HOC Hochschild Mining Plc

TIDMHOC

RNS Number : 2814J

Hochschild Mining PLC

26 April 2022

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26 April 2022

Production Report for the 3 months ended 31 March 2022

Ignacio Bustamante, Chief Executive Officer said:

"Our flagship Inmaculada operation has delivered a better than expected first quarter of the year and despite our Argentinian operations having faced Covid-related workforce absences and seasonal vacations early in the period, we are on track to meet 2022 production and cost targets.

We completed our purchase of Amarillo Gold on 1 April and are looking forward to commencing construction at the exciting Mara Rosa project in Brazil in the near future. In addition, we have recently initiated a new drilling campaign at the Snip project in Canada following our announcement in March of a significant increase in resources. Finally, I am pleased to report that our 2022 brownfield exploration programme has commenced at all our operations."

Operational highlights

-- Q1 2022 attributable production ([1])

o 47,226 ounces of gold

o 2.4 million ounces of silver

o 80,889 gold equivalent ounces

o 5.8 million silver equivalent ounces

-- Solid first quarter operational delivery at Inmaculada; San Jose impacted by Covid-related absenteeism and seasonal vacations earlier in Q1

-- On track to deliver overall 2022 production target of 360,000-375,000 gold equivalent ounces (26.0-27.0 million silver equivalent ounces)

-- 2022 all-in sustaining costs on track to meet guidance of $1,330-1,370 per gold equivalent ounce ($18.5-19.0 per silver equivalent ounce)

Project & Exploration highlights

-- Amarillo Gold acquisition completed on 1 April 2022, enhancing the company's portfolio by adding a long-life asset located in a mining friendly jurisdiction

-- New drilling campaign started at Snip development project in Canada following announcement of a significant increase in resources on 1 March 2022

-- 2022 brownfield drilling campaigns underway at all operations

ESG highlights

-- Lost Time Injury Frequency Rate of 1.89 (FY 2021: 1.26) ([2])

-- Accident Severity Index of 61 (FY 2021: 676) ([3])

-- Water Consumption of 174lt/person/day (FY 2021: 193lt/person/day)

-- Domestic waste generation of 1.01 kg/person/day (FY 2021: 1.00kg/person/day)

-- ECO score of 5.79 out of 6 (FY 2021: 5.29) ([4])

Strong financial position

-- Total cash of approximately $367 million as at 31 March 2022 ($387 million as at 31 December 2021)

-- Net cash of approximately $54 million as at 31 March 2022 ($86 million as at 31 December 2021)

-- Current Net Cash/LTM EBITDA of approximately 0.153x as at 31 March 2022

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A conference call will be held at 2.30pm (London time) on Tuesday 26 April 2022 for analysts and investors. Dial in details as follows:

International Dial in: +44 330 165 4012; UK Toll-Free Number: 0800 279 6877; US/Canada Toll Free: 800-289-0720

Pin: 8158412

Please dial into the call approximately ten minutes before the 2.30pm start time.

A recording of the conference call will be available on demand on the Company's website: www.hochschildmining.com

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Overview

In Q1 2022, Hochschild delivered attributable production of 80,889 gold equivalent ounces or 5.8 million silver equivalent ounces with a better than expected result from Inmaculada offset by further disruption from Covid-19 impacting San Jose in Argentina and lower than expected grades at Pallancata. The Company remains on track to meet its overall attributable production target for 2022 of 360,000-375,000 gold equivalent ounces or 26.0-27.0 million silver equivalent ounces.

The Company reiterates that its all-in sustaining cost for 2022 is on track to be in line with the guidance of between $1,330 and $1,370 per gold equivalent ounce (or $18.5 and $19.0 per silver equivalent ounce).

TOTAL GROUP PRODUCTION

 
                          Q1 2022  Q4 2021  Q1 2021  12 mths 
                                                      2021 
Silver production 
 (koz)                    2,759    3,892    3,321    14,746 
Gold production 
 (koz)                    53.68    68.22    62.31    262.39 
Total silver equivalent 
 (koz)                    6,624    8,804    7,808    33,638 
Total gold equivalent 
 (koz)                    92.00    122.28   108.44   467.19 
Silver sold (koz)         2,600    3,877    3,182    14,712 
Gold sold (koz)           49.64    67.80    61.14    260.71 
 

Total production includes 100% of all production, including production attributable to Hochschild's joint venture partner at San Jose.

ATTRIBUTABLE GROUP PRODUCTION

 
                    Q1 2022  Q4 2021  Q1 2021  12 mths 
                                                2021 
Silver production 
 (koz)              2,424    3,209    2,829    12,174 
Gold production 
 (koz)              47.23    56.91    52.84    221.42 
Silver equivalent 
 (koz)              5,824    7,306    6,634    28,116 
Gold equivalent 
 (koz)              80.89    101.48   92.13    390.50 
 

Attributable production includes 100% of all production from Inmaculada, Pallancata and 51% from San Jose.

Production

Inmaculada

 
Product                  Q1 2022         Q4 2021      Q1 2021  12 mths 
                                                                2021 
Ore production (tonnes 
 treated)                329,364         341,577      337,480  1,349,892 
Average grade silver 
 (g/t)                   153             191          158      174 
Average grade gold 
 (g/t)                   3.75            4.03         3.92     4.05 
Silver produced 
 (koz)                   1,493           1,850        1,419    6,236 
Gold produced (koz)               37.81        41.99  39.80    165.73 
Silver equivalent 
 (koz)                   4,216           4,873        4,285    18,168 
Gold equivalent 
 (koz)                   58.55           67.69        59.52    252.34 
Silver sold (koz)        1,382.9         1,843        1,414    6,216 
Gold sold (koz)          35.16           41.95        39.65    165.86 
 

Inmaculada's first quarter production was 37,811 ounces of gold and 1.5 million ounces of silver which amounts to gold equivalent output of 58,552 ounces which was ahead of budgeted expectations and was due to higher than planned silver and gold recoveries and higher gold grades.

Pallancata

 
Product                  Q1 2022          Q4 2021       Q1 2021  12 mths 
                                                                  2021 
Ore production (tonnes 
 treated)                124,782          128,228       126,950  530,681 
Average grade silver 
 (g/t)                               165           177  240      212 
Average grade gold 
 (g/t)                   0.74             0.85          0.85     0.84 
Silver produced 
 (koz)                   581              648           897      3,261 
Gold produced (koz)      2.70             3.14          3.18     13.05 
Silver equivalent 
 (koz)                               776  874           1,126    4,200 
Gold equivalent 
 (koz)                            10.77   12.14         15.64    58.33 
Silver sold (koz)        577              642           771      3,263 
Gold sold (koz)          2.69             3.12          2.72     13.03 
 

In the first quarter, Pallancata produced 581,000 ounces of silver and 2,702 ounces of gold bringing silver equivalent total production to 776,000 ounces with tonnage and silver grades lower than expected.

   San Jose   (the Company has a 51% interest in San Jose) 
 
Product                  Q1 2022        Q4 2021  Q1 2021  12 mths 
                                                           2021 
Ore production (tonnes 
 treated)                73,892         143,398  101,345  539,229 
Average grade silver 
 (g/t)                   331            346      344      344 
Average grade gold 
 (g/t)                   6.36           5.77     6.53     5.47 
Silver produced 
 (koz)                   685            1,393    1,005    5,250 
Gold produced (koz)      13.16          23.10    19.33    83.62 
Silver equivalent 
 (koz)                           1,632  3,056    2,396    11,270 
Gold equivalent 
 (koz)                           22.67  42.45    33.28    156.53 
Silver sold (koz)        640.2          1,392    997      5,233 
Gold sold (koz)          11.79          22.73    18.77    81.83 
 

The first quarter at San Jose in Argentina is traditionally a shorter operational period due to the scheduled hourly workers' holiday which was taken during January this year. However, the operation also continued to be impacted by Covid-related employee absences and tonnage was consequently lower than expected resulting in production of 0.7 million ounces of silver and 13,165 ounces of gold which makes 1.6 million silver equivalent ounces. However, the operation remains on track to meet 2022 full year guidance of between 5.7 and 6.1 million silver equivalent ounces.

Average realisable prices and sales

Average realisable precious metal prices in Q1 2022 (which are reported before the deduction of commercial discounts) were $1,916/ounce for gold and $26.0/ounce for silver (Q1 2021: $1,703/ounce for gold and $24.4/ounce for silver).

Advanced Project: Mara Rosa

On 22 March 2022, the Company announced that it had received shareholder approval for the acquisition of Amarillo Gold Inc. with completion occurring on 1 April 2022.

The Mara Rosa project in Brazil is progressing according to schedule with detailed engineering over 60% complete and construction at site planned to start in the second quarter. The construction management team is now in place and mobilised at site. Off-site camp construction was completed in March whilst the powerline construction started in March with completion expected in the first half of 2023. Finally, Hochschild is working closely with the regional environmental agency in the State of Goias to obtain the outstanding construction permits.

Development project: Snip

Exploration recommenced during the quarter, with approximately 2,500m drilled from underground. Work also began on the Pre-Feasibility Study, which was awarded to Ausenco Engineering Canada.

A Communications and Engagement Agreement with the Tahltan Central Government was signed at the beginning of the year with constructive discussions between the two parties continuing.

The Company issued an updated mineral resource estimate on March 1st. Indicated mineral resources more than tripled to 840,000 ounces and inferred resources almost doubled to 723,000 ounces (compared to the previous 2020 estimate) as a result of approximately 28,000m of drilling and the application of Hochschild's standard approach to resource evaluation.

Assays were received from Skeena Resources for 34 drill holes drilled in 2021, with potential resource additions from the following intercepts:

 
Hole      From   To     Length  Au 
           (m)    (m)    (m)     (g/t) 
S21-125   46.7   48.8   2.1     14.5 
S21-126   25.0   27.0   2.0     41.4 
S21-135   155.5  158.0  2.5     15.6 
S21-142   13.5   14.8   1.3     24.2 
S21-142   19.7   21.8   2.1     12.2 
S21-151   25.4   26.6   1.2     12.5 
 

Possible new veins were identified with the following results:

 
Hole      From   To     Length  Au 
           (m)    (m)    (m)     (g/t) 
S21-125   65.8   66.9   1.1     56.3 
S21-137   446.0  447.1  1.1     13.5 
S21-139   249.0  252.0  3.0     48.8 
S21-139   217.4  218.0  0.6     48.9 
S21-155   201.5  204.0  2.5     15.1 
 

A further 5,000m of drilling is planned for the second quarter.

Development project: Volcan

During the first quarter, the Company restructured its 100% ownership of the Volcan project in Chile under a newly-established Canadian company, Tiernan Gold Corp. The Company is currently evaluating strategic alternatives for Tiernan.

Tiernan expects to complete an update to the Mineral Resource Estimate for Volcan during Q2 2022. In parallel, engineering is also being carried out to redefine the business case for Volcan, including an optimised mine and project development plan. The results of the Mineral Resource Estimate and optimisation work are expected to be outlined in a new technical report.

Brownfield exploration

Inmaculada

In Q1 2021, the exploration team started its drilling campaign with work continuing into the second quarter.

In addition, the team will continue with 2,000m of potential drilling at the Huarmapata area, 2,800m of resource drilling in Josefa along with 1,000m in the Union Shakira vein.

Pallancata

At Pallancata, 3,139m of potential drilling was carried out in the Ranichico, Pallancata and Pablo zones and also 6,135m of resource drilling in the Laura-Demian and Miriam structures with drilling intercepting quartz sulphide veins and grades of 250-300 silver equivalent grammes per tonne.

 
Vein              Results (resource drilling) 
Miriam            DHLMIR-A13: 1.8m @ 1.5g/t Au & 261g/t Ag 
                   DHLMIR-A14: 0.8m @ 1.9g/t Au & 371g/t Ag 
Rina              DHLRI-A187: 0.8m @ 11.6g/t Au & 47g/t Ag 
Virgen de Carmen  DHLRI-A187: 2.0m @ 1.6g/t Au & 303g/t Ag 
Demian            DLDE-A02: 2.5m @ 0.9g/t Au & 303g/t Ag 
 

The programme for the second quarter will consist of 5,000m of resource drilling in the Laura-Demian structure as well as a resumption of drilling at the Corina deposit to the north.

San Jose

In Q1 2022, 2,049m of potential drilling was executed around the mine area and in the Saavedra area.

 
Vein         Results (resource drilling) 
Celina       SJD-2451: 1.5m @ 6.0g/t Au & 236g/t Ag 
              SJD-2453: 1.2m @ 8.3g/t Au & 561g/t Ag 
Celina Piso  SJD-2453: 1.1m @ 2.8g/t Au & 546g/t Ag 
Jimena       SJD-2463: 5.2m @ 1.6g/t Au & 47g/t Ag 
              SJD-2465: 2.4m @ 2.8g/t Au & 48g/t Ag 
 

Drilling continues in the second quarter, with 2,000m of resource drilling in the Olivia and Celina veins as well starting to explore the Ciclon project further away in the Santa Cruz province.

Financial position

Total cash was approximately $367 million as at 31 March 2022 resulting in a net cash position of approximately $54 million. This balance does not reflect the payment for the acquisition of Amarillo Gold Inc. which was completed on 1 April 2022.

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Enquiries:

Hochschild Mining PLC

Charles Gordon +44 (0)20 3709 3264

Head of Investor Relations

Hudson Sandler

Charlie Jack +44 (0)207 796 4133

Public Relations

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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 owns the Mara Rosa Advanced Project in Brazil as well as numerous long-term projects throughout the Americas.

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Forward looking statements

This announcement may contain forward looking statements. 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, for various reasons, be materially different from any future results, performance or achievements expressed or implied by such forward looking statements.

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, the Board of 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.

Note

The information contained within this announcement is deemed by the Company to constitute inside information as stipulated under the Market Abuse Regulation (Regulation (EU) No.596/2014). Upon the publication of this announcement via a Regulatory Information Service, this inside information is now considered to be in the public domain.

LEI: 549300JK10TVQ3CCJQ89

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[1] All equivalent figures assume the average gold/silver ratio for 2021 of 72x.

[2] Calculated as total number of accidents per million labour hours

([3]) Calculated as total number of days lost per million labour hours.

[4] 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.

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April 26, 2022 10:06 ET (14:06 GMT)