33g/t Ag
PLC-195-027: 2.8m @ 7.7g/t Au & 72g/t Ag
PLC-195-031: 0.7m @ 3.9g/t Au & 50g/t Ag
PLC-195-033 1.7m @ 2.5g/t Au & 202g/t Ag
------------------------------------------
Prometida North PLC-195-030: 1.0m @ 1.2g/t Au & 15g/t Ag
PLC-195-031: 0.4m @ 2.6g/t Au & 24g/t Ag
------------------------------------------
Prometida South PLC-195-006: 4.1m @ 3.7g/t Au & 26g/t Ag
PLC-195-031: 3.7m @ 1.3g/t Au & 13g/t Ag
PLC-195-039: 1.0m @ 3.7g/t Au & 37g/t Ag
------------------------------------------
North east vein PLC-195-009: 0.4m @ 12.8g/t Au & 19g/t
Ag
------------------------------------------
San Jose
At San Jose, potential drilling was executed at the Aguas Vivas
system in the first half with structures corresponding to an
intermediate sulphidation system with associated grades of zinc and
lead.
Potential drilling was also executed earlier in the year at the
Pluma 19 structure, the south-east Kospi projection and East and
West Antonella. In Q3 2019, just over 5,000m of potential and
inferred resource drilling was carried out with the majority
concentrating on an area including the Kospi, Kospi South East,
Ramal Huevos Verdes and the new Milagro structures. The team has
also executed a 1,800m long drill hole to the west of Huevos
Verdes. Towards the end of the year, further potential drilling was
carried out at the Micaela, Ayelen extension, Kospi Norte and Tonio
veins. Finally, almost 4,000m of resource drilling was executed
around the current operations.
A magnetometry study was performed on the potential extension of
Cerro Negro structures (Telken) covering a total area of 14.3km(2)
.
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
--------------------------------------------
Roma SJD-1963: 1.0m @ 2.0g/t Au & 228g/t Ag
--------------------------------------------
Kospi SE SJD-1980: 0.9m @ 7.1g/t Au & 467g/t Ag
--------------------------------------------
Kospi SE 02 SJD-1980: 0.5m @ 46g/t Au & 11,416g/t Ag
--------------------------------------------
Kospi SJM-432: 2.5m @ 4.8g/t Au & 502g/t Ag
--------------------------------------------
RHVN K SJM-433: 2.0m @ 3.3g/t Au & 155g/t Ag
--------------------------------------------
RHVN D SJM-433: 1.1m @ 30.4g/t Au & 1,991g/t Ag
--------------------------------------------
RMLHVND SJM-434: 1.0m @ 2.7g/t Au & 266g/t Ag
--------------------------------------------
Milagro SJD-2001: 1.0m @ 6.3g/t Au & 355g/t Ag
--------------------------------------------
Sigmoide Luli SJD-2013: 0.9m @ 1.0g/t Au & 142g/t Ag
SJD-2014: 4.1m @ 1.5g/t Au & 45g/t Ag
--------------------------------------------
Luli Sur SJD-2013: 3.1m @ 7.0g/t Au & 727g/t Ag
SJD-2014: 0.8m @ 4.2g/t Au & 753g/t Ag
--------------------------------------------
Shala SJD-2013: 0.9m @ 1.2g/t Au & 90g/t Ag
--------------------------------------------
Mara SJD-2013: 1.0m @ 13.3g/t Au & 1,259g/t
Ag
--------------------------------------------
Ramal Luli SJD-2014: 1 .9m @ 2.7g/t Au & 43g/t Ag
--------------------------------------------
Ramal Ayelen SJD-2018: 1.6m @ 24.3g/t Au & 1,302g/t
Ag
--------------------------------------------
New vein SJM-446: 2.0m @ 1.7g/t Au & 78g/t Ag
--------------------------------------------
In 2020, the programme at San Jose involves further long hole
drilling, a Titan geophysics programme to the south, 5,000m of
drilling at the Telken structures close to Cerro Negro and an
assessment of the regional opportunities also to the south of the
land package.
Ares
In the fourth quarter of 2020, 1,711m of potential drilling was
carried at Ares following previous results from long drill holes.
New structures were identified with grades but were generally
narrow. New surveys east of the Victoria target are scheduled for
2020.
Vein Results
Lula DDHVIC-1901: 0.3m @ 0.4g/t Au & 124g/t
Ag
------------------------------------------
New structure DDHVIC-1901: 0.3m @ 3.7g/t Au & 737g/t
Ag
DDHVIC-1901: 0.3m @ 2.8g/t Au & 262g/t
Ag
DDHVIC-1902: 0.3m @ 1.8g/t Au & 56g/t Ag
DDHVIC-1902: 0.9m @ 4.2g/t Au & 49g/t Ag
DDHVIC-1902: 0.6m @ 1.9g/t Au & 31g/t Ag
DDHVIC-1902: 0.3m @ 1.2g/t Au & 3g/t Ag
DDHVIC-1902: 0.3m @ 1.4g/t Au & 146g/t
Ag
DDHVIC-1902: 0.4m @ 9.7g/t Au & 61g/t Ag
DDHVIC-1902: 1.5m @ 4.8g/t Au & 13g/t Ag
------------------------------------------
Other brownfield projects
During 2019, a considerable range of preparatory geological work
and permit applications was carried out on a number of Hochschild's
former mines and near-term projects with the result that in 2020,
the brownfield team intends to drill a number of targets across the
Company's southern Peru cluster subject to the receipt of final
exploration permits. In addition to work mentioned above at the
Corina and Ares deposits, this includes: Titan geophysics and
drilling at the former Selene mine; geophysics and a drilling
programme at Arcata; drilling at the Crespo project; and drilling
at the Huacullo area, which is adjacent to Azuca.
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.
Corina
At Corina, drilling in the third quarter of the year confirmed
promising mineralisation within two sub-parallel structures, Corina
and Micky. Drill results are included below and do not necessarily
represent true widths.
Drillhole From (m) To (m) Width (m) g/t Au g/t Ag
COR19001 201.55 204.75 3.20 1.13 24.00
--------- ------- ---------- ------- -------
including 203.40 204.75 1.35 1.80 31.00
--------- ------- ---------- ------- -------
COR19001 218.80 228.20 9.40 0.43 7.11
--------- ------- ---------- ------- -------
COR19002 253.15 254.45 1.30 0.43 4.40
--------- ------- ---------- ------- -------
COR19002 330.20 348.50 18.30 0.26 1.35
--------- ------- ---------- ------- -------
COR19003 142.85 146.85 4.00 0.28 1.57
--------- ------- ---------- ------- -------
219.80 221.00 1.20 0.46 67.40
--------- ------- ---------- ------- -------
COR19004 152.00 156.85 4.85 0.07 0.78
--------- ------- ---------- ------- -------
265.00 266.35 1.35 0.61 9.00
--------- ------- ---------- ------- -------
COR19005 91.10 94.60 3.50 8.97 32.00
--------- ------- ---------- ------- -------
including 92.10 93.65 1.55 15.90 47.00
--------- ------- ---------- ------- -------
COR19005 117.90 122.90 5.00 0.60 4.99
--------- ------- ---------- ------- -------
COR19005 160.80 162.80 2.00 1.18 2.90
--------- ------- ---------- ------- -------
COR19006 209.60 211.10 1.50 1.71 7.65
--------- ------- ---------- ------- -------
including 210.70 211.10 0.40 2.89 7.90
--------- ------- ---------- ------- -------
COR19006 284.85 287.10 2.25 0.27 0.87
--------- ------- ---------- ------- -------
COR19007 126.40 142.10 15.70 4.56 53.69
--------- ------- ---------- ------- -------
including 132.30 135.00 2.70 15.94 207.20
--------- ------- ---------- ------- -------
and 132.30 133.70 1.40 19.55 290.00
--------- ------- ---------- ------- -------
COR19007 184.60 189.20 4.60 1.10 27.64
--------- ------- ---------- ------- -------
COR19007 200.75 201.75 1.00 1.32 14.50
--------- ------- ---------- ------- -------
COR19008 209.40 211.00 1.60 0.52 2.05
--------- ------- ---------- ------- -------
COR19008 220.80 223.00 2.20 3.20 25.66
--------- ------- ---------- ------- -------
including 220.80 221.80 1.00 5.73 51.00
--------- ------- ---------- ------- -------
COR19009 144.80 149.00 4.20 0.82 6.71
--------- ------- ---------- ------- -------
COR19009 152.50 157.60 5.10 1.05 14.19
--------- ------- ---------- ------- -------
including 156.50 157.00 0.50 2.63 53.70
--------- ------- ---------- ------- -------
COR19009 160.40 165.40 5.00 1.08 6.98
--------- ------- ---------- ------- -------
including 164.50 165.40 0.90 1.86 2.40
--------- ------- ---------- ------- -------
COR19010 189.10 202.60 13.50 6.15 31.10
--------- ------- ---------- ------- -------
including 195.10 198.10 3.00 16.08 82.60
--------- ------- ---------- ------- -------
COR19010 206.90 210.60 3.70 7.66 17.66
--------- ------- ---------- ------- -------
including 207.90 208.90 1.00 17.35 126.00
--------- ------- ---------- ------- -------
COR19010 222.65 230.30 7.65 4.08 37.39
--------- ------- ---------- ------- -------
including 222.65 228.40 5.75 4.95 45.85
--------- ------- ---------- ------- -------
including 224.45 224.95 0.50 8.14 77.60
--------- ------- ---------- ------- -------
Hochschild has the option to purchase the Corina Project from
Lara Resources by making staged cash payments totalling $4 million
of which $0.3 million has been paid to date, with the next
instalment of $0.4 million due by July 2020. The Company must also
carry out $2.0 million in exploration expenditures, which has been
almost fulfilled by the most recent programme, and pay a 2% net
smelter return royalty on any future production. The project has
now been transferred to Hochschild's brownfield exploration team
and a new drilling campaign will begin in 2020 to define inferred
resources.
Snip
Hochschild has the right to enter into an option to earn a 60%
undivided interest in Skeena Resources' Snip gold project located
in the Golden Triangle of British Columbia by spending twice the
amount Skeena has spent since it originally optioned Snip from
Barrick.
The 2019 Phase I drilling programme was designed to validate an
isolated, historical and incompletely sampled high-grade
intersection in the 200 Footwall Corridor. The original target in
the 200 Footwall was identified by 1997 underground drill hole
UG-2610 which intersected 26.8 g/t Au over 3.4m in an incompletely
sampled zone. The recent intercept in drill hole S19-044 has
discovered a new occurrence of very high-grade mineralisation
averaging 1,132 g/t Au over 1.5m, including a significant
subinterval containing abundant visible gold grading 3,390 g/t Au
over 0.5m. Additional intercepts reported include:
Target Results
Snip S19-035: 5.1m @ 16.6g/t Au
Including 0.5m@ 96.2g/t Au and 0.9m @
39.8g/t Au
S19-041: 0.7m @ 57.9g/t Au
S19-041: 0.5m @ 57.0g/t Au
S19-043: 1.4m @ 12.0g/t Au
---------------------------------------
Phase I drill hole S19-043 was completed prior to the newly
discovered mineralisation in drill hole S19-044 and intersected
anomalous gold grades associated with sheared veining including
12.0 g/t Au over 1.4m. Recently completed modelling of the 200
Footwall mineralisation indicates that this drill hole did not
extend deep enough to adequately test the 200 Footwall and will be
deepened during the next phase of drilling.
Other projects
In 2020, the team and its joint venture/strategic alliance
partners are planning to drill properties across the Americas in
Peru and the United States. This includes: the Cooke Mountain gold
project owned by Adamera Minerals Corp in Washington State, United
States; the Horsethief project owned by Allianza Minerals Ltd, also
in Nevada; and the Condor project in Peru.
Biolantanidos
On 2 October 2019, Hochschild announced the acquisition 93.8% of
the Biolantanidos rare earths deposit in Chile that it did not
already own for a consideration of $56.4 million and therefore
consolidated 100% of the project. Biolantanidos was previously
controlled by the private fund FIP Lantanidos, managed by private
equity firm Mineria Activa SpA. Hochschild initially invested $2.5
million in the project during 2018 and early 2019 in exchange for a
6.2% equity stake with an option to increase ownership.
The deposit has a high concentration of key rare earth minerals
and in particular those with permanent magnetic properties such as
Terbium, Dysprosium, Praseodymium and Neodymium. These metals offer
highly attractive enhancement properties for a wide range of
end-use applications and play a pivotal role in driving the
efficiency of motors, particularly in electric vehicles and wind
turbines.
The project consists of ionic clay resources, similar to those
found in China, but very different from most other hard rock-based
rare earth projects worldwide. Mineralisation occurs from the
surface to 20-30 metres deep and mining will not require
explosives. The clay undergoes a simple washing process in which
rare earths will be desorbed into a solution, concentrated and
calcined to obtain a rare earth oxide. Furthermore, there is no
requirement for a tailings dam as the washed clay is expected to be
returned to the open pits. The process is environmentally friendly
as it does not require potentially harmful chemicals whilst capital
and operational expenditure is projected to be low with the result
that the project is expected to be one of the lowest cost rare
earth producers.
An initial modular project has been developed in the Penco area
in an area of 500 hectares, approximately 15km from Concepción in
Chile and with excellent access to infrastructure and energy. Other
modules are expected to be evaluated in the future, providing
significant low capital expenditure growth potential.
Prior to the acquisition, Biolantanidos constructed an on-site
pilot plant that has demonstrated both technical and commercial
viability, and the opportunity to scale up into industrial
operations. Although the company prepared a feasibility study, it
is Hochschild's intention to revise the study over the next 14
months and has recently appointed a dedicated management team to
oversee development of the project.
FINANCIAL REVIEW
The reporting currency of Hochschild Mining plc is U.S. dollars.
In discussions of financial performance, the Group removes the
effect of exceptional items, unless otherwise indicated, and in the
income statement results are shown both pre and post such
exceptional items. Exceptional items are those items, which due to
their nature or the expected infrequency of the events giving rise
to them, need to be disclosed separately on the face of the income
statement to enable a better understanding of the financial
performance of the Group and to facilitate comparison with prior
years.
Revenue
Gross revenue
Gross revenue from continuing operations increased by 6% to
$780.4 million in 2019 (2018: $733.6 million) due to an increase in
the average precious metals prices received as well as a rise in
gold sales offsetting a fall in ounces sold of silver in line with
decreased silver production. [6]
Gold
Gross revenue from gold in 2019 increased to $449.0 million
(2018: $386.2 million) due to a 5% increase in the total amount of
gold ounces sold in 2019. This resulted from increases at the
Inmaculada and the San Jose mines.
Silver
Gross revenue fell in 2019 to $331.2 million (2018: $347.0
million) mainly due to a fall in silver sales resulting from the
decision to place the predominantly silver producing Arcata mine on
care and maintenance in the first quarter of 2019.
Gross average realised sales prices
The following table provides figures for average realised prices
( before the deduction of commercial discounts) and ounces sold for
2019 and 2018:
Average realised prices Year ended Year ended
31 Dec 2019 31 Dec 2018
------------- -------------
Silver ounces sold (koz) 20,062 22,687
Avg. realised silver price ($/oz) 16.5 15.3
Gold ounces sold (koz) 317.52 304.51
Avg. realised gold price ($/oz) 1,414 1,268
----------------------------------- ------------- -------------
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 2019, the Group recorded
commercial discounts of $24.7 million (2018: $29.4 million) with
the decrease explained by the significant decrease in production
from the concentrate-only Arcata mine. The ratio of commercial
discounts to gross revenue in 2019 was 3% (2018: 4%).
Net revenue
Net revenue was $755.7 million (2018: $704.3 million),
comprising net gold revenue of $441.6 million (2018: $378.8
million) and net silver revenue of $314.0million (2018: $325.1
million). In 2019, gold accounted for 58% and silver 42% of the
Company's consolidated net revenue (2018: gold 54% and silver
46%).
Reconciliation of gross revenue by mine to Group net revenue
$000 Year ended Year ended % change
31 Dec 2019 31 Dec 2018
------------- -------------
Silver revenue
Arcata 4,984 52,292 (90)
Inmaculada 90,110 86,810 4
Pallancata 121,494 113,108 7
San Jose 114,623 94,804 21
Commercial discounts (17,258) (21,958) (21)
Net silver revenue 313,953 325,056 (3)
Gold revenue
Arcata 873 12,573 (93)
Inmaculada 262,033 219,293 19
Pallancata 37,237 33,176 12
San Jose 148,901 121,202 23
Commercial discounts (7,460) (7,395) 1
Net gold revenue 441,584 378,849 17
---------------------- ------------- ------------- ---------
Other revenue 139 340 (59)
---------------------- ------------- ------------- ---------
Net revenue 755,676 704,290 7
---------------------- ------------- ------------- ---------
Costs
Total cost of sales was $512.7 million in 2019 (2018: $531.8
million). The direct production cost excluding depreciation was
lower at $327.7 million (2018: $363.9 million) mainly due to lower
production and lower cost per tonne both resulting from the
decision to place Arcata on temporary care and maintenance in early
2019. This was partially offset by higher production cost at
Inmaculada and Pallancata, in line with higher production tonnage,
higher mine backfill, detoxification costs and personnel expenses
at Inmaculada, as well as higher costs at San Jose mainly due to
the start of the new backfill and water recovery plants. D
epreciation in production cost increased to $184.4 million (2018:
$164.2 million) due to higher estimated unit cost to put resources
into production, therefore affecting future capex. O ther items,
which principally includes personnel-related provisions, increased
to $4.4 million in 2019 (2018: $1.1 million) mainly due to the
return of the workers profit sharing provision ($3.9 million).
Change in inventories was $3.8 million in 2019 (2018: $2.5 million)
due to a slight rise in products in process.
$000 Year ended Year ended % Change
31 Dec 2019 31 Dec 2018
------------- -------------
Direct production cost excluding
depreciation 327,660 363,922 (10)
Depreciation in production cost 184,388 164,244 12
Other items [7] 4,445 1,141 290
Change in inventories (3,782) 2,481 (252)
---------------------------------- ------------- ------------- ---------
Cost of sales 512,711 531,788 (4)
---------------------------------- ------------- ------------- ---------
Unit cost per tonne
The Company reported unit cost per tonne at its operations of
$115.8 per tonne in 2019, a 4% decrease versus 2018 ($121.1 per
tonne) mainly due to the decision to place Arcata on temporary
care-and-maintenance, good cost control and increased mined tonnage
at Inmaculada and Pallancata. These effects were partially offset
by higher mine backfill, detoxification costs, personnel expenses
and permitting costs at Inmaculada. There were also higher costs at
San Jose related to the operation of the new backfill and water
recovery plants.
Unit cost per tonne by operation (including royalties) [8] :
Operating unit ($/tonne) Year ended Year ended % change
31 Dec 2019 31 Dec 2018
------------- -------------
Peru [9] 89.4 99.7 (10)
Inmaculada 93.3 84.7 10
Pallancata 83.8 93.6 (10)
-------------------------- ------------- ------------- ---------
Arcata 182.2 167.7 9
-------------------------- ------------- ------------- ---------
Argentina
San Jose 219.2 218.6 -
-------------------------- ------------- ------------- ---------
Total 115.8 121.1 (4)
-------------------------- ------------- ------------- ---------
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 [10] :
$000 unless otherwise indicated Year ended Year ended % change
31 Dec 2019 31 Dec 2018
------------- -------------
Group cash cost 378,931 409,719 (8)
----------------------------------- ------------- ------------- ---------
(+) Cost of sales 512,711 531,788 (4)
(-) Depreciation and amortisation
in cost of sales (182,676) (164,819) 11
(+) Selling expenses 21,071 10,068 109
(+) Commercial deductions [11] 27,825 32,682 (15)
Gold 7,674 7,558 2
Silver 20,151 25,124 (20)
----------------------------------- ------------- ------------- ---------
Revenue 755,676 704,290 7
----------------------------------- ------------- ------------- ---------
Gold 441,584 378,849 17
Silver 313,953 325,056 (3)
Others 139 340 (59)
----------------------------------- ------------- ------------- ---------
Ounces sold
----------------------------------- ------------- ------------- ---------
Gold 317.5 304.5 4
Silver 20,062 22,687 (12)
----------------------------------- ------------- ------------- ---------
Group cash cost ($/oz)
----------------------------------- ------------- ------------- ---------
Co product Au 698 724 (4)
Co product Ag 7.8 8.3 (6)
By product Au 141 195 (28)
By product Ag (3.5) 1.0 (450)
----------------------------------- ------------- ------------- ---------
Co-product cash cost per ounce is the cash cost allocated to the
primary metal (allocation based on proportion of revenue), divided
by the ounces sold of the primary metal. By-product cash cost per
ounce is the total cash cost minus revenue and commercial discounts
of the by-product divided by the ounces sold of the primary
metal.
All-in sustaining cost reconciliation
All-in sustaining cash costs per silver equivalent ounce
Year ended 31 Dec 2019
$000 unless otherwise Inmaculada Pallancata San Main Arcata Corporate Total
indicated Jose operations &
others
----------- ----------- -------- ------------ ------- ----------
(+) Production cost
excluding depreciation 124,814 75,590 120,529 320,933 6,727 - 327,660
(+) Other items and
workers profit sharing
in cost of sales 1,902 1,976 567 4,445 - - 4,445
(+) Operating and exploration
capex for units [12] 66,435 26,605 41,406 134,446 42 2,470 136,958
(+) Brownfield exploration
expenses 3,976 7,116 9,753 20,845 1,065 3,954 25,864
(+) Administrative expenses
(excl depreciation)
[13] 3,917 1,642 6,215 11,774 44 31,669 43,487
(+) Royalties and special
mining tax [14] 3,510 1,471 - 4,981 47 3,429 8,457
-------------------------------- ----------- ----------- -------- ------------ ------- ---------- --------
Sub-total 204,554 114,400 178,470 497,424 7,925 41,522 546,871
-------------------------------- ----------- ----------- -------- ------------ ------- ---------- --------
Au ounces produced 189,180 25,952 105,478 320,611 966 - 321,577
Ag ounces produced (000s) 5,747 7,259 6,846 19,851 311 - 20,163
Ounces produced (Ag
Eq 000s oz) 21,070 9,361 15,390 45,821 390 - 46,210
-------------------------------- ----------- ----------- -------- ------------ ------- ---------- --------
Sub-total ($/oz Ag Eq) 9.7 12.2 11.6 10.9 20.3 - 11.8
-------------------------------- ----------- ----------- -------- ------------ ------- ---------- --------
(+) Commercial deductions 2,580 11,133 13,336 27,049 776 27,825
(+) Selling expenses 481 996 19,444 20,921 150 21,071
-------------------------------- ----------- ----------- -------- ------------ ------- ---------- --------
Sub-total 3,061 12,129 32,780 47,970 926 - 48,896
-------------------------------- ----------- ----------- -------- ------------ ------- ---------- --------
Au ounces sold 188,585 25,446 102,824 316,855 662 - 317,515
Ag ounces sold (000s) 5,732 7,161 6,846 19,738 323 - 20,062
Ounces sold (Ag Eq 000s
oz) 21,008 9,222 15,174 45,404 377 45,780
-------------------------------- ----------- ----------- -------- ------------ ------- ---------- --------
Sub-total ($/oz Ag Eq) 0.1 1.3 2.2 1.1 2.5 - 1.1
-------------------------------- ----------- ----------- -------- ------------ ------- ---------- --------
All-in sustaining costs
($/oz Ag Eq) 9.9 13.5 13.8 11.9 22.8 - 12.9
-------------------------------- ----------- ----------- -------- ------------ ------- ---------- --------
All-in sustaining costs
($/oz Au Eq) 798 1,097 1,114 965 1,847 - 1,045
-------------------------------- ----------- ----------- -------- ------------ ------- ---------- --------
Year ended 31 Dec 2018
$000 unless otherwise Arcata Inmaculada Pallancata San Main Corporate Total
indicated Jose operations &
others
------- ----------- ----------- -------- ------------ ----------
(+) Production cost
excluding depreciation 62,559 114,291 68,907 118,165 363,922 - 363,922
(+) Other items in cost
of sales - - - 1,141 1,141 - 1,141
(+) Operating and exploration
capex for units 526 57,678 28,939 42,849 129,992 634 130,626
(+) Brownfield exploration
expenses 9,024 1,732 2,162 4,224 17,142 3,563 20,705
(+) Administrative expenses
(excl depreciation) 651 3,516 1,560 6,952 12,679 31,618 44,297
(+) Royalties and special
mining tax [15] - 3,113 1,381 - 4,494 2,746 7,240
-------------------------------- ------- ----------- ----------- -------- ------------ ---------- --------
Sub-total 72,760 180,330 102,949 173,331 529,370 38,561 567,931
-------------------------------- ------- ----------- ----------- -------- ------------ ---------- --------
Au ounces produced 10,575 174.,199 26,399 96,595 307,768 - 307,768
Ag ounces produced (000s) 3,416 5,690 7,499 6,165 22,720 - 22,720
Ounces produced (Ag
Eq 000s oz) 4,273 19,800 9,588 13,989 47,650 - 47,650
-------------------------------- ------- ----------- ----------- -------- ------------ ---------- --------
Sub-total ($/oz Ag Eq) 17.0 9.1 10.7 12.4 11.1 - 11.9
-------------------------------- ------- ----------- ----------- -------- ------------ ---------- --------
(+) Commercial deductions 8,273 2,788 10,441 11,180 32,682 - 32,682
(+) Selling expenses 999 344 728 7,997 10,068 - 10,068
-------------------------------- ------- ----------- ----------- -------- ------------ ---------- --------
Sub-total 9,272 3,132 11,169 19,177 42,750 - 42,750
-------------------------------- ------- ----------- ----------- -------- ------------ ---------- --------
Au ounces sold 9,926 172,395 26,234 96,595 304,505 - 304,505
Ag ounces sold (000s) 3,397 5,676 7,439 6,175 22,687 - 22,687
Ounces sold (Ag Eq 000s
oz) 4,201 19,640 9,564 13,947 47,352 - 47,352
-------------------------------- ------- ----------- ----------- -------- ------------ ---------- --------
Sub-total ($/oz Ag Eq) 2.2 0.2 1.2 1.4 0.9 - 0.9
-------------------------------- ------- ----------- ----------- -------- ------------ ---------- --------
All-in sustaining costs
($/oz Ag Eq) 19.2 9.3 11.9 13.8 12.0 - 12.8
-------------------------------- ------- ----------- ----------- -------- ------------ ---------- --------
All-in sustaining costs
($/oz Au Eq) [16] 1,558 751 964 1,115 973 - 1,039
-------------------------------- ------- ----------- ----------- -------- ------------ ---------- --------
Administrative expenses
Administrative expenses was similar to 2018 at $45.9 million
(2018: $45.8 million) primarily due to personnel expenses remaining
broadly unchanged although the Company has started to again
provision the workers profit sharing Peru ($1.4 million) after
being in a tax loss position over the last six years. This was
partially offset by lower bonuses provisions (specifically
LTIP).
Exploration expenses
In 2019, exploration expenses increased to $38.0 million (2018:
$34.4 million) in line with the overall rise in the Company's
investment in brownfield and greenfield exploration. In addition,
the Group capitalises part of its brownfield exploration, which
mostly relates to costs incurred converting potential resource to
the Inferred or Measured and Indicated categories. In 2019, the
Company capitalised $6.0 million relating to brownfield exploration
compared to $9.2 million in 2018, bringing the total investment in
exploration for 2019 to $44.0 million (2018: $43.6 million).
Selling expenses
Selling expenses increased to $21.1 million (2018: $10.1
million) principally due to the reintroduction of export taxes in
Argentina in September 2018 ($16.3million).
Other income/expenses
Other income was slightly higher at $9.0 million (2018: $8.1
million) due to adjustments to electrical services receivables in
Peru. Also, other income includes revenue from logistic services in
the Matarani warehouse and net income from services provided to
contractors.
Other expenses before exceptional items were higher at $33.9
million (2018: $17.1 million) mainly due to an increase in the
provision for mine closure adjustments at Ares and Sipan ($13.6
million). This has resulted from the latest review completed by the
Group's consultant on these former operations' mine closure plans.
At Ares, the variation ($7.7 million) is the result of improvements
to the Tailings Storage Facility water treatment plant as part of
its final closure. The figure also includes the operational cost of
the plant over two years. For Sipan, the review ($5.2 million)
incorporates the operating cost of the two water treatment plants
for an additional five years. In addition, there is an additional
negative impact on mine closure provision ($0.6 million) due to a
change in the discount rate. Other expenses also include care and
maintenance expenses, corporate social responsibility tax in
Argentina and adjustments to receivables.
Adjusted EBITDA
Adjusted EBITDA increased by 28% to $343.3 million (2018: $268.0
million) primarily due to the increase in the average precious
metal prices received and good cost control offsetting 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 Year ended Year ended % change
31 Dec 2019 31 Dec 2018
------------- -------------
Profit from continuing operations before exceptional items, net finance
income/(cost), foreign
exchange loss and income tax 112,276 72,804 54
Depreciation and amortisation in cost of sales 182,676 164,819 11
Depreciation and amortisation in administrative expenses and other expenses 2,480 1,486 67
Exploration expenses 37,965 34,381 10
Personnel and other exploration related fixed expenses (6,316) (5,916) 7
Other non-cash income, net [17] 14,251 436 3,169
----------------------------------------------------------------------------- ------------- ------------- ---------
Adjusted EBITDA 343,332 268,010 28
----------------------------------------------------------------------------- ------------- ------------- ---------
Adjusted EBITDA margin 45% 38%
----------------------------------------------------------------------------- ------------- ------------- ---------
Finance income
Finance income before exceptional items of $2.9 million
increased from 2018 ($2.0 million) due to a small increase in
interest on deposits.
Finance costs
Finance costs before exceptional items decreased from $11.2
million in 2018 to $10.0 million in 2019, principally due to the
reduction in interest payments resulting from the repayment of the
Company's Senior Notes in H1 2018 and lower average interest
rates.
Foreign exchange (losses)/gains
The Group recognised a foreign exchange loss of $1.8 million
(2018: $8.9 million loss) as a result of exposures in currencies
other than the functional currency - mainly the Argentinean peso
which again depreciated in 2019 ($1.9 million loss) and the
Peruvian sol which appreciated during the year ($0.3 million
loss).
Income tax
The Company's pre-exceptional income tax charge was $43.3
million (2018: $36.5 million). The increase in the charge is
explained by the Company's increase in profitability in 2019.
Income tax includes royalties ($5.0 million), Special Mining Tax
($3.4 million) and withholding tax on dividends paid from Peru to
the UK ($3.3 million). Excluding these effects, the effective tax
rate was 29% (2018: 27%).
Exceptional items
Exceptional items in 2019 totalled an $18.6 million loss after
tax (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 ($12.2 million) and the
impairment of the Pallancata mine unit of $14.7 million. 2018
exceptional items included the payment of the premium to redeem
early the Senior Notes and the reversal of capitalised Senior Notes
issuance costs.
The tax effect of these exceptional items was a $7.9 million tax
gain (2018: $4.8 million tax gain). The total effective tax rate
was 46% (2018: 83%).
Cash flow and balance sheet review
Cash flow:
$000 Year ended Year ended Change
31 Dec 2019 31 Dec 2018
------------- -------------
Net cash generated from operating
activities 283,259 185,942 97,317
Net cash used in investing activities (203,613) (129,981) (73,632)
Cash flows generated from/(used
in) financing activities 9,211 (228,300) 237,511
--------------------------------------- ------------- ------------- ---------
Net increase/(decrease) in cash
and cash equivalents during
the period 88,857 (172,339) 261,196
--------------------------------------- ------------- ------------- ---------
Net cash generated from operating activities increased from
$185.9 million in 2018 to $283.3 million in 2019 mainly due to
higher Adjusted EBITDA of $343.3 million (2018: $268.0 million) and
lower interest expense of $5.0 million (2018: $28.8 million).
Net cash used in investing activities increased to $203.6
million in 2019 from $130.0 million in 2018 mainly due to the
acquisition of the Biolantanidos project and higher mine
developments as well as infill drilling at Inmaculada to access
veins discovered in 2018.
Cash from financing activities increased to an inflow of $9.2
million from an outflow of $228.3 million inflow in 2018, primarily
due the new medium term loan of $200.0 million, which was used to
prepay existing short term loans of $150.0 million partially offset
by dividends paid. The 2018 outflow included mainly the repayment
of the Company's Senior Notes ($294.8 million) the repayment of
bank loans and dividends paid.
Working capital
$000 As at As at
30 December 2019 31 December 2018
------------------
Trade and other receivables 73,618 78,736
Inventories 62,600 58,035
Other financial assets - 47
Income tax (payable)/receivable (11,005) 17,462
Trade and other payables (120,537) (125,475)
Provisions (16,249) (3,153)
--------------------------------- ------------------ ------------------
Working capital (11,573) 25,652
--------------------------------- ------------------ ------------------
The Group's working capital position reduced from $25.7 million
to $(11.6) million in 2019. The key drivers were: higher income tax
payable $(28.5) million in line with 2019 profit; higher provisions
of $(13.1) million principally due to the increase of mine closure
estimates at Ares and Sipan; and lower trade receivables of $(5.1)
million. These effects were partially offset by higher inventories
of $4.6 million which were mainly precipitates and spare parts for
the new backfill plant in Argentina; and lower trade payables of
$4.9 million mainly explained by the suspension of Arcata.
Net debt
$000 unless otherwise indicated As at As at
30 December 31 December 2018
2019
-------------
Cash and cash equivalents 166,357 79,704
Long term borrowings (199,308) (50,000)
Short term borrowings [18] (234) (107,067)
--------------------------------- ------------- ------------------
Net debt (33,185) (77,363)
--------------------------------- ------------- ------------------
The Group's reported net debt position was $33.2 million as at
31 December 2019 (31 December 2018: $77.4 million). In December
2019, the Company repaid $150 million of short term loans using a
new $200 million medium term loan with Scotiabank and BBVA ($100
million each). This refinancing helped increase the cash and cash
equivalents balance to $166.4 million, which also benefited from
strong cashflow generation.
Capital expenditure ([19])
$000 Year ended Year ended
31 Dec 2019 31 Dec 2018
-------------
Arcata 42 526
Pallancata 26,605 28,939
San Jose 43,623 44,632
Inmaculada 66,435 57,678
-------------------- ------------- -------------
Operations 136,663 131,775
Biolantanidos [20] 60,726 -
Other 7,727 2,630
-------------------- ------------- -------------
Total 205,116 134,405
-------------------- ------------- -------------
2019 capital expenditure of $205.1 million (2018: $134.4
million) mainly comprised of operational capex of $136.7 million
(2018: $131.8 million) with the increase versus 2018 resulting from
increased capex at Inmaculada due to a rise in mine developments to
access veins discovered in 2018 and the acquisition of
Biolantanidos.
Forward looking Statements
This announcement contains certain forward looking statements,
including such statements within the meaning of Section 27A of the
US Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. In particular, such
forward looking statements may relate to matters such as the
business, strategy, investments, production, major projects and
their contribution to expected production and other plans of
Hochschild Mining plc and its current goals, assumptions and
expectations relating to its future financial condition,
performance and results.
Forward-looking statements include, without limitation,
statements typically containing words such as "intends", "expects",
"anticipates", "targets", "plans", "estimates" and words of similar
import. By their nature, forward looking statements involve risks
and uncertainties because they relate to events and depend on
circumstances that will or may occur in the future. Actual results,
performance or achievements of Hochschild Mining plc may be
materially different from any future results, performance or
achievements expressed or implied by such forward looking
statements. Factors that could cause or contribute to differences
between the actual results, performance or achievements of
Hochschild Mining plc and current expectations include, but are not
limited to, legislative, fiscal and regulatory developments,
competitive conditions, technological developments, exchange rate
fluctuations and general economic conditions. Past performance is
no guide to future performance and persons needing advice should
consult an independent financial adviser.
The forward looking statements reflect knowledge and information
available at the date of preparation of this announcement. Except
as required by the Listing Rules and applicable law, Hochschild
Mining plc does not undertake any obligation to update or change
any forward looking statements to reflect events occurring after
the date of this announcement. Nothing in this announcement should
be construed as a profit forecast.
Statement of Directors' responsibilities
The Directors confirm that to the best of their knowledge:
o the financial statements, prepared in accordance with the
applicable set of accounting standards, give a true and fair view
of the assets, liabilities, financial position and profit or loss
of the Company and the undertakings included in the consolidation
taken as a whole; and
o the Management report includes a fair review of the
development and performance of the business and the position of the
Company and the undertakings included in the consolidation taken as
a whole, together with a description of the principal risks and
uncertainties that they face.
CONSOLIDATED INCOME STATEMENT
For the year ended 31 December 2019
Year ended 31 December Year ended 31 December
2019 2018
==================================== ====================================
Exceptional Exceptional
Before items Before items
exceptional (note exceptional (note
items 11) Total items 11) Total
Notes US$000 US$000 US$000 US$000 US$000 US$000
==================== ===== ============ =========== ========= ============ =========== =========
Continuing
operations
==================== ===== ============ =========== ========= ============ =========== =========
Revenue 4,5 755,676 - 755,676 704,290 - 704,290
===================== ===== ============ =========== ========= ============ =========== =========
Cost of sales 6 (512,711) - (512,711) (531,788) - (531,788)
===================== ===== ============ =========== ========= ============ =========== =========
Gross profit 242,965 - 242,965 172,502 - 172,502
===================== ===== ============ =========== ========= ============ =========== =========
Administrative
expenses 7 (45,920) - (45,920) (45,783) - (45,783)
===================== ===== ============ =========== ========= ============ =========== =========
Exploration expenses 8 (37,965) - (37,965) (34,381) - (34,381)
===================== ===== ============ =========== ========= ============ =========== =========
Selling expenses 9 (21,071) - (21,071) (10,068) - (10,068)
===================== ===== ============ =========== ========= ============ =========== =========
Other income 12 9,014 - 9,014 8,062 - 8,062
===================== ===== ============ =========== ========= ============ =========== =========
Other expenses 12 (33,894) (12,199) (46,093) (17,144) - (17,144)
===================== ===== ============ =========== ========= ============ =========== =========
Impairment and
write-off
of non-current
assets, net 11 (853) (14,378) (15,231) (384) - (384)
===================== ===== ============ =========== ========= ============ =========== =========
Profit/(loss) from
continuing
operations before
net finance
income/(cost),
foreign exchange
loss and income tax 112,276 (26,577) 85,699 72,804 - 72,804
===================== ===== ============ =========== ========= ============ =========== =========
Finance income 13 2,938 - 2,938 2,048 - 2,048
===================== ===== ============ =========== ========= ============ =========== =========
Finance costs 13 (10,038) - (10,038) (11,194) (16,346) (27,540)
===================== ===== ============ =========== ========= ============ =========== =========
Foreign exchange
loss, net (1,757) - (1,757) (8,946) - (8,946)
===================== ===== ============ =========== ========= ============ =========== =========
Profit/(loss) from
continuing
operations before
income
tax 103,419 (26,577) 76,842 54,712 (16,346) 38,366
===================== ===== ============ =========== ========= ============ =========== =========
Income tax
(expense)/benefit 14 (43,336) 7,933 (35,403) (36,487) 4,822 (31,665)
===================== ===== ============ =========== ========= ============ =========== =========
Profit/(loss) for the
year
from continuing
operations 60,083 (18,644) 41,439 18,225 (11,524) 6,701
===================== ===== ============ =========== ========= ============ =========== =========
Attributable to:
==================== ===== ============ =========== ========= ============ =========== =========
Equity shareholders
of the
Parent 47,598 (18,644) 28,954 24,360 (11,524) 12,836
===================== ===== ============ =========== ========= ============ =========== =========
Non-controlling
interests 12,485 - 12,485 (6,135) - (6,135)
===================== ===== ============ =========== ========= ============ =========== =========
60,083 (18,644) 41,439 18,225 (11,524) 6,701
===== ============ =========== ========= ============ =========== =========
Basic earnings/(loss)
per
ordinary share from
continuing
operations for the
year
(expressed in US
dollars
per share) 15 0.09 (0.03) 0.06 0.05 (0.02) 0.03
===================== ===== ============ =========== ========= ============ =========== =========
Diluted
earnings/(loss)
per ordinary share
from
continuing
operations for
the year (expressed
in US
dollars per share) 15 0.09 (0.03) 0.06 0.05 (0.02) 0.03
===================== ===== ============ =========== ========= ============ =========== =========
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the year ended 31 December 2019
Year ended
31 December
================
2019 2018
Notes US$000 US$000
========================================================= ===== ======= =======
Profit for the year 41,439 6,701
========================================================== ===== ======= =======
Other comprehensive income that might be reclassified
to profit or loss in subsequent periods, net
of tax:
========================================================= ===== ======= =======
Exchange differences on translating foreign operations (327) 4
========================================================== ===== ======= =======
(327) 4
===== ======= =======
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 ('OCI') 19 3,628 (6,447)
========================================================== ===== ======= =======
3,628 (6,447)
===== ======= =======
Other comprehensive income/(loss) for the year,
net of tax 3,301 (6,443)
========================================================== ===== ======= =======
Total comprehensive income for the year 44,740 258
========================================================== ===== ======= =======
Total comprehensive income attributable to :
========================================================= ===== ======= =======
Equity shareholders of the Company 32,255 6,393
========================================================== ===== ======= =======
Non-controlling interests 12,485 (6,135)
========================================================== ===== ======= =======
44,740 258
===== ======= =======
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at 31 December 2019
As at As at
31 December 31 December
2019 2018
Notes US$000 US$000
================================================== ===== ============ ============
ASSETS
================================================== ===== ============ ============
Non-current assets
================================================== ===== ============ ============
Property, plant and equipment 16 795,277 849,172
=================================================== ===== ============ ============
Evaluation and exploration assets 17 181,562 155,241
=================================================== ===== ============ ============
Intangible assets 18 22,359 24,363
=================================================== ===== ============ ============
Financial assets at fair value through other
comprehensive income ('OCI') 19 6,159 5,296
=================================================== ===== ============ ============
Trade and other receivables 20 5,188 5,451
=================================================== ===== ============ ============
Other financial assets - 47
=================================================== ===== ============ ============
Deferred income tax assets 27 1,627 1,504
=================================================== ===== ============ ============
1,012,172 1,041,074
===== ============ ============
Current assets
================================================== ===== ============ ============
Inventories 21 62,600 58,035
=================================================== ===== ============ ============
Trade and other receivables 20 73,618 78,736
=================================================== ===== ============ ============
Income tax receivable 206 20,733
=================================================== ===== ============ ============
Cash and cash equivalents 22 166,357 79,704
=================================================== ===== ============ ============
Assets held for sale 23 38,295 -
=================================================== ===== ============ ============
341,076 237,208
===== ============ ============
Total assets 1,353,248 1,278,282
=================================================== ===== ============ ============
EQUITY AND LIABILITIES
================================================== ===== ============ ============
Capital and reserves attributable to shareholders
of the Parent
================================================== ===== ============ ============
Equity share capital 226,506 225,409
=================================================== ===== ============ ============
Share premium 438,041 438,041
=================================================== ===== ============ ============
Other reserves (221,800) (223,156)
=================================================== ===== ============ ============
Retained earnings 290,263 278,995
=================================================== ===== ============ ============
733,010 719,289
===== ============ ============
Non-controlling interests 74,631 71,003
=================================================== ===== ============ ============
Total equity 807,641 790,292
=================================================== ===== ============ ============
Non-current liabilities
================================================== ===== ============ ============
Trade and other payables 24 526 787
=================================================== ===== ============ ============
Borrowings 25 199,308 50,000
=================================================== ===== ============ ============
Provisions 26 99,322 94,640
=================================================== ===== ============ ============
Deferred income 172 31,966
=================================================== ===== ============ ============
Deferred income tax liabilities 27 63,103 71,231
=================================================== ===== ============ ============
362,431 248,624
===== ============ ============
Current liabilities
================================================== ===== ============ ============
Trade and other payables 24 120,537 125,475
=================================================== ===== ============ ============
Borrowings 25 234 107,067
=================================================== ===== ============ ============
Provisions 16,249 3,153
=================================================== ===== ============ ============
Deferred income 400 400
=================================================== ===== ============ ============
Income tax payable 11,211 3,271
=================================================== ===== ============ ============
Liabilities directly associated with asset held
for sale 23 34,545 -
=================================================== ===== ============ ============
183,176 239,366
===== ============ ============
Total liabilities 545,607 487,990
=================================================== ===== ============ ============
Total equity and liabilities 1,353,248 1,278,282
=================================================== ===== ============ ============
These financial statements were approved by the Board of
Directors on 18 February 2020 and signed on its behalf by:
Ignacio Bustamante
Chief Executive Officer
18 February 2020
CONSOLIDATED STATEMENT OF CASH FLOWS
For the year ended 31 December 2019
Year ended
31 December
====================
2019 2018
Notes US$000 US$000
===================================================== ===== ========= =========
Cash flows from operating activities
===================================================== ===== ========= =========
Cash generated from operations 290,316 222,667
====================================================== ===== ========= =========
Interest received 2,622 2,337
====================================================== ===== ========= =========
Interest paid (4,955) (28,758)
====================================================== ===== ========= =========
Payment of mine closure costs 26 (3,488) (4,494)
====================================================== ===== ========= =========
Income tax, special mining tax and mining royalty
paid(1) (1,236) (5,810)
====================================================== ===== ========= =========
Net cash generated from operating activities 283,259 185,942
====================================================== ===== ========= =========
Cash flows from investing activities
===================================================== ===== ========= =========
Purchase of property, plant and equipment (133,724) (114,498)
====================================================== ===== ========= =========
Purchase of evaluation and exploration assets 17 (68,632) (10,221)
====================================================== ===== ========= =========
Purchase of intangibles 18 (2) (1,907)
====================================================== ===== ========= =========
Purchase of financial assets at fair value through
OCI 19 (1,100) (6,433)
====================================================== ===== ========= =========
Purchase of Argentinian bonds (14,795) -
====================================================== ===== ========= =========
Proceeds from sale of Argentinian bonds 11,835 -
====================================================== ===== ========= =========
Proceeds from sale of financial assets at fair
value through OCI 421 954
====================================================== ===== ========= =========
Proceeds from sale of other assets 19 - 30
====================================================== ===== ========= =========
Proceeds from deferred income 23 2,250 2,000
====================================================== ===== ========= =========
Proceeds from sale of property, plant and equipment 134 94
====================================================== ===== ========= =========
Net cash used in investing activities (203,613) (129,981)
====================================================== ===== ========= =========
Cash flows from financing activities
===================================================== ===== ========= =========
Proceeds from borrowings 25 316,500 266,500
====================================================== ===== ========= =========
Transaction costs related to borrowings (692) -
====================================================== ===== ========= =========
Repayment of borrowings 25 (272,500) (463,393)
====================================================== ===== ========= =========
Payment of lease liabilities 2(a) (2,506) -
====================================================== ===== ========= =========
Purchase of treasury shares (309) (579)
====================================================== ===== ========= =========
Dividends paid to non-controlling interests (11,069) (10,829)
====================================================== ===== ========= =========
Dividends paid 28 (20,213) (19,999)
====================================================== ===== ========= =========
Cash flows generated from/(used in) financing
activities 9,211 (228,300)
====================================================== ===== ========= =========
Net increase/(decrease) in cash and cash equivalents
during the year 88,857 (172,339)
====================================================== ===== ========= =========
Exchange difference (2,204) (4,945)
====================================================== ===== ========= =========
Cash and cash equivalents at beginning of year 79,704 256,988
====================================================== ===== ========= =========
Cash and cash equivalents at end of year 22 166,357 79,704
====================================================== ===== ========= =========
1 Taxes paid have been offset with value added tax (VAT) credits
of US$3,717,000 (2018:US$4,320,000).
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year 31 December 2019
Other reserves
=======================================================================
Fair
value
reserve
of
financial Capital
assets and reserves
at attributable
fair Share- to
Equity value Cumulative based Total shareholders
share Share Treasury through Dividends translation Merger payment other Retained of the Non-controlling Total
capital premium shares OCI expired adjustment reserve reserve reserves earnings Parent interests equity
Notes US$000 US$000 US$000 US$000 US$000 US$000 US$000 US$000 US$000 US$000 US$000 US$000 US$000
================= ===== ======= ======= ======== ========= ========= =========== ======= ======= ========= ======== ============ =============== ========
Balance at
1 January 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) - - - (6,447) - 4 - - (6,443) - (6,443) - (6,443)
================== ===== ======= ======= ======== ========= ========== ============ =========== ======= ========= ======== ============ =============== ==========
Profit for
the year - - - - - - - - - 12,836 12,836 (6,135) 6,701
================== ===== ======= ======= ======== ========= ========== ============ =========== ======= ========= ======== ============ =============== ==========
Total
comprehensive
income/
(expense)
for the year - - - (6,447) - 4 - - (6,443) 12,836 6,393 (6,135) 258
================== ===== ======= ======= ======== ========= ========== ============ =========== ======= ========= ======== ============ =============== ==========
Sale of financial
assets at fair
value through
OCI 19 - - - 3,060 - - - - 3,060 (3,060) - - -
================== ===== ======= ======= ======== ========= ========== ============ =========== ======= ========= ======== ============ =============== ==========
Issuance of
shares 1,094 - - - - - - - - - 1,094 - 1,094
================== ===== ======= ======= ======== ========= ========== ============ =========== ======= ========= ======== ============ =============== ==========
Exercise of
share options - - 719 - - - - (4,675) (4,675) 2,862 (1,094) - (1,094)
================== ===== ======= ======= ======== ========= ========== ============ =========== ======= ========= ======== ============ =============== ==========
Expiration
of dividends - - - - 62 - - - 62 - 62 - 62
================== ===== ======= ======= ======== ========= ========== ============ =========== ======= ========= ======== ============ =============== ==========
Dividends 28 - - - - - - - - - (19,999) (19,999) - (19,999)
================== ===== ======= ======= ======== ========= ========== ============ =========== ======= ========= ======== ============ =============== ==========
Dividends to
non -
controlling
interests 28 - - - - - - - - - - - (13,039) (13,039)
================== ===== ======= ======= ======== ========= ========== ============ =========== ======= ========= ======== ============ =============== ==========
Purchase of
treasury shares - - (579) - - - - - - - (579) (579)
================== ===== ======= ======= ======== ========= ========== ============ =========== ======= ========= ======== ============ =============== ==========
Share-based
payments - - - - - - - 1,901 1,901 - 1,901 - 1,901
================== ===== ======= ======= ======== ========= ========== ============ =========== ======= ========= ======== ============ =============== ==========
Balance at
31 December
2018 225,409 438,041 - (4,324) 62 (13,708) (210,046) 4,860 (223,156) 278,995 719,289 71,003 790,292
================== ===== ======= ======= ======== ========= ========== ============ =========== ======= ========= ======== ============ =============== ==========
Other
comprehensive
income/(expense) - - - 3,628 - (327) - - 3,301 - 3,301 - 3,301
================== ===== ======= ======= ======== ========= ========== ============ =========== ======= ========= ======== ============ =============== ==========
Profit for
the year - - - - - - - - - 28,954 28,954 12,485 41,439
================== ===== ======= ======= ======== ========= ========== ============ =========== ======= ========= ======== ============ =============== ==========
Total
comprehensive
income/
(expense)
for the year - - - 3,628 - (327) - - 3,301 28,954 32,255 12,485 44,740
================== ===== ======= ======= ======== ========= ========== ============ =========== ======= ========= ======== ============ =============== ==========
Sale of financial
assets at fair
value through
OCI 19 - - - 1,658 - - - - 1,658 (1,658) - - -
================== ===== ======= ======= ======== ========= ========== ============ =========== ======= ========= ======== ============ =============== ==========
Transfer of
financial assets
at fair value
through OCI
to subsidiary 3 - - - (944) - - - - (944) 944 - - -
================== ===== ======= ======= ======== ========= ========== ============ =========== ======= ========= ======== ============ =============== ==========
Issuance of
shares 1,097 - - - - - - - - - 1,097 - 1,097
================== ===== ======= ======= ======== ========= ========== ============ =========== ======= ========= ======== ============ =============== ==========
Exercise of
share options - - 309 - - - - (4,647) (4,647) 3,241 (1,097) - (1,097)
================== ===== ======= ======= ======== ========= ========== ============ =========== ======= ========= ======== ============ =============== ==========
Expiration
of dividends - - - - 37 - - - 37 - 37 2 39
================== ===== ======= ======= ======== ========= ========== ============ =========== ======= ========= ======== ============ =============== ==========
Dividends 28 - - - - - - - - - (20,213) (20,213) - (20,213)
================== ===== ======= ======= ======== ========= ========== ============ =========== ======= ========= ======== ============ =============== ==========
Dividends to
non -
controlling
interests 28 - - - - - - - - - - - (8,859) (8,859)
================== ===== ======= ======= ======== ========= ========== ============ =========== ======= ========= ======== ============ =============== ==========
Purchase of
treasury shares - - (309) - - - - - - - (309) (309)
================== ===== ======= ======= ======== ========= ========== ============ =========== ======= ========= ======== ============ =============== ==========
Share-based
payments - - - - - - - 1,951 1,951 - 1,951 - 1,951
================== ===== ======= ======= ======== ========= ========== ============ =========== ======= ========= ======== ============ =============== ==========
Balance at
31 December
2019 226,506 438,041 - 18 99 (14,035) (210,046) 2,164 (221,800) 290,263 733,010 74,631 807,641
================== ===== ======= ======= ======== ========= ========== ============ =========== ======= ========= ======== ============ =============== ==========
1 Notes to the condensed consolidated financial statements
For the year ended 31 December 2019
The financial information for the year ended 31 December 2019
and 2018 contained in this document does not constitute statutory
accounts as defined in section 435 of the Companies Act 2006. The
financial information for the years ended 31 December 2019 and 2018
have been extracted from the consolidated financial statements of
Hochschild Mining plc for the year ended 31 December 2019 which
have been approved by the directors on 18 February 2020 and will be
delivered to the Registrar of Companies in due course. The
auditor's report on those financial statements was unqualified and
did not contain a statement under section 498 of the Companies Act
2006.
2 Significant accounting policies
Basis of preparation
The consolidated financial statements have been prepared in
accordance with International Financial Reporting Standards (IFRS)
as adopted by the European Union (EU) and the Companies Act
2006.
The basis of preparation and accounting policies used in
preparing the consolidated financial statements for the years ended
31 December 2019 and 2018 are set out below. The consolidated
financial statements have been prepared on a historical cost basis
except for the revaluation of certain financial instruments that
are measured at fair value at the end of each reporting period, as
explained below. These accounting policies have been consistently
applied, except for the effects of the adoption of new and amended
accounting standard.
The financial statements are presented in US dollars (US$) and
all monetary amounts are rounded to the nearest thousand ($000)
except when otherwise indicated.
The financial statements have been prepared on the going concern
basis. Details of the factors which have been taken into account in
assessing the Group's going concern status are set out within the
Directors' report.
Changes in accounting policy and disclosures
The Group applied IFRS 16 Leases and IFRIC 23 Uncertainty over
Income Tax Treatments for the first time from 1 January 2019. The
nature and effect of these changes as a result of the adoption of
this new standard and interpretation are described below. Other
than the changes described below, the accounting policies adopted
in the preparation of the consolidated financial statements are
consistent with those applied in the preparation of the
consolidated financial statement for the year ended 31 December
2018.
Several other amendments and interpretations applied for the
first time in 2019 but did not have an impact on the consolidated
financial statements of the Group and, hence, have not been
disclosed.
-- 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 Leases.
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. 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,
-- The accounting for operating leases related to low value assets (below US$5,000)
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 straight-line 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.
The resulting lease liability as of 1 January 2019 was determined
as follows: US$000
--------
Operating lease commitments as at 31 December 2018 2,448
Previous not disclosed operating lease commitments 5,579
--------
8,027
--------
Discounted using the lessee's incremental borrowing rate
of at the date of initial application 7,785
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 5,337
--------
Less: current portion (2,553)
--------
Non-current portion 2,784
--------
The effect of adoption IFRS 16 is as follows:
Right - of-use
assets Lease
vehicles(1) Liabilities(2)
US$000 US$000
-------------- ---------------
Recognised on transition as at 1 January 2019 5,337 (5,337)
Depreciation expense (2,454) -
Interests expense(3) - (96)
Termination of contracts (350) 350
Payments - 2,506
-------------- ---------------
Balance at 31 December 2019 2,533 (2,577)
============== ===============
1 Included in the consolidated statement of financial position
within "Property, plant and equipment".
2 Included in the consolidated statement of financial position
within "Trade and other payables" (Current: US$2,577,000,
Non-current: US$nil).
3 Included in the consolidated income statement within "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
Upon adoption of the Interpretation, the Group considered
whether it has any uncertain tax positions; the taxation
authorities may challenge those tax treatments. The Group
determined, based on its tax compliance, that it is probable that
its tax treatments (including those for its subsidiaries) will be
accepted by the taxation authorities. Therefore, the Interpretation
did not have a material impact on the consolidated financial
statements of the Group.
3 Acquisition of assets
REE UNO SpA ("REE UNO")
On 9 November 2018 Minera Hochschild Chile SCM ("Hochschild")
signed an agreement for an investment in the Biolantanidos Project
with Fondo de Inversión Privado Lantanidos ("FIP"). REE UNO has the
rights over the concessions called the Biolantánidos, a rare-earth
metals extraction and production project, located in Penco, BiobÃo
Region, Chile.
On that date, Hochschild subscribed for 591,326,947 type A
shares of REE UNO, that represented 5% of the total type A shares,
and 4.84% of the total share capital of REE UNO. The total
consideration was 1,351,880,000 Chilean pesos equivalent to
US$2,000,000. FIP was the owner of the remaining 11,235,211,986
type A shares of "REE UNO" (representing 95% of total type A shares
of REE UNO) whilst multiple shareholders held 100% of the interest
in the type B shares.
In April 2019, Hochschild signed a new agreement to increase its
interest in REE UNO and subscribed for additional 147,831,737 type
A shares, that represented 1.23% of the total type A shares. The
total consideration was 333,065,000 Chilean pesos equivalent to
US$500,000.
On 22 August 2019, Hochschild signed an agreement for the sale
and transfer of all the type A and B shares of REE UNO, from FIP
and all the other shareholders. The transfer of the remaining type
A shares and type B shares was completed on 2 October 2019 with the
total consideration amounting to US$57,344,974, of which US$983,142
remains pending payment as at 31 December 2019.
On the date of completion, the Group remeasured the fair value
of the investment previously held and recognised a gain of
US$998,000 in OCI. On reclassification of the investment to
subsidiary, US$944,000 was reclassified from the fair value
reserves of financial assets at fair value through OCI to retained
earnings.
The transaction is considered as an asset acquisition, and REE
UNO consolidates its financial information with the Group from 2
October 2019, being the date when the Group obtained control.
The fair value of assets acquired and liabilities assumed as at
2 October 2019 comprise the following:
US$000
------------------------------------------------------------- -------
Cash and cash equivalents 1,120
-------------------------------------------------------------- -------
Other receivables 1,541
-------------------------------------------------------------- -------
Evaluation and exploration assets 59,358
-------------------------------------------------------------- -------
Property, plant and equipment 218
-------------------------------------------------------------- -------
Total assets 62,237
-------------------------------------------------------------- -------
Accounts payable and other liabilities (1,448)
-------------------------------------------------------------- -------
Total liabilities (1,448)
-------------------------------------------------------------- -------
Net assets acquired 60,789
-------------------------------------------------------------- -------
Fair value of type A shares held in REE UNO (note 19) 3,444
-------------------------------------------------------------- -------
Consideration for the acquisition of remaining type A shares
and B shares in REE UNO 57,345
-------------------------------------------------------------- -------
Total consideration 60,789
-------------------------------------------------------------- -------
Cash paid 56,362
-------------------------------------------------------------- -------
Less cash acquired with the subsidiary (1,120)
-------------------------------------------------------------- -------
Net cash flow on acquisition 55,242
-------------------------------------------------------------- -------
4 Segment reporting
The Group's activities are principally related to mining
operations which involve the exploration, production and sale of
gold and silver. Products are subject to the same risks and returns
and are sold through similar distribution channels. The Group
undertakes a number of activities solely to support mining
operations including power generation and services. Transfer prices
between segments are set on an arm's length basis in a manner
similar to that used for third parties. Segment revenue, segment
expense and segment results include transfers between segments at
market prices. Those transfers are eliminated on consolidation.
For internal reporting purposes, management takes decisions and
assesses the performance of the Group through consideration of the
following reporting segments:
-- Operating unit - San Jose, which generates revenue from the
sale of gold and silver (dore and concentrate).
-- Operating unit - Arcata and Pallancata, which generate
revenue from the sale of gold and silver (concentrate). The Arcata
mine unit was put into care and maintenance on 13 February
2019.
-- Operating unit - Inmaculada, which generates revenue from the
sale of gold and silver (dore).
-- Exploration, which explores and evaluates areas of interest
in brownfield and greenfield sites with the aim of extending the
life of mine of existing operations and to assess the feasibility
of new mines. The exploration segment includes costs charged to the
profit and loss and capitalised as assets.
-- Other - includes the profit or loss generated by Empresa de
Transmisión Aymaraes S.A.C.
The Group's administration, financing, other activities
(including other income and expense), and income taxes are managed
at a corporate
level and are not allocated to operating segments.
Segment information is consistent with the accounting policies
adopted by the Group. Management evaluates the financial
information
based on IFRS as adopted for use in the European Union.
The Group measures the performance of its operating units by the
segment profit or loss that comprises gross profit, selling
expenses
and exploration expenses.
Segment assets include items that could be allocated directly to
the segment.
(a) Reportable segment information
Adjustment
and
Arcata Pallancata San Jose Inmaculada Exploration Other1 eliminations Total
US$000 US$000 US$000 US$000 US$000 US$000 US$000 US$000
============== ======= ========== ======== ========== =========== ======= ============ =========
Year ended 31
December
2019
============== ======= ========== ======== ========== =========== ======= ============ =========
Revenue from
external
customers 5,261 140,784 242,972 351,936 - 139 - 741,092
=============== ======= ========== ======== ========== =========== ======= ============ =========
Inter segment
revenue - - - - - 6,101 (6,101) -
=============== ======= ========== ======== ========== =========== ======= ============ =========
Total revenue
from
customers 5,261 140,784 242,972 351,936 - 6,240 (6,101) 741,092
=============== ======= ========== ======== ========== =========== ======= ============ =========
Provisional
pricing
adjustment (180) 6,814 7,743 207 - - - 14,584
=============== ======= ========== ======== ========== =========== ======= ============ =========
Total revenue 5,081 147,598 250,715 352,143 - 6,240 (6,101) 755,676
=============== ======= ========== ======== ========== =========== ======= ============ =========
Segment
profit/(loss) (2,027) 15,187 61,472 144,199 (38,062) 9,169 (6,009) 183,929
=============== ======= ========== ======== ========== =========== ======= ============ =========
Others2 (107,087)
=============== ======= ========== ======== ========== =========== ======= ============ =========
Profit from
continuing
operations
before
income tax 76,842
=============== ======= ========== ======== ========== =========== ======= ============ =========
Other segment
information
============== ======= ========== ======== ========== =========== ======= ============ =========
Depreciation3 (430) (50,432) (51,754) (79,917) (397) (4,327) - (187,257)
=============== ======= ========== ======== ========== =========== ======= ============ =========
Amortisation - - (1,396) (144) (462) (67) - (2,069)
=============== ======= ========== ======== ========== =========== ======= ============ =========
Impairment and
write-off of
assets,
net (30) (14,892) (488) (135) 315 (1) - (15,231)
=============== ======= ========== ======== ========== =========== ======= ============ =========
Assets
============== ======= ========== ======== ========== =========== ======= ============ =========
Capital
expenditure 42 25,357 43,623 66,435 62,881 6,778 - 205,116
=============== ======= ========== ======== ========== =========== ======= ============ =========
Current assets 2,133 20,500 48,286 26,601 38,301 2,873 - 138,694
=============== ======= ========== ======== ========== =========== ======= ============ =========
Other
non-current
assets 5,977 50,438 163,656 506,779 220,934 51,414 - 999,198
=============== ======= ========== ======== ========== =========== ======= ============ =========
Total segment
assets 8,110 70,938 211,942 533,380 259,235 54,287 - 1,137,892
=============== ======= ========== ======== ========== =========== ======= ============ =========
Not reportable
assets4 - - - - - 215,356 - 215,356
=============== ======= ========== ======== ========== =========== ======= ============ =========
Total assets 8,110 70,938 211,942 533,380 259,235 269,643 - 1,353,248
=============== ======= ========== ======== ========== =========== ======= ============ =========
1 'Other' revenue relates to revenues earned by Empresa de Transmisión Aymaraes S.A.C.
2 Comprised of administrative expenses of US$45,920,000, other
income of US$9,014,000, other expenses of US$46,093,000, write-off
of assets (net) of US$853,000, impairment of assets (net) of
US$14,378,000, finance income of US$2,938,000, finance expense of
US$10,038,000, and foreign exchange loss of US$1,757,000.
3 Includes depreciation capitalised in the Crespo project
(US$809,000), and San Jose unit (US$2,217,000).
4 Not reportable assets are comprised of financial assets at
fair value through OCI of US$6,159,000, other receivables of
US$41,007,000, income tax receivable of US$206,000, deferred income
tax asset of US$1,627,000, and cash and cash equivalents of
US$166,357,000.
Adjustment
and
Arcata Pallancata San Jose Inmaculada Exploration Other1 eliminations Total
US$000 US$000 US$000 US$000 US$000 US$000 US$000 US$000
============== ======= ========== ======== ========== =========== ======= ============ =========
Year ended 31
December
2018
============== ======= ========== ======== ========== =========== ======= ============ =========
Revenue from
external
customers 57,836 138,221 207,431 306,108 - 340 - 709,936
=============== ======= ========== ======== ========== =========== ======= ============ =========
Inter segment
revenue - - - - - 6,328 (6,328) -
=============== ======= ========== ======== ========== =========== ======= ============ =========
Total revenue
from
customers 57,836 138,221 207,431 306,108 - 6,668 (6,328) 709,936
=============== ======= ========== ======== ========== =========== ======= ============ =========
Provisional
pricing
adjustment (1,199) (2,378) (2,064) (5) - - - (5,646)
=============== ======= ========== ======== ========== =========== ======= ============ =========
Total revenue 56,637 135,843 205,367 306,103 - 6,668 (6,328) 704,290
=============== ======= ========== ======== ========== =========== ======= ============ =========
Segment
profit/(loss) (7,314) 31,226 20,289 116,361 (34,800) 11,178 (8,887) 128,053
=============== ======= ========== ======== ========== =========== ======= ============ =========
Others2 (89,687)
=============== ======= ========== ======== ========== =========== ======= ============ =========
Profit from
continuing
operations
before
income tax 38,366
=============== ======= ========== ======== ========== =========== ======= ============ =========
Other segment
information
============== ======= ========== ======== ========== =========== ======= ============ =========
Depreciation3 (178) (36,377) (52,006) (74,878) (377) (4,771) - (168,587)
=============== ======= ========== ======== ========== =========== ======= ============ =========
Amortisation - - (1,324) (221) (462) (84) - (2,091)
=============== ======= ========== ======== ========== =========== ======= ============ =========
Impairment and
write-off of
assets,
net (38) (31) (233) (56) - (26) - (384)
=============== ======= ========== ======== ========== =========== ======= ============ =========
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
assets4 - - - - - 146,270 - 146,270
=============== ======= ========== ======== ========== =========== ======= ============ =========
Total assets 11,550 111,525 212,946 544,800 195,982 201,479 - 1,278,282
=============== ======= ========== ======== ========== =========== ======= ============ =========
1 'Other' revenue relates to revenues earned by Empresa de Transmisión Aymaraes S.A.C.
2 Comprised of administrative expenses of US$45,783,000, other
income of US$8,062,000, other expenses of US$17,144,000, write-off
of assets (net) of US$384,000, finance income of US$2,048,000,
finance expense of US$27,540,000, and foreign exchange loss of
US$8,946,000.
3 Includes depreciation capitalised in the Crespo project
(US$810,000), and San Jose unit (US$1,783,000).
4 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 asset of
US$1,504,000 and cash and cash equivalents of US$79,704,000.
(b) Geographical information
The revenue for the period based on the country in which the
customer is located is as follows:
Year ended
31 December
================
2019 2018
US$000 US$000
================== ======= =======
External customer
================== ======= =======
Canada 381,149 28,661
=================== ======= =======
Switzerland 109,927 89,285
=================== ======= =======
Korea 91,304 97,943
=================== ======= =======
Germany 75,003 32,277
=================== ======= =======
Peru 50,579 70,842
=================== ======= =======
Japan 24,404 26,084
=================== ======= =======
Bulgaria 17,864 2,102
=================== ======= =======
USA 5,446 357,096
=================== ======= =======
Total 755,676 704,290
=================== ======= =======
Inter-segment
================== ======= =======
Peru 6,101 6,328
=================== ======= =======
Total 761,777 710,618
=================== ======= =======
In the periods set out below, certain customers accounted for
greater than 10% of the Group's total revenues as detailed in the
following table:
Year ended 31 December
2019 Year ended 31 December 2018
================================= =================================
US$000 % Revenue Segment US$000 % Revenue Segment
==================== ======= ========= ============= ======= ========= =============
Asahi Refining
Canada 352,949 47% Inmaculada 12 0% Inmaculada
===================== ======= ========= ============= ======= ========= =============
Argor Heraus 105,436 14% San Jose 74,210 11% San Jose
===================== ======= ========= ============= ======= ========= =============
Pallancata Pallancata
LS Nikko 91,304 12% and San Jose 97,943 14% and San Jose
===================== ======= ========= ============= ======= ========= =============
Republic Metals Inmaculada
Corporation 66 0% San Jose 86,974 12% and San Jose
===================== ======= ========= ============= ======= ========= =============
Bank of Nova Scotia - 0% Inmaculada 162,843 23% Inmaculada
===================== ======= ========= ============= ======= ========= =============
Asahi Refining
USA (806) 0% Inmaculada 85,136 12% Inmaculada
===================== ======= ========= ============= ======= ========= =============
Non-current assets, excluding financial instruments and deferred
income tax assets, were allocated to the geographical areas in
which the assets are located as follows:
As at 31 December
====================
2019 2018
US$000 US$000
=========================================== ========= =========
Peru 709,022 753,016
============================================ ========= =========
Argentina 163,656 172,726
============================================ ========= =========
Mexico 838 38,835
============================================ ========= =========
Chile 125,682 64,199
============================================ ========= =========
Total non-current segment assets 999,198 1,028,776
============================================ ========= =========
Financial assets at fair value through OCI 6,159 5,296
============================================ ========= =========
Trade and other receivables 5,188 5,451
============================================ ========= =========
Other financial assets - 47
============================================ ========= =========
Deferred income tax assets 1,627 1,504
============================================ ========= =========
Total non-current assets 1,012,172 1,041,074
============================================ ========= =========
5 Revenue
Year ended
31 December
================
2019 2018
US$000 US$000
================================== ======= =======
Gold (from dore bars) 322,062 277,357
=================================== ======= =======
Silver (from dore bars) 135,583 131,818
=================================== ======= =======
Gold (from concentrate) 119,522 101,492
=================================== ======= =======
Silver (from concentrate) 178,370 193,238
=================================== ======= =======
Other minerals (from concentrate) - 45
=================================== ======= =======
Services 139 340
=================================== ======= =======
Total 755,676 704,290
=================================== ======= =======
Included within revenue is an effect relating to provisional
pricing adjustments arising on sales resulting in total revenue
from customers in the amount of US$741,092,000 (2018:
US$709,936,000).
The provisional pricing adjustments are as follows:
Year ended
31 December
================
2019 2018
US$000 US$000
========================== ======= =======
Gold (from dore bars) 238 (8)
=========================== ======= =======
Silver (from dore bars) 60 (43)
=========================== ======= =======
Gold (from concentrate) 5,748 (1,080)
=========================== ======= =======
Silver (from concentrate) 8,538 (4,515)
=========================== ======= =======
Total 14,584 (5,646)
=========================== ======= =======
Included within revenue is a transaction price related to the
shipping services provided by the Group to the customers arising on
sale of:
Year ended
31 December
================
2019 2018
US$000 US$000
========================== ======= =======
Gold (from dore bars) 1,011 856
=========================== ======= =======
Silver (from dore bars) 766 664
=========================== ======= =======
Gold (from concentrate) 2,456 1,806
=========================== ======= =======
Silver (from concentrate) 2,920 2,159
=========================== ======= =======
Total 7,153 5,485
=========================== ======= =======
6 Cost of sales
Included in cost of sales are:
Year ended
31 December
================
2019 2018
US$000 US$000
================================================= ======= =======
Depreciation and amortisation in cost of sales1 182,676 164,819
================================================== ======= =======
Personnel expenses (note 10 ) 102,977 116,065
================================================== ======= =======
Mining royalty (note 30 ) 6,412 5,857
================================================== ======= =======
Change in products in process and finished goods (3,782) 2,481
================================================== ======= =======
Other items2 567 1,141
================================================== ======= =======
1 The depreciation and amortisation in production cost is US$184,388,000 (2018: US$164,244,000).
2 Other items include costs related to stoppage of US$567,000 at
the San José mine unit (2018: Other items include costs related to
stoppage of US$202,000 and termination benefits of US$939,000 at
the San José mine unit).
7 Administrative expenses
Year ended
31 December
============ =======
2019 2018
US$000 US$000
============================== ============ =======
Personnel expenses (note 10) 26,580 28,165
=============================== ============ =======
Professional fees 5,481 3,614
=============================== ============ =======
Donations 331 785
=============================== ============ =======
Lease rentals 1,343 1,372
=============================== ============ =======
Travel expenses 1,058 1,061
=============================== ============ =======
Third party services 347 3,434
=============================== ============ =======
Communications 502 430
=============================== ============ =======
Indirect taxes 1,461 1,041
=============================== ============ =======
Depreciation and amortisation 2,274 1,486
=============================== ============ =======
Technology and systems 1,400 537
=============================== ============ =======
Security 912 784
=============================== ============ =======
Other1 4,231 3,074
=============================== ============ =======
Total 45,920 45,783
=============================== ============ =======
1 Predominantly related to advertising costs of US$388,000
(2018; US$163,000), insurance fees of US$384,000 (2018:
US$243,000), repair and maintenance of US$320,000 (2018:
US$480,000), supplies costs of US$202,000 (2018: US$145,000) and
personnel transportation of US$330,000 (2018: US$303,000).
8 Exploration expenses
Year ended
31 December
================
2019 2018
US$000 US$000
==================================== ======= =======
Mine site exploration1
==================================== ======= =======
Arcata 1,065 9,024
===================================== ======= =======
Ares 884 699
===================================== ======= =======
Inmaculada 3,976 1,732
===================================== ======= =======
Pallancata 7,116 2,162
===================================== ======= =======
San Jose 9,753 4,224
===================================== ======= =======
22,794 17,841
======= =======
Prospects2
==================================== ======= =======
Peru 265 815
===================================== ======= =======
USA 3,600 2,928
===================================== ======= =======
Chile 1,300 2,213
===================================== ======= =======
5,165 5,956
======= =======
Generative3
==================================== ======= =======
Peru 3,322 4,640
===================================== ======= =======
USA - 28
===================================== ======= =======
3,322 4,668
======= =======
Personnel (note 10) 5,748 5,398
===================================== ======= =======
Others 568 518
===================================== ======= =======
Depreciation of right of use assets 368 -
===================================== ======= =======
Total 37,965 34,381
===================================== ======= =======
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.
The Group determines the cash flows which relate to the
exploration activities of the companies engaged only in
exploration. Exploration activities incurred by Group operating
companies are not included since it is not practicable to separate
the liabilities related to the exploration activities of these
companies from their operating liabilities.
Cash outflows on exploration activities were US$7,503,000 in
2019 (2018: US$10,498,000).
9 Selling expenses
Year ended
31 December
================
2019 2018
US$000 US$000
============================== ======= =======
Personnel expenses (note 10 ) 288 302
=============================== ======= =======
Warehouse services 1,627 2,032
=============================== ======= =======
Taxes1 16,259 5,148
=============================== ======= =======
Other 2,897 2,586
=============================== ======= =======
Total 21,071 10,068
=============================== ======= =======
1 Corresponds to the export duties in Argentina, applicable from
September 2018.
10 Personnel expenses before exceptional items
Year ended
31 December
================
2019 2018
US$000 US$000
=========================== ======= =======
Salaries and wages 100,441 110,290
============================ ======= =======
Workers profit sharing 5,965 -
============================ ======= =======
Other legal contributions 21,453 23,268
============================ ======= =======
Statutory holiday payments 6,380 7,282
============================ ======= =======
Long Term Incentive Plan 1,294 4,487
============================ ======= =======
Restricted share plan 843 1,374
============================ ======= =======
Termination benefits 2,265 4,101
============================ ======= =======
Other 1,600 2,764
============================ ======= =======
Total 140,241 153,566
============================ ======= =======
Personnel expenses are distributed as follows:
Year ended
31 December
================
2019 2018
US$000 US$000
============================================= ======= =======
Cost of sales 102,977 116,065
============================================== ======= =======
Administrative expenses 26,580 28,165
============================================== ======= =======
Exploration expenses 5,748 5,398
============================================== ======= =======
Selling expenses 288 302
============================================== ======= =======
Other expenses 4,263 3,225
============================================== ======= =======
Capitalised as property, plant and equipment 385 411
============================================== ======= =======
Total 140,241 153,566
============================================== ======= =======
Average number of employees for 2019 and 2018 were as
follows:
Year ended
31 December
==============
2019 2018
=============== ====== ======
Peru 2,072 2,878
================ ====== ======
Argentina 1,394 1,220
================ ====== ======
Chile 3 3
================ ====== ======
United Kingdom 10 10
================ ====== ======
Total 3,479 4,111
================ ====== ======
11 Exceptional items
Exceptional items are those significant items which, due to
their nature or the expected infrequency of the events giving rise
to them, need to be disclosed separately on the face of the income
statement to enable a better understanding of the financial
performance of the Group and facilitate comparison with prior
years. Unless stated, exceptional items do not correspond to a
reporting segment of the Group.
Year ended Year ended
31 December 31 December
2019 2018
US$000 US$000
========================================================== ============ ============
Other expenses
========================================================== ============ ============
Restructuring of Arcata mine unit 1 (12,199) -
=========================================================== ============ ============
Total (12,199) -
=========================================================== ============ ============
(Impairment)/impairment reversal of non-financial assets,
net
========================================================== ============ ============
Impairment of assets 2 (14,693) -
=========================================================== ============ ============
Reversal of impairment of assets 2 315 -
=========================================================== ============ ============
Total (14,378) -
=========================================================== ============ ============
Finance costs
========================================================== ============ ============
Expenses related to the repayment of the bond4 - (16,346)
=========================================================== ============ ============
Total - (16,346)
=========================================================== ============ ============
Income tax benefit 3 and 5 7,933 4,822
=========================================================== ============ ============
Total 7,933 4,822
=========================================================== ============ ============
The exceptional items for the year ended 31 December 2019 are as
follows:
1 The termination benefits of 859 employees resulting from the
restructuring process generated as the Arcata mine unit was placed
on care and maintenance. The Arcata mine unit was impaired in
December 2017.
2 Impairment of the Pallancata mine unit of US$14,693,000 and
reversals of impairment related to the San Felipe mine project of
US$315,000.
3 The current tax credit generated by the termination benefits
arising from the restructuring process of the Arcata mine unit of
US$3,599,000 and the deferred tax credit generated by the
impairment of Pallancata mine unit of US$4,334,000.
The exceptional items for the year ended 31 December 2018 are as
follows:
4 Premium and other finance expenses related to the repayment of
Compañia Minera Ares S.A.C. ("Minera Ares") bond of US$350,000,000
fully repaid on 23 January 2018. The Group repaid the capital of
US$294,775,000, plus interests of US$11,423,000, premium of
US$11,423,000 and their corresponding withholding tax of
US$946,000. The charge in profit and loss during 2018 was
US$17,833,000, of which US$1,487,000 corresponded to the interests
(US$1,392,000) and its corresponding withholding tax (US$95,000)
generated in 2018, and the balance of US$16,346,000, recognised as
an exceptional item, includes the premium of US$11,423,000, its
corresponding withholding tax of US$473,000 and the recognition of
the capitalised expenses related to obtaining the bond of
US$4,450,000.
5 Deferred tax credit generated by the premium and other finance
expenses related to the repayment of the Minera Ares bond.
12 Other income and other expenses before exceptional items
Year ended Year ended
31 December 31 December
2019 2018
============ ============
Before Before
exceptional exceptional
items items
US$000 US$000
=========================================================== ============ ============
Other Income
=========================================================== ============ ============
Decrease in provision for mine closure (note 26(1)) 223 -
============================================================ ============ ============
Export credits1 6 1,287
============================================================ ============ ============
Logistic services 4,489 4,128
============================================================ ============ ============
Income related to the San Felipe agreement (note 23) 600 -
============================================================ ============ ============
Other2 3,696 2,647
============================================================ ============ ============
Total 9,014 8,062
============================================================ ============ ============
Other expenses
=========================================================== ============ ============
Increase in provision for mine closure (note 26(1)) (13,621) (52)
============================================================ ============ ============
Provision of obsolescence of supplies (note 21) (1,449) (384)
============================================================ ============ ============
Care and maintenance expenses of Ares mine unit (4,593) (5,688)
============================================================ ============ ============
Contingencies 71 (140)
============================================================ ============ ============
Donations (10) (9)
============================================================ ============ ============
Write off of value added tax (144) (66)
============================================================ ============ ============
Corporate social responsibility contribution in Argentina3 (3,636) (2,382)
============================================================ ============ ============
Termination benefits Arcata mine unit4 - (1,324)
============================================================ ============ ============
Care and maintenance expenses of Arcata mine unit (4,888) -
============================================================ ============ ============
Provision for impairment of receivables5 (3,706) (5,656)
============================================================ ============ ============
Other6 (1,918) (1,443)
============================================================ ============ ============
Total (33,894) (17,144)
============================================================ ============ ============
1 Corresponds to the benefit of silver refund in Argentina which was effective until August 2018.
2 Mainly corresponds to the recognition of a receivable from a
supplier following a claim ruled in favour of the Group of
US$1,061,000 (2018: US$nil), the gain on recovery of expenses of
US$623,000 (2018: US$930,000), gain on sale of supplies of
US$325,000 (2018: US$410,000) and the gain recognised for the
Mosquito project of US$400,000 (2018: US$400,000).
3 Relates to a contribution in Argentina to the Santa Cruz
province, effective since January 2016 and calculated as a
proportion of sales.
4 Due to the redundancy of 107 employees in the Arcata mine
unit, aligned with the mine plan for 2018.
5 Mainly due to write-off of a claim receivable of US$2,934,000
(2018: mainly due to the write-off of a trade receivable of
US$4,946,000 from a costumer declared bankrupt under the United
States bankruptcy code chapter 11).
6 Mainly corresponds to the expenses due to concessions of
US$667,000 (2018: US$320,000), depreciation expense for
right-of-use assets of US$206,000 (2018:US$nil) and rentals of
US$33,000 (2018: US$191,000).
13 Finance income and finance costs before exceptional items
Year ended Year ended
31 December 31 December
2019 2018
============ ============
Before Before
exceptional exceptional
items items
US$000 US$000
============================================================= ============ ============
Finance income
============================================================= ============ ============
Interest on deposits and liquidity funds 2,557 2,001
============================================================== ============ ============
Interest income 2,557 2,001
============================================================== ============ ============
Other 381 47
============================================================== ============ ============
Total 2,938 2,048
============================================================== ============ ============
Finance costs
============================================================= ============ ============
Interest on secured bank loans (note 25 ) (4,122) (4,923)
============================================================== ============ ============
Other interest (335) (726)
============================================================== ============ ============
Interest on the US$350m bond (note 11) - (1,392)
============================================================== ============ ============
Interest expense (4,457) (7,041)
============================================================== ============ ============
Unwind of discount on mine rehabilitation (note 26) (506) (368)
============================================================== ============ ============
Loss on discount of other receivables1 (902) (1,625)
============================================================== ============ ============
Loss from changes in the fair value of financial instruments
2 (3,007) (1,256)
============================================================== ============ ============
Other 3 (1,166) (904)
============================================================== ============ ============
Total (10,038) (11,194)
============================================================== ============ ============
1 Mainly related to the effect of the discount of tax credits in Argentina and Peru.
2 Mainly due to the effect of the sale of the bonds in Argentina
(2018: related to the fair value adjustments of the warrants of Red
Eagle Mining Corporation acquired in 2017).
3 Includes the effect of the discount of the lease liabilities
related to IFRS 16 (refer to note 2(b)).
14 Income tax expense
Year ended 31 December Year ended 31 December
2019 2018
================================== ==================================
Before Before
exceptional Exceptional exceptional Exceptional
items items Total items items Total
US$000 US$000 US$000 US$000 US$000 US$000
================================ ============ =========== ======= ============ =========== =======
Current corporate income tax
from continuing operations
================================ ============ =========== ======= ============ =========== =======
Corporate income tax charge 35,543 (3,599) 31,944 8,338 - 8,338
================================= ============ =========== ======= ============ =========== =======
Withholding tax 3,253 - 3,253
================================= ============ =========== ======= ============ =========== =======
38,796 (3,599) 35,197 8,338 - 8,338
============ =========== ======= ============ =========== =======
Deferred taxation
================================ ============ =========== ======= ============ =========== =======
Origination and reversal of
temporary differences from
continuing operations (note
28 ) (2,687) (4,334) (7,021) 20,909 (4,822) 16,087
================================= ============ =========== ======= ============ =========== =======
Effect of change in income
tax rates1 (1,230) - (1,230) - - -
================================= ============ =========== ======= ============ =========== =======
(3,917) (4,334) (8,251) 20,909 (4,822) 16,087
============ =========== ======= ============ =========== =======
Corporate income tax 34,879 (7,933) 26,946 29,247 (4,822) 24,425
================================= ============ =========== ======= ============ =========== =======
Current mining royalties
================================ ============ =========== ======= ============ =========== =======
Mining royalty charge (note
30) 5,028 - 5,028 4,494 - 4,494
================================= ============ =========== ======= ============ =========== =======
Special mining tax charge (note
30) 3,429 - 3,429 2,746 - 2,746
================================= ============ =========== ======= ============ =========== =======
Total current mining royalties 8,457 - 8,457 7,240 - 7,240
================================= ============ =========== ======= ============ =========== =======
Total taxation charge/(credit)
in the income statement 43,336 (7,933) 35,403 36,487 (4,822) 31,665
================================= ============ =========== ======= ============ =========== =======
1 On 29 December 2017, the Argentinian government enacted a tax
reform. The main change was the reduction in the statutory income
tax rate, from 35% to 30% with effect from 1 January 2018 and to
25% with effect from 1 January 2020. On December 2019 there was a
further tax reform in Argentina, stating that the income tax rate
of 25% will be applied from 1 January 2021.
The weighted average statutory income tax rate was 30.9% for
2019 and 32.2% 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.
There was no tax related to items charged or credited to equity
during the year ended 31 December 2019 (2018: US$nil).
The total taxation charge on the Group's profit before tax
differs from the theoretical amount that would arise using the
weighted average tax rate applicable to the consolidated profits of
the Group companies as follows:
As at 31 December
===================
2019 2018
US$000 US$000
========================================================= ========= ========
Profit from continuing operations before income tax 76,842 38,366
========================================================== ========= ========
At average statutory income tax rate of 30.9% ( 2018:
32.2 %) 23,740 12,352
========================================================== ========= ========
Expenses not deductible for tax purposes 360 593
========================================================== ========= ========
Adjustment related to Restricted Share Plan (RSP) (940) -
========================================================== ========= ========
Change in statutory income tax rate 1,230 -
========================================================== ========= ========
Deferred tax recognised on special investment regime1 (2,590) (1,399)
========================================================== ========= ========
Movement in unrecognised deferred tax2 5,223 2,915
========================================================== ========= ========
Special mining tax and mining royalty deductible for
corporate income tax (2,495) (2,136)
========================================================== ========= ========
Other (2,288) (1,971)
========================================================== ========= ========
Corporate income tax at average effective income tax
rate of 28.9% (2018: 27.0%) before foreign exchange
effect and withholding tax 22,240 10,354
========================================================== ========= ========
Special mining tax and mining royalty3 8,457 7,240
========================================================== ========= ========
Corporate income tax and mining royalties at average
effective income tax rate of 39.9% (2018: 45.9%) 30,697 17,594
========================================================== ========= ========
Foreign exchange rate effect4 1,453 14,071
========================================================== ========= ========
Corporate income tax and mining royalties at average
effective income tax rate of 41.8% (2018: 82.5%) before
withholding tax 32,150 31,665
========================================================== ========= ========
Withholding tax 3,253 -
========================================================== ========= ========
Total taxation charge in the income statement at average
effective tax rate 46.1% (2018: 82.5%) from continuing
operations 35,403 31,665
========================================================== ========= ========
1 Argentina benefits from a special investment regime that
allows for a super (double) deduction in calculating its taxable
profits for all costs relating to prospecting, exploration and
metallurgical analysis, pilot plants and other expenses incurred in
the preparation of feasibility studies for mining projects.
2 Includes the income tax charge on mine closure provision of
US$836,000 (2018: income tax credit of US$412,000), the tax charge
related to the Inmaculada mine unit depreciation of US$1,636,000
(2018: US$1,631,000), and the effect of not recognised tax losses
of US$2,751,000 (2018: US$1,696,000).
3 Corresponds to the impact of a mining royalty and special mining tax in Peru (note 30).
4 The foreign exchange effect is composed of US$3,280,000 loss
(2018: US$9,311,000 loss) from Argentina and a gain of US$1,827,000
(2017: US$4,760,000 loss) from Peru. This mainly corresponds to the
foreign exchange effect of converting tax bases and monetary items
from local currency to the corresponding functional currency. The
main contributor of the foreign exchange effect on the tax charge
in 2018 is the devaluation of the Argentinian peso.
15 Basic and diluted earnings per share
Earnings per share ('EPS') is calculated by dividing profit for
the year attributable to equity shareholders of the Parent by the
weighted average number of ordinary shares issued during the
year.
The Company has dilutive potential ordinary shares.
As at 31 December 2019 and 2018, EPS has been calculated as
follows:
As at 31 December
===================
2019 2018
============================================================= ========= ========
Basic earnings/(loss) per share from continuing operations
============================================================= ========= ========
Before exceptional items (US$) 0.09 0.05
============================================================== ========= ========
Exceptional items (US$) (0.03) (0.02)
============================================================== ========= ========
Total for the year and from continuing operations (US$) 0.06 0.03
============================================================== ========= ========
Diluted earnings/(loss) per share from continuing operations
============================================================= ========= ========
Before exceptional items (US$) 0.09 0.05
============================================================== ========= ========
Exceptional items (US$) (0.03) (0.02)
============================================================== ========= ========
Total for the year and from continuing operations (US$) 0.06 0.03
============================================================== ========= ========
Profit from continuing operations before exceptional items and
attributable to equity holders of the Parent is derived as
follows:
As at 31 December
===================
2019 2018
========================================================= ========= ========
Profit attributable to equity holders of the Parent
- continuing operations (US$ 000 ) 28,954 12,836
========================================================== ========= ========
Exceptional items after tax - attributable to equity
holders of the Parent (US$ 000 ) 18,644 11,524
========================================================== ========= ========
Profit from continuing operations before exceptional
items attributable to equity holders of the Parent (US$
000 ) 47,598 24,360
========================================================== ========= ========
Profit from continuing operations before exceptional
items attributable to equity holders of the Parent for
the purpose of diluted earnings per share (US$ 000 ) 47,598 24,360
========================================================== ========= ========
The following reflects the share data used in the basic and
diluted earnings per share computations:
As at 31 December
===================
2019 2018
=========================================================== ========= ========
Basic weighted average number of ordinary shares in
issue (thousands) 510,562 508,878
============================================================ ========= ========
Effect of dilutive potential ordinary shares related
to contingently issuable shares (thousands) 538 4,018
============================================================ ========= ========
Weighted average number of ordinary shares in issue
for the purpose of diluted earnings per share (thousands) 511,100 512,896
============================================================ ========= ========
16 Property, plant and equipment
Mining
properties
and Construction
development Land Plant Mine in progress
costs and and closure and capital
1 buildings equipment Vehicles asset advances Total
US$000 US$000 US$000 US$000 US$000 US$000 US$000
===================== =========== ========== ========== ======== ======== ============ =========
Year ended 31
December
2019
===================== =========== ========== ========== ======== ======== ============ =========
Cost
===================== =========== ========== ========== ======== ======== ============ =========
At 31 December 2018 1,345,516 519,450 590,447 6,680 96,397 14,966 2,573,456
====================== =========== ========== ========== ======== ======== ============ =========
Recognised on
transition
of IFRS 16 - - - 5,337 - - 5,337
====================== =========== ========== ========== ======== ======== ============ =========
At 1 January 2019,
after
IFRS 16 adjustment 1,345,516 519,450 590,447 12,017 96,397 14,966 2,578,793
====================== =========== ========== ========== ======== ======== ============ =========
14,773
Additions 99,658 716 21,084 842 - 3 137,073
====================== =========== ========== ========== ======== ======== ============ =========
Asset acquisition - - 218 - - - 218
====================== =========== ========== ========== ======== ======== ============ =========
Change in discount
rate - - - - 3,249 - 3,249
====================== =========== ========== ========== ======== ======== ============ =========
Change in mine closure
estimate - - - - 50 - 50
====================== =========== ========== ========== ======== ======== ============ =========
Disposals - - (1,893) (1,969) - - (3,862)
====================== =========== ========== ========== ======== ======== ============ =========
Write-offs - - (3,426) - - (241) (3,667)
====================== =========== ========== ========== ======== ======== ============ =========
Transfers and other
movements
2 4,200 8,915 4,525 858 - (14,302) 4,196
====================== =========== ========== ========== ======== ======== ============ =========
At 31 December 2019 1,449,374 529,081 610,955 11,748 99,696 15,196 2,716,050
====================== =========== ========== ========== ======== ======== ============ =========
Accumulated
depreciation
and impairment
===================== =========== ========== ========== ======== ======== ============ =========
At 1 January 2019 999,695 298,024 349,908 4,707 71,003 947 1,724,284
====================== =========== ========== ========== ======== ======== ============ =========
Depreciation for the
year 108,911 34,177 37,076 3,262 3,831 - 187,257
====================== =========== ========== ========== ======== ======== ============ =========
Disposals - - (1,744) (777) - - (2,521)
====================== =========== ========== ========== ======== ======== ============ =========
Write-offs - - (2,814) - - - (2,814)
====================== =========== ========== ========== ======== ======== ============ =========
Impairment/(reversal
of impairment), net 10,856 1,864 1,798 49 - - 14,567
====================== =========== ========== ========== ======== ======== ============ =========
Transfers and other
movements
2 - - (69) 69 - - -
====================== =========== ========== ========== ======== ======== ============ =========
At 31 December 2019 1,119,462 334,065 384,155 7,310 74,834 947 1,920,773
====================== =========== ========== ========== ======== ======== ============ =========
Net book amount at 31
December 2019 329,912 195,016 226,800 4,438 24,862 14,249 795,277
====================== =========== ========== ========== ======== ======== ============ =========
1 Within mining properties and development costs there is a
balance at 31 December 2019 related to Crespo project
(US$27,693,000) that is not currently being depreciated as the unit
is not operating.
2 Transfers and other movements include US$4,200,000 that was
transferred from evaluation and exploration assets (note 17).
3 There were no borrowing costs capitalised in property, plant and equipment.
Mining
properties
and Construction
development Land Plant Mine in progress
costs and and closure and capital
1 buildings equipment Vehicles asset advances Total
US$000 US$000 US$000 US$000 US$000 US$000 US$000
===================== =========== ========== ========== ======== ======== ============ =========
Year ended 31
December
2018
===================== =========== ========== ========== ======== ======== ============ =========
Cost
===================== =========== ========== ========== ======== ======== ============ =========
At 1 January 2018 1,259,902 496,924 557,482 6,611 98,537 33,409 2,452,865
====================== =========== ========== ========== ======== ======== ============ =========
19,447
Additions 83,106 754 18,888 82 - 3 122,277
====================== =========== ========== ========== ======== ======== ============ =========
Change in discount
rate - - - - (1,126) - (1,126)
====================== =========== ========== ========== ======== ======== ============ =========
Change in mine closure
estimate - - - - (1,014) - (1,014)
====================== =========== ========== ========== ======== ======== ============ =========
Disposals - - (156) (212) - - (368)
====================== =========== ========== ========== ======== ======== ============ =========
Write-offs - (176) (1,094) (392) - (21) (1,683)
====================== =========== ========== ========== ======== ======== ============ =========
Transfers and other
movements 2 2,508 21,948 15,327 591 - (37,869) 2,505
====================== =========== ========== ========== ======== ======== ============ =========
At 31 December 2018 1,345,516 519,450 590,447 6,680 96,397 14,966 2,573,456
====================== =========== ========== ========== ======== ======== ============ =========
Accumulated
depreciation
and impairment
===================== =========== ========== ========== ======== ======== ============ =========
At 1 January 2018 899,381 266,069 318,817 4,745 67,155 1,032 1,557,199
====================== =========== ========== ========== ======== ======== ============ =========
Depreciation for the
year 100,185 32,095 31,983 476 3,848 - 168,587
====================== =========== ========== ========== ======== ======== ============ =========
Disposals - - (141) (191) - - (332)
====================== =========== ========== ========== ======== ======== ============ =========
Write-offs - (141) (808) (350) - - (1,299)
====================== =========== ========== ========== ======== ======== ============ =========
Impairment/(reversal
of impairment), net - - - - - - -
===================== =========== ========== ========== ======== ======== ============ =========
Transfers and other
movements 2 129 1 57 27 - (85) 129
====================== =========== ========== ========== ======== ======== ============ =========
At 31 December 2018 999,695 298,024 349,908 4,707 71,003 947 1,724,284
====================== =========== ========== ========== ======== ======== ============ =========
Net book amount at 31
December 2018 345,821 221,426 240,539 1,973 25,394 14,019 849,172
====================== =========== ========== ========== ======== ======== ============ =========
1 Within mining properties and development costs there is a
balance at 31 December 2018 related to Crespo project
(US$26,855,000) that is not currently being depreciated.
2 Transfers and other movements include US$2,379,000 that was
transferred from evaluation and exploration assets (note 17).
3 Includes borrowing costs capitalised in property, plant and
equipment amounting to US$239,000. The capitalisation rate used was
2.88%.
In 2019, management determined that there was a trigger of
impairment in the San Jose mine unit due to the increase of the
discount rate from 9.5% to 13.5%, mainly explained by the rise in
country risk premium in Argentina. The impairment test result did
not show a difference versus the carrying value given that the
negative effects of the increased discount rate were offset by an
increase in the silver and gold analyst consensus prices.
Therefore, no impairment, nor impairment reversal was
recognised.
As a result of the delays in obtaining exploration permits in
the Pallancata mine unit, management revised its mine plan. The
revised plan considers only the reserves and resources economically
exploitable based on the latest model whilst spreading the
remaining reserves and resources over a longer period of time to
allow more time for the permitting and exploration campaigns to be
completed. Management determined that this was a trigger of
impairment and an impairment test was carried. The effect of the
changes in the mine plan was partly offset by an increase in
analyst consensus prices, and the resulting impairment charge
recognised as at 31 December 2019 amounted to US$14,693,000
(US$14,567,000 in property, plant and equipment and US$126,000 in
evaluation and exploration assets).
In 2018, management determined there were triggers of impairment
in the San Jose mine unit due to the devaluation of the US$,
inflation and the new export tax approved in Argentina since
September 2018. The impairment test result did not show a
difference versus the carrying value given that the level of
devaluation offset inflation and the new export tax. Therefore, no
impairment was recognised.
No indicators of impairment or reversal of impairment were
identified in the other CGUs, which includes other exploration
projects.
The recoverable values of the San Jose and Pallancata CGUs were
determined using a fair value less costs of disposal (FVLCD)
methodology. FVLCD was determined using a combination of level 2
and level 3 inputs, which result in fair value measurements
categorised in its entirety as level 3 in the fair value hierarchy,
to construct a discounted cash flow model to estimate the amount
that would be paid by a willing third party in an arm's length
transaction.
The key assumptions on which management has based its
determination of FVLCD and the associated recoverable values
calculated are gold and silver prices, future capital requirements,
production costs, reserves and resources volumes (reflected in the
production volume), and the discount rate.
2019
US$ per oz. 2020 2021 2022 2023 2024 Long-term
============= ====== ====== ====== ------ ------ ==========
Gold 1,506 1,492 1,469 1,377 1,340 1,369
============== ====== ====== ====== ------ ------ ==========
Silver 18.3 17.5 17.7 17.7 18.5 17.7
============== ====== ====== ====== ------ ------ ==========
San Jose Pallancata
========================== ========= -----------
Discount rate (post tax) 13.5% 6.5%
=========================== ========= -----------
The Period of six and two years were used to prepare the cash
flow projections of the San Jose mine unit and the Pallancata mine
unit respectively which is in line with their life of mine.
31 December 2019 (US$000) San Jose Pallancata
================================ ========= -----------
Current carrying value of CGU,
net of deferred tax 132,278 59,147
================================= ========= -----------
2018
US$ per oz. 2019 2020 2021 2022 2023 Long-term
============= ====== ====== ====== ====== ====== ==========
Gold 1,251 1,258 1,237 1,218 1,300 1,300
============== ====== ====== ====== ------ ------ ==========
Silver 15.70 16.9 17.1 16.6 18.0 18.0
============== ====== ====== ====== ------ ------ ==========
San
Jose
========================== ======
Discount rate (post tax) 9.5%
=========================== ======
The Period of 6 years was used to make the cash flow projections
of San Jose mine unit which reflects its life of mine.
31 December 2018 (US$000) San
Jose
==================================================== ========
Current carrying value of CGU, net of deferred tax 138,877
===================================================== ========
The estimated recoverable values of the Group's CGUs are equal
to, or not materially different than, their carrying values.
Sensitivity analysis
Other than as disclosed below, management believes that no
reasonably possible change in any of the key assumptions above
would cause the carrying value of any of its cash generating units
to exceed its recoverable amount.
A change in any of the key assumptions would have the following
impact:
US$000
----------------------
San Jose Pallancata
---------------------------------------- --------- -----------
Gold and silver prices (decrease by
10%) (62,700) (19,900)
------------------------------------------ --------- -----------
Gold and silver prices (increase by
5%)(1) 17,839 8,500
------------------------------------------ --------- -----------
Production costs (increase by 10%) (38,000) (11,300)
------------------------------------------ --------- -----------
Production costs (decrease by 10%)(1) 17,839 10,600
------------------------------------------ --------- -----------
Production volume (decrease by 10%) (28,700) (6,000)
------------------------------------------ --------- -----------
Production volume (increase by 10%)(1) 17,839 4,900
------------------------------------------ --------- -----------
Post tax discount rate (increase by (11,200) -
3%)(2)
---------------------------------------- --------- -----------
Post tax discount rate (decrease by
3%)(2) 12,900
------------------------------------------ --------- -----------
Capital expenditure (increase by 10%) (11,700) -
------------------------------------------ --------- -----------
Capital expenditure (decrease by 10%) 11,700 -
------------------------------------------ --------- -----------
1 This represents the maximum impairment loss that could be
reversed, as it represents the carrying amount that would have been
determined, net of depreciation or amortisation, if no impairment
loss had been recognised.
2 Management believes that a 3% change is a reasonably possible
change in the post-tax discount rate in Argentina. However, changes
in the perception of Argentina arising from political, social and
financial disruption may give rise to significant movement in the
discount rate used in the assessment of the San Jose CGU.
Lease contracts
The Group has lease contracts for vehicles used in its
operations and administrative offices. Leases of motor vehicles
generally have lease terms of three years. The Group's obligations
under its leases are secured by the lessor's title to the leased
assets.
The Group also has certain leases of assets with lease terms of
twelve months or less and leases of office equipment with low
value. The Group applies the short-term lease and lease of
low-value assets recognition exemptions for these leases.
The following are the amounts recognised in profit or loss:
US$000
----------------------------------------------------------- --------
Depreciation expense for right-of-use assets (2,454)
------------------------------------------------------------- --------
Interest expense on lease liabilities (96)
------------------------------------------------------------- --------
Expense relating to short-term leases (included in cost
of sales, administrative, exploration and other expenses) (4,985)
------------------------------------------------------------- --------
Expense relating to leases of low-value assets (included
in cost of sales, administrative, exploration and other
expenses) (1,233)
------------------------------------------------------------- --------
Variable lease payments (included in cost of sales) (3,470)
------------------------------------------------------------- --------
Total amount recognised in profit or loss (12,238)
------------------------------------------------------------- --------
The Group had total cash outflows for leases of US$12,194,000 in
2019 (US$14,133,000 in 2018). There were no non-cash additions to
right-of-use assets and lease liabilities during the year. The
future cash outflows relating to leases that have not yet commenced
are US$5,527,000.
17 Evaluation and exploration assets
San
Azuca Crespo Felipe Biolantanidos Volcan Others Total
US$000 US$000 US$000 US000$ US$000 US$000 US$000
================================= ====== ======= ======== ============= ======= ======= ========
Cost
================================= ====== ======= ======== ============= ======= ======= ========
Balance at 1 January
2018 81,599 26,239 55,450 - 94,452 12,668 270,408
================================== ====== ======= ======== ============= ======= ======= ========
Additions 427 360 - - 230 9,204 10,221
================================== ====== ======= ======== ============= ======= ======= ========
Transfers to property
plant and equipment - - - - - (2,508) (2,508)
================================== ====== ======= ======== ============= ======= ======= ========
Balance at 31 December
2018 82,026 26,599 55,450 - 94,682 19,364 278,121
================================== ====== ======= ======== ============= ======= ======= ========
Asset acquisition (note
3) - - - 59,358 - - 59,358
================================== ====== ======= ======== ============= ======= ======= ========
Additions 687 643 - 1,149 770 6,025 9,274
================================== ====== ======= ======== ------------- ======= ======= ========
Transfers to assets held
for sale (note 23) - - (55,450) - - - (55,450)
================================== ====== ======= ======== ------------- ======= ======= ========
Transfers to property
plant and equipment - - - - - (4,236) (4,236)
================================== ====== ======= ======== ============= ======= ======= ========
Balance at 31 December
2019 82,713 27,242 - 60,507 95,452 21,153 287,067
================================== ====== ======= ======== ============= ======= ======= ========
Accumulated impairment
================================= ====== ======= ======== ============= ======= ======= ========
Balance at 1 January
2018 45,876 9,878 17,470 - 44,381 5,404 123,009
================================== ====== ======= ======== ------------- ======= ======= ========
Transfers to property,
plant and equipment - - - - - (129) (129)
================================== ====== ======= ======== ============= ======= ======= ========
Balance at 31 December
2018 45,876 9,878 17,470 - 44,381 5,275 122,880
================================== ====== ======= ======== ============= ======= ======= ========
(Impairment reversal)/impairment - - (315) - - 126 (189)
================================== ====== ======= ======== ------------- ======= ======= ========
Transfers to assets held
for sale (note 23) - - (17,155) - - - (17,155)
================================== ====== ======= ======== ------------- ======= ======= ========
Transfers to property,
plant and equipment - - - - - (31) (31)
================================== ====== ======= ======== ============= ======= ======= ========
Balance at 31 December
2019 45,876 9,878 - - 44,381 5,370 105,505
================================== ====== ======= ======== ============= ======= ======= ========
Net book value as at
31 December 2018 36,150 16,721 37,980 - 50,301 14,089 155,241
================================== ====== ======= ======== ============= ======= ======= ========
Net book value as at
31 December 2019 36,837 17,364 - 60,507 51,071 15,783 181,562
================================== ====== ======= ======== ============= ======= ======= ========
At 31 December 2019, the Group has recorded an impairment charge
with respect to evaluation and exploration assets of the Pallancata
mine unit of US$126,000 (the calculation of the recoverable values
is detailed in note 16).
There were no borrowing costs capitalised in evaluation and
exploration assets.
As at 31 December 2019, the San Felipe project, which is part of
the exploration segment, was reclassified to assets held for sale.
Consequently, management recognised a reversal of impairment of
US$315,000 in the period to adjust the carrying value to the amount
pending of collection from the option payment at 31 December 2019
(refer to note 23).
18 Intangible assets
Transmission Water Software Legal
line1 permits2 licences rights3 Total
US$000 US$000 US$000 US$000 US$000
======================================== ============ ========== ========= ======== =======
Cost
======================================== ============ ========== ========= ======== =======
Balance at 1 January 2018 22,157 26,583 1,872 6,686 57,298
========================================= ============ ========== ========= ======== =======
Additions - - 13 1,894 1,907
========================================= ============ ========== ========= ======== =======
Transfer - - 3 - 3
========================================= ============ ========== ========= ======== =======
Balance at 31 December 2018 22,157 26,583 1,888 8,580 59,208
========================================= ============ ========== ========= ======== =======
Additions - - 2 - 2
========================================= ============ ========== ========= ======== =======
Transfer - - 9 - 9
========================================= ============ ========== ========= ======== =======
Balance at 31 December 2019 22,157 26,583 1,899 8,580 59,219
========================================= ============ ========== ========= ======== =======
Accumulated amortisation and impairment
======================================== ============ ========== ========= ======== =======
Balance at 1 January 2018 14,163 12,686 1,529 4,376 32,754
========================================= ============ ========== ========= ======== =======
Amortisation for the year4 1,113 - 212 766 2,091
========================================= ============ ========== ========= ======== =======
Balance at 31 December 2018 15,276 12,686 1,741 5,142 34,845
========================================= ============ ========== ========= ======== =======
Amortisation for the year4 1,210 - 186 673 2,069
========================================= ============ ========== ========= ======== =======
Transfer - - (54) - (54)
========================================= ============ ========== ========= ======== =======
Balance at 31 December 2019 16,486 12,686 1,873 5,815 36,860
========================================= ============ ========== ========= ======== =======
Net book value as at 31 December
2018 6,881 13,897 147 3,438 24,363
========================================= ============ ========== ========= ======== =======
Net book value as at 31 December
2019 5,671 13,897 26 2,765 22,359
========================================= ============ ========== ========= ======== =======
1 The transmission line is amortised using the units of
production method. At 31 December 2019 the remaining amortisation
period is approximately 6 years (2018: 7 years).
2 Corresponds to the acquisition of water permits of Andina
Minerals Group ("Andina"). These permits have an indefinite life
according to Chilean law. To determine the fair value less costs of
disposal of the Volcan cash-generating unit, which includes the
water permits held by the Group, the Group used the value-in-situ
methodology. This methodology applies a realisable 'enterprise
value' to unprocessed mineral resources which was US$6.60 per gold
equivalent ounce of resources at 31 December 2019 (2018: US$6.70).
The risk adjusted enterprise value figure has been determined using
a combination of level 2 and level 3 inputs, which result in a fair
value measurement categorised in its entirety as level 3 in the
fair value hierarchy, to estimate the amount that would be paid by
a willing third party in an arm's length transaction, taking into
account the water restrictions imposed by the Chilean
government.
3 Legal rights correspond to expenditures required to give the
Group the right to use a property for the surface exploration work,
development and production.
At 31 December 2019 the remaining amortisation period is from 4
to 14 years (2018: 5 to 20 years).
4 The amortisation for the period is included in cost of sales
and administrative expenses in the income statement.
The carrying amount of the Volcan CGU, which includes the water
permits, is reviewed annually to determine whether it is in excess
of its recoverable amount. No impairments were recognised in 2019
and 2018. The estimated recoverable amount is not materially
different than its carrying value.
Key assumptions
2019 2018
================================================== ===== =====
Risk adjusted value per in-situ (gold equivalent
ounce) US$ 6.60 6.70
=================================================== ===== =====
US$000 2019 2018
=================================== ======= =======
Current carrying value Volcan CGU 64,968 64,198
==================================== ======= =======
The estimated recoverable amount is not materially greater than
its carrying value.
Sensitivity analysis
Other than as disclosed below, management believes that no
reasonably possible change in any of the key assumptions above
would cause the carrying value exceed its recoverable amount.
A change in the value in situ assumption could cause an
impairment loss or reversal of impairment to be recognised as
follows:
Approximate (impairment)/reversal of impairment 2019 2018
resulting from the following changes (US$000)
================================================= ======== ========
Value per in-situ ounce (10% decrease) (6,297) (6,407)
================================================== ======== ========
Value per in-situ ounce (10% increase) 6,297 6,407
================================================== ======== ========
Risk factor (increase by 5%) (4,844) (1,725)
================================================== ======== ========
Risk factor (decrease by 5%) 4,844 1,725
================================================== ======== ========
19 Financial assets at fair value through OCI
Year ended
31 December
================
2019 2018
US$000 US$000
================================== ======= =======
Beginning balance 5,296 6,264
=================================== ======= =======
Acquisitions1 1,100 6,433
=================================== ======= =======
Fair value change recorded in OCI 3,628 (6,447)
=================================== ======= =======
Disposals2 (421) (954)
=================================== ======= =======
Transfer of shares (note 3) (3,444) -
=================================== ======= =======
Ending balance 6,159 5,296
=================================== ======= =======
1 Corresponds to the purchase of 147,831,737 shares of REE UNO
(US$500,000), and 452,200 shares of Americas Silver Corporation
(ASC) (US$600,000) (note 23) (2018: Purchase of 591,326,947 shares
of REE UNO (US$2,000,000), 7,519,331 shares of Skeena Resources
Limited (Skeena) (US$4,313,000) and 15,600 shares of Cobalt Power
Group (US$120,000)).
2 As the investments were not considered to be strategic, the
Group sold 10,032,000 shares of Santa Cruz Silver Mining (SCSM)
with a fair value at the date of sale of US$421,000 generating a
loss on disposal of US$1,658,000 (2018: Sale of 14,545,454 shares
of Red Eagle and 3,383,000 shares of SCSM with a fair value at the
date of sale of US$799,000 and US$155,000, generating a loss on
disposal of US$2,514,000 and US$546,000 respectively).
The Group made the election at initial recognition to measure
the equity investments at fair value through OCI as they are not
held for trading.
The fair value at 31 December 2019 and 31 December 2018 is as
follows:
US$000
-------------
2019 2018
======================================================== ====== =====
Listed equity investments:
======================================================== ====== =====
Power Group Projects Corp (formerly Cobalt Power Group) 28 53
========================================================= ------ =====
Santa Cruz Silver Mining - 435
========================================================= ====== =====
Revelo Resources Corp. 4 4
========================================================= ====== =====
Skeena Resources Limited 3,937 1,599
========================================================= ====== =====
Goldspot Discoveries Inc. 755 -
========================================================= ====== =====
Americas Silver Corporation 1,417 -
========================================================= ====== =====
Empire Petroleum Corp. 18 19
========================================================= ====== =====
Total listed equity investments 6,159 2,110
========================================================= ====== =====
Non-listed equity investments:
======================================================== ====== =====
Pembrook Mining Corp. - -
======================================================== ====== =====
ECI Exploration and Mining Inc. - -
======================================================== ====== =====
Goldspot Discoveries Inc. - 1,240
========================================================= ====== =====
REE UNO SpA - 1,946
========================================================= ====== =====
Total non-listed equity investments - 3,186
========================================================= ====== =====
Total 6,159 5,296
========================================================= ------ =====
Fair value of the listed shares is determined by reference to
published price quotations in an active market and they are
categorised as level 1.
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.
20 Trade and other receivables
As at 31 December
==========================================
2019 2018
================================================== ==================== ====================
Non-current Current Non-current Current
US$000 US$000 US$000 US$000
================================================== =========== ======= =========== =======
Trade receivables - 37,799 - 45,201
=================================================== =========== ======= =========== =======
Advances to suppliers - 3,810 - 2,950
=================================================== =========== ======= =========== =======
Duties recoverable from exports of Minera
Santa Cruz 1 664 - 1,546 1,788
=================================================== =========== ======= =========== =======
Receivables from related parties (note
29 (a) ) - 569 - 76
=================================================== =========== ======= =========== =======
Loans to employees 726 177 744 206
=================================================== =========== ======= =========== =======
Interest receivable - 178 - 66
=================================================== =========== ======= =========== =======
Receivable from Kaupthing, Singer and Friedlander
Bank - 197 - 195
=================================================== =========== ======= =========== =======
Other2 1,671 11,496 723 12,591
=================================================== =========== ======= =========== =======
Provision for impairment3 - (6,766) - (5,997)
=================================================== =========== ======= =========== =======
Assets classified as receivables 3,061 47,460 3,013 57,076
=================================================== =========== ======= =========== =======
Prepaid expenses 800 2,281 8 2,028
=================================================== =========== ======= =========== =======
Value Added Tax (VAT)4 1,327 23,877 2,430 19,632
=================================================== =========== ======= =========== =======
Total 5,188 73,618 5,451 78,736
=================================================== =========== ======= =========== =======
The fair values of trade and other receivables approximate their
book value.
1 Relates to export benefits through the Patagonian Port and
silver refunds in Minera Santa Cruz, discounted over 18 and 24
months (2018: 24 months) at a rate of 22.24% (2018: 9.98%) for
dollars denominated amounts and 48.93% (2018: 57.00%) for
Argentinian pesos. The loss on the unwinding of the discount is
recognised within finance costs.
2 Mainly corresponds to account receivables from contractors for
the sale of supplies of US$6,235,000 (2018: US$6,111,000), and
other tax claims of US663,000 (2018: US$3,227,000).
3 Includes the provision for impairment of trade receivable from
customers in Peru of US$1,533,000 (2018: US$1,554,000), the
impairment of deposits in Kaupthing, Singer and Friedlander of
US$197,000 (2018: US$195,000), the impairment of the account
receivable from a third party of US$4,626,000 (2018: US$3,233,000)
and other receivables of US$410,000 (2018: US$1,015,000).
4 Primarily relates to US$12,832,000 (2018: US$11,462,000) of
VAT receivable related to the San Jose project that will be
recovered through future sales of gold
and silver and also through the sale of these credits to
third-parties by Minera Santa Cruz. . It also includes the VAT
ofMinera Ares. of US$7,724,000 (2018: US$6,248,000) and Empresa de
Transmisión Aymaraes S.A.C. of US$2,435,000 (2018: US$3,569,000).
The VAT is valued at its recoverable amount.
Movements in the provision for impairment of receivables:
Individually
impaired
US$000
======================================= ============
At 1 January 2018 4,594
======================================== ============
Provided for during the year (note 12) 5,884
======================================== ============
Released during the year1 (4,481)
======================================== ============
At 31 December 2018 5,997
======================================== ============
Provided for during the year (note 12) 3,706
======================================== ============
Released during the year1 (2,937)
======================================== ============
At 31 December 2019 6,766
======================================== ============
1 Corresponds to the release of the provision of US$5,000 (2018:
increase of US$2,000) and write off of US$2,932,000 (2018:
US$4,479,000).
As at 31 December 2019 and 2018, none of the financial assets
classified as receivables (net of impairment) were past due.
21 Inventories
As at 31 December
===================
2019 2018
US$000 US$000
======================================= ========= ========
Finished goods valued at cost 1,950 1,543
======================================== ========= ========
Products in process valued at cost 19,460 16,085
======================================== ========= ========
Products in process accrual 6,445 8,030
======================================== ========= ========
Supplies and spare parts 41,582 37,765
======================================== ========= ========
69,437 63,423
========= ========
Provision for obsolescence of supplies (6,837) (5,388)
======================================== ========= ========
Total 62,600 58,035
======================================== ========= ========
Finished goods include ounces of gold and silver, dore and
concentrate.
Products in process include stockpile and precipitates.
The Group either sells dore bars as a finished product or if it
is commercially advantageous to do so, delivers the bars for
refining into gold and silver ounces which are then sold. In the
latter scenario, the dore bars are classified as products in
process. At 31 December 2019 and 2018 the Group had no dore on hand
included in products in process.
Concentrate is sold to smelters, but in addition could be used
as a product in process to produce dore.
As part of the Group's short-term financing policies, it
acquires pre-shipment loans which are guaranteed by the sales
contracts. The Group has no such contracts as at 31 December 2019
(2018: $6,047,000) (refer to note 25).
The amount of expense recognised in profit and loss related to
the consumption of inventory of supplies, spare parts and raw
materials is US$112,383,000 (2018: US$111,485,000).
Movements in the provision for obsolescence comprise an increase
in the provision of US$1,449,000 (2018: US$384,000) and the
reversal of US$nil relating to the sale of supplies and spare
parts, that had been provided for (2018: US$nil).
22 Cash and cash equivalents
As at 31 December
===================
2019 2018
US$000 US$000
======================================================= ========= ========
Cash at bank 331 366
======================================================== ========= ========
Liquidity funds1 16 -
======================================================== ========= ========
Current demand deposit accounts2 37,900 43,095
======================================================== ========= ========
Time deposits3 128,110 36,243
======================================================== ========= ========
Cash and cash equivalents considered for the statement
of cash flows 166,357 79,704
======================================================== ========= ========
The fair value of cash and cash equivalents approximates their
book value. The Group does not have undrawn borrowing facilities
available in the future for operating activities or capital
commitments.
1 The liquidity funds are mainly invested in certificates of
deposit, commercial papers and floating rate notes with a weighted
average maturity of nil days as at
31 December 2019 (2018: nil days).
2 Relates to bank accounts which are freely available and bear interest.
3 These deposits have an average maturity of 7 days (2018: Average of 14 days).
23 Assets held for sale
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$33,646,000 as non-refundable payments at
31 December 2019 (2018: US$31,396,000). These payments will reduce
the total consideration that IMSC will be required to pay upon
exercise of the option and constitute an advance of the final
purchase price, rather than an option premium and, as such, they
were recorded as deferred income.
In March 2017, IMSC entered into an agreement with Americas
Silver Corporation ('ASC') to assign 100% of its interest in the
San Felipe Project. On 15 December 2018, the option to sell the San
Felipe property to ASC was extended to 15 December 2020 with the
outstanding option payment of US$6,000,000 payable in quarterly
equal instalments over the 2 years period. In consideration for the
extension, the Group received 452,200 ASC's common shares on 18
January 2019 at an issue price equal to US$600,000 that was
recognised as other income.
During 2019 the Group collected US$2,250,000 (2018:
US$2,000,000).
ASC has demonstrated its intention to pay the outstanding
balance of US$3,750,000 during the first semester of 2020, and in
consequence, as the sale is highly probable to be completed within
the twelve months of the year-end, the assets and liabilities were
transfer to assets and liabilities related to asset held for sale,
respectively.
The major classes of assets and liabilities classified as assets
held for sale as at 31 December 2019 are as follows:
US$000
========
Assets
=========================================================== ========
Evaluation and exploration assets, net of impairment (note
17) 38,295
============================================================ ========
Total non-current assets 38,295
============================================================ ========
Liabilities
=========================================================== ========
Provision for mine closure (note 26) (899)
------------------------------------------------------------ --------
Deferred income (33,646)
============================================================ ========
Total liabilities directly associated with assets held for
sale (34,545)
============================================================ ========
Net assets directly associated with assets held for sale 3,750
============================================================ --------
24 Trade and other payables
As at 31 December
==========================================
2019 2018
==================== ====================
Non-current Current Non-current Current
US$000 US$000 US$000 US$000
=========================================== =========== ======= =========== =======
Trade payables1 - 75,252 - 69,568
============================================ =========== ======= =========== =======
Salaries and wages payable2 - 26,956 - 36,272
============================================ =========== ======= =========== =======
Dividends payable - 37 - 2,247
============================================ =========== ======= =========== =======
Taxes and contributions 6 5,220 14 6,314
============================================ =========== ======= =========== =======
Guarantee deposits - 5,440 - 7,922
============================================ =========== ======= =========== =======
Mining royalties (note 30) - 607 - 506
============================================ =========== ======= =========== =======
Accounts payable to related parties (note
29 (a) ) - 192 - 7
============================================ =========== ======= =========== =======
Liabilities related to right of use assets - 2,577 - -
============================================ =========== ======= =========== =======
Other 520 4,256 773 2,639
============================================ =========== ======= =========== =======
Total 526 120,537 787 125,475
============================================ =========== ======= =========== =======
The fair value of trade and other payables approximate their
book values.
1 Trade payables relate mainly to the acquisition of materials,
supplies and contractors' services. These payables do not accrue
interest and no guarantees have
been granted.
2 Salaries and wages payable relates to remuneration payable. At
31 December 2019, there was Board members' remuneration payable of
US$184,000 (2018: US$nil) and no long-term incentive plan payable
(2018: US$8,215,000).
25 Borrowings
As at 31 December
================================================================
2019 2018
=============================== ===============================
Effective Effective
interest Non-current Current interest Non-current Current
rate US$000 US$000 rate US$000 US$000
======================================================== ========= =========== ======= ========= =========== =======
Secured bank loans (a)
======================================================== ========= =========== ======= ========= =========== =======
4.0%
to
* Pre-shipment loans in Minera Santa Cruz (note 20) - - 5.0% - 6,047
========================================================= ========= =========== ======= ========= =========== =======
2.43%
to
* Bank loans 3.05% 199,308 234 3.00% 50,000 101,020
========================================================= ========= =========== ======= ========= =========== =======
Total 199,308 234 50,000 107,067
========================================================= ========= =========== ======= ========= =========== =======
(a) Secured bank loans:
Short-term bank loans:
As at 31 December 2018 the Group held two credit agreements
signed by Minera Ares with BBVA Continental with an interest rate
of 2.70% and Scotiabank with an interest rate of 3.00%. Both loans
were repaid during the year. The carrying value including accrued
interest payable at 31 December 2018 was US$50,581,000 and
US$50,111,000 respectively.
Medium-term bank loans:
In December 2019, a five-year credit agreement was signed
between Minera Ares and Scotiabank Peru S.A.A., The Bank of Nova
Scotia and BBVA Securities Inc with Hochschild Mining plc as
guarantor. The US$200,000,000 medium term loan is payable on equal
quarterly instalments from the second anniversary of the loan with
an interest rate of Libor three months plus 1.5% payable quarterly
until maturity on 13 December 2024. The carrying value including
accrued interests payable net of capitalised expenses related to
the borrowing (US$692,000) at 31 December 2019 is
US$199,542,000
As at 31 December 2018 the Group held two credit agreements
signed by Minera Ares with Nova Scotia Bank with an interest rate
of 2.43% and Citibank with an interest rate of 2.43%. The carrying
value including accrued interest payable at 31 December 2018 is
US$25,164,000 and US$25,164,000 respectively and were fully repaid
during 2019.
The maturity of non-current borrowings is as follows:
As at 31 December
===================
2019 2018
US$000 US$000
====================== ========= ========
Between 1 and 2 years - 50,000
======================= ========= ========
Between 2 and 5 years 199,308 -
======================= ========= ========
Over 5 years - -
====================== ========= ========
Total 199,308 50,000
======================= ========= ========
The carrying amount of current borrowings differs their fair
value only with respect to differences arising under the effective
interest rate calculations described above. The carrying amount and
fair value of the non--current borrowings are as follows:
Carrying amount Fair value
as at 31 December as at 31 December
==================== ====================
2019 2018 2019 2018
US$000 US$000 US$000 US$000
=================== ========= ========= ========= =========
Secured bank loans 199,308 50,000 186,653 47,353
==================== ========= ========= ========= =========
Total 199,308 50,000 186,653 47,353
==================== ========= ========= ========= =========
The movement in borrowings during the year is as follows:
As at As at
1 January Additions Repayments Reclassifications 31 December
2019 US$000 US$000 US$000 US$000 2019 US$000
======================== ============ ========= ========== ================= ============
Current
======================== ============ ========= ========== ================= ============
Bank loans 107,067 120,622 (227,455) - 234
========================= ============ ========= ========== ================= ============
107,067 120,622 (227,455) - 234
============ ========= ========== ================= ============
Non-current
======================== ============ ========= ========== ================= ============
Bank loans 50,000 199,308 (50,000) - 199,308
========================= ============ ========= ========== ================= ============
50,000 199,308 (50,000) - 199,308
============ ========= ========== ================= ============
Accrued interest (1,067) (4,122) 4,955 - (234)
========================= ============ ========= ========== ================= ============
Before accrued interest 156,000 315,808 (272,500) - 199,308
========================= ============ ========= ========== ================= ============
26 Provisions
Long
Provision Term Workers
for mine Incentive profit
closure1 Plan2 sharing Other Total
US$000 US$000 US$000 US$000 US$000
========= ========== -------- ======= =======
At 1 January 2018 100,069 5,831 - 4,410 110,310
============================================= ========= ========== -------- ======= =======
Additions - 3,386 - 140 3,526
============================================= ========= ========== -------- ======= =======
Accretion (note 13) 368 - - - 368
============================================= ========= ========== -------- ======= =======
Change in discount rate (1,609) - - - (1,609)
============================================= ========= ========== -------- ======= =======
Change in estimates (479) - - - (479)
============================================= ========= ========== -------- ======= =======
Foreign exchange effect - - - (1,614) (1,614)
============================================= ========= ========== -------- ======= =======
Transfer to trade and other payables - (8,215) - - (8,215)
============================================= ========= ========== -------- ======= =======
Payments (4,494) - - - (4,494)
============================================= ========= ========== -------- ======= =======
At 31 December 2018 93,855 1,002 - 2,936 97,793
============================================= ========= ========== -------- ======= =======
Less: current portion 1,986 - - 1,167 3,153
============================================= ========= ========== -------- ======= =======
Non-current portion 91,869 1,002 - 1,769 94,640
============================================= ========= ========== -------- ======= =======
At 1 January 2019 93,855 1,002 - 2,936 97,793
============================================= ========= ========== -------- ======= =======
Additions/(reductions) - (184) 5,965 (71) 5,710
============================================= ========= ========== -------- ======= =======
Accretion (note 13) 506 - - - 506
============================================= ========= ========== -------- ======= =======
Change in discount rate 3,819 - - - 3,819
============================================= ========= ========== -------- ======= =======
Change in estimates 12,878 - - - 12,878
============================================= ========= ========== -------- ======= =======
Foreign exchange effect - - 98 (846) (748)
============================================= ========= ========== -------- ======= =======
Transfer to liabilities directly associated
with assets held for sale (note 23) (899) - - - (899)
============================================= ========= ========== -------- ======= =======
Payments (3,488) - - - (3,488)
============================================= ========= ========== -------- ======= =======
At 31 December 2019 106,671 818 6,063 2,019 115,571
============================================= ========= ========== -------- ======= =======
Less: current portion 9,358 - 6,063 828 16,249
============================================= ========= ========== -------- ======= =======
Non-current portion 97,313 818 - 1,191 99,322
============================================= ========= ========== -------- ======= =======
1 The provision represents the discounted values of the
estimated cost to decommission and rehabilitate the mines at the
expected date of closure of each of the mines. The present value of
the provision has been calculated using a real pre-tax annual
discount rate, based on a US Treasury bond of an appropriate tenure
adjusted for the impact of quantitative easing as at 31 December
2019 and 2018 respectively, and the cash flows have been adjusted
to reflect the risk attached to these cash flows. Uncertainties on
the timing for use of this provision include changes in the future
that could impact the time of closing the mines, as new resources
and reserves are discovered. The discount rate used was 0.00%
(2018: 0.30%). Expected cash flows will be over a period from one
to eighteen years (2018: over a period from one to nineteen
years).
Based on the internal and external reviews of mine
rehabilitation estimates, the provision for mine closure increased
by US$12,878,000 mainly due to increase in the Ares mine unit
(US$7,787,000) and Sipan mine unit (US$5,264,000) (2018: decreased
by US$479,000, mainly due to the decrease in the Selene mine unit
(US$1,131,000) and Inmaculada mine unit (US$903,000), partially
offset by the increase in the Arcata mine unit (US$1,745,000).
A net charge of US$13,398,000 related to changes in estimates
(US$12,828,000) and discount rates (US$570,000) for mines already
closed were recognised directly in the income statement (2018: a
net charge of US$52,000 related to changes in estimates
(US$535,000) and credit for discount rates (US$483,000) for mines
already closed).
A change in any of the following key assumptions used to
determine the provision would have the following impact:
US$000
========================================================== ========
Closure costs (increase by 10%) increase of provision 10,087
=========================================================== ========
Discount rate (increase by 0.5%) (decrease of provision) (2,201)
=========================================================== ========
2 Corresponds to the provision related to awards granted under
the Long Term Incentive Plan ('LTIP') to designated personnel of
the Group. Includes the following benefits:(i) 2019 awards, granted
in July 2019, payable in February 2022, as 50% in cash , (ii) 2018
awards, granted in May 2018, payable in May 2021, as 50% in cash
(iii)). (iii) 2017 awards, granted in March 2017, payable in March
2020 with a result of US$nil. Only employees who remain in the
Group's employment on the vesting date will be entitled to vested
awards, subject to exceptions approved by the Remuneration
Committee of the Board. There are two parts to the performance
conditions attached to LTIP awards: 70% is subject to the Company's
TSR ranking relative to a tailored peer group of mining companies,
and 30% is subject to the Company's TSR ranking relative to the
constituents of the FTSE 350 mining index. The liability for the
LTIP paid in cash is measured, initially and at the end of each
reporting period until settled, at the fair value of the awards, by
applying the Monte Carlo pricing model, taking into account the
terms and conditions on which the awards were granted, and the
extent to which the employees have rendered services to date. The
net decrease to the provision of US$184,000 (2018: US$3,386,000
increase) have been recorded as administrative expenses US$172,000
(2018: US$3,203,000) and exploration expenses US$12,000 (2018:
US$183,000).
The following tables list the inputs to the Monte Carlo model
used for the LTIPs as at 31 December 2019 and 2018,
respectively:
LTIP 2017 LTIP 2018 LTIP 2019
========================== ========================== ==========================
31 December 31 December 31 December 31 December 31 December 31 December
2019 2018 2019 2018 2019 2018
For the period ended US$000 US$000 US$000 US$000 US$000 US$000
===================== ============ ============ ============ ============ ============ ============
Dividend yield (%) - 1.80 1.73 1.80 1.73 -
====================== ============ ============ ============ ============ ============ ============
Expected volatility
(%) - 2.41 2.70 3.51 2.70 -
====================== ============ ============ ============ ============ ============ ============
Risk-free interest
rate (%) - 0.71 0.61 0.71 0.53 -
====================== ============ ============ ============ ============ ============ ============
Expected life (years) - 1 1 2 2 -
====================== ============ ============ ============ ============ ============ ============
Weighted average share
price (pence GBP) - 240.88 235.08 235.08 161.37 -
====================== ============ ============ ============ ============ ============ ============
The expected volatility reflects the assumption that the
historical volatility over a period similar to the life of the
awards and is indicative of future trends, which may not
necessarily be the actual outcome.
27 Deferred income tax
The changes in the net deferred income tax assets/(liabilities)
are as follows:
As at 31 December
===================
2019 2018
US$000 US$000
=========================================== ========= ========
Beginning of the year (69,727) (53,640)
============================================ ========= ========
Income statement charge/(credit) (note 14) 8,251 (16,087)
============================================ ========= ========
End of the year (61,476) (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 movement in deferred income tax assets and liabilities
before offset during the year is as follows:
Differences Provisional
in cost Mine pricing
of PP&E development adjustment Others Total
US$000 US$000 US$000 US$000 US$000
================================= =========== ============ =========== ======= =======
Deferred income tax liabilities
================================= =========== ============ =========== ======= =======
At 1 January 2018 44,122 69,333 201 1,627 115,283
================================== =========== ============ =========== ======= =======
Income statement (credit)/charge (3,908) 14,255 809 49 11,205
================================== =========== ============ =========== ======= =======
At 31 December 2018 40,214 83,588 1,010 1,676 126,488
================================== =========== ============ =========== ======= =======
Income statement (credit)/charge (3,444) (1,820) (657) 2,607 (3,314)
================================== =========== ============ =========== ======= =======
At 31 December 2019 36,770 81,768 353 4,283 123,174
================================== =========== ============ =========== ======= =======
Provision
Differences for
in cost mine Tax
of PP&E closure losses Mine development Others(1) Total
US$000 US$000 US$000 US$000 US$000 US$000
================================= =========== ========= ======= ================ ========= =======
Deferred income tax
assets
================================= =========== ========= ======= ================ ========= =======
At 1 January 2018 30,672 19,483 1,839 802 8,847 61,643
================================== =========== ========= ======= ================ ========= =======
Income statement credit/(charge) (4,374) (1,080) (1,635) (109) 2,316 (4,882)
================================== =========== ========= ======= ================ ========= =======
At 31 December 2018 26,298 18,403 204 693 11,163 56,761
================================== =========== ========= ======= ================ ========= =======
Income statement credit/(charge) 4,746 2,977 (204) (109) (2,473) 4,937
================================== =========== ========= ======= ================ ========= =======
At 31 December 2019 31,044 21,380 - 584 8,690 61,698
================================== =========== ========= ======= ================ ========= =======
1 Credit/(charge) in the period mainly related to inventory of
US$1,149,000 (2018: US$635,000), statutory holiday provision of
US$866,000 (2018: US$1,113,000) and long term incentive plan of
US$574,000 (2018: US$2,655,000).
The amounts after offset, as presented on the face of the
statement of financial position, are as follows:
As at 31 December
===================
2019 2018
US$000 US$000
================================ ========= ========
Deferred income tax assets 1,627 1,504
================================= ========= ========
Deferred income tax liabilities (63,103) (71,231)
================================= ========= ========
Unrecognised tax losses expire in the following years:
As at 31 December
===================
2019 2018
US$000 US$000
======================== ========= ========
Expire in one year - 465
========================= ========= ========
Expire in two years 4,483 -
========================= ========= ========
Expire in three years 2,990 4,511
========================= ========= ========
Expire in four years - 2,861
========================= ========= ========
Expire after four years 128,109 121,583
========================= ========= ========
135,942 129,420
========= ========
Other unrecognised deferred income tax assets comprise (gross
amounts):
As at 31 December
===================
2019 2018
US$000 US$000
============================ ========= ========
Provision for mine closure1 7,456 6,596
============================= ========= ========
1 This relates to provision for mine closure expenditure which
is expected to be incurred in periods in which taxable profits are
not expected to be available to offset the expenditure.
Unrecognised deferred tax liability on retained earnings
At 31 December 2019 and 2018, there was no recognised deferred
tax liability for taxes that would be payable on the unremitted
earnings
of certain of the Group's subsidiaries as the intention is that
these amounts are permanently reinvested.
28 Dividends
2019 2018
US$000 US$000
========================================================= ======= =======
Dividends paid and proposed during the year
========================================================= ======= =======
Equity dividends on ordinary shares:
========================================================= ======= =======
Final dividend for 2018 : 1.959 US cents per share (
2017: 1.965 US cents per share) 10,002 9,999
========================================================== ======= =======
Interim dividend for 2019 : 2.000 US cents per share
( 2018: 1.965 US cents per share) 10,211 10,000
========================================================== ======= =======
Total dividends paid on ordinary shares 20,213 19,999
========================================================== ======= =======
Proposed dividends on ordinary shares:
========================================================= ======= =======
Final dividend for 2019: 2.335 US cents per share (2018:
1.959 US cents per share) 12,000 10,002
========================================================== ======= =======
Dividends declared to non-controlling interests: 0.05
US$ per share ( 2018 : 0.08 US$ per share) 8,859 13,039
========================================================== ======= =======
Total dividends declared to non-controlling interests 8,859 13,039
========================================================== ======= =======
Dividends per share
The interim dividend paid in September 2019 was US$10,000,211
(2.000 US cents per share). A proposed dividend in respect of the
year ending 31 December 2019 of 2.335 US cents per share, amounting
to a total dividend of US$12,000,000, is subject to approval at the
Annual General Meeting to be held on 21 May 2020 and is not
recognised as a liability as at 31 December 2019.
29 Related-party balances and transactions
(a) Related-party accounts receivable and payable
The Group had the following related-party balances and
transactions during the years ended 31 December 2019 and 2018. The
related parties are companies owned or controlled by the main
shareholder of the Parent company or associates.
Accounts receivable Accounts payable
as at 31 December as at 31 December
===================== ====================
2019 2018 2019 2018
US$000 US$000 US$000 US$000
=============================== ========== ========= ========= =========
Current related party balances
=============================== ========== ========= ========= =========
Cementos Pacasmayo S.A.A.1 569 76 56 7
================================ ========== ========= ========= =========
Tecsup2 - - 41 -
================================ ========== ========= ========= =========
Universidad UTEC2 - - 95 -
================================ ========== ========= ========= =========
Total 569 76 192 7
================================ ========== ========= ========= =========
1 The account receivable relates to reimbursement of expenses
paid by the Group on behalf of Cementos Pacasmayo S.A.A. The
account payable relates to the payment of rentals.
2 Peruvian not for profit educational institutions controlled by Eduardo Hochschild.
As at 31 December 2019 and 2018, all accounts are, or were,
non-interest bearing.
No security has been granted or guarantees given by the Group in
respect of these related party balances.
Principal transactions between affiliates are as follows:
Year ended
================
2019 2018
US$000 US$000
============================================================= ======= =======
Expenses
============================================================= ======= =======
Expense recognised for the rental paid to Cementos Pacasmayo
S.A.A. (200) (200)
============================================================== ======= =======
Expense recognised for the interests generated by the
short-term loan from Banco de Credito del Peru (480) -
============================================================== ======= =======
The Group enters into transactions with Banco de Credito del
Peru at arm's length such as short-term loan and deposits which are
undertaken in the normal course of a banker-customer relationship.
This bank is controlled by Dionisio Romero who is a non-executive
director of the Group.
Transactions between the Group and these companies are on an
arm's length basis.
(b) Compensation of key management personnel of the Group
As at 31 December
===================
Compensation of key management personnel (including 2019 2018
Directors) US$000 US$000
============================================================= ========= ========
Short-term employee benefits 7,911 6,619
============================================================== ========= ========
Long Term Incentive Plan, Deferred Bonus Plan and Restricted
Share Plan 1,184 2,899
============================================================== ========= ========
Total compensation paid to key management personnel 9,085 9,518
============================================================== ========= ========
This amount includes the remuneration paid to the Directors of
the Parent Company of the Group of US$4,238,000 (2018:
US$4,601,000).
30 Mining royalties
Peru
In accordance with Peruvian legislation, owners of mining
concessions must pay a mining royalty for the exploitation of
metallic and non--metallic resources. Mining royalties have been
calculated with rates ranging from 1% to 3% of the value of mineral
concentrate or equivalent sold, based on quoted market prices.
In October 2011 changes came into effect for mining companies,
with the following features:
a) Introduction of a Special Mining Tax ('SMT'), levied on
mining companies at the stage of exploiting mineral resources. The
additional tax is calculated by applying a progressive scale of
rates ranging from 2% to 8.4%, of the quarterly operating
profit.
b) Modification of the mining royalty calculation, which
consists of applying a progressive scale of rates ranging from 1%
to 12%, of the quarterly operating profit. The former royalty was
calculated on the basis of monthly sales value of mineral
concentrates.
The SMT and modified mining royalty are accounted for as an
income tax in accordance with IAS 12 "Income Taxes".
c) For companies that have mining projects benefiting from tax
stability regimes, mining royalties are calculated and recorded as
they were previously, applying an additional new special charge on
mining that is calculated using progressive scale rates, ranging
from 4% to 13.12% of quarterly operating profit.
d) In the case of the Arcata mine unit, the company left the tax
stability agreement, but has maintained the agreement for the
mining royalties, such that the Arcata unit, is liable for the new
SMT but the mining royalties remain payable at the same rate as
they were, before the modification in 2011. The tax stability
agreement expired on 31 December 2018, therefore as of 1 January
2019 the mining royalty of Arcata is calculated as the other mine
units.
As at 31 December 2019, the amount payable as under the former
mining royalty (for the Arcata mining unit), the new mining royalty
(for the Arcata, Pallancata and Inmaculada mining units), and the
SMT amounted to US$nil (2018: US$39,000), US$1,263,000 (2018:
US$975,000), and US$1,196,000 (2018: US$279,000) respectively. The
former mining royalty is recorded as 'Trade and other payables',
and the new mining royalty and SMT as 'Income tax payable' in the
Statement of Financial Position. The amount recorded in the income
statement was US$nil (2018: US$561,000) representing the former
mining royalty, classified as cost of sales, US$5,028,000 (2018:
US$4,494,000) of new mining royalty and US$3,429,000 (2018:
US$2,727,000) of SMT, both classified as income tax.
Argentina
In accordance with Argentinian legislation, Provinces (being the
legal owners of the mineral resources) are entitled to collect
royalties from mine operators. For San Jose, the mining royalty
applicable to dore and concentrate is 3% of the pit-head value. As
at 31 December 2019, the amount payable as mining royalties
amounted to US$607,000 (2018: US$467,000). The amount recorded in
the income statement as cost of sales was US$6,412,000 (2018:
US$5,296,000).
31 Subsequent events
(a) Interest rate swap
On 14 February 2020, the Group signed an interest swap agreement
with JP Morgan to fix the floating Libor interest rate of the
medium-term loan of Minera Ares to 2.534%, effective from 17 March
2020.
(b) Sale of financial assets at fair value through OCI
In January 2020, the Group sold 7,339,331 shares of Skeena for a
total consideration of CAD 7,030,000 (equivalent to US$5,337,00),
generating a gain of US$1,093,000, recognised in OCI.
Also, in January 2020, the Group sold 452,200 shares of ASC for
a total consideration of CAD 1,651,000 (equivalent to
US$1,257,000), generating a gain of US$657,000, recognised in
OCI.
Profit by operation
(Segment report reconciliation) as at 31 December 2019
Consolidation
adjustment
Group (US$000) Arcata Pallancata Inmaculada San Jose and others Total/HOC
=================================== ======= ========== ========== ========= ============= =========
Revenue 5,081 147,598 352,143 250,715 139 755,676
==================================== ======= ========== ========== ========= ============= =========
Cost of sales (pre consolidation) (6,958) (131,415) (207,463) (169,799) 2,924 (512,711)
==================================== ======= ========== ========== ========= ============= =========
Consolidation adjustment (172) (1,644) (1,264) 156 2,924 -
==================================== ======= ========== ========== ========= ============= =========
Cost of sales (post consolidation) (6,786) (129,771) (206,199) (169,955) - (512,711)
==================================== ======= ========== ========== ========= ============= =========
Production cost excluding
depreciation (6,727) (75,590) (124,814) (120,529) - (327,660)
==================================== ======= ========== ========== ========= ============= =========
Depreciation in production
cost (49) (50,767) (82,524) (51,048) - (184,388)
==================================== ======= ========== ========== ========= ============= =========
Workers profit sharing - (1,976) (1,902) (3,878)
==================================== ======= ========== ========== ========= ============= =========
Other items - - - (567) - (567)
==================================== ======= ========== ========== ========= ============= =========
Change in inventories (10) (1,438) 3,041 2,189 - 3,782
==================================== ======= ========== ========== ========= ============= =========
Gross profit (1,877) 16,183 144,680 80,916 3,063 242,965
==================================== ======= ========== ========== ========= ============= =========
Administrative expenses - - - - (45,920) (45,920)
==================================== ======= ========== ========== ========= ============= =========
Exploration expenses - - - - (37,965) (37,965)
==================================== ======= ========== ========== ========= ============= =========
Selling expenses (150) (996) (481) (19,444) - (21,071)
==================================== ======= ========== ========== ========= ============= =========
Other income/expenses - - - - (37,079) (37,079)
==================================== ======= ========== ========== ========= ============= =========
Operating profit before impairment (2,027) 15,187 144,199 61,472 (117,901) 100,930
==================================== ======= ========== ========== ========= ============= =========
Impairment and write-off of
assets - - - - (15,231) (15,231)
==================================== ======= ========== ========== ========= ============= =========
Finance income - - - - 2,938 2,938
==================================== ======= ========== ========== ========= ============= =========
Finance costs - - - - (10,038) (10,038)
==================================== ======= ========== ========== ========= ============= =========
Foreign exchange loss - - - - (1,757) (1,757)
==================================== ======= ========== ========== ========= ============= =========
Profit/(loss) from continuing
operations before
income tax (2,027) 15,187 144,199 61,472 (141,989) 76,842
==================================== ======= ========== ========== ========= ============= =========
Income tax - - - - (35,403) (35,403)
==================================== ======= ========== ========== ========= ============= =========
Profit/(loss) for the year
from continuing operations (2,027) 15,187 144,199 61,472 (177,392) 41,439
==================================== ======= ========== ========== ========= ============= =========
1 On a post-exceptional basis.
RESERVES AND RESOURCES
Ore reserves and mineral resources estimates
Hochschild Mining plc reports its mineral resources and reserves
estimates in accordance with the Australasian Code for Reporting of
Exploration Results, Mineral Resources and Ore Reserves 2012
edition ("the JORC Code"). This establishes minimum standards,
recommendations and guidelines for the public reporting of
exploration results and mineral resources and reserves estimates.
In doing so it emphasises the importance of principles of
transparency, materiality and confidence. The information on ore
reserves and mineral resources on pages 57 to 59 were prepared by
or under the supervision of Competent Persons (as defined in the
JORC Code). Competent Persons are required to have sufficient
relevant experience and understanding of the style of
mineralisation, types of deposits and mining methods in the area of
activity for which they are qualified as a Competent Person under
the JORC Code. The Competent Person must sign off their respective
estimates of the original mineral resource and ore reserve
statements for the various operations and consent to the inclusion
of that information in this report, as well as the form and context
in which it appears.
Hochschild Mining plc employs its own Competent Person who has
audited all the estimates set out in this report. Hochschild Mining
Group companies are subject to a comprehensive programme of audits
which aim to provide assurance in respect of ore reserve and
mineral resource estimates. These audits are conducted by Competent
Persons provided by independent consultants. The frequency and
depth of an audit depends on the risks and/or uncertainties
associated with that particular ore reserve and mineral resource,
the overall value thereof and the time that has lapsed since the
previous independent third-party audit.
The JORC Code requires the use of reasonable economic
assumptions. These include long-term commodity price forecasts
(which, in the Group's case, are prepared by ex-house specialists
largely using estimates of future supply and demand and long-term
economic outlooks).
Ore reserve estimates are dynamic and are influenced by changing
economic conditions, technical issues, environmental regulations
and any other relevant new information and therefore these can vary
from year-to-year. Mineral resource estimates can also change and
tend to be influenced mostly by new information pertaining to the
understanding of the deposit and secondly the conversion to ore
reserves.
The estimates of ore reserves and mineral resources are shown as
at 31 December 2019, unless otherwise stated. Mineral resources
that are reported include those mineral resources that have been
modified to produce ore reserves. All tonnage and grade information
has been rounded to reflect the relative uncertainty in the
estimates; there may therefore be small differences. The prices
used for the reserves calculation were: Au Price: US$1,300 per
ounce and Ag Price: US$16.0 per ounce.
ATTRIBUTABLE METAL RESERVES AS AT 31 DECEMBER 2019
Proved
and probable Ag Au Ag Au Ag Eq
Reserve category (t) (g/t) (g/t) (moz) (koz) (moz)
----------------- ------------- ------- ------ ------ ------ ------
OPERATIONS(1)
----------------- ------------- ------- ------ ------ ------ ------
Inmaculada
----------------- ------------- ------- ------ ------ ------ ------
Proved 2,326,765 170 4.3 12.7 324.0 40.6
------------------ ------------- ------- ------ ------ ------ ------
Probable 3,286,326 111 2.6 11.8 276.8 35.6
------------------ ------------- ------- ------ ------ ------ ------
Total 5,613,091 136 3.3 24.5 600.7 76.1
------------------ ------------- ------- ------ ------ ------ ------
Pallancata
----------------- ------------- ------- ------ ------ ------ ------
Proved 773,843 322 1.2 8.0 29.6 10.6
------------------ ------------- ------- ------ ------ ------ ------
Probable 121,375 255 1.1 1.0 4.3 1.4
------------------ ------------- ------- ------ ------ ------ ------
Total 895,218 313 1.2 9.0 33.9 11.9
------------------ ------------- ------- ------ ------ ------ ------
San Jose
----------------- ------------- ------- ------ ------ ------ ------
Proved 399,500 489 7.8 6.3 99.5 14.8
------------------ ------------- ------- ------ ------ ------ ------
Probable 125,729 363 5.8 1.5 23.4 3.5
------------------ ------------- ------- ------ ------ ------ ------
Total 525,228 459 7.3 7.7 122.9 18.3
------------------ ------------- ------- ------ ------ ------ ------
GRAND TOTAL
----------------- ------------- ------- ------ ------ ------ ------
Proved 3,500,108 240 4.0 27.0 453.1 66.0
------------------ ------------- ------- ------ ------ ------ ------
Probable 3,533,429 125 2.7 14.2 304.4 40.4
------------------ ------------- ------- ------ ------ ------ ------
TOTAL 7,033,537 182 3.3 41.2 757.5 106.4
------------------ ------------- ------- ------ ------ ------ ------
Note: Where reserves are attributable to a joint venture
partner, reserve figures reflect the Company's ownership only.
Includes discounts for ore loss and dilution.
1 Operations were audited by P&E Consulting.
ATTRIBUTABLE METAL RESOURCES AS AT 31 DECEMBER 2019(1)
Tonnes Ag Au Ag Eq Ag Au Ag Eq
Resource category (t) (g/t) (g/t) (g/t) (moz) (koz) (moz)
------------------ ----------- ------ ------ ------ ------ -------- -------
OPERATIONS
------------------ ----------- ------ ------ ------ ------ -------- -------
Inmaculada
------------------ ----------- ------ ------ ------ ------ -------- -------
Measured 2,230,000 214 5.54 691 15.4 397.5 49.5
------------------- ----------- ------ ------ ------ ------ -------- -------
Indicated 3,353,000 145 3.63 456 15.6 390.9 49.2
------------------- ----------- ------ ------ ------ ------ -------- -------
Total 5,583,000 172 4.39 550 30.9 788.3 98.7
------------------- ----------- ------ ------ ------ ------ -------- -------
Inferred 10,368,000 131 3.19 405 43.6 1,063.1 135.1
------------------- ----------- ------ ------ ------ ------ -------- -------
Pallancata
------------------ ----------- ------ ------ ------ ------ -------- -------
Measured 1,635,000 364 1.51 493 19.1 79.1 25.9
------------------- ----------- ------ ------ ------ ------ -------- -------
Indicated 571,000 275 1.24 382 5.0 22.8 7.0
------------------- ----------- ------ ------ ------ ------ -------- -------
Total 2,206,000 341 1.44 464 24.2 101.9 32.9
------------------- ----------- ------ ------ ------ ------ -------- -------
Inferred 1,982,000 297 1.22 402 18.9 77.9 25.6
------------------- ----------- ------ ------ ------ ------ -------- -------
San Jose
------------------ ----------- ------ ------ ------ ------ -------- -------
Measured 797,640 537 8.59 1,276 13.8 220.4 32.7
------------------- ----------- ------ ------ ------ ------ -------- -------
Indicated 503,370 364 6.04 883 5.9 97.7 14.3
------------------- ----------- ------ ------ ------ ------ -------- -------
Total 1,301,010 470 7.61 1,124 19.7 318.1 47.0
------------------- ----------- ------ ------ ------ ------ -------- -------
Inferred 905,760 356 5.62 839 10.4 163.6 24.4
------------------- ----------- ------ ------ ------ ------ -------- -------
GROWTH PROJECTS
------------------ ----------- ------ ------ ------ ------ -------- -------
Crespo
------------------ ----------- ------ ------ ------ ------ -------- -------
Measured 5,211,000 47 0.47 85 7.9 78.7 14.3
------------------- ----------- ------ ------ ------ ------ -------- -------
Indicated 17,298,000 38 0.40 70 20.9 222.5 39.0
------------------- ----------- ------ ------ ------ ------ -------- -------
Total 22,509,000 40 0.42 74 28.8 301.0 53.2
------------------- ----------- ------ ------ ------ ------ -------- -------
Inferred 775,000 46 0.57 92 1.1 14.2 2.3
------------------- ----------- ------ ------ ------ ------ -------- -------
Azuca
------------------ ----------- ------ ------ ------ ------ -------- -------
Measured 191,000 244 0.77 307 1.5 4.7 1.9
------------------- ----------- ------ ------ ------ ------ -------- -------
Indicated 6,859,000 187 0.77 249 41.2 168.8 54.9
------------------- ----------- ------ ------ ------ ------ -------- -------
Total 7,050,000 188 0.77 250 42.7 173.5 56.7
------------------- ----------- ------ ------ ------ ------ -------- -------
Inferred 6,946,000 170 0.89 242 37.9 199.5 54.1
------------------- ----------- ------ ------ ------ ------ -------- -------
Volcan
------------------ ----------- ------ ------ ------ ------ -------- -------
Measured 105,918,000 - 0.74 60 - 2,513.1 203.6
------------------- ----------- ------ ------ ------ ------ -------- -------
Indicated 283,763,000 - 0.70 57 - 6,368.0 515.8
------------------- ----------- ------ ------ ------ ------ -------- -------
Total 389,681,000 - 0.71 57 - 8,881.1 719.4
------------------- ----------- ------ ------ ------ ------ -------- -------
Inferred 41,553,000 - 0.50 41 - 670.7 54.3
------------------- ----------- ------ ------ ------ ------ -------- -------
Arcata
------------------ ----------- ------ ------ ------ ------ -------- -------
Measured 834,000 438 1.35 554 11.7 36.1 14.8
------------------- ----------- ------ ------ ------ ------ -------- -------
Indicated 1,304,000 411 1.36 527 17.2 56.9 22.1
------------------- ----------- ------ ------ ------ ------ -------- -------
Total 2,138,000 421 1.35 538 29.0 93.0 37.0
------------------- ----------- ------ ------ ------ ------ -------- -------
Inferred 3,533,000 371 1.26 479 42.1 142.6 54.4
------------------- ----------- ------ ------ ------ ------ -------- -------
GRAND TOTAL
------------------ ----------- ------ ------ ------ ------ -------- -------
Measured 116,816,640 18 0.89 95 69.4 3,329.5 355.7
------------------- ----------- ------ ------ ------ ------ -------- -------
Indicated 313,651,370 11 0.73 73 105.9 7,327.5 736.1
------------------- ----------- ------ ------ ------ ------ -------- -------
Total 430,468,010 13 0.77 79 175.3 10,657.0 1,091.8
------------------- ----------- ------ ------ ------ ------ -------- -------
Inferred 66,062,760 73 1.10 167 154.1 2,331.5 354.6
------------------- ----------- ------ ------ ------ ------ -------- -------
1 Prices used for resources calculation: Au: $1,300/oz and Ag: $16.0/oz and Ag/Au ratio of 86x.
CHANGE IN ATTRIBUTABLE RESERVES AND RESOURCES
Percentage December
attributable December 2019
Ag equivalent content December 2018 Att
(million ounces) Category 2019 Att.(1) .(1) Net difference % change
---------------------- --------- ------------- -------- -------- -------------- --------
Inmaculada Resource 100% 221.9 233.8 12.0 5.4%
----------------------- ---------- ------------- -------- -------- -------------- --------
Reserve 68.4 76.1 7.7 11.3%
---------- ------------- -------- -------- -------------- --------
Pallancata Resource 100% 69.7 58.6 (11.1) (16.0%)
----------------------- ---------- ------------- -------- -------- -------------- --------
Reserve 20.6 11.9 (8.7) (42.0%)
---------- ------------- -------- -------- -------------- --------
San Jose Resource 51% 78.5 71.4 (7.1) (9.0%)
----------------------- ---------- ------------- -------- -------- -------------- --------
Reserve 20.7 18.3 (2.4) (11.6%)
---------- ------------- -------- -------- -------------- --------
Crespo Resource 100% 57.1 57.1 - -
----------------------- ---------- ------------- -------- -------- -------------- --------
Reserve - - - -
---------------------- --------- ------------- -------- -------- -------------- --------
Azuca Resource 100% 112.7 112.7 - -
----------------------- ---------- ------------- -------- -------- -------------- --------
Reserve - - - -
---------------------- --------- ------------- -------- -------- -------------- --------
Volcan Resource 100% 821.5 821.5 - -
----------------------- ---------- ------------- -------- -------- -------------- --------
Reserve - - - -
---------------------- --------- ------------- -------- -------- -------------- --------
Arcata Resource 100% 91.3 91.3 - -
----------------------- ---------- ------------- -------- -------- -------------- --------
Reserve - - - -
---------------------- --------- ------------- -------- -------- -------------- --------
Total Resource 1,452.6 1,446.3 (6.3) 0.4%
----------------------- ---------- ------------- -------- -------- -------------- --------
Reserve 109.7 106.4 (3.3) (3.0%)
---------- --------------------- ------------- -------- -------- -------------- --------
1 Attributable reserves and resources based on the Group's
percentage ownership of its joint venture projects.
SHAREHOLDER INFORMATION
Company website
Hochschild Mining plc Interim and Annual Reports and results
announcements are available via the internet on our website at
www.hochschildmining.com. Shareholders can also access the latest
information about the Company and press announcements as they are
released, together with details of future events and how to obtain
further information.
Registrars
The Registrars can be contacted as follows for information about
the AGM, shareholdings, and dividends and to report changes in
personal details:
BY POST
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 15 May 2020 in respect of the 2019 final
dividend.
The Company's registrars can also arrange for the dividend to be
paid directly into a shareholder's UK bank account. To take
advantage of this facility in respect of the 2019 final dividend, a
dividend mandate form, also available from the Company's
registrars, should be completed and returned to the registrars by
15 May 2020. 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 2020
Ex-dividend date 7 May
Record date 11 May
Deadline for return of currency election forms 15 May
Payment date 2 June
----------------------------------------------- -------
17 Cavendish Square
London
W1G 0PH
United Kingdom
[1] Revenue presented in the financial statements is disclosed
as net revenue and is calculated as gross revenue less commercial
discounts plus services revenue
(2) Please see the Financial Review page 19 for a definition of
Adjusted EBITDA
[3] 2019 and 2018 (restated) equivalent figures calculated using
the previous Company gold/silver ratio of 81x. All 2020 forecasts
assume the average gold/silver ratio of 86x.
4 All-in sustaining cost per (AISC) silver equivalent ounce:
Calculated before exceptional items and includes cost of sales less
depreciation in production cost and change in inventories,
administrative expenses (excl depreciation), 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 2019.
[5] 2019 and 2018 (restated) equivalent figures calculated using
the previous Company gold/silver ratio of 81x. All 2020 forecasts
assume the average gold/silver ratio of 86x.
[6] Includes revenue from services
[7] Other items in and workers profit sharing in costs of
sales
[8] Unit cost per tonne is calculated by dividing mine and
treatment production costs (excluding depreciation) by extracted
and treated tonnage respectively
[9] 2018 unit cost per tonne for Peru includes the Arcata mine.
2019 does not include the Arcata mine.
[10] Cash costs are calculated to include cost of sales,
commercial discounts and selling expenses items less depreciation
included in cost of sales
[11] Includes commercial discounts (from the sales of
concentrate) and commercial discounts from the sale of dore
[12] Operating capex from San Jose does not include capitalised
DD&A resulting from mine equipment utilised for mine
developments
[13] Administrative expenses does not include expenses from the
Biolantanidos project ($160,000)
[14] Royalties arising from revised royalty tax schemes
introduced in 2011 and included in income tax line
[15] Royalties arising from revised royalty tax schemes
introduced in 2011 and included in income tax line
[16] Calculated using a gold silver ratio of 81:1
[17] 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
[18] Includes pre-shipment loans and short term interest
payables
[19] 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
[20] Capital expenditure from Biolantanidos includes the fair
value of the asset plus additions since the acquisition
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
FR FIFEIFTIALII
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