TIDMHOC
RNS Number : 2562W
Hochschild Mining PLC
17 August 2022
17 August 2022
Hochschild Mining PLC
Interim Results
Six months ended 30 June 2022
PRODUCTION AND COSTS ON TRACK WITH FULL YEAR GUIDANCE
UNCHANGED
STRONG PROGRESS AT KEY GROWTH PROJECTS
Financial Highlights
-- Revenue of $347.8 million (H1 2021: $394.8 million) ([1])
-- Adjusted EBITDA of $130.5 million (H1 2021: $198.5 million)
([2])
-- Profit before income tax (pre-exceptional) of $15.3 million
(H1 2021: $97.8 million)
-- Profit before income tax (post-exceptional) of $5.4 million
(H1 2021: $83.8 million)
-- Basic earnings per share (pre-exceptional) of $0.01 (H1 2021:
$0.08)
-- Basic loss per share (post-exceptional) of $(0.01) (H1 2021:
$0.07)
-- Cash and cash equivalent balance of $204.3 million as at 30
June 2022 (31 December 2021: $386.8 million) following completion
of the Amarillo acquisition on 1 April
-- Net debt of $109.3 million as at 30 June 2022 (31 December
2021: net cash of $86.3 million)
-- Interim dividend of 1.95 cents per share totalling $10.0
million (H1 2021: 1.95 cents per share totalling $10.0 million)
Operational Highlights [3]
-- All-in sustaining costs (AISC) from operations of $1,371 per
gold equivalent ounce (H1 2021: $1,055) or $19.0 per silver
equivalent ounce (H1 2021: $14.7) [4] , in line with guidance
-- H1 2022 attributable production of 166,708 gold equivalent
ounces or 12.0 million silver equivalent ounces (H1 2021: 188,509
gold equivalent ounces or 13.6 million silver equivalent
ounces)
Project & Exploration Highlights
-- Mara Rosa project in Brazil is advancing on schedule - total
project progress to date is 9% with a key environmental
authorisation announced on 10 August and first production on track
for H1 2024
-- Drilling commenced at Snip with encouraging results,
pre-feasibility study to be completed by end of 2022
-- Brownfield programme conducted in the surrounding areas of
all three mines
o Pallancata medium-term drill programme delivering positive
results - continuing to test short-term targets
o Exploration commenced at Ciclon project in Santa Cruz,
Argentina
2022 outlook
-- On track to deliver overall 2022 production target of
360,000-375,000 gold equivalent ounces or 26.0-27.0 million silver
equivalent ounces
-- 2022 AISC on track to meet guidance of $1,330 - $1,370 per
gold equivalent ounce or $18.5-$19.0 per silver equivalent
ounce
ESG highlights
-- 2021 Sustainability Report recently published
-- Lost Time Injury Frequency Rate of 1.28 (FY 2021: 1.26)
([5])
-- Accident Severity Index of 72 (FY 2021: 676) ([6])
-- Water consumption of 175lt/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 5.35 out of 6 (FY 2021: 5.29) ([7])
$000 unless stated Six months to 30 June 2022 Six months to 30 June 2021 % change
--------------------------- ---------------------------
Attributable silver production (koz) 5,065 5,922 (14)
Attributable gold production (koz) 96 106 (9)
Revenue 347,781 394,750 (12)
Adjusted EBITDA 130,525 198,504 (34)
Profit/(loss) from continuing operations
(pre-exceptional) 9,503 38,065 (75)
Profit/(loss) from continuing operations
(post-exceptional) (420) 28,594 (101)
Basic earnings/(loss) per share
(pre-exceptional) $ 0.01 0.08 (88)
Basic earnings/(loss) per share
(post-exceptional) $ (0.01) 0.07 (114)
------------------------------------------------- --------------------------- --------------------------- ---------
_______________________________________________________________________________________
A live conference call and audio webcast will be held at 2.00pm
(London time) on Wednesday 17 August 2022 for analysts and
investors.
For a live webcast of the presentation please click on the link
below:
https://stream.brrmedia.co.uk/broadcast/62cf10ef287bf548a3b8d1d2
Conference call dial in details:
UK: +44 (0)330 165 4012
UK Toll Free: 0800 279 6877
US/Canada Toll Free: 800-289-0720
Pin: 8806529
_______________________________________________________________________________________
Investor Meet Company presentation
Hochschild will provide a live presentation relating to the
Interim Results via the Investor Meet Company platform today at
4.00PM (BST).
The presentation is open to all existing and potential
shareholders. Questions can be submitted via the Investor Meet
Company platform at any time during the live presentation.
Investors can sign up to Investor Meet Company for free and add
to meet Hochschild Mining PLC via the following link. Investors who
already follow the Company on the Investor Meet Company platform
will automatically be invited.
https://www.investormeetcompany.com/hochschild-mining-plc/register-investor
_______________________________________________________________________________________
Enquiries:
Hochschild Mining PLC
Charles Gordon
+44 (0)20 3709 3264
Head of Investor Relations
Hudson Sandler
Charlie Jack
+44 (0)207 796 4133
Public Relations
_______________________________________________________________________________________
Non-IFRS Financial Performance Measures
The Company has included certain non-IFRS measures in this news
release. The Company believes that these measures, in addition to
conventional measures prepared in accordance with IFRS, provide
investors an improved ability to evaluate the underlying
performance of the Company. The non-IFRS measures are intended to
provide additional information and should not be considered in
isolation or as a substitute for measures of performance prepared
in accordance with IFRS. These measures do not have any
standardised meaning prescribed under IFRS, and therefore may not
be comparable to other issuers.
About Hochschild Mining PLC:
Hochschild Mining PLC is a leading precious metals company
listed on the London Stock Exchange (HOCM.L / HOC LN) and
crosstrades on the OTCQX Best Market in the U.S. (HCHDF), with a
primary focus on the exploration, mining, processing and sale of
silver and gold. Hochschild has over fifty years' experience in the
mining of precious metal epithermal vein deposits and currently
operates three underground epithermal vein mines, two located in
southern Peru and one in southern Argentina. Hochschild also owns
the Mara Rosa Advanced Project in Brazil as well as numerous
long-term projects throughout the Americas
IGNACIO BUSTAMANTE, CHIEF EXECUTIVE OFFICER SAID:
In the first half of 2022, we have once again seen a period of
global turmoil which has significantly impacted both commodity
markets and the local political and economic environments in which
Hochschild operates. The response from our teams has been highly
commendable and we remain well positioned to meet all our 2022
priorities. These include delivering on our production and cost
targets, investment in our Mara Rosa project in Brazil and meeting
our ESG commitments which are focused on the wellbeing of our
employees, the environment and the communities in our areas of
influence.
Following the Russian invasion of Ukraine in late February, all
commodities rose strongly in response to expected supply deficits
or as stores of value with gold passing $2,000 per ounce in early
March. But since then, with inflation increasing substantially and
the resulting steep interest rate rises likely to lead to dollar
strength and global recession, we have seen a major pullback in our
underlying commodities with gold and silver prices falling
substantially from their recent peaks. This volatile market
environment has presented challenges for our business but we can
look forward to a busy second half with opportunities for value
accretive investment in exploration and project development across
our portfolio.
ESG
We have made further good progress on our ESG performance in the
first-half. On the subject of safety, the implementation of the
second iteration of our Safety Culture Transformation Plan, was
extended to our new locations in Brazil and Canada whilst, in Peru,
we commenced a risk perception training programme focussing on the
subject of workplace accidents. I am happy to report that our
historically low safety KPIs (as at 30th June) are indicative of
the success of this and other safety-related initiatives.
The Company has also had a busy six months with regards to
environmental management. As at 30 June, we have achieved an
excellent ECO score of 5.35 out of 6 (FY 2022 Target: 5.0), with
two of our operations achieving a perfect score to date. In
addition, we have made considerable progress on our environmental
culture transformation programme. This seeks to embed an
environmentally conscious culture across all areas of our business.
Meanwhile, we continue to work to achieve a positive impact in the
local communities surrounding our operations involving
collaboration with full respect for local customs and social
dynamics. Our efforts have been focussed on: local employment;
procurement of local goods and services; investments in education,
connectivity, health and nutrition and socio-economic development;
and supporting local governments.
Following the publication of a Global Industry Standard on
Tailings Management by the International Council on Mining and
Metals last year, we commenced a review of the governance of our
Tailings Storage Facilities ("TSFs"). This led to the adoption, by
the Board, of a Tailings Management Policy which has initiated
several workstreams including the allocation of responsibilities
for internal and external oversight of our TSFs. Finally, I am
delighted that following the appointment of our first
Sustainability Director, we continue to progress with our reporting
on overall ESG matters with the recent publication of our 2021
Sustainability Report. Our next key milestone will be the
publication of our roadmap to achieving Net Zero by 2050.
Operations
Hochschild's production in the first half was in line with our
expectations. This was achieved despite more disruption at San Jose
from Covid as well as a fire in the mine's crushing area which
temporarily affected operations but did not impact our full-year
production forecasts. Attributable production was 166,708 gold
equivalent ounces (12.0 million silver equivalent ounces), which
was lower than the first half of 2021 due to declining grades at
Pallancata, scheduled lower grades at Inmaculada, and the stoppages
at San Jose. This was delivered at an all-in sustaining cost
("AISC") of $1,371 per gold equivalent ounce ($19.0 per silver
equivalent ounce). Inmaculada had another solid half with
production of 111,766 gold equivalent ounces (H1 2021: 117,975
ounces) and AISC in line with expectations at $1,015 per gold
equivalent ounce (H1 2021: $890 per ounce). Although costs are in
line with guidance, the Company has started a cost optimisation
plan to contend with inflationary pressures and commodity price
volatility.
Pallancata's current mining area is almost depleted, and grades
have been declining for several quarters with the result that the
Company has updated the mine plan for 2022 and is considering all
geological options with regards to the mine's future. Output
reflected the declining grades and was 1.6 million silver
equivalent ounces (H1 2021: 2.5 million ounces) with the mine's
AISC unsurprisingly higher at $33.1 per silver equivalent ounce (H1
2021: $18.0 per ounce). In Argentina, the above-mentioned Covid and
operational issues led to production of 4.7 million silver
equivalent ounces in the first half (H1 2021: 5.0 million ounces)
and also affected AISC which were at $22.9 per silver equivalent
ounce (H1 2021: $16.9 per ounce).
Projects
The Hochschild project pipeline has been transformed in the last
year with the purchase of Amarillo Gold in Brazil, which we
completed on 1 April, and the commencement of earning-in 60% of
Skeena Resource's interest in the Snip Gold project in British
Columbia, Canada. Both projects deliver the prospect of near to
medium-term growth and are expected to be highly value accretive
additions to our portfolio with strong geological upside.
At the Mara Rosa project in the state of Goias in Brazil, we
have made strong progress in the second quarter since taking
control. We are now at 9% total completion with many long lead-time
items already purchased and site preparation well advanced. A key
remaining permit has recently been granted which will enable the
team to start construction of the processing plant and other site
infrastructure. We remain on track for first production at this
low-cost project in the first half of 2024 and will provide regular
progress updates over the next few quarters.
The first half was also one of solid progress at the Snip
project. Work on a pre-feasibility study began and included
metallurgical work, processing plant designs and resource model
updates. A drill campaign also commenced and has already delivered
some encouraging intercepts with assay results expected through to
the end of the year when we expect to complete the overall
study.
Exploration
Our brownfield exploration programme started in the first half
in the surrounding areas of all three of our mines. We have seen a
good set of drilling results at Pallancata which, although outside
the current permitted area, could represent the medium-term future
for the mine. We will also continue to test our short-term targets
close to the current mining operations for the remainder of the
year. At San Jose, exploration also continued in the area
surrounding the mine but in addition we began drilling the Ciclon
project which is further away from the San Jose district and is one
of a number of greenfield projects we control in the wider Santa
Cruz province. Finally, at Inmaculada, we have decided to slow the
brownfield exploration programme given that the resources added in
the last few years have taken the mine-life to well over ten years
and it is currently a strategic priority to allocate cash for
capital expenditure requirements at our Mara Rosa advanced
project.
Financial results
Both silver and gold production were lower, as guided, versus H1
2021 and consequently, when combined with a 10% fall in the average
silver price achieved (partially offset by a 6% rise in the average
gold price achieved), revenue decreased by 12% to $347.8 million
(H1 2021: $394.8 million). AISC was $1,371 per gold equivalent
ounce (H1 2021: $1,055 per ounce) with the rise reflecting the
scheduled decreased production at Inmaculada and Pallancata, and
the stoppages at San Jose. Adjusted EBITDA of $130.5 million (H1
2021: $198.5 million) mostly reflects the decreased production
levels and increased costs whilst pre-exceptional earnings per
share were $0.01 (H1 2021: $0.08 per share). Post-exceptional
earnings per share were also lower at ($0.01) (H1 2021: $0.07), and
include an impairment of $9.9 million in the investment in Aclara
Resources Inc.
Financial position
Our balance sheet remains in a good position to fund our future
capital requirements following the completion of the Amarillo Gold
acquisition on 1 April 2022 ($123.4 million), with cash and cash
equivalents of $204.3 million at the end of June (31 December 2021:
$386.8 million) and net debt of $109.3 million (31 December 2021:
net cash $86.3 million).
Outlook
Political, social and economic risks in Latin America as a whole
remain elevated. Consequently, we are closely monitoring any new
legislative, regulatory and local initiatives which could impact
our exploration and operational activities. Nonetheless, we look
forward to the second half which will feature further investment in
our exciting Mara Rosa project as well as a pre-feasibility study
at the Snip project. In addition, in Peru we can expect the
completion of the modified Environmental Impact Study for
Inmaculada and further brownfield exploration at Pallancata which
aims to secure the medium-term future of the mine whilst we assess
the short-term geological viability of the current mining area.
In such a complex world, our strategic direction remains firm,
and we are sticking to our purpose - responsible and innovative
mining committed to a better world. I am grateful to all our
stakeholders for their continued support. The past year has shown
our ability to operate through challenging times and we are
confident that Hochschild has the experience and expertise to
deliver on our ambitious strategic initiatives going forward. The
Board is pleased to declare an interim dividend of 1.95 cents per
share ($10.0 million).
OPERATING REVIEW
OPERATIONS
Note: All 2022 and 2021 silver/gold equivalent production
figures assume a gold/silver ratio of 72:1.
Production
In H1 2022, Hochschild delivered attributable production of
166,708 gold equivalent ounces or 12.0 million silver equivalent
ounces (on an attributable basis) with the decrease versus the same
period of 2021 resulting from planned lower production at
Inmaculada and Pallancata, as well as the impact of stoppages at
San Jose in the first quarter.
Total group production
Six months to 30 June Six months to 30 June
2022 2021
-----------------------
Silver production
(koz) 6,105 7,021
Gold production (koz) 113.94 125.07
Total silver equivalent
(koz) 14,309 16,027
Total gold equivalent
(koz) 198.74 222.59
Silver sold (koz) 6,045 7,005
Gold sold (koz) 112.70 124.32
------------------------- ----------------------- ----------------------
Total production includes 100% of all production, including
production attributable to Hochschild's minority shareholder at San
Jose.
Attributable group production
Six months to 30 June Six months to 30 June
2022 2021
-----------------------
Silver production
(koz) 5,065 5,922
Gold production (koz) 96.36 106.26
Silver equivalent
(koz) 12,003 13,573
Gold equivalent (koz) 166.71 188.51
----------------------- ----------------------- ----------------------
Attributable production includes 100% of all production from
Inmaculada and Pallancata and 51% from San Jose.
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. Grades at
Inmaculada are expected to rise in the second half of the year,
although this will be offset by Pallancata's lower-than-budgeted
grades throughout 2022 and therefore the Company has modified the
full year production split as follows:
Revised attributable 2022 Production forecast split
Operation Oz Au Eq Moz Ag Eq
----------------
Inmaculada 233,000-239,000 16.8-17.2
Pallancata 47,000-51,000 3.4-3.6
San Jose 80,000-85,000 5.8-6.2
----------- ---------------- ----------
Total 360,000-375,000 26.0-27.0
----------- ---------------- ----------
Costs
AISC from operations in H1 2022 was $1,371 per gold equivalent
ounce or $19.0 per silver equivalent ounce (H1 2021: $1,055 per
gold equivalent ounce or $14.7 per silver equivalent ounce), higher
than H1 2021 mainly due to lower average grades and higher costs
and capex. In light of the revised 2022 production split detailed
above, the following is a revised AISC split by operation:
Revised 2022 AISC forecast split
Operation $/oz Au Eq $/oz Ag Eq
------------
Inmaculada 1,070-1,100 14.8-15.3
Pallancata 2,130-2,170 29.6-30.1
San Jose 1,500-1,540 20.8-21.4
---------------------- ------------ -----------
Total from operations 1,330-1,370 18.5-19.0
---------------------- ------------ -----------
Inmaculada
The 100% owned Inmaculada gold/silver underground operation is
located in the Region of Ayacucho in southern Peru. It commenced
operations in 2015.
Inmaculada summary Six months to Six months % change
30 June 2022 to 30 June
2021
--------------- ------------
Ore production (tonnes) 657,202 672,137 (2)
Average silver grade (g/t) 145 160 (9)
Average gold grade (g/t) 3.61 3.92 (8)
Silver produced (koz) 2,815 2,777 1
Gold produced (koz) 72.67 79.40 (8)
Silver equivalent produced
(koz) 8,047 8,494 (5)
Gold equivalent produced
(koz) 111.77 117.98 (5)
Silver sold (koz) 2,805 2,769 1
Gold sold (koz) 72.72 79.49 (9)
Unit cost ($/t) 111.8 93.6 19
Total cash cost ($/oz Au
co-product) 679 547 24
All-in sustaining cost ($/oz
Au Eq) 1,015 890 14
------------------------------ --------------- ------------ ---------
Production
In the first half of 2022, Inmaculada produced 111,766 gold
equivalent ounces (H1 2021: 117,975 ounces). As expected, grades
were lower than H1 2021 although this was partially offset by
higher recoveries. Overall, H1 2022 production was better than
expected.
The Company is currently in the final stages of the permitting
process of Inmaculada's modified Environmental Impact Study with
completion expected during H2.
Costs
AISC was $1,015 per gold equivalent ounce (H1 2021: $890 per
ounce). The increase is mainly explained by industry inflation
affecting fuel, reagents, and supplies. In addition, there was a
lower proportion of mechanised mining. Finally, the comparison was
affected by capital expenditure deferrals in H1 2021, mainly mine
development.
Pallancata
The 100% owned Pallancata silver/gold property is located in the
Region of Ayacucho in southern Peru. Pallancata commenced
production in 2007. Ore from Pallancata is transported 22km to the
Selene plant for processing.
Pallancata summary Six months Six months % change
to 30 June to 30 June
2022 2021
------------- ------------
Ore production (tonnes) 259,058 289,002 (10)
Average silver grade (g/t) 159 237 (33)
Average gold grade (g/t) 0.72 0.86 (16)
Silver produced (koz) 1,167 2,000 (42)
Gold produced (koz) 5.39 7.28 (26)
Silver equivalent produced
(koz) 1,556 2,525 (38)
Gold equivalent produced
(koz) 21.60 35.06 (38)
Silver sold (koz) 1,160 2,000 (42)
Gold sold (koz) 5.36 7.29 (26)
Unit cost ($/t) 137.4 106.0 30
Total cash cost ($/oz Ag
co-product) 24.0 15.6 54
All-in sustaining cost ($/oz
Ag Eq) 33.1 18.0 84
------------------------------ ------------- ------------ ---------
Production
In H1 2022, Pallancata produced 1.6 million silver equivalent
ounces (H1 2021: 2.5 million ounces). Grades have been lower than
expected throughout the first half and consequently, with the rapid
fall in the silver price in the period, the Company has updated the
mine plan for 2022 and is considering all geological options with
regards to future ore production from the Pallancata mining
area.
Costs
AISC was $33.1 per silver equivalent ounce (H1 2021: $18.0 per
ounce). Costs were increased versus H1 2021 mainly due to lower
grades, inflation, and a higher proportion of conventional mining
resulting in higher personnel expenses.
San Jose
The San Jose silver/gold mine is located in Argentina, in the
province of Santa Cruz, 1,750km south west of Buenos Aires. San
Jose commenced production in 2007. Hochschild holds a controlling
interest of 51% in the mine and is the mine operator. The remaining
49% is owned by the minority interest, McEwen Mining Inc.
San Jose summary Six months Six months % change
to to
30 June 2022 30 June 2021
--------------- --------------
Ore production (tonnes) 205,359 246,194 (17)
Average silver grade (g/t) 365 321 14
Average gold grade (g/t) 6.19 5.45 14
Silver produced (koz) 2,123 2,244 (5)
Gold produced (koz) 35.88 38.40 (7)
Silver equivalent produced
(koz) 4,706 5,008 (6)
Gold equivalent produced
(koz) 65.37 69.56 (6)
Silver sold (koz) 2,080 2,236 (7)
Gold sold (koz) 34.62 37.54 (8)
Unit cost ($/t) 309.6 208.6 48
Total cash cost ($/oz Ag
co-product) 13.6 12.6 8
All-in sustaining cost ($/oz
Au Eq) 1,649 1,214 36
------------------------------ --------------- -------------- ---------
Production
The first half 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, in the
first quarter the operation also continued to be impacted by
Covid-related employee absences and also by a fire in the crushing
area, which temporarily affected operations but without any impact
on full year production forecasts or costs (which are expected to
be covered by insurance). Tonnage was consequently lower than
expected although gold grades were higher than forecast resulting
in production of 4.7 million silver equivalent ounces (H1 2021: 5.0
million ounces).
Costs
AISC was $1,649 per gold equivalent ounce (H1 2021: $1,214 per
ounce), higher versus H1 2021 due to inflation affecting production
costs, higher mine development capital expenditure and lower
production. This was partially offset by local currency
devaluation. The company has started a cost optimisation plan to
mitigate inflationary pressures and commodity price volatility.
ADVANCED PROJECT: MARA ROSA
On 22 March 2022, the Company announced that it had received
shareholder approval for the acquisition of Amarillo Gold Inc. in
Brazil with completion occurring on 1 April 2022.
The Mara Rosa project is progressing according to schedule with
the following key highlights:
-- Total project progress currently 9%
-- Detailed engineering 80% complete
-- Long lead time equipment (e.g. ball mills and filters)
purchased
-- Metso 3-stage crusher being delivered to site
-- Construction earthworks ongoing (B1 Water Reservoir, waste
storage facilities)
-- Mining pre-stripping contracts progressing
-- Project powerline construction ongoing
On 10 August, the Company announced that the Goiás state's
environmental authority, the State Secretariat for the Environment
and Sustainable Development (SEMAD), had granted the key permit to
enable the Company to start construction of the processing plant.
It also allows all the required site infrastructure for progressing
the project's critical paths. Capital expenditure for 2022 has been
revised from $120 million to a range of between $90 million and
$110 million.
DEVELOPMENT PROJECT: SNIP
Exploration recommenced during the first quarter of 2022, with
approximately 2,500m drilled from underground. Work also began this
half on the Pre-Feasibility Study, which was awarded to Ausenco
Engineering Canada. This included metallurgical test work, an
evaluation of ARD potential in waste samples, and a flowsheet
trade-off study which were all completed. Processing plant designs
and an updated resources model are expected to conclude in Q3. The
full study remains on track for completion at the end of the year.
In addition, a new 2-year Environmental Baseline program was
approved and data collection began.
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 1
March 2022. 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
------ ------ -------
During the second quarter, approximately 7,300m was drilled by
Hochschild from underground, with all "twin" holes completed by the
end of the quarter. Work in the third quarter will be focused on
finishing the "infill" and "potential" holes in the programme and
logging the resultant core. Assay results are expected through to
the end of the year.
Assay results were received during the period, with the
following highlights:
Vein Results (Twin hole)
215 UG22-297: 2.3m @ 9.5g/t Au & 11g/t Ag
---------------------------------------
215 UG22-289: 8.0m @ 20.2g/t Au & 10g/t Ag
---------------------------------------
221 UG22-291: 3.8m @ 11.8g/t Au & 13g/t Ag
---------------------------------------
226 UG22-289: 8.7m @ 5.8g/t Au & 6g/t Ag
---------------------------------------
233 UG22-297: 4.6m @ 35.0g/t Au & 11g/t Ag
---------------------------------------
246 UG22-293: 2.3m @ 18.8g/t Au & 8g/t Ag
---------------------------------------
The Company has increased the 2022 budget from $9 million to $19
million with the increase mostly reflecting the addition of work on
the baseline study.
DEVELOPMENT PROJECT: VOLCAN
In early 2022, 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.
During the half, work continued to advance the Volcan project.
This included updating the Mineral Resource Estimate as well as
developing an optimised mine and project development plan. During
the third quarter, the Company expects to advance several trade-off
studies aimed at creating additional project value. The results of
the engineering work are expected to be outlined in a new technical
report for Volcan.
BROWNFIELD EXPLORATION
Inmaculada
In the first half, most of the drilling at Inmaculada was in the
second quarter with potential drilling at the Huarmapata area and
resource drilling in the Josefa vein and the Union Shakira vein.
Drilling totalled 4,200m with the best result below from the Josefa
vein:
Vein Results (potential/resource drilling)
Josefa IMM22-139: 2.8m @ 1.9g/t Au & 43g/t Ag
---------------------------------------
During Q3, the plan is to carry out 6,000m of further drilling
in the Josefa vein.
Pallancata
At Pallancata, the year started with 3,139m of potential
drilling 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.
Subsequently, 12,500m of resource drilling was executed in the
second quarter at Laura-Demian, Royropata and Miriam. Whilst the
results are encouraging, the structures are outside the current
permitted area and will require new permits before they can be
brought into the mine plan. Quartz-sulfide veins were intercepted
with grades of between 250 and 1,600 silver equivalent grams per
tonne. Selected results from H1 are below:
Vein Results (potential/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
DHMIR-A16: 1.3m @ 1.0g/t Au & 155g/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
DLDE-A03: 3.8m @ 0.8g/t Au & 184g/t Ag
DLRY-A08: 1.1m @ 4.1g/t Au & 820g/t Ag
------------------------------------------
Laura DLDE-A04: 6.1m @ 0.8g/t Au & 251g/t Ag
DLLAU-A08: 1.3m @ 0.5g/t Au & 274g/t Ag
DLLAU-A09: 0.9m @ 4.7g/t Au & 286g/t Ag
DLLAU-A11: 1.9m @ 0.9g/t Au & 298g/t Ag
------------------------------------------
Royropata DLDE-A06: 4.2m @ 0.6g/t Au & 224g/t Ag
DLRY-A08: 1.5m @ 1.1g/t Au & 345g/t Ag
------------------------------------------
Royropata 2 DLDE-A06: 1.3m @ 3.0g/t Au & 1,039g/t Ag
DLRY-A08: 3.0m @ 1.8g/t Au & 596g/t Ag
------------------------------------------
Royropata 4 DLDE-A06: 17.8m @ 1.2g/t Au & 384g/t Ag
DLRY-A08: 5.1m @ 2.3g/t Au & 647g/t Ag
------------------------------------------
Royropata 5 DLDE-A06: 2.3m @ 3.0g/t Au & 1,446g/t Ag
------------------------------------------
During Q3, there will be 2,000m of further drilling in the vein
structures in the Royropata system.
San Jose
In H1 2022, 5,600 of potential drilling was executed around the
mine area and in the Saavedra area and also 2,000m of resource
drilling in the Olivia and Celina veins, as well starting to
explore the Ciclon project (700m of drilling) further away in the
Santa Cruz province. Selected results from H1 are below:
Vein Results (potential/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
----------------------------------------
Agostina SJD-2468: 4.1m @ 7.5g/t Au & 84g/t Ag
SJD-2469: 5.4m @ 3.3g/t Au & 29g/t Ag
SJD-2471: 1.9m @ 1.6g/t Au & 68g/t Ag
----------------------------------------
Ayelen SE SJM-594: 1.5m @ 6.9g/t Au & 648g/t Ag
----------------------------------------
Ciclon DCE22-02: 2.9m @ 1.0g/t Au & 615g/t Ag
----------------------------------------
During Q3, 2,000m of potential drilling will be carried out on
the Ayelen SE to find new resources.
FINANCIAL REVIEW
The reporting currency of Hochschild Mining PLC is U.S. dollars.
In discussions of financial performance, the Group removes the
effect of exceptional items, unless otherwise indicated, and in the
income statement results are shown both pre and post such
exceptional items. Exceptional items are those items, which due to
their nature or the expected infrequency of the events giving rise
to them, need to be disclosed separately on the face of the income
statement to enable a better understanding of the financial
performance of the Group and to facilitate comparison with prior
periods.
Revenue
Gross revenue [8]
Gross revenue from continuing operations decreased by 12% to
$354.7 million in H1 2022 (H1 2021: $404.4 million) due to the
lower average realised silver prices, and lower silver and gold
production. Output was mainly impacted by lower grades in
Pallancata, and lower treated tonnage in San Jose due to
Covid-related employee absences and a fire in the crushing area
which temporarily affected operations . These were partially offset
by a higher average realised gold price.
In February 2021, the Company hedged 4 million ounces of 2021
silver production at $27.10 per ounce and 4 million ounces of 2022
silver production at $26.86 per ounce. As of June 2022, 2.00
million silver ounces (H1 2021: 1.82 million) were priced at $26.86
(H1 2021: $27.10) per ounce, boosting the realised price.
Gold
Gross revenue from gold in H1 2022 decreased to $211.3 million
(H1 2021: $220.3 million) due to lower gold produced across all
operations. This was partially offset by a 6% increase in the
average realised gold price.
Silver
Gross revenue decreased in H1 2022 to $143.4 million (H1 2021:
$184.1 million) mainly due to a 10% decrease in the average
realised silver price and lower silver production at Pallancata due
to lower tonnage treated and grades.
Gross average realised sales prices
The following table provides figures for average realised prices
( before the deduction of commercial discounts) and ounces sold for
H1 2022 and H1 2021:
Average realised prices Six months to Six months to
30 June 2022 30 June 2021
-------------- --------------
Gold ounces sold (koz) 112.70 124.32
Avg. realised gold price ($/oz) 1,875 1,772
Silver ounces sold (koz) 6,045 7,005
Avg. realised silver price ($/oz) 23.7 26.3
----------------------------------- -------------- --------------
Commercial discounts
Commercial discounts refer to refinery treatment charges,
refining fees and payable deductions for processing concentrate,
and are deducted from gross revenue on a per tonne basis (treatment
charge), per ounce basis (refining fees) or as a percentage of
gross revenue (payable deductions). In H1 2022, the Group recorded
commercial discounts of $7.2 million (H1 2021: $9.8 million) with
the fall explained by the decrease in production. The ratio of
commercial discounts to gross revenue in H1 2022 was 2.0% (H1 2021:
2.4%).
Net revenue
Net revenue was $347.8 million (H1 2021: $394.8 million),
comprising net gold revenue of $208.7 million (H1 2021: $217.3
million) and net silver revenue of $138.8 million (H1 2021: $177.3
million). In H1 2022, gold accounted for 60% and silver for 40% of
the Company's consolidated net revenue (H1 2021: gold 55% and
silver 45%).
Reconciliation of gross revenue by mine to Group net revenue
$000 Six months to Six months to % change
30 June 2022 30 June 2021
-------------- --------------
Gold revenue
Inmaculada 135,893 142,512 (5)
Pallancata 10,084 12,562 (20)
San Jose 65,343 65,190 0
Commercial discounts (2,655) (2,959) (10)
Net gold revenue 208,665 217,305 (4)
-------------- --------------
Silver revenue
Inmaculada 68,303 72,586 (6)
Pallancata 28,920 53,175 (46)
San Jose 46,154 58,386 (21)
Commercial discounts (4,561) (6,890) (34)
---------------------- -------------- -------------- ---------
Net silver revenue 138,816 177,257 (22)
---------------------- -------------- -------------- ---------
Other revenue 300 188 60
---------------------- -------------- -------------- ---------
Net revenue 347,781 394,750 (12)
---------------------- -------------- -------------- ---------
Costs
Total cost of sales before exceptional items was $240.5 million
in H1 2022 (H1 2021: $223.2 million). The direct production cost
excluding depreciation was higher at $174.0 million (H1 2021:
$139.9 million) mainly due to inflation, higher mine development
capex and the use of a higher proportion of conventional mining
methods. D epreciation in production cost decreased to $68.8
million (H1 2021: $73.8 million) due to lower extracted volumes
across all operations. Fixed costs incurred during total or partial
production stoppages were incurred in Argentina and were $3.9
million in H1 2022 (H1 2021: $6.2 million).
$000 Six months Six months % change
to to
30 June 30 June 2021
2022
----------- --------------
Direct production cost excluding
depreciation 174,001 139,939 24
Depreciation in production cost 68,801 73,815 (7)
Other items and workers profit
sharing 2,046 2,944 (31)
Fixed costs during operational
stoppages and reduced capacity 3,870 6,196 (38)
Change in inventories (8,202) 261 (3,243)
---------------------------------- ----------- -------------- ---------
Cost of sales 240,516 223,155 8
---------------------------------- ----------- -------------- ---------
Fixed costs during operational stoppages and reduced
capacity:
$000 Six months Six months % change
to to
30 June 30 June 2021
2022
----------- --------------
Personnel 2,292 5,293 (57)
Third party services 1,495 826 81
Supplies 5 - 100
Depreciation and amortisation 2 - 100
Others 76 77 (1)
------------------------------- ----------- -------------- ---------
Cost of sales 3,870 6,196 (38)
------------------------------- ----------- -------------- ---------
Unit cost per tonne
The Company reported unit cost per tonne at its operations of
$156.6 per tonne in H1 2022, a 31% increase versus H1 2021 ($119.5
per tonne). This was due to the effect of: higher costs resulting
from a scheduled higher proportion of conventional mining methods
across all mining units; inflation; and lower treated tonnage.
Unit cost per tonne by operation (including royalties) [9] :
Operating unit ($/tonne) Six months Six months % change
to to
30 June 30 June 2021
2022
----------- --------------
Peru 119.4 97.4 23
Inmaculada 111.8 93.6 19
Pallancata 137.4 106.0 30
-------------------------- ----------- -------------- ---------
Argentina
San Jose 309.6 208.6 48
-------------------------- ----------- -------------- ---------
Total 156.6 119.5 31
-------------------------- ----------- -------------- ---------
Cash costs
Cash costs include cost of sales, commercial deductions and
selling expenses before exceptional items, less depreciation
included in cost of sales.
Cash cost reconciliation [10]
Six months to 30 June 2022
$000 unless otherwise indicated Inmaculada Pallancata San Total
Jose
----------- ----------- ---------
Group cash cost 74,152 37,802 70,021 181,975
-------------------------------------- ----------- ----------- --------- ---------
(+) Cost of sales [11] 112,680 43,848 77,710 234,238
(-) Depreciation and amortisation in
cost of sales (40,193) (8,754) (18,786) (67,733)
(+) Selling expenses 322 242 6,163 6,727
(+) Commercial deductions [12] 1,343 2,466 4,934 8,743
Gold 1,007 490 2,272 3,769
Silver 336 1,976 2,662 4,974
-------------------------------------- ----------- ----------- --------- ---------
Revenue 204,196 36,538 106,747 347,781
-------------------------------------- ----------- ----------- --------- ---------
Gold 135,893 9,594 63,178 208,665
Silver 68,303 26,944 43,569 138,816
Others - - - 300
-------------------------------------- ----------- ----------- --------- ---------
Ounces sold
-------------------------------------- ----------- ----------- --------- ---------
Gold 72.7 5.4 34.6 112.7
Silver 2,805 1,160 2,080 6,045
-------------------------------------- ----------- ----------- --------- ---------
Group cash cost ($/oz)
-------------------------------------- ----------- ----------- --------- ---------
Co product Au 679 1,853 1,197 970
Co product Ag 8.8 24.0 13.7 12.0
By product Au 76 1,658 687 395
By product Ag (22.4) 23.9 2.2 (5)
-------------------------------------- ----------- ----------- --------- ---------
Six months to 30 June 2021
$000 unless otherwise indicated Inmaculada Pallancata San Total
Jose
----------- ----------- ---------
Group cash cost 65,645 38,643 60,446 164,734
-------------------------------------- ----------- ----------- --------- ---------
(+) Cost of sales [13] 102,416 44,318 70,225 216,959
(-) Depreciation and amortisation in
cost of sales (38,591) (9,912) (22,376) (70,879)
(+) Selling expenses 328 272 6,534 7,134
(+) Commercial deductions [14] 1,492 3,965 6,063 11,520
Gold 997 523 2,535 4,055
Silver 495 3,442 3,528 7,465
-------------------------------------- ----------- ----------- --------- ---------
Revenue 215,098 61,772 117,692 394,750
-------------------------------------- ----------- ----------- --------- ---------
Gold 142,512 12,039 62,754 217,305
Silver 72,586 49,733 54,938 177,257
Others - - - 188
-------------------------------------- ----------- ----------- --------- ---------
Ounces sold
-------------------------------------- ----------- ----------- --------- ---------
Gold 79.5 7.3 37.5 124.3
Silver 2,769 2,000 2,236 7,005
-------------------------------------- ----------- ----------- --------- ---------
Group cash cost ($/oz)
-------------------------------------- ----------- ----------- --------- ---------
Co product Au 547 1,034 859 730
Co product Ag 8.0 15.6 12.6 10.6
By product Au (94) (1,994) 53 (161)
By product Ag (28.1) 13.0 (2.2) (8.1)
-------------------------------------- ----------- ----------- --------- ---------
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 [15]
All-in sustaining cash costs per silver equivalent ounce
Six months to 30 June 2022
$000 unless otherwise Inmaculada Pallancata San Main Corporate Total
indicated José operations & others
----------- ----------- ----------- ------------ ----------
(+) Direct production cost
excluding depreciation
[16] 70,771 35,108 65,704 171,583 - 171,583
(+) Other items and workers
profit sharing in cost
of sales 1,095 951 - 2,046 - 2,046
(+) Operating and exploration
capex for units 34,013 8,236 23,324 65,573 356 65,929
(+) Brownfield exploration
expenses 1,618 3,713 4,324 9,655 1,794 11,449
(+) Administrative expenses
(excl. depreciation) 2,151 385 3,012 5,548 18,502 24,050
(+) Royalties and special
mining tax [17] 2,099 376 - 2,475 1,533 4,008
-------------------------------- ----------- ----------- ----------- ------------ ---------- --------
Sub-total 111,747 48,769 96,364 256,880 22,185 279,065
-------------------------------- ----------- ----------- ----------- ------------ ---------- --------
Au ounces produced 72,666 5,393 35,883 113,942 - 113,942
Ag ounces produced (000s) 2,815 1,167 2,123 6,105 - 6,105
Ounces produced (Ag Eq
000s oz) 8,047 1,556 4,706 14,309 - 14,309
-------------------------------- ----------- ----------- ----------- ------------ ---------- --------
Sub-total ($/oz Ag Eq) 13.9 31.4 20.5 18.0 1.6 19.6
-------------------------------- ----------- ----------- ----------- ------------ ---------- --------
(+) Commercial deductions 1,343 2,466 4,934 8,743 - 8,743
(+) Selling expenses 322 242 6,163 6,727 - 6,727
-------------------------------- ----------- ----------- ----------- ------------ ---------- --------
Sub-total 1,665 2,708 11,097 15,470 - 15,470
-------------------------------- ----------- ----------- ----------- ------------ ---------- --------
Au ounces sold 72,718 5,357 34,622 112,697 - 112,697
Ag ounces sold (000s) 2,805 1,160 2,080 6,045 - 6,045
Ounces sold (Ag Eq 000s
oz) 8,040 1,546 4,573 14,159 - 14,159
-------------------------------- ----------- ----------- ----------- ------------ ---------- --------
Sub-total ($/oz Ag Eq) 0.2 1.8 2.4 1.0 - 1.0
-------------------------------- ----------- ----------- ----------- ------------ ---------- --------
All-in sustaining costs
($/oz Ag Eq) 14.1 33.1 22.9 19.0 1.6 20.6
-------------------------------- ----------- ----------- ----------- ------------ ---------- --------
All-in sustaining costs
($/oz Au Eq) [18] 1,015 2,383 1,649 1,371 112 1,483
-------------------------------- ----------- ----------- ----------- ------------ ---------- --------
Six months to 30 June 2021
$000 unless otherwise Inmaculada Pallancata San Main Corporate Total
indicated Jose operations & others
----------- ----------- ------- ------------ ----------
(+) Direct production cost
excluding depreciation 62,571 30,338 47,030 139,939 - 139,939
(+) Other items and workers
profit sharing in cost
of sales 1,585 1,359 - 2,944 - 2,944
(+) Operating and exploration
capex for units [19] 32,834 5,970 17,149 55,953 498 56,451
(+) Brownfield exploration
expenses 726 1,957 4,701 7,384 1,639 9,023
(+) Administrative expenses
(excl. depreciation) [20] 2,726 783 2,786 6,295 16,803 23,098
(+) Royalties and special
mining tax [21] 2,725 782 - 3,507 3,518 7,025
-------------------------------- ----------- ----------- ------- ------------ ---------- --------
Sub-total 103,167 41,189 71,666 216,022 22,458 238,480
-------------------------------- ----------- ----------- ------- ------------ ---------- --------
Au ounces produced 79,402 7,277 38,396 125,075 - 125,075
Ag ounces produced (000s) 2,777 2,000 2,244 7,021 - 7,021
Ounces produced (Ag Eq
000s oz) 8,494 2,525 5,008 16,027 - 16,027
-------------------------------- ----------- ----------- ------- ------------ ---------- --------
Sub-total ($/oz Ag Eq) 12.1 16.3 14.3 13.5 1.4 14.9
-------------------------------- ----------- ----------- ------- ------------ ---------- --------
(+) Commercial deductions 1,492 3,965 6,063 11,520 - 11,520
(+) Selling expenses 328 272 6,534 7,134 - 7,134
-------------------------------- ----------- ----------- ------- ------------ ---------- --------
Sub-total 1,820 4,237 12,597 18,654 - 18,654
-------------------------------- ----------- ----------- ------- ------------ ---------- --------
Au ounces sold 79,491 7,286 37,540 124,317 - 124,317
Ag ounces sold (000s) 2,769 2,000 2,236 7,005 - 7,005
Ounces sold (Ag Eq 000s
oz) 8,493 2,524 4,938 15,955 - 15,955
-------------------------------- ----------- ----------- ------- ------------ ---------- --------
Sub-total ($/oz Ag Eq) 0.2 1.7 2.6 1.2 - 1.2
-------------------------------- ----------- ----------- ------- ------------ ---------- --------
All-in sustaining costs
($/oz Ag Eq) 12.3 18.0 16.9 14.7 1.4 16.1
-------------------------------- ----------- ----------- ------- ------------ ---------- --------
All-in sustaining costs
($/oz Au Eq) 890 1,296 1,214 1,055 101 1,156
-------------------------------- ----------- ----------- ------- ------------ ---------- --------
Administrative expenses
Administrative expenses were slightly up by 4% to $24.9 million
(H1 2021: $24.0 million) mainly due to travel expenses and
administrative expenses related to Mara Rosa's operations.
Exploration expenses
In H1 2022, exploration expenses increased to $23.8 million (H1
2021: $17.4 million) mainly due to the Snip project's exploration
expenses of $6.9 million (H1 2021: Nil), and higher exploration
expenses at Pallancata of $3.7 million (H1 2021: $2.0 million).
In addition, the Group capitalises part of its brownfield
exploration, which mostly relates to costs incurred converting
potential resources to the Inferred or Measured and Indicated
categories. In H1 2022, the Company capitalised $0.2 million
relating to brownfield exploration (H1 2021: $4.0 million),
bringing the total investment in exploration for H1 2022 to $24.0
million (H1 2021: $21.4 million).
Selling expenses
Selling expenses decreased to $6.7 million (H1 2021: $7.1
million) mainly due to lower volumes sold.
Other income/expenses
Other income was $2.6 million (H1 2021: $1.9 million) with the
increase mainly explained by the recovery of a previously written
off receivable in Mara Rosa of $0.5 million.
Other expenses before exceptional items were $22.9 million (H1
2021: $13.8 million) with the increase mainly due to: a rise in
provisions for mine closures of $10.8 million - mainly due to the
change in estimate at the Ares unit (H1 2021: $1.5 million); an
increase in care and maintenance costs of $4.2 million (H1 2021:
$2.4 million); and higher labour contingencies in Argentina of $1.7
million (H1 2021: $0.2 million). These effects were partially
offset by a decrease in expenses related to the voluntary
redundancy programme in Argentina of $1.0 million (H1 2021: $4.9
million).
Adjusted EBITDA
Adjusted EBITDA decreased by 34% to $130.5 million (H1 2021:
$198.5 million) mainly due to the decrease in revenue explained by
the lower average realised silver price and lower silver and gold
production in addition to higher production costs across all
operations.
Adjusted EBITDA is calculated as profit from continuing
operations before exceptional items, net finance costs, foreign
exchange losses and income tax plus non-cash items (depreciation
and amortisation and changes in mine closure provisions) and
exploration expenses other than personnel and other exploration
related fixed expenses.
$000 unless otherwise indicated Six months to Six months to % change
30 June 2022 30 June 2021
-------------- --------------
Profit from continuing operations before exceptional items, net finance
income/(cost), foreign
exchange loss and income tax 29,413 110,771 (72)
Depreciation and amortisation in cost of sales 67,735 70,879 (4)
Depreciation and amortisation in administrative and other expenses 915 990 (8)
Exploration expenses 23,826 17,436 37
Personnel and other exploration related fixed expenses (4,227) (3,409) 24
Other non-cash income, net [22] 12,863 1,837 505
--------------------------------------------------------------------------- -------------- -------------- ---------
Adjusted EBITDA 130,525 198,504 (34)
--------------------------------------------------------------------------- -------------- -------------- ---------
Adjusted EBITDA margin 38% 50% (24)
--------------------------------------------------------------------------- -------------- -------------- ---------
Finance income
Finance income was $2.2 million (H1 2021: $2.1 million) in line
with the total for H1 2021, with the positive impact from the
discount of mine closure provisions and recovery of interest on tax
disputes being offset by lower interest on cash deposits.
Finance costs
Finance costs decreased from $13.3 million in H1 2021 to $13.1
million in H1 2022, principally due to the net effect of: foreign
exchange transaction costs to acquire $3.3 million dollars in
Argentina in H1 2022 of $2.8 million (H1 2021: costs of $6.3
million to acquire $8.8 million dollars); a loss on the fair value
of C3 Metals Inc. shares of $2.3 million (H1 2021: $nil); and
higher interest expenses of $6.3 million (H1 2021: $4.6 million)
mainly due to additional $100 million medium-term loan drawn down
in December 2021.
Foreign exchange losses
The Group recognised a foreign exchange loss of $2.6 million (H1
2021: $1.8 million loss) as a result of exposures in currencies
other than the functional currency.
Income tax
The Company's Group's pre-exceptional income tax charge was $5.8
million (H1 2021: $59.7 million). The significant decrease in the
charge is mainly explained by the decrease in profitability versus
H1 2021. In addition, there was an increase in the tax rate in
Argentina to 35% during H1 2021, increasing deferred income tax by
$11.5 million in the period.
The effective tax rate (pre-exceptional) for the period was
37.9% (H1 2021: 61.1%), compared to the weighted average statutory
income tax rate of 35.0% (H1 2021: 31.7%). The higher effective tax
rate in H1 2022 versus the average statutory rate is mainly
explained by: the impact of non-recognised tax losses in
non-operating companies increasing the rate by 18.8%; the effect of
Royalties and Special Mining Tax increasing the rate by 11.1%;
partially offset by the effect of local currency revaluation
decreasing the rate by 25.6%.
Exceptional items
Exceptional items in H1 2022 totalled a $9.9 million loss after
tax (H1 2021: $9.5 million loss after tax) related to the
impairment of the investment in Aclara Resources Inc.
The tax effect of the exceptional items was a $nil (2021: $4.5
million tax gain). The total effective tax rate was 107.8% (2021:
65.9%).
Cash flow and balance sheet review
Cash flow
$000 Six months Six months Change
to to
30 June 30 June 2021
2022
----------- --------------
Net cash generated from operating
activities 18,658 119,811 (101,153)
Net cash used in investing activities (199,172) (67,021) (132,151)
Cash flows generated (used in)/from
financing activities 306 (25,268) 25,574
Foreign exchange adjustment (2,257) (2,476) 219
--------------------------------------- ----------- -------------- ----------
Net increase/(decrease) in cash
and cash equivalents during the
period (182,465) 25,046 (207,511)
--------------------------------------- ----------- -------------- ----------
Net cash generated from operating activities decreased from
$119.8 million in H1 2021 to $18.7 million in H1 2022 mainly due to
the lower Adjusted EBITDA of $130.5 million (H1 2021: $198.5
million), and higher temporary cash outflows due to working capital
changes.
Net cash used in investing activities increased to $199.2
million in H1 2022 from $67.0 million in H1 2021 mostly due to the
consideration paid for the acquisition of Amarillo Gold on 1 April
2022 of $123.4 million and higher purchases of property, plant and
equipment .
Cash generated (used in)/from financing activities changed to an
inflow of $0.3 million in H1 2022 from an outflow of $25.3 million
in H1 2021 mainly due to: (i) pre-shipment loans raised in H1 2022
of $13.4 million (H1 2021: $1.8 million), (ii) no repayments of
debt in H1 2022 (H1 2021: $6.3 million), (iii) payment of $0.3
million in dividends to shareholders and to Hochschild's minority
shareholder at San Jose (1H 2021: $7.6 million).
Working capital
$000 As at As at
30 June 2022 31 December 2021
--------------
Trade and other receivables 84,973 69,749
Inventories 57,678 49,184
Derivative financial assets/(liabilities) 19,236 14,073
Income tax payable, net 987 (22,322)
Trade and other payables (126,136) (133,482)
Provisions (14,305) (32,058)
------------------------------------------- -------------- ------------------
Working capital 22,433 (54,856)
------------------------------------------- -------------- ------------------
The Group's working capital position in H1 2022 increased by
$77.3 million from $(54.9) million to $22.4 million. The key
drivers of the increase were: higher trade and other receivables of
$15.2 million; higher inventories of $8.5 million; lower income tax
payable of $23.3 million, and lower provisions of $17.8
million.
Net cash/(debt)
$000 unless otherwise indicated As at As at
30 June 2022 31 December 2021
--------------
Cash and cash equivalents 204,324 386,789
Non-current borrowings (300,000) (300,000)
Current borrowings[23] (13,595) (499)
--------------------------------- -------------- ------------------
Net cash/(debt) (109,271) 86,290
--------------------------------- -------------- ------------------
The Group's reported net debt position was $109.3 million as at
30 June 2022 (31 December 2021: net cash position of $86.3
million). The decrease in cash and cash equivalents is mainly due
to the consideration paid for the Amarillo Gold acquisition of
$123.4 million and lower cash generated from operating activities
.
Capital expenditure ([24])
$000 Six months Six months to
to 30 June 2021
30 June 2022
--------------
Inmaculada 34,013 32,834
Pallancata 8,236 5,970
San Jose 24,551 18,127
Operations 66,800 56,931
--------------
Mara Rosa 133,516 -
Aclara - 6,366
Other 2,134 3,616
------------ -------------- --------------
Total 202,450 66,913
------------ -------------- --------------
H1 2022 capital expenditure of $202.5 million (H1 2021: $66.9
million) mainly comprised the acquisition cost of Mara Rosa and
subsequent capex of $133.5 million and operational capex of $66.8
million (H1 2021: $56.9 million). Operational capex was higher
mainly due to higher mine development capital expenditure in San
Jose, and the comparison affected by capital expenditure deferrals
in H1 2021, mainly mine development
Non-IFRS Financial Performance Measures
The Company has included certain non-IFRS measures in this news
release. The Company believes that these measures, in addition to
conventional measures prepared in accordance with IFRS, provide
investors an improved ability to evaluate the underlying
performance of the Company. The non-IFRS measures are intended to
provide additional information and should not be considered in
isolation or as a substitute for measures of performance prepared
in accordance with IFRS. These measures do not have any
standardised meaning prescribed under IFRS, and therefore may not
be comparable to other issuers.
Forward looking statements
This announcement contains certain forward looking statements,
including such statements within the meaning of Section 27A of the
US Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. In particular, such
forward looking statements may relate to matters such as the
business, strategy, investments, production, major projects and
their contribution to expected production and other plans of
Hochschild Mining PLC and its current goals, assumptions and
expectations relating to its future financial condition,
performance and results.
Forward-looking statements include, without limitation,
statements typically containing words such as "intends", "expects",
"anticipates", "targets", "plans", "estimates" and words of similar
import. By their nature, forward looking statements involve risks
and uncertainties because they relate to events and depend on
circumstances that will or may occur in the future. Actual results,
performance or achievements of Hochschild Mining PLC may be
materially different from any future results, performance or
achievements expressed or implied by such forward looking
statements. Factors that could cause or contribute to differences
between the actual results, performance or achievements of
Hochschild Mining PLC and current expectations include, but are not
limited to, legislative, fiscal and regulatory developments,
competitive conditions, technological developments, exchange rate
fluctuations and general economic conditions. The Company cautions
against undue reliance on any forward looking statement or
guidance, particularly in light of the current economic climate and
the significant volatility, uncertainty and disruption caused by
Covid-19. Past performance is no guide to future performance and
persons needing advice should consult an independent financial
adviser.
The forward looking statements reflect knowledge and information
available at the date of preparation of this announcement. Except
as required by the Listing Rules and applicable law, Hochschild
Mining PLC does not undertake any obligation to update or change
any forward looking statements to reflect events occurring after
the date of this announcement. Nothing in this announcement should
be construed as a profit forecast.
RISKS
The principal risks and uncertainties facing the Company in
respect of the year ended 31 December 2021 are set out in detail in
the Risk Management section of the 2021 Annual Report and in Note
38 to the 2021 Consolidated Financial Statements.
The key risks disclosed in the 2021 Annual Report (available at
www.hochschildmining.com ) are categorised as:
-- Financial risks comprising commodity price risk and
commercial counterparty risk;
-- Operational risks including the risks associated with
operational performance, business interruption/supply chain,
information security and cybersecurity, exploration & reserve
and resource replacement and personnel risks;
-- Macro-economic risks which include political, legal and
regulatory risks; and
-- Sustainability risks including risks associated with health
and safety, Covid-19, environmental, climate change and community
relations.
These risks continue to apply to the Company in respect of the
remaining six months of the financial year.
RELATED PARTY TRANSACTIONS
Related party transactions are disclosed in Note 23 to the
interim condensed consolidated financial statements
GOING CONCERN
After making enquiries, the Directors have a reasonable
expectation that the Group has adequate resources to continue in
operational existence for the duration of the Going Concern Period
until 30 September 2023. Accordingly, they continue to adopt the
going concern basis in preparing the interim condensed set of
financial statements. For further detail refer to the detailed
discussion of the assumptions outlined in the Going concern
disclosures in Note 2 "Significant Accounting Policies" of the
interim condensed consolidated financial statements.
STATEMENT OF DIRECTORS' RESPONSIBILITIES
The Directors confirm that, to the best of their knowledge, the
interim condensed consolidated financial statements have been
prepared in accordance with UK adopted International Accounting
Standard 34 "Interim Financial Reporting" and that the interim
management report includes a fair review of the information
required by Disclosure Guidance and Transparency Rules 4.2.7R and
4.2.8R.
A list of current Directors and their functions is maintained on
the Company's website.
For and on behalf of the Board
Ignacio Bustamante
Chief Executive Officer
16 August 2022
INDEPENT REVIEW REPORT TO HOCHSCHILD MINING PLC
Conclusion
We have been engaged by Hochschild Mining PLC (the 'Company') to
review the condensed set of financial statements in the half-yearly
financial report for the six months ended 30 June 2022 which
comprises the interim condensed consolidated income statement, the
interim condensed consolidated statement of comprehensive income,
the interim condensed consolidated statement of financial position,
the interim condensed consolidated statement of cash flows, the
interim condensed consolidated statement of changes in equity and
the related notes 1 to 24. We have read the other information
contained in the half yearly financial report and considered
whether it contains any apparent misstatements or material
inconsistencies with the information in the condensed set of
financial statements.
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the half-yearly financial report for the six months ended 30
June 2022 is not prepared, in all material respects, in accordance
with UK adopted International Accounting Standard 34 and the
Disclosure Guidance and Transparency Rules of the United Kingdom's
Financial Conduct Authority.
Basis for Conclusion
We conducted our review in accordance with International
Standard on Review Engagements 2410 (UK) "Review of Interim
Financial Information Performed by the Independent Auditor of the
Entity" issued by the Financial Reporting Council. A review of
interim financial information consists of making enquiries,
primarily of persons responsible for financial and accounting
matters, and applying analytical and other review procedures. A
review is substantially less in scope than an audit conducted in
accordance with International Standards on Auditing (UK) and
consequently does not enable us to obtain assurance that we would
become aware of all significant matters that might be identified in
an audit. Accordingly, we do not express an audit opinion.
As disclosed in note 2, the annual financial statements of the
Group are prepared in accordance with UK adopted International
Accounting Standards. The condensed set of financial statements
included in this half-yearly financial report has been prepared in
accordance with UK adopted International Accounting Standard 34,
"Interim Financial Reporting".
Conclusions Relating to Going Concern
Based on our review procedures, which are less extensive than
those performed in an audit as described in the Basis for
Conclusion section of this report, nothing has come to our
attention to suggest that management have inappropriately adopted
the going concern basis of accounting or that management have
identified material uncertainties relating to going concern that
are not appropriately disclosed.
This conclusion is based on the review procedures performed in
accordance with this ISRE, however future events or conditions may
cause the entity to cease to continue as a going concern.
Responsibilities of the directors
The directors are responsible for preparing the half-yearly
financial report in accordance with the Disclosure Guidance and
Transparency Rules of the United Kingdom's Financial Conduct
Authority.
In preparing the half-yearly financial report, the directors are
responsible for assessing the Group's ability to continue as a
going concern, disclosing, as applicable, matters related to going
concern and using the going concern basis of accounting unless the
directors either intend to liquidate the Company or to cease
operations, or have no realistic alternative but to do so.
Auditor's Responsibilities for the review of the financial
information
In reviewing the half-yearly report, we are responsible for
expressing to the Company a conclusion on the condensed set of
financial statements in the half-yearly financial report. Our
conclusion, including our Conclusions Relating to Going Concern,
are based on procedures that are less extensive than audit
procedures, as described in the Basis for Conclusion paragraph of
this report.
Use of our report
This report is made solely to the Company in accordance with
guidance contained in International Standard on Review Engagements
2410 (UK) "Review of Interim Financial Information Performed by the
Independent Auditor of the Entity" issued by the Financial
Reporting Council. To the fullest extent permitted by law, we do
not accept or assume responsibility to anyone other than the
Company, for our work, for this report, or for the conclusions we
have formed.
Ernst & Young LLP
London
17 August 2022
Interim condensed consolidated income statement
Six months ended Six months ended
30 June 2022 (Unaudited) 30 June 2021 (Unaudited)
------------------------- -------------------------
Exceptional Exceptional
Before items Before items
exceptional (Note exceptional (Note
items 9) Total items 9) Total
Notes US$000 US$000 US$000 US$000 US$000 US$000
------------------ ----- ----------- ----------- --------- ----------- ----------- ---------
Continuing
operations
Revenue 5 347,781 - 347,781 394,750 - 394,750
Cost of sales 6 (240,516) - (240,516) (223,155) (13,091) (236,246)
------------------- ----- ----------- ----------- --------- ----------- ----------- ---------
Gross profit 107,265 - 107,265 171,595 (13,091) 158,504
------------------- ----- ----------- ----------- --------- ----------- ----------- ---------
Administrative
expenses (24,913) - (24,913) (24,042) - (24,042)
Exploration
expenses 7 (23,826) - (23,826) (17,436) - (17,436)
Selling expenses 8 (6,727) - (6,727) (7,134) - (7,134)
Other income 9 2,580 - 2,580 1,857 - 1,857
Other expenses 9 (22,902) - (22,902) (13,770) (865) (14,635)
Impairment and
Write-off
of non-financial
assets 13 (2,064) - (2,064) (299) - (299)
------------------- ----- ----------- ----------- --------- ----------- ----------- ---------
Profit/(loss) from
continuing
operations
before net finance
income/(cost),
foreign
exchange loss and
income tax 29,413 - 29,413 110,771 (13,956) 96,815
------------------- ----- ----------- ----------- --------- ----------- ----------- ---------
Share of loss of an
associate 15 (551) (9,923) (10,474) - - -
Finance income 11 2,163 - 2,163 2,061 - 2,061
Finance costs 11 (13,083) - (13,083) (13,252) - (13,252)
Foreign exchange
loss (2,649) - (2,649) (1,777) - (1,777)
------------------- ----- ----------- ----------- --------- ----------- ----------- ---------
Profit/(loss) from
continuing
operations
before income tax 15,293 (9,923) 5,370 97,803 (13,956) 83,847
------------------- ----- ----------- ----------- --------- ----------- ----------- ---------
Income tax
(expense)/benefit 12 (5,790) - (5,790) (59,738) 4,485 (55,253)
------------------- ----- ----------- ----------- --------- ----------- ----------- ---------
Profit/(loss) for
the period from
continuing
operations 9,503 (9,923) (420) 38,065 (9,471) 28,594
------------------- ----- ----------- ----------- --------- ----------- ----------- ---------
Attributable to:
Equity shareholders
of the parent 7,156 (9,923) (2,767 ) 42,063 (7,338) 34,725
Non-controlling
interests 2,347 - 2,347 (3,998) (2,133) (6,131)
------------------- ----- ----------- ----------- --------- ----------- ----------- ---------
9,503 (9,923) (420) 38,065 (9,471) 28,594
----- ----------- ----------- --------- ----------- ----------- ---------
Basic and diluted
earnings/(loss)
per
ordinary share
from
continuing
operations
for the period
(expressed
in U.S. dollars
per
share) 0.01 (0.02) (0.01) 0.08 (0.01) 0.07
------------------- ----- ----------- ----------- --------- ----------- ----------- ---------
Interim condensed consolidated statement of comprehensive
income
Six months ended
30 June
----------------------------------
2022 (Unaudited) 2021 (Unaudited)
Notes US$000 US$000
----- ---------------- ----------------
(Loss)/profit for the period (420) 28,594
------------------------------------------------ ----- ---------------- ----------------
Other comprehensive income that might
be reclassified to profit or loss in
subsequent periods; net of tax:
Net gain on cash flow hedges 16 6,734 7,151
Deferred tax charge on cash flow hedges (1,987) (2,109)
Exchange differences on translating foreign
operations (1) (18,883) (1,660)
Share of other comprehensive loss of
an associate (1,541) -
------------------------------------------------ ----- ---------------- ----------------
(15,677) 3,382
----- ---------------- ----------------
Other comprehensive income that will
not be reclassified to profit or loss
in subsequent periods; net of tax:
Net (loss)/gain on equity instruments
at fair value through other comprehensive
income ("OCI") (159) 154
------------------------------------------------ ----- ---------------- ----------------
(159) 154
-----
Other comprehensive (loss)/income for
the period, net of tax (15,836) 3,536
------------------------------------------------ ----- ---------------- ----------------
Total comprehensive (loss)/income for
the period (16,256) 32,130
------------------------------------------------ ----- ---------------- ----------------
Total comprehensive (loss)/income attributable
to:
Equity shareholders of the parent (18,603) 38,261
Non-controlling interests 2,347 (6,131)
------------------------------------------------ ----- ---------------- ----------------
(16,256) 32,130
----- ---------------- ----------------
1 Foreign exchange effect generated in the Group's companies
when the functional currency is the local currency. Increase in
2022 mainly explained by Amarillo Minaracao do Brasil Ltda.,
subsidiary of the Amarillo Gold Group, purchased on 1 April 2022 of
US$ 13,451,000.
Interim condensed consolidated statement of financial
position
As at
30 As at 31
June December
2022 2021
(Unaudited)
Notes US$000 US$000
--------------------------------------- ----- ------------- ----------
ASSETS
--------------------------------------- ----- ------------- ----------
Non-current assets
Property, plant and equipment 13 755,941 738,119
Evaluation and exploration assets 14 221,526 123,304
Intangible assets 16,980 18,094
Investment in an associate 15 31,544 43,559
Financial assets at fair value through
OCI 16 502 661
Financial assets at fair value through
profit and loss 16 873 3,155
Trade and other receivables 3,835 2,470
Derivative financial assets 16 6,613 5,042
Deferred income tax assets 17 5,757 484
-------------------------------------------- -----
1,043,571 934,888
----- ------------- ----------
Current assets
Inventories 57,678 49,184
Trade and other receivables 84,973 69,749
Derivative financial assets 16 19,236 14,073
Income tax receivable 2,757 32
Cash and cash equivalents 18 204,324 386,789
-------------------------------------------- -----
368,968 519,827
----- ------------- ----------
Total assets 1,412,539 1,454,715
-------------------------------------------- ----- ------------- ----------
EQUITY AND LIABILITIES
--------------------------------------- ----- ------------- ----------
Capital and reserves attributable
to shareholders of the Parent
Equity share capital 21 9,061 226,506
Share premium 21 - 438,041
Other reserves (234,192) (217,657)
Retained earnings 891,271 248,664
-------------------------------------------- ----- ------------- ----------
666,140 695,554
----- ------------- ----------
Non-controlling interests 65,951 63,890
-------------------------------------------- -----
Total equity 732,091 759,444
-------------------------------------------- ----- ------------- ----------
Non-current liabilities
Trade and other payables 3,262 2,815
Borrowings 19 300,000 300,000
Provisions 20 137,825 116,835
Deferred income tax liabilities 17 83,555 87,228
-------------------------------------------- ----- ------------- ----------
524,642 506,878
----- ------------- ----------
Current liabilities
Trade and other payables 126,136 133,482
Borrowings 19 13,595 499
Provisions 20 14,305 32,058
Income tax payable 1,770 22,354
-------------------------------------------- -----
155,806 188,393
----- ------------- ----------
Total liabilities 680,448 695,271
-------------------------------------------- ----- ------------- ----------
Total equity and liabilities 1,412,539 1,454,715
-------------------------------------------- ----- ------------- ----------
Interim condensed consolidated statement of cash flows
Six months ended
30 June
----------------------------------
2022 (Unaudited) 2021 (Unaudited)
Notes US$000 US$000
------------------------------------------------------------------ ----- ---------------- ----------------
Cash flows from operating activities
Cash generated from operations 24 41,208 140,205
Interest received 1,069 1,121
Interest paid 19 (3,814) (2,354)
Payment of mine closure costs (3,789) (2,638)
Income tax paid (16,016) (16,523)
------------------------------------------------------------------- ----- ---------------- ----------------
Net cash generated from operating
activities 18,658 119,811
------------------------------------------------------------------- ----- ---------------- ----------------
Cash flows from investing activities
Purchase of property, plant and equipment (82,590) (52,956)
Purchase of evaluation and exploration
assets (113,625) (12,452)
Purchase of intangibles (354) -
Purchase of Argentinian bonds 11(2) (6,091) (15,161)
Purchase of financial assets at fair
value to OCI - (7)
Proceeds from sale of Argentinian
bonds 11(2) 3,289 8,815
Proceeds from sale of financial assets
at fair value through OCI - 9
Proceeds from sale of financial assets
at fair value though profit and
loss......................................................... - 4,726
Proceeds from sale of property, plant
and equipment 13 199 5
------------------------------------------------------------------- -----
Net cash used in investing activities (199,172) (67,021)
------------------------------------------------------------------- ----- ---------------- ----------------
Cash flows from financing activities
Proceeds from borrowings 19 13,411 1,804
Repayment of borrowings - (6,309)
Payment of lease liabilities (821) (1,200)
Dividends paid to shareholders 22 (11,998) (12,002)
Dividends paid to non-controlling
interests 22 (286) (7,561)
------------------------------------------------------------------- -----
Cash flows generated from/(used
in) financing activities 306 (25,268)
------------------------------------------------------------------- ----- ---------------- ----------------
Net increase/(decrease) in cash and
cash equivalents during the period (180,208) 27,522
Impact of foreign exchange (2,257) (2,476)
Cash and cash equivalents at beginning
of period 386,789 231,883
------------------------------------------------------------------- ----- ---------------- ----------------
Cash and cash equivalents at end
of period 18 204,324 256,929
------------------------------------------------------------------- ----- ---------------- ----------------
Interim condensed consolidated statement of changes in
equity
Other reserves
--------
Share Fair
of value Capital
Unrealised other reserve and
gain/ compre- of reserves
(loss) hensive financial attributable
on hedges loss assets to
US$000 of an at fair shareholders
Equity asso- value Cumulative Share-based Total of
share Share Treasury Dividends ciate through translation Merger payment other Retained the Non-controlling Total
capital premium shares expired US$000 OCI adjustment reserve reserve reserves earnings Parent interests equity
Notes US$000 US$000 US$000 US$000 US$000 US$000 US$000 US$000 US$000 US$000 US$000 US$000 US$000
Balance at 1
January
2022 226,506 438,041 - 99 13,476 (9) 74 (25,163) (210,046) 3,912 (217,657) 248,664 695,554 63,890 759,444
----------------- ----- --------- --------- --------- --------- ------------- -------- --------- ----------- --------- ----------- --------- --------- ------------ --------------- --------
Other
comprehensive
income/(loss) - - - - 4,747 (1,541) (159) (18,883) - - (15,836) - (15,836) - (15,836)
Loss for the
period - - - - - - - - - - - (2,767) (2,767) 2,347 (420)
----------------- ----- --------- --------- --------- --------- ------------- -------- --------- ----------- --------- ----------- --------- --------- ------------ --------------- --------
Total
comprehensive
income/(loss)
for
the period - - - - 4,747 (1,541) (159) (18,883) - - (15,836) (2,767) (18,603) 2,347 (16,256)
----------------- ----- --------- --------- --------- --------- ------------- -------- --------- ----------- --------- ----------- --------- --------- ------------ --------------- --------
Dividends 22 - - - - - - - - - - - (11,998) (11,998) - (11,998)
Dividends paid to
non-controlling
interest 22 - - - - - - - - - - - - - (286) (286)
Issuance of
deferred
bonus shares 21 303,268 - - - - - - - - - - (303,268) - - -
Cancelation of
deferred
bonus shares 21 (303,268) - - - - - - - - - - 303,268 - - -
Cancelation of
share
premium account 21 - (438,041) - - - - - - - - - 438,041 - - -
Nominal value
reduction 21 (217,445) - - - - - - - - - - 217,445 - - -
Share-based
payments - - - - - - - - - 1,187 1,187 - 1,187 - 1,187
Forfeiture of
share
options - - - - - - - - - (1,886) (1,886) 1,886 - - -
----------------- ----- --------- --------- --------- --------- ------------- -------- --------- ----------- --------- ----------- --------- --------- ------------ --------------- --------
Balance at 30
June
2022 (unaudited) 9,061 - - 99 18,223 (1,550) (85) (44,046) (210,046) 3,213 (234,192) 891,271 666,140 65,951 732,091
----------------- ----- --------- --------- --------- --------- ------------- -------- --------- ----------- --------- ----------- --------- --------- ------------ --------------- --------
Balance at 1
January
2021 226,506 438,041 - 99 (4,169) - (205) (13,876) (210,046) 2,533 (225,664) 287,652 726,535 79,550 806,085
----------------- ----- --------- --------- --------- --------- ------------- -------- --------- ----------- --------- ----------- --------- --------- ------------ --------------- --------
Other
comprehensive
income/(loss) - - - - 5,042 - 154 (1,660) - - 3,536 - 3,536 - 3,536
Profit for the
period - - - - - - - - - - - 34,725 34,725 (6,131) 28,594
----------------- ----- --------- --------- --------- --------- ------------- -------- --------- ----------- --------- ----------- --------- --------- ------------ --------------- --------
Total
comprehensive
income/(loss)
for
the period - - - - 5,042 - 154 (1,660) - - 3,536 34,725 38,261 (6,131) 32,130
----------------- ----- --------- --------- --------- --------- ------------- -------- --------- ----------- --------- ----------- --------- --------- ------------ --------------- --------
Sale of financial
assets at fair
value
through OCI - - - - - - 18 - - - 18 (18) - - -
Dividends 22 - - - - - - - - - - - (12,002) (12,002) - (12,002)
Dividends paid to
non-controlling
interest 22 - - - - - - - - - - - - - (7,561) (7,561)
Treasury shares - - - - - - - - - - - - - - -
Share-based
payments - - - - - - - - - 709 709 - 709 - 709
Forfeit of share
options - - - - - - - - - (1,063) (1,063) 1,063 - - -
----------------- ----- --------- --------- --------- --------- ------------- -------- --------- ----------- --------- ----------- --------- --------- ------------ --------------- --------
Balance at 30
June
2021 (unaudited) 226,506 438,041 - 99 873 - (33) (15,536) (210,046) 2,179 222,464 311,420 753,503 65,858 819,361
----------------- ----- --------- --------- --------- --------- ------------- -------- --------- ----------- --------- ----------- --------- --------- ------------ --------------- --------
Notes to the interim condensed consolidated financial
statements
1 Corporate Information
Hochschild Mining PLC (hereinafter the "Company" and together
with its subsidiaries, the "Group") is a public limited company
incorporated on 11 April 2006 under the Companies Act 1985 as a
limited company and registered in England and Wales with registered
number 05777693. The Company's registered office is located at 17
Cavendish Square, London W1G 0PH, United Kingdom. Its ordinary
shares are traded on the London Stock Exchange.
The Group's principal business is the mining, processing and
sale of gold and silver. The Group has two operating mines
(Pallancata and Inmaculada) located in Southern Peru, and one
operating mine (San Jose) located in Argentina. The Group also has
a portfolio of projects located across Peru, Argentina, Mexico,
Brazil and Chile at various stages of development.
These interim condensed consolidated financial statements were
approved for issue on behalf of the Board of Directors on 16 August
2022.
2 Significant Accounting Policies
Basis of preparation
These interim condensed consolidated financial statements set
out the Group's financial position as at 30 June 2022 and 31
December 2021 and its financial performance and cash flows for the
six months ended 30 June 2022 and 30 June 2021.
They have been prepared in accordance with the Disclosure and
Transparency Rules of the Financial Conduct Authority and UK
adopted International Accounting Standard 34, "Interim Financial
Reporting". Accordingly, the interim condensed consolidated
financial statements do not include all the information required
for full annual financial statements and therefore, should be read
in conjunction with the Group's 2021 annual consolidated financial
statements as published in the 2021 Annual Report. The annual
financial statements of the Group will be prepared in accordance
with UK adopted IFRS.
The interim condensed consolidated financial statements do not
constitute statutory accounts as defined in the Companies Act 2006.
The financial information for the full year is based on the
statutory accounts for the financial year ended 31 December 2021. A
copy of the statutory accounts for that year, which were prepared
in accordance with International Accounting Standards in conformity
with the requirements of the Companies Act 2006 and International
Financial Reporting Standards (IFRS) adopted pursuant to Regulation
(EC) No 1606/2002 as it applied in the European Union (EU) has been
delivered to the Registrar of Companies. The auditor's report under
section 495 of the Companies Act 2006 in relation to those accounts
was unmodified and did not include a reference to any matters to
which the auditor drew attention by way of emphasis without
qualifying the report and did not contain a statement under s498(2)
or s498(3) of the Companies Act 2006.
The impact of the seasonality or cyclicality of operations is
not regarded as significant on the interim condensed consolidated
financial statements.
The interim condensed consolidated financial statements are
presented in US dollars ($) and all monetary amounts are rounded to
the nearest thousand ($000) except when otherwise indicated.
Critical accounting estimates and judgements
The impact of Covid-19 on the Group has been considered in the
preparation of the interim financial statements including our
evaluation of critical accounting estimates and judgements.
Many of the amounts included in the financial statements involve
the use of judgement and/or estimation. These judgements and
estimates are based on management's best knowledge of the relevant
facts and circumstances, having regard to prior experience, but
actual results may differ from the amounts included in the
financial statements. Information about such judgements and
estimates is contained in the accounting policies and/or the notes
to the financial statements.
The significant accounting judgments, estimates and assumptions
remain consistent with those disclosed in the consolidated
financial statements for the year ended 31 December 2021. The most
significative are:
Critical judgements:
-- Assessment of impairment indicators for the Group's GCUs - note 13
-- Pandemic expenses - note 10
-- Acquiring a subsidiary or a group of assets - note 4.
In identifying a business combination or acquisition of assets
the Group considers the underlying inputs, processes and outputs
acquired as a part of the transaction. For an acquired set of
activities and assets to be considered a business there must be at
least some inputs and processes that have the capability to achieve
the purposes of the Group. Where significant inputs and processes
have not been acquired, a transaction is considered to be the
purchase of assets. For the assets and assumed liabilities acquired
the Group allocates the total consideration paid (including
directly attributable transaction costs) based on the relative fair
values of the underlying items. On 1 April 2022 the Group acquired
the control of Amarillo Gold Group (note 4). The transaction was
accounted as a purchase of assets as no significant systems,
processes or outputs were acquired, with the main asset acquired
being the Posse gold project.
The Group analyses the effect of pandemics on its operations and
accounting treatment, because they generate stoppages, low capacity
production, excess absenteeism and incremental cost. In the case of
Covid-19, the fixed 'normal' production costs during the stoppage
are recognised as expenses and are not considered cost of the
inventories produced. In the income statement these fixed costs are
classified as pre-exceptional.
To determine whether the incremental Covid-related costs should
be recognised as exceptional expenses, consideration has been given
as to whether they meet the criteria as set out in the Groups'
accounting policy (note 2z) in the 2021 Annual Report, in
particular regarding the expected infrequency of the events that
have given rise to them.
As at 30 June 2022, the valuation of certain of the Group's
assets and liabilities reflect the changes to certain assumptions
used in the determination of their value, such as future gold and
silver prices, discount rates, exchange rates, and interest rates
(note 16). These assumptions are subject to greater variability
than normal under the current Covid-19 environment.
Significant estimates:
-- Mine closure estimates - note 20
Changes in accounting policies and disclosures
The accounting policies adopted in the preparation of the
interim condensed consolidated financial statements are consistent
with those followed in the preparation of the Group's annual
consolidated financial statements for the year ended 31 December
2021, except for the adoption of new standards and interpretations
effective from 1 January 2022. The Group has not early adopted any
other standard, interpretation or amendment that has been issued
but is not yet effective. Several amendments apply for the first
time in 2022, but do not have an impact on the interim condensed
consolidated financial statements of the Group.
Going concern
The Directors have reviewed Group liquidity and covenant
forecasts to assess whether the Group is able to continue in
operation for the period to 30 September 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 potential downside scenarios, consideration was
given to the year-on-year reduction in the cost of complying with
Covid-19 related protocols given the relaxation of mandated
requirements and the impact of near-term cost inflation on Life of
Mine projections.
With regards to Covid-19, the Directors consider the risk of
Covid-related suspensions across all operations to be very low
based on trends experienced in the first half of 2022. While this
assessment takes into account the effectiveness of the Group's
health protocols, it is also dependent on:
-- the continued progress in Peru and Argentina with regards to
their respective government's vaccination rollout programmes which,
at the time of writing, are proceeding to administer the fourth
dose of their selected vaccine; and
-- the effectiveness of these vaccines relative to new variants of the virus.
The Directors have also considered the ongoing political
uncertainty in Peru which, when combined with records level of
inflation, has led to a heightened risk of social unrest.
Accordingly, the analysis reflects (a) the possibility of future
increases in the level of tax and royalties payable despite the
fact that no such measures have been announced and (b) operational
stoppages.
For purposes of the review, the Base Scenario assumed budgeted
production for the year, the most recently approved Life of Mine
plan, budgeted capex for the construction of the Mara Rosa mine and
precious metal prices of $1,802/oz for gold and $23.4/oz for silver
(the "Assumed Prices"). The Directors also considered "Severe" and
"Remote" scenarios, which were considered to be unlikely by the
Directors. The former takes into account, a four-week suspension of
all operations during H2 2022 and an increase in royalties and
taxes. The latter analyses the cumulative impact of the Severe
scenario and precious metal prices which are 20% lower than the
Assumed Prices. Those prices would be significantly below current
spot and futures prices. In both of these scenarios, it has been
assumed that $50 million of the Company's approved credit lines
have been utilised and furthermore, on the occurrence of the Remote
scenario, costs and capital expenditure would be reduced by
15%.
Under all scenarios and metal price assumptions and
sensitivities, the cash balance remained more than adequate for the
Group's forecast expenditure with sufficient headroom maintained to
comply with debt covenants.
The results of a reverse stress test were also considered.
After their thorough review, the Directors have a reasonable
expectation that the Group has adequate resources to continue in
operational existence during the Going Concern Period. Accordingly,
they continue to adopt the going concern basis in preparing the
condensed set of financial statements.
3 Segment reporting
The following tables present revenue and profit/(loss)
information for the Group's operating segments for the six months
ended 30 June 2022 and 2021 and asset information as at 30 June
2022 and 31 December 2021 respectively:
Six months ended
30 June 2022 Other Total
San Adjustments
Pallancata Jose Inmaculada Exploration and eliminations
(Unaudited) US$000 US$000 US$000 US$000 US$000 US$000 US$000
------------------ ----------- ------- ----------- ------------ -------- ---------------- ---------
Revenue from external
customers 39,084 110,804 204,262 - 300 - 354,450
Inter segment revenue - - - - 4,834 (4,834) -
----------------------- ----------- ------- ----------- ------------ -------- ---------------- ---------
Total revenue from
customers 39,084 110,804 204,262 - 5,134 (4,834) 354,450
----------------------- ----------- ------- ----------- ------------ -------- ---------------- ---------
Provisional pricing
adjustments (2,546) (4,057) (66) - - - (6,669)
-----------------------
Total revenue 36,538 106,747 204,196 - 5,134 (4,834) 347,781
----------------------- ----------- ------- ----------- ------------ -------- ---------------- ---------
Segment profit/(loss) (8,614) 18,436 86,617 (24,286) 4,098 461 76,712
----------------------- ----------- ------- ----------- ------------ -------- ---------------- ---------
Others(1) (71,342)
----------------------- ----------- ------- ----------- ------------ -------- ---------------- ---------
Profit from continuing
operations before
income tax 5,370
----------------------- ----------- ------- ----------- ------------ -------- ---------------- ---------
As at 30 June 2022
(Unaudited)
Assets
------------------ ----------- ------- ----------- ------------ -------- ---------------- ---------
Capital expenditure 8,225 24,551 34,013 135,067 594 - 202,450
----------------------- ----------- ------- ----------- ------------ -------- ---------------- ---------
Current assets 14,763 44,367 18,336 - 4,399 - 81,865
Other non-current
assets 3,241 166,895 507,924 272,157 44,230 - 994,447
----------------------- ----------- ------- ----------- ------------ -------- ---------------- ---------
Total segment assets 18,004 211,262 526,260 272,157 48,629 - 1,076,312
----------------------- ----------- ------- ----------- ------------ -------- ---------------- ---------
Not reportable
assets(2) - - - - 336,227 - 336,227
----------------------- ----------- ------- ----------- ------------ -------- ---------------- ---------
Total assets 18,004 211,262 526,260 272,157 384,856 - 1,412,539
----------------------- ----------- ------- ----------- ------------ -------- ---------------- ---------
1 Comprised of administrative expenses of US$24,913,000, other
income of US$2,580,000, other expenses of US$22,902,000, impairment
and write off of non-financial assets of US$2,064,000, share of
losses of an associate of US$10,474,000, finance income of
US$2,163,000, finance costs of US$13,083,000 and foreign exchange
loss of US$2,649,000.
2 Not reportable assets are comprised of financial assets at
fair value through OCI of US$502,000, financial assets at fair
value through profit and loss of US$873,000, other receivables of
US$64,621,000, income tax receivable of US$2,757,000, deferred
income tax asset of US$5,757,000, investment in associates
US$31,544,000, derivative financial assets of US$25,849,000 and
cash and cash equivalents of US$204,324,000.
Adjustments
Six months ended San and
30 June 2021 Pallancata Jose Inmaculada Exploration Other eliminations Total
(Unaudited) US$000 US$000 US$000 US$000 US$000 US$000 US$000
---------------- ---------- ------- ---------- ----------- ------- ------------ ---------
Revenue from
external
customers 62,286 117,497 215,114 - 188 - 395,085
Inter segment
revenue - - - - 4,498 (4,498) -
---------------- ---------- ------- ---------- ----------- ------- ------------ ---------
Total revenue
from
customers 62,286 117,497 215,114 - 4,686 (4,498) 395,085
---------------- ---------- ------- ---------- ----------- ------- ------------ ---------
Provisional
pricing
adjustments (514) 195 (16) - - - (335)
----------------
Total revenue 61,772 117,692 215,098 - 4,686 (4,498) 394,750
---------------- ---------- ------- ---------- ----------- ------- ------------ ---------
Segment
profit/(loss) 14,216 28,233 106,344 (17,578) 3,582 (863) 133,934
---------------- ---------- ------- ---------- ----------- ------- ------------ ---------
Others(1) - - - - - - (50,087)
---------------- ---------- ------- ---------- ----------- ------- ------------ ---------
Profit from
continuing
operations
before
income tax 83,847
---------------- ---------- ------- ---------- ----------- ------- ------------ ---------
As at 31
December
2021
Assets
---------------- ---------- ------- ---------- ----------- ------- ------------ ---------
Capital
expenditure 14,250 43,666 76,512 15,896 3,537 - 153,861
---------------- ---------- ------- ---------- ----------- ------- ------------ ---------
Current assets 9,072 43,473 20,182 - 4,230 - 76,957
Other
non-current
assets 3,241 157,749 515,943 155,702 46,882 - 879,517
---------------- ---------- ------- ---------- ----------- ------- ------------ ---------
Total segment
assets 12,313 201,222 536,125 155,702 51,112 - 956,474
---------------- ---------- ------- ---------- ----------- ------- ------------ ---------
Not reportable
assets(2) - - - - 498,241 - 498,241
---------------- ---------- ------- ---------- ----------- ------- ------------ ---------
Total assets 12,313 201,222 536,125 155,702 549,353 - 1,454,715
---------------- ---------- ------- ---------- ----------- ------- ------------ ---------
1 Comprised of administrative expenses of US$24,042,000, other
income of US$1,857,000, other expenses of US$14,635,000, write off
of non-financial assets of US$299,000, finance income of
US$2,061,000, finance costs of US$13,252,000 and foreign exchange
loss of US$1,777,000.
2 Not reportable assets are comprised of financial assets at
fair value through OCI of US$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.
4 Acquisition of assets
Amarillo Gold Group ("Amarillo")
On 1 April 2022, the Group acquired a 100% interest in Amarillo
Gold Corporation (Amarillo) flagship Mara Rosa ("Mara Rosa")
project located in Goiás State, Brazil, which includes the
construction stage Posse gold project as well as certain
early-stage and pre resource stage exploration targets. Posse has a
positive definitive feasibility study that shows it can be built
into a profitable operation with low costs and a strong financial
return. Mara Rosa also shows the potential for discovering
additional near-surface deposits that will extend Posse's mine life
beyond its initial ten years. Considering the significant
experience in developing precious metal deposits in the Americas,
the Group is ideally placed to take Posse to its next stage and
generate strong sustainable value for the company and the project's
stakeholders.
The Group has applied its judgement to weigh the characteristics
of Amarillo's acquisition and conclude whether it constitutes the
acquisition of a business or a set of assets and activities. Since
there are no outputs acquired, the Group based its conclusion on
the fact that the processes acquired are not critical to the
ability to develop or convert the actual inputs into outputs. In
this context, and in application of IFRS 3, the Group concluded
that the acquisition of Amarillo does not constitute the
acquisition of a business but the acquisition of a set of
assets.
The consideration paid for the transaction amounted to
C$154,429,478 (US$123,420,039), and transaction costs amounted to
US$4,830,000. In addition, a 2 per cent net smelter revenue royalty
on certain exploration properties owned by Amarillo that are
separate from Posse was granted.
Amarillo consolidates its financial information with the Group
from 1 April 2022, being the date on which the Group obtained
control.
The fair value of assets acquired and liabilities assumed as at
1 April 2022 comprise the following:
US$000
---------------------------------------------------------- -------
Cash and cash equivalents 4,246
Other receivables 968
Intangibles 21
Evaluation and exploration assets 107,362
Property, plant and equipment 15,078
Deferred income tax asset 3,775
Income tax receivable 36
----------------------------------------------------------- -------
Total assets 131,486
----------------------------------------------------------- -------
Accounts payable and other liabilities (3,236)
----------------------------------------------------------- -------
Total liabilities (3,236)
----------------------------------------------------------- -------
Net assets acquired 128,250
----------------------------------------------------------- -------
Consideration for the acquisition of Amarillo Gold Canada
shares 123,420
Transaction costs 4,830
----------------------------------------------------------- -------
Total consideration 128,250
----------------------------------------------------------- -------
Cash paid 128,250
----------------------------------------------------------- -------
Less cash acquired with the subsidiary (4,246)
----------------------------------------------------------- -------
Net cash flow on acquisition 124,004
----------------------------------------------------------- -------
5 Revenue
Period ended 30 June 2022 Period ended 30 June 2021
(unaudited) (unaudited)
------------------------------------------------------ -------------------------------------------------------
Revenue from Revenue from
customers customers
------------------------------ ------------ -------- ------------------------------ ------------ ---------
Goods/ Goods/
services Shipping Provisional services Shipping Provisional
sold services Total pricing Total sold services Total pricing Total
US$000 US$000 US$000 US$000 US$000 US$000 US$000 US$000 US$000 US$000
-------------- --------- -------- -------- --------- -------- ------------
Gold (from
dore bars) 164,011 458 164,469 (34) 164,435 167,912 403 168,315 5 168,320
Silver (from
dore bars) 87,531 312 87,843 (74) 87,769 94,986 355 95,341 18 95,359
Gold (from
concentrate) 44,215 1,277 45,492 (1,262) 44,230 47,878 966 48,844 141 48,985
Silver (from
concentrate) 54,822 1,524 56,346 (5,299) 51,047 81,196 1,201 82,397 (499) 81,898
Services 300 - 300 - 300 188 - 188 - 188
-------------- --------- --------- -------- ------------ -------- --------- --------- -------- ------------ ---------
Total 350,879 3,571 354,450 (6,669) 347,781 392,160 2,925 395,085 (335) 394,750
-------------- --------- --------- -------- ------------ -------- --------- --------- -------- ------------ ---------
6 Cost of sales before exceptional items
Included in cost of sales are:
Six months ended
30 June
----------------------------------
2022 (Unaudited) 2021 (Unaudited)
US$000 US$000
---------------------------------------------------- ---------------- ----------------
Depreciation and amortisation in cost of sales
1 67,733 70,879
Personnel expenses 2 58,052 42,558
Mining royalty 3,020 3,404
Change in products in process and finished goods(3) (8,202) 261
Fixed costs at the operations during stoppages,
reduced capacity and excess absenteeism(4) 3,870 6,196
----------------------------------------------------- ---------------- ----------------
1 The depreciation and amortisation in production cost is
US$68,801,000 (2021: US$73,815,000).
2 Includes workers' profit sharing of US$2,046,000 (2021:
US$2,944,000).
3 Corresponds to the difference between the beginning and ending
balance of the finished products and products in process included
in the production cost during the period.
4 Corresponds to the unallocated fixed costs accumulated during
operation below planned operating capacity and excess absenteeism
due to the Covid-19 pandemic of US$2,081,000 (2021: US$6,196,000) ,
and the unallocated fixed cost accumulated during operations below
planning operating capacity due to the fire in San Jose of
US$1,789,000 (2021: US$nill).
7 Exploration expenses
Six months ended 30
June
-----------------------------
2022 2021
(Unaudited) (Unaudited)
US$000 US$000
-------------------------- ------------- -------------
Mine site exploration1
Arcata 43 1,363
Ares 159 289
Inmaculada 1,618 726
Selene - -
Pallancata 3,714 1,957
San Jose 4,324 4,701
------------------------------ ------------- -------------
9,858 9,036
------------- -------------
Prospects2
Canada 6,903 -
Peru 204 1,726
USA 1,353 371
Chile (20) (21)
------------------------------ ------------- -------------
8,440 2,076
------------- -------------
Generative3
Peru 928 2,170
Mexico 270 734
Chile - (156)
1,198 2,748
------------- -------------
Personnel 3,682 3,145
Depreciation right-of-use 102 167
Others 546 264
------------------------------ ------------- -------------
Total 23,826 17,436
------------------------------ ------------- -------------
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.
8 Selling expenses
Six months ended 30
June
----------------------------------
2022 (Unaudited) 2021 (Unaudited)
US$000 US$000
------------------- ---------------- ----------------
Personnel expenses 159 151
Warehouse services 511 592
Taxes 1 5,219 5,490
Other 838 901
-------------------- ---------------- ----------------
Total 6,727 7,134
-------------------- ---------------- ----------------
1 Corresponds to the export duties in Argentina calculated as a
fixed amount in pesos per US$ of export.
9 Other income and expenses before exceptional Six months ended 30
items June
----------------------------------
2022 (Unaudited) 2021 (Unaudited)
US$000 US$000
----------------------------------------------- ---------------- ----------------
Other income
Logistic services - 7
Gain on recovery of expenses 213 265
Recovery of previously written off account
receivable 543 -
Others 1 1,824 1,585
------------------------------------------------ ---------------- ----------------
Total 2,580 1,857
------------------------------------------------ ---------------- ----------------
Other expenses
Increase in provision for mine closure (10,799) (1,538)
Depreciation right-of-use assets (52) (64)
Corporate social responsibility contribution
in Argentina (1,615) (1,801)
Care and maintenance expenses of Ares mine
unit (1,921) (1,305)
Care and maintenance expenses of Arcata mine
unit (2,271) (1,093)
Voluntary retirement program in Argentina
2 (938) (4,934)
Damage Inmaculada machine belt (1,831) -
Others(3) (3,475) (3,035)
------------------------------------------------ ---------------- ----------------
Total (22,902) (13,770)
------------------------------------------------ ---------------- ----------------
1 It mainly includes export credits in Argentina of US$345,000
(2021: US$89,000), gain on sale of property, plant and equipment of
US$199,000 (2021: US$3,000), gain on sale of supplies US$281,000
(2021: US$131,000).
2 Voluntary retirement programme implemented at Minera Santa
Cruz as a result of the need to comply with the Provincial
Employment Law that requires at least 70% of the workforce to have
resided in the province of Santa Cruz for three years.
3 It mainly includes the remuneration of the employees included
in the voluntary retirement program of US$463,000 (June 2021
US$2,581,000), since Minera Santa Cruz has to pay them until the
employment relationship is terminated even though they are
prevented from attending the mining unit.
10 Exceptional items
Exceptional items relate to:
Six months ended 30
June
----------------------------------
2022 (Unaudited) 2021 (Unaudited)
US$000 US$000
---------------------------------------- ---------------- ----------------
Cost of sales
Incremental cost due to pandemic (1) - (13,091)
-----------------------------------------
Total - (13,091)
-----------------------------------------
Other expense
Incremental cost due to pandemic - (865)
----------------------------------------- ---------------- ----------------
Total - (865)
----------------------------------------- ---------------- ----------------
Share of loss on an associate
Impairment of Aclara Resources Inc. (2) (9,923) -
---------------------------------------- ---------------- ----------------
Total (9,923)
----------------------------------------- ---------------- ----------------
Income tax expense
Income tax credit - 4,485
----------------------------------------- ---------------- ----------------
Total - 4,485
----------------------------------------- ---------------- ----------------
The exceptional items for the period ended 30 June 2022 and 2021
correspond to:
1 Incremental production costs incurred in the operating mine
units to manage the Covid-19 pandemic have been presented within
cost of sales and costs incurred by mine units in care and
maintenance and those related to corporate activities have been
presented within other expenses:
30 June
2021
--------- ---------
Cost Other
of sales expenses
US$000 US$000
--------- ---------
Third party services 9,145 406
Personnel expenses 1,770 342
Consumption of medical supplies 800 69
Cleaning and food services 1,337 25
Depreciation and amortisation 19 20
Others 20 3
--------- ---------
Total 13,091 865
These costs were incurred in respect of the implementation of
the necessary protocols including incremental third party services
mainly related to accommodation whilst testing all workers for
active Covid-19 cases prior to travelling to mine units, medical
tests and additional transportation costs to facilitate social
distancing.
2 Corresponds to the impairment charge of US$9,923,000 based on
the updated valuation of the investment in Aclara Resources Inc. as
at 30 June 2022.
11 Finance income and finance cost before exceptional items
The Group recognised the following finance income and finance
costs before exceptional items:
Six months ended 30
June
----------------------------------
2022 (Unaudited) 2021 (Unaudited)
US$000 US$000
------------------------------------------------- ---------------- ------------------
Finance income:
Interest on deposits and liquidity funds 562 954
Interest on loans 104 96
Unwind of discount on mine rehabilitation 1,098 968
Others 399 43
-------------------------------------------------- ---------------- ----------------
Total 2,163 2,061
-------------------------------------------------- ---------------- ----------------
Finance cost:
Interest on bank loans (5,303) (3,749)
Other interest (1,045) (827)
-------------------------------------------------- ---------------- ----------------
Total interest expense (6,348) (4,576)
-------------------------------------------------- ---------------- ----------------
Loss on discount of other receivables (1) (957) (1,008)
Loss from changes in the fair value of financial
instruments (2) (2,802) (6,346)
Loss from changes in the fair value of financial
assets at fair value through profit and loss (2,282) -
Loss on sale of financial assets at fair value
through profit and loss - (681)
Others (694) (641)
-------------------------------------------------- ---------------- ----------------
Total (13,083) (13,252)
-------------------------------------------------- ---------------- ----------------
1 Mainly corresponds to the gain/(loss) on discount of tax
credits in Argentina.
2 Represents the foreign exchange transaction costs to acquire
US$3,289,000 dollars through the sale of bonds in Argentina (2021:
US$8,815,000).
12 Income tax expense
Six months ended 30
June
----------------------------------
2022 (Unaudited) 2021 (Unaudited)
US$000 US$000
-------------------------------------------------- ---------------- ----------------
Current tax
Current income tax expense/(credit) 9,386 25,577
Withholding tax - 525
Current mining royalty charge 2,475 3,507
Current special mining tax charge 1,533 3,518
---------------------------------------------------
Total 13,394 33,127
--------------------------------------------------- ---------------- ----------------
Deferred tax
Origination and reversal of temporary differences (7,604) 22,126
--------------------------------------------------- ---------------- ----------------
Total (7,604) 22,126
--------------------------------------------------- ---------------- ----------------
Total taxation charge in the income statement 5,790 55,253
--------------------------------------------------- ---------------- ----------------
The pre-exceptional tax charge for the period was US$5,790,000
(2021: US$59,738,000).
The weighted average statutory income tax rate was 35.0% for
2022 and 31.7% for 2021. This is calculated as the average of the
statutory tax rates applicable in the countries in which the Group
operates, weighted by the profit/(loss) before tax of the Group
companies in their respective countries as included in the
consolidated financial statements. The interim income tax rate
calculation is based on the estimate average annual effective tax
rate of the Group.
The change in the weighted average statutory income tax rate is
due to a change in the weighting of profit/(loss) before tax in the
various jurisdictions in which the Group operates.
The effective tax rate for corporate income tax before foreign
exchange effect for the six months ended 30 June 2022 is 64.8%
(2021: 39.3%), compared to the corporate income tax and mining
royalties before foreign exchange effect of 24.9% (2021: 56.4%) and
the total taxation charge in the income statement of 107.8% (2021:
65.9%).
The decrease in the charge is mainly explained by the reduction
of the 2021 current income tax of Argentina (US$ 2,353,000) and,
the non-cash impact of local currency revaluation in Peru (US$
2,000,000), the exchange losses of loans in brazilian Reais (US
1,300,000) and the argentinian tax adjustment related to inflation
(US$ 2,300,000), which increase the tax bases impacting deferred
income tax by US$5,595,000 (2021: credit of US$7,900,000).
The UK Government increased the rate of Corporation Tax to 25%
on profits over GBP250,000 from April 2023. There is no impact on
the deferred tax calculation of the Group.
13 Property, plant and equipment
During the six months ended 30 June 2022, the Group acquired and
developed assets with a cost of US$88,471,000 (2021:
US$54,461,000). The additions for the six months ended 30 June 2022
relate to:
Mining Other property Total additions
properties plant and of property
and development equipment plant and
(Unaudited) (Unaudited) equipment
US$000 US$000 (Unaudited)
US$000
----------- ---------------- --------------- ---------------
San Jose 17,919 6,632 24,551
Pallancata 6,419 1,806 8,225
Inmaculada 25,460 8,305 33,765
Mara Rosa - 21,446 21,446
Others 192 292 484
------------ ---------------- --------------- ---------------
Total 49,990 38,481 88,471
------------ ---------------- --------------- ---------------
Assets with a net book value of US$nil were disposed of by the
Group during the six month period ended 30 June 2022 (2021:
US$1,000) resulting in a net gain on disposal of US$199,000 (2021:
gain of US$3,000).
For the six months ended 30 June 2022, the depreciation charge
on property, plant and equipment was US$70,020,000 (2021:
US$74,445,000).
There were borrowing costs capitalised in property, plant and
equipment amounting to US$28,000 (2021: US$10,000).
As at 30 June 2022, all property, plant and equipment additions
during the six month period ended 30 June 2022 of Pallancata mine
unit have been fully depreciated or impaired.
No indicators of impairment or reversal of impairment were
identified in the other CGUs, which includes other exploration
projects.
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$320,000 in evaluation and exploration assets).
No indicators of impairment or reversal of impairment were
identified in the other CGUs, which includes other exploration
projects.
The recoverable value of the Pallancata CGU was determined using
a fair value less costs of disposal (FVLCD) methodology. FVLCD was
determined using a combination of level 2 and level 3 inputs, which
result in fair value measurements categorised in its entirety as
level 3 in the fair value hierarchy, to construct a discounted cash
flow model to estimate the amount that would be paid by a willing
third party in an arm's length transaction.
The key assumptions on which management has based its
determination of FVLCD and the associated recoverable values
calculated are gold and silver prices, future capital requirements,
production costs, reserves and resources volumes (reflected in the
production volume), and the discount rate.
Real Prices US$ per oz. 2022 2023
---------------------------- ------ ------
Gold 1,764 1,669
Silver 23.5 22.3
---------------------------- ------ ------
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
------------------------------------------------- -----------
The estimated recoverable values of the Group's CGUs are equal
to, or not materially different than, their carrying values.
14 Evaluation and exploration assets
During the six months ended 30 June 2022, the Group capitalised
evaluation and exploration costs of US$113,625,000 (2021:
US$12,452,000). The additions correspond to the following
properties:
Unaudited
US$000
----------- ---------
Mara Rosa 112,070
Azuca 479
Inmaculada 248
Crespo 539
Volcan 289
Total 113,625
------------- ---------
There were no transfers from evaluation and exploration assets
to property, plant and equipment during the period (2021:
US$nil).
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. The calculation of the recoverable values is
detailed in note 13.
15 Investment in an associate
The Group retains a 20.0% interest in Aclara Resources Inc.
("Aclara"), a listed company involved in the exploration of,
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.
Upon Aclara's Initial Public Offering ('IPO') on 10 December
2021, HM Holdings retained 20% of Aclara shares. The investment was
recorded at initial recognition at fair value, based on the IPO'
offering price, and is accounted for using the equity method in the
consolidated financial statements.
The fair value of Aclara shares as at 30 June 2022 amounted to
US$10,096,000 (31 December 2021: US$37,080,000).
The following table summarises the financial information of the
Group's investment in Aclara Resources Inc:
As at 30 As at 31
June December
2022 2021
(Unaudited)
US$000 US$000
---------------------------------------------------- ------------- ----------
Current assets 78,338 91,320
Non-current assets 74,541 68,126
Current liabilities (1,695) (3,185)
Equity 151,184 156,261
Group's share in equity (20%) 30,237 31,252
Fair value adjustment allocated to the evaluation
and exploration assets on initial recognition(1) 11,230 12,307
Impairment(2) (9,923) -
---------------------------------------------------------
Group's carrying amount of the investment
20% 31,544 43,559
--------------------------------------------------------- ------------- ----------
Summarised consolidated statement of profit
and loss
Revenue - -
Administrative expenses (2,314) (324)
Exploration expenses (473) (510)
Finance income 99 -
Finance cost (9) (17)
Foreign exchange loss (58) (479)
Loss from continuing operations for the period (2,755) (1,330)
--------------------------------------------------------- ------------- ----------
Loss from continuing operation for the period
(2021: from incorporation) (2,755) (847)
--------------------------------------------------------- ------------- ----------
Group's share of loss for the period (551) (169)
--------------------------------------------------------- ------------- ----------
Other comprehensive loss that may be reclassified
to profit or loss in subsequent periods, net
of tax
Exchange differences on translating foreign
operations (7,706) (4,526)
Total comprehensive loss for the period (7,706) (4,526)
Total comprehensive loss (2021: from incorporation) (7,706) (46)
--------------------------------------------------------- ------------- ----------
Group's share of comprehensive loss for the
period (1,541) (9)
--------------------------------------------------------- ------------- ----------
1. This represents the 20% of the fair value adjustment,
estimated by the Group, to Aclara's exploration and evaluation
assets on initial recognition, representing US$56,150,000
(2021:US$61,535,000).
2. This represents the 20% share in the total impairment,
estimated by the Group, of Aclara's exploration and evaluation
assets of US$49,615,000. (2021:nil)
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 decrease in the fair value of Aclara's shares, and Aclara's
withdrawal of the application for an environmental impact
assessment ("EIA") of its flagship project "Penco" (now planned to
be filed by Q2 2023), which is expected to result in a two-year
delay to anticipated first production date, were considered
indications of impairment. Therefore, in compliance with IAS 36,
the Group has performed a valuation on Aclara, and determined an
impairment charge of US$9,923,000.
The recoverable value of Aclara was determined using a value in
use methodology. The key assumptions on which management has based
its valuation of Aclara's shares are the independent technical
report of Penco module issued in September 2021, forecast prices, a
discount rate of 8.5%, and a 2-year delay in the first production
date due to the withdrawal of the application for the EIA.
Sensitivity analysis
An increase of 1% in the discount rate and a delay of 1
additional year in the first production date would have the
following impact in the Group's investment in Aclara:
US$000
---------------------------------------------------- --------
Discount rate (increase by 1%) (2,549)
Delay in first production date (1 additional year) (3,682)
---------------------------------------------------- --------
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 30 June 2022, after recognising
the changes in the Group's share of net assets of the associate and
the impairment charge is US$31,544,000 (31 December 2021:
US$43,559,000).
No dividends were received from the associate during 2022 and
2021.
The associate had no contingent liabilities or capital
commitments as at 30 June 2022 and 31 December 2021.
16 Financial instruments
Fair value hierarchy
The Group uses the following hierarchy for determining and
disclosing the fair value of financial instruments by valuation
technique:
Level 1: quoted (unadjusted) prices in active markets for
identical assets or liabilities.
Level 2: other techniques for which all inputs which have a
significant effect on the recorded fair value are observable,
either directly or indirectly.
Level 3: techniques which use inputs which have a significant
effect on the recorded fair value that are not based on observable
market data.
At 30 June 2022 and 31 December 2021, the Group held the
following financial instruments measured at fair value:
As at 30
June 2022 Level Level
(Unaudited) 1 2 Level 3
US$000 US$000 US$000 US$000
----------------------------- ------------- -------- -------- --------
Assets measured at fair
value
Equity shares(1) 1,375 1,375 - -
Derivative financial assets 25,849 - 25,849 -
Trade receivables 24,187 - - 24,187
-----------------------------
51,411 1,375 25,849 24,187
----------------------------- ------------- -------- -------- --------
1 These investments were classified as financial assets at fair
value through OCI (US$502,000) and financial assets at fair value
through profit and loss (US$ 873,000).
2 Derivative financial assets - Silver forward
On 8 February 2021, the Group signed agreements with JP Morgan
to hedge the sale of 4,000,000 ounces of silver at US$27.10 per
ounce for 2021 and a further 4,000,000 ounces of silver at US$26.86
per ounce for 2022.
On 10 November 2021, the Group signed agreements with JP Morgan
to hedge the sale of 3,300,000 ounces of silver at US$25.0 per
ounce for 2023.
The silver forwards are being used to hedge exposure to changes
in cash flows from silver commodity prices. There is an economic
relationship between the hedged item and the hedging instruments
due to a common underlying. In accordance with IFRS 9, the
derivative instruments are categorised as cash flow hedges at the
inception of the hedging relationship and, on an ongoing basis, the
Group assesses whether a hedging relationship meets the hedge
effectiveness requirements. The Group has established a hedge ratio
of 1:1 for the hedging relationships as the underlying risk of the
silver forwards is identical to the hedged risk components. To test
the hedge effectiveness, the Group uses the hypothetical derivative
method and compares the changes in the fair value of the silver
forwards against the changes in fair value of the hedged item
attributable to the hedged risk. That said, it is observed that the
effectiveness tests comply with the requirements of IFRS 9 and that
the hedging strategy is highly effective.
The fair values of the silver forwards were calculated using a
discounted cash flow model applying a combination of level 1 (USD
quoted market commodity prices) and level 2 inputs. The models used
to value the commodity forward contracts are standard models, that
calculate the present value of the fixed-legs (the fixed silver
leg) and compare them with the present value of the expected cash
flows of the flowing legs (the London metal exchange "LME" silver
fixing). In the case of the commodity forward contracts, the models
use the LME AG forward curve and the US LIBOR swap curve for
discounting.
This approach results in the fair value measurement categorised
in its entirety as level 2 in the fair value hierarchy. The fair
values of the silver forwards as at 30 June 2022 are as
follows:
US$000
-------------------- -------
Current assets 19,236
Non-current assets 6,613
-------------------- -------
25,849
The effect recorded us as follows:
US$000
------------------------------------ -------
Income statement - revenue 7,130
Equity - Unrealised gain on hedges 25,849
------------------------------------ -------
The sensitivity to a reasonable movement in the commodity
prices, with all other variables held constant, determined as a
+/-10% change in prices -US$10,677,000 / US$10,425,000 effect on
OCI.
As at December Level Level
2021 (Unaudited) 1 2 Level 3
US$000 US$000 US$000 US$000
----------------------------- ------------------ -------- -------- --------
Assets measured at fair
value
Equity shares(1) 3,816 3,816 - -
Derivative financial assets 19,115 - 19,115 -
Trade and other receivables 27,773 - - 27,773
-----------------------------
50,704 3,816 19,115 27,773
----------------------------- ------------------ -------- -------- --------
1 These investments were classified as financial assets at fair
value through OCI (US$661,000) and financial assets at fair value
through profit and loss (US$ 3,155,000).
During the six months ended 30 June 2022 and the year ended 31
December 2021 there were no transfers between these levels.
The reconciliation of the financial instruments categorised as
Level 3 is as follows:
Trade receivables
subject to
price adjustments
US$000
------------------------------------------------ ------------------
Balance at 1 January 2021 45,353
Net change in trade receivables from goods sold (12,969)
Changes in fair value of price adjustments (6,614)
Realised price adjustments during the year 2,003
Balance at 31 December 2021 27,773
-------------------------------------------------- ------------------
Net change in trade receivables from goods sold 2,147
Changes in fair value of price adjustments (6,669)
Realised price adjustments during the period 936
-------------------------------------------------- ------------------
Balance at 30 June 2022 (Unaudited) 24,187
-------------------------------------------------- ------------------
The Group has price adjustments arising from the sale of
concentrate and dore which were provisionally priced at the time
the sale was recorded. The sensitivity of the fair value to an
immediate 10% favourable or adverse change in the price of gold and
silver (assuming all other variables remain constant), is as
follows:
Increase/ Effect on
decrease in profit before
price of tax
Period ounces of: US$000
----------------- -------------- --------------
Gold +/-10% +/-130
30 June 2022 Silver+/-10% +/-537
------------------ --------------- --------------
Gold +/-10% +/-95
31 December 2021 Silver+/-10% +/-757
------------------ --------------- --------------
17 Deferred income tax assets and liabilities
The changes in the net deferred income tax assets/(liabilities)
are as follows:
As at 30 June As at 31 December
2022 2021
(Unaudited) US$000
US$000
------------------------ -------------- ------------------
Beginning of the period (86,744) (72,307)
Income statement charge 7,604 (7,054)
OCI (charge)/credit (1,987) (7,383)
Retained earnings 3,775 -
Foreign exchange effect (446) -
---------------------------- -------------- ------------------
End of the period (77,798) (86,744)
---------------------------- -------------- ------------------
Deferred income tax assets and liabilities are offset when there
is a legally enforceable right to offset current tax assets against
current tax liabilities and when the deferred income tax assets and
liabilities relate to the same fiscal authority.
The amounts after offset, as presented on the face of the
Statement of financial position, are as follows:
As at As at
30 June 31 December
2022 2021
(Unaudited)
US$000 US$000
------------------------------------ ------------- -------------
Deferred income tax assets(1) 5,757 484
Deferred income tax liabilities (83,555) (87,228)
---------------------------------------- ------------- -------------
Net deferred income tax liabilities (77,798) (86,744)
---------------------------------------- ------------- -------------
1 Increase mainly explained by the deferred income tax asset in
Amarillo Minaracao do Brasil Ltda., subsidiary of the Amarillo Gold
group acquired on 1 April 2022 (note 4) of US$5,076,000.
18 Cash and cash equivalents
As at
As at 30 31 December
June 2022 2021
(Unaudited)
US$000 US$000
----------------------------------- ------------- -------------
Cash at bank 1,208 1,065
Current demand deposit accounts(1) 77,066 86,058
Time deposits(2) 126,050 299,666
--------------------------------------- ------------- -------------
Cash and cash equivalents 204,324 386,789
--------------------------------------- ------------- -------------
1 Relates to bank accounts which are readily accessible to the
Group and bear interest.
2 These deposits have an average maturity of 17 days (as at 31
December 2021: 18 days).
19 Borrowings
As at 30 June 2022 As at 31 December
(Unaudited) 2021
------------------------------- -------------------------------
Effective Effective
interest Non-current Current interest Non-current Current
rate US$000 US$000 rate US$000 US$000
---------------------------------------------- --------- ----------- ------- --------- ----------- -------
Secured bank loans
35%
* Pre-shipment loans in Minera Santa Cruz to 48% - 12,774 - - -
* Mid-term loans in Minera Ares 4.4% 300,000 821 2.17% 300,000 499
----------------------------------------------- --------- ----------- ------- --------- ----------- -------
Total 300,000 13,595 300,000 499
----------------------------------------------- --------- ----------- ------- --------- ----------- -------
The movement in borrowings during the six-month period to 30
June 2022 is as follows:
As at Additions Repayments As at
December US$000 US$000 30 June
2021 Reclassifications 2022 (Unaudited)
US$000 US$000 US$000
------------------ ---------- ---------- ----------- -------------------- ------------------
Current
Bank loans(1) - 13,411 - (1,832) 11,579
Accrued interest 499 5,303 (3,814) 28 2,016
------------------- --------------------
499 18,714 (3,814) (1,804) 13,595
--------------------
Non-current
Bank loans(1) 300,000 - - - 300,000
------------------- --------------------
300,000 - - - 300,000
---------- ---------- ----------- -------------------- ------------------
1 Relates to pre-shipment loans for a total amount of
US$11,579,000 (31 December 2021: US$nil) which are credit lines
given by banks to meet payment obligations arising from the exports
of the Group. In addition, the balance at 30 June 2022 and 31
December 2021 includes a five-year credit agreement 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 at
30 June 2022 is US$300,821,000 (31 December 2021:
US$300,499,000).
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 30 As at 31 As at 30 As at 31
June 2022 December June 2022 December
(Unaudited) 2021 US$000 (Unaudited) 2021 US$000
US$000 US$000
----------- ------------ ------------ ------------ ------------
Bank loans 300,821 300,499 295,930 296,122
Total 300,821 300,499 295,930 296,122
------------ ------------ ------------ ------------ ------------
20 Provisions
As at 30 June As at 31 December
2022 (Unaudited) 2021
-------------------- --------------------
Non-current Current Non-current Current
US$000 US$000 US$000 US$000
------------------------------- ----------- ------- ----------- -------
Provision for mine closure1 133,609 8,714 114,365 19,670
Workers' profit sharing2 - 3,354 - 10,892
Provision for contingencies(3) 4,216 1,945 2,003 1,496
Long term incentive plan - 292 467 -
-------------------------------- ----------- ------- ----------- -------
Total 137,825 14,305 116,835 32,058
-------------------------------- ----------- ------- ----------- -------
1 The provision represents the discounted values of the
estimated cost to decommission and rehabilitate the mines at the
expected date of closure of each of the mines. The present value of
the provision has been calculated using a real pre-tax annual
discount rate, based on a US Treasury bond of an appropriate tenure
adjusted for the impact of inflation as at 30 June 2022 and 31
December 2021 respectively, and the cash flows have been adjusted
to reflect the risk attached to these cash flows. Uncertainties on
the timing for use of this provision include changes in the future
that could impact the time of closing the mines, as new resources
and reserves are discovered. The pre-tax real discount rate used
was -1.15% (2021: -2.09%). Movement in the provision relates to an
increase due to change in estimate of US$19,436,000 (mainly in the
mine units Ares US$9,458,000, San José US$7,812,000 and Pallancata
US$910,000), net of payments of US$4,730,000, a decrease related to
change in discount rate of US$5,320,000 and a decrease related to
unwind of discount on mine rehabilitation of US$1,098,000.
A change in any of the following key assumptions used to
determine the provision would have the following impact:
US$000
--------------------------------------------------------- -------
Closure costs (increase by 10%) increase of provision 14,237
Discount rate (increase by 0.5%) (decrease of provision) (8,112)
--------------------------------------------------------- -------
2 Corresponds to worker's profit sharing in Compania Minera
Ares.
3 Mainly corresponds to the increase due to an income tax
contingency in CompañÃa Minera Ares of US$2,213,000.
21 Equity
Share capital and share premium
The movement in share capital of the Company from 31 December
2021 to 30 June 2022 is as follows:
Number Share
of ordinary capital Share premium
shares US$000 US$000
---------------------------------------- ------------- --------- -------------
Shares issued as at 1 January 2021 513,875,563 226,506 438,041
Shares issued as at 31 December 2021 513,875,563 226,506 438,041
Deferred bonus shares issued on 20 June
2022 513,875,563 303,268 -
Cancelation of deferred bonus shares
on 22 June 2022 (513,875,563) (303,268) -
Cancelation of share premium account
on 24 June 2022 - - (438,041)
Reduction of nominal value to 1 pence
on 24 June 2022 - (217,445) -
Shares issued as at 30 June 2022 513,875,563 9,061 -
----------------------------------------- ------------- --------- -------------
Following the passing of certain special resolutions at an
Extraordinary General Meeting of shareholders held on 26th May
2022, the Company capitalised the Company's merger reserve by
applying its balance to the issuance of
513,875,563 bonus shares with a nominal value of US$0.59 each (the "Bonus Shares").
Subsequently, the Company obtained, on 21 June 2022, the
approval of the High Courts of Justice of England and Wales (the
Companies Court (Ch D) of the Business and Property Courts) to:
i. the cancellation of the Bonus Shares with the sum arising on
the cancellation being credited to the Company's retained earnings
reserve;
ii. the reduction of the Company's share premium account to nil
and crediting the corresponding amount to the Company's retained
earnings reserve; and
iii. the reduction in the nominal value of the Ordinary Shares
from 25 pence per Ordinary Share to 1 pence per Ordinary Share,
(both (ii) and (iii) above collectively referred to as "the
Reductions").
The Reductions were effective on registration of the relevant
court order by the Registrar of Companies, which
took place on 24th June 2022.
22 Dividends paid and declared
Dividends declared and paid to non-controlling interests in the
six months ended 30 June 2022 were US$286,000 (2021:
US$7,561,000).
A final dividend in respect of 2021 was recommended to
shareholders of US$11,998,000 (final dividend for 2020:
US$12,002,000). An interim dividend in respect of the six months
ended 30 June 2022 amounting to US$10,000,000 (2021: US$10,020,000)
has been declared by the Directors . Dividends paid to shareholders
of the parent in the six months ended 30 June 2022 were
US$11,998,000 (2021: US$12,002,000).
23 Related party transactions
There were no significant transactions with related parties
during the six months period ended 30 June 2022.
24 Notes to the statement of cash flows
Six months ended 30
June
-----------------------------
2022 202
(Unaudited) (Unaudited)
US$000 US$000
-------------------------------------------------- ------------- -------------
Reconciliation of profit for the period to
net cash generated from operating activities
Profit/(loss) for the period (420) 28,594
Adjustments to reconcile Group profit to net
cash inflows from operating activities
Depreciation 69,444 74,459
Amortisation of intangibles 384 563
Impairment of non-financial assets 1,741 -
Write-off of non-financial assets, net 323 299
Impairment of an associate 9,923 -
Share of loss of an associate 551 -
Gain on sale of property, plant and equipment (199) (3)
Increase of provision for mine closure 10,799 1,538
Loss from changes in the fair value of financial
assets at fair value through profit and loss 2,282 -
Finance income (2,163) (2,061)
Finance costs 13,083 13,252
Income tax expense 5,790 55,253
Other 3,639 3,910
Increase/(decrease) of cash flows from operations
due to changes in assets and liabilities
Trade and other receivables (39,469) (24,387)
Income tax receivable (2,725) 10
Other financial assets and liabilities 2,802 1,200
Inventories (9,240) (621)
Trade and other payables (19,345) (13,384)
Provisions (5,992) 1,583
------------------------------------------------------ ------------- -------------
Cash generated from operations 41,208 140,205
------------------------------------------------------ ------------- -------------
25 Subsequent events
In early August 2022, Compania Minera Ares SAC (CMA) received a
preliminary administrative fine from the Peruvian environmental
supervisory authority (OEFA) in connection with an environmental
incident at the Arcata mine in March 2013. The event involved the
spillage of between four to six cubic metres of hydraulic backfill
from a pipe which impacted the soil along the pipeline. CMA took
immediate measures to remediate the impacted soil.
In 2017, CMA filed a report with OEFA detailing the remediation
work that it had undertaken. Five years later (in 2022), OEFA
requested additional evidence of the remediation undertaken.
In early August 2022, OEFA issued a fine for alleged
non-performance of the requisite remediation work. However, CMA
considers that its technical information will confirm that it took
all appropriate measures and, accordingly, there are no grounds for
the imposition of a fine.
Based on the assessment of its technical team and the advice of
external legal counsel, management believes that it has grounds to
robustly defend its position and, accordingly, further believes
that a successful challenge to the imposition of the fine would be
probable. Consequently, no provision has been made. Management
considers that it is possible that a fine may be levied but
confident that the worst-case scenario would result in an amount
payable of up to $1.8m, being less than the preliminary
administrative fine issued.
Profit by operation (1)
(Segment report reconciliation) as at 30 June 2022:
Consolidation
adjustment
Group (US$000) Pallancata San Jose Inmaculada and others Total/HOC
========================================= ========== ======== ========== ============= =========
Revenue 36,538 106,747 204,196 300 347,781
========================================== ========== ======== ========== ============= =========
Cost of sales (pre consolidation) (44,910) (82,148) (117,257) 3,799 (240,516)
========================================== ========== ======== ========== ============= =========
Consolidation adjustment 307 - 3,492 (3,799) -
Cost of sales (post consolidation) (44,603) (82,148) (113,765) - (240,516)
Production cost excluding depreciation (35,846) (66,304) (71,851) - (174,001)
Depreciation in production
cost (8,083) (20,926) (39,792) - (68,801)
Workers profit sharing (951) - (1,095) - (2,046)
Other items (17) (3,848) (5) - (3,870)
Change in inventories 294 8,930 (1,022) - 8,202
========================================== ========== ======== ========== ============= =========
Gross profit (8,065) 24,599 90,431 300 107,265
========================================== ========== ======== ========== ============= =========
Administrative expenses - - - (24,913) (24,913)
Exploration expenses - - - (23,826) (23,826)
Selling expenses (242) (6,163) (322) - (6,727)
Other expenses, net - - - (20,322) (20,322)
========================================== ========== ======== ========== ============= =========
Operating profit/(loss) before
impairment (8,307) 18,436 90,109 (68,761) 31,477
========================================== ========== ======== ========== ============= =========
Impairment and write-off of
non-financial assets, net - - - (2,064) (2,064)
Share of post-tax losses from
associate - - - (10,474) (10,474)
Finance income - 2,163 2,163
Finance costs - - - (13,083) (13,083)
Foreign exchange loss - - - (2,649) (2,649)
========================================== ========== ======== ========== ============= =========
Profit/(loss) from continuing
operations before
income tax (8,307) 18,436 90,109 (94,868) 5,370
========================================== ========== ======== ========== ============= =========
Income tax - - - (5,790) (5,790)
========================================== ========== ======== ========== ============= =========
Profit/(loss) for the period
from continuing operations (8,307) 18,436 90,109 (100,658) (420)
========================================== ========== ======== ========== ============= =========
1 On a post-exceptional basis.
SHAREHOLDER INFORMATION
Company website
Hochschild Mining PLC Interim and Annual Reports and results
announcements are available via the internet on our website at
www.hochschildmining.com. Shareholders can also access the latest
information about the Company and press announcements as they are
released, together with details of future events and how to obtain
further information.
Registrars
The Registrars can be contacted as follows for information about
the AGM, shareholdings, dividends and to report changes in personal
details:
BY EMAIL
shareholderenquiries@linkgroup.co.uk
POST
Link Group, 10(th) Floor, Central Square, 29 Wellington Street,
Leeds LS1 4DL
BY TELEPHONE
(+44 (0)) 371 664 0300 ( Calls are charged at the standard
geographic rate and will vary by provider. Calls outside the United
Kingdom will be charged at the applicable international rate. Lines
are open between 9am - 5:30pm, Monday to Friday excluding public
holidays in England and Wales)
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 9 September 2022 in respect of the 2022 interim
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 2022 interim dividend,
a dividend mandate form, also available from the Company's
registrars, should be completed and returned to the registrars by 9
September 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 1 September
Record date 2 September
Deadline for return of currency election forms 9 September
Payment date 23 September
----------------------------------------------- -------------
17 Cavendish Square
London
W1G 0PH
Registered in England and Wales with Company Number 5777693
[1] Revenue presented in the financial statements is disclosed
as net revenue and is calculated as gross revenue less commercial
discounts plus services revenue
(2) Please see the Financial Review on page 14 for a definition
of Adjusted EBITDA
[3] All equivalent figures calculated using the Company's 2022
average gold/silver ratio of 72:1.
4 All-in sustaining cost per (AISC) silver equivalent ounce:
Calculated before exceptional items and includes production cost
excluding depreciation, other items and workers profit sharing in
cost of sales, administrative expenses (excl. depreciation),
brownfield exploration, operating and exploration capex and
royalties and special mining tax (presented with income tax)
divided by silver or gold equivalent ounces produced, plus
commercial deductions and selling expenses divided by silver or
gold equivalent ounces sold using a gold/silver ratio of 72:1.
Excludes non-recurrent COVID-19 expenses of $2.4 million in H1
2022..
[5] Calculated as total number of accidents per million labour
hours.
([6]) Calculated as total number of days lost per million labour
hours.
[7] The ECO Score is an internally designed Key Performance
Indicator measuring environmental performance in one number and
encompassing numerous fronts including management of waste water,
outcome of regulatory inspections and sound environmental practices
relating to water consumption and the recycling of materials.
[8] Includes revenue from services
[9] Unit cost per tonne is calculated by dividing mine and
treatment production costs (excluding depreciation) by extracted
and treated tonnage respectively
[10] Cash costs are calculated to include cost of sales,
commercial discounts and selling expenses items less depreciation
included in cost of sales
([11]) Does not include non-recurrent COVID-19 expenses of $2.4
million, unallocated fixed costs accumulated during operation below
planned operating capacity and excess absenteeism in Argentina due
to the Covid-19 pandemic of $2.0 million, and unallocated fixed
cost accumulated during operations below planning operating
capacity due to the fire in San Jose of $1.7 million
[12] Includes commercial discounts (from the sales of
concentrate) and commercial discounts from the sale of dore
([13]) Does not include fixed costs during operational stoppages
and reduced capacity of $6.2 million
[14] Includes commercial discounts (from the sales of
concentrate) and commercial discounts from the sale of dore
[15] Calculated using a gold /silver ratio of 72:1.
[16] Excludes non-recurrent COVID expenses of $2.4 million
[17] Royalties arising from revised royalty tax schemes
introduced in 2011 and included in income tax line
[18] Calculated using a gold silver ratio of 72:1
[19] Operating capex from San Jose does not include capitalised
depreciation and amortisation resulting from mine equipment
utilised for mine developments
[20] Administrative expenses does not include expenses from the
Biolantanidos project ($19,000)
[21] Royalties arising from revised royalty tax schemes
introduced in 2011 and included in income tax line
[22] Adjusted EBITDA has been presented before the effect of
significant non-cash (income)/expenses related to changes in mine
closure provisions and the write-off of property, plant and
equipment
[23] Includes pre-shipment loans and short term interest
payables
[24] 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
IR FDLBFLVLEBBL
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