TIDMHOC
RNS Number : 5097W
Hochschild Mining PLC
19 August 2020
_______________________________________________________________________________________
19 August 2020
Interim Results for the six months ended 30 June 2020
Covid-19 Response
-- Swift company-wide response to unprecedented
circumstances
-- Prioritisation of employee health above business
continuity
-- Implementation of more stringent set of health protocols at
all mines than mandated by authorities
-- Comprehensive testing programme carried out
-- Full medical teams in place with additional equipment
acquired
-- Additional community health and educational support
provided
-- Inmaculada restarted production on 28 July and is currently
expected to reach full capacity by end of August
Financial highlights
-- Revenue of $232.0 million (H1 2019: $354.5 million) ([1])
-- Adjusted EBITDA of $80.6 million (H1 2019: $153.7 million)
([2])
-- Profit before income tax (pre-exceptional) of $13.1 million
(H1 2019: $41.5 million)
-- Profit before income tax (post-exceptional) of $6.5 million
(H1 2019: $29.5 million)
-- Basic loss per share (pre-exceptional) of $(0.01) (H1 2019:
$0.04 earnings)
-- Basic loss per share (post-exceptional) of $(0.02) (H1 2019:
$0.03 earnings)
-- Cash and cash equivalent balance of $162.1 million as at 30
June 2020 (31 December 2019: $166.4 million)
-- Net debt of $58.4 million as at 30 June 2020 (31 December
2019: $33.2 million)
Exploration & Business Development highlights
-- Full brownfield exploration plan scheduled to be completed by
year-end
-- Drilling programmes at all operations and surrounding
regional targets
-- Programmes scheduled at Arcata, Corina, Cochaloma, Pablo Sur
and Palca targets
-- Drilling at Condor (by project partner) and Crespo
early-stage projects also scheduled
-- Maiden resource for Snip project in northwest British
Columbia announced by partner, Skeena Resources
-- Further greenfield programmes set for H2 in Peru, Canada and
the U.S.
-- Work continuing on BioLantanidos rare earths project with
feasibility study on track for completion in Q1 2021
H1 2020 ESG highlights
-- Lost Time Injury Frequency Rate of 0.98 (2019: 1.05) [3]
-- Accident Severity Index of 999 (2019: 54) [4]
-- Water Consumption of 225lt/person/day (2019:
206lt/person/day)
-- Domestic waste generation of 0.98 kg/person/day (2019:
1.04kg/person/day)
-- ECO score of 5.74 out of 6 (2019: 4.82) [5]
$000 unless stated Six months to 30 June 2020 Six months to 30 June 2019 % change
--------------------------- ---------------------------
Attributable silver production (koz) 4,108 8,687 (53)
Attributable gold production (koz) 79 138 (43)
Revenue 232,029 354,450 (35)
Adjusted EBITDA 80,584 153,734 (48)
(Loss)/profit from continuing operations
(pre-exceptional) (4,345) 25,085 (117)
(Loss)/profit from continuing operations
(post-exceptional) (9,006) 16,661 (154)
Basic (loss)/earnings per share
(pre-exceptional) $ (0.01) 0.04 (125)
Basic (loss)/earnings per share
(post-exceptional) $ (0.02) 0.03 (167)
------------------------------------------------- --------------------------- --------------------------- ---------
_______________________________________________________________________________________
A live conference call and audio webcast will be held at 2.30pm
(London time) on Wednesday 19 August 2020 for analysts and
investors.
For a live webcast of the presentation please click on the link
below:
https://webcasting.brrmedia.co.uk/broadcast/5f1e81f5864c395ee4bb2991
Conference call dial in details:
UK: +44 (0)330 336 9140
UK Toll Free: 0800 279 7204
US/Canada Toll Free: 888-256-1007
Pin: 3606266
_______________________________________________________________________________________
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) (OTCMKTS:
$HCHDF) 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.
IGNACIO BUSTAMANTE, CHIEF EXECUTIVE OFFICER SAID:
Covid-19
The story of Hochschild's first half of 2020 is dominated by the
global Covid-19 crisis and the challenges it has brought to the
countries in which we operate, our communities and our employees.
We believe that Hochschild's overall response to the pandemic has
balanced the needs of all of our stakeholders, starting with the
health and safety of our people, which remains our first priority.
We took immediate and decisive action in mid-March as soon as the
virus impacted the country and chose to halt our Peruvian
operations and exploration programmes and responded quickly again
in early July when our Inmaculada mine experienced a number of
positive cases of the virus. In Argentina, we immediately complied
with the nationwide mandatory quarantine and have been very careful
to follow the ongoing restrictions on the movement of people in the
country by executing a careful remobilisation and ramp-up at the
mine.
Throughout the organisation, we have taken all the necessary
actions to work through the uncertainties and challenges facing our
company and host countries. This includes a wide range of safety
protocols in place at all our locations that go well beyond the
official requirements and we have also established a comprehensive
virus testing programme, revised community relation strategies and
increased the size of the Company's medical team. In addition,
employees have received regular updates on safe work practices as
we tailor our approach based on the evolving government
guidelines.
Our Company entered the crisis with a strong balance sheet and
liquidity position, providing us with resilience and the ability to
implement our crisis response and protect our business. I am very
proud of our Company's resourcefulness and would like to say a
heartfelt thank you to all of our employees for their continued
dedication and efforts over the past few months in such difficult
circumstances.
Safety
We take our responsibilities to our people extremely seriously
and their safety and wellbeing is our highest priority. We
dedicated significant resources to our internally designed Safety
Culture Transformation Plan which, since implementation in 2017,
resulted in historic levels of safety performance last year. We
have redoubled our focus on this critical area and have therefore
relaunched the second iteration of this initiative, known
internally as Safety 2.0.
It is with deep regret that despite all the progress we have
achieved, we suffered a fatality at our Pallancata mine during H1
2020. A thorough investigation was carried out and the findings
were reported to the Board. This tragic event has made us even more
determined to continue reinforcing our controls, promoting the
right behaviours and creating a culture of safety that is deeply
embedded throughout the organisation.
Operations
As mentioned above, Hochschild's output in the first half was
impacted by Covid-19 related stoppages at all our mines lasting
from the middle of March until the restart was announced towards
the end of May. Production was 126,835 gold equivalent ounces (10.9
million silver equivalent ounces) which was understandably
substantially lower than the 2019 figure of 239,090 gold equivalent
ounces (20.6 million silver equivalent ounces). Inmaculada
delivered a solid start to the year in the first quarter but the
stoppage resulted in production of only 79,604 gold equivalent
ounces (H1 2019: 132,915 ounces). All-in sustaining costs were
lower than budgeted at $777 per gold equivalent ounce, principally
due to expenditure on the mine's tailings dam being deferred until
the second half of the year. Inmaculada is back in production
following the second stoppage in July and expected to be operating
at full production capacity by the end of August.
Pallancata was similarly affected. Production, was 1.8 million
silver equivalent ounces (H1 2019: 5.0 million ounces) with the
mine's all-in sustaining cost at $14.0 per silver equivalent ounce
(H1 2019: $12.1 per ounce). The increase in costs versus the prior
year was due to the mining of lower grade areas and less production
resulting from the stoppages.
In Argentina, San Jose experienced a shorter stoppage with
production restarting on 27 April. However, the ongoing
restrictions on the movement of people in the country resulted in a
slow and difficult remobilisation and ramp-up process, which we
expect to be complete by the end of the third quarter. Production
was 4.4 million silver equivalent ounces in the first half (H1
2019: 7.4 million ounces) with costs at $15.6 per silver equivalent
ounce (H1 2019: $13.9 per ounce).
Exploration
Whilst the 2020 brownfield programme has now restarted, almost
three months of the schedule were deferred due to the crisis.
However, we have now been able to reconfigure the programme and
have an ambitious 6 month plan in place which includes a mix of
surface and underground drilling in the surrounding areas of all
three of our current mines. Our objectives in terms of upgrading
our current resource base and discovering new potential resources
remain intact and we will report on progress at the end of the
final two quarters of the year. Our brownfield team also has plans
to drill further afield in Peru: at the Corina zone to the north of
Selene; at Palca and Cochaloma near to Pallancata; at Selene
itself; and at Ares, Arcata and Crespo on the east side of
Hochschild's Southern Peru Cluster.
Our greenfield programme has also been impacted but we have
recently seen encouraging progress from Snip in British Columbia
where our partner Skeena Resources has achieved a maiden resource
for the deposit. We look forward to results from the project's
second drilling campaign which has now started. Furthermore,
third-party exploration work is also due to begin in the United
States at the Illipah and Horsethief projects in Nevada, as well as
Adamera in Washington state, both subject to the quarantine being
lifted.
In Chile, work on our BioLantanidos rare earths project has
progressed well notwithstanding a few minor delays resulting from
the impact of the Covid-19 crisis in the country. We now have key
management personnel in place and are advancing the various work
streams including: updating the resource model; progressing the
project's permitting; carrying out metallurgical tests and
equipment piloting; and completing the plan to engage with the
surrounding communities. We remain on track to deliver a
feasibility study in the first quarter of 2021.
Financial results
For the reasons discussed above, total Group production was
significantly lower versus H1 2019 and consequently, despite a 28%
rise in the average gold price achieved and an 8% rise in the
silver price, revenue was reduced to $232.0 million (H1 2019:
$354.5 million). All-in sustaining costs do not include
approximately $22.5 million of fixed costs at the operations
incurred during the stoppages and ramp up (presented within Other
Expenses) and are also affected by the deferral of sustaining and
development capital expenditure to the second half. Therefore the
H1 2020 figure of $11.9 per silver equivalent ounce (H1 2019: $11.0
per ounce) is lower than the original guidance. Adjusted EBITDA of
$80.6 million (H1 2019: $153.7 million) mostly reflects the reduced
production levels whilst pre-exceptional loss per share of $(0.01)
(H1 2019: $0.04 earnings per share) also includes the impact of an
increase in the income tax arising from the impact of local
currency devaluation in Peru and Argentina. Post-exceptional
earnings per share was lower at $(0.02) (H1 2019: $0.03 earnings
per share) mainly due to the exceptional after tax cost of $4.6
million of Covid-19 response initiatives which are deemed to be
exceptional as they are incremental to the Group's regular
business, are material impacts and are not expected to be
recurring.
Financial position
Our balance sheet remains in a strong position despite the
significant impact of the Covid-19 crisis with cash and cash
equivalents of $162.1 million at the end of June (31 December 2019:
$166.4 million) and net debt of $58.4 million (31 December 2019:
$33.2 million).
Outlook
This year has seen precious metal prices continuing the strong
rise which started in mid-2019 with fresh impetus coming from the
significant fiscal and monetary stimulus initiated by governments
and central banks in response to the Covid-19 crisis. Gold has
recorded an all-time high recently and silver has reached its
highest price level in seven years and we are therefore hopeful of
delivering a strong rebound in profitability in the second half of
the year provided our people are able to operate safely and
experience less disruption. We intend to provide updated guidance
when we have assessed the full impact of the suspensions.
We have a very busy second half of brownfield and greenfield
activity planned with the aim of adding reserves and resources and
identifying new projects for our pipeline. We continue to assess
value accretive acquisitions throughout the Americas and are also
carrying out development work on our suite of early-stage projects
such as Azuca, Volcan and BioLantanidos.
In April, owing to the uncertainty caused by the crisis, the
Board decided to withdraw the proposal to pay the 2019 final
dividend. With Inmaculada currently still in a ramp-up phase and
the Covid-19 crisis continuing to cause uncertainty in the
countries where Hochschild operates, the Board has concluded that
it would be inappropriate to pay a distribution to shareholders at
this time.
OPERATING REVIEW
OPERATIONS
Note: All 2020 and 2019 (restated) silver/gold equivalent
production figures assume a gold/silver ratio of 86:1.
Production
In H1 2020, Hochschild delivered attributable production of
126,835 gold equivalent ounces or 10.9 million silver equivalent
ounces (on an attributable basis) with the half year impacted by
effects of the Covid-19 crisis and the consequent operational
stoppage at all three of the Company's mines. The Inmaculada and
Pallancata mines were stopped for 11 weeks from 16 March 2020 with
operations resuming on 31 May and 1 June respectively whilst the
San Jose operation in Argentina stopped for six weeks and resumed
on 27 April with a phased ramp-up process which reached 70%
capacity during June.
Total group production
Six months to Six months to
30 June 2020 30 June 2019
---------------
Silver production
(koz) 5,018 10,237
Gold production (koz) 93.59 162.16
Total silver equivalent
(koz) 13,067 24,182
Total gold equivalent
(koz) 151.94 281.19
Silver sold (koz) 4,897 10,221
Gold sold (koz) 93.58 160.25
------------------------- --------------- --------------
Total production includes 100% of all production, including
production attributable to Hochschild's minority shareholder at San
Jose.
Attributable group production
Six months to Six months to
30 June 2020 30 June 2019
---------------
Silver production
(koz) 4,108 8,687
Gold production (koz) 79.07 138.08
Silver equivalent
(koz) 10,908 20,562
Gold equivalent (koz) 126.84 239.09
----------------------- --------------- --------------
Attributable production includes 100% of all production from
Inmaculada, Pallancata and 51% from San Jose.
Costs
All-in sustaining cost from operations in H1 2020 was $1,026 per
gold equivalent ounce or $11.9 per silver equivalent ounce (H1
2019: $945 per gold equivalent ounce or $11.0 per silver equivalent
ounce), higher than H1 2019 mainly due to the effect of less
production resulting from the stoppages impacting administrative
expenses and capex in all units and also due to lower grades in
Pallancata and San Jose. This was partially offset by local
currency devaluation in both Peru and Argentina. These figures do
not include fixed costs incurred at the operations during the
stoppages as well as abnormal costs during the phases of reduced
production capacity. Costs are expected to rise in the second half
due to timing in the execution of sustaining and development
capital expenditure much of which was deferred due to the
stoppages.
Inmaculada
The 100% owned Inmaculada gold/silver underground operation is
located in the Department of Ayacucho in southern Peru. It
commenced operations in June 2015.
Inmaculada summary Six months Six months % change
to to
30 June 2020 30 June 2019
--------------- ------------------
Ore production (tonnes) 402,371 670,487 (40)
Average silver grade (g/t) 154 157 (2)
Average gold grade (g/t) 4.42 4.62 (4)
Silver produced (koz) 1,768 2,950 (40)
Gold produced (koz) 59.05 98.61 (40)
Silver equivalent produced
(koz) 6,846 11,431 (40)
Gold equivalent produced
(koz) 79.60 132.92 (40)
Silver sold (koz) 1,758 2,942 (40)
Gold sold (koz) 59.48 97.48 (39)
Unit cost ($/t) 91.1 90.8 -
Total cash cost ($/oz Au
co-product) 583 480 21
All-in sustaining cost ($/oz
Au Eq) 777 738 5
------------------------------ --------------- ------------------ ---------
Production
Inmaculada's first half production was 79,604 gold equivalent
ounces (H1 2019: 132,915 ounces) with the reduction due to the
cessation of operations for 11 weeks starting in mid-March.
Operations were halted again on 6 July 2020 due to a number of
cases of Covid-19. In both cases, a reduced workforce performed
care and maintenance activities. The Inmaculada team was
subsequently retested for the virus and remobilised with production
restarting on 28 July although full production will only be reached
by the end of August due to ongoing virus-related logistical
challenges.
Costs
All-in sustaining costs were at $777 per gold equivalent ounce
(H1 2019: $738 per ounce) with fixed costs incurred during the
stoppage and ramp-up ($5.7 million) not included in the figure and
with key capex items including the tailings dam expansion deferred
until the second half of the year. Costs were increased versus H1
2019 due to lower production resulting from the stoppages and lower
gold grades partially offset by lower exploration expenses and
local currency devaluation.
Pallancata
The 100% owned Pallancata silver/gold property is located in the
Department of Ayacucho in southern Peru. Pallancata commenced
production in 2007. Ore from Pallancata is transported 22km to the
Selene plant for processing.
Pallancata summary Six months Six months % change
to to
30 June 2020 30 June 2019
--------------- --------------
Ore production (tonnes) 188,740 472,294 (60)
Average silver grade (g/t) 257 284 (10)
Average gold grade (g/t) 0.92 1.01 (9)
Silver produced (koz) 1,392 3,812 (63)
Gold produced (koz) 4.92 13.44 (63)
Silver equivalent produced
(koz) 1,815 4,969 (63)
Gold equivalent produced
(koz) 21.10 57.78 (63)
Silver sold (koz) 1,271 3,768 (66)
Gold sold (koz) 4.41 13.20 (67)
Unit cost ($/t) 88.6 80.9 10
Total cash cost ($/oz Ag
co-product) 9.9 8.6 15
All-in sustaining cost ($/oz
Ag Eq) 14.0 12.1 16
------------------------------ --------------- -------------- ---------
Production
In H1 2020, Pallancata's output was 1.8 million silver
equivalent ounces (H1 2019: 5.0 million ounces). In addition to the
production days lost due to the stoppage, grades, as expected,
dropped moderately.
Costs
All-in sustaining costs were at $14.0 per silver equivalent
ounce (H1 2019: $12.1 per ounce) with fixed costs incurred during
the stoppage and ramp-up not included in the figure ($4.4 million)
and with some development and exploration expenditure deferred
until the second half of the year. The mining of lower grade areas
and less production resulting from the stoppages led to increased
costs versus H1 2019, partially offset by local currency
devaluation.
San Jose
The San Jose silver/gold mine is located in Argentina, in the
province of Santa Cruz, 1,750km south west of Buenos Aires. San
Jose commenced production in 2007. Hochschild holds a controlling
interest of 51% in the mine and is the mine operator. The remaining
49% is owned by the minority interest, McEwen Mining Inc.
San Jose summary Six months Six months % change
to to
30 June 2020 30 June 2019
--------------- --------------
Ore production (tonnes) 162,394 251,753 (35)
Average silver grade (g/t) 401 446 (10)
Average gold grade (g/t) 6.36 6.89 (8)
Silver produced (koz) 1,858 3,162 (41)
Gold produced (koz) 29.62 49.14 (40)
Silver equivalent produced
(koz) 4,406 7,388 (40)
Gold equivalent produced
(koz) 51.23 85.91 (40)
Silver sold (koz) 1,868 3,189 (41)
Gold sold (koz) 29.69 48.89 (39)
Unit cost ($/t) 231.1 229.2 1
Total cash cost ($/oz Ag
co-product) 9.3 9.3 -
All-in sustaining cost ($/oz
Ag Eq) 15.6 13.9 12
------------------------------ --------------- -------------- ---------
Production
The San Jose operation in Argentina restarted concentrate
production on 27 April, although the ongoing countrywide
restrictions on the movement of people resulted in the ramp-up
being phased over a significant period of time with full production
expected to be reached towards the end of the third quarter. The
total for the first half of the year was 4.4 million silver
equivalent ounces (H1 2019: 7.4 million ounces). In addition,
grades were on average lower than H1 2019 due to the logistic
restrictions forcing a change in the mining method.
Costs
All-in sustaining costs were at $15.6 per silver equivalent
ounce (H1 2019: $13.9 per ounce) with the operation impacted by the
effect of lower ounces produced versus H1 2019 despite fixed costs
incurred during the stoppage and phased ramp-up not being included
in the figure ($11.8 million). In addition, the mining of lower
grade areas and higher inflation in the country led to increased
costs versus H1 2019, partially offset by local currency
devaluation.
EXPLORATION
Inmaculada
In Q1 2020, 4,690m of potential drilling was carried out in the
Bety, Lady, Pilar East, Shakira and South veins before the
programme was halted in mid-March. Also, 1,204m of resource
drilling was executed at the Angela and Ramal 4 veins. After the
resumption of operations in the second quarter, a further 1,677m of
potential drilling was carried out.
Vein Results (resource drilling)
Bety IMS-20-001: 1.0m @ 1.3g/t Au & 94g/t Ag
-----------------------------------------
Lady LAD-19-001: 1.3m @ 1.5g/t Au & 120g/t Ag
-----------------------------------------
Lady Sur LAD-19-002: 0.9m @ 5.7g/t Au & 17g/t Ag
LAD-19-003: 1.4m @ 27.0g/t Au & 113g/t
Ag
-----------------------------------------
Shakira HUA-19-001: 3.1m @ 5.1g/t Au & 252g/t Ag
HUA-20-008A: 1.3m @ 2.5g/t Au & 259g/t
Ag
-----------------------------------------
South vein IMM-20-002: 0.8m @ 15.0g/t Au & 1,753g/t
Ag
-----------------------------------------
Noe HUA-20-008A: 1.1m @ 5.0g/t Au & 179g/t
Ag
-----------------------------------------
During Q3 2020, the plan is to drill 25,000m to incorporate new
resources from the Juliana and Shakira veins.
Pallancata
At Pallancata, 5,145m of potential drilling was executed before
the programme was also halted in the first quarter. This included
just over 3,000m of long hole drilling from underground towards the
Anomalia NE, Royropata, Veta 1, Mercedes, Luisa and Erika veins and
1,880m of drilling tracing the continuity of the Pallancata Vein.
In the second quarter, 2,734m of potential drilling was executed
targeting the Erika and Luciano veins and again the continuation of
the Pallancata vein.
4,213m of infill drilling was also carried out in the Huararani
and Marco areas in the first quarter with results likely to lead to
a redefinition of the geology of these structures.
Vein Results (resource drilling)
Paola DLLU-A206: 0.9m @ 1.3g/t Au & 479g/t Ag
----------------------------------------
Karina DLLU-A206: 1.1m @ 6.8g/t Au & 539g/t Ag
----------------------------------------
Gracia N DLPE-A171: 0.7m @ 0.7g/t Au & 88g/t Ag
----------------------------------------
Pallancata c DLPL-A932: 4.6m @ 3.0g/t Au & 790g/t Ag
----------------------------------------
Puka DLHU-A49: 1.9m @ 1.1g/t Au & 351g/t Ag
----------------------------------------
In Q3 2020, the plan is to carry out 6,300m of resource drilling
in the Pallancata vein extension and 2,500m of potential drilling
towards the Marco vein and the Pablo West zone.
San Jose
At San Jose, 2,889m of potential drilling was executed in before
the stoppage in the first quarter in the Micaela Oeste, Emily,
Karina and Carlos structures. When exploration restarted in the
second quarter, 6,020m of potential drilling was carried out
towards the Ayelen, Erika, Mara, Sigmoide Julia, Emilia, Salvador
and Micaela Oeste targets. Additionally, during Q2 2020 the Titan
geophysics survey was completed.
Vein Results (potential)
Micaela Oeste SJD-2070: 0.9m @ 9.6g/t Au & 207g/t Ag
SJD-2074: 0.3m @ 0.4g/t Au & 32g/t Ag
-----------------------------------------
Emily SJD-2081: 0.6m @ 0.8g/t Au & 34g/t Ag
SJD-2085: 0.6m @ 1.6g/t Au & 100g/t Ag
SJD-2090: 0.5m @ 0.1g/t Au & 35g/t Ag
-----------------------------------------
Elisa SJD-2085: 0.9m @ 9.6g/t Au & 207g/t Ag
-----------------------------------------
Karina SJD-2058: 0.5m @ 0.5g/t Au & 118g/t Ag
-----------------------------------------
Carlos SJD-2084: 1.9m @ 3.5g/t Au & 1,024g/t Ag
-----------------------------------------
Odin SJD-2103: 2.8m @ 17.1g/t Au & 591g/t Ag
SJD-2109: 0.9m @ 6.9g/t Au & 126g/t Ag
-----------------------------------------
Julia SJD-2108: 1.0m @ 7.0g/t Au & 812g/t Ag
SJD-2110: 1.2m @ 5.8g/t Au & 197g/t Ag
-----------------------------------------
Erika SJD-2114: 0.8m @ 1.5g/t Au & 332g/t Ag
-----------------------------------------
New vein 1 SJD-2110: 0.9m @ 8.0g/t Au & 398g/t Ag
-----------------------------------------
New vein 2 SJD-2118: 0.8m @ 1.2g/t Au & 226g/t Ag
-----------------------------------------
During Q3 2020, subject to a successful potential drilling
programme, 5,000m will be drilled in the Erika vein to add
resources.
BIOLANTANIDOS
At the 100% owned Biolantanidos rare earths deposit in Chile,
despite minor delays due to Covid-19, progress on the feasibility
study has been maintained with key advances made in geology,
processing and equipment testing. The project's environmental
permitting process has continued to move forward and in addition,
further brownfield targets have been identified which are expected
to increase the project's resources. Finally, the rare earths
dedicated team continues to grow as some key employees have already
been added to the Biolantanidos organisation, including Rodrigo
Ceballos, the new General Manager.
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. In H1 2020, there was
considerable disruption to the programme from the Covid-19 crisis
but exploration work was possible towards the end of the half at:
the Cooke Mountain gold project owned by Adamera Minerals Corp in
Washington State, United States; the Horsethief project owned by
Allianza Minerals Ltd in Nevada; and the Illipah project owned by
EMX Royalty Corp also in Nevada.
Snip
At Snip in the Golden Triangle of British Columbia, Hochschild's
partner, Skeena Resources Limited, recently achieved a maiden
resource at their 100%-owned Snip Gold Project in northwest British
Columbia, Canada.
The underground constrained Indicated resources include 244,000
ounces of gold hosted within 539,000 tonnes at an average gold
grade of 14.0 g/t Au. Resources within the Inferred category
include 402,000 ounces of gold hosted within 942,000 tonnes at an
average gold grade of 13.3 g/t Au (Table 1). In the determination
of reasonable prospects for economic extraction, long hole stoping
is contemplated. Sensitivities to the gold cut-off are presented in
Table 2.
Table 1: Snip Indicated and Inferred underground resources
reported undiluted at a 2.5 g/t Au cut-off grade within stope
optimised mining shapes.
Domain Tonnes Contained Contained
(000) Grade Au Metal Au
(g/t) (000 oz)
-----------------------------
Indicated Mineral Resources
----------- ------- ---------- ----------
Main - V 165 12.8 68
----------------------------------------- ------- ---------- ----------
Main - S 337 15.0 163
----------------------------------------- ------- ---------- ----------
Twin West 37 10.4 12
----------------------------------------- ------- ---------- ----------
Total Indicated 539 14.0 244
------- ---------- ----------
Inferred Mineral Resources
----------- ------- ---------- ----------
Main - V 287 13.1 121
----------------------------------------- ------- ---------- ----------
Main - S 599 13.4 258
----------------------------------------- ------- ---------- ----------
Twin West 56 12.4 23
----------------------------------------- ------- ---------- ----------
Total Inferred 942 13.3 402
------- ---------- ----------
Table 2: Snip Indicated and Inferred Resource sensitivities to
block cut-off grade
Cut-Off Grade Tonnes Grade Ounces
Au (g/t) (000) (g/t) (000)
--------------------
Indicated Category
----------------- ------- ------- -------
>2 557 13.7 245
-------------------------------------- ------- ------- -------
>2.5 (reported) 539 14.0 244
-------------------------------------- ------- ------- -------
>3 518 14.5 242
-------------------------------------- ------- ------- -------
>3.5 495 15.0 239
-------------------------------------- ------- ------- -------
Inferred Category
----------------- ------- ------- -------
>2 977 12.9 404
-------------------------------------- ------- ------- -------
>2.5 (reported) 942 13.3 402
-------------------------------------- ------- ------- -------
>3 911 13.6 399
-------------------------------------- ------- ------- -------
Total Inferred >3.5 880 14.0 396
----------------- ------- ------- -------
A technical report will be filed on Skeena's company website
within 45 days of the 21 July 2020 press release. Skeena intends to
commence drilling at Snip shortly to follow-up on the first
campaign from 2019 with the aim of expanding the resource.
In September 2018, Skeena granted Hochschild an option to earn a
60% undivided interest in Snip by spending twice the amount Skeena
had spent since it originally optioned Snip from Barrick. Under the
Heads of Agreement agreed between Skeena and Hochschild, Hochschild
had three years from the closing (by 16 October 2021) to provide
notice to Skeena that it wished to exercise its option. Once
exercised, Hochschild will have three years to:
-- incur expenditures on Snip that are no less than twice the
amount of such expenditures incurred by Skeena from 23 March 2016
up until the time of exercise of the Option by Hochschild. As of 30
June 2020, Skeena had incurred C$18.9 million of expenditures at
Snip;
-- incur no less than C$7.5 million in exploration or
development expenditures on Snip in each 12-month period of the
Option Period; and
-- provide 60% of the financial assurance required by
governmental authorities for the Snip mining properties
FINANCIAL REVIEW
The reporting currency of Hochschild Mining PLC is U.S. dollars.
In discussions of financial performance, the Group removes the
effect of exceptional items, unless otherwise indicated, and in the
income statement results are shown both pre and post such
exceptional items. Exceptional items are those items, which due to
their nature or the expected infrequency of the events giving rise
to them, need to be disclosed separately on the face of the income
statement to enable a better understanding of the financial
performance of the Group and to facilitate comparison with prior
periods.
Revenue
Gross revenue [6]
Gross revenue from continuing operations decreased by 35% to
$238.7 million in H1 2020 (H1 2019: $366.5 million) due to the
effects of the production stoppages in the second quarter resulting
from the Covid-19 crisis. This was partially offset by a strong
rise in the average realised gold price.
Gold
Gross revenue from gold in H1 2020 decreased to $159.2 million
(H1 2019: $213.0 million) due to the fall in gold sales of 42%
arising from the production stoppages. This was partially offset by
a 28% increase in the average realised gold price.
Silver
Gross revenue fell in H1 2020 to $79.5 million (H1 2019: $153.5
million) due to a fall in silver sales of 52% arising from the
production stoppages. This was partially offset by an 8% increase
in the average realised silver price.
Gross average realised sales prices
The following table provides figures for average realised prices
( before the deduction of commercial discounts) and ounces sold for
H1 2020 and H1 2019:
Average realised prices Six months to Six months to
30 June 2020 30 June 2019
-------------- --------------
Silver ounces sold (koz) 4,897 10,221
Avg. realised silver price ($/oz) 16.2 15.0
Gold ounces sold (koz) 93.58 160.25
Avg. realised gold price ($/oz) 1,701 1,329
----------------------------------- -------------- --------------
Commercial discounts
Commercial discounts refer to refinery treatment charges,
refining fees and payable deductions for processing concentrate,
and are deducted from gross revenue on a per tonne basis (treatment
charge), per ounce basis (refining fees) or as a percentage of
gross revenue (payable deductions). In H1 2020, the Group recorded
commercial discounts of $6.7 million (H1 2019: $12.1 million) with
the decrease explained by the significant reduction in production.
The ratio of commercial discounts to gross revenue in H1 2020 was
2.9% (H1 2019: 3.3%).
Net revenue
Net revenue was $232.0 million (H1 2019: $354.5 million),
comprising net gold revenue of $156.5 million (H1 2019: $209.5
million) and net silver revenue of $75.5 million (H1 2019: $144.9
million). In H1 2020, gold accounted for 67% and silver for 33% of
the Company's consolidated net revenue (H1 2019: gold 59% and
silver 41%).
Reconciliation of gross revenue by mine to Group net revenue
$000 Six months to Six months to % change
30 June 2020 30 June 2019
-------------- --------------
Silver revenue
Arcata - 4,970 -
Inmaculada 29,736 43,359 (31)
Pallancata 18,998 57,114 (67)
San Jose 30,777 48,087 (36)
Commercial discounts (4,009) (8,618) (53)
---------------------- -------------- -------------- ---------
Net silver revenue 75,502 144,912 (48)
---------------------- -------------- -------------- ---------
Gold revenue
Arcata - 889 -
Inmaculada 97,505 127,315 (23)
Pallancata 8,167 18,275 (55)
San Jose 53,517 66,483 (20)
Commercial discounts (2,713) (3,524) (23)
---------------------- -------------- -------------- ---------
Net gold revenue 156,476 209,438 (25)
---------------------- -------------- -------------- ---------
Other revenue 51 100 (49)
---------------------- -------------- -------------- ---------
Net revenue 232,029 354,450 (35)
---------------------- -------------- -------------- ---------
Costs
Total cost of sales was $146.9 million in H1 2020 (H1 2019:
$252.8 million). The direct production cost excluding depreciation
was lower at $89.8 million (H1 2019: $158.4 million) mainly due the
stoppages. Also, this does not include $22.5 million of fixed costs
at the operations incurred during the stoppages (presented within
Other Expenses). D epreciation in production cost decreased to
$49.4 million (H1 2019: $90.4 million) due to lower extracted
volumes across all operations mainly due to the stoppages and also
does not include $1.5 million of depreciation incurred during the
stoppages (also presented within Other Expenses). Change in
inventories was $7.7 million in H1 2020 (H1 2019: $2.9 million) due
to a reduction in products in process.
$000 Six months Six months % change
to to
30 June 2020 30 June 2019
-------------- --------------
Direct production cost excluding
depreciation 89,815 158,444 (43)
Depreciation in production cost 49,402 90,371 (45)
Other items and workers profit - 1,135 -
sharing
Change in inventories 7,728 2,881 168
---------------------------------- -------------- -------------- ---------
Cost of sales 146,945 252,831 (42)
---------------------------------- -------------- -------------- ---------
Unit cost per tonne
The Company reported unit cost per tonne at its operations of
$123.0 per tonne in H1 2020, a 7% increase versus H1 2019 ($114.7
per tonne) mainly due to the expected lower tonnage rate at
Pallancata.
Unit cost per tonne by operation (including royalties) [7] :
Operating unit ($/tonne) Six months Six months % change
to to
30 June 2020 30 June 2019
-------------- --------------
Peru [8] 90.6 86.6 5
Inmaculada 91.1 90.8 -
Pallancata 88.6 80.9 10
-------------------------- -------------- -------------- ---------
Arcata - 184.5 -
-------------------------- -------------- -------------- ---------
Argentina
San Jose 231.1 229.2 1
-------------------------- -------------- -------------- ---------
Total 123.0 114.7 7
-------------------------- -------------- -------------- ---------
Cash costs
Cash costs include cost of sales, commercial deductions and
selling expenses before exceptional items, less depreciation
included in cost of sales.
Cash cost reconciliation [9] :
$000 unless otherwise indicated Six months Six months % change
to to
30 June 2019 30 June 2018
-------------- --------------
Group cash cost 111,821 185,735 (40)
----------------------------------- -------------- -------------- ---------
(+) Cost of sales 146,945 252,831 (42)
(-) Depreciation and amortisation
in cost of sales (48,831) (91,322) (47)
(+) Selling expenses 5,987 10,480 (43)
(+) Commercial deductions [10] 7,720 13,746 (44)
Gold 2,787 3,636 (23)
Silver 4,933 10,110 (51)
----------------------------------- -------------- -------------- ---------
Revenue 232,029 354,450 (35)
----------------------------------- -------------- -------------- ---------
Gold 156,476 209,438 (25)
Silver 75,502 144,912 (48)
Others 51 100 (49)
----------------------------------- -------------- -------------- ---------
Ounces sold
----------------------------------- -------------- -------------- ---------
Gold 93.6 160.2 (42)
Silver 4,897 10,221 (52)
----------------------------------- -------------- -------------- ---------
Group cash cost ($/oz)
----------------------------------- -------------- -------------- ---------
Co product Au 806 685 18
Co product Ag 7.4 7.4 -
By product Au 335 192 74
By product Ag (9.7) (2.7) 259
----------------------------------- -------------- -------------- ---------
Co-product cash cost per ounce is the cash cost allocated to the
primary metal (allocation based on proportion of revenue), divided
by the ounces sold of the primary metal. By-product cash cost per
ounce is the total cash cost minus revenue and commercial discounts
of the by-product divided by the ounces sold of the primary
metal.
All-in sustaining cost reconciliation
All-in sustaining cash costs per silver equivalent ounce
Six months to 30 June 2020
$000 unless otherwise Inmaculada Pallancata San Jose Main Corporate Total
indicated operations & others
----------- ----------- --------- ------------ ----------
(+) Production cost
excluding depreciation 33,867 16,971 39,083 89,921 - 89,921
(+) Other items and - - - - - -
workers profit sharing
in cost of sales
(+) Operating and exploration
capex for units [11] 22,463 3,546 11,998 38,007 121 38,128
(+) Brownfield exploration
expenses 958 1,528 4,694 7,179 1,912 9,092
(+) Administrative expenses
(excl depreciation)
[12] 2,189 430 2,808 5,428 13,167 18,595
(+) Royalties and special
mining tax [13] 1,245 245 1,490 713 2,204
-------------------------------- ----------- ----------- --------- ------------ ---------- --------
Sub-total 60,722 22,720 58,583 142,025 15,914 157,939
-------------------------------- ----------- ----------- --------- ------------ ---------- --------
Au ounces produced 59,046 4,920 29,621 93,587 - 93.587
Ag ounces produced (000s) 1,768 1,392 1,858 5,018 - 5,018
Ounces produced (Ag
Eq 000s oz) 6,846 1,815 4,406 13,067 - 13,067
-------------------------------- ----------- ----------- --------- ------------ ---------- --------
Sub-total ($/oz Ag Eq) 8.9 12.5 13.3 10.9 - 12.1
-------------------------------- ----------- ----------- --------- ------------ ---------- --------
(+) Commercial deductions 880 2,144 4,696 7,720 - 7,720
(+) Selling expenses 235 324 5,428 5,987 - 5,987
-------------------------------- ----------- ----------- --------- ------------ ---------- --------
Sub-total 1,115 2,468 10,124 13,707 - 13,707
-------------------------------- ----------- ----------- --------- ------------ ---------- --------
Au ounces sold 59,480 4,410 29,691 93,581 - 93,581
Ag ounces sold (000s) 1,758 1,271 1,868 4,897 - 4,897
Ounces sold (Ag Eq 000s
oz) 6,873 1,651 4,421 12,945 - 12,945
-------------------------------- ----------- ----------- --------- ------------ ---------- --------
Sub-total ($/oz Ag Eq) 0.2 1.5 2.3 1.1 - 1.1
-------------------------------- ----------- ----------- --------- ------------ ---------- --------
All-in sustaining costs
($/oz Ag Eq) 9.0 14.0 15.6 11.9 - 13.1
-------------------------------- ----------- ----------- --------- ------------ ---------- --------
All-in sustaining costs
($/oz Au Eq) 777 1,205 1,340 1,026 - 1,131
-------------------------------- ----------- ----------- --------- ------------ ---------- --------
Six months to 30 June 2019
$000 unless Inmaculada Pallancata San Main Arcata Corporate Total
otherwise José operations & others
indicated
------------------- ------------------- ---------- ------------------- -------------- --------------------
(+) Production cost
excluding
depreciation 58,598 36,603 56,430 151,631 6,813 - 158,444
(+) Other items and
workers profit
sharing
in cost of sales 278 290 567 1,135 - - 1,135
(+) Operating and
exploration
capex for units 31,025 14,456 21,527 67,008 48 1,258 68,314
(+) Brownfield
exploration
expenses 3,110 1,483 5,404 9,997 795 2,180 12,972
(+) Administrative
expenses
(excl depreciation) 1,651 675 3,247 5,573 49 16,353 21,975
(+) Royalties and
special
mining tax [14] 1,714 701 - 2,414 51 1,132 3,597
---------------------- ------------------- ------------------- ---------- ------------------- -------------- -------------------- -----------------
Sub-total 96,376 54,208 87,175 237,758 7,756 20,923 266,437
---------------------- ------------------- ------------------- ---------- ------------------- -------------- -------------------- -----------------
Au ounces produced 98,608 13,444 49,137 161,188 966 - 162,155
Ag ounces produced
(000s) 2,950 3,812 3,162 9,925 311 - 10,237
Ounces produced (Ag
Eq 000s oz) 11,431 4,969 7,388 23,788 394 - 24,182
---------------------- ------------------- ------------------- ---------- ------------------- -------------- -------------------- -----------------
Sub-total ($/oz Ag
Eq) 8.4 10.9 11.8 10.0 19.7 - 11.0
---------------------- ------------------- ------------------- ---------- ------------------- -------------- -------------------- -----------------
(+) Commercial
deductions 1,358 5,596 6,016 12,970 776 - 13,746
(+) Selling expenses 315 474 9,545 10,334 146 - 10,480
---------------------- ------------------- ------------------- ---------- ------------------- -------------- -------------------- -----------------
Sub-total 1,673 6,070 15,561 22,304 922 - 24,226
---------------------- ------------------- ------------------- ---------- ------------------- -------------- -------------------- -----------------
Au ounces sold 97,484 13,200 48,891 159,575 674 - 160,248
Ag ounces sold
(000s) 2,942 3,768 3,189 9,899 322 - 10,221
Ounces sold (Ag Eq
000s
oz) 11,325 4,903 7,394 23,622 380 - 24,002
---------------------- ------------------- ------------------- ---------- ------------------- -------------- -------------------- -----------------
Sub-total ($/oz Ag
Eq) 0.1 1.2 2.1 1.0 2.4 - 1.0
---------------------- ------------------- ------------------- ---------- ------------------- -------------- -------------------- -----------------
All-in sustaining
costs
($/oz Ag Eq) 8.6 12.1 13.9 11.0 22.1 - 12.0
---------------------- ------------------- ------------------- ---------- ------------------- -------------- -------------------- -----------------
All-in sustaining
costs
($/oz Au Eq) [15] 738 1,045 1,196 945 1,900 - 1,034
---------------------- ------------------- ------------------- ---------- ------------------- -------------- -------------------- -----------------
Administrative expenses
Administrative expenses were reduced by 12% to $20.2 million (H1
2019: $23.0 million) primarily due to lower personnel costs and
postponed expenses due to the Covid-19 crisis.
Exploration expenses
In H1 2020, exploration expenses decreased to $12.7 million (H1
2019: $18.6 million) mainly due to slower execution of the budgeted
greenfield and brownfield programme as a result of the Covid-19
lockdown.
Selling expenses
Selling expenses reduced to $6.0 million (H1 2019: $10.5
million) principally due to the fact that in Argentina, which
levies export taxes, the San Jose operation was stopped for a
significant period of time.
Other income/expenses
Other income was lower at $1.1 million (H1 2019: $4.5 million)
mainly due to a reduction in income from logistics services at the
Matarani warehouse.
Other expenses before exceptional items were $27.9 million (H1
2019: $8.8 million) due to f ixed costs of $24.0 million at the
operations incurred during the stoppages being presented within
Other Expenses. In accordance with IAS2 and Hochschild accounting
policies, production fixed costs during the stoppage are not
directly related to units of production or inventories
Fixed costs at the operations during stoppages and reduced
capacity
$000
Personnel costs 16,038
Third party services 4,765
Supplies 551
Depreciation and amortisation 1,542
Others 1,116
Total 24,012
The increase has been partially offset by the reduction of care
and maintenance expenses at Arcata and Ares. In H1 2019, there were
more requirements at Arcata due to it being recently placed on
temporary care and maintenance. In Ares in H1 2019, similar
activity has been reduced in H1 2020.
Adjusted EBITDA
Adjusted EBITDA decreased by 48% to $80.6 million (H1 2019:
$153.7 million) primarily due to the fall in revenue due to the
operational stoppages necessitated by the Covid-19 crisis and in
spite of increased precious metal prices.
Adjusted EBITDA is calculated as profit from continuing
operations before exceptional items, net finance costs, foreign
exchange losses and income tax plus non-cash items (depreciation
and amortisation and changes in mine closure provisions) and
exploration expenses other than personnel and other exploration
related fixed expenses.
$000 unless otherwise indicated Six months to Six months to % change
30 June 2020 30 June 2019
-------------- --------------
Profit from continuing operations before exceptional items, net finance
cost, foreign exchange
(loss)/gain and income tax 18,065 44,693 (60)
Depreciation and amortisation in cost of sales 48,831 91,322 (47)
Depreciation and amortisation in administrative and other expenses 2,663 1,167 128
Exploration expenses 12,743 18,552 (31)
Personnel and other exploration related fixed expenses (2,926) (3,087) (5)
Other non-cash income, net [16] 1,208 1,087 11
--------------------------------------------------------------------------- -------------- -------------- ---------
Adjusted EBITDA 80,584 153,734 (48)
--------------------------------------------------------------------------- -------------- -------------- ---------
Adjusted EBITDA margin 35% 43%
--------------------------------------------------------------------------- -------------- -------------- ---------
Finance income
Finance income was $2.1 million (H1 2019: $1.4 million) with the
main reason for increase in H1 2020 being increased interest on
deposits.
Finance costs
Finance costs increased from $3.5 million in H1 2019 to $5.1
million in H1 2020, principally due to the rise in interest
payments resulting from the $50.0 million net increase in debt
completed in December 2019 and short term debt taken in
Argentina.
Foreign exchange losses
The Group recognised a foreign exchange loss of $1.9 million (H1
2018: $1.1 million loss) as a result of exposures in currencies
other than the functional currency - the Peruvian sol and the
Argentinean peso which both depreciated in H1 2020.
Income tax
The Company's Group's pre-exceptional income tax charge was
$17.4 million (H1 2019: $16.4 million). The slight increase in the
charge is explained by the non-cash impact of local currency
devaluation in Peru and Argentina in H1 2020 of 7% and 18%
respectively, which reduced the tax bases impacting deferred income
tax by $9.8 million. The currency devaluation impact on Income tax
was partially offset by the decrease in profitability in the period
due to Covid-19 related production stoppages.
The effective tax rate (pre-exceptional) for the period was
133.2% (H1 2019: 39.5%), compared to the weighted average statutory
income tax rate of 30.7% (H1 2019: 30.5%). The high effective tax
rate in H1 2020 versus the average statutory rate is mainly
explained by the impact of local currency devaluation increasing
the rate by 74.6%, the impact from Royalties and the Special Mining
Tax which increased the effective rate by 16.8%, and the impact
from lower profit in the period which amplifies the effect of minor
non-deductible expenses.
Exceptional items
Exceptional items in H1 2020 totalled a $4.7 million loss after
tax (H1 2019: $8.4 million loss after tax). Exceptional items
mainly included $6.6 million of Covid-19 response initiatives
partially offset by the associated tax effect. These initiatives
include: incremental personnel expenses which are mainly one-off
bonuses paid to those workers required to oversee critical
processes during period of suspension; donations; accommodation
whilst testing all workers for active Covid-19 cases prior to
travelling to mine units; and additional transportation costs to
facilitate social distancing. These items are presented as
exceptional as they are incremental to the Group's regular
business, resulting from initiatives to respond to the impact from
Covid-19. They are material impacts and are not expected to be
recurring. In H1 2019, there was the payment of termination
benefits due to the restructuring process generated by the
temporary suspension of operations at the Arcata mine unit ($11.9
million), partially offset by its corresponding tax effect.
Covid-19 response initiatives
$000 Peru Argentina Total
------ ----------
Personnel 1,203 - 1,203
Donations 1,173 123 1,296
Third party services 2,765 503 3,268
Others 801 48 849
---------------------- ------ ---------- ------
Total 5,942 674 6,616
---------------------- ------ ---------- ------
Cash flow and balance sheet review
Cash flow
$000 Six months Six months Change
to to
30 June 2020 30 June 2019
-------------- --------------
Net cash generated from operating
activities 16,122 100,500 (84,378)
Net cash used in investing activities (37,099) (70,281) 33,182
Cash flows generated from/(used in)
financing activities 18,454 (13,796) 32,250
--------------------------------------- -------------- -------------- ---------
Foreign exchange adjustment (1,743) (684) (1,059)
--------------------------------------- -------------- -------------- ---------
Net (decrease)/increase in cash and
cash equivalents during the period (4,266) 15,739 (20,005)
--------------------------------------- -------------- -------------- ---------
Net cash generated from operating activities decreased from
$100.5 million in H1 2019 to $16.1 million in H1 2020 mainly due to
lower Adjusted EBITDA of $80.6 million (H1 2019: $153.7
million).
Net cash used in investing activities decreased to $37.1 million
in H1 2020 from $70.3 million in H1 2019 mainly due to lower
operational capex and in particular mine development due to the
Covid-19 crisis and resulting stoppages.
Cash generated from/(used in) financing activities increased to
an inflow of $18.5 million in H1 2020 from an outflow of $13.8
million in H1 2019. In H1 2020, $19.9 million of short-term loans
were raised in Argentina to finance working capital during the
stoppage. Also, H1 2019 included $12.2 million in dividends to
shareholders and Hochschild's minority shareholder at San Jose.
Working capital
$000 As at As at
30 June 2020 31 December 2019
--------------
Trade and other receivables 67,377 73,618
Inventories 51,793 62,600
Derivative financial liabilities (1,582) -
Income tax receivable/(payable), net 1,446 (11,005)
Trade and other payables (77,915) (120,537)
Provisions (8,867) (16,249)
-------------------------------------- -------------- ------------------
Working capital 32,252 (11,573)
-------------------------------------- -------------- ------------------
The Group's working capital position in H1 2020 increased by
$43.8 million from $(11.6) million to $32.3 million aligned with
production stoppages due to Covid-19. The key drivers of the
increase were lower trade payables of $42.6 million, lower income
tax receivable/(payable) of $12.5 million and lower provisions of
$7.4 million. These were partially offset by lower inventories of
$10.8 million, lower trade and other receivables of $6.2 million
and higher derivative financial liability of $1.6 million resulting
from the interest rate swap entered to fix the interest rate of the
$200 million medium-term loan.
Net debt
$000 unless otherwise indicated As at As at
30 June 2020 31 December 2019
--------------
Cash and cash equivalents 162,091 166,357
Non-current borrowings 199,473 (199,308)
Current borrowings [17] (20,474) (234)
--------------------------------- -------------- ------------------
Net debt (57,856) (33,185)
--------------------------------- -------------- ------------------
The Group's reported net debt position was $57.9 million as at
30 June 2020 (31 December 2019: $33.2 million). The increase in net
debt is mainly a result of the net increase in current borrowings
in Argentina and reduced net cash generation in the period.
Capital expenditure ([18])
$000 Six months to Six months to
30 June 2020 30 June 2019
--------------
Arcata - 48
Pallancata 3,546 14,456
San Jose 12,685 22,553
Inmaculada 22,463 31,025
--------------- -------------- --------------
Operations 38,694 68,082
Biolantanidos 1,798 -
Other 2,298 2,749
--------------- -------------- --------------
Total 42,790 70,831
--------------- -------------- --------------
H1 2020 capital expenditure of $42.8 million (H1 2019: $70.8
million) mainly comprised of operational capex of $38.7 million (H1
2019: $68.1 million) with the decrease versus H1 2019 resulting
from deferred capex at all operations due to the Covid-19
crisis.
Non-IFRS Financial Performance Measures
The Company has included certain non-IFRS measures in this news
release. The Company believes that these measures, in addition to
conventional measures prepared in accordance with IFRS, provide
investors an improved ability to evaluate the underlying
performance of the Company. The non-IFRS measures are intended to
provide additional information and should not be considered in
isolation or as a substitute for measures of performance prepared
in accordance with IFRS. These measures do not have any
standardised meaning prescribed under IFRS, and therefore may not
be comparable to other issuers.
Forward looking statements
This announcement contains certain forward looking statements,
including such statements within the meaning of Section 27A of the
US Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. In particular, such
forward looking statements may relate to matters such as the
business, strategy, investments, production, major projects and
their contribution to expected production and other plans of
Hochschild Mining PLC and its current goals, assumptions and
expectations relating to its future financial condition,
performance and results.
Forward-looking statements include, without limitation,
statements typically containing words such as "intends", "expects",
"anticipates", "targets", "plans", "estimates" and words of similar
import. By their nature, forward looking statements involve risks
and uncertainties because they relate to events and depend on
circumstances that will or may occur in the future. Actual results,
performance or achievements of Hochschild Mining PLC may be
materially different from any future results, performance or
achievements expressed or implied by such forward looking
statements. Factors that could cause or contribute to differences
between the actual results, performance or achievements of
Hochschild Mining PLC and current expectations include, but are not
limited to, legislative, fiscal and regulatory developments,
competitive conditions, technological developments, exchange rate
fluctuations and general economic conditions. The Company cautions
against undue reliance on any forward looking statement or
guidance, particularly in light of the current economic climate and
the significant volatility, uncertainty and disruption caused by
Covid-19. Past performance is no guide to future performance and
persons needing advice should consult an independent financial
adviser.
The forward looking statements reflect knowledge and information
available at the date of preparation of this announcement. Except
as required by the Listing Rules and applicable law, Hochschild
Mining PLC does not undertake any obligation to update or change
any forward looking statements to reflect events occurring after
the date of this announcement. Nothing in this announcement should
be construed as a profit forecast.
RISKS
The principal risks and uncertainties facing the Company in
respect of the year ended 31 December 2019 are set out in detail in
the Risk Management & Viability section of the 2019 Annual
Report and in Note 36 to the 2019 Consolidated Financial
Statements.
The key risks disclosed in the 2019 Annual Report (available at
www.hochschildmining.com ) are categorised as:
-- Financial risks comprising commodity price risk and
commercial counterparty risk;
-- Operational risks including the risks associated with
operational performance, business interruption, information
security and cybersecurity, exploration & reserve and resource
replacement and personnel risks;
-- Macro-economic risks which include political, legal and
regulatory risks; and
-- Sustainability risks including risks associated with health
and safety, environmental and community relations.
These risks continue to apply to the Company in respect of the
remaining six months of the financial year.
Covid-19
H1 2020
In response to the Covid-19 pandemic, the Group's Risk Committee
compiled a tailored risk matrix which was considered by the Board
and identified each critical aspect of the business impacted by the
outbreak and which formed the basis of management's mitigation and
control plans. A Covid-19 Crisis Committee was established tasked
with the day-to-day monitoring of the implementation of these
plans.
The table below summarises the framework of the Covid-19 Risk
Matrix
Category of Key Covid-19 Brief Description
Risk
1. Employee Health Implementing protocols to safeguard employee
and Wellbeing wellbeing
-----------------------------------------------------------
2. Talent and Workforce Addressing employee's concerns and impact on
morale resulting from operational disruption
-----------------------------------------------------------
3. Government and Impact of governmental regulations and repercussions
Social Responsibility on community relations
-----------------------------------------------------------
4. Legal Risk of litigation from suppliers and contractors
and delays in securing permits for operations/exploration
activities
-----------------------------------------------------------
4. Financial Management Impact on the Group's finances and financial
and Reporting reporting systems
-----------------------------------------------------------
6. Technology and Increased reliance on IT support to facilitate
Information Security remote working and increased exposure to cyber
attacks/loss of confidential data
-----------------------------------------------------------
7. Supply Chain and Suspension of port operations and other forms
Global Trade of disruption to critical supplies
-----------------------------------------------------------
8. Sales and Customers Inability to fulfill sales due to disruption
to port operations or logistics.
-----------------------------------------------------------
9. Risk Management Remote working could result in weakened internal
controls and possible fraud
-----------------------------------------------------------
Summarised below is how these risks were managed during H1
2020:
-- Workers transported to hometowns for medical examination
-- Remote working facilitated in Peru, Argentina and London
before the imposition of formal lockdowns
-- One-off bonuses paid to those workers required to oversee
critical processes during period of suspension
-- Health protocols implemented across all operations,
co-ordinated by the Covid-19 Crisis Committee. These included:
-- High-risk employees identified for re-allocation of duties on remote working basis
-- Testing of all workers for active Covid-19 cases prior to
travelling to mine units. Those tested remain in quarantine pending
test results. Testing also carried out on the presentation of
symptoms and immediate transportation to nearest medical
facilities
-- Adaptation of physical sites and changes to operational
procedures to facilitate social distancing and to treat suspected
cases
-- Reinforced presence of Health teams
-- Installation of increased IT infrastructure with enhanced
security
-- Comprehensive communications campaign to ensure all employees
were kept informed of developments and to reinforce social
distancing measures and good hygiene practices
-- Community Relations strategy refocused on health and
education. Initiatives included delivery of over 2,500 hygiene and
food packs to employees and local communities
-- Close co-operation with central/provincial governmental
authorities which, in both Peru and Argentina, have declared mining
as essential for their respective economies.
-- Ongoing dialogue with suppliers and customers
-- Implementation of a Cash Optimisation Plan including the
cancellation/postponement of certain operational, administrative
and exploration expenditure and the withdrawal of the proposed 2019
final dividend.
-- Ongoing monitoring of counterparty risk with constant
communication with customers and evaluating credit ratings of
providers of finance.
H2 2020
As the timing of full resumption of the Group's operations
remains uncertain due to the ongoing presence of the virus in the
countries in which we operate, "Resumption of Operations due to
Covid-19" is a new principal risk which has emerged that has been
recognised in our Risk Register. The Group has adopted more
stringent health protocols in Peru than those mandated by law and,
together with the actions described above, has adopted the
following measures to mitigate the impact of further disruption to
the business.
-- Temporary suspension of Inmaculada
-- The engagement of a specialist contractor to undertake a
deep-clean of Inmaculada
-- Change to working shift patterns
-- Development of technology-based systems to (a) report, in
real time, suspected cases and to provide daily updates on
treatment (b) ensure that working shift changes are undertaken in a
Covid-secure manner e.g. by planning hotel room allocations, lab
test results and transportation planning
-- The use of a rapid Covid test in conjunction with molecular
tests (designed to detect active cases of Covid) for all workers
prior to transportation to the mine site; and
-- Establishment of Health brigades to ensure compliance with
the Group's Covid protocols.
RELATED PARTY TRANSACTIONS
Related party transactions are disclosed in note 22 to the
condensed set of financial statements
GOING CONCERN
After making enquiries, the Directors have a reasonable
expectation that the Group has adequate resources to continue in
operational existence for the foreseeable future. Accordingly, they
continue to adopt the going concern basis in preparing the
condensed set of financial statements. For further detail refer to
the detailed discussion of the assumptions outlined in the Going
concern disclosures in Note 2 "Significant Accounting Policies" of
the condensed consolidated financial statements.
STATEMENT OF DIRECTORS' RESPONSIBILITIES
The Directors confirm that, to the best of their knowledge, the
interim condensed consolidated financial statements have been
prepared in accordance with IAS 34 "Interim Financial Reporting" as
adopted by the European Union and that the interim management
report includes a fair review of the information required by
Disclosure Guidance and Transparency Rules 4.2.7R and 4.2.8R.
A list of current Directors and their functions is maintained on
the Company's website.
For and on behalf of the Board
Ignacio Bustamante
Chief Executive Officer
18 August 2020
INDEPENT REVIEW REPORT TO HOCHSCHILD MINING PLC
Introduction
We have been engaged by Hochschild Mining PLC (the 'Company') to
review the condensed set of financial statements in the half-yearly
financial report for the six months ended 30 June 2020 which
comprises the Interim condensed consolidated income statement, the
Interim condensed consolidated statement of comprehensive income,
the Interim condensed consolidated statement of financial position,
the Interim condensed consolidated statement of cash flows, the
Interim condensed consolidated statement of changes in equity and
the related notes 1 to 24. We have read the other information
contained in the half yearly financial report and considered
whether it contains any apparent misstatements or material
inconsistencies with the information in the condensed set of
financial statements.
This report is made solely to the Company in accordance with
guidance contained in International Standard on Review Engagements
2410 (UK and Ireland) "Review of Interim Financial Information
Performed by the Independent Auditor of the Entity" issued by the
Auditing Practices Board. To the fullest extent permitted by law,
we do not accept or assume responsibility to anyone other than the
Company, for our work, for this report, or for the conclusions we
have formed.
Directors' Responsibilities
The half-yearly financial report is the responsibility of, and
has been approved by, the directors. The directors are responsible
for preparing the half-yearly financial report in accordance with
the Disclosure Guidance and Transparency Rules of the United
Kingdom's Financial Conduct Authority.
As disclosed in note 2, the annual financial statements of the
Group are prepared in accordance with International Financial
Reporting Standards as adopted by the European Union. The condensed
set of financial statements included in this half-yearly financial
report has been prepared in accordance with International
Accounting Standard 34, "Interim Financial Reporting", as adopted
by the European Union.
Our Responsibility
Our responsibility is to express to the Company a conclusion on
the condensed set of financial statements in the half-yearly
financial report based on our review.
Scope of Review
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410, "Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity" issued by the Auditing Practices Board for use in
the United Kingdom. A review of interim financial information
consists of making enquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other
review procedures. A review is substantially less in scope than an
audit conducted in accordance with International Standards on
Auditing (UK and Ireland) and consequently does not enable us to
obtain assurance that we would become aware of all significant
matters that might be identified in an audit. Accordingly, we do
not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the half-yearly financial report for the six months ended 30
June 2020 is not prepared, in all material respects, in accordance
with International Accounting Standard 34 as adopted by the
European Union and the Disclosure Guidance and Transparency Rules
of the United Kingdom's Financial Conduct Authority.
Ernst & Young LLP
London
18 August 2020
Interim condensed consolidated income statement
Six-months ended Six-months ended
Notes 30 June 2020 (Unaudited) 30 June 2019 (Unaudited)
----- ------------------------- -------------------------
Exceptional Exceptional
Before items Before items
exceptional (Note exceptional (Note
items 9) Total items 9) Total
US$000 US$000 US$000 US$000 US$000 US$000
------------------ ----- ----------- ----------- --------- ----------- ----------- ---------
Continuing
operations
Revenue 4 232,029 - 232,029 354,450 - 354,450
Cost of sales 5 (146,945) - (146,945) (252,831) - (252,831)
------------------- ----- ----------- ----------- --------- ----------- ----------- ---------
Gross profit 85,084 - 85,084 101,619 - 101,619
------------------- ----- ----------- ----------- --------- ----------- ----------- ---------
Administrative
expenses (20,236) - (20,236) (23,021) - (23,021)
Exploration
expenses 6 (12,743) - (12,743) (18,552) - (18,552)
Selling expenses 7 (5,987) - (5,987) (10,480) - (10,480)
Other income 8 1,096 - 1,096 4,471 - 4,471
Other expenses 8 (27,941) (6,616) (34,557) (8,827) (11,949) (20,776)
Write-off of
non-financial
assets (1,208) - (1,208) (517) - (517)
------------------- ----- ----------- ----------- --------- ----------- ----------- ---------
Profit/(loss) from
continuing
operations
before net finance
income/(cost),
foreign
exchange loss and
income tax 18,065 (6,616) 11,449 44,693 (11,949) 32,744
------------------- ----- ----------- ----------- --------- ----------- ----------- ---------
Finance income 10 2,074 - 2,074 1,424 - 1,424
Finance costs 10 (5,144) - (5,144) (3,504) - (3,504)
Foreign exchange
loss (1,915) - (1,915) (1,146) - (1,146)
------------------- ----- ----------- ----------- --------- ----------- ----------- ---------
Profit/(loss) from
continuing
operations
before income tax 13,080 (6,616) 6,464 41,467 (11,949) 29,518
------------------- ----- ----------- ----------- --------- ----------- ----------- ---------
Income tax
(expense)/benefit 11 (17,425) 1,955 (15,470) (16,382) 3,525 (12,857)
------------------- ----- ----------- ----------- --------- ----------- ----------- ---------
(Loss)/profit for
the period from
continuing
operations (4,345) (4,661) (9,006) 25,085 (8,424) 16,661
------------------- ----- ----------- ----------- --------- ----------- ----------- ---------
Attributable to:
Equity shareholders
of the parent (3,763) (4,190) (7,953) 22,319 (8,424) 13,895
Non-controlling
interests (582) (471) (1,053) 2,766 - 2,766
------------------- ----- ----------- ----------- --------- ----------- ----------- ---------
(4,345) (4,661) (9,006) 25,085 (8,424) 16,661
----- ----------- ----------- --------- ----------- ----------- ---------
Basic
(loss)/earnings
per ordinary share
from continuing
operations
for the period
(expressed
in U.S. dollars
per
share) (0.01) (0.01) (0.02) 0.04 (0.01) 0.03
------------------- ----- ----------- ----------- --------- ----------- ----------- ---------
Diluted
(loss)/earnings
per ordinary share
from continuing
operations
for the period
(expressed
in U.S. dollars
per
share) (0.01) (0.01) (0.02) 0.04 (0.01) 0.03
------------------- ----- ----------- ----------- --------- ----------- ----------- ---------
Interim condensed consolidated statement of comprehensive
income
Six-months ended
30 June
----------------------------------
2020 (Unaudited) 2019 (Unaudited)
US$000 US$000
----------------------------------------------- ---------------- ----------------
(Loss)/profit for the period (9,006) 16,661
-------------------------------------------------- ---------------- ----------------
Other comprehensive income that might
be reclassified to profit or loss in
subsequent periods; net of tax:
Net loss on cash flow hedges (7,047) -
Deferred tax benefit on cash flow hedges 2,079 -
Exchange differences on translating foreign
operations (163) (17)
-------------------------------------------------- ---------------- ----------------
Sub total (5,131) (17)
-------------------------------------------------- ---------------- ----------------
Other comprehensive income that will
not be reclassified to profit or loss
in subsequent periods; net of tax:
Net gain on equity instruments at fair
value through other comprehensive income
("OCI") 1,479 1,484
-------------------------------------------------- ---------------- ----------------
Sub total 1,479 1,484
--------------------------------------------------
Other comprehensive (loss)/profit for
the period, net of tax (3,652) 1,467
-------------------------------------------------- ---------------- ----------------
Total comprehensive (loss)/income for
the period (12,658) 18,128
-------------------------------------------------- ---------------- ----------------
Total comprehensive (loss)/income attributable
to:
Equity shareholders of the parent (11,605) 15,362
Non-controlling interests (1,053) 2,766
-------------------------------------------------- ---------------- ----------------
(12,658) 18,128
---------------- ----------------
Interim condensed consolidated statement of financial
position
As at 30 As at 31
June December
2020 2019
(Unaudited)
Notes US$000 US$000
--------------------------------------- ----- ------------- ----------
ASSETS
Non-current assets
Property, plant and equipment 12 787,089 795,277
Evaluation and exploration assets 13 184,365 181,562
Intangible assets 21,786 22,359
Financial assets at fair value through
OCI 14 568 6,159
Trade and other receivables 6,394 5,188
Deferred income tax assets 15 1,173 1,627
-------------------------------------------- -----
1,001,375 1,012,172
----- ------------- ----------
Current assets
Inventories 51,793 62,600
Trade and other receivables 67,377 73,618
Income tax receivable 3,580 206
Cash and cash equivalents 16 162,091 166,357
Assets held for sale 38,295 38,295
-------------------------------------------- -----
323,136 341,076
----- ------------- ----------
Total assets 1,324,511 1,353,248
-------------------------------------------- ----- ------------- ----------
EQUITY AND LIABILITIES
Capital and reserves attributable
to shareholders of the Parent
Equity share capital 20 226,506 226,506
Share premium 20 438,041 438,041
Other reserves (227,667) (221,800)
Retained earnings 284,946 290,263
-------------------------------------------- ----- ------------- ----------
721,826 733,010
----- ------------- ----------
Non-controlling interests 73,293 74,631
-------------------------------------------- -----
Total equity 795,119 807,641
-------------------------------------------- ----- ------------- ----------
Non-current liabilities
Trade and other payables 355 526
Derivative financial liabilities 14 5,544 -
Borrowings 17 199,473 199,308
Provisions 18 103,751 99,322
Deferred income 71 172
Deferred income tax liabilities 15 74,281 63,103
-------------------------------------------- ----- ------------- ----------
383,475 362,431
----- ------------- ----------
Current liabilities
Trade and other payables 77,915 120,537
Derivative financial liabilities 14 1,582 -
Borrowings 17 20,474 234
Provisions 18 8,867 16,249
Deferred income 400 400
Income tax payable 2,134 11,211
Liabilities directly associated with
asset held for sale 34,545 34,545
-------------------------------------------- ----- ------------- ----------
145,917 183,176
----- ------------- ----------
Total liabilities 529,392 545,607
-------------------------------------------- ----- ------------- ----------
Total equity and liabilities 1,324,511 1,353,248
-------------------------------------------- ----- ------------- ----------
Interim condensed consolidated statement of cash flows
Six-months ended
30 June
----------------------------------
2020 (Unaudited) 2019 (Unaudited)
Notes US$000 US$000
------------------------------------------ ----- ---------------- ----------------
Cash flows from operating activities
Cash generated from operations 23 24,186 105,310
Interest received 804 785
Interest paid 17 (2,794) (1,598)
Payment of mine closure costs (1,367) (1,386)
Income tax (paid)/received (4,707) (2,611)
------------------------------------------- ---------------- ----------------
Net cash generated from operating
activities 16,122 100,500
------------------------------------------- ---------------- ----------------
Cash flows from investing activities
Purchase of property, plant and equipment (41,404) (67,231)
Purchase of evaluation and exploration
assets (2,803) (3,854)
Purchase of intangibles 13 - (2)
Purchase of financial assets at fair
value to OCI 14 - (500)
Proceeds from deferred income 19 - 750
Proceeds from sale of financial assets
at fair value to OCI 14 7,070 424
Proceeds from sale of property, plant
and equipment 12 38 132
------------------------------------------- -----
Net cash used in investing activities (37,099) (70,281)
------------------------------------------- ----- ---------------- ----------------
Cash flows from financing activities
Proceeds from borrowings 17 27,910 63,500
Repayment of borrowings 17 (8,000) (63,500)
Purchase of treasury shares 20 (292) (309)
Payment of lease liabilities (879) (1,275)
Dividends paid to shareholders 21 - (10,002)
Dividends paid to non-controlling
interests 21 (285) (2,210)
------------------------------------------- -----
Cash flows generated from/(used in)
financing activities 18,454 (13,796)
------------------------------------------- ----- ---------------- ----------------
Net increase/(decrease) in cash and
cash equivalents during the period (2,523) 16,423
Impact of foreign exchange (1,743) (684)
Cash and cash equivalents at beginning
of period 166,357 79,704
------------------------------------------- ----- ---------------- ----------------
Cash and cash equivalents at end
of period 16 162,091 95,443
------------------------------------------- ----- ---------------- ----------------
Interim condensed consolidated statement of changes in
equity
Other reserves
Fair
value Capital
Unrealised reserve and
gain/ of reserves
(loss) financial attributable
on hedges assets to
US$000 at fair shareholders
Equity value Cumulative Share-based Total of
share Share Treasury Dividends through translation Merger payment other Retained the Non-controlling Total
capital premium shares expired OCI adjustment reserve reserve reserves earnings Parent interests equity
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
2020 226,506 438,041 - 99 - 18 (14,035) (210,046) 2,.164 (221,800) 290,263 733,010 74,631 807,641
------------------ ----- ------- ------- --------- --------- ------------- --------- ----------- --------- ----------- --------- -------- ------------ --------------- --------
Other
comprehensive
(expense)/income - - - - (4,968) 1,479 (163) - - (3,652) - (3,652) - (3,652)
Loss for the
period - - - - - - - - - - (7,953) (7,953) (1.053) (9,006)
------------------ ----- ------- ------- --------- --------- ------------- --------- ----------- --------- ----------- --------- -------- ------------ --------------- --------
Total
comprehensive
(loss)/income for
the period - - - - (4,968) 1,479 (163) - - (3,652) (7,953) (11,605) (1,053) (12,658)
------------------ ----- ------- ------- --------- --------- ------------- --------- ----------- --------- ----------- --------- -------- ------------ --------------- --------
Sale of financial
assets at fair
value
through OCI 14 - - - - - (1,841) - - - (1,841) 1,841 - - -
Dividends to
non-controlling
interests 21 - - - - - - - - - - - - (285) (285)
Treasury shares - - (292) - - - - - - - - (292) - (292)
Share-based
payments - - - - - - - - 713 713 - 713 - 713
Exercise of share
options 20 - - 292 - - - - - (1,087) (1,087) 795 - - -
------------------ ----- ------- ------- --------- --------- ------------- --------- ----------- --------- ----------- --------- -------- ------------ --------------- --------
Balance at 30 June
2020 (unaudited) 226,506 438,041 - 99 (4,968) (344) (14,198) (210,046) 1,790 (227,667) 284,946 721,826 73,293 795,119
------------------ ----- ------- ------- --------- --------- ------------- --------- ----------- --------- ----------- --------- -------- ------------ --------------- --------
Balance at 1
January
2019 225,409 438,041 62 - (4,324) (13,708) (210,046) 4,860 (223,156) 278,995 719,289 71,003 790,292
------------------ ----- ------- ------- --------- --------- ------------- --------- ----------- --------- ----------- --------- -------- ------------ --------------- --------
Other
comprehensive
income/(expense) - - - - - 1,484 (17) - - 1,467 - 1,467 - 1,467
Profit/(loss) for
the period - - - - - - - - - - 13,895 13,895 2,766 16,661
------------------ ----- ------- ------- --------- --------- ------------- --------- ----------- --------- ----------- --------- -------- ------------ --------------- --------
Total
comprehensive
(loss)/income for
the period - - - - - 1,484 (17) - - 1,467 13,895 15,362 2,766 18,128
------------------ ----- ------- ------- --------- --------- ------------- --------- ----------- --------- ----------- --------- -------- ------------ --------------- --------
Sale of financial
assets at fair
value
through OCI 14 - - - - - 1,656 - - - 1,656 (1,656) - - -
Dividends 21 - - - - - - - - - - (10,002) (10,002) - (10,002)
Treasury shares - - (309) - - - - - - - - (309) - (309)
Share-based
payments - - - - - - - - 946 946 - 946 - 946
Exercise of share
options 20 - - 309 - - - - - (515) (515) 206 - - -
------------------ ----- ------- ------- --------- --------- ------------- --------- ----------- --------- ----------- --------- -------- ------------ --------------- --------
Balance at 30 June
2019 (unaudited) 225,409 438,041 - 62 - (1,184) (13,725) (210,046) 5,291 (219,602) 281,438 725,286 73,769 799,055
------------------ ----- ------- ------- --------- --------- ------------- --------- ----------- --------- ----------- --------- -------- ------------ --------------- --------
Notes to the interim condensed consolidated financial
statements
1 Corporate Information
Hochschild Mining PLC (hereinafter the "Company" and together
with its subsidiaries, the "Group") is a public limited company
incorporated on 11 April 2006 under the Companies Act 1985 as a
limited company and registered in England and Wales with registered
number 05777693. The Company's registered office is located at 17
Cavendish Square, London W1G 0PH, United Kingdom. Its ordinary
shares are traded on the London Stock Exchange.
The Group's principal business is the mining, processing and
sale of gold and silver. The Group has two operating mines
(Pallancata and Inmaculada) located in Southern Peru, and one
operating mine (San Jose) located in Argentina. During the first
quarter of 2019 the Arcata mine unit, located in Peru, ceased
operations. The Group also has a portfolio of projects located
across Peru, Argentina and Chile and the United States of America
at various stages of development.
These interim condensed consolidated financial statements were
approved for issue on behalf of the Board of Directors on 18 August
2020.
2 Significant Accounting Policies
(a) Basis of preparation
These interim condensed consolidated financial statements set
out the Group's financial position as at 30 June 2020 and 31
December 2019 and its financial performance and cash flows for the
six months ended 30 June 2020 and 30 June 2019.
They have been prepared in accordance with the Disclosure and
Transparency Rules of the Financial Conduct Authority and IAS 34
Interim Financial Reporting in accordance with International
Financial Reporting Standards ('IFRS') as adopted by the European
Union. Accordingly, the interim condensed consolidated financial
statements do not include all the information required for full
annual financial statements and therefore, should be read in
conjunction with the Group's 2019 annual consolidated financial
statements as published in the 2019 Annual Report.
The interim condensed consolidated financial statements do not
constitute statutory accounts as defined in the Companies Act 2006.
The financial information for the full year is based on the
statutory accounts for the financial year ended 31 December 2019. A
copy of the statutory accounts for that year, which were prepared
in accordance with IFRS as adopted by the European Union has been
delivered to the Registrar of Companies. The auditor's report under
section 495 of the Companies Act 2006 in relation to those accounts
was unmodified and did not include a reference to any matters to
which the auditor drew attention by way of emphasis without
qualifying the report and did not contain a statement under s498(2)
or s498(3) of the Companies Act 2006.
The impact of the seasonality or cyclicality of operations is
not regarded as significant on the interim condensed consolidated
financial statements.
The interim condensed consolidated financial statements are
presented in US dollars ($) and all monetary amounts are rounded to
the nearest thousand ($000) except when otherwise indicated.
(b) Critical accounting estimates and judgements
The impact of Covid-19 on the Group has been considered in the
preparation of the interim financial statements including our
evaluation of critical accounting estimates and judgements.
Many of the amounts included in the financial statements involve
the use of judgement and/or estimation. These judgements and
estimates are based on management's best knowledge of the relevant
facts and circumstances, having regard to prior experience, but
actual results may differ from the amounts included in the
financial statements. Information about such judgements and
estimates is contained in the accounting policies and/or the notes
to the financial statements.
The significant accounting judgments, estimates and assumptions
which remain consistent with those disclosed in the consolidated
financial statements for the year ended 31 December 2019, except
for:
Critical judgements:
-- Assessment of impairment indicators for the Group's GCUs - note 12
-- Criteria for exceptional items - note 9
Significant estimates:
-- Mine closure estimates - note 18
-- Recoverable values of mining assets - note 12
As at 30 June 2020, the valuation of certain of the Group's
assets and liabilities reflect the changes to certain assumptions
use in the determination of their value, such as future gold and
silver prices, discount rates, exchange rates, and interest rates.
These assumptions are subject to greater variability than normal
under the current Covid-19 environment.
(c) Changes in accounting policies and disclosures
The accounting policies adopted in the preparation of the
interim condensed consolidated financial statements are consistent
with those followed in the preparation of the Group's annual
consolidated financial statements for the year ended 31 December
2019, except for the adoption of new standards and interpretations
effective for the Group from 1 January 2020. Other amendments and
interpretations apply for the first time in 2020, but do not have
an impact on the interim condensed consolidated financial
statements of the Group. The Group has not early adopted any other
standard, interpretation or amendment that has been issued but is
not yet effective.
Derivative financial instruments and hedge accounting
In 2020, the Group used interests rate swaps to hedge certain of
its cash flows from loans against interest rate risk. Consequently,
the Group has opted to apply hedge accounting under the
requirements of IFRS 9 Financial Instruments.
Initial recognition and subsequent measurement
These derivative financial instruments were initially recognised
at fair value on the date on which the derivative contract was
entered into and were subsequently remeasured at fair value.
Derivatives are carried as financial assets when the fair value is
positive and as financial liabilities when the fair value is
negative.
For the purpose of hedge accounting, hedges are classified as
cash flow hedges when hedging the exposure to variability in cash
flows that is either attributable to a particular risk associated
with a recognised asset or liability or a highly probable forecast
transaction or the foreign currency risk in an unrecognised firm
commitment.
At the inception of a hedge relationship, the Group formally
designates and documents the hedge relationship to which it wishes
to apply hedge accounting and the risk management objective and
strategy for undertaking the hedge.
The documentation includes identification of the hedging
instrument, the hedged item, the nature of the risk being hedged
and how the Group will assess whether the hedging relationship
meets the hedge effectiveness requirements (including the analysis
of sources of hedge ineffectiveness and how the hedge ratio is
determined). A hedging relationship qualifies for hedge accounting
if it meets all of the following effectiveness requirements:
-- There is 'an economic relationship' between the hedged item and the hedging instrument.
-- The effect of credit risk does not 'dominate the value
changes' that result from that economic relationship.
-- The hedge ratio of the hedging relationship is the same as
that resulting from the quantity of the hedged item that the Group
actually hedges and the quantity of the hedging instrument that the
Group actually uses to hedge that quantity of hedged item
Cash flow hedges
Changes in the fair value of derivatives designated as cash flow
hedges, which are held to hedge the exposure to variability in cash
flows of the hedged items, are recognised in other components of
equity until changes in the fair value of the hedged item are
recognised in profit or loss. However, the ineffective portion of
the changes in the fair value of such derivatives is recognised in
profit or loss. The Group use cash flow hedges for hedging the
exposure to variability in interest cash flows of a floating rate
interest bearing assets and liabilities arising from changes in
interest rates.
The amounts that have been recognised in other components of
equity relating to such hedging instruments are reclassified to
profit or loss when the hedged transaction affects profit or loss.
However, if a hedged item is a recognised non-financial asset or
non-financial liability, the amounts that have been recognised in
other components of equity relating to the hedging instrument are
reclassified as adjustments to the initial carrying amount of the
non-financial asset or non-financial liability.
(d) Going concern
The Directors have reviewed liquidity and covenant forecasts for
the Group, which have been revised to reflect the expected impact
of Covid-19 and they have also considered potential downside
scenarios and the impact of specific mitigating actions in
assessing whether the Group is able to continue in operation for 12
months from the date of these financial statements.
The Directors consider the risk of another government-imposed
suspension across all operations to be low. In Peru, the government
has declared the mining industry as one of the key drivers for the
country's economic recovery and the Group's mines are located in
isolated areas, thus allowing the Company to control and monitor
access to its facilities. In Argentina, the central government has
declared mining as an essential activity for the economy and the
local authorities of Santa Cruz (where the San Jose mine is
located) are also providing support for the continuity of the
mining industry which is of critical regional importance.
Furthermore, the Group has mitigated the risk of a company-mandated
suspension due to the various protocols that have been implemented,
for example, stringent health and safety measures have been put in
place at all mines which go well beyond those required by law and
include (a) the systematic testing of each employee prior to
travelling to the mine units and (b) the use of technology-based
systems to track, in real time, suspected cases.
The Group has had two Covid-19 related stoppages so far. The
second of these stoppages was implemented by the Company to deal
with a localised outbreak at Inmaculada and was much shorter in
duration than the first as management had accumulated, and
continues to accumulate, the knowledge and experience in dealing
with these circumstances.
The Directors reviewed a number of scenarios including a base
case (the "Base Scenario"), reflecting actual production in H1
2020, a period of ramp-up at our operations during H2 2020,
incremental Covid-related costs throughout the remaining months of
2020 and average precious metal prices of $1,725/oz for gold and
$18/oz for silver (the "Assumed Prices"). Taking into account the
risks associated with Covid-19, described in the Risks section of
the announcement, the Directors also reviewed an unlikely, but
plausible severe scenario (the "Severe Scenario") which takes into
account (a) the Assumed Prices (b) an eight-week suspension of all
operations during H2 2020 (c) forecast expenditure according to the
Base Scenario and (d) incremental Covid-19 related costs throughout
2021.
In line with their usual practice, the Directors considered the
impact on the Group's cash balance and debt covenant compliance
under each scenario applying different precious metal price
assumptions. The Severe Scenario was also analysed by the Directors
with reduced precious metal prices of $1,400/oz for gold and $16/oz
for silver (significantly below current spot and futures prices)
(the "Remote Scenario") which naturally resulted in a reduced cash
balance but it nevertheless remained more than adequate for the
Group's forecast expenditure with sufficient headroom maintained to
comply with debt covenants. In each scenario, it has been assumed
that all employees remain on full pay and that no drastic cost
cutting mitigating actions would be necessary to maintain a
comfortable level of liquidity.
After making enquiries, the Directors have a reasonable
expectation that the Group has adequate resources to continue in
operational existence for the foreseeable future. Accordingly, they
continue to adopt the going concern basis in preparing the
condensed set of financial statements.
3 Segment reporting
The following tables present revenue and profit/(loss)
information for the Group's operating segments for the six months
ended 30 June 2020 and 2019 and asset information as at 30 June
2020 and 31 December 2019 respectively:
Adjustments
Six months ended Other and
30 June 2020 Pallancata San Jose Inmaculada Exploration (1) eliminations
(Unaudited) US$000 US$000 US$000 US$000 US$000 US$000 Total US$000
---------------- ---------- -------- ---------- ----------- ------- --------------- ------------
Revenue from
external
customers 25,258 78,928 127,161 - 51 - 231,398
Inter segment
revenue - - - - 2,877 (2,877) -
----------------- ---------- -------- ---------- ----------- ------- --------------- ------------
Total revenue
from customers 25,258 78,928 127,161 - 2,928 (2,877) 231,398
----------------- ---------- -------- ---------- ----------- ------- --------------- ------------
Provisional
pricing
adjustments (237) 788 80 - - - 631
-----------------
Total revenue 25,021 79,716 127,241 - 2,928 (2,877) 232,029
----------------- ---------- -------- ---------- ----------- ------- --------------- ------------
Segment
profit/(loss) (2,137) 20,701 58,763 (13,103) 2,075 55 66,354
Others(2) (59,890)
----------------- ---------- -------- ---------- ----------- ------- --------------- ------------
Profit from
continuing
operations
before income
tax 6,464
----------------- ---------- -------- ---------- ----------- ------- --------------- ------------
As at 30 June
2020 (Unaudited)
---------------- ---------- -------- ---------- ----------- ------- --------------- ------------
Assets
Capital
expenditure 3,473 12,685 22,463 3,341 828 - 42,790
Current assets 15,290 48,087 15,664 38,301 5,471 - 122,813
Other non-current
assets 43,964 159,793 510,248 223,958 55,277 - 993,240
----------------- ---------- -------- ---------- ----------- ------- --------------- ------------
Total segment
assets 59,254 207,880 525,912 262,259 60,748 - 1,116,053
----------------- ---------- -------- ---------- ----------- ------- --------------- ------------
Not reportable
assets(3) - - - - 208,458 - 208,458
----------------- ---------- -------- ---------- ----------- ------- --------------- ------------
Total assets 59,254 207,880 525,912 262,259 269,206 - 1,324,511
----------------- ---------- -------- ---------- ----------- ------- --------------- ------------
1 The Arcata mine unit was put into care and maintenance on 13
February 2019 and consequently is reported in others from 1 January
2020.
2 Comprised of administrative expenses of US$20,236,000, other
income of US$1,096,000, other expenses of US$34,557,000, write off
of non-financial assets of US$1,208,000, finance income of
US$2,074,000, finance costs of US$5,144,000 and foreign exchange
loss of US$1,915,000.
3 Not reportable assets are comprised of financial assets at
fair value through OCI of US$568,000, other receivables of
US$41,046,000, income tax receivable of US$3,580,000, deferred
income tax assets of US$1,173,000, and cash and cash equivalents of
US$162,091,000.
Six months Adjustments
ended and
30 June 2019 Pallancata San Jose Inmaculada Exploration Other(1) eliminations
(Unaudited) US$000 US$000 US$000 US$000 US$000 US$000 Total US$000
--------------- ---------- -------- ---------- ----------- -------- --------------- ------------
Revenue from
external
customers 69,629 106,997 170,460 - 5,347 - 352,433
Inter segment
revenue - - - - 3,009 (3,009) -
---------------- ---------- -------- ---------- ----------- -------- --------------- ------------
Total revenue
from customers 69,629 106,997 170,460 - 8,356 (3,009) 352,433
---------------- ---------- -------- ---------- ----------- -------- --------------- ------------
Provisional
pricing
adjustments 164 1,803 214 - (164) - 2,017
----------------
Total revenue 69,793 108,800 170,674 - 8,192 (3,009) 354,450
---------------- ---------- -------- ---------- ----------- -------- --------------- ------------
Segment
profit/(loss) 5,830 19,944 65,494 (18,707) 2,391 (2,365) 72,587
Others(2) (43,069)
---------------- ---------- -------- ---------- ----------- -------- --------------- ------------
Profit from
continuing
operations
before income
tax 29,518
------------
As at 31
December
2019
------------
Assets
Capital
expenditure 25,357 43,623 66,435 62,881 6,820 - 205,116
Current assets 20,500 48,286 26,601 38,301 5,006 - 138,694
Other
non-current
assets 50,438 163,656 506,779 220,934 57,391 - 999,198
---------------- ---------- -------- ---------- ----------- -------- --------------- ------------
Total segment
assets 70,938 211,942 533,380 259,235 62,397 - 1,137,892
---------------- ---------- -------- ---------- ----------- -------- --------------- ------------
Not reportable
assets(3) - - - - 215,356 - 215,356
---------------- ---------- -------- ---------- ----------- -------- --------------- ------------
Total assets 70,938 211,942 533,380 259,235 277,753 - 1,353,248
---------------- ---------- -------- ---------- ----------- -------- --------------- ------------
1 For comparative purposes the Arcata mine unit is disclosed in
others as it was put into care and maintenance on 13 February 2019
and consequently is reported in others from 1 January 2020.
2 Comprised of administrative expenses of US$23,021,000, other
income of US$4,471,000, other expenses of US$20,776,000, write off
of non-financial assets of US$517,000, finance income of
US$1,424,000, finance costs of US$3,504,000 and foreign exchange
loss of US$1,146,000.
3 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 assets of US$1,627,000, and cash and cash equivalents of
US$166,357,000.
4 Revenue
Six-months ended 30
June
----------------------------------
2020 (Unaudited) 2019 (Unaudited)
US$000 US$000
-------------------------- ---------------- ----------------
Gold (from dore bars) 113,295 154,141
Silver (from dore bars) 38,989 62,824
Gold (from concentrate) 43,181 55,297
Silver (from concentrate) 36,513 82,088
Other 51 100
--------------------------- ---------------- ----------------
Total 232,029 354,450
--------------------------- ---------------- ----------------
Included within revenue is a gain of US$631,000 (2019: gain of
US$2,017,000) relating to provisional pricing adjustments arising
on sales of concentrates and dore, mainly contributed by
provisional pricing of US$558,000 loss (2019: loss of US$678,000)
from silver concentrates and US$1,048,000 gain (2019: gain of
US$2,999,000) from gold concentrates, US$15,000 loss (2019: loss of
US$339,000) from silver dore and US$156,000 gain (2019: gain of
US$35,000) resulting in total revenue from customers in the amount
of US$231,398,000 (2019: US$352,433,000).
Included within revenue is a transaction price of US$2,143,000
(2019: US$3,444,000) related to the shipping services provided by
the Group to the customers arising on sale of concentrates of
US$1,575,000, gold: US$927,000, silver: US$648,000 and doré
ofUS$568,000, gold: US$358,000, silver: US$210,000 (2019:
concentrates of US$2,650,000, gold: US$1,244,000, silver:
US$1,406,000 and doré of US$794,000, gold: US$460,000, silver:
US$334,000).
5 Cost of sales before exceptional items
Included in cost of sales are:
Six-months ended 30
June
----------------------------------
2020 (Unaudited) 2019 (Unaudited)
US$000 US$000
----------------------------------------------- ---------------- ----------------
Depreciation and amortisation in cost of sales
1 48,831 91,322
Personnel expenses 2 29,261 51,071
Mining royalty 2,048 2,797
Change in products in process and finished
goods 7,728 2,881
------------------------------------------------ ---------------- ----------------
1 The depreciation and amortisation in production cost is
US$49,402,000 (2019: US$90,371,000).
2 Includes workers profit sharing of US$nil (2019:
US$568,000).
6 Exploration expenses
Six months ended 30
June
--------------------------------
2020 2019
(Unaudited) (Unaudited)
US$000 US$000
-------------------------- ------------- -------------
Mine site exploration1
Arcata 76 795
Ares 327 241
Inmaculada 958 3,110
Selene 6 -
Pallancata 1,522 1,483
San Jose 4,694 5,404
------------------------------- ------------- -------------
7,583 11,033
------------- -------------
Prospects2
Peru 610 277
USA 74 2,293
Chile (124) 431
------------------------------- ------------- -------------
560 3,001
------------- -------------
Generative3
Peru 1,416 1,249
Chile 96 -
1,512 1,249
------------- -------------
Personnel 2,716 2,886
Depreciation right-of-use 162 182
Others 210 201
------------------------------- ------------- -------------
Total 12,743 18,552
------------------------------- ------------- -------------
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.
7 Selling expenses
Six-months ended 30
June
----------------------------------
2020 (Unaudited) 2019 (Unaudited)
US$000 US$000
------------------- ---------------- ----------------
Personnel expenses 151 260
Warehouse services 466 799
Taxes 1 4,282 8,086
Other 1,088 1,335
-------------------- ---------------- ----------------
Total 5,987 10,480
-------------------- ---------------- ----------------
1 Corresponds to the export duties in Argentina calculated as a
fixed amount in pesos per US$ of export.
8 Other income and expenses before exceptional Six-months ended 30
items June
----------------------------------
2020 (Unaudited) 2019 (Unaudited)
US$000 US$000
----------------------------------------------- ---------------- ----------------
Other income
Logistic services 336 2,448
Gain on recovery of expenses - 596
Income related to the San Felipe agreement
(note 18) - 600
Others 760 827
------------------------------------------------ ---------------- ----------------
Total 1,096 4,471
------------------------------------------------ ---------------- ----------------
Other expenses
Increase in provision for mine closure - (570)
Provision of obsolescence of supplies - (55)
Loss on recovery of expenses (165) -
Depreciation right-of-use assets (75) (121)
Corporate social responsibility contribution
in Argentina (874) (1,417)
Care and maintenance expenses of Ares mine
unit (852) (2,346)
Care and maintenance expenses of Arcata mine
unit (1,061) (2,920)
Effect of Covid-19 pandemic 1 (24,012) -
Others (902) (1,398)
------------------------------------------------ ---------------- ----------------
Total (27,941) (8,827)
------------------------------------------------ ---------------- ----------------
1 Corresponds to the fixed cost accumulated during the stoppage
and operation of the mine units under planned capacity due to the
Covid-19 pandemic. These costs mainly include personnel expenses of
US$16,038,000, third party services of US$4,765,000, supplies of
US$551,000 and depreciation and amortisation of US$1,542,000.
In accordance with the Group's accounting policy for inventory,
the cost of work in process and finished inventory (ore
inventories) is based on the cost of production, which includes: 1)
costs, materials and contractor expenses which are directly
attributable to the extraction and processing of ore; 2)
depreciation of property, plant and equipment used in the
extraction; and processing of ore; and 3) related production
overheads (based on normal operating capacity). Costs that do not
meet these criteria are therefore not part of the costs of the
inventories and are not presented within cost of sales.
Consequently, they have been presented as of other expenses.
9 Exceptional items
Exceptional items relate to:
Six-months ended 30
June
----------------------------------
2020 (Unaudited) 2019 (Unaudited)
US$000 US$000
-------------------------------------- ---------------- ----------------
Other expense
Incremental cost due to pandemic (1) (6,616) -
Restructuring of Arcata mine unit (3) - (11,949)
--------------------------------------- ---------------- ----------------
Total (6,616) (11,949)
--------------------------------------- ---------------- ----------------
Income tax expense
Income tax credit (2 and 4) 1,955 3,525
--------------------------------------- ---------------- ----------------
Total 1,955 3,525
--------------------------------------- ---------------- ----------------
The exceptional items for the period ended 30 June 2020
correspond to:
1 Incremental costs to manage the Covid-19 pandemic. Costs have
been incurred in respect of the implementation of the necessary
protocols including incremental third party services of
US$3,268,000 (mainly related to accommodation whilst testing all
workers for active Covid-19 cases prior to travelling to mine units
and for additional transportation costs to facilitate social
distancing), personnel expenses of US$1,203,000 (mainly reflecting
one-off bonuses paid to those workers required to oversee critical
processes during period of suspension) and donations of
US$1,296,000 (which includes the value of equipment donated to
assist the national effort in Peru to control the pandemic as well
as the donations to hardship funds administered by educational
institutions, UTEC and TECSUP (refer to note 22)). For further
detail on the health protocols implemented across all operations
refer to the detailed discussion outlined in the Risks section of
the announcement. The Group discloses these expenses as exceptional
items as they are 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. These expenses
are not expected to be recurring.
2 The tax effect generated by the incremental costs arising from the Covid-19 pandemic.
The exceptional items for the period ended 30 June 2019
correspond to:
3 The termination benefits of 845 employees resulting from the
restructuring process generated as the Arcata mine unit was placed
on care and maintenance.
4 The current tax credit generated by the termination benefits
arising from the restructuring process of the Arcata mine unit.
10 Finance income and finance cost before exceptional items
The Group recognised the following finance income and finance
costs before exceptional items:
Six-months ended 30
June
----------------------------------
2020 (Unaudited) 2019 (Unaudited)
US$000 US$000
------------------------------------------------- ---------------- ------------------
Finance income:
Interest on deposits and liquidity funds 1,152 749
Interest on loans 185 63
Gain on discount of other receivables (1) 716 525
Others 21 87
-------------------------------------------------- ---------------- ----------------
Total 2,074 1,424
-------------------------------------------------- ---------------- ----------------
Finance cost:
Interest on bank loans (3,647) (2,351)
Other interest (175) (202)
-------------------------------------------------- ---------------- ----------------
Total interest expense (3,822) (2,553)
-------------------------------------------------- ---------------- ----------------
Unwind of discount rate - (284)
Loss from changes in the fair value of financial
instruments (617) -
Loss on discount of deferred income (1) (101) -
Others (604) (667)
-------------------------------------------------- ---------------- ----------------
Total (5,144) (3,504)
-------------------------------------------------- ---------------- ----------------
1 Mainly corresponds to the gain/(loss) on discount of tax
credits in Argentina.
11 Income tax expense
Six-months ended 30
June
----------------------------------
2020 (Unaudited) 2019 (Unaudited)
US$000 US$000
-------------------------------------------------- ---------------- ----------------
Current tax
Current income tax expense (444) 7,512
Current mining royalty charge 1,490 2,466
Current special mining tax charge 713 1,132
---------------------------------------------------
Total 1,759 11,110
--------------------------------------------------- ---------------- ----------------
Deferred tax
Origination and reversal of temporary differences 13,711 1,747
--------------------------------------------------- ---------------- ----------------
Total 13,711 1,747
--------------------------------------------------- ---------------- ----------------
Total taxation charge in the income statement 15,470 12,857
--------------------------------------------------- ---------------- ----------------
The pre-exceptional tax charge for the period was US$17,425,000
(2019: US$16,382,000).
The weighted average statutory income tax rate was 30.7% for
2020 and 30.5% for 2019. This is calculated as the average of the
statutory tax rates applicable in the countries in which the Group
operates, weighted by the profit/(loss) before tax of the Group
companies in their respective countries as included in the
consolidated financial statements.
The change in the weighted average statutory income tax rate is
due to a change in the weighting of profit/(loss) before tax in the
various jurisdictions in which the Group operates.
The effective tax rate for corporate income tax before foreign
exchange effect for the six months ended 30 June 2020 is 54.3% (30
June 2019: 32.9%), compared to the corporate income tax and mining
royalties before foreign exchange effect of 88.4% (30 June 2019:
45.0%) and the total taxation charge in the income statement of
239.3% (30 June 2019: 43.6%).
The increase in the charge is mainly explained by the non-cash
impact of local currency devaluation in Peru and Argentina in H1
2020 of 7% and 18% respectively, which reduced the tax bases
impacting deferred income tax by US$9,800,000 (30 June 2019: credit
of US$440,000).
12 Property, plant and equipment
During the six months ended 30 June 2020, the Group acquired and
developed assets with a cost of US$39,987,000 (30 June 2019:
US$66,975,000). The additions for the six months ended 30 June 2020
relate to:
Mining properties Other property Total additions
and development plant and of property
(Unaudited) equipment plant and
US$000 (Unaudited) equipment
US$000 (Unaudited)
US$000
----------- ----------------- --------------- ---------------
San Jose 9,205 3,480 12,685
Pallancata 3,473 - 3,473
Inmaculada 15,393 7,070 22,463
Others 423 943 1,366
------------ ----------------- --------------- ---------------
Total 28,494 11,493 39,987
------------ ----------------- --------------- ---------------
Assets with a net book value of US$nil were disposed of by the
Group during the six month period ended 30 June 2020 (30 June 2019:
US$130,000) resulting in a net gain on disposal of US$38,000 (30
June 2019: gain of US$2,000).
For the six months ended 30 June 2020, the depreciation charge
on property, plant and equipment was US$51,404,000 (30 June 2019:
US$89,661,000).
In June 2020, management determined that there was a trigger of
impairment in the San Jose mine unit due to the increase of the
discount rate from 13.5% to 15.7%, mainly explained by the rise in
country risk premium in Argentina. (31 December 2019: trigger of
impairment also determined due to the increase in the discount rate
from 9.56% to 13.5%). In both periods, the impairment test resulted
in no impairment, or impairment reversal being recognised as the
negative effects of the increased discount rate were offset by an
increase in the gold analyst consensus prices.
In June 2020, management also determined that there was a
trigger of impairment related to a change in the mine plan of the
Pallancata mine unit. The life of mine has been extended six months
by spreading the production of the estimated reserves and resources
across this longer period to allow more time for exploration
activities to be completed. Additionally, economically marginal
areas have been removed, reducing both future production ounces and
capital expenditures. The impairment test resulted in no impairment
or impairment reversal being recognised. The effect of the changes
in the mine plan was offset by the increase in the gold analyst
consensus prices.
In 2019, 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 out. 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$126,000 in
evaluation and exploration assets).
No indicators of impairment or reversal of impairment were
identified in the other CGUs, which includes other exploration
projects.
The recoverable values of the San Jose and Pallancata CGUs were
determined using a fair value less costs of disposal (FVLCD)
methodology. FVLCD was determined using a combination of level 2
and level 3 inputs, which result in fair value measurements
categorised in its entirety as level 3 in the fair value hierarchy,
to construct a discounted cash flow model to estimate the amount
that would be paid by a willing third party in an arm's length
transaction.
The key assumptions on which management has based its
determination of FVLCD and the associated recoverable values
calculated are gold and silver prices, future capital requirements,
production costs, reserves and resources volumes (reflected in the
production volume), and the discount rate.
2020
US$ per oz. 2020 2021 2022 2023 2024 Long-term
------------- ------ ------ ------ ------ ------ ----------
Gold 1,780 1,659 1,545 1,450 1,407 1,400
Silver 17.7 17.2 16.9 16.4 16.4 17.0
------------- ------ ------ ------ ------ ------ ----------
San Pallancata
Jose
-------------------------- ------ -----------
Discount rate (post tax) 15.7% 5.6%
-------------------------- ------ -----------
Periods of 7.5 and 2.5 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.
30 June 2020 (US$000) San Pallancata
Jose
---------------------------------------------------- -------- -----------
Current carrying value of CGU, net of deferred tax 128,515 43,649
---------------------------------------------------- -------- -----------
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$000
----------------------
San Jose Pallancata
--------------------------------------------------- --------- -----------
Gold and silver prices (decrease by 10%) (61,700) (17,700)
Gold and silver prices (increase by 10%)(1 and 2) 16,800 12,700
Production costs (increase by 10%) (37,100) (9,100)
Production costs (decrease by 10%)(1) 16,800 7,200
Production volume (decrease by 10%) (49,900) (13,900)
Production volume (increase by 10%)(1) 16,800 9,500
Post-tax discount rate (increase by 3%)(3) (7,400)
Post-tax discount rate (decrease by 3%)(3) 8,300
Capital expenditure (increase by 10%) (10,200)
Capital expenditure (decrease by 10%) 9,700
--------------------------------------------------- --------- -----------
1 In the case of San Jose, this represents the maximum
impairment loss that could be reversed, as it represents the
carrying amount that would have been determined, net of
depreciation or amortisation, if no impairment loss had been
recognised.
2 In the case of Pallancata, , this represents the maximum
impairment loss that could be reversed, as it represents the
carrying amount that would have been determined, net of
depreciation or amortisation, if no impairment loss had been
recognised.
3 Management believes that a 3% change is a reasonably possible
change in the post-tax discount rate in Argentina. However, changes
in the perception of Argentina arising from political, social and
financial disruption may give rise to significant movement in the
discount rate used in the assessment of the San Jose CGU.
2019
US$ 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 Pallancata
Jose
-------------------------- ------ -----------
Discount rate (post tax) 13.5% 6.5%
-------------------------- ------ -----------
Periods of 6 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 Pallancata
Jose
---------------------------------------------------- -------- -----------
Current carrying value of CGU, net of deferred tax 132,278 59,147
---------------------------------------------------- -------- -----------
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 3%)(2) (11,200)
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 In the case of Argentina, 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.
13 Evaluation and exploration assets
During the six months ended 30 June 2020, the Group capitalised
evaluation and exploration costs of US$2,803,000 (30 June 2019:
US$3,854,000). The additions correspond to the following
properties:
Unaudited
US$000
------------------- ---------
Biolantánidos 1,683
Azuca 421
Crespo 312
Volcan 387
Total 2,803
--------------------- ---------
There were no transfers from evaluation and exploration assets
to property, plant and equipment during the period (2019:
US$nil).
14 Financial instruments
Fair value hierarchy
The Group uses the following hierarchy for determining and
disclosing the fair value of financial instruments by valuation
technique:
Level 1: quoted (unadjusted) prices in active markets for
identical assets or liabilities.
Level 2: other techniques for which all inputs which have a
significant effect on the recorded fair value are observable,
either directly or indirectly.
Level 3: techniques which use inputs which have a significant
effect on the recorded fair value that are not based on observable
market data.
At 30 June 2020 and 31 December 2019, the Group held the
following financial instruments measured at fair value:
As at
30 June 2020
(Unaudited) Level 1 Level 2 Level 3
US$000 US$000 US$000 US$000
----------------------------- -------------- -------- -------- --------
Assets measured at fair
value
Equity shares(1) 568 568 - -
Trade and other receivables 32,725 - - 32,725
-----------------------------
33,293 568 - 32,725
----------------------------- -------------- -------- -------- --------
Liabilities measured at
fair value
Derivative financial liabilities (7,126) - (7,126) -
----------------------------------
(7,126) - (7,126) -
---------------------------------- -------- --------
1 During 2020, the Group sold 452,100 shares of Americas Silver
Corporation (ASC), 7,399,331 shares of Skeena Resources Limited and
3,897,500 shares of Goldspot Discoveries Inc., with a fair value at
the date of sale of US$1,257,000, US$5,337,000 and US$476,000
respectively, generating a gain on disposal of US$658, 000,
US$1,091,000 and US$92,000 respectively, recognised in equity.
Derivative financial liabilities - Interest rate swap
On 14 February 2020, the Group and JP Morgan Chase Bank, N.A.
entered into an interest rate swap with a notional amount equal to
the principal of the medium term loan whereby the Group pays fixed
rate of at 2.534% and receives interests at a variable rate equal
to Libor+1.15% on the notional amount from 17 March 2020 to 17
December 2024 (refer note 17). The interest rate swap is being used
to hedge the exposure to changes in the cashflows of its variable
rate medium-term loan. In accordance with IFRS 9, this derivative
instrument is categorised as a cash flow hedge at the inception of
the hedging relationship, and on an ongoing basis, the Group
assesses whether a hedging relationship meets the hedge
effectiveness requirements. At a minimum, an entity shall perform
the ongoing assessment at each reporting date or upon a significant
change in the circumstances affecting the hedge effectiveness
requirements, whichever comes first. The assessment relates to
expectations about hedge effectiveness and is therefore only
forward-looking.
The fair value of the interest rate swap was calculated using a
discounted cash flow model applying a combination of level 1 (USD
swap curve and USD zero yield curve) and level 2 inputs. This
approach results in the fair value measurement categorised in its
entirety as level 2 in the fair value hierarchy. The fair value of
the interest rate swap as at 30 June 2020 is as follows:
US$000
------------------------- -------
Current liabilities 1,582
Non-current liabilities 5,544
-------------------------
7,126
------------------------- -------
The effect recorded is as follows:
US$000
-------------------------------------------- -------
Income statement - finance costs 355
Equity - Unrealised gain/ (loss) on hedges 7,047
-------------------------------------------- -------
As at
31 December
2019 Level 1 Level 2 Level 3
US$000 US$000 US$000 US$000
----------------------------- ------------- -------- -------- --------
Assets measured at fair
value
Equity shares(2) 6,159 6,159 - -
Trade and other receivables 37,799 - - 37,799
------------------------------ ------------- -------- -------- --------
43,958 6,159 - 37,799
------------- -------- -------- --------
2 During 2019, 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 recognised
in equity.
During the six months ended 30 June 2020 there were no transfers
between these levels. During the year ended 31 December 2019 there
were transfers between level 3 to level 1, related to the listing
of the shares of Goldspot Discoveries Inc. initially recognised as
level 3.
The reconciliation of the financial instruments categorised as
Level 3 is as follows:
Trade receivables
Unlisted subject to
equity shares price adjustments
US$000 US$000
------------------------------------------------ -------------- ------------------
Balance at 1 January 2019 3,186 45,201
Acquisition 500 -
Fair value adjustment recognised through OCI 1,868 -
Reclassification to investment in subsidiaries (3,444) -
Reclassification to listed equity shares (2,110) -
Net change in trade receivables from goods sold - (4,887)
Changes in fair value of price adjustments - 14,584
Realised price adjustments during the period - (17,099)
------------------------------------------------- -------------- ------------------
Balance at 31 December 2019 - 37,799
------------------------------------------------- -------------- ------------------
Net change in trade receivables from goods sold - (4,065)
Changes in fair value of price adjustments - 631
Realised price adjustments during the period - (1,640)
------------------------------------------------- -------------- ------------------
Balance at 30 June 2020 (Unaudited) - 32,725
------------------------------------------------- -------------- ------------------
The fair value of non-listed equity investments is determined
based on financial information available of the companies and they
are categorised as level 3
15 Deferred income tax assets and liabilities
The changes in the net deferred income tax assets/(liabilities)
are as follows:
As at As at
30 June 31 December
2020 2019
(Unaudited) US$000
US$000
--------------------------------- ------------- ------------
Beginning of the period (61,476) (69,727)
Income statement (charge)/credit (13,711) 8,251
OCI credit 2,079 -
-------------------------------------- ------------- ------------
End of the period (73,108) (61,476)
-------------------------------------- ------------- ------------
Deferred income tax assets and liabilities are offset when there
is a legally enforceable right to offset current tax assets against
current tax liabilities and when the deferred income tax assets and
liabilities relate to the same fiscal authority.
The amounts after offset, as presented on the face of the
Statement of financial position, are as follows:
As at As at
30 June 31 December
2020 2019
(Unaudited)
US$000 US$000
------------------------------------ ------------- ------------
Deferred income tax assets 1,173 1,627
Deferred income tax liabilities (74,281) (63,103)
----------------------------------------- ------------- ------------
Net deferred income tax liabilities (73,108) (61,476)
----------------------------------------- ------------- ------------
16 Cash and cash equivalents
As at As at
30 June 31 December
2020 2019
(Unaudited)
US$000 US$000
----------------------------------- ------------- ------------
Cash at bank 480 331
Liquidity funds - 16
Current demand deposit accounts(1) 93,467 37,900
Time deposits(2) 68,144 128,110
---------------------------------------- ------------- ------------
Cash and cash equivalents 162,091 166,357
---------------------------------------- ------------- ------------
1 Relates to bank accounts which are readily accessible to the
Group and bear interest.
2 These deposits have an average maturity of 41 days (as at 31
December 2019: 7 days).
17 Borrowings
As at 30 June 2020 As at 31 December
(Unaudited) 2019
------------------------------- -------------------------------
Effective Effective
interest Non-current Current interest Non-current Current
rate US$000 US$000 rate US$000 US$000
---------------------------------------------- --------- ----------- ------- --------- ----------- -------
Secured bank loans
4.7%
* Pre-shipment loans in Minera Santa Cruz to 36% - 18,141 - -
* Short-term loans in Minera Santa Cruz 38.6% 2,172
* Mid-term loans in Minera Ares 2.178% 199,473 161 3.05% 199,308 234
----------------------------------------------- --------- ----------- ------- --------- ----------- -------
Total 199,473 20,474 199,308 234
----------------------------------------------- --------- ----------- ------- --------- ----------- -------
The movement in borrowings during the six month period to 30
June 2020 is as follows:
As at Additions Repayments As at
1 January US$000 US$000 30 June
2020 US$000 Transfers 2020 (Unaudited)
US$000 US$000
------------- ---------- ----------- ------------ ------------------
Current
Bank loans(1) - 27,910 (8,000) - 19,910
Accrued interest 234 3,124 (2,794) - 564
------------
234 31,034 (10,794) - 20,474
------------
Non-current
Bank loans(1) 199,308 - - 165 199,473
------------
199,308 - - 165 199,473
------------- ---------- ----------- ------------ ------------------
1 Relates to pre-shipment loans for a total amount of
US$18,141,000 (31 December 2019: US$nil) which are credit lines
given by banks to meet payment obligations arising from the exports
of the Group and a short-term loan of US$2,172,000 (31 December
2019: US$nil). In addition, the balance at 30 June 2020 and 31
December 2019 includes a five-year credit agreement signed between
Compania 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 17 March 2022 with an interest rate of
Libor three months plus 1.15% payable quarterly until maturity on
13 December 2024. The carrying value including accrued interests
payable net of capitalised expenses related to the borrowing (30
June 2020: US$527,000, 31 December 2019: US$692,000) at 30 June
2020 is US$199,634,000 (31 December 2019: US$199,542,000). On 14
February 2020, the Group entered into an interest rate swap with JP
Morgan Chase Bank, N.A. to fix the interest rate of the medium term
loan at 2.534% from 17 March 2020 to 17 December 2024.
The carrying amount of current borrowings approximates their
fair value. The carrying amount and fair value of the non--current
borrowings are as follows:
Carrying amount Fair value
-------------------------- -------------------------------
As at 30 As at As at As at
June 2020 31 December 30 June 31 December
(Unaudited) 2019 US$000 2020 (Unaudited) 2019
US$000 US$000 US$000
----------- ------------ ------------ ----------------- ------------
Bank loans 199,473 199,308 197,894 186,653
Total 199,473 199,308 197,894 186,653
------------ ------------ ------------ ----------------- ------------
18 Provisions
As at 30 June As at 31 December
2020 (Unaudited) 2019
-------------------- --------------------
Non-current Current Non-current Current
US$000 US$000 US$000 US$000
---------------------------- ----------- ------- ----------- -------
Provision for mine closure1 101,767 8,001 97,313 9,358
Workers profit sharing2 - - - 6,063
Provision for contingencies 1,119 726 1,191 828
Long term incentive plan 865 140 818 -
----------------------------- ----------- ------- ----------- -------
Total 103,751 8,867 99,322 16,249
----------------------------- ----------- ------- ----------- -------
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 inflation as at 30 June 2020 and 31
December 2019 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 pre-tax real discount rates used
were negatives from -0.57% to -0.65% (2019: 0.00%). Movements in
the provision relates to a decrease due to change in estimate of
US$1,176,000 and payments of US$1,367,000, net of an increase
related to change in discount rate of US$5,640,000.
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 10,977
Discount rate (increase by 0.5%) (decrease of provision) (2,540)
--------------------------------------------------------- -------
2 Corresponds to worker's profit sharing in Compania Minera Ares
paid during 2020.
19 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
30 June 2020 and 31 December 2019. 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 Gold
and Silver Corporation ("AGSC", formerly 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 AGSC was extended to 15 December 2020 with the
outstanding option payment of US$6,000,000 payable in equal
quarterly-instalments over the 2 years period. In consideration for
the extension, the Group received 452,200 of 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.
AGSC had not paid any of the quarterly instalments of US$750,000
due since 13 December 2019. However, AGSC has demonstrated its
intention to pay the outstanding balance of US$3,750,000 during the
first semester of 2020. On 9 July 2020 the Group received and
accepted a proposal from AGSC to exercise the option by paying the
remaining balance of US$3,750,000 plus applicable value added tax
in the form of 1,687,401 shares of AGSC at a price of C$3.49 each
(equivalent to US$2.58 each). The AGSC shares issued will be
subject to a statutory 4-month and one day resale restriction from
the date of issuance. As the sale is considered highly probable to
be completed within the twelve months of the period-end, the assets
and liabilities continue to be disclosed as asset held for sale at
30 June 2020.
20 Equity
Share capital and share premium
The movement in share capital of the Company from 31 December
2019 to 30 June 2020 is as follows:
Number of
ordinary Share capital Share premium
shares US$000 US$000
----------------------------------- ----------- ------------- -------------
Shares issued as at 1 January 2020 513,875,563 226,506 438,041
Shares issued as at 30 June 2020 513,875,563 226,506 438,041
------------------------------------ ----------- ------------- -------------
On 21 March 2019, the Group purchased 115,640 shares for a total
consideration of GBP236,000 (equivalent to US$309,000).
On 22 March 2019, 115,682 Treasury shares with a value of
US$309,000 (being the cost incurred to acquire the shares) were
transferred to the CEO of the Group with respect to the Enhanced
Long term Incentive Plan.
On 31 December 2019 the Company issued 3,321,643 ordinary
shares, under the Restricted Share Plan, to certain employees of
the Group.
On 30 March 2020, the Group purchased 182,941 shares for a total
consideration of GBP234,000 (equivalent to US$292,000).
On 30 March 2020, 182,941 Treasury shares with a value of
US$292,000 (being the cost incurred to acquire the shares) were
transferred to the CEO of the Group with respect to the Enhanced
Long term Incentive Plan.
At 30 June 2020 the Group has no Treasury shares (31 December
2019: nil)
21 Dividends paid and declared
Dividends declared to non-controlling interests in the six
months ended 30 June 2020 were US$285,000 (30 June 2019: US$nil).
Dividends paid to non-controlling interests in the six months ended
30 June 2020 were US$285,000 (30 June 2019: US$2,210,000).
There was no final dividend declared to shareholders of the
parent for 2019 (Final dividend for 2018: US$10,002,000). The
Directors of the Company have not declared an interim dividend in
respect of the six months ended 30 June 2020 (30 June 2019:
US$10,211,000). Dividends paid to shareholders of the parent in the
six months ended 30 June 2020 were US$nil (30 June 2019:
US$10,002,000).
22 Related party transactions
During the six month period ended 30 June 2020, the Group made a
number of donations to assist the national effort in Peru to
control the spread of Covid-19 including donations of US$500,000 to
each of the Universidad de Ingenieria y TecnologÃa ("UTEC") and
TECSUP. These donations were to hardship funds administered by each
institution to support students impacted financially by the
pandemic. An additional amount of US$50,000 was donated in total to
UTEC and TECSUP to fund the research and development of equipment
and treatment for virus patients. Both entities are Peruvian not
for profit educational institutions controlled by Eduardo
Hochschild.
There were no other significant transactions with related
parties during the six months period ended 30 June 2020.
23 Notes to the statement of cash flows
Six- months ended 30
June
--------------------------------
2020 2019
(Unaudited) (Unaudited)
US$000 US$000
-------------------------------------------------- ------------- -------------
Reconciliation of profit for the period to
net cash generated from operating activities
(Loss)/profit for the period (9,006) 16,661
Adjustments to reconcile Group profit to net
cash inflows from operating activities
Depreciation 51,750 90,599
Amortisation of intangibles 573 1,121
Write-off of assets (net) 1,208 517
Gain on sale of property, plant and equipment (38) (2)
Provision for obsolescence of supplies 55
Finance income (2,074) (1,424)
Finance costs 5,144 3,504
Income tax expense 15,470 12,857
Other 3,814 2,624
Increase/(decrease) of cash flows from operations
due to changes in assets and liabilities
Trade and other receivables (4,361) (23,927)
Other financial assets and liabilities 79 -
Inventories 9,385 5,846
Trade and other payables (41,708) (5.079)
Provisions (6,050) 1,958
------------------------------------------------------- ------------- -------------
Cash generated from operations 24,186 105,310
------------------------------------------------------- ------------- -------------
24 Subsequent events
a) On 6 July 2020 operations were halted in Inmaculada due to a
number of cases of Covid-19 with a reduced workforce performing
care and maintenance activities. The Inmaculada team subsequently
was retested for the virus and remobilised with production
restarting on 28 July although full production will only be reached
by the end of August. This is a non-adjusting post balance sheet
event however the impact will need to be considered in the
consolidated financial statements for the year ending 31 December
2020. Should the Group's operations continue to be affected by
Covid-19, the significant estimates and judgements that will be
made in preparing future financial statements would be impacted. In
the absence of any changes to the current gold and silver prices
projections, we would not anticipate recording any impairment to
the Inmaculada CGU; however we would expect the estimated
recoverable amount of our CGUs related to the San Jose and
Pallancata mine units could be reduced. An additional impairment
tests would be required as the CGUs were not impaired as at 30 June
2020 and are sensitive to future stoppage of operations of
$8,900,000 and $3,700,000 respectively, per month of stoppage.
Profit by operation (1)
(Segment report reconciliation) as at 30 June 2020
(Unaudited)
Consolidation
adjustment
Company (US$000) Pallancata San Jose Inmaculada and others Total/HOC
-------------------------------------- ---------- -------- ---------- ------------- ---------
Revenue 25,021 79,716 127,241 51 232,029
Cost of sales (pre-consolidation) (26,834) (53,587) (68,243) 1,719 (146,945)
--------------------------------------- ---------- -------- ---------- ------------- ---------
Consolidation adjustment (136) - (1,477) 1,613 -
Cost of sales (post-consolidation) (26,698) (53,587) (66,766) 106 (146,945)
Production cost excluding
depreciation (16,971) (39,083) (33,867) 106 (89,815)
Depreciation in production
cost (11,275) (16,683) (21,444) - (49,402)
Change in inventories 1,548 2,179 (11,455) - (7,728)
--------------------------------------- ---------- -------- ---------- ------------- ---------
Gross profit (1,813) 26,129 58,998 1,770 85,084
--------------------------------------- ---------- -------- ---------- ------------- ---------
Administrative expenses - - - (20,236) (20,236)
Exploration expenses - - - (12,743) (12,743)
Selling expenses (324) (5,428) (235) - (5,987)
Other income/(expenses) - - - (33,461) (33,461)
--------------------------------------- ---------- -------- ---------- ------------- ---------
Operating profit/(loss)
before impairment (2,137) 20,701 58,763 (64,670) 12,657
--------------------------------------- ---------- -------- ---------- ------------- ---------
Write-off of non-financial
assets - - - (1,208) (1,208)
Finance income - - - 2,074 2,074
Finance costs - - - (5,144) (5,144)
Foreign exchange - - - (1,915) (1,915)
--------------------------------------- ---------- -------- ---------- ------------- ---------
Profit/(loss) from continuing
operations before income
tax (2,137) 20,701 58,763 (70,863) 6,464
--------------------------------------- ---------- -------- ---------- ------------- ---------
Income tax - - - (15,470) (15,470)
--------------------------------------- ---------- -------- ---------- ------------- ---------
(Loss)/profit for the period
from continuing operations (2,137) 20,701 58,763 (86,333) (9,006)
--------------------------------------- ---------- -------- ---------- ------------- ---------
1 On a post-exceptional basis.
SHAREHOLDER INFORMATION
Company website
Hochschild Mining PLC Interim and Annual Reports and results
announcements are available via the internet on our website at
www.hochschildmining.com. Shareholders can also access the latest
information about the Company and press announcements as they are
released, together with details of future events and how to obtain
further information.
Registrars
The Registrars can be contacted as follows for information about
the AGM, shareholdings, dividends and to report changes in personal
details:
BY POST
Link Asset Services, The Registry, 34 Beckenham Road, Beckenham,
Kent BR3 4TU.
BY TELEPHONE
If calling from the UK: 0371 664 0300 (calls cost 12p per minute
plus your phone company's access charge. Lines are open
9.00am-5.30pm Mon to Fri excluding public holidays in England and
Wales).
If calling from overseas: +44 371 664 0300 (Calls charged at the
applicable international rate).
17 Cavendish Square
London
W1G 0PH
Registered in England and Wales with Company Number 5777693
[1] Revenue presented in the financial statements is disclosed
as net revenue and is calculated as gross revenue less commercial
discounts plus services revenue
(2) Refer to page 13 of the Financial Review for a definition of
Adjusted EBITDA
[3] Calculated as total number of accidents per million labour
hours
([4]) Calculated as total number of days lost per million labour
hours.
[5] The ECO Score is an internally designed Key Performance
Indicator measuring environmental performance in one number and
encompassing numerous fronts including management of waste water,
outcome of regulatory inspections and sound environmental practices
relating to water consumption and the recycling of materials.
[6] Includes revenue from services
[7] Unit cost per tonne is calculated by dividing mine and
treatment production costs (excluding depreciation) by extracted
and treated tonnage respectively
[8] Unit cost per tonne for Peru does not include the Arcata
mine but Arcata is included in the Total Group unit cost
figure.
[9] Cash costs are calculated to include cost of sales,
commercial discounts, and selling expenses less depreciation
included in cost of sales
[10] Includes commercial discounts from the sales of concentrate
and the sale of dore
[11] Operating capex from San Jose does not include capitalised
DD&A resulting from mine equipment utilised for mine
developments
[12] Administrative expenses does not include expenses from the
Biolantanidos project ($595,000)
[13] Royalties arising from revised royalty tax schemes
introduced in 2011 and included in income tax line
[14] Royalties arising from revised royalty tax schemes
introduced in 2011 and included in income tax line
[15] Calculated using a gold silver ratio of 86:1
[16] Adjusted EBITDA has been presented before the effect of
significant non-cash (income)/expenses related to changes in mine
closure provisions and the write-off of property, plant and
equipment
[17] Includes pre-shipment loans and short term interest
payables
[18] Includes additions in property, plant and equipment and
evaluation and exploration assets (confirmation of resources) and
excludes increases in the expected closure costs of mine asset
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
IR VVLFFBVLZBBL
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