TIDMHOC
RNS Number : 9635I
Hochschild Mining PLC
18 August 2021
18 August 2021
Hochschild Mining PLC
Interim Results
Six months ended 30 June 2021
HOCHSCHILD MINING PLC INTERIM RESULTS FOR THE SIX MONTHSED 30
JUNE 2021
Strong rebound in profitability in H1 2021
-- Revenue of $394.8 million (H1 2020: $232.0 million) ([1])
-- Adjusted EBITDA of $198.5 million (H1 2020: $80.6 million)
([2])
-- Profit before income tax (pre-exceptional) of $97.8 million
(H1 2020: $13.1 million)
-- Profit before income tax (post-exceptional) of $83.8 million
(H1 2020: $6.5 million)
-- Basic earnings per share (pre-exceptional) of $0.08 (H1 2020:
$0.01 loss)
-- Basic earnings per share (post-exceptional) of $0.07 (H1
2020: $0.02 loss)
-- Cash and cash equivalent balance of $256.9million as at 30
June 2021 (31 December 2020: $231.9 million)
-- Net cash of $51.1 million as at 30 June 2021 (31 December
2020: net cash of $21.6 million)
H1 2021 Operational and Exploration [3]
-- All-in sustaining costs (AISC) from operations of $1,136 per
gold equivalent ounce (H1 2020: $1,026) or $13.2 per silver
equivalent ounce (H1 2020: $11.9) [4]
-- H1 2021 attributable production of 175,119 gold equivalent
ounces or 15.1 million silver equivalent ounces (H1 2020: 126,835
gold equivalent ounces or 10.9 million silver equivalent
ounces)
-- Brownfield programme adding significant high-grade Inferred
resources in H1:
o 409,000 gold equivalent ounces added from Angela North vein at
Inmaculada at a gold equivalent grade of 10.6 grams per tonne.
o 7 million silver equivalent ounces added year-to-date at San
Jose at a silver equivalent grade of 944 grams per tonne
-- Drilling campaigns executed at Pallancata, Corina, Cochaloma,
Arcata and Crespo
-- Further high grade drill results achieved at Skeena
Resources' Snip project in British Columbia
2021 outlook
-- On track to deliver overall 2021 production target of
360,000-372,000 gold equivalent ounces or 31.0-32.0 million silver
equivalent ounces
-- 2021 all-in sustaining costs on track to meet $1,210 and
$1,250 per gold equivalent ounce guidance ($14.1 and $14.5 per
silver equivalent ounce)
-- Hochschild to host rare earths capital markets presentation
on 8 September 2021
ESG highlights
-- 2020 Sustainability Report recently published
-- Lost Time Injury Frequency Rate of 1.31 (FY 2020: 1.38)
([5])
-- Accident Severity Index of 684 (FY 2020: 474) ([6])
-- Safety KPIs exclude impact of June 2021 bus accident in line
with parameters adopted by Hochschild in 2018 with reference to
guidance from International Council on Mining and Metals
-- Water consumption of 215lt/person/day (FY 2020:
231lt/person/day)
-- Domestic waste generation of 1.01 kg/person/day (FY 2020:
1.18kg/person/day)
-- ECO score of 5.36 out of 6 (FY 2020: 5.74) ([7])
$000 unless stated Six months to 30 June 2021 Six months to 30 June 2020 % change
--------------------------- ---------------------------
Attributable silver production (koz) 5,922 4,108 44
Attributable gold production (koz) 106 79 34
Revenue 394,750 232,029 70
Adjusted EBITDA 198,504 80,584 146
Profit/(loss) from continuing operations
(pre-exceptional) 38,065 (4,345) 976
Profit/(loss) from continuing operations
(post-exceptional) 28,594 (9,006) 417
Basic earnings/(loss) per share
(pre-exceptional) $ 0.08 (0.01) 900
Basic earnings/(loss) per share
(post-exceptional) $ 0.07 (0.02) 450
------------------------------------------------- --------------------------- --------------------------- ---------
_______________________________________________________________________________________
A live conference call and audio webcast will be held at 2.00pm
(London time) on Wednesday 18 August 2021 for analysts and
investors.
For a live webcast of the presentation please click on the link
below:
https://webcasting.brrmedia.co.uk/broadcast/6109364e2379e74e98fa91f1
Conference call dial in details:
UK: +44 (0)330 027 1846
UK Toll Free: 0800 031 4838
US/Canada Toll Free: 800-367-2403
Pin: 1461060
_______________________________________________________________________________________
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:
The first half of 2021 has delivered a number of operational and
ESG challenges and I believe the admirable response of our Company
and our people has ensured we are making good progress on all of
our 2021 priorities despite the unprecedented tragic traffic
accident in June, the continuation of the Covid-19 pandemic in
addition to local political change. I am deeply appreciative of the
determination and resilience of our people. They have helped ensure
our business remains strongly positioned to continue strategic
growth and reinforce our corporate values, which are centred on the
wellbeing of our employees, the environment and the communities in
which we operate.
Safety
In mid-June a tragic traffic accident took place in southern
Peru involving our transport contractor which claimed the lives of
26 people who worked at our Pallancata operation. The entire
organisation has been deeply affected by this very sad and
unprecedented incident and the management team has been doing
everything possible to investigate its circumstances and provide a
wide range of support measures to everyone affected. We have of
course been fully supporting the local authorities and the
contractor with their respective accident investigations.
It is also with deep regret that, despite all the progress we
have achieved over the last few years with our Safety
Transformation programmes, we have to report an accident at our San
Jose mine towards the end of first quarter that claimed the life of
one of our contractors during the preparation of scheduled
electrical maintenance work. A detailed investigation was carried
out following the incident and the findings were reported to the
Board. An action plan comprising internal communications and
changes to operating procedures was subsequently implemented across
all operations. As can be seen in our recently published
Sustainability Report, our Company adopts a rigorous framework of
safety protocols which cover all aspects of our business. The
safety of everyone who works at Hochschild is our highest
priority.
Operations
Hochschild's output in the first half was in line with our
expectations and this was achieved despite the necessity to
continue with our Covid-19 protocols at all our mines. Attributable
production was 175,119 gold equivalent ounces (15.1 million silver
equivalent ounces), which was understandably substantially higher
than the pandemic-impacted 2020 figure of 126,835 gold equivalent
ounces (10.9 million silver equivalent ounces) and was at an All-in
sustaining cost ("AISC") of $1,136 per gold equivalent ounce (13.2
per silver equivalent ounce). Inmaculada delivered a solid half
with production of 111,696 gold equivalent ounces (H1 2020: 79,604
ounces) with AISC lower than expected at $940 per gold equivalent
ounce, principally due to delayed capital expenditure and lower
production costs.
Pallancata's production in the first half reflected the current
focus of the operation on mine development and brownfield
exploration in order to extend the mine life. Output was 2.6
million silver equivalent ounces (H1 2020: 1.8 million ounces) with
the mine's all-in sustaining cost at $17.3 per silver equivalent
ounce (H1 2020: $14.0 per ounce). In Argentina, San Jose operated
throughout the half year but continued to experience Covid-related
restrictions on labour availability in the country limiting the
Company's ability to access certain planned mining zones and
impacting grades. Production was 5.5 million silver equivalent
ounces in the first half (H1 2020: 4.4 million ounces) with costs
at $15.2 per silver equivalent ounce (H1 2020: $15.6 per ounce)
with the decrease mostly due to lower production costs.
Exploration
Once again the brownfield programme continued in the surrounding
areas of all three of our mines and I am delighted to report that
we have delivered a strong first half of drilling results which we
believe will increase both the quantity and quality of resources at
both Inmaculada and San Jose. At Inmaculada, drilling in the Angela
North vein has already yielded an additional 409,000 gold
equivalent ounces at higher grades than current reserve grade
whilst at San Jose we have added a further 7 million silver
equivalent ounces close to current operations. At Pallancata, our
brownfield team is completing a study into optimising the long-term
mine plan that incorporates the existing resource base with the aim
of delivering an extension to the life of the operation.
Our greenfield programme has also recently seen encouraging
progress at the Snip project in British Columbia where our partner
Skeena Resources has continued to deliver high grade drill results
in the first half of the year. We are aiming to make a decision on
whether to exercise our option on the project before its expiry
during October. Furthermore, third-party exploration work has also
been ongoing at prospects in the United States, Mexico and Peru
with several more identified for the second half of the year.
In Chile, our Biolantanidos rare earths project has made further
progress in the first half with the focus on delivering a first
module that proves the business case by producing a profitable
product. The work has involved engineering focused on resource
estimation for the first 500 hectares (out of a package of 220,000
hectares), developing the corresponding mine plan and improving
metallurgical recoveries. Subsequent developmental stages are
expected to include optimisation of the metallurgical process, more
production modules and vertical integration opportunities. For the
first module, results from a Preliminary Economic Assessment are
expected in the third quarter whilst the environmental permitting
process has also progressed into its final stages. We look forward
to presenting in detail on this exciting business early in
September 2021.
Financial results
Total Group production was significantly higher versus the
Covid-19 impacted H1 2020 and consequently, when combined with a 4%
rise in the average gold price achieved and a weighty 62% rise in
the silver price, revenue was increased by 70% to $394.8 million
(H1 2020: $232.0 million). All-in sustaining costs were $13.2 per
silver equivalent ounce (H1 2020: $11.9 per ounce) with the rise
reflecting the significant deferrals of capital expenditure
resulting from operational stoppages in the first half of 2020.
Adjusted EBITDA of $198.5 million (H1 2020: $80.6 million) mostly
reflects the increased production levels whilst pre-exceptional
earnings per share of $0.08 (H1 2020: $0.01 loss per share)
includes the impact of an increase in the income tax calculation
arising from the impact of the change of tax rate in Argentina to
35% and local currency devaluation on our tax bases.
Post-exceptional earnings per share was also substantially higher
at $0.07 (H1 2020: $0.02 loss per share) mainly due once again to
the exceptional after tax cost of $14.0 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 very strong position despite the
significant impact over the last year of the Covid-19 crisis, with
cash and cash equivalents of $256.9 million at the end of June (31
December 2020: $231.9 million) and net cash of $51.1 million (31
December 2020: net cash $21.6 million).
Outlook
This year has seen somewhat calmer precious metals markets after
the strong rises of 2019 and 2020 although silver did experience a
spike at the start of 2021 to reach just over $30 due to some
short-lived US retail purchases in early February. There has been
an increase in political risk in Peru and Chile and the Group
continues to monitor new legislative and regulatory initiatives
which could result in increased taxes/royalties, other costs and
potential permitting delays that could potentially impact our
exploration and operational activities.
The second half will feature more planned brownfield and
greenfield work with the aim of adding reserves and resources and
identifying new projects for our pipeline. In addition to the
option on the Snip project, with the support of Tom Elliott, who
recently joined us as Vice President North America, we will
primarily focus on greenfield exploration projects in North America
and continue to assess value accretive acquisitions throughout the
Americas. We can also look forward to introducing the market to our
Biolantanidos rare earths project next month.
We remain confident that Hochschild's ongoing solid operational
performance, robust cashflow and a strong balance sheet leave us in
an advantageous position to successfully execute on a busy period
of exploration and business development activity.
OPERATING REVIEW
OPERATIONS
Note: All 2021 and 2020 silver/gold equivalent production
figures assume a gold/silver ratio of 86:1.
Production
In H1 2021, Hochschild delivered attributable production of
175,119 gold equivalent ounces or 15.1 million silver equivalent
ounces (on an attributable basis) with the substantial increase
versus the same period of 2020 resulting from the impact in H1 2020
of the Covid-19 crisis and the consequent operational stoppage at
all three of the Company's mines. The Company remains on track to
meet its 2021 production target of between 360,000 and 372,000 gold
equivalent ounces or between 31.0 and 32.0 million silver
equivalent ounces.
Total group production
Six months to Six months to
30 June 2021 30 June 2020
---------------
Silver production
(koz) 7,021 5,018
Gold production (koz) 125.07 93.59
Total silver equivalent
(koz) 17,778 13,067
Total gold equivalent
(koz) 206.72 151.94
Silver sold (koz) 7,005 4,897
Gold sold (koz) 124.32 93.58
------------------------- --------------- --------------
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 2021 30 June 2020
---------------
Silver production
(koz) 5,922 4,108
Gold production (koz) 106.26 79.07
Silver equivalent
(koz) 15,060 10,908
Gold equivalent (koz) 175.12 126.84
----------------------- --------------- --------------
Attributable production includes 100% of all production from
Inmaculada, Pallancata and 51% from San Jose.
Costs
All-in sustaining cost from operations in H1 2021 was $1,136 per
gold equivalent ounce or $13.2 per silver equivalent ounce (H1
2020: $1,026 per gold equivalent ounce or $11.9 per silver
equivalent ounce), higher than H1 2020 mainly due to as a result of
returning to a full production rate versus the 2020 H1 Covid
stoppages. This is reflected in lower average grades and higher
costs and capex. As budgeted, these costs are expected to rise in
the second half due to timing in the execution of sustaining and
development capital expenditure and additional capital expenditure
allocated to Pallancata and Inmaculada to develop resources for
increasing life-of-mine.
Inmaculada
The 100% owned Inmaculada gold/silver underground operation is
located in the Department of Ayacucho in southern Peru. It
commenced operations in June 2015.
Inmaculada summary Six months Six months % change
to to
30 June 2021 30 June 2020
--------------- --------------
Ore production (tonnes) 672,137 402,371 67
Average silver grade (g/t) 160 154 4
Average gold grade (g/t) 3.92 4.42 (11)
Silver produced (koz) 2,777 1,768 57
Gold produced (koz) 79.40 59.05 34
Silver equivalent produced
(koz) 9,606 6,846 40
Gold equivalent produced
(koz) 111.70 79.60 40
Silver sold (koz) 2,769 1,758 58
Gold sold (koz) 79.49 59.48 34
Unit cost ($/t) 93.6 91.1 3
Total cash cost ($/oz Au
co-product) 547 583 (6)
All-in sustaining cost ($/oz
Au Eq) 940 777 21
------------------------------ --------------- -------------- ---------
Production
Inmaculada's first half production was 111,696 gold equivalent
ounces (H1 2020: 79,604 ounces), driven by a significant increase
in treated tonnage versus the same period of 2020 when the
operation was severely impacted by stoppages caused by the global
pandemic. This was despite lower grades in line with the mine
plan.
Costs
All-in sustaining costs were $940 per gold equivalent ounce (H1
2020: $777 per ounce). Costs were increased versus H1 2020 when a
considerable portion of capital expenditure was deferred including
the tailings dam expansion due to the stoppages and also due to
lower scheduled grades. Costs are expected to rise in H2 2021 in
line with expectations as the infill drilling campaign at Angela
North East and further expenditure on the ore sorting pilot plant
are included.
Pallancata
The 100% owned Pallancata silver/gold property is located in the
Department of Ayacucho in southern Peru. Pallancata commenced
production in 2007. Ore from Pallancata is transported 22km to the
Selene plant for processing.
Pallancata summary Six months Six months % change
to to
30 June 2021 30 June 2020
--------------- --------------
Ore production (tonnes) 289,002 188,740 53
Average silver grade (g/t) 237 257 (8)
Average gold grade (g/t) 0.86 0.92 (7)
Silver produced (koz) 2,000 1,392 44
Gold produced (koz) 7.28 4.92 48
Silver equivalent produced
(koz) 2,626 1,815 45
Gold equivalent produced
(koz) 30.54 21.10 45
Silver sold (koz) 2,000 1,271 57
Gold sold (koz) 7.29 4.41 65
Unit cost ($/t) 106.0 88.6 20
Total cash cost ($/oz Ag
co-product) 15.6 9.9 58
All-in sustaining cost ($/oz
Ag Eq) 17.3 14.0 23
------------------------------ --------------- -------------- ---------
Production
In H1 2021, Pallancata's output was 2.6 million silver
equivalent ounces (H1 2020: 1.8 million ounces), with the focus of
the team currently on mine development and brownfield exploration
in expectation of an extension to the mine life.
Costs
All-in sustaining costs were at $17.3 per silver equivalent
ounce (H1 2020: $14.0 per ounce). Costs were increased versus H1
2020 mainly due to the use more conventional mining methods in 2021
and lower grades. The figure is expected to substantially increase
in the second half as new capital expenditure is budgeted for
development work to access newly economic resources which are
expected to further extend the mine life.
San Jose
The San Jose silver/gold mine is located in Argentina, in the
province of Santa Cruz, 1,750km south west of Buenos Aires. San
Jose commenced production in 2007. Hochschild holds a controlling
interest of 51% in the mine and is the mine operator. The remaining
49% is owned by the minority interest, McEwen Mining Inc.
San Jose summary Six months Six months % change
to to
30 June 2021 30 June 2020
--------------- --------------
Ore production (tonnes) 246,194 162,394 52
Average silver grade (g/t) 321 401 (20)
Average gold grade (g/t) 5.45 6.36 (14)
Silver produced (koz) 2,244 1,858 21
Gold produced (koz) 38.40 29.62 30
Silver equivalent produced
(koz) 5,546 4,406 26
Gold equivalent produced
(koz) 64.48 51.23 26
Silver sold (koz) 2,236 1,868 20
Gold sold (koz) 37.54 29.69 26
Unit cost ($/t) 208.6 231.1 (10)
Total cash cost ($/oz Ag
co-product) 12.6 9.3 35
All-in sustaining cost ($/oz
Ag Eq) 15.2 15.6 (2)
------------------------------ --------------- -------------- ---------
Production
The total for the first half of the year at San Jose was 5.5
million silver equivalent ounces (H1 2020: 4.4 million ounces).
Grades were lower with ongoing Covid-related restrictions on labour
availability in the country limiting the Company's ability to
access certain planned mining zones. In addition, low grade mineral
from developments was used to fill up plant capacity.
Costs
All-in sustaining costs were at $15.2 per silver equivalent
ounce (H1 2020: $15.6 per ounce) which is below expectations due to
lower production costs, deferred capital expenditure and local
currency devaluation. Costs will rise in the second half in line
planned mine development and the purchase of new mining
equipment.
EXPLORATION
Inmaculada
In H1 2021, the exploration team carried out 2,819m of potential
drilling and 25,386m of resource drilling mostly testing the Angela
North structure. Selected results are below:
Vein Results (potential/resource drilling)
Angela North IMS-21-056: 5.9m @ 2.5g/t Au & 99g/t Ag
IMS-21-062: 9.7m @ 91.7g/t Au & 3,013g/t
Ag
IMS-21-063: 2.1m @ 6.5g/t Au & 217g/t Ag
IMS-21-065: 7.0m @ 3.7g/t Au & 198g/t Ag
IMS-21-066: 2.4m @ 4.3g/t Au & 386g/t Ag
IMS-21-067: 1.0m @ 2.4g/t Au & 234g/t Ag
IMS-21-070: 1.5m @ 2.1g/t Au & 156g/t Ag
IMS-21-071: 1.4m @ 3.6g/t Au & 123g/t Ag
IMS-21-072: 2.0m @ 1.8g/t Au & 109g/t Ag
IMS-21-075: 3.1m @ 5.5g/t Au & 341g/t Ag
IMS-21-077: 2.7m @ 1.4g/t Au & 103g/t Ag
IMS-21-078: 9.1m @ 14.1g/t Au & 1,639g/t
Ag
IMS-21-087: 5.6m @ 12.6g/t Au & 494g/t
Ag
IMS-21-069: 1.2m @ 7.1g/t Au & 533g/t Ag
IMS-21-078: 9.7m @ 14.1g/t Au & 424g/t
Ag
IMS-21-085: 3.5m @ 5.2g/t Au & 149g/t Ag
IMS-21-088: 3.7m @ 5.9g/t Au & 304g/t Ag
IMS-21-089: 2.1m @ 1.9g/t Au & 109g/t Ag
IMS-21-100: 1.4m @ 3.2g/t Au & 171g/t Ag
------------------------------------------
Ramal Angela North 1 IMS-21-056: 1.6m @ 2.0g/t Au & 151g/t Ag
------------------------------------------
Ramal Angela North 2 IMS-21-056: 0.8m @ 5.4g/t Au & 572g/t Ag
------------------------------------------
Ramal Piso Angela IMS-21-100: 1.7m @ 2.9g/t Au & 196g/t Ag
------------------------------------------
Juliana connection IMS-21-079: 2.0m @ 12.8g/t Au & 527g/t
Ag
IMS-21-088: 1.4m @ 6.8g/t Au & 292g/t Ag
------------------------------------------
Split 1 IMS-21-089: 2.7m @ 1.8g/t Au & 181g/t Ag
------------------------------------------
Split 2 IMS-21-096: 2.4m @ 8.0g/t Au & 387g/t Ag
------------------------------------------
Year-to-date, 409,000 gold equivalent ounces have been added to
the Inmaculada Inferred resource base at a gold equivalent grade of
10.6 grams per tonne.
During Q3, the plan is to carry out 2,500m of potential drilling
and 3,000m of resource drilling in the Juliana North
Pallancata
At Pallancata, 3,543m of potential drilling was carried out
testing the continuity of the Pallancata vein, the Falla NW, Pablo,
Pablo Piso and Marco veins vein structures. Quartz veins were
intercepted but so far without economic value. At Cochaloma, 800m
of potential drilling in the Esperanza and Cochaloma veins were
executed, also intercepting a quartz structure but again without
economic value.
In Corina, 5,245m were drilled in the Calvario, Clara, Anomalia
NE, Corina and Luciano veins. Selected results are below:
Vein Results (resource drilling)
Corina DHCOR-21-026: 1.6m @ 6.0g/t Au & 39g/t
Ag
DHCOR-21-028: 1.6m @ 3.1g/t Au & 22g/t
Ag
DHCOR-21-036: 5.5m @ 1.3g/t Au & 3g/t Ag
------------------------------------------
During Q3, there will be further drilling on the Pallancata,
Pablo, Paola and Pepita veins close to the mine and additional
drilling at Cochaloma and Corina.
San Jose
In H1 2021, the team carried out 1,679m of potential drilling
targeting the Escondida and the Betania veins as well as the North
Telken area close to Cerro Negro. 5,202m of resource drilling was
also executed targeting Escondida, Isabel and Ramal Isabel
structures.
Vein Results (potential/resource drilling)
Isabel SJD-2210: 1.2m @ 4.9g/t Au & 552g/t Ag
SJD-2211: 1.0m @ 3.7g/t Au & 376g/t Ag
SJD-2241: 1.0m @ 8.2g/t Au & 499g/t Ag
SJM-179: 1.3m @ 3.7g/t Au & 586g/t Ag
-----------------------------------------
Ramal Isabel 1 SJD-2210: 0.8m @ 2.2g/t Au & 772g/t Ag
SJD-2241: 0.8m @ 1.6g/t Au & 337g/t Ag
-----------------------------------------
Ramal Isabel 2 SJD-2241: 2.0m @ 1.1g/t Au & 309g/t Ag
-----------------------------------------
Escondida SJM-529: 2.0m @ 62.5g/t Au & 5,571g/t Ag
SJD-2267: 1.4m @ 18.4g/t Au & 1,879g/t
Ag
SJD-2273: 1.9m @ 2.5g/t Au & 284g/t Ag
SJD-2280: 1.2m @ 2.4g/t Au & 317g/t Ag
SJD-2280: 2.4m @ 2.7g/t Au & 305g/t Ag
-----------------------------------------
Betania SJD-2328: 3.1m @ 5.5g/t Au & 6g/t Ag
-----------------------------------------
Year-to-date, 7.2 million silver equivalent ounces have been
added to the San Jose Inferred resource base at a silver equivalent
grade of 944 grams per tonne.
During Q3, 3,000m of potential drilling will be carried out on
the Betania structure in addition to a target generated by Titan to
the south of San Jose.
BIOLANTANIDOS
In Chile, the Biolantanidos rare earths project made further
good progress in the first half with the focus on delivering a
first module that proves the business case by producing a
profitable product. The work in the first stage includes
engineering focused on resource estimation for the first 500
hectares (out of a package of 220,000 hectares), developing the
corresponding mine plan and improving metallurgical recoveries.
Subsequent developmental stages are expected to include
optimisation of the metallurgical process, more production modules
and vertical integration opportunities. For the first module,
results from a Preliminary Economic Assessment are expected in the
third quarter whilst the environmental permitting process has also
continued into its final stages. The Company will be hosting a
detailed presentation on the business early in September 2021.
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 2021, exploration
work continued at: the Sarape project owned by Orogen in Mexico;
the Cooke Mountain gold project owned by Adamera Minerals Corp in
Washington, United States; the Condor project owned by a private
company in Peru; and the Currant project owned by Da Venda Gold in
Nevada, United States.
Permitting work to drill in the near future is also being
completed at the SW Pipe project owned by NV Gold Corp also in
Nevada and the Corvinon and Pampamali projects in Peru.
Given the increased political risk in Peru and Chile, Hochschild
will focus its greenfield exploration strategy primarily in North
America to diversify geographic risk with the greenfield team in
discussion with a number of partners on a further seven projects in
the United States.
Snip
In April 2021, at Snip in the Golden Triangle of British
Columbia, Hochschild's partner, Skeena Resources Limited, reported
diamond drill core results from the 2020-2021 campaign of
exploration drilling. The exploratory programme was focused upon
resource expansion and delineating additional mineralisation in
previously unexplored areas of the near mine environment. The
surface-based programme was comprised of ten drill holes totalling
5,366 metres. Highlights were [8] :
-- 45.40 g/t Au over 0.50 m (S20-047)
-- 45.76 g/t Au over 5.60 m (S20-049)
-- 29.52 g/t Au over 4.03 m (S20-049)
-- 37.78 g/t Au over 2.86 m (S20-049)
Skeena disclosed further drill results in May and after the
period end in July from its 2021 Phase 3 infill and exploration
drilling programme. The aim is to upgrade areas of existing
Inferred resources from Skeena's 2020 Mineral Resource Estimate, to
the Measured and Indicated categories. Highlights were(8) :
-- 155.76 g/t Au over 3.22 m (S21-076)
-- 140.50 g/t Au over 0.50 m (S21-078)
-- 8.40 g/t Au over 3.00 m (S21-080)
-- 61.30 g/t Au over 0.50 m (S21-083)
-- 30.72 g/t Au over 3.82 m (S21-099)
-- 48.44 g/t Au over 4.50 m (UG21-126)
-- 33.63 g/t Au over 4.00 m (UG21-169)
-- 25.64 g/t Au over 4.00 m (UG21-172)
-- 58.47 g/t Au over 3.81 m (UG21-175)
-- 46.94 g/t Au over 4.75 m (UG21-176)
-- 110.22 g/t Au over 4.41 m (UG21-177)
Further detail can be found on the Skeena Resources website
within press releases issued on 27 April, 20 May and 7 July:
https://skeenaresources.com/
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 [9]
Gross revenue from continuing operations increased by 69% to
$404.4 million in H1 2021 (H1 2020: $238.7 million) due to the
rebound in silver and gold production in the first half versus the
same period of 2020 which was impacted by the production stoppages
resulting from the Covid-19 crisis. In addition, there was a strong
rise in the average realised silver price.
In February 2021, the Company hedged 4 million ounces of 2021
silver production at $27.10 per ounce and 4 million ounces of 2022
silver production at $26.86 per ounce. As of June 2021, 1.82
million silver ounces were priced at $27.10 per ounce, boosting the
realised price.
Gold
Gross revenue from gold in H1 2021 increased to $220.3 million
(H1 2020: $159.2 million) due to the rise in gold sales of 33%
resulting from the rebound of production versus the Covid-19
impacted H1 2020. This was added to by a 4% increase in the average
realised gold price.
Silver
Gross revenue rose in H1 2021 to $184.1 million (H1 2020: $79.5
million) due to an increase in silver sales of 43% versus the
Covid-19 impacted H1 2020. This was significantly augmented by a
62% increase in the average realised silver price.
Gross average realised sales prices
The following table provides figures for average realised prices
( before the deduction of commercial discounts) and ounces sold for
H1 2021 and H1 2020:
Average realised prices Six months to Six months to
30 June 2021 30 June 2020
--------------- --------------
Silver ounces sold (koz) 7,005 4,897
Avg. realised silver price ($/oz) 26.3 16.2
Gold ounces sold (koz) 124.32 93.58
Avg. realised gold price ($/oz) 1,772 1,701
----------------------------------- --------------- --------------
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 2021, the Group recorded
commercial discounts of $9.8 million (H1 2020: $6.7 million) with
the increase explained by the significant increase in production.
The ratio of commercial discounts to gross revenue in H1 2021 was
2.4% (H1 2020: 2.9%).
Net revenue
Net revenue was $394.8 million (H1 2020: $232.0 million),
comprising net gold revenue of $217.3 million (H1 2020: $156.5
million) and net silver revenue of $177.3 million (H1 2020: $75.5
million). In H1 2021, gold accounted for 55% and silver for 45% of
the Company's consolidated net revenue (H1 2020: gold 67% and
silver 33%).
Reconciliation of gross revenue by mine to Group net revenue
$000 Six months to Six months to % change
30 June 2021 30 June 2020
--------------- --------------
Silver revenue
Inmaculada 72,586 29,736 144
Pallancata 53,175 18,998 180
San Jose 58,386 30,777 90
Commercial discounts (6,890) (4,009) 72
---------------------- --------------- -------------- ---------
Net silver revenue 177,257 75,502 135
---------------------- --------------- -------------- ---------
Gold revenue
Inmaculada 142,512 97,505 46
Pallancata 12,562 8,167 54
San Jose 65,190 53,517 22
Commercial discounts (2,959) (2,713) 9
---------------------- --------------- -------------- ---------
Net gold revenue 217,305 156,476 39
---------------------- --------------- -------------- ---------
Other revenue 188 51 269
---------------------- --------------- -------------- ---------
Net revenue 394,750 232,029 70
---------------------- --------------- -------------- ---------
Costs
Total cost of sales before exceptional items was $223.2 million
in H1 2021 (H1 2020: $171.0 million). The direct production cost
excluding depreciation was higher at $139.9 million (H1 2020: $89.8
million) mainly due the stoppages affecting H1 2020. Abnormal costs
during the phases of reduced production capacity were $6.2 million
(H1 2020: $24.0 million) and are shown separately below. D
epreciation in production cost increased to $73.8 million (H1 2020:
$49.4 million) due to higher extracted volumes across all
operations, again mainly due to the stoppages affecting H1
2020.
$000 Six months Six months % change
to to
30 June 2021 30 June 2020
--------------- --------------
Direct production cost excluding
depreciation 139,939 89,815 56
Depreciation in production cost 73,815 49,402 49
Other items and workers profit 2,944 - -
sharing
Fixed costs during operational
stoppages and reduced capacity 6,196 24,012 (74)
Change in inventories 261 7,728 (97)
---------------------------------- --------------- -------------- ---------
Cost of sales 223,155 170,957 31
---------------------------------- --------------- -------------- ---------
Fixed costs during operational stoppages and reduced
capacity
$000 Six months Six months % change
to to
30 June 2021 30 June 2020
--------------- --------------
Personnel 5,293 16,038 (67)
Third party services 826 4,765 (83)
Supplies - 551 -
Depreciation and amortisation - 1,542 -
Others 77 1,116 (93)
------------------------------- --------------- -------------- ---------
Cost of sales 6,196 24,012 (74)
------------------------------- --------------- -------------- ---------
Unit cost per tonne
The Company reported unit cost per tonne at its operations of
$119.5 per tonne in H1 2021, a 3% decrease versus H1 2020 ($123.0
per tonne). This resulted from lower costs in Inmaculada resulting
from using more mechanised mining methods, lower costs in San Jose
from treating low cost stockpiles and higher devaluation in Peru.
These impacts were partially offset by expected higher costs at
Pallancata due to lower tonnage rates.
Unit cost per tonne by operation (including royalties) [10]
:
Operating unit ($/tonne) Six months Six months % change
to to
30 June 2021 30 June 2020
--------------- --------------
Peru 97.4 90.6 8
Inmaculada 93.6 91.1 3
Pallancata 106.0 88.6 20
-------------------------- --------------- -------------- ---------
Argentina
San Jose 208.6 231.1 (10)
-------------------------- --------------- -------------- ---------
Total 119.5 123.0 (3)
-------------------------- --------------- -------------- ---------
Cash costs
Cash costs include cost of sales, commercial deductions and
selling expenses before exceptional items, less depreciation
included in cost of sales.
Cash cost reconciliation [11]
Six months to 30 June 2021
$000 unless otherwise indicated Inmaculada Pallancata San Jose Total
--------------------- ----------- -------------------
Group cash cost 65,645 38,643 60,446 164,734
-------------------------------------- --------------------- ----------- ------------------- ---------
(+) Cost of sales [12] 102,416 44,318 70,225 216,959
(-) Depreciation and amortisation in
cost of sales (38,591) (9,912) (22,376) (70,879)
(+) Selling expenses 328 272 6,534 7,134
(+) Commercial deductions [13] 1,492 3,965 6,063 11,520
Gold 997 523 2,535 4,055
Silver 495 3,442 3,528 7,465
-------------------------------------- --------------------- ----------- ------------------- ---------
Revenue 215,098 61,772 117,692 394,750
-------------------------------------- --------------------- ----------- ------------------- ---------
Gold 142,512 12,039 62,754 217,305
Silver 72,586 49,733 54,938 177,257
Others - - - 188
-------------------------------------- --------------------- ----------- ------------------- ---------
Ounces sold
-------------------------------------- --------------------- ----------- ------------------- ---------
Gold 79.5 7.3 37.5 124.3
Silver 2,769 2,000 2,236 7,005
-------------------------------------- --------------------- ----------- ------------------- ---------
Group cash cost ($/oz)
-------------------------------------- --------------------- ----------- ------------------- ---------
Co product Au 547 1,034 859 730
Co product Ag 8.0 15.6 12.6 10.6
By product Au (94) (1,994) 53 (161)
By product Ag (28.1) 13.0 (2.2) (8.1)
-------------------------------------- --------------------- ----------- ------------------- ---------
Six months to 30 June 2020
$000 unless otherwise indicated Inmaculada Pallancata San Jose Total
----------- ----------- ---------
Group cash cost 45,252 18,305 48.370 111,821
-------------------------------------- ----------- ----------- --------- ---------
(+) Cost of sales [14] 66,766 26,698 53,587 146,945
(-) Depreciation and amortisation in
cost of sales (22,629) (10,861) (15,341) (48,831)
(+) Selling expenses 235 324 5,428 5,987
(+) Commercial deductions [15] 880 2,144 4,696 7,720
Gold 69 430 2,288 2,787
Silver 811 1,714 2,408 4,933
-------------------------------------- ----------- ----------- --------- ---------
Revenue 127,241 25,021 79,716 232,029
-------------------------------------- ----------- ----------- --------- ---------
Gold 97,505 7,737 51,234 156,476
Silver 29,736 17,284 28,482 75,502
Others - - - 51
-------------------------------------- ----------- ----------- --------- ---------
Ounces sold
-------------------------------------- ----------- ----------- --------- ---------
Gold 59.5 4.4 29.7 93.6
Silver 1,758 1,271 1,868 4,897
-------------------------------------- ----------- ----------- --------- ---------
Group cash cost ($/oz)
-------------------------------------- ----------- ----------- --------- ---------
Co product Au 583 1,283 1,047 806
Co product Ag 6.0 9.9 9.3 7.4
By product Au 247 (157) 589 335
By product Ag (29.8) 8.0 (2.8) (9.7)
-------------------------------------- ----------- ----------- --------- ---------
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 [16]
All-in sustaining cash costs per silver equivalent ounce
Six months to 30 June 2021
$000 unless otherwise indicated Inmaculada Pallancata San Jose Main Corporate Total
operations &
others
----------- ----------- --------- ------------ ----------
(+) Direct production cost
excluding depreciation 62,571 30,338 47,030 139,939 - 139,939
(+) Other items and workers
profit sharing in cost
of sales 1,585 1,359 - 2,944 - 2,944
(+) Operating and exploration
capex for units [17] 32,834 5,970 17,149 55,953 498 56,451
(+) Brownfield exploration
expenses 726 1,957 4,701 7,384 1,638 9,023
(+) Administrative expenses
(excl. depreciation) [18] 2,726 783 2,786 6,294 16,803 23,098
(+) Royalties and special
mining tax [19] 2,725 783 3,507 3,518 7,026
---------------------------------- ----------- ----------- --------- ------------ ---------- --------
Sub-total 103,167 41,189 71,667 216,023 22,457 238,480
---------------------------------- ----------- ----------- --------- ------------ ---------- --------
Au ounces produced 79,402 7,277 38,396 125,075 125,075
Ag ounces produced (000s) 2,777 2,000 2,244 7,021 7,021
Ounces produced (Ag Eq
000s oz) 9,606 2,626 5,546 17,778 17,778
---------------------------------- ----------- ----------- --------- ------------ ---------- --------
Sub-total ($/oz Ag Eq) 10.7 15.7 12.9 12.1 13.4
---------------------------------- ----------- ----------- --------- ------------ ---------- --------
(+) Commercial deductions 1,492 3,965 6,063 11,520 11,520
(+) Selling expenses 328 272 6,534 7,134 7,134
---------------------------------- ----------- ----------- --------- ------------ ---------- --------
Sub-total 1,820 4,237 12,597 18,654 - 18,654
---------------------------------- ----------- ----------- --------- ------------ ---------- --------
Au ounces sold 79,491 7,286 37,540 124,317 124,317
Ag ounces sold (000s) 2,769 2,000 2,236 7,005 7,005
Ounces sold (Ag Eq 000s
oz) 9,605 2,626 5,464 17,696 17,696
---------------------------------- ----------- ----------- --------- ------------ ---------- --------
Sub-total ($/oz Ag Eq) 0.2 1.6 2.3 1.1 1.1
---------------------------------- ----------- ----------- --------- ------------ ---------- --------
All-in sustaining costs
($/oz Ag Eq) 10.9 17.3 15.2 13.2 1.3 14.5
---------------------------------- ----------- ----------- --------- ------------ ---------- --------
All-in sustaining costs
($/oz Au Eq) 940 1,488 1,310 1,136 109 1,244
---------------------------------- ----------- ----------- --------- ------------ ---------- --------
Six months to 30 June 2020
$000 unless otherwise indicated Inmaculada Pallancata San José Main Corporate Total
operations &
others
----------- ----------- -------------- ------------ ----------
(+) Direct production cost
excluding depreciation 33,867 16,971 39,083 89,921 89,921
(+) Other items and workers - - - - -
profit sharing in cost
of sales
(+) Operating and exploration
capex for units 22,463 3,546 11,998 38,007 121 38,128
(+) Brownfield exploration
expenses 958 1,528 4,694 7,179 1,912 9,092
(+) Administrative expenses
(excl. depreciation) 2,189 430 2,808 5,428 13,167 18,595
(+) Royalties and special
mining tax [20] 1,245 245 1,490 713 2,204
---------------------------------- ----------- ----------- -------------- ------------ ---------- --------
Sub-total 60,722 22,720 58,583 142,025 15,914 157,939
---------------------------------- ----------- ----------- -------------- ------------ ---------- --------
Au ounces produced 59,046 4,920 29,621 93,587 93,587
Ag ounces produced (000s) 1,768 1,392 1,858 5,018 5,018
Ounces produced (Ag Eq
000s oz) 6,846 1,815 4,406 13,067 13,067
---------------------------------- ----------- ----------- -------------- ------------ ---------- --------
Sub-total ($/oz Ag Eq) 8.9 12.5 13.3 10.9 12.1
---------------------------------- ----------- ----------- -------------- ------------ ---------- --------
(+) Commercial deductions 880 2,144 4,696 7,720.00 7,720
(+) Selling expenses 235 324 5,428 5,987.00 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) [21] 777 1,205 1,340 1,026 1,131
---------------------------------- ----------- ----------- -------------- ------------ ---------- --------
Administrative expenses
Administrative expenses were up by 19% to $24.0 million (H1
2020: $20.2 million) but in line with the Company's expectations.
The increase is primarily due to higher legal workers profit
sharing provisions in Peru.
Exploration expenses
In H1 2021, exploration expenses increased to $17.4 million (H1
2020: $12.7 million) mainly due to the H1 2020 reduced execution of
the greenfield and brownfield programme as a result of the Covid-19
lockdown.
In addition, the Group capitalises part of its brownfield
exploration, which mostly relates to costs incurred converting
potential resources to the Inferred or Measured and Indicated
categories. In H1 2021, the Company capitalised $4.0 million
relating to brownfield exploration (H1 2020: nil), bringing the
total investment in exploration for H1 2021 to $21.4 million (H1
2020: $12.7 million).
Selling expenses
Selling expenses increased to $7.1 million (H1 2020: $6.0
million) mainly due to higher volume sold and higher prices,
principally due to the fact that in Argentina, which levies export
taxes, the San Jose operation was affected by production stoppages
in H1 2020.
Other income/expenses
Other income was higher at $1.9 million (H1 2020: $1.1 million)
mainly due to the resumption of normal business activity in H1 2021
versus the impacted H1 2020 and also the sale of non-critical
assets.
Other expenses before exceptional items were $13.8 million (H1
2020: $3.9 million) with the increase mainly due to: a voluntary
redundancy programme in Argentina of $7.5 million; higher
responsibility taxes in Argentina of $1.8 million (H1 2020: $0.9
million) and an increase in mine closure provisions ($1.5 million).
In addition, there were lower assets write-offs of $0.3 million in
H1 2021 (H1 2020: $1.2 million).
Adjusted EBITDA
Adjusted EBITDA increased by 146% to $198.5 million (H1 2020:
$80.6 million) due to the increase in revenue due to the rebound in
production following H1 2020 operational stoppages resulting from
the Covid-19 crisis. In addition, there were significant increases
in precious metal prices. These effects were partially offset by
higher production costs.
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 2021 30 June 2020
--------------- --------------
Profit from continuing operations before exceptional items, net finance
cost, foreign exchange
(loss)/gain and income tax 110,771 18,065 513
Depreciation and amortisation in cost of sales 70,879 48,831 45
Depreciation and amortisation in administrative and other expenses 990 2,663 (63)
Exploration expenses 17,436 12,743 37
Personnel and other exploration related fixed expenses (3,409) (2,926) 17
Other non-cash income, net [22] 1,837 1,208 52
-------------------------------------------------------------------------- --------------- -------------- ---------
Adjusted EBITDA 198,504 80,584 146
-------------------------------------------------------------------------- --------------- -------------- ---------
Adjusted EBITDA margin 50% 35% 43
-------------------------------------------------------------------------- --------------- -------------- ---------
Finance income
Finance income was $2.1 million (H1 2020: $2.1 million) in line
with the total for H1 2020 with lower interest on cash deposits
(due to lower interest rates) being offset by the positive impact
from the discount of mine closure provisions.
Finance costs
Finance costs increased from $5.1 million in H1 2020 to $13.3
million in H1 2021, principally due to: foreign exchange
transaction costs to acquire $8.8 million dollars in Argentina,
which resulted in a loss of $6.3 million (H1 2020: $0.6 million); a
loss on the unwinding of VAT credits in Argentina of $1.0 million
(H1 2020: nil); a loss on the sale of Americas Gold & Silver
Corporation shares versus December 2020 of $0.7 million; and higher
interest expenses resulting from pre-shipment loans in Argentina of
$1.1 million (H1 2020: $0.6 million).
Foreign exchange losses
The Group recognised a foreign exchange loss of $1.8 million (H1
2020: $1.9 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 2021.
Income tax
The Company's Group's pre-exceptional income tax charge was
$59.7 million (H1 2020: $17.4 million). The significant rise in the
charge is explained by the rebound in profitability versus the
Covid-impacted H1 2020. In addition, there was an increase in the
tax rate in Argentina to 35% impacting deferred income tax of $11.5
million as well as a non-cash impact of local currency devaluation
in Peru and Argentina in H1 2021 of $6.6 million and $1.4 million
respectively (H1 2020: $9.8 total impact).
The effective tax rate (pre-exceptional) for the period was
61.1% (H1 2020: 133.2%), compared to the weighted average statutory
income tax rate of 31.7% (2020: 30.7%). The high effective tax rate
in H1 2021 versus the average statutory rate is mainly explained
by: the impact of the change in tax rate in Argentina increasing
the rate by 11.8%; the effect of local currency devaluation
increasing the rate by 8.1%; the impact from Royalties and the
Special Mining Tax increasing the rate by 7.2%; and the impact of
non-deductible expenses related to buying US dollars in Argentina
increasing the rate by 2.5%.
Exceptional items
Exceptional items in H1 2021 totalled a $9.5 million loss after
tax (H1 2020: $4.7 million loss after tax). Exceptional items
mainly included $14.0 million of Covid-19 response initiatives
distributed between cost of sales and other expenses (H1 2020: $6.6
million) partially offset by the associated tax effect. These
initiatives include: incremental personnel expenses; Covid tests;
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 to the Group's operations.
Covid-19 response initiatives [23]
$000 Six months Six months % change
to to
30 June 2021 30 June 2020
--------------- --------------
Personnel 2,112 1,202 76
Donations - 1,251 (100)
Third party services including cleaning
and food services 10,913 3,202 241
Others 931 961 (3)
----------------------------------------- --------------- -------------- ---------
Total 13,956 6,616 111
----------------------------------------- --------------- -------------- ---------
The tax effect of these exceptional items was a $4.5 million tax
gain (2020: $2.0 million tax gain). The total effective tax rate
was 65.9% (2020: 239.3%).
Cash flow and balance sheet review
Cash flow
$000 Six months Six months Change
to to
30 June 2021 30 June 2020
--------------- --------------
Net cash generated from operating
activities 119,811 16,739 103,072
Net cash used in investing activities (67,021) (37,716) (29,305)
Cash flows generated (used in)/from
financing activities (25,268) 18,454 (43,722)
Foreign exchange adjustment (2,476) (1,743) (733)
--------------------------------------- --------------- -------------- ---------
Net increase/(decrease) in cash and
cash equivalents during the period 25,046 (4,266) 29,312
--------------------------------------- --------------- -------------- ---------
Net cash generated from operating activities increased from
$16.7 million in H1 2020 to $119.8 million in H1 2021 mainly due to
higher Adjusted EBITDA of $198.5 million (H1 2020: $80.6
million).
Net cash used in investing activities increased to $67.0 million
in H1 2021 from $37.7 million in H1 2020 mainly due to higher
operational capex and mine development versus H1 2020 when there
were deferrals resulting from the stoppages. In addition, there
were higher exchange transaction costs to acquire dollars in
Argentina.
Cash generated (used in)/from financing activities changed to an
outflow of $25.3 million in H1 2021 from an inflow of $18.5 million
in H1 2020. In H1 2020, $19.9 million of short-term loans were
raised in Argentina to finance working capital during the stoppages
whereas in H1 2021 short-term debt was partially repaid. Also, H1
2021 included the payment of $19.6 million (1H 2020: $0.3 million)
in dividends to shareholders and to Hochschild's minority
shareholder at San Jose.
Working capital
$000 As at As at
30 June 2021 31 December 2020
--------------
Trade and other receivables 90,357 78,196
Inventories 41,741 42,362
Derivative financial assets/(liabilities) 2,600 (1,500)
Income tax receivable/(payable), net (19,497) (20,709)
Trade and other payables (112,072) (114,415)
Provisions (22,763) (25,504)
------------------------------------------- -------------- ------------------
Working capital (19,634) (41,570)
------------------------------------------- -------------- ------------------
The Group's working capital position in H1 2021 increased by
$21.9 million from $(41.6) million to $(19.6) million. The key
drivers of the increase were: higher trade and other receivables of
$12.2 million in line with higher prices and higher volume sold;
higher derivative financial assets of $4.1 million mainly comprised
of the position on the Company's silver hedges; and lower trade and
other payables of $2.3 million.
Net cash/(debt)
$000 unless otherwise indicated As at As at
30 June 2021 31 December
2020
--------------
Cash and cash equivalents 256,929 231,883
Non-current borrowings (166,268) (199,554)
Current borrowings [24] (39,543) (10,778)
--------------------------------- -------------- -------------
Net cash/(debt) 51,118 21,551
--------------------------------- -------------- -------------
The Group's reported net cash position was $51.1 million as at
30 June 2021 (31 December 2020: $21.6 million). The Group benefited
from strong cashflow resulting from the higher production and
higher precious metal prices.
Capital expenditure ([25])
$000 Six months Six months to
to 30 June 2020
30 June 2021
---------------
Inmaculada 32,834 22,463
Pallancata 5,970 3,546
San Jose 18,127 12,685
Operations 56,931 38,694
Biolantanidos 6,366 1,798
Other 3,616 2,298
--------------- --------------- --------------
Total 66,913 42,790
--------------- --------------- --------------
H1 2021 capital expenditure of $66.9 million (H1 2020: $42.8
million) mainly comprised of operational capex of $56.9 million (H1
2020: $38.7 million) with the increase versus H1 2020 resulting
from deferred capex at all operations in H1 2020 due to the
Covid-19 crisis.
Dividends
Following a detailed review, the Company has identified an issue
concerning the Company's compliance with the Companies Act 2006 in
relation to the payment of certain historic dividends (the
"Relevant Historic Dividends"). In particular, the Company did not
have sufficient distributable reserves at the appropriate
point.
Notwithstanding the above, the Board notes the Company's robust
net cash position.
The Company has identified certain steps that are anticipated
will create sufficient distributable reserves in the Company and is
working with its advisers towards that objective. We will update
shareholders on this in due course. Subject to creating sufficient
distributable reserves, the directors anticipate announcing an
interim dividend by the end of the month.
Furthermore, the Company expects it will require a resolution to
be passed at a General Meeting to be held in due course to relieve
the shareholders of any obligation to repay the Relevant Historic
Dividends and to release the Directors from any related
liability.
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 2020 are set out in detail in
the Risk Management section of the 2020 Annual Report and in Note
37 to the 2020 Consolidated Financial Statements.
The key risks disclosed in the 2020 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 matters (including permitting) and
community relations.
These risks continue to apply to the Company in respect of the
remaining six months of the financial year. Below we provide
further detail on two aspects of the above risks of particular
relevance with regards to H1 2021 and their impact on the remainder
of the year.
1. Covid-19
H1 2021
During the first half of the year, the Company continued to
prioritise employee welfare through the ongoing implementation of
its Covid protocols overseen by the Covid-19 Crisis Committee. Such
measures encompass regular testing, the adaptation of the Group's
operations to facilitate social distancing and the swift provision
of medical services for suspected cases. Further details on how the
Group has managed Covid-related risks can be found in the 2020
Annual Report.
Outlook
The Group has benefited from uninterrupted operations during the
first half of the year and, as a reflection of the ongoing rollout
of the vaccination programmes in Peru and Argentina, has cautiously
commenced the process of putting in place plans to gradually revert
to its standard operating protocols starting in 2022. Management
will continue to closely monitor infection levels in the countries
of operation and are able to adapt to signs of increased case rates
should they arise.
2. Political Risk
H1 2021
As referenced in the 2020 Annual Report, the first-round
Presidential elections in Peru were held in April 2021 with
campaigning by the run-off candidates taking place in the lead up
to the second round of voting in early June 2021. Mining has always
been and continues to be a politicised issue and, as a result,
risks associated with social conflict were heightened during this
period.
Outlook
With a new far-left government in place, the Group may be
vulnerable to new legislative and regulatory initiatives which
could result in increased taxes/royalties and other costs. In
addition, governmental processes such as permitting will likely
become more onerous and may become subject to social investment
requirements, resulting in delays and thereby potentially impacting
the Group's exploration and operational activities. Moreover, the
government's announcement that it will seek to draft a new
constitution will further polarise the country, increase country
and social risks, and impact economic recovery. The Group continues
to review developments closely and looks to participate in open
dialogue with the authorities both individually and through the
National Mining Association.
RELATED PARTY TRANSACTIONS
Related party transactions are disclosed in Note 21 to the
interim condensed consolidated 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 duration of the Going Concern Period
until 30 September 2022. Accordingly, they continue to adopt the
going concern basis in preparing the interim 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
interim 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 UK adopted International Accounting
Standard 34 "Interim Financial Reporting" 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
17 August 2021
INDEPENT REVIEW REPORT TO HOCHSCHILD MINING PLC
Conclusion
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 2021 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 22. 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.
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 2021 is not prepared, in all material respects, in accordance
with UK adopted International Accounting Standard 34 and the
Disclosure Guidance and Transparency Rules of the United Kingdom's
Financial Conduct Authority.
Basis for Conclusion
We conducted our review in accordance with 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. 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
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.
As disclosed in note 2, the annual financial statements of the
Group will be prepared in accordance with UK adopted International
Financial Reporting Standards ('IFRSs'). The condensed set of
financial statements included in this half-yearly financial report
has been prepared in accordance with UK adopted International
Accounting Standard 34, "Interim Financial Reporting".
Responsibilities of 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.
Auditor's Responsibilities for the review of the financial
information
In reviewing the half-yearly report, we are responsible for
expressing to the Company a conclusion on the condensed set of
financial statements in the half-yearly financial report. Our
conclusion, based on procedures that are less extensive than audit
procedures, is described in the Basis for Conclusion paragraph of
this report.
Use of our report
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.
Ernst & Young LLP
London
18 August 2021
Interim condensed consolidated income statement
Six months ended Six months ended
30 June 2021 (Unaudited) 30 June 2020 (Unaudited)
------------------------- -------------------------
Exceptional Exceptional
Before items Before items
exceptional (Note exceptional (Note
items 9) Total items 9) Total
Notes US$000 US$000 US$000 US$000 US$000 US$000
------------------ ----- ----------- ----------- --------- ----------- ----------- ---------
Continuing
operations
Revenue 4 394,750 - 394,750 232,029 - 232,029
Cost of sales (30
June 2020 restated
- note 2(a)) 5 (223,155) (13,091) (236,246) (170,957) (4,727) (175,684)
------------------- ----- ----------- ----------- --------- ----------- ----------- ---------
Gross profit (30
June 2020 restated
- note 2(a)) 171,595 (13,091) 158,504 61,072 (4,727) 56,345
------------------- ----- ----------- ----------- --------- ----------- ----------- ---------
Administrative
expenses (24,042) - (24,042) (20,236) - (20,236)
Exploration
expenses 6 (17,436) - (17,436) (12,743) - (12,743)
Selling expenses 7 (7,134) - (7,134) (5,987) - (5,987)
Other income 8 1,857 - 1,857 1,096 - 1,096
Other expenses (30
June 2020 restated
- note 2(a)) 8 (13,770) (865) (14,635) (3,929) (1,889) (5,818)
Write-off of
non-financial
assets (299) - (299) (1,208) - (1,208)
------------------- ----- ----------- ----------- --------- ----------- ----------- ---------
Profit/(loss) from
continuing
operations
before net finance
income/(cost),
foreign
exchange loss and
income tax 110,771 (13,956) 96,815 18,065 (6,616) 11,449
------------------- ----- ----------- ----------- --------- ----------- ----------- ---------
Finance income 10 2,061 - 2,061 2,074 - 2,074
Finance costs 10 (13,252) - (13,252) (5,144) - (5,144)
Foreign exchange
loss (1,777) - (1,777) (1,915) - (1,915)
------------------- ----- ----------- ----------- --------- ----------- ----------- ---------
Profit/(loss) from
continuing
operations
before income tax 97,803 (13,956) 83,847 13,080 (6,616) 6,464
------------------- ----- ----------- ----------- --------- ----------- ----------- ---------
Income tax
(expense)/benefit 11 (59,738) 4,485 (55,253) (17,425) 1,955 (15,470)
------------------- ----------- ----------- --------- ----------- ----------- ---------
Profit/(loss) for
the period from
continuing
operations 38,065 (9,471) 28,594 (4,345) (4,661) (9,006)
------------------- ----------- ----------- --------- ----------- ----------- ---------
Attributable to:
Equity shareholders
of the parent 42,063 (7,338) 34,725 (3,763) (4,190) (7,953)
Non-controlling
interests (3,998) (2,133) (6,131) (582) (471) (1,053)
------------------- ----------- ----------- --------- ----------- ----------- ---------
38,065 (9,471) 28,594 (4,345) (4,661) (9,006)
----------- ----------- --------- ----------- ----------- ---------
Basic
earnings/(loss)
per ordinary share
from continuing
operations
for the period
(expressed
in U.S. dollars
per
share) 0.08 (0.01) 0.07 (0.01) (0.01) (0.02)
------------------- ----------- ----------- --------- ----------- ----------- ---------
Diluted
earnings/(loss)
per ordinary share
from continuing
operations
for the period
(expressed
in U.S. dollars
per
share) 0.08 (0.01) 0.07 (0.01) (0.01) (0.02)
------------------- ----------- ----------- --------- ----------- ----------- ---------
Interim condensed consolidated statement of comprehensive
income
Six months ended
30 June
----------------------------------
2021 (Unaudited) 2020 (Unaudited)
Notes US$000 US$000
----- ---------------- ----------------
Profit/(loss) for the period 28,594 (9,006)
------------------------------------------------ ----- ---------------- ----------------
Other comprehensive income that might
be reclassified to profit or loss in
subsequent periods; net of tax:
Net gain/(loss) on cash flow hedges 14 7,151 (7,047)
Deferred tax (charge)/benefit on cash
flow hedges (2,109) 2,079
Exchange differences on translating foreign
operations (1,660) (163)
------------------------------------------------ ----- ---------------- ----------------
3,382 (5,131)
----- ---------------- ----------------
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") 154 1,479
------------------------------------------------ ----- ---------------- ----------------
154 1,479
-----
Other comprehensive income/(loss) for
the period, net of tax 3,536 (3,652)
------------------------------------------------ ----- ---------------- ----------------
Total comprehensive income/(loss) for
the period 32,130 (12,658)
------------------------------------------------ ----- ---------------- ----------------
Total comprehensive income/(loss) attributable
to:
Equity shareholders of the parent 38,261 (11,605)
Non-controlling interests (6,131) (1,053)
------------------------------------------------ ---------------- ----------------
32,130 (12,658)
---------------- ----------------
Interim condensed consolidated statement of financial
position
As at As at
30 June 31 December
2021 2020
(Unaudited)
Notes US$000 US$000
--------------------------------------- ----- ------------- ------------
ASSETS
--------------------------------------- ----- ------------- ------------
Non-current assets
Property, plant and equipment 12 766,354 787,663
Evaluation and exploration assets 13 203,407 192,121
Intangible assets 20,503 21,564
Financial assets at fair value through
OCI 14 554 402
Financial assets at fair value through
profit and loss 14 - 5,407
Trade and other receivables 5,547 5,395
Derivative financial assets 14 1,482 -
Deferred income tax assets 15 618 1,009
-------------------------------------------- -----
998,465 1,013,561
----- ------------- ------------
Current assets
Inventories 41,741 42,362
Trade and other receivables 90,357 78,196
Derivative financial assets 14 3,664 -
Income tax receivable 49 59
Cash and cash equivalents 16 256,929 231,883
-------------------------------------------- -----
392,740 352,500
----- ------------- ------------
Total assets 1,391,205 1,366,061
-------------------------------------------- ----- ------------- ------------
EQUITY AND LIABILITIES
--------------------------------------- ----- ------------- ------------
Capital and reserves attributable
to shareholders of the Parent
Equity share capital 19 226,506 226,506
Share premium 19 438,041 438,041
Other reserves (222,464) (225,664)
Retained earnings 311,420 287,652
-------------------------------------------- ----- ------------- ------------
753,503 726,535
----- ------------- ------------
Non-controlling interests 65,858 79,550
-------------------------------------------- -----
Total equity 819,361 806,085
-------------------------------------------- ----- ------------- ------------
Non-current liabilities
Trade and other payables 50 205
Derivative financial liabilities 14 2,934 4,503
Borrowings 17 166,268 199,554
Provisions 18 110,244 109,033
Deferred income tax liabilities 15 97,160 73,316
-------------------------------------------- ----- ------------- ------------
376,656 386,611
----- ------------- ------------
Current liabilities
Trade and other payables 112,072 114,415
Derivative financial liabilities 14 1,064 1,500
Borrowings 17 39,543 10,778
Provisions 18 22,763 25,504
Deferred income 200 400
Income tax payable 19,546 20,768
-------------------------------------------- -----
195,188 173,365
----- ------------- ------------
Total liabilities 571,844 559,976
-------------------------------------------- ----- ------------- ------------
Total equity and liabilities 1,391,205 1,366,061
-------------------------------------------- ----- ------------- ------------
Interim condensed consolidated statement of cash flows
Six months ended
30 June
----------------------------------
2021 (Unaudited) 2020 (Unaudited)
Notes US$000 US$000
------------------------------------------------------------------ ----- ---------------- ----------------
Cash flows from operating activities
Cash generated from operations* 22 140,205 24,803
Interest received 1,121 804
Interest paid 17 (2,354) (2,794)
Payment of mine closure costs (2,638) (1,367)
Income tax paid (16,523) (4,707)
------------------------------------------------------------------- ----- ---------------- ----------------
Net cash generated from operating
activities* 119,811 16,739
------------------------------------------------------------------- ----- ---------------- ----------------
Cash flows from investing activities
Purchase of property, plant and equipment (52,956) (41,404)
Purchase of evaluation and exploration
assets (12,452) (2,803)
Purchase of Argentinian bonds* (15,161) (1,713)
Purchase of financial assets at fair
value to OCI 14 (7) -
Proceeds from sale of Argentinian
bonds* 8,815 1,096
Proceeds from sale of financial assets
at fair value through OCI 14 9 7,070
Proceeds from sale of financial assets
at fair value though profit and loss............................. 14 4,726 -
Proceeds from sale of property, plant
and equipment 12 5 38
------------------------------------------------------------------- -----
Net cash used in investing activities (67,021) (37,716)
------------------------------------------------------------------- ----- ---------------- ----------------
Cash flows from financing activities
Proceeds from borrowings 17 1,804 27,910
Repayment of borrowings 17 (6,309) (8,000)
Purchase of treasury shares 19 - (292)
Payment of lease liabilities (1,200) (879)
Dividends paid to shareholders 20 (12,002) -
Dividends paid to non-controlling
interests 20 (7,561) (285)
------------------------------------------------------------------- -----
Cash flows (used in)/ from financing
activities (25,268) 18,454
------------------------------------------------------------------- ----- ---------------- ----------------
Net increase/(decrease) in cash and
cash equivalents during the period 27,522 (2,523)
Impact of foreign exchange (2,476) (1,743)
Cash and cash equivalents at beginning
of period 231,883 166,357
------------------------------------------------------------------- ----- ---------------- ----------------
Cash and cash equivalents at end
of period 16 256,929 162,091
------------------------------------------------------------------- ----- ---------------- ----------------
*Comparative information has been restated to present the
foreign exchange transactions carried in Argentina on a gross basis
within investing activities
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
2021 226,506 438,041 - 99 (4,169) (205) (13,876) (210,046) 2,533 (225,664) 287,652 726,535 79,550 806,085
----------------- ----- ------- ------- --------- --------- ------------- --------- ----------- --------- ----------- --------- -------- ------------ --------------- --------
Other
comprehensive
income/(loss) - - - - 5,042 154 (1,660) - - 3,536 - 3,536 - 3,536
Profit for the
period - - - - - - - - - - 34,725 34,725 (6,131) 28,594
----------------- ----- ------- ------- --------- --------- ------------- --------- ----------- --------- ----------- --------- -------- ------------ --------------- --------
Total
comprehensive
income/(loss)
for
the period - - - - 5,042 154 (1,660) - - 3,536 34,725 38,261 (6,131) 32,130
----------------- ----- ------- ------- --------- --------- ------------- --------- ----------- --------- ----------- --------- -------- ------------ --------------- --------
Sale of financial
assets at fair
value
through OCI - - - - - 18 - - - 18 (18) - - -
Dividends 20 - - - - - - - - - - (12,002) (12,002) - (12,002)
Dividends paid to
non-controlling
interest 20 - - - - - - - - - - - - (7,561) (7,561)
Treasury shares - - - - - - - - - - - - - -
Share-based
payments - - - - - - - - 709 709 - 709 - 709
Forfeiture of
share
options - - - - - - - - (1,063) (1,063) 1,063 - - -
----------------- ----- ------- ------- --------- --------- ------------- --------- ----------- --------- ----------- --------- -------- ------------ --------------- --------
Balance at 30
June
2021 (unaudited) 226,506 438,041 - 99 873 (33) (15,536) (210,046) 2,179 (222,464) 311,420 753,503 65,858 819,361
----------------- ----- ------- ------- --------- --------- ------------- --------- ----------- --------- ----------- --------- -------- ------------ --------------- --------
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
(loss)/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 - - - - - (1,841) - - - (1,841) 1,841 - - -
Dividends paid to
non-controlling
interest 20 - - - - - - - - - - - - (285) (285)
Treasury shares 19 - - (292) - - - - - - - - (292) - (292)
Share-based
payments - - - - - - - - 713 713 - 713 - 713
Exercise of share
options 19 - - 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
----------------- ----- ------- ------- --------- --------- ------------- --------- ----------- --------- ----------- --------- -------- ------------ --------------- --------
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. The Group also has
a portfolio of projects located across Peru, Argentina and Chile at
various stages of development.
These interim condensed consolidated financial statements were
approved for issue on behalf of the Board of Directors on 17 August
2021.
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 2021 and 31
December 2020 and its financial performance and cash flows for the
six months ended 30 June 2021 and 30 June 2020.
They have been prepared in accordance with the Disclosure and
Transparency Rules of the Financial Conduct Authority and UK
adopted International Accounting Standard 34, "Interim Financial
Reporting". 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 2020 annual consolidated financial
statements as published in the 2020 Annual Report. The annual
financial statements of the Group will be prepared in accordance
with UK adopted IFRS.
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 2020. A
copy of the statutory accounts for that year, which were prepared
in accordance with International Accounting Standards in conformity
with the requirements of the Companies Act 2006 and International
Financial Reporting Standards (IFRS) adopted pursuant to Regulation
(EC) No 1606/2002 as it applied in the European Union (EU) 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.
The prior period income statement reflects a reclassification of
certain balances between cost of sales and other expenses to better
reflect the effects of the Covid-19 pandemic on certain costs
incurred by the Group:
-- Fixed costs at operations during stoppages and reduced
capacity: corresponds to the unallocated fixed costs accumulated
during the stoppages and operation of the mine units below planned
operating capacity due to the Covid-19 pandemic which have been
reclassified from other expenses to cost of sales (note 5).
-- Incremental costs due to Covid-19 pandemic: incremental
production costs incurred in the operating mine units to manage the
Covid-19 pandemic which have been reclassified from other expenses
to cost of sales, and presented as exceptional (note 9).
We have assessed the new presentation and concluded that the
reclassification of these Covid-related costs from other expenses
to cost of sales better reflects the nature of the expense and
therefore provides more reliable and relevant information.
As a result, the affected financial statement line items for the
prior period have been restated to present information on a
consistent basis as follows:
Period As reported Reclassification As restated
ended
30 June
2020
--------- ----------------------------------- ---------------------------------- -----------------------------------
Before Before Before
exceptional Exceptional exceptional Exceptional exceptional Exceptional
US$000 items items Total items items Total items items Total
--------- ----------- ----------- --------- ----------- ----------- -------- ----------- ----------- ---------
Cost of
sales (146,945) - (146,945) (24,012) (4,727) (28,739) (170,957) (4,727) (175,684)
--------- ----------- ----------- --------- ----------- ----------- -------- ----------- ----------- ---------
Gross
profit 85,084 - 85,084 (24,012) (4,727) (28,739) 61,072 (4,727) 56,345
--------- ----------- ----------- --------- ----------- ----------- -------- ----------- ----------- ---------
Other
expenses (27,941) (6,616) (34,557) 24,012 4,727 28,739 (3,929) (1,889) (5,818)
--------- ----------- ----------- --------- ----------- ----------- -------- ----------- ----------- ---------
The impact on the current period is to increase the cost of
sales and decrease other expenses by $19,287,000 respectively (of
which $6,196,000 is pre-exceptional and $13,091,000 is
exceptional).
There was no impact on the statement of financial position or
statement of cash flows from the reclassification in the current or
prior periods.
(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
remain consistent with those disclosed in the consolidated
financial statements for the year ended 31 December 2020. The most
significant are:
Critical judgements:
-- Assessment of impairment indicators for the Group's GCUs - note 12
-- Pandemic expenses - note 9
The Group analyses the effect of pandemics on its operations and
accounting treatment, because they generate stoppages, low capacity
production, excess absenteeism and incremental cost. In the case of
Covid-19, the fixed 'normal' production costs during the stoppage
are recognised as expenses and are not considered cost of the
inventories produced. In the income statement these fixed costs are
classified as pre-exceptional.
To determine whether the incremental Covid-related costs should
be recognised as exceptional expenses, consideration has been given
as to whether they meet the criteria as set out in the Groups'
accounting policy (note 2y) in the 2020 Annual Report, in
particular regarding the expected infrequency of the events that
have given rise to them.
Significant estimates:
-- Mine closure estimates - note 18
-- Valuation of financial instruments - note 14
As at 30 June 2021, the valuation of certain of the Group's
assets and liabilities reflect the changes to certain assumptions
used in the determination of their value, such as future gold and
silver prices, discount rates, exchange rates, and interest rates
(note 14). 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
2020, except for the adoption of new standards and interpretations
effective from 1 January 2021. The Group has not early adopted any
other standard, interpretation or amendment that has been issued
but is not yet effective. Several amendments apply for the first
time in 2021, but do not have an impact on the interim condensed
consolidated financial statements of the Group.
(d) Going concern
The Directors have reviewed Group liquidity and covenant
forecasts to assess whether the Group is able to continue in
operation for the period to 30 September 2022 (the "Going Concern
Period") which is at least 12 months from the date of these
financial statements. In line with their usual practice, the
Directors also considered the impact of a number of potential
downside scenarios on the Group's future cash flows and liquidity
position as well as debt covenant compliance. The scenarios were
further reviewed under varying precious metal price
assumptions.
Within these potential downside scenarios, consideration was
given to the on-going impact of the Covid-19 pandemic, the results
of the recent Peruvian election and the potential actions of
suppliers, customers and other third parties.
Specifically with regard to Covid-19, the Directors consider the
risk of Covid-related suspensions across all operations to be low
based on trends experienced in the first half of 2021. While this
assessment takes into account the effectiveness of the Group's
health protocols, it is also dependent on the continued progress in
Peru and Argentina with regards to their respective government's
vaccination rollout programmes and the effectiveness of these
vaccines relative to new variants of the virus.
In considering the possible impact on the business following the
final results of the Presidential elections in Peru, the Directors
note that, as at the date of the signing of the financial
statements, no new policies specifically relevant to the mining
sector have been announced. However, the Directors recognize the
possibility of future changes including potential increases in the
level of tax and royalties payable.
For purposes of the review, the Base Scenario assumed budgeted
production for the year, the most recently approved Life of Mine
plan, certain Covid 19-related costs throughout the remaining
months of 2021 and average metal prices of $1,805/oz for gold and
$25.2/oz for silver (the "Assumed Prices"). The Directors also
considered "Severe" and "Remote" scenarios, which were considered
to be unlikely by the Directors. The former takes into account, a
four-week suspension of all operations during H2 2021 and an
increase in royalties and taxes. The latter analyses the cumulative
impact of the Severe scenario and precious metal prices which are
20% lower than the Assumed Prices. Those prices would be
significantly below current spot and futures prices. In each
scenario, it has been assumed that all employees remain on full pay
and that mitigating actions, while available, would not be
necessary to maintain a comfortable level of liquidity.
Under all scenarios and metal price assumptions and
sensitivities, the cash balance remained more than adequate for the
Group's forecast expenditure with sufficient headroom maintained to
comply with debt covenants. The results of a reverse stress test
were also considered.
After their thorough review, the Directors have a reasonable
expectation that the Group has adequate resources to continue in
operational existence during the Going Concern Period. 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 2021 and 2020 and asset information as at 30 June
2021 and 31 December 2020 respectively:
Six months ended
30 June 2021 Other Total
Adjustments
Pallancata San Jose Inmaculada Exploration and eliminations
(Unaudited) US$000 US$000 US$000 US$000 US$000 US$000 US$000
----------------- ---------- -------- ---------- ----------- ------- ---------------- ---------
Revenue from external
customers 62,286 117,497 215,114 - 188 - 395,085
Inter segment revenue - - - - 4,498 (4,498) -
---------------------- ---------- -------- ---------- ----------- ------- ---------------- ---------
Total revenue from
customers 62,286 117,497 215,114 - 4,686 (4,498) 395,085
---------------------- ---------- -------- ---------- ------- ---------------- ---------
Provisional pricing
adjustments (514) 195 (16) - - - (335)
----------------------
Total revenue 61,772 117,692 215,098 - 4,686 (4,498) 394,750
---------------------- ---------- -------- ---------- ----------- ------- ---------------- ---------
Segment profit/(loss) 14,216 28,233 106,344 (17,578) 3,582 (863) 133,934
---------------------- ---------- -------- ---------- ----------- ------- ---------------- ---------
Others(1) (50,087)
---------------------- ---------- -------- ---------- ----------- ------- ---------------- ---------
Profit from continuing
operations before
income tax 83,847
---------------------- ---------- -------- ---------- ----------- ------- ---------------- ---------
As at 30 June
2021
(Unaudited)
Assets
----------------- ---------- -------- ---------- ----------- ------- ---------------- ---------
Capital expenditure 5,810 18,127 32,834 8,836 1,306 - 66,913
---------------------- ---------- -------- ---------- ----------- ------- ---------------- ---------
Current assets 30,497 42,052 16,122 - 4,952 - 93,623
Other non-current
assets 27,708 161,971 510,833 238,988 50,764 - 990,264
---------------------- ---------- -------- ---------- ----------- ------- ---------------- ---------
Total segment assets 58,205 204,023 526,955 238,988 55,716 - 1,083,887
---------------------- ---------- -------- ---------- ----------- ------- ---------------- ---------
Not reportable
assets(2) - - - - 307,318 - 307,318
---------------------- ---------- -------- ---------- ----------- ------- ---------------- ---------
Total assets 58,205 204,023 526,955 238,988 363,034 - 1,391,205
---------------------- ---------- -------- ---------- ----------- ------- ---------------- ---------
1 Comprised of administrative expenses of US$24,042,000, other
income of US$1,857,000, other expenses of US$14,635,000, write off
of non-financial assets of US$299,000, finance income of
US$2,061,000, finance costs of US$13,252,000 and foreign exchange
loss of US$1,777,000.
2 Not reportable assets are comprised of financial assets at
fair value through OCI of US$554,000, other receivables of
US$44,023,000, derivative financial assets of US$5,145,000, income
tax receivable of US$49,000, deferred income tax assets of
US$618,000, and cash and cash equivalents of US$256,929,000.
Adjustments
Six months ended San and
30 June 2020 Pallancata Jose Inmaculada Exploration Other eliminations Total
(Unaudited) US$000 US$000 US$000 US$000 US$000 US$000 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) (9,194) 8,107 49,248 (13,103) 2,075 482 37,615
---------------- ---------- ------- ---------- ----------- ------- ------------ ---------
Others(1) (31,151)
---------------- ---------- ------- ---------- ----------- ------- ------------ ---------
Profit from
continuing
operations
before
income tax 6,464
---------------- ---------- ------- ---------- ----------- ------- ------------ ---------
As at 31
December
2020
Assets
---------------- ---------- ------- ---------- ----------- ------- ------------ ---------
Capital
expenditure 7,399 23,030 62,128 12,772 2,595 - 107,924
---------------- ---------- ------- ---------- ----------- ------- ------------ ---------
Current assets 24,692 43,735 14,613 - 4,675 - 87,715
Other
non-current
assets 33,784 166,887 516,505 232,135 52,037 - 1,001,348
---------------- ---------- ------- ---------- ----------- ------- ------------ ---------
Total segment
assets 58,476 210,622 531,118 232,135 56,712 - 1,089,063
---------------- ---------- ------- ---------- ----------- ------- ------------ ---------
Not reportable
assets(2) - - - - 276,998 - 276,998
---------------- ---------- ------- ---------- ----------- ------- ------------ ---------
Total assets 58,476 210,622 531,118 232,135 333,710 - 1,366,061
---------------- ---------- ------- ---------- ----------- ------- ------------ ---------
1 Comprised of administrative expenses of US$20,236,000, other
income of US$1,096,000, other expenses of US$5,818,000, 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.
2 Not reportable assets are comprised of financial assets at
fair value through OCI of US$402,000, financial assets at fair
value through profit and loss of US$5,407,000, other receivables of
US$38,238,000, income tax receivable of US$59,000, deferred income
tax asset of US$1,009,000, and cash and cash equivalents of
US$231,883,000.
4 Revenue
Period ended 30 June 2021 Period ended 30 June 2020
(unaudited) (unaudited)
------------------------------------------------------ -------------------------------------------------------
Revenue from customers Revenue from
customers
------------------------------ ------------ -------- ------------------------------ ------------ ---------
Goods/ Goods/
services Shipping Provisional services Shipping Provisional
sold services Total pricing Total sold services Total pricing Total
US$000 US$000 US$000 US$000 US$000 US$000 US$000 US$000 US$000 US$000
-------------- --------- -------- -------- --------- -------- ------------
Gold (from
dore bars) 167,912 403 168,315 5 168,320 112,781 358 113,139 156 113,295
Silver (from
dore bars) 94,986 355 95,341 18 95,359 38,794 210 39,004 (15) 38,989
Gold (from
concentrate) 47,878 966 48,844 141 48,985 41,206 927 42,133 1,048 43,181
Silver (from
concentrate) 81,196 1,201 82,397 (499) 81,898 36,423 648 37,071 (558) 36,513
Services 188 - 188 - 188 51 - 51 - 51
-------------- --------- --------- -------- ------------ -------- --------- --------- -------- ------------ ---------
Total 392,160 2,925 395,085 (335) 394,750 229,255 2,143 231,398 631 232,029
-------------- --------- --------- -------- ------------ -------- --------- --------- -------- ------------ ---------
5 Cost of sales before exceptional items
Included in cost of sales are:
Six months ended 30
June
----------------------------------
2021 (Unaudited) 2020 (Unaudited)
US$000 US$000
------------------------------------------------- ---------------- ----------------
Depreciation and amortisation in cost of sales
1 70,879 48,831
Personnel expenses 2 42,558 29,261
Mining royalty 3,404 2,048
Change in products in process and finished goods 261 7,728
Fixed costs at the operations during stoppages,
reduced capacity and excess absenteeism(3) 6,196 24,012
-------------------------------------------------- ---------------- ----------------
1 The depreciation and amortisation in production cost is US$73,815,000 (2020: US$49,402,000).
2 Includes workers' profit sharing of US$2,944,000 (2020: US$nil).
3 Corresponds to the unallocated fixed costs accumulated during
the stoppages operation of the mine units below planned operating
capacity and excess absenteeism due to the Covid-19 pandemic. These
costs mainly include personnel expenses of US$5,293,000 (2020:
US$16,038,000), third party services of US$826,000 (2020:
US$4,765,000), supplies of US$nil (2020: US$551,000), depreciation
and amortisation of US$nil (2020: US$1,542,000) and others costs of
US$77,000 (2020: US$1,116,000).
6 Exploration expenses
Six months ended 30
June
--------------------------------
2021 2020
(Unaudited) (Unaudited)
US$000 US$000
-------------------------- ------------- -------------
Mine site exploration1
Arcata 1,363 76
Ares 289 327
Inmaculada 726 958
Selene - 6
Pallancata 1,957 1,522
San Jose 4,701 4,694
------------------------------- ------------- -------------
9,036 7,583
------------- -------------
Prospects2
Peru 1,726 610
USA 371 74
Chile (21) (124)
------------------------------- ------------- -------------
2,076 560
------------- -------------
Generative3
Peru 2,170 1,416
Mexico 734 -
Chile (156) 96
2,748 1,512
------------- -------------
Personnel 3,145 2,716
Depreciation right-of-use 167 162
Others 264 210
------------------------------- ------------- -------------
Total 17,436 12,743
------------------------------- ------------- -------------
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
------------------------------
2021 2020
(Unaudited) (Unaudited)
US$000 US$000
------------------- ------------ ------------
Personnel expenses 151 151
Warehouse services 592 466
Taxes 1 5,490 4,282
Other 901 1,088
------------------------ ------------ ------------
Total 7,134 5,987
------------------------ ------------ ------------
1 Corresponds to the export duties in Argentina calculated as a
fixed amount in pesos per US$ of export.
8 Other income and expenses before exceptional Six months ended 30
items June
------------------------------
2021 2020
(Unaudited) (Unaudited)
US$000 US$000
----------------------------------------------- ------------ ------------
Other income
Logistic services 7 336
Gain on recovery of expenses 265 -
Others 1,585 760
---------------------------------------------------- ------------ ------------
Total 1,857 1,096
---------------------------------------------------- ------------ ------------
Other expenses
Increase in provision for mine closure (1,538) -
Loss on recovery of expenses - (165)
Depreciation right-of-use assets (64) (75)
Corporate social responsibility contribution
in Argentina (1,801) (874)
Care and maintenance expenses of Ares mine
unit (1,305) (852)
Care and maintenance expenses of Arcata mine
unit (1,093) (1,061)
Voluntary retirement program in Argentina
1 (4,934) -
Others(2) (3,035) (902)
---------------------------------------------------- ------------ ------------
Total (13,770) (3,929)
---------------------------------------------------- ------------ ------------
1 Voluntary retirement program implemented at Minera Santa Cruz
as a result of the need to comply with the Provincial Employment
Law that requires at least 70% of the workforce to have resided in
the province of Santa Cruz for three years.
2 Mainly includes the remuneration for the six months period
ended 30 June 2021 of the employees included in the voluntary
retirement program (US$2,581,000), since Minera Santa Cruz has to
pay them until the employment relationship is terminated even
though they are prevented from attending the mining unit.
9 Exceptional items
Exceptional items relate to:
Six months ended 30
June
----------------------------------
2021 (Unaudited) 2020 (Unaudited)
US$000 US$000
------------------------------------- ---------------- ----------------
Cost of sales
Incremental cost due to pandemic (1) (13,091) (4,727)
--------------------------------------
Total (13,091) (4,727)
--------------------------------------
Other expense
Incremental cost due to pandemic (865) (1,889)
-------------------------------------- ---------------- ----------------
Total (865) (1,889)
-------------------------------------- ---------------- ----------------
Income tax expense
Income tax credit (2) 4,485 1,955
-------------------------------------- ---------------- ----------------
Total 4,485 1,955
-------------------------------------- ---------------- ----------------
The exceptional items for the period ended 30 June 2021 and 2020
correspond to:
1 Incremental production costs incurred in the operating mine
units to manage the Covid-19 pandemic have been presented within
cost of sales and costs incurred by mine units in care and
maintenance and those related to corporate activities have been
presented within other expenses:
Six months ended 30 June
2021 2020
--------------------
Cost Other Cost Other
of sales expenses of sales expenses
US$000 US$000 US$000 US$000
-------------------------------- --------- --------- --------- ---------
Third party services 9,145 406 2,986 62
Personnel expenses 1,770 342 1,028 174
Donations - - 124 1,127
Consumption of medical supplies 800 69 267 31
Cleaning and food services 1,337 25 119 35
Depreciation and amortisation 19 20 32 -
Others 20 3 171 460
--------------------------------- --------- --------- --------- ---------
Total 13,091 865 4,727 1,889
---------------------------------
These costs were incurred in respect of the implementation of
the necessary protocols including incremental third party services
mainly related to accommodation whilst testing all workers for
active Covid-19 cases prior to travelling to mine units, medical
tests and additional transportation costs to facilitate social
distancing, personnel expenses mainly reflecting one-off bonuses
paid to those workers required to oversee critical processes during
period of suspension, donations 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.
The pandemic can be considered a single protracted globally
pervasive event with a financial impact over a number of reporting
periods. Management initial expectation was that these cost would
ceased to be incurred at the end of 2020 or early 2021, and whilst
the majority of the costs have reduced over time as a result of the
efficiencies made to the health protocols and logistics required to
operate throughout the pandemic, some residual costs continue to be
incurred to date. Notwithstanding this, management does not expect
these costs to continue beyond December 2021 and therefore they are
not expected to become recurring to the Group's operations
2 The tax effect generated by the incremental costs arising from the Covid-19 pandemic.
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
----------------------------------
2021 (Unaudited) 2020 (Unaudited)
US$000 US$000
------------------------------------------------- ---------------- ------------------
Finance income:
Interest on deposits and liquidity funds 954 1,152
Interest on loans 96 185
Gain on discount of other receivables (1) - 716
Unwind of discount on mine rehabilitation 968 -
Others 43 21
-------------------------------------------------- ---------------- ----------------
Total 2,061 2,074
-------------------------------------------------- ---------------- ----------------
Finance cost:
Interest on bank loans (3,749) (3,647)
Other interest (827) (175)
-------------------------------------------------- ---------------- ----------------
Total interest expense (4,576) (3,822)
-------------------------------------------------- ---------------- ----------------
Loss on discount of other receivables (1) (1,008) -
Loss from changes in the fair value of financial
instruments (2) (6,346) (617)
Loss on sale of financial assets at fair value
through profit and loss (note 14) (681) -
Others (641) (705)
-------------------------------------------------- ---------------- ----------------
Total (13,252) (5,144)
-------------------------------------------------- ---------------- ----------------
1 Mainly corresponds to the gain/(loss) on discount of tax credits in Argentina.
2 Represents the foreign exchange transaction costs to acquire
US$8,815,000 dollars through the sale of bonds in Argentina (2020:
US$1,096,000).
11 Income tax expense
Six months ended 30
June
------------------------------
2021 2020
(Unaudited) (Unaudited)
US$000 US$000
-------------------------------------------------- ------------ ------------
Current tax
Current income tax expense/(credit) 25,577 (444)
Withholding tax 525 -
Current mining royalty charge 3,507 1,490
Current special mining tax charge 3,518 713
-------------------------------------------------------
Total 33,127 1,759
------------------------------------------------------- ------------ ------------
Deferred tax
Origination and reversal of temporary differences 22,126 13,711
------------------------------------------------------- ------------ ------------
Total 22,126 13,711
------------------------------------------------------- ------------ ------------
Total taxation charge in the income statement 55,253 15,470
------------------------------------------------------- ------------ ------------
The pre-exceptional tax charge for the period was US$59,738,000
(2020: US$17,425,000).
The weighted average statutory income tax rate was 31.7% for
2021 and 30.7% for 2020. 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 interim income tax rate
calculation is based on the estimate average annual effective tax
rate of the Group.
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. In 2021 the
Argentinian tax rate increased to 35% generating higher deferred
tax of US$11,500,000.
The effective tax rate for corporate income tax before foreign
exchange effect for the six months ended 30 June 2021 is 39.3%
(2020: 54.3%), compared to the corporate income tax and mining
royalties before foreign exchange effect of 56.4% (2020: 88.4%) and
the total taxation charge in the income statement of 65.90% (2020:
239.3%).
The increase in the charge is mainly explained by the increase
in the Argentinian tax rate and the non-cash impact of local
currency devaluation in Peru and Argentina in H1 2021 of 9% and 15%
respectively (2020: 7% and 18%), which reduced the tax bases
impacting deferred income tax by US$7,900,000 (2020: credit of
US$9,800,000).
The UK Government increased the rate of Corporation Tax to 25%
on profits over GBP250,000 from April 2023. There is no impact on
the deferred tax calculation of the Group.
12 Property, plant and equipment
During the six months ended 30 June 2021, the Group acquired and
developed assets with a cost of US$54,461,000 (30 June 2020:
US$39,987,000). The additions for the six months ended 30 June 2021
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 11,465 6,662 18,127
Pallancata 4,847 963 5,810
Inmaculada 21,884 6,986 28,870
Others 293 1,361 1,654
------------ ----------------- --------------- ---------------
Total 38,489 15,972 54,461
------------ ----------------- --------------- ---------------
Assets with a net book value of US$1,000 were disposed of by the
Group during the six month period ended 30 June 2021 (2020: US$nil)
resulting in a net gain on disposal of US$3,000 (2020: gain of
US$38,000).
For the six months ended 30 June 2021, the depreciation charge
on property, plant and equipment was US$74,445,000 (2020:
US$51,404,000).
There were borrowing costs capitalised in property, plant and
equipment amounting to US$10,000.
As at 30 June 2021, no indicators of impairment or reversal of
impairment were identified in any of the Group's CGUs. Although the
Group incurred incremental expenses in the six-month period to 30
June 2021 as a result of COVID 19, management has assessed that
these costs are unlikely to continue beyond December 2021 (note 9).
Therefore, the incremental costs incurred as a result of COVID-19
are not considered to be an indicator of impairment.
In 2020, management determined that there was a trigger of
impairment reversal for the Pallancata and San Jose mine units as
both of these CGUs have previously been impaired.
The impairment test performed over the San Jose CGU resulted in
a reversal of impairment recognised as at 31 December 2020
amounting to US$8,303,000 (US$7,890,000 in property, plant and
equipment, US$100,000 in evaluation and exploration assets and
US$313,000 in intangibles).
The result of the impairment test performed over the Pallancata
CGU showed that the recoverable value of Pallancata supports the
carrying value, and neither an impairment nor impairment reversal
was recognised at 31 December 2020.
In 2020, no indicators of impairment or reversal of impairment
were identified in the other CGUs, which includes other exploration
projects.
The recoverable values of the San Jose and Pallancata CGUs were
determined using a fair value less costs of disposal (FVLCD)
methodology. FVLCD was determined using a combination of level 2
and level 3 inputs, which result in fair value measurements
categorised in its entirety as level 3 in the fair value hierarchy,
to construct a discounted cash flow model to estimate the amount
that would be paid by a willing third party in an arm's length
transaction.
The key assumptions on which management has based its
determination of FVLCD and the associated recoverable values
calculated are future gold and silver prices, future capital
requirements, production costs, reserves and resources volumes
(reflected in the production volume), and the discount rate.
The estimated recoverable values of the Group's CGUs are equal
to, or not materially different than, their carrying values.
31 December 2020
US$ per oz. 2021 2022 2023 2024 Long-term
------------- ------ ------ ------ ------ ----------
Gold 1,937 1,823 1,684 1,452 1,400
Silver 26.4 21.8 21.0 19.2 17.8
------------- ------ ------ ------ ------ ----------
31 December 2020 San Jose Pallancata
-------------------------- --------- -----------
Discount rate (post tax) 15.9% 4.1%
-------------------------- --------- -----------
The period of 6 and 2 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 2020 (US$000) San Jose Pallancata
------------------------------------------------ --------- -----------
Current carrying value of CGU, net of deferred
tax 127,500 35,481
------------------------------------------------ --------- -----------
The estimated recoverable values of the Group's CGUs are equal
to, or not materially different than, their carrying values.
13 Evaluation and exploration assets
During the six months ended 30 June 2021, the Group capitalised
evaluation and exploration costs of US$12,452,000 (30 June 2020:
US$2,803,000). The additions correspond to the following
properties:
Unaudited
US$000
------------------- ---------
Biolantánidos 6,312
Azuca 376
Inmaculada 3,964
Crespo 1,022
Volcan 778
Total 12,452
--------------------- ---------
There were no transfers from evaluation and exploration assets
to property, plant and equipment during the period (2020:
US$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 2021 and 31 December 2020, the Group held the
following financial instruments measured at fair value:
As at
30 June 2021
(Unaudited) Level 1 Level 2 Level 3
US$000 US$000 US$000 US$000
----------------------------- -------------- -------- -------- --------
Assets measured at fair
value
Equity shares(1) 554 554 - -
Derivative financial assets 5,146 - 5,146 -
Trade receivables 51,882 - - 51,882
-----------------------------
57,582 554 5,146 51,882
----------------------------- -------------- -------- -------- --------
Liabilities measured at
fair value
Derivative financial liabilities 3,998 - 3,998 -
----------------------------------
3,998 - 3,998 -
---------------------------------- ------ ------
1 These investments are classified as financial assets at fair
value through OCI. During 2021 the Group sold 1,687,401 shares of
Americas Gold and Silver Corporation (AGSC), classified as
financial assets at fair value through profit and loss, with a fair
value at the date of the sale of US$4,726,000, generating a loss on
disposal of US$681,000 which was recognised within finance costs.
During the six-month period ended 30 June 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.
As at
31 December
2020 Level 1 Level 2 Level 3
US$000 US$000 US$000 US$000
---------------------------------- ------------- -------- -------- --------
Assets measured at fair
value
Equity shares(1) 5,809 5,809 - -
Trade receivables 45,353 - - 45,353
Liabilities measured at
fair value
Derivative financial liabilities (6,003) - (6,003) -
----------------------------------- ------------- -------- -------- --------
1 These investments were classified as financial assets at fair
value through OCI (US$402,000) and financial assets at fair value
through profit and loss (US$ 5,407,000).
Derivative financial assets - Silver forward
On 8 February 2021, the Group signed agreements with JP Morgan
to hedge the sale of 4,000,000 ounces of silver at US$27.10 per
ounce for 2021 and a further 4,000,000 ounces of silver at US$26.86
per ounce for 2022.
The silver forward is being used to hedge the exposure to
changes in the cashflows of the silver commodity prices. 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. The fair
value of the silver forward was calculated using a discounted cash
flow model applying a combination of level 1 (USD quoted market
commodity prices) and level 2 inputs.
The models used to value the commodity forward contracts are
maker standard models, that calculated the present value of the
fixed-legs (the fixed silver leg) and competed them with present
value of the expected cash flows of the flowing legs (the London
metal exchange "LME" silver fixing). In the case of the commodity
forward contracts, the model uses the LME AG forward curve and the
US LIBOR swap curve for discounting.
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 silver forward as at 30 June 2021 is as follows:
US$000
-------------------- -------
Current assets 3,664
Non-current assets 1,482
--------------------
5,146
-------------------- -------
The effect recorded is as follows:
US$000
------------------------------------ -------
Income statement - revenue 868
Equity - Unrealised gain on hedges 5,146
------------------------------------ -------
The sensitivity to a reasonable movement in the commodity
prices, with all other variables held constant, determined as a
+/-10% change in prices -US$16,043,000/ US$16,128,000 effect on
OCI.
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 interest at a variable rate equal to
Libor+1.15% on the notional amount from 17 March 2020 to 17
December 2024 (refer to 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 models used to value the interest rate swap (IRS) are maker
standard models that calculated the present value of the fixed-legs
(fixed-rate of the IRS) and competed them with present value of the
expected cash flows of the flowing legs (LIBOR payment).
In the case of the IRS the model used the US LIBOR swap curve as
an input.
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 IRS as at 30 June 2021 is as follows:
US$000
------------------------- -------
Current liabilities 1,064
Non-current liabilities 2,934
-------------------------
3,998
------------------------- -------
The effect recorded is as follows:
US$000
------------------------------------ -------
Income statement - finance costs 1,193
Equity - Unrealised gain on hedges 2,005
------------------------------------ -------
The sensitivity to a reasonable movement in the interest rate,
with all other variables held constant, of the financial
instruments with a floating rate, determined as a +/-20bps change
in interest rates US$674,000 / -US$860,000 effect on OCI.
During the six months ended 30 June 2021 and the year ended 31
December 2020 there were no transfers between these levels.
The reconciliation of the financial instruments categorised as
Level 3 is as follows:
Trade receivables
subject to
price adjustments
US$000
------------------------------------------------ ------------------
Balance at 1 January 2020 37,799
Net change in trade receivables from goods sold 6,289
Changes in fair value of price adjustments 10,999
Realised price adjustments during the year (9,734)
Balance at 31 December 2020 45,353
-------------------------------------------------- ------------------
Net change in trade receivables from goods sold 12,840
Changes in fair value of price adjustments (335)
Realised price adjustments during the period (5,976)
-------------------------------------------------- ------------------
Balance at 30 June 2021 (Unaudited) 51,882
-------------------------------------------------- ------------------
The Group has price adjustments arising from the sale of
concentrate and dore which were provisionally priced at the time
the sale was recorded.
The sensitivity of the fair value to an immediate 10% favourable
or adverse change in the price of gold and silver (assuming all
other variables remain constant), is as follows:
Increase/ Effect on
decrease in profit before
price of tax
Period ounces of: US$000
----------------- -------------- --------------
Gold +/-10% +/-20
30 June 2021 Silver+/-10% +/-52
------------------ --------------- --------------
Gold +/-10% +/-210
31 December 2020 Silver+/-10% +/-890
------------------ --------------- --------------
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 2021 31 December
2020
(Unaudited) US$000
US$000
------------------------ ------------- ------------
Beginning of the period (72,307) (61,476)
Income statement charge (22,126) (12,575)
OCI (charge)/credit (2,109) 1,744
----------------------------- ------------- ------------
End of the period (96,542) (72,307)
----------------------------- ------------- ------------
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 main effect is explained by the increase of the Argentinian
tax rate (refer to note 11).
The movement in deferred income tax assets and liabilities
before offset during the period is as follows:
Differences Provisional
in cost Mine pricing
of PP&E development adjustment Others Total
US$000 US$000 US$000 US$000 US$000
================================= =========== ============ =========== ======= =======
Deferred income tax liabilities
At 1 January 2020 36,770 81,768 353 4,283 123,174
================================== =========== ============ =========== ======= =======
Income statement charge/(credit) 2,751 3,184 343 (636) 5,642
================================== =========== ============ =========== ======= =======
At 31 December 2020 39,521 84,952 696 3,647 128,816
================================== =========== ============ =========== ======= =======
Income statement charge/(credit) 11,026 1,882 (696) 1,922 14,134
================================== =========== ============ =========== ======= =======
At 30 June 2021 50,547 86,834 - 5,569 142,950
================================== =========== ============ =========== ======= =======
Provision
Differences for
in cost mine Mine
of PP&E closure development Others(1) Total
US$000 US$000 US$000 US$000 US$000
================================= =========== ========= ============ ========= =======
Deferred income tax assets
At 1 January 2020 31,044 21,380 584 8,690 61,698
================================== =========== ========= ============ ========= =======
Income statement charge/(credit) (10,914) 4,004 (110) 87 (6,933)
================================== =========== ========= ============ ========= =======
Equity credit/(charge) - - - 1,744 1,744
================================== =========== ========= ============ ========= =======
At 31 December 2020 20,130 25,384 474 10,521 56,509
================================== =========== ========= ============ ========= =======
Income statement charge/(credit) (6,454) 1,044 (55) (2,527) (7,992)
================================== =========== ========= ============ ========= =======
Equity (charge) - - - (2,109) (2,109)
================================== =========== ========= ============ ========= =======
At 30 June 2021 13,676 26,428 419 5,885 46,408
================================== =========== ========= ============ ========= =======
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
2021 2020
(Unaudited)
US$000 US$000
------------------------------------ ------------- ------------
Deferred income tax assets 618 1,009
Deferred income tax liabilities (97,160) (73,316)
----------------------------------------- ------------- ------------
Net deferred income tax liabilities (96,542) (72,307)
----------------------------------------- ------------- ------------
16 Cash and cash equivalents
As at As at
30 June 31 December
2021 2020
(Unaudited)
US$000 US$000
----------------------------------- ------------- ------------
Cash at bank 1,170 1,198
Current demand deposit accounts(1) 79,834 79,834
Time deposits(2) 175,925 150,851
---------------------------------------- ------------- ------------
Cash and cash equivalents 256,929 231,883
---------------------------------------- ------------- ------------
1 Relates to bank accounts which are readily accessible to the Group and bear interest.
2 These deposits have an average maturity of 19 days (as at 31 December 2020: 45 days).
17 Borrowings
As at 30 June 2021 As at 31 December
(Unaudited) 2020
------------------------------- -------------------------------
Effective Effective
interest Non-current Current interest Non-current Current
rate US$000 US$000 rate US$000 US$000
---------------------------------------------- --------- ----------- ------- --------- ----------- -------
Secured bank loans
28% 28%
* Pre-shipment loans in Minera Santa Cruz to 39% - 6,077 to 35% - 10,628
* Mid-term loans in Minera Ares 1.3% 166,268 33,466 1.5% 199,554 150
----------------------------------------------- --------- ----------- ------- --------- ----------- -------
Total 166,268 39,543 199,554 10,778
----------------------------------------------- --------- ----------- ------- --------- ----------- -------
The movement in borrowings during the six month period to 30
June 2021 is as follows:
As at Additions Repayments As at
US$000 US$000
1 January 30 June
2021 2021
US$000 Reclassifications (Unaudited)
US$000 US$000
----------------- ------------ ---------- ----------- ------------------- -------------
Current
Bank loans(1) 10,101 1,804 (6,309) 33,483 39,079
Accrued interest 677 2,509 (2,354) (368) 464
----------------------- -------------------
10,778 4,313 (8,663) 33,115 39,543
-------------------
Non-current
Bank loans(1) 199,554 47 - (33,333) 166,268
----------------------- -------------------
199,554 47 - (33,333) 166,268
------------ ---------- ----------- ------------------- -------------
1 Relates to pre-shipment loans for a total amount of
US$6,077,000 (31 December 2020: US$10,628,000) which are credit
lines given by banks to meet payment obligations arising from the
exports of the Group. In addition, the balance at 30 June 2021 and
31 December 2020 includes a five-year credit agreement signed
between CompañÃa 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 in
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 2021: US$399,000, 31 December 2020: US$446,000)
at 30 June 2021 is US$199,734,000 (31 December 2020:
US$199,704,000). 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 the pre-shipment loans approximates their
fair value. The carrying amount and fair value of the mid-term loan
are as follows:
Carrying amount Fair value
------------------------------ ------------------------------
As at As at As at As at
30 June 31 December 30 June 31 December
2021 2020 2021 2020
(Unaudited) US$000 (Unaudited) US$000
US$000 US$000
----------- ------------ ------------ ------------ ------------
Bank loans 199,734 199,704 197,903 199,110
Total 199,734 199,704 197,903 199,110
---------------- ------------ ------------ ------------ ------------
18 Provisions
As at 30 June As at 31 December
2021 (Unaudited) 2020
-------------------- --------------------
Non-current Current Non-current Current
US$000 US$000 US$000 US$000
------------------------------- ----------- ------- ----------- -------
Provision for mine closure1 108,545 14,739 107,007 19,390
Workers' profit sharing2 - 6,392 - 5,389
Provision for contingencies(3) 1,208 1,500 900 725
Long term incentive plan 491 132 1,126 -
-------------------------------- ----------- ------- ----------- -------
Total 110,244 22,763 109,033 25,504
-------------------------------- ----------- ------- ----------- -------
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 2021 and 31
December 2020 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 rate used
was -1.95% (2020: -1.58%). Movement in the provision relates to an
increase due to change in estimate of US$1,414,000 (mainly in the
mine units Ares US$619,000, San José US$405,000 and Inmaculada
US$369,000), net of payments of US$2,638,000, a decrease related to
change in discount rate of US$921,000 and a decrease related to
unwind of discount on mine rehabilitation of US$968,000.
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 12,328
Discount rate (increase by 0.5%) (decrease of provision) (41)
--------------------------------------------------------- ------
2 Corresponds to worker's profit sharing in Compania Minera Ares paid during 2020.
3 Mainly corresponds to the increase due to an income tax
contingency in CompañÃa Minera Ares of US$903,800.
19 Equity
Share capital and share premium
The movement in share capital of the Company from 31 December
2020 to 30 June 2021 is as follows:
Number of
ordinary Share capital Share premium
shares US$000 US$000
----------------------------------- ----------- ------------- -------------
Shares issued as at 1 January 2021 513,875,563 226,506 438,041
Shares issued as at 30 June 2021 513,875,563 226,506 438,041
------------------------------------ ----------- ------------- -------------
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 2021 the Group has no treasury shares (31 December
2020: nil).
20 Dividends paid and declared
Dividends declared and paid to non-controlling interests in the
six months ended 30 June 2021 were US$7,561,000 (2020:
US$285,000).
There was a final dividend declared to shareholders of the
parent for 2020 of US$12,002,000 (final dividend for 2019: US$nil).
Dividends paid to shareholders of the parent in the six months
ended 30 June 2021 were US$12,002,000 (2020: US$nil).
Following a detailed review, the Company has identified an issue
concerning the Company's compliance with the Companies Act 2006 in
relation to the payment of certain historic dividends (the
"Relevant Historic Dividends"). In particular, the Company did not
have sufficient distributable reserves at the appropriate
point.
Notwithstanding the above, the Board notes the Company's robust
net cash position.
The Company has identified certain steps that are anticipated
will create sufficient distributable reserves in the Company and is
working with its advisers towards that objective. We will update
shareholders on this in due course. Subject to creating sufficient
distributable reserves, the directors anticipate announcing an
interim dividend by the end of the month.
Furthermore, the Company expects it will require a resolution to
be passed at a General Meeting to be held in due course to relieve
the shareholders of any obligation to repay the Relevant Historic
Dividends and to release the Directors from any related
liability.
21 Related party transactions
There were no significant transactions with related parties
during the six months period ended 30 June 2021.
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.
22 Notes to the statement of cash flows
Six months ended 30
June
--------------------------------
2021 2020
(Unaudited) (Unaudited)
US$000 US$000
-------------------------------------------------- ------------- -------------
Reconciliation of profit for the period to
net cash generated from operating activities
Profit/(loss) for the period 28,594 (9,006)
Adjustments to reconcile Group profit to net
cash inflows from operating activities
Depreciation 74,459 51,750
Amortisation of intangibles 563 573
Write-off of non-financial assets 299 1,208
Gain on sale of property, plant and equipment (3) (38)
Increase of provision for mine closure 1,538 -
Finance income (2,061) (2,074)
Finance costs 13,252 5,144
Income tax expense 55,253 15,470
Other* 3,910 3,197
Increase/(decrease) of cash flows from operations
due to changes in assets and liabilities
Trade and other receivables (24,387) (4,361)
Income tax receivable 10 -
Other financial assets and liabilities 1,200 79
Inventories (621) 9,385
Trade and other payables (13,384) (40,474)
Provisions 1,583 (6,050)
------------------------------------------------------- ------------- -------------
Cash generated from operations* 140,205 24,803
------------------------------------------------------- ------------- -------------
*Comparative information has been restated to present the
foreign exchange transactions carried in Argentina on a gross basis
within investing activities.
Profit by operation (1)
Consolidation
adjustment
Group (US$000) Pallancata San Jose Inmaculada and others Total/HOC
========================================= ========== ======== ========== ============= =========
Revenue 61,772 117,692 215,098 188 394,750
========================================== ========== ======== ========== ============= =========
Cost of sales (pre consolidation) (47,284) (82,925) (108,426) 2,389 (236,246)
========================================== ========== ======== ========== ============= =========
Consolidation adjustment 435 192 (3,016) 2,389 -
Cost of sales (post consolidation) (47,719) (83,117) (105,410) - (236,246)
Production cost excluding depreciation (30,338) (47,030) (62,571) - (139,939)
Depreciation in production
cost (13,150) (21,969) (38,696) - (73,815)
Workers profit sharing (1,359) - (1,585) - (2,944)
Other items (3,401) (12,892) (2,994) - (19,287)
Change in inventories 529 (1,226) 436 - (261)
========================================== ========== ======== ========== ============= =========
Gross profit 14,488 34,767 106,672 2,577 158,504
========================================== ========== ======== ========== ============= =========
Administrative expenses - - - (24,042) (24,042)
Exploration expenses - - - (17,436) (17,436)
Selling expenses (272) (6,534) (328) - (7,134)
Other expenses, net - - - (12,778) (12,778)
========================================== ========== ======== ========== ============= =========
Operating profit/(loss) before
impairment 14,216 28,233 106,344 (51,679) 97,114
========================================== ========== ======== ========== ============= =========
Write-off of non-financial
assets, net - - - (299) (299)
Finance income - - - 2,061 2,061
Finance costs - - - (13,252) (13,252)
Foreign exchange loss - - - (1,777) (1,777)
========================================== ========== ======== ========== ============= =========
Profit/(loss) from continuing
operations before
income tax 14,216 28,233 106,344 (64,946) 83,847
========================================== ========== ======== ========== ============= =========
Income tax - - - (55,253) (55,253)
========================================== ========== ======== ========== ============= =========
Profit/(loss) for the period
from continuing operations 14,216 28,233 106,344 (120,199) 28,594
========================================== ========== ======== ========== ============= =========
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 EMAIL
shareholderenquiries@linkgroup.co.uk
POST
Link Group, 10(th) Floor, Central Square, 29 Wellington Street,
Leeds LS1 4DL
BY TELEPHONE
(+44 (0)) 371 664 0300 ( Calls are charged at the standard
geographic rate and will vary by provider. Calls outside the United
Kingdom will be charged at the applicable international rate. Lines
are open between 9am - 5:30pm, Monday to Friday excluding public
holidays in England and Wales)
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] Please see the Financial Review page 16 for a definition of
Adjusted EBITDA
[3] All equivalent figures calculated using the Company's 2020
average gold/silver ratio of 86:1.
[4] All-in sustaining cost per (AISC) silver equivalent ounce:
Calculated before exceptional items and includes production cost
excluding depreciation, other items and workers profit sharing in
cost of sales, administrative expenses (excl depreciation),
brownfield exploration, operating and exploration capex and
royalties and special mining tax (presented with income tax)
divided by silver or gold equivalent ounces produced, plus
commercial deductions and selling expenses divided by silver or
gold equivalent ounces sold using a gold/silver ratio of 86:1.
[5] Calculated as total number of accidents per million labour
hours.
([6]) Calculated as total number of days lost per million labour
hours.
[7] 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.
[8] True widths range from 60-100% of reported core lengths.
Length weighted Au composites are constrained by geological
considerations. Grade-capping of individual assays has not been
applied to the Au assays informing the length-weighted Au
composites. Samples below detection limit were nulled to a value of
zero.
[9] Includes revenue from services
[10] Unit cost per tonne is calculated by dividing mine and
treatment production costs (excluding depreciation) by extracted
and treated tonnage respectively
[11] Cash costs are calculated to include cost of sales,
commercial discounts and selling expenses items less depreciation
included in cost of sales
([12]) Does not include fixed costs during operational stoppages
and reduced capacity of $6.2 million
[13] Includes commercial discounts (from the sales of
concentrate) and commercial discounts from the sale of dore
([14]) Does not include Fixed costs during operational stoppages
and reduced capacity of $24.0 million
[15] Includes commercial discounts (from the sales of
concentrate) and commercial discounts from the sale of dore
[16] Calculated using a gold /silver ratio of 86:1.
[17] Operating capex from San Jose does not include capitalised
depreciation and amortisation resulting from mine equipment
utilised for mine developments
[18] Administrative expenses does not include expenses from the
Biolantanidos project ($19,000)
[19] Royalties arising from revised royalty tax schemes
introduced in 2011 and included in income tax line
[20] Royalties arising from revised royalty tax schemes
introduced in 2011 and included in income tax line
[21] Calculated using a gold silver ratio of 86:1
[22] 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
[23] Covid-19 response initiatives are distributed between cost
of sales and other expenses. Cost of sales mainly includes the
expenses related to the operating mine units of $13.1 million.
Other expenses includes corporate expenses and expenses from
non-operating units of $0.9 million.
[24] Includes pre-shipment loans and short term interest
payables
[25] 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
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END
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