TIDMHOC
RNS Number : 5049C
Hochschild Mining PLC
23 February 2022
23 February 2022
Hochschild Mining plc
Preliminary Results
Year ended 31 December 2021
HOCHSCHILD MINING PLC RESULTS FOR YEARED 31 DECEMBER 2021
Hochschild delivers strong results and strategic progress
Significant 2021 financial performance
-- Strong balance sheet and financial performance despite
continuing Covid-19 impact
-- Revenue of $811.4 million (2020: $621.8 million) ([1])
-- Adjusted EBITDA of $382.8 million (2020: $270.9 million)
([2])
-- Profit before income tax (pre-exceptional) of $148.7 million
(2020: $85.8 million)
-- Profit before income tax (post-exceptional) of $137.3 million
(2020: $62.9 million)
-- Basic earnings per share (pre-exceptional) of $0.14 (2020:
$0.06)
-- Basic earnings per share (post-exceptional) of $0.15 (2020:
$0.03)
-- Cash and cash equivalent balance of $386.8 million as at 31
December 2021 (2020: $231.9 million)
-- Net cash of $86.3 million as at 31 December 2021 (2020: net
cash of $21.6 million)
-- Final proposed dividend of 2.3 cents per share ($12.0
million) bringing the full-year total cash dividend to $22.0
million (2020: $32.6 million) [3]
-- Dividend in specie of $94.9 million from Aclara demerger
2021 Operational strength ([4])
-- All-in sustaining costs (AISC) from operations of $1,241 per
gold equivalent ounce (2020: $1,098) or $14.4 per silver equivalent
ounce (2020: $12.8) in line with full year cost guidance of
$1,210-$1,250 per gold equivalent ounce or $14.1-14.5 per silver
equivalent ounce [5]
-- Full year attributable production of 362,972 gold equivalent
ounces (31.2 million silver equivalent ounces) in line with
attributable production guidance of 360,000-372,000 gold equivalent
ounces (31.0-32.0 million silver equivalent ounces)
-- Strong operational performance despite impact from Covid
protocols in 2021
2021 Exploration & Business Development highlights
-- Resource additions on a 100% basis:
o 75 million silver equivalent ounces in 2021 using 72x gold
silver ratio
o 83 million silver equivalent ounces in 2021 using 86x gold
silver ratio
-- 2021 total reserves up 12% with reserve grade up
approximately 19% versus 2020
-- Announcement of definitive agreement to acquire Amarillo Gold
in Brazil; completion expected in Q1 2022
-- Option exercised to start earning-in 60% interest in Skeena
Resources' Snip gold project
-- Completion of demerger and listing of Aclara Resources Inc.
on the TSX
-- Volcan gold project CEO appointed; 2022 work programme being
developed
2021 ESG KPIs
-- Lost Time Injury Frequency Rate of 1.26 (2020: 1.38) [6]
-- Accident Severity Index of 676 (2020: 474) [7]
-- 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 193lt/person/day (2020:
231lt/person/day)
-- Domestic waste generation of 1.00 kg/person/day (2020:
1.18kg/person/day)
-- ECO score of 5.29 out of 6 (2020: 5.74) [8]
2022 outlook
-- Production target:
o 335,000-345,000 gold equivalent ounces (28.8-29.7 million
silver equivalent ounces) using 86x gold silver ratio
o 360,000-375,000 gold equivalent ounces (26.0-27.0 million
silver equivalent ounces) using 72x gold silver ratio
-- All-in sustaining costs target:
o $1,440-$1,480 per gold equivalent ounce ($16.8-17.2 per silver
equivalent ounce) using 86x gold silver ratio
o $1,330-$1,370 per gold equivalent ounce ($18.5-19.0 per silver
equivalent ounce) using 72x gold silver ratio
-- Total sustaining and development capital expenditure expected
to be approximately $150-160 million
-- Brownfield exploration budget expected to be approximately
$34 million
-- Amarillo/Posse gold project capital expenditure in Brazil
planned for $120 million
-- Greenfield budget of approximately $11 million; Snip
investment expected to be approximately $9 million
$000 unless stated Year ended Year ended % change
31 Dec 2021 31 Dec 2020
------------- -------------
Attributable silver production (koz) 12,174 9,808 24
Attributable gold production (koz) 221 175 26
Revenue 811,387 621,827 30
Adjusted EBITDA 382,837 270,918 41
Profit from continuing operations (pre-exceptional) 67,450 36,192 86
Profit from continuing operations (post-exceptional) 71,106 20,426 248
Basic earnings per share (pre-exceptional) $ 0.14 0.06 133
Basic earnings per share (post-exceptional) $ 0.15 0.03 400
------------------------------------------------------ ------------- ------------- ---------
________________________________________________________________________________________
A presentation will be held for analysts and investors at 9.30am
(UK time) on Wednesday 23 February 2022 at the offices of Hudson
Sandler,
25 Charterhouse Square, London, EC1M 6AE
The presentation and a link to the live audio webcast of the
presentation can be found at the Hochschild website:
www.hochschildmining.com
or:
https://webcasting.brrmedia.co.uk/broadcast/61ee86fe73640b735eff25bb
To join the event via conference call, please see dial in details below:
UK Toll-Free Number: 0800 279 6877
International Dial in: +44 (0)330 336 9601
US/Canada Toll-Free Number: 800-289-0720
Pin: 3326250#
________________________________________________________________________________________
Enquiries:
Hochschild Mining plc
Charles Gordon
+44 (0)20 3709 3264
Head of Investor Relations
Hudson Sandler
Charlie Jack
+44 (0)20 7796 4133
Public Relations
________________________________________________________________________________________
Non-IFRS Financial Performance Measures
The Company has included certain non-IFRS measures in this news
release. The Company believes that these measures, in addition to
conventional measures prepared in accordance with IFRS, provide
investors an improved ability to evaluate the underlying
performance of the Company. The non-IFRS measures are intended to
provide additional information and should not be considered in
isolation or as a substitute for measures of performance prepared
in accordance with IFRS. These measures do not have any
standardised meaning prescribed under IFRS, and therefore may not
be comparable to other issuers.
About Hochschild Mining plc:
Hochschild Mining plc is a leading precious metals company
listed on the London Stock Exchange (HOCM.L / HOC LN) with a
primary focus on the exploration, mining, processing and sale of
silver and gold. Hochschild has over fifty years' experience in the
mining of precious metal epithermal vein deposits and currently
operates three underground epithermal vein mines, two located in
southern Peru and one in southern Argentina. Hochschild also has
numerous long-term projects throughout the Americas.
CHAIRMAN'S STATEMENT
2021 was a very demanding year for the Company due to the
continued effects of Covid-19 and challenges resulting from
operating in jurisdictions with increased political, regulatory and
social risk. I am very proud of the resilience and dedication
demonstrated by all colleagues in successfully delivering on our
annual targets and ensuring our commitments to the environment, our
stakeholders and communities remain the utmost priority. Hochschild
is in a strong position strategically and in 2021 we made a number
of changes to our portfolio that lay the foundations for
sustainable low-cost growth in the near future.
However, I would like to first turn to an event that severely
affected us in June 2021. 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 upset by this unprecedented
incident and the management team ensured everything possible was
done to investigate its circumstances and provide a wide range of
support to everyone affected. We have worked with the local
authorities and the contractor with their respective accident
investigations and have provided whatever support we can with the
aim of avoiding such incidents in the future.
Safety remains our highest priority and in 2021, we continued
with the implementation of the second stage of our safety plan,
known as Safety 2.0. The plan combines technical and people-focused
approaches and, during the year, we saw our risk management systems
externally reviewed as well as the development of an
all-encompassing safety indicator - the "Seguscore". This will help
us to further embed a safety-first culture across our organisation.
As reported in the interim results, we regrettably suffered a fatal
accident at San Jose towards the end of the first quarter, and, in
November a contractor was fatally injured at the Aclara rare earths
project. Further details on these accidents will be provided in our
2021 Sustainability report.
I am very proud to report a strong environmental performance in
2021. For the first time ever, four of our assets achieved the
highest rating under our internally designed ECO Score. This
innovative indicator distils, in one single number, numerous facets
of environmental management. Furthermore, in acknowledgement of our
responsibilities to our stakeholders, we sought in 2021 to build on
our environmental reporting practices. Our first standalone
Sustainability Report received external recognition and we look to
build on this success with numerous initiatives this year
including, most notably, our ambition to achieve Carbon Neutrality,
which is well advanced and due to be published later this
quarter.
As Covid-19 eased in 2021, our community relations team was able
to resume its focus on our key local initiatives. In education, we
donated almost 300 tablets to elementary schoolchildren close to
our Inmaculada mine to enhance learning. We were also able to
continue implementing our strategy of establishing digital centres
to service the communities by establishing three more in the
Ayacucho region, in southern Peru. With regards to health and
nutrition, we co-ordinated home visits to promote early child
development and facilitated a Covid-19 vaccination programme for
the elderly. We also launched a project in a town close to
Inmaculada, which seeks to enhance access to water by installing
equipment to collect and store water for domestic use. Finally,
among the many programmes promoting economic development, we
provided technical support to community-led agricultural activities
as part of our "Impulso Productivo" programme. You can find further
details on our work in the Sustainability Report.
In November, the Company faced an unprecedented situation when
the Peruvian Head of Cabinet published minutes of a meeting held in
Ayacucho which arbitrarily provided for the closure and withdrawal
of certain mining projects, including the Company's Pallancata and
Inmaculada mines. It was further announced that approvals would no
longer be granted to authorize additional mining, exploration, or
expansion activities in relation to these mines. However, the
Government subsequently affirmed its commitment to upholding the
rule of law and acknowledged the continued rights of mining
companies to request extensions and modifications of existing
permits for mining and exploration activities. Whilst we never
stopped operating, this crisis exemplifies the country's current
heightened political, regulatory and social risk.
2021 was a crucial year for business development. In the second
half, we executed three different transactions that have reshaped
our company into one that is focused on delivering mid-term growth
across a wider range of jurisdictions in the Americas. In
September, we exercised our option to start earning-in a 60%
interest in Skeena Resources' Snip gold project in British
Columbia. In November, we announced the acquisition of Amarillo
Gold with its Posse gold project in Brazil, which is due to
commence production in 2024. Both projects complement our current
portfolio and, with Canada and Brazil, we are entering two
jurisdictions that have established and stable mining histories.
Finally, we were pleased to complete the demerger and listing on
the Toronto Stock Exchange of our Chilean rare earth business,
renamed Aclara Resources. With almost $100 million of capital
raised concurrently, Aclara is in a strong position to advance the
Penco project and our confidence is confirmed by our decision to
retain a 20% stake.
Turning to our operations, we were once again able to deliver on
our annual production and cost targets despite our stringent Covid
protocols remaining in place throughout the year. In addition,
precious metal prices remained strong, and with our business
continuing to generate robust free cashflow and the additional
liquidity provided by our increased loan, we are in a comfortable
position to finance the construction of the Posse project over the
next two years and advance Snip through the development phase.
Our brownfield programme also made excellent progress this year.
The team made significant discoveries at Inmaculada in the north
west of the deposit which they expect will add further high grade
resources to the mine plan. At San Jose, we have also added
resources near to the current mine whilst at Pallancata, we have
been able to optimise the long term mine plan utilising the
existing resource base and have extended the life of the operation
for a further two years whilst we look for additional near-mine and
regional resource opportunities.
Sanjay Sarma stepped down from the Hochschild Board to join the
board of Aclara Resources on completion of the demerger. I would
like to thank Sanjay for the valuable and unique perspective he has
brought to the Hochschild Board discussions. I am delighted that
Tracey Kerr joined the Hochschild Board on 10 December. She brings
vast experience in areas of crucial importance to the Company
including geology, safety and sustainability. The Board and I look
forward to working closely with Tracey.
Outlook
2021 saw precious metal prices in a period of consolidation.
Gold fell slightly by 3.5% in the year and silver was much more
volatile, down 11.5% although this followed a 47% rise in 2020.
However, the ongoing price strength allied to reliable operational
performance and good cost control has resulted in high levels of
profitability and continued good cashflow. We have maintained a
strong capital base and have managed the Company's balance sheet
and liquidity to ensure long-term financial stability. The Board is
therefore pleased to recommend a final dividend of 2.3 cents per
share ($12.0 million).
Our Company is managed with a conviction that acting responsibly
and with integrity is the only way to build and manage a business
over the long term. We have a clear sense of our social purpose and
a strong belief in our duty to respect the dignity of everyone who
works for us. In, addition, we have always been committed to
operating under the highest standards of corporate citizenship,
environmental and industry best practice whilst acting as a good
and supportive neighbour to the communities around us and
recognising our wider obligations to society as a whole. The Board
and I would like to thank all of our stakeholders for their
contributions and continued support during such a momentous
period.
Eduardo Hochschild, Chairman
22 February 2022
CHIEF EXECUTIVE OFFICER'S STATEMENT
2021 has been an important year for our Company. We have taken
decisive strategic action to shape Hochschild's future and
delivered strong operational and financial results whilst
continuing to operate responsibly and focus on the implementation
of our ESG strategy. I continue to be very proud of all our people
and their response to numerous challenges again posed by the
pandemic and also by a volatile political, economic and social
environment in Peru.
Such solid operational delivery provides the foundation upon
which, in the second half of the year, we announced the acquisition
of Amarillo Gold Corp. in Brazil, exercised our option to start
earning-in a 60% interest in the Snip gold project in Canada and
demerged our rare earths business, Aclara Resources, and listed it
on the Toronto Stock Exchange. We believe that these strategic
steps will underpin Hochschild's ability to grow shareholder value
over the next decade.
ESG
The tragic traffic accident of our transport contractor which
the Chairman has discussed in his statement was a shock for
everyone in our Company. However, our commitment to a broad suite
of ESG initiatives remains absolute as part of our focus on safety
and responsibility towards the environment and our stakeholders.
Given the partially reduced dominance of Covid-19 in 2021, we were
able to resume our focus on the key pillars of our work with the
local communities with numerous and wide-ranging initiatives in
education, digital strategy, health and nutrition, access to safe
sources of water, local employment and procurement of local goods
and services. On the environmental front, we again achieved an
excellent ECO score, enhanced our reporting by participating in the
Carbon Disclosure Project ('CDP') and early-adopting the Task Force
on Climate-Related Financial Disclosures ('TCFD') reporting
requirements, and we are currently working hard to complete our
first corporate strategy to become net zero carbon. During the
year, we also continued to invest in our safety risk-management
system which will support and complement the various programmes in
our safety plan.
Operations
Hochschild's output in 2021 continued our good record in meeting
annual guidance. Overall production was 362,972 gold equivalent
ounces (31.2 million silver equivalent ounces) which was
understandably substantially higher than the Covid-impacted 2020
figure of 289,293 gold equivalent ounces (24.9 million silver
equivalent ounces). This was produced at an all-in sustaining cost
of $1,241 per gold equivalent ounce ($14.4 per silver equivalent
ounce) which was slightly higher than 2020 reflecting increased
development capital expenditure. Hochschild's flagship mine,
Inmaculada had another strong year producing 238,238 gold
equivalent ounces (2020: 176,086 ounces) at $971 per gold
equivalent ounce.
At Pallancata, production in 2021 reflected the current focus on
mine development and brownfield exploration to extend the mine life
but still had a steady year delivering 4.4 million silver
equivalent ounces (2020: 4.8 million ounces) at a cost of $22.8 per
silver equivalent ounce. In Argentina, San Jose operated throughout
the 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 12.4 million silver equivalent ounces (2020: 9.7
million ounces) with costs at $16.7 per silver equivalent
ounce.
Business Development
In October, we decided to exercise our option to start
earning-in a 60% interest in Skeena Resources' Snip project in
Tahltan Territory of British Columbia. This represented the first
step in our strategy to add another high-grade project with strong
upside potential into our pipeline. Since October, we have
established a positive dialogue with the Tahltan Nation and
provincial authorities, designed an ambitious drill program for
2022, and built a team to take over operations management at the
project. It is an exciting time for Hochschild as we build out our
Canadian presence.
Also in October, we announced the demerger of our rare earths
business, Aclara Resources and its listing on the Toronto Stock
Exchange. We believe that it was the logical next step forward and
that, as two standalone businesses, both Hochschild and Aclara will
have the greatest potential for delivering long-term value
creation. Each will have their own strategic focus on their
respective products, their own dedicated management teams,
separated access to capital and an independent valuation whilst
maintaining a strategic relationship that will allow Aclara to
benefit from Hochschild's track record on project execution and
ESG. Furthermore, we felt that current and future Hochschild
shareholders will also benefit from retaining a meaningful stake in
a business that offers an exciting proposition in a high growth
market. We were pleased that the demerger and IPO was completed in
December with almost $100 million raised.
In November, we announced a definitive agreement to acquire
Amarillo Gold for a net acquisition cost of C$135 million ($106
million) with the key asset being the flagship Posse gold project
located in Goiás State, Brazil. The acquisition enhances our
project pipeline and is the result of a long-term Company review
process of a wide range of growth opportunities. Posse is an
attractive low-cost project with relatively near-term production
and strong exploration upside potential. With our significant
experience in developing precious metal deposits in the Americas,
Hochschild is ideally placed to take Posse to its next stage and
generate strong sustainable value for the Company and the project's
local stakeholders as well as widening our focus in stable mining
jurisdictions in the Americas.
Exploration
Once again the brownfield programme focused on the surrounding
areas of all three of our mines and I am pleased to report that our
team have had a successful campaign and delivered resource
increases at both Inmaculada and San Jose. At Inmaculada, drilling
in the Angela North and surrounding veins yielded just over 850,000
gold equivalent ounces at higher grades than current reserve grade
whilst at San Jose we have added almost 13 million silver
equivalent ounces close to current operations.[9] At Pallancata,
the team completed a revised mine plan that incorporates the
existing resource base and therefore have been able to guarantee
the mine's future for the next two years at least. There remain
some promising brownfield drill targets close to the current mine
and in the district as a whole which could secure the long-term
supply for the nearby Selene plant.
Financial position
A reliable production performance and strong price environment
has resulted in our balance sheet remaining in an enviable position
with cash and cash equivalents of $386.8 million at the end of
December (2020: $231.9 million). This is before the estimated net
payment of C$135 million for Amarillo Gold (due by the end of Q1
2022) and includes an additional $100 million medium-term loan
(drawn down in December 2021) and a $20 million investment in the
Aclara Resources Inc IPO. This has led to a net cash position of
$86.3 million (31 December 2020: $21.6 million net cash).
Financial results
Total Group production was significantly higher versus 2020,
which was impacted by the Covid related stoppages, and
consequently, combined with a 12% rise in the silver price
received, revenue increased to $811.4 million (2020: $621.8
million). All-in sustaining costs were in line with guidance at
$14.4 per silver equivalent ounce (2020: $12.8 per ounce). Adjusted
EBITDA of $382.8 million (2020: $270.9 million) mostly reflects the
increased production levels and partially offset by increased cost
of sales and administrative costs. Pre-exceptional earnings per
share of $0.14 (2020: $0.06 per share) includes the impact of an
increase in finance costs in Argentina and also of income tax
arising from the impact of local currency devaluation in Peru and
Argentina and the increased income tax rate in Argentina.
Post-exceptional earnings per share was higher at $0.15 (2020:
$0.03 earnings per share) mainly due to the exceptional gain on
Aclara demerger of $37.5 million, partially offset by a $24.9
million impairment of Pallancata and $24.1 million of Covid-19
response initiatives which are also deemed to be exceptional as
they were incremental to the Group's regular business. The net
after-tax effect of exceptional items is $3.7 million.
Outlook
We expect attributable production in 2022 of between
360,000-375,000 gold equivalent ounces (26.0 to 27.0.0 million
silver equivalent ounces) assuming the silver to gold ratio of 72:1
(the average ratio for 2021). This will be driven by:
218,000-222,000 gold equivalent ounces from Inmaculada; an
attributable contribution of 5.7 to 6.1 million silver equivalent
ounces from San Jose; and 4.6-4.9 million ounces from Pallancata.
All-in sustaining costs for operations are expected at between
$1,330 and $1,370 per gold equivalent ounce ($18.5 to $18.9 per
silver equivalent ounce). This forecast includes lower grades at
Inmaculada due to the inclusion into the mine plan of veins
discovered between 2018 and 2020. It also includes a rise in mine
development costs at Inmaculada and San Jose to access veins
discovered in 2021 and increase reserves at San Jose.
The budget for brownfield exploration is at approximately $34
million with the greenfield and advanced project budget set at
approximately $11 million. In addition, a budget of approximately
$9 million has been allocated to advancing the Snip project in
Canada with a project capex budget of $120 million assigned to the
Posse project in Brazil.
We have also recently begun to re-establish operations in Chile
at our 100%-owned Volcan gold project. In 2022, we expect to
complete a work programme to optimise the business case for this
substantial gold asset. In parallel, the project is expected to be
restructured into a newly established Canadian company, named
Tiernan Gold. Tiernan will be run by newly appointed CEO, Greg
McCunn and during the year, we will be evaluating different
strategic alternatives.
2022 promises to be another year of volatility and the world is
not free from the pandemic yet. However, throughout our history,
Hochschild has shown an ability to withstand operational, political
and social challenges and we believe that we have the correct
long-term strategy to generate value for our shareholders today
while we transition the company for the future. Finally, our
commitment to a broad suite of ESG initiatives remains absolute as
part of our focus on safety and responsibility.
Ignacio Bustamante, Chief Executive Officer
22 February 2022
OPERATING REVIEW
OPERATIONS
Note: 2021 and 2020 equivalent figures calculated using the
previous Company gold/silver ratio of 86x. All 2022 forecasts
assume the average gold/silver ratio for 2021 of 72x.
Production
In 2021, Hochschild delivered attributable production of 362,972
gold equivalent ounces or 31.2 million silver equivalent ounces, in
line with the Company's forecasts but with the increase versus 2020
reflecting the impact in 2020 from Covid-related disruptions
throughout the year.
The overall attributable production target for 2022 is
360,000-375,000 gold equivalent ounces or 26.0-27.0 million silver
equivalent ounces.
Total 2021 group production
Year ended Year ended
31 Dec 2021 31 Dec 2020
-------------
Silver production
(koz) 14,746 11,821
Gold production (koz) 262.39 207.08
Total silver equivalent
(koz) 37,311 29,631
Total gold equivalent
(koz) 433.85 344.54
Silver sold (koz) 14,712 11,846
Gold sold (koz) 260.71 207.78
------------------------- ------------- -------------
Total production includes 100% of all production, including
production attributable to Hochschild's minority shareholder at San
Jose.
Attributable 2021 group production
Year ended Year ended
31 Dec 2021 31 Dec 2020
-------------
Silver production
(koz) 12,174 9,808
Gold production (koz) 221.42 175.24
Silver equivalent
(koz) 31,216 24,879
Gold equivalent (koz) 362.97 289.29
----------------------- ------------- -------------
Attributable production includes 100% of all production from
Inmaculada, Pallancata and 51% from San Jose.
Attributable 2022 Production forecast split
Operation Oz Au Eq Moz Ag Eq
----------------
Inmaculada 218,000-222,000 15.7-16.0
Pallancata 64,000-68,000 4.6-4.9
San Jose 79,000-85,000 5.7-6.1
----------- ---------------- ----------
Total 360,000-375,000 26.0-27.0
----------- ---------------- ----------
Costs
All-in sustaining cost from operations in 2021 was $1,241 per
gold equivalent ounce or $14.4 per silver equivalent ounce (2020:
$1,098 per gold equivalent ounce or $12.8 per silver equivalent
ounce), higher than 2020 mainly as a result of lower grades at
Pallancata and San Jose and higher costs and capital expenditure.
Additional capital expenditure was also allocated to Pallancata and
Inmaculada to develop resources for increasing life-of-mine. These
figures do not include unabsorbed fixed costs from workers that
were unable to work during the Covid 19 crisis of $8.7 million
(2020: $44.7 million; includes fixed costs without depreciation
from stoppages and operating at reduced capacity), as well as $22.5
million (2020: $27.6 million) of exceptional Covid-19 response
initiatives.
The all-in sustaining cost from operations in 2022 is expected
to be between $1,330 and $1,370 per gold equivalent ounce (or $18.5
and $19.0 per silver equivalent ounce). Grades at Inmaculada are
expected to be lower due to the inclusion into the mine plan of
veins discovered between 2018 and 2020. It also includes a rise in
mine development costs at Inmaculada and San Jose to access veins
discovered in 2021 and increase reserves at San Jose.
2022 AISC forecast split
Operation $/oz Au Eq $/oz Ag Eq
------------
Inmaculada 1,180-1,210 16.4-16.8
Pallancata 1,760-1,800 24.4-25.0
San Jose 1,370-1,410 19.0-19.6
---------------------- ------------ -----------
Total from operations 1,330-1,370 18.5-19.0
---------------------- ------------ -----------
Inmaculada
The 100% owned Inmaculada gold/silver underground operation is
located in the Department of Ayacucho in southern Peru. It
commenced operations in June 2015.
Inmaculada summary Year ended Year ended % change
31 Dec 2021 31 Dec 2020
------------- -------------
Ore production (tonnes) 1,349,892 948,937 42
Average silver grade (g/t) 174 154 13
Average gold grade (g/t) 4.05 4.33 (6)
Silver produced (koz) 6,236 4,034 55
Gold produced (koz) 165.73 129.17 28
Silver equivalent produced
(koz) 20,488 15,143 35
Gold equivalent produced
(koz) 238.24 176.09 35
Silver sold (koz) 6,216 4,020 55
Gold sold (koz) 165.86 129.70 28
Unit cost ($/t) 99.2 95.1 4
Total cash cost ($/oz Au
co-product) 557 576 (3)
All-in sustaining cost ($/oz
Au Eq) 971 922 5
------------------------------ ------------- ------------- ---------
Production
The Inmaculada mine delivered gold equivalent production of
238,238 ounces (2020: 176,086 ounces) in 2021, with the increase
versus 2020 due to the impact of two Covid-19 related stoppages
during 2020. Grades and gold recoveries have proved to be higher
than originally budgeted.
Costs
All-in sustaining costs were $971 per gold equivalent ounce
(2020: $922 per ounce) with the increase versus 2020 due to a
considerable portion of capital expenditure being deferred,
including the tailings dam expansion, due to the stoppages and also
due to lower scheduled gold grades partially offset by higher
silver grades.
Pallancata
The 100% owned Pallancata silver/gold property is located in the
Department of Ayacucho in southern Peru. Pallancata commenced
production in 2007. Ore from Pallancata is transported 22
kilometres to the Selene plant for processing.
Pallancata summary Year ended Year ended % change
31 Dec 2021 31 Dec 2020
------------- -------------
Ore production (tonnes) 530,681 519,611 2
Average silver grade (g/t) 212 247 (14)
Average gold grade (g/t) 0.84 0.87 (3)
Silver produced (koz) 3,261 3,679 (11)
Gold produced (koz) 13.05 12.93 1
Silver equivalent produced
(koz) 4,382 4,790 (9)
Gold equivalent produced
(koz) 50.96 55.70 (9)
Silver sold (koz) 3,263 3,654 (11)
Gold sold (koz) 13.03 12.80 2
Unit cost ($/t) 124.8 101.2 23
Total cash cost ($/oz Ag
co-product) 19.2 13.1 47
All-in sustaining cost ($/oz
Ag Eq) 22.8 15.6 46
------------------------------ ------------- ------------- ---------
Production
In 2021, Pallancata produced 4.4 million silver equivalent
ounces (2020: 4.8 million ounces) with the reduction versus the
original forecast (5.4 -5.6 million ounces) due to the effects of
lower-than-budgeted grades in line with the current declining
production profile.
Costs
All-in sustaining costs were at $22.8 per silver equivalent
ounce (2020: $15.6 per ounce). Costs were increased versus 2020
mainly due to the use of more conventional mining methods in 2021
and lower grades. The figure also included new capital expenditure
for development work to access newly economic resources.
San Jose
The San Jose silver/gold mine is located in Argentina, in the
province of Santa Cruz, 1,750 kilometres south west of Buenos
Aires. San Jose commenced production in 2007. Hochschild holds a
controlling interest of 51% and is the mine operator. The remaining
49% is owned by McEwen Mining Inc.
San Jose summary Year ended Year ended % change
31 Dec 2021 31 Dec 2020
------------- -------------
Ore production (tonnes) 539,229 401,202 34
Average silver grade (g/t) 344 357 (4)
Average gold grade (g/t) 5.47 5.63 (3)
Silver produced (koz) 5,250 4,108 28
Gold produced (koz) 83.62 64.99 29
Silver equivalent produced
(koz) 12,440 9,697 28
Gold equivalent produced
(koz) 144.66 112.76 28
Silver sold (koz) 5,233 4,172 25
Gold sold (koz) 81.83 65.28 25
Unit cost ($/t) 229.0 199.4 15
Total cash cost ($/oz Ag
co-product) 13.3 11.1 20
All-in sustaining cost ($/oz
Ag Eq) 16.7 14.6 14
------------------------------ ------------- ------------- ---------
Production
San Jose's 2021 total production was 12.4 million silver
equivalent ounces (2020: 9.7 million ounces) with the increase
versus 2020 reflecting Covid-related stoppages, which impacted the
2020 result. Grades were lower than budgeted for the year but
practically offset by higher than expected tonnage.
Costs
All-in sustaining costs were at $16.7 per silver equivalent
ounce (2020: $14.6 per ounce) with the rise driven by higher
production costs, increased mine development capex, higher
exploration expenses and the purchase of new mining equipment.
EXPLORATION
Inmaculada
In 2021, the exploration team carried out 9,169m of potential
drilling and 39,424m of resource drilling mostly testing the newly
discovered Angela North, Juliana North East and Josefa structures.
The key results are below:
Vein Results (potential/resource drilling)
Angela North IMS21-056: 5.9m @ 2.5g/t Au & 99g/t Ag
IMS21-062: 9.7m @ 91.7g/t Au & 3,013g/t
Ag
IMS21-063: 2.1m @ 6.5g/t Au & 217g/t Ag
IMS21-065: 7.0m @ 3.7g/t Au & 198g/t Ag
IMS21-066: 2.4m @ 4.3g/t Au & 386g/t Ag
IMS21-067: 1.0m @ 2.4g/t Au & 234g/t Ag
IMS21-070: 1.5m @ 2.1g/t Au & 156g/t Ag
IMS21-071: 1.4m @ 3.6g/t Au & 123g/t Ag
IMS21-072: 2.0m @ 1.8g/t Au & 109g/t Ag
IMS21-075: 3.1m @ 5.5g/t Au & 341g/t Ag
IMS21-077: 2.7m @ 1.4g/t Au & 103g/t Ag
IMS21-078: 9.1m @ 14.1g/t Au & 424g/t Ag
IMS21-087: 5.6m @ 12.6g/t Au & 494g/t Ag
IMS21-069: 1.2m @ 7.1g/t Au & 533g/t Ag
IMS21-078: 9.7m @ 14.1g/t Au & 424g/t Ag
IMS21-085: 3.5m @ 5.2g/t Au & 149g/t Ag
IMS21-088: 3.7m @ 5.9g/t Au & 304g/t Ag
IMS21-089: 2.1m @ 1.9g/t Au & 109g/t Ag
IMS21-100: 1.4m @ 3.2g/t Au & 171g/t Ag
------------------------------------------
Juliana IMS21-079: 2.0m @ 12.8g/t Au & 527g/t Ag
IMS21-088: 1.4m @ 6.8g/t Au & 292g/t Ag
IMS21-174: 4.9m @ 11.3g/t Au & 33g/t Ag
IMS21-182: 1.2m @ 50.8g/t Au & 81g/t Ag
IMS21-184: 3.5m @ 18.0g/t Au & 977g/t Ag
IMS21-127: 1.0m @ 1.8g/t Au & 259g/t Ag
IMS21-127: 2.8m @ 2.2g/t Au & 115g/t Ag
IMS21-127: 0.9m @ 2.8g/t Au & 196g/t Ag
IMS21-149: 1.5m @ 8.7g/t Au & 62g/t Ag
IMS21-149: 0.9m @ 3.6g/t Au & 111g/t Ag
IMS21-155: 3.2m @ 7.5g/t Au & 774g/t Ag
IMS21-156: 1.6m @ 3.2g/t Au & 33g/t Ag
IMS21-156: 1.6m @ 3.2g/t Au & 31g/t Ag
IMS21-156: 2.1m @ 13.8g/t Au & 316g/t Ag
IMS21-150: 2.4m @ 20.7g/t Au & 1,255g/t
Ag
IMS21-151: 1.9m @ 2.0g/t Au & 141g/t Ag
IMS21-058: 2.4m @ 1.3g/t Au & 119g/t Ag
IMS21-174: 1.3m @ 3.3g/t Au & 172g/t Ag
------------------------------------------
Josefa IMS21-155: 1.1m @ 17.6g/t Au & 1,149g/t
Ag
IMS21-155: 1.2m @ 4.3g/t Au & 70g/t Ag
IMS21-155: 7.8m @ 2.0g/t Au & 70g/t Ag
IMS21-155: 1.0m @ 3.6g/t Au & 114g/t Ag
IMS21-198: 2.3m @ 2.3g/t Au & 312g/t Ag
IMS21-200: 4.9m @ 3.8g/t Au & 311g/t Ag
------------------------------------------
In 2021, 852,000 gold equivalent ounces have been added to the
Inmaculada inferred resource base at a gold equivalent grade of 7.5
grams per tonne.
During the first quarter of 2022, the programme will focus on
2,100m of potential drilling in the west of the Angela North vein
and in the north of the Eduardo vein zone. Other key targets for
2022 are Josefa, Juliana NE, Minascucho, Anomalia III and Anomalia
IV.
Pallancata
At Pallancata, 19,390m of potential drilling was carried at the
Pallancata vein, the Falla NW, Pablo, Pablo Piso and Marco veins
vein structures and then later in the year at the Mirian, San
Javier and the continuation of the Pallancata vein to the north
west. In addition, there was drilling at the Pablo II target which
intercepted quartz veins with grade and in the final quarter there
were intercepts in quartz-sulphide veins, Laura and Demian. Key
results are below:
Vein Results (potential drilling)
Pablo II DLEP-A64: 2.7m @ 0.4g/t Au & 93g/t Ag
DLEP-A65: 0.9m @ 0.7g/t Au & 222g/t Ag
------------------------------------------
Mirian DLVC-A62: 3.4m @ 1.4g/t Au & 314g/t Ag
------------------------------------------
Norca DLVC-A62: 1.0m @ 1.0g/t Au & 475g/t Ag
------------------------------------------
San Javier DLVC-A62: 1.1m @ 0.6g/t Au & 473g/t Ag
------------------------------------------
Pallancata NW DLPL-A969: 0.9m @ 1.6g/t Au & 181g/t Ag
------------------------------------------
Laura DLLAU-A01: 1.9m @ 1.5g/t Au & 473g/t Ag
Including : 1.2m @ 2.1g/t Au & 655g/t Ag
DLLAU-A03: 2.5m @ 0.8g/t Au & 332g/t Ag
Including : 1.1m @ 1.1g/t Au & 537g/t Ag
DLLOL-A01: 6.9m @ 0.7g/t Au & 208g/t Ag
Including : 1.5m @ 1.2g/t Au & 336g/t Ag
------------------------------------------
Demian DLEP-A66: 1.3m @ 2.6g/t Au & 696g/t Ag
DLLAU-A03: 2.6m @ 1.0g/t Au & 307g/t Ag
Including : 1.1m @ 1.8g/t Au & 602g/t Ag
------------------------------------------
In Q1 2022, the schedule consists of 5,000m of potential
drilling in the Laura-Demian veins as well as the Paola, Rina 4,
Stockwork Veta Juliet, Stockwork Pallancata Central and the Gracia
veins. Other main targets for the year are expected to be Pablo
West, Escarpa and Luisa.
San Jose
During 2021, the team carried out 11,455 m of potential drilling
around the Saavedra area in several veins the Escondida, Betania,
Isabel, Jimena, Agostina and Lucy veins as well as the North Telken
area close to Cerro Negro. 6.673m of resource drilling was also
executed targeting Escondida, and also in the area close to the
current mine in the Amelia, Huevos Verdes, Olivia and Karina
veins
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: 2.0m @ 5.5g/t Au & 6g/t Ag
SJD-2351: 1.1m @ 12.6g/t Au & 7g/t Ag
SJD-2371: 6.3m @ 44.4g/t Au & 34g/t Ag
SJD-2378: 1.9m @ 7.3g/t Au & 81g/t Ag
SJD-2408: 2.6m @ 5.4g/t Au & 10g/t Ag
SJD-2414: 3.4m @ 6.9g/t Au & 36g/t Ag
-----------------------------------------
Sig Betania SJD-2408: 1.0m @ 6.1g/t Au & 11g/t Ag
-----------------------------------------
Jimena SJD-2353: 2.4m @ 3.8g/t Au & 40g/t Ag
SJD-2372: 1.9m @ 14.5g/t Au & 342g/t Ag
SJD-2378: 2.0m @ 8.5g/t Au & 24g/t Ag
SJD-2399: 1.4m @ 3.1g/t Au & 157g/t Ag
SJD-2406: 0.8m @ 2.6g/t Au & 482g/t Ag
SJD-2410: 6.4m @ 7.1g/t Au & 56g/t Ag
SJD-2418: 2.6m @ 3.1g/t Au & 12g/t Ag
-----------------------------------------
Agostina SJD-2378: 2.8m @ 5.1g/t Au & 13g/t Ag
-----------------------------------------
Amelia SJD-2329: 3.0m @ 13.0g/t Au & 1,740g/t
Ag
SJD-2342: 4.3m @ 14.9g/t Au & 1,381g/t
Ag
SJD-2361: 0.9m @ 3.4g/t Au & 323g/t Ag
-----------------------------------------
Tensional Huevos Verdes
N SJD-2346: 1.8m @ 6.7g/t Au & 582g/t Ag
-----------------------------------------
Olivia SJD-2385: 0.8m @ 2.6g/t Au & 196g/t Ag
SJM-547: 2.0m @ 7.8g/t Au & 366g/t Ag
-----------------------------------------
In 2021 as a whole 12.7 million silver equivalent ounces have
been added to the San Jose resource base at a silver equivalent
grade of 881 grams per tonne.
The drilling plan for the first quarter of 2022 will focus on
the western zone of the mine in the Olivia NW and Olivia NS
structures. At Saavedra, an environmental permit is due before the
programme can resume.
GREENFIELD
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.
Drilling in 2021 was carried out 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. Sarape was subsequently
discarded. In addition, 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 with drilling set to begin before the end of H1
2022. Permitting work has also continued at the Corvinon and
Pampamali projects in Peru.
Given the increased political risk in Peru and Chile, the
greenfield team has focused its exploration strategy primarily in
North America to diversify geographic risk. Four new projects have
been optioned during the year from EMX Royalties in Idaho and
Nevada as well as the Red Rock prospect in Nevada from a private
owner.
SNIP
Project description
Snip was acquired by Skeena from Barrick Gold Corp. in July 2017
and consists of one mining lease and eight mineral claims totalling
approximately 4,546 hectares in the Liard Mining Division and is
situated in Tahltan Territory. The former Snip mine produced
approximately one million ounces of gold from 1991 until 1999 at an
average gold grade of 27.5 g/t. Since then, the project has been
improved with the recent construction of nearby infrastructure
(paved highway, hydro-electric facilities and ocean port
facilities) and substantially higher gold prices.
Underground drilling recommenced in late 2017 to explore for
additional mineralised shoots in a large shear structure. A maiden
mineral resource was announced in July 2020 including 244,000
ounces of gold in the indicated category at an average grade of
14.0 g/t and 402,000 ounces of gold in the inferred category at an
average grade of 13.3 g/t. A Technical Report was issued in
September 2020.
Subsequent drill campaigns, totalling approximately 32,000
metres, successfully:
-- upgraded areas of existing Inferred resources from the
Mineral Resource Estimate to the Measured and Indicated
categories;
-- expanded the resource; and
-- delineated additional mineralisation in previously unexplored
areas of the near-mine environment.
In September 2018, Skeena granted Hochschild an option to earn a
60% interest in Snip over three years by spending twice the amount
Skeena had spent since it originally optioned the property from
Barrick in March 2016. Up until the exercise of the option, Skeena
estimated that it had incurred approximately C$50 million of
expenditure on the project.
Terms of the option
The exercise of the HOC Option was also subject to the following
terms:
-- Hochschild must incur no less than C$7.5 million in
exploration or development expenditures on Snip in each year of the
Option Period (which, provided that Hochschild has incurred at
least C$22.5 million on the project, can be extended by a further
year on payment of US$1 million to Skeena);
-- On complying with the above, Hochschild must provide 60% of
the financial assurance required by governmental authorities for
the Snip mining properties; and
-- Hochschild can terminate the HOC Option at any time (with no
liability to complete the aggregate spending requirement), but must
make a cash payment for any shortfall in the minimum annual spend
(or pro-rated minimum annual spend if terminated after the first
anniversary of the notice exercising the HOC Option).
2022 plans
In 2022, Hochschild plans on continuing the drill campaigns and
initiating selected studies and testwork. The Company plans on
drilling approximately 10,000 metres from surface and underground
during the year. Approximately 70% of planned metres will be for
infill and twin holes, and 30% for exploration.
A Pre-Feasibility Study will be undertaken during the year,
using existing resources and results from the 2022 programme, to
trade-off a series of mining and mineral processing opportunities
identified at the project, and assess a potential project
development route to move to a Feasibility Study.
AMARILLO GOLD
On 30 November 2021, Hochschild announced that it had entered
into a definitive agreement to acquire Amarillo Gold Corporation at
a net acquisition cost of an estimated C$135 million.
The Transaction constitutes a Class 1 Transaction under the UK
Listing Rules due to the level of Posse's Proven and Probable
Reserves relative to those of Hochschild. As such, the Transaction
is subject to Hochschild shareholder approval as well as the
approvals of Amarillo shareholders, the Canadian court, regulatory
authorities and the satisfaction of certain other customary
conditions. The Transaction has been unanimously recommended by the
board of directors of Amarillo and has the full support of
Amarillo's major shareholders, Baccarat Trade Investments Ltd. and
Eric Sprott. The Hochschild board believes the Transaction is in
the best interests of Hochschild's and unanimously intends to
recommend that shareholders vote in favour of the Transaction.
Completion is expected to occur towards the end of this
quarter.
Posse Overview
Posse is an open pit gold project located in Mara Rosa in the
mining friendly jurisdiction of Goiás State, Brazil. The brownfield
project benefits from existing infrastructure and attractive costs.
Construction of certain infrastructure is underway, with the
project having received several of the necessary installation
licenses from state authorities in Goias during 2021 and 2022,
including the licenses to install the power line and several mine
components (e.g. waste piles, low grade deposit). Hochschild has
revised the Posse mine plan contained in the August 2020 Definitive
Feasibility Study, and will include further details in a mineral
expert's report to be incorporated in the shareholder circular to
be issued in the next few weeks.
Hochschild's Posse Mine Plan Forecasts
Initial Mine Life 10 years
Average Annual Production 80koz Au (100koz Au over the first four years)
-------------------------------------------------
Average Annual AISC US$750/oz Au - US$850/oz Au
-------------------------------------------------
Initial Capex US$180m - US$200m
-------------------------------------------------
Sustaining Capex US$40m
-------------------------------------------------
After-Tax NPV(5%) at US$150m - US$160m
US$1,600/oz Au
-------------------------------------------------
After-Tax IRR at US$1,600/oz
Au 18% - 20%
-------------------------------------------------
After-Tax NPV(5%) at US$200m - US$240m
US$1,800/oz Au
-------------------------------------------------
After-Tax IRR at US$1,800/oz
Au 24% - 26%
-------------------------------------------------
Posse NI 43-101 Proven and Probable Reserves
Tonnes Au Au
(Mt) (g/t) (koz)
Proven 11.8 1.20 456
------- ------- -------
Probable 12.0 1.16 446
------- ------- -------
Proven and Probable 23.8 1.18 902
------- ------- -------
Posse NI 43-101 Measured, Indicated and Inferred Resources
Tonnes Au Au
(Mt) (g/t) (koz)
Measured 14 1.2 510
------- ------- -------
Indicated 19 1.1 640
------- ------- -------
Measured and Indicated 32 1.1 1,200
------- ------- -------
Inferred [10] 0.1 0.6 1.7
------- ------- -------
Exploration Potential Overview
Hochschild has identified compelling near-mine and regional
exploration opportunities for Posse and the Mara Rosa property.
Posse is open down plunge to the southwest, providing potential to
extend the mine life near the existing pit shell. There is also an
opportunity to define multiple satellite deposits along the 10km
Posse structural trend including the Araras, Speti 24 and Pastinho
priority targets. Recent drilling has identified Pastinho as a
promising target with similar geological characteristics to Posse
and multiple parallel gold structures extending from the surface to
approximately 200 m of vertical depth while remaining open. In
addition to the 2,500 hectares of mining concessions containing the
Posse deposit and the 6,000 hectares of exploration concessions on
the Posse structural trend, Hochschild will acquire an additional
59,000 hectares of regional exploration concessions on the Mara
Rosa property.
VOLCAN
On 20 January 2002, Hochschild announced the appointment of Greg
McCunn as CEO of the Volcan gold project in Chile. Concurrently,
the Board has approved a work programme for 2022 which includes
reestablishing operations in the Copiapo province, updating the
mineral resource estimate and exploring ways of optimising the
project development plan which are expected to be outlined in a new
technical report.
Hochschild is also expected to restructure the project into a
newly incorporated Canadian company (100%-owned by the Company)
named 'Tiernan Gold'. In parallel with completion of the technical
report, the Company will be evaluating strategic alternatives for
Tiernan Gold.
FINANCIAL REVIEW
The reporting currency of Hochschild Mining plc is U.S. dollars.
In discussions of financial performance, the Group removes the
effect of exceptional items, unless otherwise indicated, and in the
income statement results are shown both pre and post such
exceptional items. Exceptional items are those items, which due to
their nature or the expected infrequency of the events giving rise
to them, need to be disclosed separately on the face of the income
statement to enable a better understanding of the financial
performance of the Group and to facilitate comparison with prior
years.
Revenue
Gross revenue [11]
Gross revenue from continuing operations increased by 29% to
$831.0 million in 2021 (2020: $641.5 million) mainly due to the
rebound to a normal year of operation following the production
stoppages during 2020 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. On 10 November 2021, the
Company hedged 3.3 million ounces of 2023 silver production at
$25.00 per ounce. During the year ended 31 December 2021, 4.0
million silver ounces were hedged at $27.10 per ounce, boosting the
realised price.
Gold
Gross revenue from gold in 2021 increased to $464.3 million
(2020: $376.9 million) due to the 25% rise in gold sales resulting
from the rebound of production versus the Covid-19 impacted 2020.
This was partially offset by a 2% fall in the average realised gold
price.
Silver
Gross revenue from silver increased in 2021 to $366.2 million
(2020: $264.5 million) due to a 24% rise in silver sales resulting
from the rebound of production versus the Covid-19 impacted 2020.
This was significantly augmented by a 12% rise in the average
realised silver price.
Gross average realised sales prices
The following table provides figures for average realised prices
( before the deduction of commercial discounts) and ounces sold for
2021 and 2020:
Average realised prices Year ended Year ended
31 Dec 2021 31 Dec 2020
------------- -------------
Silver ounces sold (koz) 14,712 11,846
Avg. realised silver price ($/oz) 24.9 22.3
Gold ounces sold (koz) 260.71 207.77
Avg. realised gold price ($/oz) 1,781 1,814
----------------------------------- ------------- -------------
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 2021, the Group recorded
commercial discounts of $19.6 million (2020: $19.7 million) in line
with 2020. The ratio of commercial discounts to gross revenue in
2021 was 2% (2020: 3%).
Net revenue
Net revenue was $811.4 million (2020: $621.8 million),
comprising net gold revenue of $457.8 million (2020: $370.1
million) and net silver revenue of $353.1 million (2020: $251.6
million). In 2021, gold accounted for 56% and silver 44% of the
Company's consolidated net revenue (2020: gold 60% and silver
40%).
Reconciliation of gross revenue by mine to Group net revenue
$000 Year ended Year ended % change
31 Dec 2021 31 Dec 2020
------------- -------------
Silver revenue
Inmaculada 156,675 84,651 85
Pallancata 82,727 83,405 (1)
San Jose 126,790 96,472 31
Commercial discounts (13,088) (12,932) 1
---------------------- ------------- ------------- ---------
Net silver revenue 353,104 251,596 40
---------------------- ------------- ------------- ---------
Gold revenue
Inmaculada 296,160 230,255 29
Pallancata 22,989 24,154 (5)
San Jose 145,187 122,483 19
Commercial discounts (6,517) (6,810) (4)
---------------------- ------------- ------------- ---------
Net gold revenue 457,819 370,082 24
---------------------- ------------- ------------- ---------
Other revenue 464 149 211
---------------------- ------------- ------------- ---------
Net revenue 811,387 621,827 30
---------------------- ------------- ------------- ---------
Cost of sales
Total cost of sales before exceptional items was $487.8 million
in 2021 (2020: $397.8 million). The direct production cost
excluding depreciation was higher at $323.4 million (2020: $218.2
million) mainly due the Covid-19 related stoppages affecting 2020.
Abnormal costs during the phases of reduced production capacity
were $8.7 million (2020: $46.5 million). Depreciation in production
cost increased to $148.8 million (2020: $113.1 million) due to
higher extracted volumes across all operations, again mainly due to
the stoppages affecting 2020. Unallocated fixed costs from workers
that were unable to work during the Covid-19 crisis were $8.7
million (2020: $46.5 million; includes fixed costs from stoppages
and operating at reduced capacity), and are shown separately
below.
$000 Year ended Year ended % Change
31 Dec 2021 31 Dec 2020
------------- -------------
Direct production cost excluding
depreciation 323,418 218,212 48
Depreciation in production cost 148,842 113,146 32
Other items and workers profit
sharing 6,512 2,632 147
Fixed costs during operational
stoppages and reduced capacity 8,680 46,480 (81)
Change in inventories 320 17,323 (98)
---------------------------------- ------------- ------------- ---------
Cost of sales 487,772 397,793 23
---------------------------------- ------------- ------------- ---------
Fixed costs during operational stoppages and reduced
capacity
$000 Year ended Year ended % Change
31 Dec 2021 31 Dec 2020
------------- -------------
Personnel 7,607 32,117 (76)
Third party services 995 8,948 (89)
Supplies - 1,698 -
Depreciation and amortisation - 1,818 -
Others 78 1,899 (96)
------------------------------- ------------- ------------- ---------
Cost of sales 8,680 46,480 (81)
------------------------------- ------------- ------------- ---------
Unit cost per tonne
The Company reported unit cost per tonne at its operations of
$133.5 per tonne in 2021, an 11% increase versus 2020 ($119.9 per
tonne) This was due to: higher costs in Inmaculada resulting from
using more semi-mechanised mining methods with a higher extraction
cost; higher costs at Pallancata due to the use of more
conventional mining methods; and higher costs in San Jose from
expenditure related to the accessing and mining of incremental
resources.
Unit cost per tonne by operation (including royalties) [12]
:
Operating unit ($/tonne) Year ended Year ended % change
31 Dec 2021 31 Dec 2020
------------- -------------
Peru 106.5 97.5 9
Inmaculada 99.2 95.1 4
Pallancata 124.8 101.2 23
-------------------------- ------------- ------------- ---------
Argentina
San Jose 229.0 199.4 15
-------------------------- ------------- ------------- ---------
Total 133.5 119.9 11
-------------------------- ------------- ------------- ---------
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 [13]
Year ended 31 Dec 2021
$000 unless otherwise indicated Inmaculada Pallancata San Jose Total
----------- ----------- ---------
Group cash cost 141,316 80,354 150,663 372,333
-------------------------------------- ----------- ----------- --------- ----------
(+) Cost of sales [14] 213,812 93,049 172,231 479,092
(-) Depreciation and amortisation in
cost of sales (76,372) (19,915) (49,195) (145,482)
(+) Selling expenses 616 620 14,195 15,431
(+) Commercial deductions [15] 3,260 6,600 13,432 23,292
Gold 2,164 1,034 5,717 8,915
Silver 1,096 5,566 7,715 14,377
-------------------------------------- ----------- ----------- --------- ----------
Revenue 452,835 99,116 258,972 810,923
-------------------------------------- ----------- ----------- --------- ----------
Gold 296,160 21,955 139,704 457,819
Silver 156,675 77,161 119,268 353,104
Ounces sold
----------- ----------- ---------
Gold 165.9 13.0 81.8 260.7
Silver 6,216 3,263 5,233 14,712
-------------------------------------- ----------- ----------- --------- ----------
Group cash cost ($/oz)
-------------------------------------- ----------- ----------- --------- ----------
Co product Au 557 1,366 993 806
Co product Ag 7.9 19.2 13.3 11.0
By product Au (99) (182) 289 19
By product Ag (25.3) 17.6 1.0 (6.4)
-------------------------------------- ----------- ----------- --------- ----------
Year ended 31 Dec 2020
$000 unless otherwise indicated Inmaculada Pallancata San Jose Total
--------------------- -------------------- --------------------
Group cash cost 102,135 62,181 107,119 271,435
-------------------------------------- --------------------- -------------------- -------------------- ----------
(+) Cost of sales [16] 154,950 83,272 113,091 351,313
(-) Depreciation and amortisation in
cost of sales (55,338) (28,608) (30,716) (114,662)
(+) Selling expenses 417 632 11,705 12,754
(+) Commercial deductions [17] 2,106 6,885 13,039 22,030
Gold 117 1,102 5,715 6,934
Silver 1,989 5,783 7,324 15,096
-------------------------------------- --------------------- -------------------- -------------------- ----------
Revenue 314,906 100,674 206,098 621,678
-------------------------------------- --------------------- -------------------- -------------------- ----------
Gold 230,255 23,052 116,775 370,082
Silver 84,651 77,622 89,323 251,596
Ounces sold
--------------------- -------------------- --------------------
Gold 129.7 12.8 65.3 207.8
Silver 4,020 3,654 4,172 11,846
-------------------------------------- --------------------- -------------------- -------------------- ----------
Group cash cost ($/oz)
-------------------------------------- --------------------- -------------------- -------------------- ----------
Co product Au 576 1,112 930 778
Co product Ag 6.8 13.1 11.1 9.3
By product Au 119 (1,658) 160 23
By product Ag (31.9) 10.4 (3.7) (8.9)
-------------------------------------- --------------------- -------------------- -------------------- ----------
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 [18]
All-in sustaining cash costs per silver equivalent ounce
Year ended 31 Dec 2021
$000 unless otherwise indicated Inmaculada Pallancata San Jose Main Corporate Total
operations &
others
----------- ----------- --------- ------------ ----------
(+) Direct production cost
excluding depreciation 134,110 66,859 122,449 323,418 - 323,418
(+) Other items and workers
profit sharing in cost
of sales 3,489 3,023 - 6,512 - 6,512
(+) Operating and exploration
capex for units [19] 76,512 14,526 41,325 132,363 1,735 134,098
(+) Brownfield exploration
expenses 3,276 5,993 9,653 18,923 3,658 22,581
(+) Administrative expenses
(excl depreciation) [20] 4,909 1,074 6,104 12,087 38,782 50,870
(+) Royalties and special
mining tax [21] 5,190 1,136 - 6,326 5,916 12,242
---------------------------------- ----------- ----------- --------- ------------ ---------- --------
Sub-total 227,486 92,612 179,532 499,629 50,092 549,721
---------------------------------- ----------- ----------- --------- ------------ ---------- --------
Au ounces produced 165,730 13,045 83,615 262,390 - 262,390
Ag ounces produced (000s) 6,236 3,261 5,250 14,746 14,746
Ounces produced (Ag Eq
000s oz) 20,488 4,382 12,440 37,311 - 37,311
---------------------------------- ----------- ----------- --------- ------------ ---------- --------
Sub-total ($/oz Ag Eq) 11.1 21.1 14.4 13.4 - 14.7
---------------------------------- ----------- ----------- --------- ------------ ---------- --------
(+) Commercial deductions 3,260 6,600 13,432 23,292 - 23,292
(+) Selling expenses 616 620 14,195 15,431 - 15,431
---------------------------------- ----------- ----------- --------- ------------ ---------- --------
Sub-total 3,876 7,220 27,627 38,723 - 38,723
---------------------------------- ----------- ----------- --------- ------------ ---------- --------
Au ounces sold 165,857 13,027 81,831 260,714 - 260,714
Ag ounces sold (000s) 6,216 3,263 5,233 14,712 - 14,712
Ounces sold (Ag Eq 000s
oz) 20,480 4,383 12,270 37,133 - 37,133
---------------------------------- ----------- ----------- --------- ------------ ---------- --------
Sub-total ($/oz Ag Eq) 0.2 1.6 2.3 1.0 - 1.0
---------------------------------- ----------- ----------- --------- ------------ ---------- --------
All-in sustaining costs
($/oz Ag Eq) 11.3 22.8 16.7 14.4 1.3 15.8
---------------------------------- ----------- ----------- --------- ------------ ---------- --------
All-in sustaining costs
($/oz Au Eq) 971 1,959 1,435 1,241 115 1,357
---------------------------------- ----------- ----------- --------- ------------ ---------- --------
Not included in the figure are unabsorbed fixed costs from
workers that were unable to work during the Covid 19 crisis of $8.7
million (2020: $44.7 million; includes fixed costs without
depreciation from stoppages and operating at reduced capacity), as
well as $22.5 million (2020: $27.6 million) of exceptional Covid-19
response initiatives. These effects would have an impact on the
AISC from main operations of $0.2/oz Ag Eq and $0.6/oz Ag Eq
respectively (2020: $1.5/oz Ag Eq and $0.9/oz Ag Eq
respectively).
Year ended 31 Dec 2020
$000 unless Inmaculada Pallancata San Jose Main Corporate Total
otherwise indicated operations & others
----------- ----------- --------------------- ---------------------- ----------
(+) Direct
production cost
excluding
depreciation 86,874 51,534 79,804 218,212 - 218,212
(+) Other items and
workers
profit sharing in
cost
of sales 1,383 1,249 - 2,632 - 2,632
(+) Operating and
exploration
capex for units
[22] 62,128 7,506 21,681 91,315 447 91,762
(+) Brownfield
exploration
expenses 2,526 4,652 9,720 16,898 3,745 20,643
(+) Administrative
expenses
(excl depreciation) 3,768 1,205 5,590 10,563 30,533 41,096
(+) Royalties and
special
mining tax [23] 3,098 990 - 4,088 3,119 7,206
---------------------- ----------- ----------- --------------------- ---------------------- ---------- -------------------
Sub-total 159,777 67,136 116,795 343,707 37,592 381,299
---------------------- ----------- ----------- --------------------- ---------------------- ---------- -------------------
Au ounces produced 129,173 12,925 64,987 207,085 - 207,085
Ag ounces produced
(000s) 4,034 3,679 4,108 11,821 - 11,821
Ounces produced (Ag
Eq
000s oz) 15,143 4,790 9,697 29,631 - 29,631
---------------------- ----------- ----------- --------------------- ---------------------- ---------- -------------------
Sub-total ($/oz Ag
Eq) 10.6 14.0 12.0 11.6 - 12.9
---------------------- ----------- ----------- --------------------- ---------------------- ---------- -------------------
(+) Commercial
deductions 2,106 6,885 13,039 22,030 - 22,030
(+) Selling expenses 417 632 11,705 12,754 - 12,754
---------------------- ----------- ----------- --------------------- ---------------------- ---------- -------------------
Sub-total 2,523 7,517 24,744 34,784 - 34,784
---------------------- ----------- ----------- --------------------- ---------------------- ---------- -------------------
Au ounces sold 129,697 12,798 65,280 207,776 - 207,776
Ag ounces sold
(000s) 4,020 3,654 4,172 11,846 - 11,846
Ounces sold (Ag Eq
000s
oz) 15,174 4,754 9,786 29,715 - 29,715
---------------------- ----------- ----------- --------------------- ---------------------- ---------- -------------------
Sub-total ($/oz Ag
Eq) 0.2 1.6 2.5 1.2 - 1.2
---------------------- ----------- ----------- --------------------- ---------------------- ---------- -------------------
All-in sustaining
costs
($/oz Ag Eq) 10.7 15.6 14.6 12.8 1.3 14.0
---------------------- ----------- ----------- --------------------- ---------------------- ---------- -------------------
All-in sustaining
costs
($/oz Au Eq) 922 1,341 1,253 1,098 109 1,208
---------------------- ----------- ----------- --------------------- ---------------------- ---------- -------------------
Administrative expenses
Administrative expenses were increased by 20% to $51.9 million
(2020: $43.3 million) due to increased professional fees of $3.7
million mainly linked to M&A transactions, tax penalties of
$1.5 million and higher legal workers profit sharing provisions in
Peru of $1.3 million.
Exploration expenses
In 2021, exploration expenses increased to $39.9 million (2020:
$32.8 million) due to the 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 resource to the Inferred or Measured and Indicated
categories. In 2021, the Company capitalised $6.1 million relating
to brownfield exploration compared to $1.7 million in 2020,
bringing the total investment in exploration for 2021 to $46.0
million (2020: $34.5 million).
Selling expenses
Selling expenses were increased to $15.4 million (2020: $12.8
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 2020.
Other income/expenses
Other income before exceptional items was higher at $8.4 million
(2020: $3.6 million) mainly due to increased gains on the sale of
equipment ($3.3 million) and $1.0 million of higher income on the
recovery of expenses and provisions.
Other expenses before exceptional items were higher at $44.6
million (2020: $28.9 million) with the increase mainly due to: a
voluntary redundancy programme in Argentina of $8.3 million; mine
provision increases of $22.1 million (2020: $16.1 million), and
higher corporate social responsibility contribution in Argentina of
$3.9 million (2020: $2.7 million).
Adjusted EBITDA
Adjusted EBITDA increased by 41% to $382.8 million (2020: $270.9
million) mainly due to the increase in revenue resulting from the
rebound in production following 2020 operational stoppages due to
the Covid-19 crisis. In addition, there was a significant increase
in the average realised silver price. These effects were partially
offset by higher production costs and lower gold prices.
Adjusted EBITDA is calculated as profit from continuing
operations before exceptional items, net finance costs, foreign
exchange losses and income tax plus non-cash items (depreciation
and amortisation and changes in mine closure provisions) and
exploration expenses other than personnel and other exploration
related fixed expenses.
$000 unless otherwise indicated Year ended Year ended % change
31 Dec 2021 31 Dec 2020
------------- -------------
Profit from continuing operations before exceptional items, net finance
income/(cost), foreign
exchange loss and income tax 179,438 107,837 66
Depreciation and amortisation in cost of sales 145,482 116,480 25
Depreciation and amortisation in administrative expenses and other expenses 2,184 2,158 1
Exploration expenses 39,848 32,795 22
Personnel and other exploration related fixed expenses (7,099) (6,486) 9
Other non-cash income, net [24] 22,958 18,134 27
----------------------------------------------------------------------------- ------------- ------------- ---------
Adjusted EBITDA 382,811 270,918 41
----------------------------------------------------------------------------- ------------- ------------- ---------
Adjusted EBITDA margin 47% 44%
----------------------------------------------------------------------------- ------------- ------------- ---------
Finance income
Finance income before exceptional items of $3.9 million
decreased from 2020 ($4.2 million) mainly due to the net effect of:
a decrease of $1.1 million due to change in the fair value of the
Group's holding in Americas Gold & Silver Corporation shares
received as payment for the San Felipe project; lower interest on
deposits of $0.3 million; and lower income on discount of credits
of $0.3 million. This was partially offset by higher income due to
the unwinding of the discount on mine rehabilitation of $1.6
million.
Finance costs
Finance costs before exceptional items increased from $23.6
million in 2020 to $32.1 million in 2021, principally due to: the
cancelation of the Libor rate swap of the refinanced $200 million
medium-term loan ($3.8 million); the refinancing cost of the
medium-term loan ($1.8 million); and foreign exchange transaction
costs to acquire $18.1 million dollars in Argentina, which resulted
in a loss of $15.3 million (2020: $12.8 million).
Foreign exchange (losses)/gains
The Group recognised a foreign exchange loss of $2.4 million
(2020: $2.6 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 2021.
Income tax
The Company's pre-exceptional income tax charge was $81.3
million (2020: $49.6 million). The significant rise in the charge
is explained by the rebound in profitability versus the
Covid-impacted 2020. In addition, there was an increase in the tax
rate in Argentina to 35% impacting deferred income tax by $12.5
million.
The effective tax rate (pre-exceptional) for the period was
54.7% (2020: 57.8%), compared to the weighted average statutory
income tax rate of 30.9% (2020: 30.8%). The high effective tax rate
in 2021 versus the average statutory rate is mainly explained by
the impact of a higher income tax rate in Argentina increasing the
effective rate by 8.4%, Royalties and the Special Mining Tax which
increased the effective rate by 8.2%, local currency devaluation in
Peru increasing the rate by 5.0%, and the impact of non-deductible
expenses related to buying US dollars in Argentina increasing the
rate by 3.4%.
Exceptional items
Exceptional items in 2021 totalled a $3.7 million gain after tax
(2020: $15.8 million loss after tax). Exceptional items in 2021
included: a gain on the demerger of Aclara Resources of $37.5
million (non-taxable); impairment of the Pallancata mining unit of
$24.9 million; and $24.1 million of Covid-19 response initiatives
distributed between cost of sales and other expenses (2020: $31.2
million). Covid-19 response 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. Given the
current progress of the pandemic, the response expenses are not
expected to be recorded as exceptional items in the future.
Covid-19 response initiatives [25]
$000 Peru Argentina Total
------- ----------
Personnel 2,743 2 2,745
Donations 1 3 4
Third party services 8,236 11,421 19,657
Others 1,381 227 1,680
---------------------- ------- ---------- -------
Total 12,361 11,653 24,014
---------------------- ------- ---------- -------
The tax effect of these exceptional items was a $15.1 million
tax gain (2020: $7.2 million tax gain). The total effective tax
rate was 48.2% (2020: 68.0%). The net attributable profit of
exceptional items was $7.4 million.
Cash flow and balance sheet review
Cash flow:
$000 Year ended Year ended Change
31 Dec 31 Dec 2020
2021
----------- -------------
Net cash generated from operating
activities 282,520 195,374 86,137
Net cash used in investing activities (183,434) (112,229) (71,205)
Cash flows generated generated/(used
in) from financing activities 59,307 (12,411) 71,718
Foreign exchange adjustment (3,487) (5,208) 2,730
------------------------------------------- ----------- ------------- ---------
Net increase in cash and cash equivalents
during the year 154,906 65,526 89,380
------------------------------------------- ----------- ------------- ---------
Net cash generated from operating activities increased from
$195.4 million in 2020 to $282.5 million in 2021 mainly due to
higher Adjusted EBITDA of $382.8 million (2020: $270.9
million).
Net cash used in investing activities increased from $112.2
million in 2020 to $183.4 million in 2021 mainly due to higher
purchases of property, plant and equipment, and evaluation and
exploration assets; and the purchase of Aclara shares for $20.0
million.
Cash from financing activities increased to an inflow of $59.3
million from an outflow of $12.4 million in 2020, primarily due to
the additional medium-term loan of $100.0 million, partially offset
by higher dividends to non-controlling interest of $9.8 million
(2020: $0.3 million) and lower repayment of borrowings of $14.8
million (2020: $37.7 million).
Working capital
$000 As at As at
31 December 2021 31 December 2020
------------------
Trade and other receivables 69,749 78,196
Inventories 49,184 42,362
Derivative financial assets/(liabilities) 14,073 (1,500)
Income tax payable, net (22,322) (20,709)
Trade and other payables (133,482) (114,415)
Provisions (32,058) (25,504)
------------------------------------------- ------------------ ------------------
Working capital (54,856) (41,570)
------------------------------------------- ------------------ ------------------
The Group's working capital position declined in 2021 from
$(41.6) million to $(54.9) million. The key drivers were: higher
trade and other payables of $19.1 million; lower trade and other
receivables of $8.5 million; and higher provisions of $6.6 million.
These effects were partially offset by: higher derivative financial
assets of $15.6 million mainly comprised of the position on the
Company's silver hedges; and higher inventories of $6.9
million.
Net cash
$000 unless otherwise indicated As at As at
31 December 31 December 2020
2021
-------------
Cash and cash equivalents 386,789 231,883
Non-current borrowings (300,000) (199,554)
Current borrowings [26] (499) (10,778)
--------------------------------- ------------- ------------------
Net cash 86,290 21,551
--------------------------------- ------------- ------------------
The Group's reported net cash position was $86.3 million as at
31 December 2021 (31 December 2020: net cash of $21.6 million). The
Group benefited from strong cashflow generation resulting from the
high precious metal prices. In 2021, the company recorded an
increase in borrowings resulting from the drawing down of a further
$100 million of the Company's revised medium-term loan.
Capital expenditure ([27])
$000 Year ended Year ended
31 Dec 2021 31 Dec 2020
-------------
Pallancata 14,250 7,506
San Jose 43,666 23,030
Inmaculada 76,512 62,128
------------ ------------- -------------
Operations 134,428 92,664
Aclara 11,476 8,650
Other 7,957 6,610
------------ ------------- -------------
Total 153,861 107,924
------------ ------------- -------------
2021 capital expenditure of $153.9 million (2020: $107.9
million) mainly comprised of operational capex of $134.4 million
(2020: $92.8 million) with the increase versus 2020 resulting from
deferred capex at all operations in 2020 due to the impact of the
Covid-19 pandemic and higher capex for development work at
Pallancata to access newly economic resources which have further
extended the mine life.
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.
Statement of Directors' responsibilities
The Directors confirm that to the best of their knowledge:
o the financial statements, prepared in accordance with the
applicable set of accounting standards, give a true and fair view
of the assets, liabilities, financial position and profit or loss
of the Company and the undertakings included in the consolidation
taken as a whole; and
o the Management report includes a fair review of the
development and performance of the business and the position of the
Company and the undertakings included in the consolidation taken as
a whole, together with a description of the principal risks and
uncertainties that they face.
CONSOLIDATED INCOME STATEMENT
For the year ended 31 December 2021
Year ended 31 December Year ended 31 December
2021 2020
==================================== ====================================
Exceptional Exceptional
Before items Before items
exceptional (note exceptional (note
items 11) Total items 11) Total
Notes US$000 US$000 US$000 US$000 US$000 US$000
==================== ===== ============ =========== ========= ============ =========== =========
Continuing
operations
Revenue 5 811,387 - 811,387 621,827 - 621,827
Cost of sales 6 (487,772) (22,511) (510,283) (397,793) (27,613) (425,406)
===================== ===== ============ =========== ========= ============ =========== =========
Gross profit 323,615 (22,511) 301,104 224,034 (27,613) 196,421
===================== ===== ============ =========== ========= ============ =========== =========
Administrative
expenses 7 (51,905) - (51,905) (43,282) - (43,282)
Exploration expenses 8 (39,848) - (39,848) (32,795) - (32,795)
Selling expenses 9 (15,431) - (15,431) (12,754) - (12,754)
Other income 12 8,435 37,461 45,896 3,617 - 3,617
Other expenses 12 (44,565) (1,503) (46,068) (28,905) (3,613) (32,518)
Impairment and
write-off
of non-current
assets, net (863) (24,846) (25,709) (2,078) 8,303 6,225
===================== ===== ============ =========== ========= ============ =========== =========
Profit/(loss) from
continuing
operations before
net finance
income/(cost),
foreign exchange
loss and income tax 179,438 (11,399) 168,039 107,837 (22,923) 84,914
===================== ===== ============ =========== ========= ============ =========== =========
Share of loss of an
associate 19 (169) - (169) - - -
Finance income 13 3,946 - 3,946 4,197 - 4,197
Finance costs 13 (32,061) - (32,061) (23,560) - (23,560)
Foreign exchange
loss, net (2,424) - (2,424) (2,631) - (2,631)
===================== ===== ============ =========== ========= ============ =========== =========
Profit/(loss) from
continuing
operations before
income
tax 148,730 (11,399) 137,331 85,843 (22,923) 62,920
===================== ===== ============ =========== ========= ============ =========== =========
Income tax
(expense)/benefit 14 (81,280) 15,055 (66,225) (49,651) 7,157 (42,494)
===================== ===== ============ =========== ========= ============ =========== =========
Profit/(loss) for the
year
from continuing
operations 67,450 3,656 71,106 36,192 (15,766) 20,426
Attributable to:
Equity shareholders
of the
Parent 69,567 7,367 76,934 31,962 (16,800) 15,162
Non-controlling
interests (2,117) (3,711) (5,828) 4,230 1,034 5,264
===================== ===== ============ =========== ========= ============ =========== =========
67,450 3,656 71,106 36,192 (15,766) 20,426
===== ============ =========== ========= ============ =========== =========
Basic earnings/(loss)
per
ordinary share from
continuing
operations for the
year
(expressed in US
dollars
per share) 15 0.14 0.01 0.15 0.06 (0.03) 0.03
===================== ===== ============ =========== ========= ============ =========== =========
Diluted
earnings/(loss)
per ordinary share
from
continuing
operations for
the year (expressed
in US
dollars per share) 15 0.13 0.01 0.14 0.06 (0.03) 0.03
===================== ===== ============ =========== ========= ============ =========== =========
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the year ended 31 December 2021
Year ended
31 December
=================
2021 2020
Notes US$000 US$000
========================================================= ===== ======== =======
Profit for the year 71,106 20,426
========================================================== ===== ======== =======
Other comprehensive income that might be reclassified
to profit or loss in subsequent periods, net
of tax:
Net gain/(loss) on cash flow hedges 25,028 (5,913)
Deferred tax (charge)/benefit on cash flow hedges (7,383) 1,744
Exchange differences on translating foreign operations (21,282) 159
Cumulative exchange difference loss transferred
to the income statement on disposal of foreign
operations 4 9,995 -
Share of other comprehensive loss of an associate (9) -
6,349 (4,010)
===== ======== =======
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') 20 261 1,765
========================================================== ===== ======== =======
261 1,765
===== ======== =======
Other comprehensive income/(loss) for the year,
net of tax 6,610 (2,245)
========================================================== ===== ======== =======
Total comprehensive income for the year 77,716 18,181
Total comprehensive income attributable to :
Equity shareholders of the Parent 83,544 12,917
Non-controlling interests (5,828) 5,264
========================================================== ===== ======== =======
77,716 18,181
===== ======== =======
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at 31 December 2021
As at As at
31 December 31 December
2021 2020
Notes US$000 US$000
================================================== ===== ============ ============
ASSETS
================================================== ===== ============ ============
Non-current assets
Property, plant and equipment 16 738,119 787,663
Evaluation and exploration assets 17 123,304 192,121
Intangible assets 18 18,094 21,564
Investment in an associate 19 43,559 -
Financial assets at fair value through OCI 20 661 402
Financial assets at fair value through profit
and loss 21 3,155 5,407
Trade and other receivables 22 2,470 5,395
Derivative financial assets 5,042 -
Deferred income tax assets 28 484 1,009
=================================================== ===== ============ ============
934,888 1,013,561
===== ============ ============
Current assets
Inventories 23 49,184 42,362
Trade and other receivables 22 69,749 78,196
Derivative financial assets 14,073 -
Income tax receivable 32 59
Cash and cash equivalents 24 386,789 231,883
=================================================== ===== ============ ============
519,827 352,500
===== ============ ============
Total assets 1,454,715 1,366,061
=================================================== ===== ============ ============
EQUITY AND LIABILITIES
================================================== ===== ============ ============
Capital and reserves attributable to shareholders
of the Parent
Equity share capital 226,506 226,506
Share premium 438,041 438,041
Other reserves (217,657) (225,664)
Retained earnings 248,664 287,652
=================================================== ===== ============ ============
695,554 726,535
===== ============ ============
Non-controlling interests 63,890 79,550
=================================================== ===== ============ ============
Total equity 759,444 806,085
=================================================== ===== ============ ============
Non-current liabilities
Trade and other payables 25 2,815 205
Derivative financial liabilities - 4,503
Borrowings 26 300,000 199,554
Provisions 27 116,835 109,033
Deferred income tax liabilities 28 87,228 73,316
=================================================== ===== ============ ============
506,878 386,611
===== ============ ============
Current liabilities
Trade and other payables 25 133,482 114,415
Derivative financial liabilities - 1,500
Borrowings 26 499 10,778
Provisions 27 32,058 25,504
Deferred income - 400
Income tax payable 22,354 20,768
=================================================== ===== ============ ============
188,393 173,365
===== ============ ============
Total liabilities 695,271 559,976
=================================================== ===== ============ ============
Total equity and liabilities 1,454,715 1,366,061
=================================================== ===== ============ ============
These financial statements were approved by the Board of
Directors on 22 February 2022 and signed on its behalf by:
Ignacio Bustamante
Chief Executive Officer
22 February 2022
CONSOLIDATED STATEMENT OF CASH FLOWS
For the year ended 31 December 2021
Year ended
31 December
====================
2021 2020
Notes US$000 US$000
==================================================== ===== ========= =========
Cash flows from operating activities
Cash generated from operations 319,588 208,999
Interest received 1,938 2,292
Interest paid 26 (5,720) (6,312)
Payment of mine closure costs 27 (9,083) (3,987)
Income tax, special mining tax and mining royalty
paid 1 (22,021) (5,618)
===================================================== ===== ========= =========
Net cash generated from operating activities 284,702 195,374
===================================================== ===== ========= =========
Cash flows from investing activities
Purchase of property, plant and equipment (130,965) (94,046)
Purchase of evaluation and exploration assets 17 (21,398) (13,287)
Purchase of financial assets at fair value through
OCI 20 (7) -
Purchase of investment in associate 19 (19,995) -
Purchase of financial assets at fair value through
profit and loss 21 (3,308) -
Purchase of Argentinian bonds 13 (33,469) (27,256)
Proceeds from sale of Argentinian bonds 13 18,133 14,486
Proceeds from sale of financial assets at fair
value through OCI 20 9 7,522
Proceeds from sale of financial assets at fair
value though profit and loss 21 4,726 -
Proceeds from sale of property, plant and equipment 3,393 352
Cash and cash equivalent of demerged entity (553) -
===================================================== ===== ========= =========
Net cash used in investing activities (183,434) (112,229)
===================================================== ===== ========= =========
Cash flows from financing activities
Proceeds from borrowings 26 105,954 48,520
Repayment of borrowings 26 (14,793) (37,717)
Payment of lease liabilities (2,182) (2,021)
Purchase of treasury shares - (292)
Dividends paid to non-controlling interests (9,832) (345)
Dividends paid 29 (22,022) (20,556)
===================================================== ===== ========= =========
Cash flows generated from/(used in) financing
activities 57,125 (12,411)
===================================================== ===== ========= =========
Net increase in cash and cash equivalents during
the year 158,393 70,734
Exchange difference (3,487) (5,208)
Cash and cash equivalents at beginning of year 231,883 166,357
===================================================== ===== ========= =========
Cash and cash equivalents at end of year 24 386,789 231,883
===================================================== ===== ========= =========
1 Taxes paid have been offset with value added tax (VAT) credits
of US$3,478,000 (2020:US$3,390,000).
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Other reserves
===========================================================================================
Fair
value
reserve
of Capital
financial Share and reserves
assets of other attributable
at fair comprehensive Unrealised Share- to
Equity value loss Cumulative gain/ based Total shareholders
share Share Treasury through of an Dividends translation (loss) Merger payment other Retained of the Non-controlling Total
capital premium shares OCI associate expired adjustment on hedges 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 US$000 US$000
================= ===== ======= ======= ======== ========= ============= ========= =========== ========== ========= ======= ========= ========= ============ =============== ========
Balance at 1
January
2020 226,506 438,041 - 18 - 99 (14,035) - (210,046) 2,164 (221,800) 290,263 733,010 74,631 807,641
================== ===== ======= ======= ======== ========= ============= ========= =========== ========== ========= ======= ========= ========= ============ =============== ========
Other
comprehensive
income/(expense) - - - 1,765 - - 159 (4,169) - - (2,245) - (2,245) - (2,245)
Profit for the
year - - - - - - - - - - - 15,162 15,162 5,264 20,426
================== ===== ======= ======= ======== ========= ============= ========= =========== ========== ========= ======= ========= ========= ============ =============== ========
Total
comprehensive
income/
(expense) for the
year - - - 1,765 - - 159 (4,169) - - (2,245) 15,162 12,917 5,264 18,181
================== ===== ======= ======= ======== ========= ============= ========= =========== ========== ========= ======= ========= ========= ============ =============== ========
Sale of financial
assets
at fair value
through
OCI 20 - - - (1,988) - - - - - - (1,988) 1,988 - - -
Exercise of share
options - - 292 - - - - - - (1,087) (1,087) 795 - - -
Dividends - - - - - - - - - - - (20,556) (20,556) - (20,556)
Dividends to non -
controlling
interests - - - - - - - - - - - - - (345) (345)
Purchase of
treasury
shares - - (292) - - - - - - - - - (292) - (292)
Share-based
payments - - - - - - - - - 1,456 1,456 - 1,456 - 1,456
================== ===== ======= ======= ======== ========= ============= ========= =========== ========== ========= ======= ========= ========= ============ =============== ========
Balance at 31
December
2020 226,506 438,041 - (205) - 99 (13,876) (4,169) (210,046) 2,533 (225,664) 287,652 726,535 79,550 806,085
================== ===== ======= ======= ======== ========= ============= ========= =========== ========== ========= ======= ========= ========= ============ =============== ========
Other
comprehensive
income/(expense) - - - 261 (9) - (11,287) 17,645 - - 6,610 - 6,610 - 6,610
Profit for the
year - - - - - - - - - - - 76,934 76,934 (5,828) 71,106
================== ===== ======= ======= ======== ========= ============= ========= =========== ========== ========= ======= ========= ========= ============ =============== ========
Total
comprehensive
income/
(expense) for the
year - - - 261 (9) - (11,287) 17,645 - - 6,610 76,934 83,544 (5,828) 77,716
================== ===== ======= ======= ======== ========= ============= ========= =========== ========== ========= ======= ========= ========= ============ =============== ========
Sale of financial
assets
at fair value
through
OCI 20 - - - 18 - - - - - - 18 (18) - - -
Dividends - - - - - - - - - - - (22,022) (22,022) - (22,022)
In specie
dividends - - - - - - - - - - - (94,945) (94,945) - (94,945)
Dividends to non -
controlling
interests - - - - - - - - - - - - (9,832) (9,832)
Share-based
payments - - - - - - - - - 2,442 2,442 - 2,442 - 2,442
Forfeiture of
share options - - - - - - - - - (1,063) (1,063) 1,063 - - -
================== ===== ======= ======= ======== ========= ============= ========= =========== ========== ========= ======= ========= ========= ============ =============== ========
Balance at 31
December
2021 226,506 438,041 - 74 (9) 99 (25,163) 13,476 (210,046) 3,912 217,657 248,664 695,554 63,890 759,444
================== ===== ======= ======= ======== ========= ============= ========= =========== ========== ========= ======= ========= ========= ============ =============== ========
For the year 31 December 2021
1 Notes to the condensed consolidated financial statements
For the year ended 31 December 2021
The financial information for the year ended 31 December 2021
and 2020 contained in this document does not constitute statutory
accounts as defined in section 435 of the Companies Act 2006. The
financial information for the years ended 31 December 2021 and 2020
have been extracted from the consolidated financial statements of
Hochschild Mining plc for the year ended 31 December 2021 which
have been approved by the directors on 22 February 2022 and will be
delivered to the Registrar of Companies in due course. The
auditor's report on those financial statements was unqualified and
did not contain a statement under section 498 of the Companies Act
2006.
2 Significant accounting policies
Basis of preparation
The consolidated financial statements of the Group have been
prepared in accordance with UK adopted International Accounting
Standards.
The basis of preparation and accounting policies used in
preparing the consolidated financial statements for the years ended
31 December 2021 are consistent with those adopted and disclosed in
the Group's financial statements for the year ended 31 December
2020. The consolidated financial statements have been prepared on a
historical cost basis except for the revaluation of certain
financial instruments that are measured at fair value at the end of
each reporting period. There have been a number of amendments to
accounting standards and new interpretations, however these have
not any impact on the accounting policies, methods of computation
or presentation applied by the Group. Further details on new UK
adopted International Accounting Standards will be disclosed in the
2021 Annual Report and Accounts.
The financial statements are presented in US dollars (US$) and
all monetary amounts are rounded to the nearest thousand ($000)
except when otherwise indicated.
Going concern
The Group's business activities, its future development and the
factors likely to affect its performance and position are set out
in the Strategic Report. The financial position of the Group, its
cash flows, liquidity position and borrowings are described in the
Financial Review and discussion of the Group's viability on the
occurrence of certain scenarios is provided in the Viability
Statement. In addition, the financial statements includes the
Group's objectives, policies and processes for managing its
capital; its financial risk management objectives; details of its
financial instruments; and its exposure to credit risk and
liquidity risk.
Covid-19
The reduced impact of Covid-19 meant that Hochschild Mining was
able to benefit from a year of uninterrupted operations. The
Company continues to take a cautious approach and prioritises
employee welfare by facilitating social distancing at the
operations, implementing testing, and taking other relevant
measures. The Company's Covid-19 Crisis Plan, which provides for
numerous mitigating measures to be adopted in response to an
outbreak of infections, can be implemented as required. At the time
of writing, the number of new Covid-19 cases in Peru and Argentina
are falling from a recent peak due to the Omicron variant and the
Directors are confident that adequate mitigation steps can be taken
to prevent significant disruption to the business. The Directors'
assessment is naturally 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 against new variants of the virus.
Further information on the action taken by the Company in 2020,
which continued in 2021, can be found on pages 64 to 71 (Risk
Management report) and pages 6 to 7 of the 2020 Annual Report.
Socio-Political Developments
As described in the Risk Management report, in the run up to the
Peruvian Presidential elections in the first half of 2021 and
following the inauguration of the left-wing Castillo administration
in late July 2021, issues associated with mining have been the
subject of increased public debate. Particular aspects relate to
mining companies' social license to operate and the taxation of
mining companies' revenues.
- Government/Legislative Action
In considering the possible impact on the business by government
action, the Directors note that, as reported in the Risk Management
report, the Peruvian Government intends to submit a legislative
bill to Congress to increases taxes on the mining sector in Q1 2022
although no specific details have been announced.
- Social License
As a result of the election of the Castillo administration,
rural communities have become more active in their demands to mine
operators for economic and other forms of support. The Company is
committed to active engagement with local communities and details
of initiatives pursued during the year can be found in the
Sustainability Report. The Company's approach was recently
acknowledged by various stakeholders who conveyed formal
expressions of support for the Company in response to events in the
Coracora district in Ayacucho in November 2021.
Directors' Assessment
The Directors have reviewed Group liquidity, including cash
resources and borrowings (refer to note 26 on details of the
US$300m Medium Term loan) and related covenant forecasts to assess
whether the Group is able to continue in operation for the period
to 31 March 2023 (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 scenarios, consideration was given to the potential
impact of Covid and the possible actions of government and other
third parties.
More specifically, the scenarios reviewed by the Directors
included a base case (the 'Base Scenario'), reflecting (among other
things) budgeted production for 2022, Life of Mine plans for
Inmaculada, Pallancata and San Jose, a budget for Covid-related
costs, the planned acquisition of Amarillo Gold Corporation in Q1
2022 and average precious metal prices of $1,745/oz for gold and
$23.3/oz for silver, being the average analysts' consensus for the
next 15 months (the 'Assumed Prices'). The Directors also
considered "Severe" and "Remote" scenarios which took into account
a combination of circumstances which is considered by the
Directors, to be unlikely. The former takes into account, a
four-week suspension of all operations 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 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 three scenarios, 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.
Conclusion
After their review, the Directors have a reasonable expectation
that the Group and the Company have adequate resources to continue
in operational existence during the Going Concern Period.
Accordingly, they continue to adopt the going concern basis of
accounting in preparing the annual financial statements.
3 Segment reporting
The Group's activities are principally related to mining
operations which involve the exploration, production and sale of
gold and silver. Products are subject to the same risks and returns
and are sold through similar distribution channels. The Group
undertakes a number of activities solely to support mining
operations including power generation and services. Transfer prices
between segments are set at an arm's length basis in a manner
similar to that used for third parties. Segment revenue, segment
expense and segment results include transfers between segments at
market prices. Those transfers are eliminated on consolidation.
For internal reporting purposes, management takes decisions and
assesses the performance of the Group through
consideration of the following reporting segments:
-- Operating unit - San Jose, which generates revenue from the
sale of gold and silver (dore and concentrate).
-- Operating unit - Pallancata, which generates revenue from the
sale of gold and silver (concentrate).
-- Operating unit - Inmaculada, which generates revenue from the
sale of gold and silver (dore).
-- Exploration, which explores and evaluates areas of interest
in brownfield and greenfield sites with the aim of extending the
life of mine of existing operations and to assess the feasibility
of new mines. The exploration segment includes costs charged to the
profit and loss and capitalised as assets.
-- Other - includes the profit or loss generated by Empresa de
Transmisión Aymaraes S.A.C.
The Group's administration, financing, other activities
(including other income and expense), and income taxes are managed
at a corporate level and are not allocated to operating
segments.
Segment information is consistent with the accounting policies
adopted by the Group. Management evaluates the financial
information based on the adopted IFRS accounting policies in the
financial statements.
The Group measures the performance of its operating units by the
segment profit or loss that comprises gross profit, selling
expenses and exploration expenses.
Segment assets include items that could be allocated directly to
the segment.
(a) Reportable segment information
Adjustment
and
Inmaculada San Jose Pallancata Exploration Other1 eliminations Total
US$000 US$000 US$000 US$000 US$000 US$000 US$000
========================== ========== ======== ========== =========== ======= ============= =========
Year ended 31 December
2021
Revenue from external
customers 452,849 260,879 103,809 - 464 - 818,001
Inter segment revenue - - - - 9,225 (9,225) -
========================== ========== ======== ========== =========== ======= ============= =========
Total revenue from
customers 452,849 260,879 103,809 - 9,689 (9,225) 818,001
========================== ========== ======== ========== =========== ======= ============= =========
Provisional pricing
adjustment (14) (1,907) (4,693) - - - (6,614)
========================== ========== ======== ========== =========== ======= ============= =========
Total revenue 452,835 258,972 99,116 - 9,689 (9,225) 811,387
========================== ========== ======== ========== =========== ======= ============= =========
Segment profit/(loss) 226,727 52,614 343 (40,520) 7,345 (684) 245,825
Others2 - - - - - - (108,494)
========================== ========== ======== ========== =========== ======= ============= =========
Profit from continuing
operations before income
tax - - - - - - 137,331
========================== ========== ======== ========== =========== ======= ============= =========
Other segment information
Depreciation3 (75,524) (51,217) (22,618) (396) (5,795) - (155,550)
Amortisation (108) (852) - (107) (51) - (1,118)
Impairment and write-off
of assets, net (326) (354) (24,940) - (89) (25,709)
========================== ========== ======== ========== =========== ======= ============= =========
Assets
Capital expenditure 76,512 43,666 14,250 15,896 3,537 - 153,861
========================== ========== ======== ========== =========== ======= ============= =========
Current assets 20,182 43,473 9,072 - 4,230 - 76,957
Other non-current assets 515,943 157,749 3,241 155,702 46,882 - 879,517
========================== ========== ======== ========== =========== ======= ============= =========
Total segment assets 536,125 201,222 12,313 155,702 51,112 - 956,474
Not reportable assets4 - - - - 498,241 - 498,241
========================== ========== ======== ========== =========== ======= ============= =========
Total assets 536,125 201,222 12,313 155,702 549,353 - 1,454,715
========================== ========== ======== ========== =========== ======= ============= =========
1 'Other' revenue relates to revenues earned by Empresa de Transmisión Aymaraes S.A.C.
2 Comprised of administrative expenses of US$51,905,000, other
income of US$45,896,000, other expenses of US$46,068,000, write-off
of assets (net) of US$863,000, impairment of non-current assets of
US$24,846,000, share of losses of an associate of US$169,000,
finance income of US$3,946,000, finance expense of US$32,061,000,
and foreign exchange loss of US$2,424,000.
3 Includes depreciation capitalised in the Crespo project
(US$430,000), and San Jose unit (US$2,341,000), products in process
(US$509,000) and recognised against the mine rehabilitation
provision (US$1,978,000).
4 Not reportable assets are comprised of financial assets at
fair value through OCI of US$661,000, financial assets at fair
value through profit and loss of US$3,155,000, other receivables of
US$44,446,000, income tax receivable of US$32,000, deferred income
tax asset of US$484,000, investment in associates US$43,559,000,
derivative financial assets of US$19,115,000 and cash and cash
equivalents of US$386,789,000.
Adjustment
and
Inmaculada San Jose Pallancata Exploration Other1 eliminations Total
US$000 US$000 US$000 US$000 US$000 US$000 US$000
========================== ========== ======== ========== =========== ======= ============= =========
Year ended 31 December
2020
Revenue from external
customers 314,742 199,803 96,134 - 149 - 610,828
Inter segment revenue - - - - 6,918 (6,918) -
========================== ========== ======== ========== =========== ======= ============= =========
Total revenue from
customers 314,742 199,803 96,134 - 7,067 (6,918) 610,828
========================== ========== ======== ========== =========== ======= ============= =========
Provisional pricing
adjustment 164 6,295 4,540 - - - 10,999
========================== ========== ======== ========== =========== ======= ============= =========
Total revenue 314,906 206,098 100,674 - 7,067 (6,918) 621,827
========================== ========== ======== ========== =========== ======= ============= =========
Segment profit/(loss) 129,103 47,290 3,989 (33,436) 5,699 (1,773) 150,872
Others2 - - - - - - (87,952)
Profit from continuing
operations before income
tax - - - - - - 62,920
========================== ========== ======== ========== =========== ======= ============= =========
Other segment information
Depreciation3 (54,522) (31,238) (28,969) (406) (3,734) - (118,869)
Amortisation (82) (552) - (442) (39) - (1,115)
Impairment and write-off
of assets, net (535) 7,750 (221) (720) (49) - 6,225
========================== ========== ======== ========== =========== ======= ============= =========
Assets
Capital expenditure 62,128 23,030 7,399 12,772 2,595 - 107,924
========================== ========== ======== ========== =========== ======= ============= =========
Current assets 14,613 43,735 24,692 - 4,675 - 87,715
Other non-current assets 516,505 166,887 33,784 232,135 52,037 - 1,001,348
========================== ========== ======== ========== =========== ======= ============= =========
Total segment assets 531,118 210,622 58,476 232,135 56,712 - 1,089,063
========================== ========== ======== ========== =========== ======= ============= =========
Not reportable assets4 - - - - 276,998 - 276,998
========================== ========== ======== ========== =========== ======= ============= =========
Total assets 531,118 210,622 58,476 232,135 333,710 - 1,366,061
========================== ========== ======== ========== =========== ======= ============= =========
1 'Other' revenue relates to revenues earned by Empresa de
Transmisión Aymaraes S.A.C.
2 Comprised of administrative expenses of US$43,282,000, other
income of US$3,617,000, other expenses of US$32,518,000, write-off
of assets (net) of US$2,078,000, reversal of impairment of
non-current assets of US$8,303,000, finance income of US$4,197,000,
finance expense of US$23,560,000, and foreign exchange loss of
US$2,631,000.
3 Includes depreciation capitalised in the Crespo project
(US$768,000), San Jose unit (US$1,349,000) and products in process
(US$168,000).
4 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.
(b) Geographical information
The revenue for the period based on the country in which the
customer is located is as follows:
Year ended
31 December
================
2021 2020
US$000 US$000
================== ======= =======
External customer
Switzerland 360,838 236,455
Canada 213,350 138,795
Korea 135,162 150,094
Germany 47,014 60,299
Japan 26,151 13,264
Chile 13,184 10,872
United Kingdom 7,982 -
Bulgaria 4,703 9,311
USA - 2,994
Peru 3,003 (257)
=================== ======= =======
Total 811,387 621,827
=================== ======= =======
Inter-segment
Peru 9,225 6,918
Total 820,612 628,745
=================== ======= =======
In the periods set out below, certain customers accounted for
greater than 10% of the Group's total revenues as detailed in the
following table:
Year ended 31 December
2021 Year ended 31 December 2020
================================= =================================
US$000 % Revenue Segment US$000 % Revenue Segment
================ ======= ========= ============= ======= ========= =============
Inmaculada Inmaculada
Argor Heraus 208,037 26% and San Jose 176,543 28% and San Jose
================= ======= ========= ============= ======= ========= =============
Pallancata Pallancata
LS Nikko 135,162 17% and San Jose 150,094 24% and San Jose
================= ======= ========= ============= ======= ========= =============
Asahi Refining
Canada 198,254 24% Inmaculada 121,048 19% Inmaculada
================= ======= ========= ============= ======= ========= =============
MKS Switzerland
S.A. 152,801 19% Inmaculada 59,912 10% Inmaculada
================= ======= ========= ============= ======= ========= =============
Non-current assets, excluding financial instruments and deferred
income tax assets, were allocated to the geographical areas in
which the assets are located as follows:
As at 31 December
===================
2021 2020
US$000 US$000
======================================================= ======== =========
Peru 665,839 699,121
Argentina 157,750 166,887
Chile 55,922 135,340
Canada 6 -
======================================================== ======== =========
Total non-current segment assets 879,517 1,001,348
======================================================== ======== =========
Financial assets at fair value through OCI 661 402
Financial assets at fair value through profit and loss 3,155 5,407
Investment in associates 43,559 -
Trade and other receivables 2,470 5,395
Deferred income tax assets 484 1,009
Derivative financial instruments 5,042 -
Total non-current assets 934,888 1,013,561
======================================================== ======== =========
4 Demerger of Aclara Resources Inc. ('Aclara')
Hochschild Mining Holdings Ltd ('HM Holdings'), a wholly-owned
subsidary of the Group had interests over a Chilean company named
REE UNO SpA. This entity holds the project Aclara (formerly named
Biolantanidos), which is located in the south of Chile, and is
currently focused on the development of the Penco module, which
will aim to produce a rare earth concentrate through a processing
plant that will be fed by clays from nearby deposits.
The Group wanted to separate the Aclara project from their other
businesses dedicated to the extraction and production of gold and
silver. For this purpose, a new company named Aclara Resources Inc.
located in Canada (hereinafter, 'Aclara') was incorporated by the
Group. The investment held in REE UNO SpA was then transferred to
Aclara.
A distribution of 70,606,502 Aclara Shares, representing 80% of
the Aclara Shares, was made to the holders of ordinary shares of
the Group by way of a dividend in specie (the "Demerger Dividend").
The approval of the Group's shareholders in respect of the Demerger
Dividend was granted at the Extraordinary General Meeting held on 5
November 2021. The Demerger Dividend was effected on 10 December
2021, shortly before the Aclara Initial Public Offering ('IPO') was
completed later that day.
Once the Aclara IPO was completed, Aclara became an independent
company listed on the Toronto Stock Exchange.
The ratio of Demerged Aclara Shares to the number of ordinary
shares in the Group was 70,606,502 to 513,875,563. Therefore, the
shareholders who were entitled to receive the Demerger Dividend
received 0.1374 Aclara Shares for each ordinary share in the
Group.
The value of the Demerger Dividend is C$120,031,053 (equivalent
to US$94,945,000) in aggregate based on the offering price of
C$1.70 per Aclara Share (the Offering Price).
HM Holdings retained 20% of the Aclara Shares. The investment
was recorded at initial recognition at fair value, based on the
Offering Price.
The fair value of the Demerger Dividend at the date of the
demerger and retained investment is therefore a level 1 fair value
measurement.
Immediately following the Demerger Dividend and pursuant to the
subscription agreement with Aclara dated 2 December 2021, HM
Holdings purchased 14,870,397 Aclara Shares at the Offering Price
for aggregate gross proceeds to Aclara of C$25,279,675 (equivalent
to US$19,996,000) .
The consolidated effect in the financial statements of the Group
is an exceptional gain of US$37,461,000 presented within other
income .
Details of the net gain on demerger of Aclara are shown
below:
US$000
========================================================= ========
Property, plant and equipment 507
Evaluation and exploration assets 70,311
Other non-current assets 2,668
Current assets 1,210
Current liabilities (3,465)
========================================================= ========
Aclara net assets and liabilities demerged(1) 71,231
========================================================= ========
Net cash and cash equivalents demerged (553)
Net cash outflow from demerger of Aclara (553)
========================================================= ========
In specie dividends relating to Aclara demerger 94,945
Retained financial investments in associate (note 19) 23,742
Net assets demerged (71,231)
Reclassification of foreign currency translation reserve (9,995)
========================================================= ========
Gain on demerger of Aclara 37,461
========================================================= ========
1 Considered in the exploration segment of the Group.
On completion of the demerger, the Group retained an 20%
interest in Aclara through the Aclara Resources Inc. investment
Company. An investment in associates of US$23,742,000 was
recognised on the Group's consolidated balance sheet in respect of
this interest.
5 Revenue
Year ended 31 December Year ended 31 December
2021 2020
================================================ ================================================
Revenue from Revenue from
customers customers
========================== =========== ======= ========================== =========== =======
Goods Shipping Provisional Goods 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) 353,258 914 354,172 40 354,212 255,142 577 255,719 144 255,863
Silver (from dore
bars) 207,022 804 207,826 (52) 207,774 101,195 383 101,578 62 101,640
Gold (from
concentrates) 100,233 2,462 102,695 912 103,607 109,816 2,447 112,263 1,956 114,219
Silver (from
concentrates) 150,140 2,704 152,844 (7,514) 145,330 138,669 2,450 141,119 8,837 149,956
Services 464 - 464 - 464 149 - 149 - 149
Total 811,117 6,884 818,001 (6,614) 811,387 604,971 5,857 610,828 10,999 621,827
====================== ======= ======== ======= =========== ======= ======= ======== ======= =========== =======
6 Cost of sales before exceptional items
Included in cost of sales are:
Year ended
31 December
================
2021 2020
US$000 US$000
======================================================== ======= =======
Depreciation and amortisation in cost of sales1 145,482 114,662
Personnel expenses (note 10)2 101,682 65,077
Mining royalty (note 31 ) 7,171 5,208
Change in products in process and finished goods 320 17,323
Fixed costs at the operations during stoppages, reduced
capacity and excess absenteeism3 8,680 46,480
========================================================= ======= =======
1 The depreciation and amortisation in production cost is US$148,842,000 (2020: US$113,146,000).
2 Includes workers profit sharing of US$6,512,000 (2020:
US$2,632,000) and excludes personnel expenses of US$7,607,000
(2020: US$32,117,000) included within unallocated fixed cost at the
operations (see below).
3 Corresponds to the unallocated fixed cost accumulated as a
result of excess absenteeism (2020: during the stoppage and
operation of the mine units under reduced operating capacity) due
to the Covid-19 pandemic. These costs mainly include personnel
expenses of US$7,607,000 (2020: US$32,117,000), third party
services of US$995,000 (2020: US$8,948,000), supplies of US$nil
(2020: US$1,698,000), depreciation and amortisation of US$nil
(2020: US$1,818,000) and other costs of US$78,000 (2020:
US$1,899,000).
7 Administrative expenses
Year ended
31 December
============ =======
2021 2020
US$000 US$000
============================== ============ =======
Personnel expenses (note 10) 29,832 27,016
Professional fees 8,710 4,978
Donations 587 373
Lease rentals 1,301 1,353
Third party services 302 241
Communications 473 427
Indirect taxes 2,057 2,029
Depreciation and amortisation 1,823 1,723
Depreciation of rights of use 226 284
Technology and systems 1,207 1,063
Security 956 891
Other1 4,431 2,904
=============================== ============ =======
Total 51,905 43,282
=============================== ============ =======
1 Predominantly relates to advertising costs of US$372,000
(2020: US$292,000), insurance fees of US$837,000 (2020:
US$464,000), repair and maintenance of US$326,000 (2020:
US$314,000), supplies costs of US$102,000 (2020: US$42,000), tax
penalties of US$1,476,000 (2020: US$55,000), travel expenses of
US$105,000 (2020: US$188,000) and personnel transportation of
US$108,000 (2020: US$115,000).
8 Exploration expenses
Year ended
31 December
================
2021 2020
US$000 US$000
================================= ======= =======
Mine site exploration1
Arcata 2,189 990
Ares 628 940
Inmaculada 3,276 2,526
Pallancata 5,993 4,652
San Jose 9,653 9,720
================================== ======= =======
21,739 18,828
======= =======
Prospects2
Peru 2,677 1,731
USA 3,731 1,902
Chile (53) (211)
Canada 51 -
================================== ======= =======
6,406 3,422
======= =======
Generative3
Peru 3,263 2,331
USA 11 12
Mexico 861 974
Chile 177 437
================================== ======= =======
4,312 3,754
======= =======
Personnel (note 10 ) 6,368 5,905
Others 731 581
================================== ======= =======
Depreciation right-of-use assets 292 305
================================== ======= =======
Total 39,848 32,795
================================== ======= =======
1 Mine-site exploration is performed with the purpose of
identifying potential minerals within an existing
mine-site, with the goal of maintaining or extending the mine's life.
2 Prospects expenditure relates to detailed geological
evaluations in order to determine zones which have mineralisation
potential that is economically viable
for exploration. Exploration expenses are generally incurred in
the following areas: mapping, sampling,
geophysics, identification of local targets and reconnaissance drilling.
3 Generative expenditure is early stage exploration expenditure
related to the basic evaluation of the region to identify prospects
areas that have the geological conditions necessary to contain
mineral deposits. Related activities include regional and field
reconnaissance, satellite images, compilation of public information
and identification of exploration targets.
The Group determines the cash flows which relate to the
exploration activities of the companies engaged only in
exploration. Exploration activities incurred by Group operating
companies are not included since it is not practicable to separate
the liabilities related to the exploration activities of these
companies from their operating liabilities. Cash outflows on
exploration activities were US$12,163,000 in 2021 (2020:
US$6,176,000).
9 Selling expenses
Year ended
31 December
================
2021 2020
US$000 US$000
============================= ======= =======
Personnel expenses (note 10) 304 303
Warehouse services 1,392 1,281
Taxes1 11,765 9,202
Other 1,970 1,968
============================== ======= =======
Total 15,431 12,754
============================== ======= =======
1 Corresponds to the export duties in Argentina.
10 Personnel expenses
Year ended
31 December
================
2021 2020
US$000 US$000
================================== ======= =======
Salaries and wages 109,769 104,331
Workers' profit sharing (note 27) 11,018 4,986
Other legal contributions 23,792 22,158
Statutory holiday payments 7,237 6,214
Long Term Incentive Plan 1,783 1,764
Termination benefits 6,470 1,495
Other 1,101 752
=================================== ======= =======
Total(1) 161,170 141,700
=================================== ======= =======
1 Includes exceptional personnel expenses amounting to
US$2,745,000 (2020: US$4,595,000) (refer to note 11(1)).
Personnel expenses are distributed as follows:
Year ended
31 December
================
2021 2020
US$000 US$000
============================================= ======= =======
Cost of sales1 111,613 101,404
Administrative expenses 29,832 27,016
Exploration expenses 6,368 5,905
Selling expenses 304 303
Other expenses2 11,579 4,255
Capitalised as property, plant and equipment 1,474 2,817
============================================== ======= =======
Total 161,170 141,700
============================================== ======= =======
1 Exceptional personnel expenses included in cost of sales
amount to US$2,324,000 (2020: US$4,210,000).
2 Exceptional personnel expenses included in other expenses
amount to US$421,000 (2020: US$385,000).
The average number of employees for 2021 and 2020 were as
follows:
Year ended
31 December
==============
2021 2020
=============== ====== ======
Peru 2,057 1,897
Argentina 1,478 1,432
Chile 42 13
United Kingdom 10 10
================ ====== ======
Total 3,587 3,352
================ ====== ======
11 Exceptional items
Exceptional items are those significant items which, due to
their nature or the expected infrequency of the events giving rise
to them, need to be disclosed separately on the face of the income
statement to enable a better understanding of the financial
performance of the Group and facilitate comparison with prior
years. Unless stated, exceptional items do not correspond to a
reporting segment of the Group.
Year ended Year ended
31 December 31 December
2021 2020
US$000 US$000
========================================================== ============ ============
Cost of sales
Incremental costs due to Covid - 19 pandemic 1 (22,511) (27,613)
Total (22,511) (27,613)
=========================================================== ============ ============
Other income
Demerger of Aclara (note 4) 37,461 -
=========================================================== ============ ============
Total 37,461 -
=========================================================== ============ ============
Other expenses
Incremental costs due to Covid-19 pandemic 1 (1,503) (3,613)
Total (1,503) (3,613)
(Impairment)/impairment reversal of non-financial assets,
net
Impairment of non-financial assets 2 (24,846) -
Reversal of impairment of non-financial assets 3 - 8,303
Total (24,846) 8,303
=========================================================== ============ ============
Income tax benefit 4 15,055 7,157
Total 15,055 7,157
=========================================================== ============ ============
The exceptional items for the year ended 31 December 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
costs of sales and costs incurred by mine units in care and
maintenance and those related to corporate activities have been
presented within other expenses.
Year ended 31 December
==============================================
2021 2020
================================ ========================== ==================
Cost Other Cost of Other
of sales expenses sales expenses
US$000 US$000 US$000 US$000
================================ ========= =============== ======= =========
Third party services 16,032 873 18,823 665
Personnel expenses (note 10) 2,324 421 4,210 385
Donations - - 124 1,365
Consumption of medical supplies 1,327 120 1,062 248
Cleaning and food services 2,728 24 1,493 59
Depreciation and amortisation 37 29 534 -
Others 63 36 1,367 891
================================= ========= =============== ======= =========
Total 22,511 1,503 27,613 3,613
================================= ========= =============== ======= =========
These costs have been 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 (occurred only in 2020),
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 (refer to note 30)).
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 costs would
cease 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.
In order to provide the users of the financial statements with a
better understanding of the financial performance of the Group in
the year, and to facilitate comparison with the prior period, we
have considered it appropriate to continue to disclose separately
as exceptional these incremental Covid-related cost up to December
2021.
Following the outbreak of the Omicron variant, the virus appears
to have shifted into an endemic phase. Consequently, these costs
will no longer be presented as exceptional items from 2022 and will
form part of the underlying profits.
2 Corresponds to the impairment related to the Pallancata mine
unit in Peru (refer to notes 16 and 17).
3 Reversals of impairment related to the San Jose mine unit (refer to notes 16, 17 and 18).
4 The current tax credit generated by the incremental costs
arising from the Covid-19 pandemic of US$7,725,000 (2020:
US$9,241,000) and the deferred tax credit generated by the
impairment of the Pallancata mine unit of US$7,330,000 (2020:
deferred tax charge generated by the reversal of the impairment
related to the San Jose mine unit of US$2,084,000).
12 Other income and other expenses before exceptional items
Year ended Year ended
31 December 31 December
2021 2020
============ ============
Before Before
exceptional exceptional
items items
US$000 US$000
=========================================================== ============ ============
Other income
Gain on sale of property, plant and equipment (note
16) 3,342 231
Logistic services 7 336
Income on recovery of expenses 418 -
Recovery of provision of obsolescence of supplies
(note 23) 2,338 1,921
Other1 2,330 1,129
============================================================ ============ ============
Total 8,435 3,617
============================================================ ============ ============
Other expenses
Increase in provision for mine closure (note 27(1)) (22,095) (16,056)
Provision of obsolescence of supplies (note 23) (559) -
Care and maintenance expenses of Ares mine unit (2,903) (2,578)
Write off of value added tax (188) (101)
Corporate social responsibility contribution in Argentina2 (3,911) (2,689)
Care and maintenance expenses of Arcata mine unit (2,772) (2,966)
Provision for impairment of receivables3 - (996)
Voluntary retirement plan in Argentina4 (8,263) -
Other 5 (3,874) (3,519)
============================================================ ============ ============
Total (44,565) (28,905)
============================================================ ============ ============
1 Mainly corresponds to the gain recognised for the Mosquito
project of US$400,000 (2020: US$400,000).
2 Relates to a contribution in Argentina to the Santa Cruz
province calculated as a proportion of sales.
3 Mainly due to write-off of a claim receivable of US$996,000.
4 Related to payments made and the provision recognised under a
voluntary retirement plan in Minera Santa Cruz.
5 Mainly corresponds to the expenses due to concessions of
US$179,000 (2020: US$295,000), depreciation expense for
right-of-use assets of US$135,000 (2020: US$151,000), the loss on
recovery of expenses of US$nil (2020: US$158,000), loss on sale of
supplies of US$2,027,000 (2020: US$1,312,000).
13 Finance income and finance costs
Year ended Year ended
31 December 31 December
2021 2020
============ ============
US$000 US$000
============================================================= ============ ============
Finance income
Interest on deposits and liquidity funds 1,815 2,106
Interest on loans to related parties 11 -
Interest income 1,826 2,106
============================================================== ============ ============
Unwind of discount on mine rehabilitation (note 27) 2,038 387
Gain on discount of other receivables1 - 335
Gain from changes in the fair value of financial instruments
2 - 1,057
Other 82 312
============================================================== ============ ============
Total 3,946 4,197
============================================================== ============ ============
Finance costs
Interest on secured bank loans (note 26 ) (5,951) (7,086)
Other interest (1,332) (684)
============================================================== ============ ============
Interest expense (7,283) (7,770)
============================================================== ============ ============
Fair value loss on interest rate swap reclassified
from equity (5,521) (1,497)
Loss on discount of other receivables1 (632) -
Loss from changes in the fair value of financial instruments
3 (16,170) (12,770)
Other (2,455) (1,523)
============================================================== ============ ============
Total (32,061) (23,560)
============================================================== ============ ============
1 Mainly related to the effect of the discount of tax credits in
Argentina and Peru.
2 Related to the fair value adjustment of the Americas Gold and
Silver Corporation (AGSC) shares.
3 Represents the fair value change of US$834,000 on the AGSC and
C3 Metals Inc shares (note 21) (2020: US$nil)) and the foreign
exchange transaction costs of US$15,336,000 (2020: US$12,770,000)
to acquire US$18,133,000 dollars through the sale of bonds in
Argentina (2020: US$14,486,000).
14 Income tax expense
Year ended 31 December Year ended 31 December
2021 2020
=================================== ==================================
Before Before
exceptional Exceptional exceptional Exceptional
items items Total items items Total
US$000 US$000 US$000 US$000 US$000 US$000
================================ ============ =========== ======== ============ =========== =======
Current corporate income tax
from continuing operations
Corporate income tax charge 53,965 (7,725) 46,240 31,551 (9,241) 22,310
Withholding tax 689 - 689 402 - 402
================================= ============ =========== ======== ============ =========== =======
54,654 (7,725) 46,929 31,953 (9,241) 22,712
============ =========== ======== ============ =========== =======
Deferred taxation
Origination and reversal of
temporary differences from
continuing operations (note
28 ) 26,885 (7,330) 19,555 8,962 2,084 11,046
Effect of change in income
tax rates1 (12,501) - (12,501) 1,529 - 1,529
================================= ============ =========== ======== ============ =========== =======
14,384 (7,330) 7,054 10,491 2,084 12,575
============ =========== ======== ============ =========== =======
Corporate income tax 69,038 (15,055) 53,983 42,444 (7,157) 35,287
================================= ============ =========== ======== ============ =========== =======
Current mining royalties
Mining royalty charge (note
31) 6,326 - 6,326 4,088 - 4,088
Special mining tax charge (note
31) 5,916 - 5,916 3,119 - 3,119
================================= ============ =========== ======== ============ =========== =======
Total current mining royalties 12,242 - 12,242 7,207 - 7,207
================================= ============ =========== ======== ============ =========== =======
Total taxation charge/(credit)
in the income statement 81,280 (15,055) 66,225 49,651 (7,157) 42,494
================================= ============ =========== ======== ============ =========== =======
1 On 16 June 2021, the Argentinian government published the Law
27630 that establishes taxable net income brackets: up to 5Mm pesos
is 0%, more than 5Mm up to 50Mm pesos is 30%, and more than 50Mm
pesos is 35% with effect from 1 January 2021. 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 arising from the change in the Corporation
Tax in the UK.
The weighted average statutory income tax rate was 27.7% for
2021 and 30.8% 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 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 partially offset
by the increase in the Argentinian tax rate.
There were tax charges in relation to the cash flow hedge gains
(2020: losses) recognised in equity during the year ended 31
December 2021 of US$7,383,000 (2020: US$1,744,000 credit).
The total taxation charge on the Group's profit before tax
differs from the theoretical amount that would arise using the
weighted average tax rate applicable to the consolidated profits of
the Group companies as follows:
As at 31 December
===================
2021 2020
US$000 US$000
========================================================= ========= ========
Profit from continuing operations before income tax 137,331 62,920
At average statutory income tax rate of 27.7% ( 2020:
30.8 %) 37,996 19,368
Expenses not deductible for tax purposes 5,482 5,251
Change in statutory income tax rate 12,501 (1,529)
Non-taxable income resulted from Aclara demerger (7,118) -
Deferred tax recognised on special investment regime1 (3,561) (2,870)
Movement in unrecognised deferred tax2 2,922 4,571
Special mining tax and mining royalty deductible for
corporate income tax (3,611) (2,126)
Other 2,176 461
========================================================== ========= ========
Corporate income tax at average effective income tax
rate of 34.1% (2020: 36.8%) before foreign exchange
effect and withholding tax 46,787 23,126
========================================================== ========= ========
Special mining tax and mining royalty3 12,242 7,207
========================================================== ========= ========
Corporate income tax and mining royalties at average
effective income tax rate of 43.0% (2020: 48.2%) 59,029 30,333
========================================================== ========= ========
Foreign exchange rate effect4 6,507 11,759
========================================================== ========= ========
Corporate income tax and mining royalties at average
effective income tax rate of 47.7% (2020: 66.9%) before
withholding tax 65,536 42,092
========================================================== ========= ========
Withholding tax 689 402
========================================================== ========= ========
Total taxation charge in the income statement at average
effective tax rate 48.2% (2020: 67.5%) from continuing
operations 66,225 42,494
========================================================== ========= ========
1 Argentina benefits from a special investment regime that
allows for a super (double) deduction in calculating its taxable
profits for all costs relating to prospecting, exploration and
metallurgical analysis, pilot plants and other expenses incurred in
the preparation of feasibility studies for mining projects.
2 Includes the income tax charge on mine closure provision of
-US$1,325,000 (2020: US$1,687,000), the tax charge related to the
Inmaculada mine unit depreciation of US$1,090,000 (2020:
US$902,000), and the effect of not recognised tax losses of
US$3,157,000 (2020: US$1,982,000).
3 Corresponds to the impact of a mining royalty and special mining tax in Peru (note 31).
4 The foreign exchange effect is composed of US$934,000 profit
(2020: US$1,584,000 loss) from Argentina and a loss of US$7,441,000
(2020: US$10,175,000 loss) from Peru. This mainly corresponds to
the foreign exchange effect of converting tax bases and monetary
items from local currency to the corresponding functional currency.
The main contributor of the foreign exchange effect on the tax
charge in 2021 is the devaluation of the Peruvian soles (2020:
Peruvian soles).
15 Basic and diluted earnings per share
Earnings per share ('EPS') is calculated by dividing profit for
the year attributable to equity shareholders of
the Parent by the weighted average number of ordinary shares issued during the year.
The Company has dilutive potential ordinary shares.
As at 31 December 2021 and 2020, EPS has been calculated as
follows:
As at 31 December
===================
2021 2020
============================================================= ======= ==========
Basic earnings/(loss) per share from continuing operations
Before exceptional items (US$) 0.14 0.06
Exceptional items (US$) 0.01 (0.03)
============================================================== ======= ==========
Total for the year and from continuing operations (US$) 0.15 0.03
============================================================== ======= ==========
Diluted earnings/(loss) per share from continuing operations
Before exceptional items (US$) 0.13 0.06
Exceptional items (US$) 0.01 (0.03)
============================================================== ======= ==========
Total for the year and from continuing operations (US$) 0.14 0.03
============================================================== ======= ==========
Profit from continuing operations before exceptional items and
attributable to equity holders of the Parent is derived as
follows:
As at 31 December
===================
2021 2020
========================================================= ========== =======
Profit attributable to equity holders of the Parent
- continuing operations (US$ 000 ) 76,934 15,162
Exceptional items after tax - attributable to equity
holders of the Parent (US$ 000 ) (7,367) 16,800
========================================================== ========== =======
Profit from continuing operations before exceptional
items attributable to equity holders of the Parent (US$
000 ) 69,567 31,962
========================================================== ========== =======
Profit from continuing operations before exceptional
items attributable to equity holders of the Parent for
the purpose of diluted earnings per share (US$ 000 ) 69,567 31,962
========================================================== ========== =======
The following reflects the share data used in the basic and
diluted earnings per share computations:
As at 31 December
===================
2021 2020
=========================================================== ========= ========
Basic weighted average number of ordinary shares in
issue (thousands) 513,876 513,876
Effect of dilutive potential ordinary shares related
to contingently issuable shares (thousands) 5,689 600
============================================================ ========= ========
Weighted average number of ordinary shares in issue
for the purpose of diluted earnings per share (thousands) 519,565 514,476
============================================================ ========= ========
16 Property, plant and equipment
Mining
properties
and Plant Construction
development Land and Mine in progress
costs and equipment closure and capital
1 buildings 1and2 Vehicles(5) asset advances Total
US$000 US$000 US$000 US$000 US$000 4 US$000 US$000
============= ============ ============ ============ =========== ======== ============ =========
Year ended 31
December
2021
Cost
============= ============ ============ ============ =========== ======== ============ =========
At 1 January
2021 1,514,704 530,784 612,620 10,654 107,740 33,320 2,809,822
============== ============ ============ ============ =========== ======== ============ =========
Additions 89,551 735 16,373 6,095 - 19,709 132,463
Change in
discount rate
(note 27(1)) - - - - (2,344) - (2,344)
Change in mine
closure
estimate
(note 27(1)) - - - - 986 - 986
Disposals - - (1,430) (5,654) - - (7,084)
Write-offs - - (7,529) (419) - - (7,948)
Demerger
Aclara (note
4) - (201) (432) - - - (633)
Foreign
exchange
effect - (21) (158) - - - (179)
Transfers and
other
movements 3 1,064 24,235 15,632 1,321 - (41,188) 1,064
============== ============ ============ ============ =========== ======== ============ =========
At 31 December
2021 1,605,319 555,532 635,076 11,997 106,382 11,841 2,926,147
============== ============ ============ ============ =========== ======== ============ =========
Accumulated
depreciation
and
impairment
============= ============ ============ ============ =========== ======== ============ =========
At 1 January
2021 1,188,404 352,088 396,155 8,754 75,919 839 2,022,159
============== ============ ============ ============ =========== ======== ============ =========
Depreciation
for the
year 95,308 24,188 29,080 2,593 4,381 - 155,550
Disposals - - (1,392) (5,515) - - (6,907)
Write-offs - - (6,676) (409) - - (7,085)
Demerger
Aclara (note
4) - - (126) - - - (126)
Foreign
exchange
effect - - (126) - - - (126)
Impairment 16,643 1,506 4,575 1,201 601 - 24,526
Transfers and
other
movements 3 37 (70) (423) 89 - 404 37
============== ============ ============ ============ =========== ======== ============ =========
At 31 December
2021 1,300,392 377,712 421,067 6,713 80,901 1,243 2,188,028
============== ============ ============ ============ =========== ======== ============ =========
Net book
amount at 31
December 2021 304,927 177,820 214,009 5,284 25,481 10,598 738,119
============== ============ ============ ============ =========== ======== ============ =========
1 Within mining properties and development costs and plant and
equipment there are US$28,947,000 and US$6,742,000 related to the
Crespo CGU that is not currently being depreciated as the unit is
not operating pending the feasibility of the project and
considering that the depreciation method is units of
production.
2 Within plant and equipment, costs of US$391,152,000 are
subject to depreciation on a unit of production basis in line with
accounting policy for which the accumulated depreciation is
US$248,187,000 and depreciation charge for the year is
US$15,377,000.
3 Transfers and other movements include US$1,027,000 that was
transferred from evaluation and exploration assets (note 17).
4 There were borrowing costs capitalised in property, plant and equipment amounting to US$37,000.
5 Vehicles include US$3,258,000 of right of use assets.
Mining
properties
and Plant Construction
development Land and Mine in progress
costs and equipment closure and capital
1 buildings 1and2 Vehicles(5) asset advances Total
US$000 US$000 US$000 US$000 US$000 4 US$000 US$000
============= ============ ============ ============ =========== ======== ============ =========
Year ended 31
December
2020
Cost
============= ============ ============ ============ =========== ======== ============ =========
At 1 January
2020 1,449,374 529,081 610,955 11,748 99,696 15,196 2,716,050
============== ============ ============ ============ =========== ======== ============ =========
Additions 62,442 118 6,431 - - 25,646 94,637
Initial
recognition - - - - 235 - 235
Change in
discount rate
(note 28(1)) - - - - 5,385 - 5,385
Change in mine
closure
estimate
(note 28(1)) - - - - 2,424 - 2,424
Disposals - (132) (1,870) (31) - - (2,033)
Write-offs - - (8,613) (1,127) - - (9,740)
Transfers and
other
movements 3 2,888 1,717 5,717 64 - (7,522) 2,864
============== ============ ============ ============ =========== ======== ============ =========
At 31 December
2020 1,514,704 530,784 612,620 10,654 107,740 33,320 2,809,822
============== ============ ============ ============ =========== ======== ============ =========
Accumulated
depreciation
and
impairment
============= ============ ============ ============ =========== ======== ============ =========
At 1 January
2020 1,119,462 334,065 384,155 7,310 74,834 947 1,920,773
============== ============ ============ ============ =========== ======== ============ =========
Depreciation
for the
year 72,067 19,030 22,700 2,618 2,454 - 118,869
Disposals - (17) (1,867) (28) - - (1,912)
Write-offs - - (6,539) (1,123) - - (7,662)
Reversal of
impairment (3,831) (1,101) (1,589) - (1,369) - (7,890)
Transfers and
other
movements 3 706 111 (705) (23) - (108) (19)
============== ============ ============ ============ =========== ======== ============ =========
At 31 December
2020 1,188,404 352,088 396,155 8,754 75,919 839 2,022,159
============== ============ ============ ============ =========== ======== ============ =========
Net book
amount at 31
December 2020 326,300 178,696 216,465 1,900 31,821 32,481 787,663
============== ============ ============ ============ =========== ======== ============ =========
1 Within mining properties and development costs and plant and
equipment there are US$28,489,000 and US$6,718,000 related to the
Crespo CGU that is not currently being depreciated as the unit is
not operating pending the feasibility of the project.
2 Within plant and equipment, costs of US$381,456,000 are
subject to depreciation on a unit of production basis in line with
accounting policy for which the accumulated depreciation is
US$230,709,000 and depreciation charge for the year is
US$10,289,000.
3 Transfers and other movements include US$2,828,000 that was
transferred from evaluation and exploration assets (note 17).
4 There were borrowing costs capitalised in property, plant and equipment amounting to US$32,000.
5 Vehicles include US$410,00 of right of use assets.
2021
As at 31 December 2021, management determined that there was a
trigger of impairment in the Pallancata mine unit due to lower
grades production and the need of an increase of capital
expenditure to access new low grade areas and extend the life of
mine by one year to 2023.
The impairment test performed over the Pallancata CGU resulted
in an impairment charge recognised as at 31 December 2021 amounting
to US$24,846,000 (US$24,526,000 in property, plant and equipment,
and US$320,000 in evaluation and exploration assets).
No indicators of impairment or reversal of impairment were
identified in the other CGUs, which includes other exploration
projects.
The recoverable value of the Pallancata CGUs was determined
using a fair value less costs of disposal (FVLCD) methodology.
FVLCD was determined using a combination of level 2 and level 3
inputs, which result in fair value measurements categorised in its
entirety as level 3 in the fair value hierarchy, to construct a
discounted cash flow model to estimate the amount that would be
paid by a willing third party in an arm's length transaction.
The key assumptions on which management has based its
determination of FVLCD and the associated recoverable values
calculated are gold and silver prices, future capital requirements,
production costs, reserves and resources volumes (reflected in the
production volume), and the discount rate.
Real prices US$ per oz. 2022 2023
========================= ====== ======
Gold 1,764 1,669
Silver 23.5 22.3
========================== ====== ======
Pallancata
========================== ===========
Discount rate (post tax) 3.3%
============================ ===========
The period of 2 years were used to prepare the cash flow
projections of the Pallancata mine unit which is in line with their
life of mine.
31 December 2021 (US$000) Pallancata
==================================================== ===========
Current carrying value of CGU, net of deferred tax 3,241
====================================================== ===========
Sensitivity analysis
As the Pallancata CGU was impaired at 31 December 2021, a
negative change in any of the key assumptions would not have an
impact on the impairment charge recognised. Given the short time
left in the life of this mine, management also believes that no
reasonably possible change in any of the key assumptions would
decrease the impairment charge recognised, other than a positive
change in the gold and silver prices.
An increase of 10% in the gold and silver prices would decrease
the impairment charge recorded by US$5.6 million.
2020
In 2020, management determined that there was a trigger of
impairment in the San Jose mine unit due to the increase of the
discount rate from 13.5% to 15.9%, mainly explained by the rise in
country risk premium in Argentina. In addition, the increase in the
short and medium analysis consensus prices of gold and silver in
the year represented 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 amounted
to US$8,303,000 (US$7,890,000 in property, plant and equipment,
US$100,000 in evaluation and exploration assets and US$313,000 in
intangibles). The reversal of impairment was mainly driven by an
increase in the analysis consensus prices of silver and gold which
was partially offset by the impact of the increase in the discount
rate.
The result of the impairment test performed over the Pallancata
CGU showed that the recoverable value of Pallancata was supported
by the carrying value, and neither an impairment nor impairment
reversal was recognised at 31 December 2020.
No indicators of impairment or reversal of impairment were
identified in the other CGUs, which includes other exploration
projects.
The recoverable values of the San Jose and Pallancata CGUs were
determined using a fair value less costs of disposal (FVLCD)
methodology.
The key assumptions on which management has based its
determination of FVLCD and the associated recoverable values
calculated are gold and silver prices, future capital requirements,
production costs, reserves and resources volumes (reflected in the
production volume), and the discount rate.
Real prices US$ 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
========================== ====== ====== ====== ====== ==========
San Jose Pallancata
========================== ========= ===========
Discount rate (post tax) 5.9% 4.1%
=========================== ========= ===========
The period of 6 and 2 years were used to prepare the cash flow
projections of San Jose mine unit and the Pallancata mine unit
respectively which were 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.
Sensitivity analysis
Other than as disclosed below, management believes that no
reasonably possible change in any of the key assumptions above
would cause the carrying value of any of its cash generating units
to exceed its recoverable amount.
A change in any of the key assumptions would have the following
impact:
US$000
======================
San Jose Pallancata
======================================= ========= ===========
Gold and silver prices (decrease by
10%) (61,800) (12,200)
Gold and silver prices (increase by
5%) 7,700(1) 9,750(1)
Production costs (increase by 10%) (32,800) (4,700)
Production costs (decrease by 10%) 7,700(1) 4,700
Production volume (decrease by 10%) (11,800) -
Production volume (increase by 10%) 7,700(1) -
Post tax discount rate (increase by (8,200) -
3%)(2)
Post tax discount rate (decrease by 7,700(1) -
3%)(2)
Capital expenditure (increase by 10%) (10,300) -
Capital expenditure (decrease by 10%) 7,700(1) -
========================================= ========= ===========
1 This represents the maximum impairment loss that could be
reversed, as it represents the carrying amount that would have been
determined, net of depreciation or amortisation, if no impairment
loss had been recognised.
2 Management believed that a 3% change was a reasonably possible
change in the post-tax discount rate in Argentina. However, changes
in the perception of Argentina arising from political, social and
financial disruption may give rise to significant movement in the
discount rate used in the assessment of the San Jose CGU.
Management has also determined that the Group's CGUs are
sensitive to future stoppage of operations as a result of Covid-19.
In the absence of any changes to the current gold and silver prices
projections or any of the other key assumptions, we would expect
the estimated recoverable amount of our CGUs related to the San
Jose and Pallancata mine units could be reduced by US$8,900,000 and
US$3,700,000 respectively, per month of stoppage.
17 Evaluation and exploration assets
Aclara (formerly
Azuca Crespo Biolantanidos) Volcan Others Total
US$000 US$000 US$000 US$000 US$000 US$000
=========================== ======= ======= ================ ======== ======= ========
Cost
Balance at 1 January
2020 82,713 27,242 60,507 95,452 21,153 287,067
============================ ======= ======= ================ ======== ======= ========
Additions 551 1,684 8,297 1,068 1,687 13,287
Transfers to property
plant and equipment (note
16) - - - - (2,857) (2,857)
============================ ======= ======= ================ ======== ======= ========
Balance at 31 December
2020 83,264 28,926 68,804 96,520 19,983 297,497
============================ ======= ======= ================ ======== ======= ========
Additions 580 2,421 11,349 953 6,095 21,398
Demerger (note 4) - - (70,311) - - (70,433)
Disposals - - (122) - - (122)
Foreign exchange effect - - (9,720) (16,222) - (25,942)
Transfers to property
plant and equipment (note
16) - - - - (1,064) (1,064)
============================ ======= ======= ================ ======== ======= ========
Balance at 31 December
2021 83,844 31,347 - 81,251 25,014 221,456
============================ ======= ======= ================ ======== ======= ========
Accumulated impairment
Balance at 1 January
2020 45,876 9,878 - 44,381 5,370 105,505
============================ ======= ======= ================ ======== ======= ========
Impairment reversal - - - - (100) (100)
Transfers to property,
plant and equipment (note
16) - - - - (29) (29)
============================ ======= ======= ================ ======== ======= ========
Balance at 31 December
2020 45,876 9,878 - 44,381 5,241 105,376
============================ ======= ======= ================ ======== ======= ========
Impairment - - - - 320 320
Foreign exchange effect - - - (7,507) - (7,507)
Transfers to property,
plant and equipment (note
16) - (37) (37)
============================ ======= ======= ================ ======== ======= ========
Balance at 31 December
2021 45,876 9,878 - 36,874 5,524 98,152
============================ ======= ======= ================ ======== ======= ========
Net book value as at
31 December 2020 37,388 19,048 68,804 52,139 14,742 192,121
============================ ======= ======= ================ ======== ======= ========
Net book value as at
31 December 2021 37,968 21,469 - 44,377 20,517 123,304
============================ ======= ======= ================ ======== ======= ========
At 31 December 2021, the Group has recorded an impairment with
respect to evaluation and exploration assets of the Pallancata mine
unit of US$320,000 (2020: reversal of impairment with respect to
evaluation and exploration assets of the San Jose mine unit of
US$100,000). The calculation of the recoverable values is detailed
in note 16.
There were no borrowing costs capitalised in evaluation and
exploration assets.
18 Intangible assets
Transmission Water Software Legal
line1 permits2 licences rights3 Total
US$000 US$000 US$000 US$000 US$000
======================================== ============ ========== ========= ======== =======
Cost
Balance at 1 January 2020 22,157 26,583 1,899 8,580 59,219
========================================= ============ ========== ========= ======== =======
Transfer - - 7 - 7
Balance at 31 December 2020 22,157 26,583 1,906 8,580 59,226
========================================= ============ ========== ========= ======== =======
Foreign exchange effect - (4,499) - - (4,499)
Disposals - - (17) - (17)
Balance at 31 December 2021 22,157 22,084 1,889 8,580 54,710
========================================= ============ ========== ========= ======== =======
Accumulated amortisation and impairment
Balance at 1 January 2020 16,486 12,686 1,873 5,815 36,860
========================================= ============ ========== ========= ======== =======
Amortisation for the year4 535 - 17 563 1,115
Reversal of impairment (313) - - - (313)
Balance at 31 December 2020 16,708 12,686 1,890 6,378 37,662
========================================= ============ ========== ========= ======== =======
Amortisation for the year4 843 - 8 267 1,118
Disposals - - (17) - (17)
Foreign exchange effect - (2,147) - - (2,147)
========================================= ============ ========== ========= ======== =======
Balance at 31 December 2021 17,551 10,539 1,881 6,645 36,616
========================================= ============ ========== ========= ======== =======
Net book value as at 31 December
2020 5,449 13,897 16 2,202 21,564
========================================= ============ ========== ========= ======== =======
Net book value as at 31 December
2021 4,606 11,545 8 1,935 18,094
========================================= ============ ========== ========= ======== =======
1 The transmission line is amortised using the units of
production method. At 31 December 2021 the remaining amortisation
period is approximately 7 years (2020: 7 years) in line with the
life of the mine. At 31 December 2020, the Group recorded a
reversal of impairment with respect to the transmission line of the
San Jose mine unit of US$313,000 (the calculation of the
recoverable values is detailed in note 16).
2 Corresponds to the acquisition of water permits of Andina
Minerals Group ("Andina"). These permits have an indefinite life
according to Chilean law. To determine the fair value less costs of
disposal of the Volcan cash-generating unit, which includes the
water permits held by the Group, the Group used the value-in-situ
methodology. This methodology applies a realisable 'enterprise
value' to unprocessed mineral resources which was US$7.15 per gold
equivalent ounce of resources at 31 December 2021 (2020: US$7.40).
The risk adjusted enterprise value figure has been determined using
a combination of level 2 (enterprise values and gold prices) and
level 3 inputs (unprocessed mineral resources and risk factor)
which result in a fair value measurement categorised in its
entirety as level 3 in the fair value hierarchy, to estimate the
amount that would be paid by a willing third party in an arm's
length transaction, taking into account the water restrictions
imposed by the Chilean government.
3 Legal rights correspond to expenditures required to give the
Group the right to use a property for the surface exploration work,
development and production. At 31 December 2021 the remaining
amortisation period is from 1.5 to 11.5 years (2020: 2.5 to 12.5
years).
4 The amortisation for the period is included in cost of sales
and administrative expenses in the income statement.
The carrying amount of the Volcan CGU, which includes the water
permits, is reviewed annually to determine whether it is in excess
of its recoverable amount. No impairments were recognised in 2021
and 2020. The estimated recoverable amount is not materially
different than its carrying value.
Key assumptions
2021 2020
================================================== ===== =====
Risk adjusted value per in-situ (gold equivalent
ounce) US$ 7.15 7.40
=================================================== ===== =====
US$000 2021 2020
=================================== ======= =======
Current carrying value Volcan CGU 55,922 66,036
==================================== ======= =======
The estimated recoverable amount is not materially different
than its carrying value.
Sensitivity analysis
Other than as disclosed below, management believes that no
reasonably possible change in any of the key assumptions above
would cause the carrying value exceed its recoverable amount.
A change in the value in situ assumption could cause an
impairment loss or reversal of impairment to be recognised as
follows:
Approximate (impairment)/reversal of impairment 2021 2020
resulting from the following changes (US$000)
================================================= ========= =========
Value per in-situ ounce (20% decrease) (13,661) (14,100)
Value per in-situ ounce (20% increase) 13,661 14,100
Risk factor (increase by 5%) (5,254) (5,400)
Risk factor (decrease by 5%) 5,254 5,400
================================================== ========= =========
19 Investment in an associate
Following the demerger of Aclara (refer to note 4), the Group
retained a 20.0% interest in Aclara Resources Inc., a listed
company involved in the exploration for rare-earth metals in Chile.
The company was incorporated under the laws of British Columbia,
Canada, where the principal executive offices are located. The
operations are conducted through one wholly-owned subsidiary named
REE UNO SpA, located in Chile.
According to IFRS 10, when a parent loses control of a
subsidiary, it must recognise any investment retained in the former
subsidiary at its fair value at the date when control is lost. Any
gain or loss on the transaction will be recorded in profit and
loss. This fair value will be accounted for the cost on initial
recognition of an investment in an associate. The fair value
recognised was US$23,742,000 (refer to note 4).
The Group's interest in Aclara is accounted for using the equity
method in the consolidated financial statements.
In addition, the Group purchased 14,870,397 shares for a total
consideration of US$19,995,000 to maintain the 20% interests after
the IPO of Aclara.
At 31 December 2021, the Group holds 32,526,101 shares in
Aclara, representing 20% interest in the Company. From 10 December
2021 Aclara is listed company listed on the Toronto Stock Exchange
and the fair value of the shares amounted to US$37,080,000 as at 31
December 2021.
The following table summarises the financial information of the
Group's investment in Aclara Resources Inc.:
Year ended
31 December
2021
US$000
========================================================
Current assets 91,320
Non-current assets 68,126
Current liabilities 3,185
Equity 156,261
Group's share in equity (20%) 31,252
Fair value adjustment allocated to the evaluation
and exploration assets on initial recognition 12,307
Group's carrying amount of the investment 20% 43,559
Summarised consolidated statement of profit and loss
Revenue -
Administrative expenses (324)
Exploration expenses (510)
Finance cost (17)
Foreign exchange effect (479)
Loss from continuing operations for the year (1,330)
Loss from continuing operation from incorporation
to 31 December 2021 (847)
Group's share of loss for the period (169)
Other comprehensive loss that may be reclassified
to profit or loss in
subsequent periods, net of tax
Exchange differences on translating foreign operations (4,526)
Total comprehensive loss for the year (4,526)
Total comprehensive loss from incorporation to 31
December 2021 (46)
Group's share of comprehensive loss for the period (9)
========================================================= =============
At the moment of the acquisition of the associate, the loss of
the period was US$483,000 and the comprehensive loss for the period
was US$4,480,000.
The carrying amount of the investment recognised the changes in
the Group's share of net assets of the associate since the
acquisition date. The balance as at 31 December 2021 is
US$43,559,000.
No dividends were received from the associate during 2021.
20 Financial assets at fair value through OCI
Year ended
31 December
================
2021 2020
US$000 US$000
================================== ======= =======
Beginning balance 402 6,159
=================================== ======= =======
Acquisitions1 7 -
Fair value change recorded in OCI 261 1,765
Disposals2 (9) (7,522)
=================================== ======= =======
Ending balance 661 402
=================================== ======= =======
1 Corresponds to the purchase of 47,625 shares of Austral Gold (US$7,000).
2 Corresponds to the sale of 51,857 shares of Revelo Resources
Corp. with a fair value at the date of sale of US$9,000 generating
a loss on disposal of US$18,000 that was recycled to retained
earnings (2020: As the investments were not considered to be
strategic, the Group sold 452,200 shares of ASC, 7,399,331 shares
of Skeena Resources Limited and 7,000,026 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$928,000, generating a gain on
disposal of US$658,000, US$1,091,000 and US$239,000
respectively).
The Group made the election at initial recognition to measure
the below equity investments at fair value through OCI as they are
not held for trading. The fair value at 31 December 2021 and 31
December 2020 is as follows:
US$000
==========
2021 2020
======================================================== ==== ====
Listed equity investments:
Power Group Projects Corp (formerly Cobalt Power Group) 12 27
Revelo Resources Corp. - 8
Austral Gold 3 -
Skeena Resources Limited 312 325
Empire Petroleum Corp. 334 42
========================================================= ==== ====
Total listed equity investments 661 402
========================================================= ==== ====
Total non-listed equity investments - -
======================================================== ==== ====
Total 661 402
========================================================= ==== ====
Fair value of the listed shares is determined by reference to
published price quotations in an active market and they are
categorised as level 1. The fair value of non-listed equity
investments is determined based on financial information available
of the companies and they are categorised as level 3.
21 Financial assets at fair value through profit and loss
Year ended 31
December
================
2021 2020
US$000 US$000
==================================================== ======= =======
Beginning balance 5,407 -
===================================================== ======= =======
Acquisitions1 3,308 4,301
Fair value change recorded in profit and loss (note
13(3)) (834) 1,106
Disposals2 (4,726) -
===================================================== ======= =======
Ending balance 3,155 5,407
===================================================== ======= =======
1 Corresponds to 25,001,540 shares of C3 Metals Inc. received in
payment of the sale of the Jasperoide property in Peru (2020:
corresponds to 1,687,401 shares of AGSC received as a payment for
the balance receivable for the sale of the San Felipe project
recognised as an asset held for sale as at 31 December 2019).
2 During 2021 the Group sold 1,687,401 shares of 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.
The below equity investments are classified at fair value
through profit and loss as they are held for trading.
The fair value at 31 December 2021 and 31 December 2020 is as
follows:
US$000
============
2021 2020
===================================== ===== =====
Listed equity investments:
Americas Gold and Silver Corporation - 5,407
C3 Metals Inc. 3,155 -
====================================== ===== =====
3,155 5,407
===== =====
Fair value of the listed shares is determined by reference to
published price quotations in an active market and they are
categorised as level 1.
22 Trade and other receivables
As at 31 December
==========================================
2021 2020
================================================== ==================== ====================
Non-current Current Non-current Current
US$000 US$000 US$000 US$000
================================================== =========== ======= =========== =======
Trade receivables - 27,773 - 45,353
Advances to suppliers - 5,119 - 4,045
Duties recoverable from exports of Minera
Santa Cruz1 184 - 846 -
Receivables from related parties (note
30 (a) ) - 224 - 388
Loans to employees 531 257 603 101
Interest receivable - 95 - 126
Receivable from Kaupthing, Singer and Friedlander
Bank - 200 - 201
Other2 1,540 9,013 1,519 10,298
Provision for impairment3 - (2,421) - (7,111)
=================================================== =========== ======= =========== =======
Assets classified as receivables 2,255 40,260 2,968 53,401
=================================================== =========== ======= =========== =======
Prepaid expenses 174 6,047 212 4,606
Value Added Tax (VAT)4 41 23,442 2,215 20,189
=================================================== =========== ======= =========== =======
Total 2,470 69,749 5,395 78,196
=================================================== =========== ======= =========== =======
The fair values of trade and other receivables approximate their
book value.
1 Relates to export benefits through the Patagonian Port and
silver refunds in Minera Santa Cruz, discounted over 18 and 24
months (2020: 18 and 24 months) at a rate of 17.55% (2020: 14.03%)
for dollars denominated amounts and 40.17% (2020: 40.34%) for
Argentinian pesos. The loss on the unwinding of the discount is
recognised within finance expense (2020: finance income).
2 Mainly corresponds to account receivables from contractors for
the sale of supplies of US$2,164 ,000 (2020: US$1,642,000) ,
receivables from government agencies of US$nil (2020:
US$4,476,000), loan to third parties of US$790,000 (2020:
US$512,000), claim receivable of US$1,165,000 (2020: US$1,269,000),
receivable from the sale of VAT in San José of US$nil (2020:
US$1,222,000l) and other tax claims of US$2,150,000 (2020:
US$45,000).
3 Includes the provision for impairment of trade receivable from
customers in Peru of US$1,277,000 (2020: US$1,403,000), the
impairment of deposits in Kaupthing, Singer and Friedlander of
US$197,000 (2020: US$201,000), the impairment of the account
receivables from government agencies of US$nil (2020:
US$4,476,000), the impairment of account receivable from third
parties of US$692,000 (2020: US$656,000) and other receivables of
US$343,000 (2020: US$375,000).
4 Primarily relates to US$17,053,000 (2020: US$9,747,000) of VAT
receivable related to the San Jose project that will be recovered
through future sales of gold and silver and also through the sale
of these credits to third-parties by Minera Santa Cruz. It also
includes the VAT of Minera Ares of US$5,570,000 (2020:
US$9,154,000), REE UNO SpA of US$nil (2020; US$2,166,000) and
Empresa de Transmisión Aymaraes S.A.C. of US$nil (2020:
US$590,000). The VAT is valued at its recoverable amount.
Movements in the provision for impairment of receivables:
Individually
impaired
US$000
======================================= ============
At 1 January 2020 6,766
======================================== ============
Provided for during the year (note 12) 996
Foreign exchange effect (651)
======================================== ============
At 31 December 2020 7,111
======================================== ============
Write - off (4,476)
Foreign exchange effect (214)
======================================== ============
At 31 December 2021 2,421
======================================== ============
As at 31 December 2021 and 2020, none of the financial assets
classified as receivables (net of impairment) were past due.
23 Inventories
As at 31 December
===================
2021 2020
US$000 US$000
======================================= ========= ========
Finished goods valued at cost 220 -
Products in process valued at cost 3,547 4,087
Products in process accrual 7,534 4,413
Supplies and spare parts 41,021 38,778
======================================== ========= ========
52,322 47,278
========= ========
Provision for obsolescence of supplies (3,138) (4,916)
======================================== ========= ========
Total 49,184 42,362
======================================== ========= ========
Finished goods include ounces of gold and silver, dore and
concentrate. Products in process include stockpile (2020:
stockpile).
The Group either sells dore bars as a finished product or if it
is commercially advantageous to do so, delivers the bars for
refining into gold and silver ounces which are then sold. In the
latter scenario, the dore bars are classified as products in
process. At 31 December 2021 and 2020 the Group had no dore on hand
included in products in process.
Concentrate is sold to smelters, but in addition could be used
as a product in process to produce dore.
As part of the Group's short-term financing policies, it
acquires pre-shipment loans which are guaranteed by the sales
contracts. The Group has contracts as at 31 December 2021 of US$nil
(2020: US$10,628,000) (refer to note 26).
The amount of expense recognised in profit and loss related to
the consumption of inventory of supplies, spare parts and raw
materials is US$109,191,000 (2020: US$76,739,000).
Movements in the provision for obsolescence comprise an increase
in the provision of US$559,000 (2020: US$nil) and the reversal of
US$2,338,000 related to supplies and spare parts, that had been
provided for (2020: US$1,921,000).
24 Cash and cash equivalents
As at 31 December
===================
2021 2020
US$000 US$000
======================================================= ========= ========
Cash at bank 1,065 1,198
Current demand deposit accounts1 86,058 79,834
Time deposits2 299,666 150,851
======================================================== ========= ========
Cash and cash equivalents considered for the statement
of cash flows 386,789 231,883
======================================================== ========= ========
The fair value of cash and cash equivalents approximates their
book value. The Group does not have undrawn borrowing facilities
available in the future for operating activities or capital
commitments.
1 Relates to bank accounts which are freely available and bear interest.
2 These deposits have an average maturity of 18 days (2020: average of 45 days).
25 Trade and other payables
As at 31 December
==========================================
2021 2020
==================== ====================
Non-current Current Non-current Current
US$000 US$000 US$000 US$000
========================================== =========== ======= =========== =======
Trade payables1 - 78,695 - 72,066
Salaries and wages payable2 - 30,850 - 26,580
Dividends payable - 31 - 34
Taxes and contributions 1 9,607 3 5,075
Guarantee deposits - 5,773 - 5,962
Mining royalties (note 31) - 1,505 - 315
Accounts payable to related parties (note
30 (a) ) - 284 - 266
Lease liabilities 2,814 1,597 - 617
Other - 5,140 202 3,500
=========================================== =========== ======= =========== =======
Total 2,815 133,482 205 114,415
=========================================== =========== ======= =========== =======
The fair value of trade and other payables approximate their
book values.
1 Trade payables relate mainly to the acquisition of materials,
supplies and contractors' services. These payables do not accrue
interest and no guarantees have been granted.
2 Salaries and wages payable relates to remuneration payable. At
31 December 2021, there were Board members remuneration payable of
US$170,000 (2020: US$151,000) and no long-term incentive plan
payable (2020: US$nil).
26 Borrowings
As at 31 December
================================================================
2021 2020
=============================== ===============================
Effective Effective
interest Non-current Current interest Non-current Current
rate US$000 US$000 rate US$000 US$000
======================================================== ========= =========== ======= ========= =========== =======
Secured bank loans (a)
28% to
* Pre-shipment loans in Minera Santa Cruz (note 23) - - 35% - 10,628
* Bank loans 2.17% 300,000 499 1.5% 199,554 150
========================================================= ========= =========== ======= ========= =========== =======
Total 300,000 499 199,554 10,778
========================================================= ========= =========== ======= ========= =========== =======
(a) Secured bank loans:
Medium-term bank loans:
In December 2019, a five-year credit agreement was signed
between Minera Ares and Scotiabank Peru S.A.A., The Bank of Nova
Scotia and BBVA Securities Inc, with Hochschild Mining plc as
guarantor. The US$200,000,000 medium term loan was payable on equal
quarterly instalments from the second anniversary of the loan with
an interest rate of Libor three months plus 1.15% payable quarterly
until maturity on 13 December 2024. In September 2021, the Group
negotiated with the same counterpart a US $ 200,000,0000 loan to
replace the original loan, plus an additional US $ 100,000,000
optional loan. US $ 200,000,000 was withdrawn on 21 September 2021,
and the optional US $ 100,000,000 loan was withdrawn on 1 December
2021. The maturity was extended until September 2026, and the
interest rate increased to 3-month USD Libor plus a spread of
1.65%. A structuring fee of US$900,000 was paid to the lender and
additional US$193,000 was incurred as transaction costs. In
addition, a commitment fee of US$120,000 was paid for the period
that the optional US $100,000,000 loan remained undrawn. This was
considered a substantial modification to the terms of the loan, and
consequently, it was treated as an extinguishment of the loan which
resulted in the derecognition of the existing liability and
recognition of a new liability. The associated costs and fees
incurred have been recognised as part of the loss on the
extinguishment.
The carrying value including accrued interests payable as at 31
December 2021 is US$300,499,000. The maturity of non-current
borrowings is as follows:
As at 31 December
===================
2021 2020
US$000 US$000
====================== ========= ========
Between 1 and 2 years 25,000 66,666
Between 2 and 5 years 275,000 132,888
Over 5 years - -
====================== ========= ========
Total 300,000 199,554
======================= ========= ========
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 31 December as at 31 December
==================== ====================
2021 2020 2021 2020
US$000 US$000 US$000 US$000
=================== ========= ========= ========= =========
Secured bank loans 300,499 199,704 296,122 199,110
==================== ========= ========= ========= =========
Total 300,499 199,704 296,122 199,110
==================== ========= ========= ========= =========
The movement in borrowings during the year is as follows:
As at As at
1 January Additions Repayments Reclassifications 31 December
2021 US$000 US$000 US$000 US$000 2021 US$000
================= ============ ========= ========== ================= ============
Current
Bank loans 10,101 5,954 (14,793) (1,262) -
Accrued interest 677 5,951 (5,720) (409) 499
================== ============ ========= ========== ================= ============
10,778 11,905 (20,513) (1,671) 499
============ ========= ========== ================= ============
Non-current
Bank loans 199,554 100,000 - 446 300,000
================== ============ ========= ========== ================= ============
199,554 100,000 - 446 300,000
============ ========= ========== ================= ============
27 Provisions
Long
Provision Term Workers
for mine Incentive profit
closure1 Plan2 sharing Other Total
US$000 US$000 US$000 US$000 US$000
========= ========== ======== ======= ========
At 1 January 2020 106,671 818 6,063 2,019 115,571
========================= ========= ========== ======== ======= ========
Additions 235 308 4,986 41 5,570
Accretion (note 13) (387) - - - (387)
Change in discount rate 7,129 - - - 7,129
Change in estimates 16,736 - - - 16,736
Foreign exchange effect - - (11) (435) (446)
Payments (3,987) - (5,649) - (9,636)
========================= ========= ========== ======== ======= ========
At 31 December 2020 126,397 1,126 5,389 1,625 134,537
========================= ========= ========== ======== ======= ========
Less: current portion (19,390) - (5,389) (725) (25,504)
========================= ========= ========== ======== ======= ========
Non-current portion 107,007 1,126 - 900 109,033
========================= ========= ========== ======== ======= ========
At 1 January 2021 126,397 1,126 5,389 1,625 134,537
========================= ========= ========== ======== ======= ========
Additions - (659) 11,018 2,164 12,523
Accretion (note 13) (2,038) - - - (2,038)
Change in discount rate (1,627) - - - (1,627)
Change in estimates 22,364 - - - 22,364
Foreign exchange effect - - (525) (290) (815)
Utilisation (1,978) - - - (1,978)
Payments (9,083) - (4,990) - (14,073)
========================= ========= ========== ======== ======= ========
At 31 December 2021 134,035 467 10,892 3,499 148,893
========================= ========= ========== ======== ======= ========
Less: current portion (19,670) - (10,892) (1,496) (32,058)
========================= ========= ========== ======== ======= ========
Non-current portion 114,365 467 - 2,003 116,835
========================= ========= ========== ======== ======= ========
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 31 December 2021 and
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 discount rate used was -2.09% (2020:-1.58%).
Expected cash flows will be over a period from one to 17 years
(2020: over a period from one to 17 years).
Based on the internal and external reviews of mine
rehabilitation estimates, the provision for mine closure increased
by US$22,364,000 mainly due to increase in the Selene mine unit of
US$14,032,000 and Sipan mine unit of US$3,103,000 (2020: increase
by US$16,736,000 mainly due to increase in the Ares mine unit of
US$14,070,000 and San Jose mine unit of US$1,944,000).
A net charge of US$22,095,000 related to changes in estimates
(US$21,378,000) and discount rates (US$717,000) for mines already
closed were recognised directly in the income statement (2020: net
charge of US$16,056,000 related to changes in estimates
(US$14,312,000) and discount rates (US$1,744,000) for mines already
closed were recognised directly in the income statement).
Utilisation for the year corresponds to depreciation of certain
assets which are used as part of mine rehabilitation. This has been
recognised against the mine rehabilitation provision.
The increase in the accretion from 2020 (US$387,000) to 2021
(US$2,038,000) is explained because the Group is closer to the
budget execution periods and the discount rates used for 2021 were
more negatives than those of 2021, hence the increase.
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 13,404
Discount rate (increase by 0.5%) (decrease of provision) (7,426)
=========================================================== ========
An element of mine closure planning can be water management
which relates to the treatment of contact water. The cost of this
water processing could continue for a number of years after closure
activities have been completed and is therefore, potentially,
exposed to long-term climate change. Mine planning for Hochschild's
operating assets takes into account mine-closure activities. In the
case of the now-closed Sipan mine, due to the specific
characteristics of the closed mine components, contact water
treatment is ongoing. According to our most recent approved Mine
Closure Plan (July 2021), Sipan will be the subject of ongoing
treatment until 2025 or until baseline water quality conditions
have been met. As at the date of approval of these financial
statements, the impact of climate change on Sipan's mine closure
planning is not expected to be material.
2 Corresponds to the provision related to awards granted under
the Long-Term Incentive Plan ('LTIP') to designated personnel of
the Group. Includes the following benefits: (i) 2020 awards,
granted in February 2020, payable in February 2023, as 50% in cash,
(ii) 2019 awards, granted in July 2019, payable in February 2022,
as 50% in cash. Only employees who remain in the Group's employment
on the vesting date will be entitled to vested awards, subject to
exceptions approved by the Remuneration Committee of the Board.
There are two parts to the performance conditions attached to LTIP
awards: 70% is subject to the Company's TSR ranking relative to a
tailored peer group of mining companies, and 30% is subject to the
Company's TSR ranking relative to the constituents of the FTSE 350
mining index. The liability for the LTIP paid in cash is measured,
initially and at the end of each reporting period until settled, at
the fair value of the awards, by applying the Monte Carlo pricing
model, taking into account the terms and conditions on which the
awards were granted, and the extent to which the employees have
rendered services to date. The net decrease to the provision of
US$659,000 (2020: US$308,000 net increase) have been recorded as
administrative expenses -US$630,000 (2020: US$295,000) and
exploration expenses -US$29,000 (2020: US$13,000).
The following tables list the inputs to the Monte Carlo model
used for the LTIPs as at 31 December 2021 and 2020,
respectively:
LTIP 2019 LTIP 2020
======================= ============ ==========================
31 December 31 December 31 December
2020 2021 2020
For the period ended US$000 US$000 US$000
======================= ============ ============ ============
Dividend yield (%) 1.43 2.37 1.43
Expected volatility
(%) 3.39 3.70 3.39
Risk-free interest
rate (%) -0.12 0.02 -0.13
Expected life (years) 1 1 2
Weighted average share
price (pence GBP) 161.37 179.61 179.61
========================= ============ ============ ============
The expected volatility reflects the assumption that the
historical volatility over a period similar to the life of the
awards and is indicative of future trends, which may not
necessarily be the actual outcome. The outcome of the 2019 LTIP as
at 31 December 2021 was $nil.
28 Deferred income tax
The changes in the net deferred income tax assets/(liabilities)
are as follows:
As at 31 December
===================
2021 2020
US$000 US$000
================================== ========= ========
Beginning of the year (72,307) (61,476)
=================================== ========= ========
Income statement credit (note 14) (7,054) (12,575)
Equity charge (7,383) 1,744
=================================== ========= ========
End of the year (86,744) (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 movement in deferred income tax assets and liabilities
before offset during the year is as follows:
Differences Provisional
in cost Mine pricing
of PP&E development adjustment Others Total
US$000 US$000 US$000 US$000 US$000
================================= =========== ============ =========== ======= =======
Deferred income tax liabilities
At 1 January 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) 6,108 (67) (752) (495) 4,794
================================== =========== ============ =========== ======= =======
At 31 December 2021 45,629 84,885 (56) 3,152 133,610
================================== =========== ============ =========== ======= =======
Differences Provision
in cost for 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 - - - 1,744 1,744
================================== =========== ========= ============ ========= =======
At 31 December 2020 20,130 25,384 474 10,521 56,509
Income statement (charge)/credit (7,333) 5,082 (109) 100 (2,260)
================================== =========== ========= ============ ========= =======
Equity charge - - - (7,383) (7,383)
================================== =========== ========= ============ ========= =======
At 31 December 2021 12,797 30,466 365 3,238 46,866
================================== =========== ========= ============ ========= =======
1 Credit/(charge) in the year mainly related to silver forward
of US$7,383,000, (2020: interest rate swap of US$1,744,000),
statutory holiday provision of US$1,112,000 (2020: US$857,000), and
long term incentive plan of US$731,000 (2020: US$771,000).
The amounts after offset, as presented on the face of the
statement of financial position, are as follows:
As at 31 December
===================
2021 2020
US$000 US$000
================================ ========= ========
Deferred income tax assets 484 1,009
Deferred income tax liabilities (87,228) (73,316)
================================= ========= ========
Total (86,744) (72,307)
================================= ========= ========
Unrecognised tax losses expire in the following years:
As at 31 December
===================
2021 2020
US$000 US$000
======================== ========= ========
Expire after four years 167,273 171,527
========================= ========= ========
167,273 171,527
========= ========
Other unrecognised deferred income tax assets comprise (gross
amounts):
As at 31 December
===================
2021 2020
US$000 US$000
============================ ========= ========
Provision for mine closure1 7,887 9,212
============================= ========= ========
1 This relates to provision for mine closure expenditure which
is expected to be incurred in periods in which taxable profits are
not expected to be available to offset the expenditure.
Unrecognised deferred tax liability on retained earnings
At 31 December 2021 and 2020, there was no recognised deferred
tax liability for taxes that would be payable on the unremitted
earnings of certain of the Group's subsidiaries as the intention is
that these amounts are permanently reinvested.
29 Dividends
2021 2020
US$000 US$000
========================================================= ======= =======
Dividends paid and proposed during the year
Equity dividends on ordinary shares:
Final dividend for 2020 : 2.335 US cents per share (
2019: nil US cents per share) 12,002 -
Interim dividend for 2021 : 1.95 US cents per share
( 2020: 4.000 US cents per share) 10,020 20,556
========================================================== ======= =======
Total dividends paid in cash 22,022 20,556
========================================================== ======= =======
Dividends in specie paid with Aclara shares (note 4) 94,945
========================================================== ======= =======
Total dividends paid on ordinary shares 116,967 20,556
========================================================== ======= =======
Proposed dividends on ordinary shares:
Final dividend for 2021: 2.335 US cents per share (2020:
2.335 US cents per share) 12,000 12,002
========================================================== ======= =======
Dividends declared to non-controlling interests: 0.058
US$ per share ( 2020 : 0.002 US$ per share) 9,832 345
========================================================== ======= =======
Total dividends declared to non-controlling interests 9,832 345
========================================================== ======= =======
Dividends paid in 2021 to non-controlling interests amounted to
US$9,832,000 (2020: US$345,069).
In August 2021, the Board became aware of an issue concerning
technical compliance with the Companies Act 2006 in relation to the
2017 final dividend, the 2018 interim and final dividends, the 2019
interim dividend, and the 2020 interim and final dividends (the
"Relevant Dividends"). In particular, the Relevant Dividends were
paid to shareholders when the Company did not have adequate
distributable reserves.
Significant corrective transactions (namely, a capital reduction
and dividend distribution by the Company's wholly-owned subsidiary,
Hochschild Mining Holdings Limited) were implemented by the Company
in September 2021, shortly after discovery of the issue. Had these
internal corporate transactions been implemented prior to the
payment of the 2017 final dividend, adequate distributable reserves
would have been available to the Company.
As previously reported, the Board intends to put resolutions to
shareholders at a General Meeting to i) complete the rectification
of this past issue and ii) increase further, to the extent
practicable, the level of Distributable Reserves available to the
Company.
Dividends per share
The interim dividend paid in September 2021 was US$10,020,000
(1.954 US cents per share). A dividend in specie amounting to
US$94,945,000 was paid in December 2021 (refer to note 4). A
proposed dividend in respect of the year ending 31 December 2021 of
2.335 US cents per share, amounting to a total dividend of
US$12,000,000, is subject to approval at the Annual General Meeting
to be held on 26 May 2022 and is not recognised as a liability as
at 31 December 2021.
30 Related-party balances and transactions
(a) Related-party accounts receivable and payable
The Group had the following related-party balances and
transactions during the years ended 31 December 2021 and 2020. The
related parties are companies owned or controlled by the main
shareholder of the Parent company or associates.
Accounts receivable Accounts payable
as at 31 December as at 31 December
===================== ====================
2021 2020 2021 2020
US$000 US$000 US$000 US$000
=============================== ========== ========= ========= =========
Current related party balances
Cementos Pacasmayo S.A.A.1 217 387 152 146
Tecsup2 1 1 115 120
Universidad UTEC2 - - 5 -
REE UNO SpA(3) 6 - - -
Aclara Resources Inc(3) - - 12 -
================================ ========== ========= ========= =========
Total 224 388 284 266
================================ ========== ========= ========= =========
1 The account receivable relates to reimbursement of expenses
paid by the Group on behalf of Cementos Pacasmayo S.A.A, an entity
controlled by Eduardo Hochschild. The account payable relates to
the payment of rentals.
2 Peruvian not-for-profit educational institutions controlled by Eduardo Hochschild.
3 Associated companies of the Aclara Group (refer to notes 4 and 19).
As at 31 December 2021 and 2020, all accounts are, or were,
non-interest bearing.
No security has been granted or guarantees given by the Group in
respect of these related party balances.
Principal transactions between affiliates are as follows:
Year ended
================
2021 2020
US$000 US$000
============================================================= ======= =======
Expenses
Expense recognised for the rental paid to Cementos Pacasmayo
S.A.A. (403) (469)
Expense donations to Tecsup - (505)
Expense donations to Universidad UTEC - (875)
Expense technical services from Tecsup (292) (190)
============================================================== ======= =======
Transactions between the Group and these companies are at an
arm's length basis.
(b) Compensation of key management personnel of the Group
Year ended
31 December
================
Compensation of key management personnel (including 2021 2020
Directors) US$000 US$000
==================================================== ======= =======
Short-term employee benefits 7,509 7,330
Long Term Incentive Plans 776 808
===================================================== ======= =======
Total compensation paid to key management personnel 8,285 8,138
===================================================== ======= =======
This amount includes the remuneration paid to the Directors of
the Parent Company of the Group of US$3,967,000 (2020:
US$3,821,000).
( c) Related Party Transaction
Participation of Pelham Investment Corporation in the IPO of Aclara
As announced by the Company on 3rd December 2021, Pelham
Investment Corporation ("Pelham"), a company controlled by the
Chairman, Eduardo Hochschild, entered into a subscription agreement
with Aclara on 2 December 2021 pursuant to which Pelham agreed to
purchase, on a prospectus exempt basis in Canada, 22,791,399 Aclara
shares at a price of C$1.70 per share (the "Offering Price"). In
addition, Pelham subscribed for 9,855,660 Aclara shares at the
Offering Price as part of the IPO. These share acquisitions, which
are in addition to the Aclara shares acquired by Pelham as part of
the demerger dividend, constitute a smaller related party
transaction for the purposes of the UK Listing Rules. Accordingly,
as also announced, the Company obtained a written confirmation from
a sponsor that the terms of the smaller related party transaction
were fair and reasonable as far as the shareholders of the Company
are concerned.
31 Mining royalties
Peru
In accordance with Peruvian legislation, owners of mining
concessions must pay a mining royalty for the exploitation of
metallic and non--metallic resources. Mining royalties have been
calculated with rates ranging from 1% to 3% of the value of mineral
concentrate or equivalent sold, based on quoted market prices.
In October 2011 changes came into effect for mining companies,
with the following features:
a) Introduction of a Special Mining Tax ('SMT'), levied on
mining companies at the stage of exploiting mineral resources. The
additional tax is calculated by applying a progressive scale of
rates ranging from 2% to 8.4%, of the quarterly operating
profit.
b) Modification of the mining royalty calculation, which
consists of applying a progressive scale of rates ranging from 1%
to 12%, of the quarterly operating profit. The former royalty was
calculated on the basis of monthly sales value of mineral
concentrates.
The SMT and modified mining royalty are accounted for as an
income tax in accordance with IAS 12 "Income Taxes".
c) For companies that have mining projects benefiting from tax
stability regimes, mining royalties are calculated and recorded as
they were previously, applying an additional new special charge on
mining that is calculated using progressive scale rates, ranging
from 4% to 13.12% of quarterly operating profit.
As at 31 December 2021, the amount payable as under the new
mining royalty and the SMT amounted to US$1,341,000 (2020:
US$1,544,000) and US$882,000 (2020: US$1,492,000) respectively. The
new mining royalty and SMT are reported as 'Income tax payable' in
the Statement of Financial Position. The amount recorded in the
income statement was US$6,326,000 (2020: US$4,088,000) of new
mining royalty and US$5,916,000 (2020: US$3,119,000) of SMT, both
classified as income tax.
Argentina
In accordance with Argentinian legislation, Provinces (being the
legal owners of the mineral resources) are entitled to collect
royalties from mine operators. For San Jose, the mining royalty
applicable to dore and concentrate is 3% of the pit-head value. As
at 31 December 2021, the amount payable as mining royalties
amounted to US$1,505,000 (2020: US$315,000). The amount recorded in
the income statement as cost of sales was US$7,171,000 (2020:
US$5,208,000).
32 Subsequent events
The Group entered into a definitive agreement with Amarillo Gold
Corporation ("Amarillo") to acquire all of the issued and
outstanding shares of Amarillo at a price of C$0.40 per share in
cash (the "Cash Offer"). Pursuant to the Transaction, the Group
will acquire a 100% interest in Amarillo's flagship Posse gold
project ("Posse") located in Goiás State, Brazil. The shareholders
of Amarillo will receive shares in a newly formed company, Lavras
Gold Corp., which will hold a stake in the Lavras do Sul project,
C$10 million of cash, and a 2.0% net smelter revenue royalty on
certain exploration properties owned by Amarillo and located
outside the current Posse resource and mine plan at Amarillo's Mara
Rosa property. The net acquisition cost to Hochschild, including
the Cash Offer, cash provided to Lavras Gold Corp. and Amarillo's
net cash is estimated to be C$135 million (approximately US$106
million).
Profit by operation(1)
(Segment report reconciliation) as at 31 December 2021
Consolidation
adjustment
Group (US$000) Pallancata Inmaculada San Jose and others Total/HOC
========================================= ========== ========== ========= ============= =========
Revenue 99,116 452,835 258,972 464 811,387
========================================== ========== ========== ========= ============= =========
Cost of sales (pre consolidation) (98,153) (225,492) (192,163) 5,525 (510,283)
========================================== ========== ========== ========= ============= =========
Consolidation adjustment (210) 6,135 (400) (5,525) -
Cost of sales (post consolidation) (98,363) (219,357) (192,563) - (510,283)
Production cost excluding depreciation (66,859) (134,110) (122,449) - (323,418)
Depreciation in production
cost (22,960) (76,828) (49,054) - (148,842)
Workers profit sharing (3,023) (3,489) - - (6,512)
Other items (5,314) (5,545) (20,332) - (31,191)
Change in inventories (207) 615 (728) - (320)
========================================== ========== ========== ========= ============= =========
Gross profit 963 227,343 66,809 5,989 301,104
========================================== ========== ========== ========= ============= =========
Administrative expenses - - - (51,905) (51,905)
Exploration expenses - - - (39,848) (39,848)
Selling expenses (620) (616) (14,195) - (15,431)
Other income/(expenses) - - - (172) (172)
========================================== ========== ========== ========= ============= =========
Operating profit before impairment 343 226,727 52,614 (85,936) 193,748
========================================== ========== ========== ========= ============= =========
Impairment and write-off of
non-current assets - - - (25,709) (25,709)
Share of post-tax losses from
associate - - - (169) (169)
Finance income - - - 3,946 3,946
Finance costs - - - (32,061) (32,061)
Foreign exchange loss - - - (2,424) (2,424)
========================================== ========== ========== ========= ============= =========
Profit/(loss) from continuing
operations before
income tax 343 226,727 52,614 (142,353) 137,331
========================================== ========== ========== ========= ============= =========
Income tax expenses - - - (66,225) (66,225)
========================================== ========== ========== ========= ============= =========
Profit/(loss) for the year
from continuing operations 343 226,727 52,614 (208,578) 71,106
========================================== ========== ========== ========= ============= =========
1 On a post-exceptional basis.
RESERVES AND RESOURCES
Ore reserves and mineral resources estimates
Hochschild Mining plc reports its mineral resources and reserves
estimates in accordance with the Australasian Code for Reporting of
Exploration Results, Mineral Resources and Ore Reserves 2012
edition ("the JORC Code"). This establishes minimum standards,
recommendations and guidelines for the public reporting of
exploration results and mineral resources and reserves estimates.
In doing so it emphasises the importance of principles of
transparency, materiality and confidence. The information on ore
reserves and mineral resources on pages 57 to 59 were prepared by
or under the supervision of Competent Persons (as defined in the
JORC Code). Competent Persons are required to have sufficient
relevant experience and understanding of the style of
mineralisation, types of deposits and mining methods in the area of
activity for which they are qualified as a Competent Person under
the JORC Code. The Competent Person must sign off their respective
estimates of the original mineral resource and ore reserve
statements for the various operations and consent to the inclusion
of that information in this report, as well as the form and context
in which it appears.
Hochschild Mining plc employs its own Competent Person who has
audited all the estimates set out in this report. Hochschild Mining
Group companies are subject to a comprehensive programme of audits
which aim to provide assurance in respect of ore reserve and
mineral resource estimates. These audits are conducted by Competent
Persons provided by independent consultants. The frequency and
depth of an audit depends on the risks and/or uncertainties
associated with that particular ore reserve and mineral resource,
the overall value thereof and the time that has lapsed since the
previous independent third-party audit.
The JORC Code requires the use of reasonable economic
assumptions. These include long-term commodity price forecasts
(which, in the Group's case, are prepared by ex-house specialists
largely using estimates of future supply and demand and long-term
economic outlooks).
Ore reserve estimates are dynamic and are influenced by changing
economic conditions, technical issues, environmental regulations
and any other relevant new information and therefore these can vary
from year-to-year. Mineral resource estimates can also change and
tend to be influenced mostly by new information pertaining to the
understanding of the deposit and secondly the conversion to ore
reserves.
The estimates of ore reserves and mineral resources are shown as
at 31 December 2021, unless otherwise stated. Mineral resources
that are reported include those mineral resources that have been
modified to produce ore reserves. All tonnage and grade information
has been rounded to reflect the relative uncertainty in the
estimates; there may therefore be small differences. The prices
used for the reserves calculation were: Au Price: US$1,800 per
ounce and Ag Price: US$26.0 per ounce.
ATTRIBUTABLE METAL RESERVES AS AT 31 DECEMBER 2021
Proved
and probable Ag Au Ag Au Ag Eq
Reserve category (t) (g/t) (g/t) (moz) (koz) (moz)
----------------- ------------- ------- ------ ------ ------ ------
OPERATIONS (1)
----------------- ------------- ------- ------ ------ ------ ------
Inmaculada
Proved 1,637,395 168 4.1 8.9 213.8 24.3
Probable 5,002,635 140 3.3 22.5 527.4 60.5
------------------ ------------- ------- ------ ------ ------ ------
Total 6,640,030 147 3.5 31.4 741.3 84.7
------------------ ------------- ------- ------ ------ ------ ------
Pallancata
Proved 524,132 265 1.2 4.5 19.9 5.9
Probable 393,336 187 0.9 2.4 11.2 3.2
------------------ ------------- ------- ------ ------ ------ ------
Total 917,468 231 1.1 6.8 31.1 9.1
------------------ ------------- ------- ------ ------ ------ ------
San Jose
Proved 396,524 368 5.7 4.7 72.5 9.9
Probable 365,792 314 5.7 3.7 66.8 8.5
------------------ ------------- ------- ------ ------ ------ ------
Total 762,315 342 5.7 8.4 139.4 18.4
------------------ ------------- ------- ------ ------ ------ ------
GRAND TOTAL
Proved 2,558,050 219 3.7 18.0 306.3 40.1
Probable 5,761,763 154 3.3 28.6 605.5 72.2
------------------ ------------- ------- ------ ------ ------ ------
TOTAL 8,319,813 174 3.4 46.6 911.8 112.2
------------------ ------------- ------- ------ ------ ------ ------
Note: Where reserves are attributable to a joint venture
partner, reserve figures reflect the Company's ownership only.
Includes discounts for ore loss and dilution.
1 Operations were audited by P&E Consulting.
ATTRIBUTABLE METAL RESOURCES AS AT 31 DECEMBER 2021(1,2)
Tonnes Ag Au Ag Eq Ag Au Ag Eq
Resource category (t) (g/t) (g/t) (g/t) (moz) (koz) (moz)
------------------ ----------- ------ ------ ------ ------ -------- -----------
OPERATIONS
------------------ ----------- ------ ------ ------ ------ -------- -----------
Inmaculada
Measured 1,938,000 199 4.89 551 12.4 304.7 34.3
Indicated 5,987,000 160 3.88 440 30.8 747.6 84.6
------------------- ----------- ------ ------ ------ ------ -------- -----------
Total 7,925,000 169 4.13 467 43.2 1,052.3 118.9
------------------- ----------- ------ ------ ------ ------ -------- -----------
Inferred 11,989,000 102 2.57 286 39.2 988.7 110.3
------------------- ----------- ------ ------ ------ ------ -------- -----------
Pallancata
Measured 1,273,000 330 1.50 439 13.5 61.6 17.9
Indicated 846,000 246 1.18 331 6.7 32.2 9.0
------------------- ----------- ------ ------ ------ ------ -------- -----------
Total 2,119,000 297 1.38 396 20.2 93.7 27.0
------------------- ----------- ------ ------ ------ ------ -------- -----------
Inferred 1,845,000 230 0.98 300 13.6 58.3 17.8
------------------- ----------- ------ ------ ------ ------ -------- -----------
San Jose
Measured 790,500 481 7.67 1,034 12.2 195.0 26.3
Indicated 611,490 358 6.21 805 7.0 122.0 15.8
------------------- ----------- ------ ------ ------ ------ -------- -----------
Total 1,401,990 427 7.04 934 19.3 317.0 42.1
------------------- ----------- ------ ------ ------ ------ -------- -----------
Inferred 937,890 332 5.22 708 10.0 157.4 21.4
------------------- ----------- ------ ------ ------ ------ -------- -----------
GROWTH PROJECTS
------------------ ----------- ------ ------ ------ ------ -------- -----------
Crespo
Measured 5,211,000 47 0.47 81 7.9 78.6 13.6
Indicated 17,298,000 38 0.40 66 21.0 222.5 37.0
------------------- ----------- ------ ------ ------ ------ -------- -----------
Total 22,509,000 40 0.42 70 28.8 301.0 50.5
------------------- ----------- ------ ------ ------ ------ -------- -----------
Inferred 775,000 46 0.57 87 1.1 14.2 2.2
------------------- ----------- ------ ------ ------ ------ -------- -----------
Azuca
Measured 191,000 244 0.77 299 1.5 4.7 1.8
Indicated 6,859,000 187 0.77 242 41.2 168.8 53.3
------------------- ----------- ------ ------ ------ ------ -------- -----------
Total 7,050,000 188 0.77 243 42.7 173.5 55.2
------------------- ----------- ------ ------ ------ ------ -------- -----------
Inferred 6,946,000 170 0.89 234 37.9 199.5 52.3
------------------- ----------- ------ ------ ------ ------ -------- -----------
Volcan
Measured 105,918,000 - 0.738 53 - 2,513.1 180.9
Indicated 283,763,000 - 0.698 50 - 6,368.0 458.5
------------------- ----------- ------ ------ ------ ------ -------- -----------
Total 389,681,000 - 0.709 51 - 8,881.1 639.4
------------------- ----------- ------ ------ ------ ------ -------- -----------
Inferred 41,553,000 - 0.502 36 - 670.7 48.3
------------------- ----------- ------ ------ ------ ------ -------- -----------
Arcata
Measured 834,000 438 1.34 535 11.7 36.1 14.3
Indicated 1,304,000 411 1.36 508 17.2 56.9 21.3
------------------- ----------- ------ ------ ------ ------ -------- -----------
Total 2,138,000 421 1.35 519 29.0 92.9 35.6
------------------- ----------- ------ ------ ------ ------ -------- -----------
Inferred 3,533,000 370 1.26 461 42.1 142.6 52.4
------------------- ----------- ------ ------ ------ ------ -------- -----------
GRAND TOTAL
------------------ ----------- ------ ------ ------ ------ -------- -----------
Measured 116,156,500 16 0.86 77 59.3 3,193.7 289.2
------------------- ----------- ------ ------ ------ ------ -------- -----------
Indicated 316,668,490 12 0.76 67 123.9 7,717.9 679.6
------------------- ----------- ------ ------ ------ ------ -------- -----------
Total 432,824,990 13 0.78 70 183.1 10,911.6 968.8
------------------- ----------- ------ ------ ------ ------ -------- -----------
Inferred 67,578,890 66 1.03 140 143.9 2,231.4 304.6
------------------- ----------- ------ ------ ------ ------ -------- -----------
1 Prices used for resources calculation: Au: $1,800/oz and Ag: $26.0/oz and Ag/Au ratio of 72x.
2 Tables represents 100 % of the Mineral Resource. Resources are inclusive of Reserves.
CHANGE IN ATTRIBUTABLE RESERVES AND RESOURCES
Percentage December December
attributable 2020 2021
Ag equivalent content December Att. Att
(million ounces) Category 2021 (1) . (1) Net difference % change
---------------------- --------- ------------- -------- -------- -------------- --------
Inmaculada Resource 100% 195.8 229.3 33.5 17.1%
Reserve 79.3 84.7 5.4 6.9%
---------- ------------- -------- -------- -------------- --------
Pallancata Resource 100% 47.8 44.8 (3.0) (6.3%)
Reserve 7.1 9.1 2.0 27.8%
---------- ------------- -------- -------- -------------- --------
San Jose Resource 51% 65.2 63.4 (1.8) (2.7%)
Reserve 14.2 18.4 4.2 29.5%
---------- ------------- -------- -------- -------------- --------
Crespo Resource 100% 52.7 52.7 - -
Reserve - - - -
---------------------- --------- ------------- -------- -------- -------------- --------
Azuca Resource 100% 107.5 107.5 - -
Reserve - - - -
---------------------- --------- ------------- -------- -------- -------------- --------
Volcan Resource 100% 687.7 687.7 - -
Reserve - - - -
---------------------- --------- ------------- -------- -------- -------------- --------
Arcata Resource 100% 88.0 88.0 - -
Reserve - - - -
---------------------- --------- ------------- -------- -------- -------------- --------
Total Resource 1,244.7 1,273.4 28.7 2.3%
Reserve 100.6 112.2 11.6 11.5%
---------- --------------------- ------------- -------- -------- -------------- --------
1 Attributable reserves and resources based on the Group's
percentage ownership of its joint venture projects.
SHAREHOLDER INFORMATION
Company website
Hochschild Mining plc Interim and Annual Reports and results
announcements are available via the internet on our website at
www.hochschildmining.com. Shareholders can also access the latest
information about the Company and press announcements as they are
released, together with details of future events and how to obtain
further information.
Registrars
The Registrars can be contacted as follows for information about
the AGM, shareholdings, and dividends and to report changes in
personal details:
BY POST
Link Asset Services, The Registry, 34 Beckenham Road, Beckenham,
Kent BR3 4TU.
BY TELEPHONE
If calling from the UK: 0371 664 0300 (calls cost 12p per minute
plus your phone company's access charge. Lines are open
9.00am-5.30pm Mon to Fri excluding public holidays in England and
Wales).
If calling from overseas: +44 371 664 0300 (Calls charged at the
applicable international rate).
Currency option and dividend mandate
Shareholders wishing to receive their dividend in US dollars
should contact the Company's registrars to request a currency
election form. This form should be completed and returned to the
registrars by 13 May 2022 in respect of the 2021 final
dividend.
The Company's registrars can also arrange for the dividend to be
paid directly into a shareholder's UK bank account. To take
advantage of this facility in respect of the 2021 final dividend, a
dividend mandate form, also available from the Company's
registrars, should be completed and returned to the registrars by
13 May 2022. This arrangement is only available in respect of
dividends paid in UK pounds sterling. Shareholders who have already
completed one or both of these forms need take no further
action.
Financial Calendar
Dividend dates 2022
Ex-dividend date 5 May
Record date 6 May
Deadline for return of currency election forms 13 May
Payment date 7 June
----------------------------------------------- -------
17 Cavendish Square
London
W1G 0PH
United Kingdom
[1] Revenue presented in the financial statements is disclosed
as net revenue and is calculated as gross revenue less commercial
discounts plus services revenue
(2) Please see the Financial Review page 16 for a definition of
Adjusted EBITDA
[3] 2020 figure includes the interim dividend of $20.6 million,
a portion of which relates to the 2019 final dividend of $12.0
differne million which was withdrawn due to Covid-19
[4] 2021 and 2020 equivalent figures calculated using the
previous Company gold/silver ratio of 86x. All 2022 forecasts
assume the average 2021 gold/silver ratio of 72x.
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.
[6] Calculated as total number of accidents per million labour
hours
([7]) Calculated as total number of days lost per million labour
hours.
[8] 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.
[9] Equivalent resource figures calculated using the gold/silver
ratio of 72x.
1 Based on limited drilling at depth
[11] Includes revenue from services
[12] Unit cost per tonne is calculated by dividing mine and
treatment production costs (excluding depreciation) by extracted
and treated tonnage respectively
[13] Cash costs are calculated to include cost of sales,
commercial discounts and selling expenses items less depreciation
included in cost of sales
([14]) Does not include Fixed costs during operational stoppages
and reduced capacity of $8.7 million
[15] Includes commercial discounts (from the sales of
concentrate) and commercial discounts from the sale of dore
([16]) Does not include Fixed costs during operational stoppages
and reduced capacity of $46.5 million
[17] Includes commercial discounts (from the sales of
concentrate) and commercial discounts from the sale of dore
[18] Calculated using a gold /silver ratio of 86:1 in line with 2020.
[19] Operating capex from San Jose does not include capitalised
DD&A resulting from mine equipment utilised for mine
developments
[20] Administrative expenses does not include expenses from
Aclara Resources Inc ($236,000)
[21] Royalties arising from revised royalty tax schemes
introduced in 2011 and included in income tax line
[22] Operating capex from San Jose does not include capitalised
DD&A resulting from mine equipment utilised for mine
developments
[23] Royalties arising from revised royalty tax schemes
introduced in 2011 and included in income tax line
[24] Adjusted EBITDA has been presented before the effect of
significant non-cash (income)/expenses related to changes in mine
closure provisions which were $22.1 million in 2021 and $16.1
million in 2020, and the write-off of property, plant and
equipment
[25] 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 (Inmaculada,
Pallancata, San Jose) of $22.5 million. Other expenses includes
corporate expenses and expenses from non-operating units of $1.5
million.
[26] Includes pre-shipment loans and short term interest
payables
[27] 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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February 23, 2022 02:01 ET (07:01 GMT)
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