TIDMHOC
RNS Number : 8855W
Hochschild Mining PLC
20 April 2023
20 April 2023
Hochschild Mining PLC
Preliminary Results
Year ended 31 December 2022
HOCHSCHILD MINING PLC RESULTS FOR YEARED 31 DECEMBER 2022
2022 Financial performance
-- Revenue of $735.6 million (2021: $811.4 million) ([1])
-- Adjusted EBITDA of $249.6 million (2021: $382.8 million)
([2])
-- Profit before income tax (pre-exceptional) of $24.3 million
(2021: $148.7 million)
-- Profit before income tax (post-exceptional) of $25.8 million
(2021: $137.3 million)
-- Basic earnings per share (pre-exceptional) of $0.01 (2021:
$0.14)
-- Basic earnings per share (post-exceptional) of $0.01 (2021:
$0.15)
-- Cash and cash equivalent balance of $143.8 million as at 31
December 2022 (2021: $386.8 million)
-- Net debt of $175.1 million as at 31 December 2022 (2021: net
cash of $86.3 million)
2022 Operational resilience ([3])
-- Peruvian government decision on Inmaculada Modified
Environmental Impact Assessment expected during Q2 2023
-- All-in sustaining costs (AISC) from operations of $1,364 per
gold equivalent ounce (2021: $1,153) or $18.9 per silver equivalent
ounce (2021: $16.0) in line with full year cost guidance of
$1,330-$1,370 per gold equivalent ounce or $18.5-19.0 per silver
equivalent ounce [4]
-- Full year attributable production of 3 58,826 gold equivalent
ounces (25.8 million silver equivalent ounces)
-- Solid operational performance despite moderate impact in Q4
from Peru social disruptio
2022 Exploration & Project Highlights
-- 2022 Attributable Reserve & Resource additions:
o Reserves up 35%
o Resources up 18%
-- Inferred Mineral Resource of 51.2 million silver equivalent
ounces announced at Royropata Zone, Pallancata
o Average width of 5 metres at a combined Ag Eq grade of
848g/t
-- Mara Rosa project in Brazil advancing on schedule and on
budget - total project progress at over 70% with first production
anticipated in H1 2024
o 27,600oz of gold hedged from March to December 2024 at a price
of $2,100 per ounce
-- Option over Snip project in Canada recently terminated
2022 ESG KPIs
-- Lost Time Injury Frequency Rate of 1.37 (2021: 1.26) [5]
-- Accident Severity Index of 93 (2021: 676) [6]
-- Water consumption of 171lt/person/day (2021:
193lt/person/day)
-- Domestic waste generation of 1.05 kg/person/day (2021:
1.00kg/person/day)
-- ECO score of 5.27 out of 6 (2021: 5.29) [7]
2023 Outlook
-- Production target:
o 301,000-314,0000 gold equivalent ounces (25.0-26.0 million
silver equivalent ounces) using 83x gold silver ratio
-- All-in sustaining costs target:
o $1,370-$1,450 per gold equivalent ounce ($16.5-$17.5 per
silver equivalent ounce) using 83x gold silver ratio
-- Total sustaining and development capital expenditure expected
to be approximately $125-135 million
-- Mara Rosa project capital expenditure expected to be
approximately $100-110 million
-- 29,250 ounces of gold hedged for the remainder of 2023 at a
price of $2,047 per ounce
$000 unless stated Year ended Year ended % change
31 Dec 2022 31 Dec 2021
------------- -------------
Attributable silver production (koz) 11,003 12,174 (10)
Attributable gold production (koz) 206 221 (7)
Revenue 735,643 811,387 (9)
Adjusted EBITDA 249,605 382,837 (35)
Profit from continuing operations (pre-exceptional) 6,745 67,450 (90)
Profit from continuing operations (post-exceptional) 4,832 71,106 (93)
Basic earnings per share (pre-exceptional) $ 0.01 0.14 (93)
Basic earnings per share (post-exceptional) $ 0.01 0.15 (93)
------------------------------------------------------ ------------- ------------- ---------
________________________________________________________________________________________
A presentation will be held for analysts and investors at 9.30am
(UK time) on Thursday 20 April 2023 at the offices of Hudson
Sandler,
25 Charterhouse Square, London, EC1M 6AE
The presentation and a link to the live audio webcast of the
presentation can be found at the Hochschild website:
www.hochschildmining.com
or:
https://stream.brrmedia.co.uk/broadcast/63c585b88b28b235f03655a4
To join the event via conference call, please see dial in details below:
UK Toll-Free Number: 0808 109 0700
International Dial in: +44 (0)330 551 0200
US/Canada Toll-Free Number: 866-580-3963
Password: Hochschild Full Year Results
________________________________________________________________________________________
Enquiries:
Hochschild Mining PLC
Charles Gordon
+44 (0)20 3709 3264
Head of Investor Relations
Hudson Sandler
Charlie Jack
+44 (0)20 7796 4133
Public Relations
________________________________________________________________________________________
Non-IFRS Financial Performance Measures
The Company has included certain non-IFRS measures in this news
release. The Company believes that these measures, in addition to
conventional measures prepared in accordance with IFRS, provide
investors an improved ability to evaluate the underlying
performance of the Company. The non-IFRS measures are intended to
provide additional information and should not be considered in
isolation or as a substitute for measures of performance prepared
in accordance with IFRS. These measures do not have any
standardised meaning prescribed under IFRS, and therefore may not
be comparable to other issuers.
About Hochschild Mining PLC
Hochschild Mining PLC is a leading precious metals company
listed on the London Stock Exchange (HOCM.L / HOC LN) 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.
Forward looking statements
This announcement may contain forward looking statements. By
their nature, forward looking statements involve risks and
uncertainties because they relate to events and depend on
circumstances that will or may occur in the future. Actual results,
performance or achievements of Hochschild Mining PLC may, for
various reasons, be materially different from any future results,
performance or achievements expressed or implied by such forward
looking statements.
The forward-looking statements reflect knowledge and information
available at the date of preparation of this announcement. Except
as required by the Listing Rules and applicable law, the Board of
Hochschild Mining PLC does not undertake any obligation to update
or change any forward-looking statements to reflect events
occurring after the date of this announcement. Nothing in this
announcement should be construed as a profit forecast.
Note
The information contained within this announcement is deemed by
the Company to constitute inside information as stipulated under
the Market Abuse Regulation (Regulation (EU) No.596/2014). Upon the
publication of this announcement via a Regulatory Information
Service, this inside information is now considered to be in the
public domain.
LEI: 549300JK10TVQ3CCJQ89
CHAIRMAN'S STATEMENT
During the past year, our Company has been directly and
indirectly impacted by a range of political, social and regulatory
challenges. However, the Board and I want to congratulate our
management team and all our colleagues on a highly creditable
operational performance and ensuring that our steadfast commitment
to the environment, stakeholders and communities remains a firm and
an integral part of our corporate purpose. At the time of writing,
we are still waiting for the final decision from the Peruvian
Government on the Modification of the Environmental Impact
Assessment ("MEIA") for Inmaculada but I would particularly like to
thank the teams involved in four years of hard work. It has proved
to be an enormous undertaking, but I am sure that, whatever the
decision, Inmaculada will remain a key part of Hochschild's
strategy for decades to come.
We continued with our focus on safety and are delighted that, in
2022, our key performance indicators highlighted a strong
performance in this area with both the accident frequency rate and
accident severity indices demonstrating the successful
implementation of our safety culture plan. As mentioned last year,
following a trial period, we launched the Seguscore in 2022 which
is being used to appraise the safety performance of each mining
unit based on, not only using our traditional measures but also on
the result of internal and external safety audits.
Acknowledging the impact of our activities on the environment, I
am proud that through the "Green Challenges" set for our
operations, we were able to reduce our water consumption to the
lowest level since 2015. This should not be considered a one-off
achievement but a reflection of an environmentally conscious
culture that has evolved since the adoption of our internal
measure, the ECO Score. Work is also on track to establish later
this year our 2030 interim targets in order to achieve Net Zero by
2050.
We have continued with our valuable community relations
initiatives which, in line with the Company's approach, see
resources dedicated to education, health and nutrition, and
sustainable development. During the year, we facilitated the
delivery of technical skills training through the establishment of
three digital centres in communities in southern Peru as part of
our Future Connection programme which has already benefited over
180 students. We also worked in collaboration with the Peruvian
Health Ministry in our "Always Healthy" programme which ran
campaigns staffed by a multi-disciplinary team of medical
practitioners thereby extending the reach of healthcare services.
Our Community Relations team has also continued with the various
programmes we have put in place to support local farmers in
marketing and selling their produce which, in certain cases, are
destined for international markets.
2022 was another important year for strategic development. In
April, we completed the acquisition of Amarillo Gold with its Mara
Rosa gold project in Brazil, which is due to commence production in
the first half of 2024. Since then, we have made excellent progress
at the project with over 70% constructed already and we are on
schedule and in line with our budget. We also delivered a
Preliminary Economic Assessment on our Snip project in British
Columbia, Canada which showed positive investment returns at
conservative gold prices. However, in line with Hochschild's
capital allocation strategy where the focus is on the Mara Rosa
construction, we recently made the decision to terminate the option
on the project.
Turning to our operations, the team had to contend with
substantial disruption during the year, including a fire in the
crushing area at San Jose, continued Covid-related labour
restrictions in Argentina and local and national social
disturbances in Peru. However, we are proud that we were able to
maintain a constructive dialogue with our communities and once
again able to deliver a robust operating performance, only
moderately below our annual production target and in line on costs.
In addition, precious metal prices remained relatively high, so our
business continued to generate strong cashflow, especially in the
fourth quarter, and we therefore are in a good position to deliver
on our capital commitments, including construction at Mara
Rosa.
In 2022, the brownfield exploration team made a significant
discovery close to Pallancata, within the Royropata zone. Although
it is outside the permitted area and will require approximately
three years to receive the necessary government approvals, the size
of the resource is already over 50 million silver equivalent ounces
with significant exploration upside. We are confident that this new
zone will be the future of mining in the area in the medium
to-long-term, despite the likely necessity to place the mine on
temporary care and maintenance at some stage in 2023. At San Jose,
we have also been able to replace resources once again whilst at
Inmaculada, the team is planning a busy year of drilling subject to
the Inmaculada MEIA approval.
During the year, we saw changes in the composition of the Board
with the retirement of Graham Birch and Dionisio Romero, who
stepped down as Non-Executive Directors at the 2022 AGM. In their
place, we welcomed Mike Sylvestre and Nicolas Hochschild.
At the forthcoming AGM, Nicolas and Eileen Kamerick will be
stepping down from the Board. Nicolas will be taking up the role of
Corporate Development Manager within the Company, reporting to the
Director of Technical Services. We look forward to continuing to
work with Nicolas in his new role. Eileen will be leaving the Board
after a tenure of over six years. I would like to take this
opportunity to express my gratitude to Eileen for chairing the
Audit Committee with the utmost diligence and for her commitment to
the Company. On behalf of the Directors, we wish Eileen all the
very best for the future. Jill Gardiner has agreed to chair the
Audit Committee on an interim basis with Mike Sylvestre also
joining the committee.
Outlook
In 2022, precious metal prices experienced considerable
volatility. Gold rose to over $2,000/ounce in the first quarter of
the year as the Ukraine war started but then fell steadily by 20%
to just over $1,600 by November as expectation of global interest
rate rises became the theme. A rebound in December left the metal
flat versus 2021 with silver rising by 3% during the year. These
increases have continued in the first quarter of 2023 and
consequently, we are confident that when combined with our
operational track record and good cost control, we can maintain
significant levels of profitability and continued good cash flow.
Strong balance sheet discipline will be crucial as construction at
Mara Rosa continues towards its completion in 2024 and therefore
the Board feels that it would be imprudent to pay a final dividend
for 2022 at this stage but will reassess the potential for capital
return at the interim results in August.
I would like to express gratitude to all stakeholders for their
ongoing support in what has been a tough period for the Company. I
also want to emphasise that we are clear-eyed in viewing the task
ahead of us. We will position the Company's strategy in line with
the Peruvian government's decision on the Inmaculada's MEIA
extension and we hope that it will provide renewed impetus. We look
forward to a year of opportunity and to maintaining the very
highest levels of safety, environmental stewardship, responsible
business practices and community support as we work to deliver on
our commitments to all stakeholders.
Eduardo Hochschild, Chairman
19 April 2023
CHIEF EXECUTIVE OFFICER'S STATEMENT
The volatile political, economic and social situation has
continued to impact Peru in recent months, and this has resulted in
a tough operating environment for Hochschild's two mines. However,
the team's response has once again been something to be proud of.
We remain confident that the permitting process for Inmaculada's
MEIA will conclude during Q2 2023 and believe the outcome will be
positive. We believe this world class deposit will continue to
underpin our Company for many decades to come and are looking
forward to reigniting the successful exploration programme and
continuing to invest in the Ayacucho region and its
communities.
However, in advance of the government's decision, the Company
has been preparing for a number of scenarios and the resulting
financing requirements going forward. These include planning in the
event of an outright MEIA denial and the resulting requirement to
resubmit the permit application as well as the potential for
additional short-to-medium term delays. We have also recently taken
advantage of precious metal price strength to hedge a total of
29,250 ounces of gold at a forward price of $2,047 per ounce in
order to realise a degree of cashflow certainty for the remainder
of the year. In addition, for 2024 we have also hedged a further
27,600 ounces of gold for the period between March and December at
a forward price of $2,100 per ounce. We believe that such a
strategy is appropriate whilst construction at Mara Rosa is
ongoing.
ESG
We remain resolutely committed to our sustainability strategy,
making consistent progress year-to-year in serving our communities,
protecting the environment, promoting health and safety, supporting
our people, and ensuring responsible business practices. In line
with our decision to publish a standalone sustainability report
every other year, the Annual Report includes a sustainability
section that provides a detailed account of the progress made in
all these critical fronts. I am proud to report that our progress
in ESG has been externally recognised by several ESG rating
agencies. I look forward to next year's standalone sustainability
report where we will be able to further highlight our leadership in
ESG-related matters.
Operations
Hochschild's output in 2022 continued our good track record.
Overall attributable production was 358,826 gold equivalent ounces
(25.8 million silver equivalent ounces) which was, as expected
lower than the 2021 figure of 390,496 gold equivalent ounces (28.1
million silver equivalent ounces) mainly due to scheduled grade
reductions at Inmaculada and Pallancata. This was produced at an
all-in sustaining cost of $1,364 per gold equivalent ounce ($18.9
per silver equivalent ounce) which was slightly higher than 2021
reflecting the lower grades at both the Peruvian assets but boosted
by the implementation of a cost optimisation plan to contend with
inflationary pressures and commodity price volatility.
Despite substantial community disruption in the final quarter,
the team at Inmaculada had another commendable year producing
237,289 gold equivalent ounces (2021: 252,337 ounces) at $1,058 per
gold equivalent ounce. At Pallancata, production in 2022 reflected
a mining area that is almost depleted with delivery of 3.2 million
silver equivalent ounces (2021: 4.2 million ounces) at a cost of
$32.4 per silver equivalent ounce. In Argentina, there was more
disruption at San Jose from Covid as well as a fire in the mine's
crushing area which temporarily affected operations but,
nevertheless, production was only marginally below the 2021 figure
at 11.0 million silver equivalent ounces (2021: 11.3 million
ounces), with costs at $21.7 per silver equivalent ounce.
Projects
We completed the purchase of Amarillo Gold in Brazil on 1 April
2022 and have made strong progress at the Mara Rosa project since
taking control. We are now over 70% of the way through the build,
with many long lead-time items purchased and construction of the
plant and other site infrastructure well advanced. We remain on
track for first production at this low-cost project in the first
half of 2024 and have also been drilling several prospective
exploration targets in the surrounding area which, in time, may
provide the long-term upside for the project.
Work at the Snip project in Canada progressed well during the
year and included metallurgy, processing plant designs and resource
model updates as well as an additional drill campaign. This
culminated in the completion of a Preliminary Economic Assessment
at the end of the year which provided the basis for potential next
steps on the project. However, early in April 2023, we decided to
terminate the option on the project due to the need to concentrate
on other capital allocation priorities, including expenditure in
Brazil and brownfield exploration at the mines.
Exploration
The brownfield programme for 2022 was focused on Pallancata and
San Jose and I am pleased to report that our team have had another
highly successful campaign, replacing resources at San Jose, and
delivering a major discovery close to Pallancata. The initial
discovered resource from the new Royropata zone to the west of
existing operations was over 50 million silver equivalent ounces.
We have already commenced the permitting process and are excited
that, with strong exploration upside potential and high-grade
structures (848 grammes per tonne silver equivalent) and widths
averaging five metres, the new zone can be the driver of
Pallancata's medium-to-long-term future.
Financial position
Production has remained reliable and with the existing strong
price environment, the Company is generating healthy cashflow. Cash
and cash equivalents of $143.8 million at the end of December
(2021: $386.8 million) reflected the net payment of approximately
C$135 million for Amarillo Gold and expenditure of just over $21
million at the Snip project. This has led to a net debt position of
$175.1 million (31 December 2021: $86.3 million net cash). In
addition, the Company closed a $200 million committed medium-term
debt facility with BBVA and Scotiabank in December 2022. The loan
has a maturity of five years and two year of grace period, at a
cost SOFR + 2.05%. The facility will be become available on receipt
of the Inmaculada MEIA approval.
Financial results
Total Group production was lower versus 2021 and, combined with
a 6% fall in the silver price received and a flat year-on-year gold
price, revenue decreased by 9% to $735.6 million (2021: $811.4
million). All-in sustaining costs were in line with guidance at
$1,364 per gold equivalent ounce or $18.9 per silver equivalent
ounce (2021: $1,153 per ounce/$16.0 per ounce). Adjusted EBITDA of
$249.6 million (2021: $382.8 million) mostly reflects reduced
production levels and increased cost of sales. Pre-exceptional
earnings per share of $0.01 (2021: $0.14 per share) includes the
impact of an increase in exploration expenses due to project
expenditure at Snip in Canada and a reduction in income tax mainly
due to the lower profitability. Post-exceptional earnings per share
was lower at $0.01 (2021: $0.15 earnings per share) and includes an
impairment of the investment in Aclara Resources Inc. of $9.9
million, the reversal of impairment loss in Pallancata of $15.5
million resulting from the new resources discovered in Royropata,
and the impairment of the Azuca project's evaluation and
exploration costs of $4.2 million. The net after-tax effect of
exceptional items is a loss of $1.9 million.
Outlook
We expect attributable production in 2023 of between
301,000-314,000 gold equivalent ounces (25.0 to 26.0 million silver
equivalent ounces) assuming the silver to gold ratio of 83:1 (the
average ratio for 2022). This will be driven by: 204,000-211,000
gold equivalent ounces from Inmaculada; an attributable
contribution of 6.1 to 6.3 million silver equivalent ounces from
San Jose; and 2.0-2.9 million ounces from Pallancata. All-in
sustaining costs for operations are expected at between $1,370 and
$1,450 per gold equivalent ounce ($16.5 to $17.5 per silver
equivalent ounce). This forecast reflects slightly lower output and
a rise in mine development costs at Inmaculada in addition to a
further reduced contribution at Pallancata before its anticipated
move to care and maintenance later in 2023.
The achievement of the Inmaculada MEIA will be a key milestone
for our Company and we are looking forward to the next twenty years
and more from this world class mine. Although 2023 has started with
more political and social volatility in Peru, we believe that
Hochschild's longstanding focus on our ESG initiatives will stand
us in good stead to withstand any future challenges. We remain
excited by the year ahead with our Brazil construction moving ahead
quickly and strong exploration potential at all our existing
deposits.
Ignacio Bustamante, Chief Executive Officer
19 April 2023
OPERATING REVIEW
OPERATIONS
Note: 2022 and 2021 equivalent figures calculated using the
previous Company gold/silver ratio of 72x. All 2023 forecasts
assume the average gold/silver ratio for 2022 of 83x.
Production
In 2022, Hochschild delivered attributable production of 358,826
gold equivalent ounces or 25.8 million silver equivalent ounces,
moderately below the Company's 2022 guidance due to the reduced
contribution at Pallancata resulting from lower grades which could
not be fully offset by higher output at Inmaculada. This was due to
local community disturbances in Q4 along with the wider political
and subsequent civil unrest in Peru since December.
The overall attributable production target for 2023 is
301,000-314,000 gold equivalent ounces or 25.0-26.0 million silver
equivalent ounces.
Total 2022 group production
Year ended Year ended
31 Dec 2022 31 Dec 2021
-------------
Silver production
(koz) 13,596 14,746
Gold production (koz) 244.63 262.39
Total silver equivalent
(koz) 31,209 33,638
Total gold equivalent
(koz) 433.46 467.19
Silver sold (koz) 13,536 14,712
Gold sold (koz) 242.89 260.71
------------------------- ------------- -------------
Total production includes 100% of all production, including
production attributable to Hochschild's minority shareholder at San
Jose.
Attributable 2022 group production
Year ended Year ended
31 Dec 2022 31 Dec 2021
-------------
Silver production
(koz) 11,003 12,174
Gold production (koz) 206.01 221.42
Silver equivalent
(koz) 25,835 28,116
Gold equivalent (koz) 358.83 390.50
----------------------- ------------- -------------
Attributable production includes 100% of all production from
Inmaculada, Pallancata and 51% from San Jose.
Attributable 2023 Production forecast split
Operation Oz Au Eq Moz Ag Eq
----------------
Inmaculada 204,000-211,000 16.9-17.5
Pallancata 24,000-27,000 2.0-2.2
San Jose 73,000-76,000 6.1-6.3
----------- ---------------- ----------
Total 301,000-314,000 25.0-26.0
----------- ---------------- ----------
Costs
All-in sustaining cost from operations in 2022 was $1,364 per
gold equivalent ounce or $18.9 per silver equivalent ounce (2021:
$1,153 per gold equivalent ounce or $16.0 per silver equivalent
ounce), higher than 2021 mainly as a result of: expected lower
average grades at Inmaculada and Pallancata; higher costs at
Inmaculada and Pallancata resulting from using a higher proportion
of conventional mining methods as well from local inflation; and
higher costs in San Jose mainly due to local inflation and
expenditure related to the accessing incremental resources. These
was partially offset by local currency devaluation in
Argentina.
The all-in sustaining cost from operations in 2023 is expected
to be between $1,370 and $1,450 per gold equivalent ounce (or $16.5
and $17.5 per silver equivalent ounce).
2023 AISC forecast split
Operation $/oz Au Eq $/oz Ag Eq
------------
Inmaculada 1,260-1,320 15.2-15.9
Pallancata 2,050-2,310 24.7-27.8
San Jose 1,400-1,470 17.0-17.7
---------------------- ------------ -----------
Total from operations 1,370-1,450 16.5-17.5
---------------------- ------------ -----------
Inmaculada
The 100% owned Inmaculada gold/silver underground operation is
located in the Department of Ayacucho in southern Peru. It
commenced operations in June 2015.
Inmaculada summary Year ended Year ended % change
31 Dec 2022 31 Dec 2021
------------- -------------
Ore production (tonnes) 1,329,177 1,349,892 (2)
Average silver grade (g/t) 156 174 (10)
Average gold grade (g/t) 3.81 4.05 (6)
Silver produced (koz) 5,936 6,236 (5)
Gold produced (koz) 154.85 165.73 (7)
Silver equivalent produced
(koz) 17,085 18,168 (6)
Gold equivalent produced
(koz) 237.29 252.34 (6)
Silver sold (koz) 5,918 6,216 (5)
Gold sold (koz) 154.93 165.86 (7)
Unit cost ($/t) 118.7 99.2 18
Total cash cost ($/oz Au
co-product) 693 557 24
All-in sustaining cost ($/oz
Au Eq) 1,058 917 15
------------------------------ ------------- ------------- ---------
Production
The Inmaculada mine delivered Inmaculada has delivered gold
equivalent production of 237,289 ounces (2021: 252,337 ounces), in
line with the upwards revised forecast published in August 2022 and
slightly reduced versus 2021 owing to budgeted lower grades.
Costs
All-in sustaining costs were $1,058 per gold equivalent ounce
(2021: $917 per ounce) with the increase versus 2021 due to
scheduled lower grades and higher production costs resulting from
the use of more semi-mechanised mining methods with a higher
extraction cost and from inflation affecting mainly fuel, reagents,
and supplies .
Pallancata
The 100% owned Pallancata silver/gold property is located in the
Department of Ayacucho in southern Peru. Pallancata commenced
production in 2007. Ore from Pallancata is transported 22
kilometres to the Selene plant for processing.
Pallancata summary Year ended Year ended % change
31 Dec 2022 31 Dec 2021
------------- -------------
Ore production (tonnes) 559,799 530,681 5
Average silver grade (g/t) 151 212 (29)
Average gold grade (g/t) 0.69 0.84 (18)
Silver produced (koz) 2,368 3,261 (27)
Gold produced (koz) 10.98 13.05 (16)
Silver equivalent produced
(koz) 3,158 4,200 (25)
Gold equivalent produced
(koz) 43.86 58.33 (25)
Silver sold (koz) 2,315 3,263 (29)
Gold sold (koz) 10.76 13.03 (17)
Unit cost ($/t) 131.9 124.8 6
Total cash cost ($/oz Ag
co-product) 26.6 19.2 39
All-in sustaining cost ($/oz
Ag Eq) 32.4 23.8 36
------------------------------ ------------- ------------- ---------
Production
In 2022, Pallancata produced 3.2 million silver equivalent
ounces (2021: 4.2 million ounces) with the reduction versus 2021
and versus the revised forecast (3.4 -3.6 million ounces) due to
the effects of lower-than-expected grades in line with the current
declining production profile.
Costs
All-in sustaining costs were at $32.5 per silver equivalent
ounce (2021: $23.8 per ounce) with the significant increase
year-on-year due to lower grades, a higher proportion of
conventional mining resulting in higher production costs and local
inflation.
San Jose
The San Jose silver/gold mine is located in Argentina, in the
province of Santa Cruz, 1,750 kilometres south west of Buenos
Aires. San Jose commenced production in 2007. Hochschild holds a
controlling interest of 51% and is the mine operator. The remaining
49% is owned by McEwen Mining Inc.
San Jose summary Year ended Year ended % change
31 Dec 2022 31 Dec 2021
------------- -------------
Ore production (tonnes) 507,189 539,229 (6)
Average silver grade (g/t) 369 344 7
Average gold grade (g/t) 5.55 5.47 1
Silver produced (koz) 5,292 5,250 1
Gold produced (koz) 78.80 83.62 (6)
Silver equivalent produced
(koz) 10,966 11,270 (3)
Gold equivalent produced
(koz) 152.31 156.53 (3)
Silver sold (koz) 5,303 5,233 1
Gold sold (koz) 77.20 81.83 (6)
Unit cost ($/t) 285.0 229.0 24
Total cash cost ($/oz Ag
co-product) 14.4 13.3 8
All-in sustaining cost ($/oz
Ag Eq) 21.7 18.4 18
------------------------------ ------------- ------------- ---------
Production
San Jose's production in 2022 totalled 11.0 million silver
equivalent ounces (2021: 11.3 million ounces) with the decrease
versus 2021 reflecting first quarter Covid-related employee
absences and a fire in the crushing area, both of which temporarily
affected operations and explain the reduction in tonnage. This was
partially offset by better-than-budgeted grades.
Costs
All-in sustaining costs were at $21.7 per silver equivalent
ounce (2021: $18.4 per ounce) with the rise versus 2021 due to
local inflation affecting production costs, higher mine development
capital expenditure to access new areas and lower production. This
was partially offset by local currency devaluation.
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.
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 allowed all the required site infrastructure for
progressing the project's critical paths.
The progressed subsequently progressed according to schedule and
budget with total project progress now standing at over 70% and
detailed engineering almost complete. The Company continues to
expect first production in H1 2024.
Earthworks
Site clearance for the processing plant and earthworks are at an
advanced stage (92% and 96% respectively) whilst the reservoir is
fully operational and already receiving pumped water from the pit.
All sites being prepared for the processing plant have been
finished on time therefore allowing civil works to start according
to schedule.
Procurement
Currently purchase orders have been issued for 93% of the
project equipment. Deliveries are on schedule with key equipment
such as the crusher, conveyor belts, HDPE pipes, aluminium cabling
for transmission lines, hydrocyclones, agitators and equipment for
the wastewater treatment station already received. Key material
packages that are pending include pipes and valves which are
expected to be closed in the first quarter.
Processing plant
The civil works contractor is fully mobilised and work on the
plant site area is at 32% completion rate. The concrete base for
the grinding area is complete with walls and equipment columns
currently progressing and expected to be finished by the end of
February whilst deliveries for the tanks are due the same
month.
Infrastructure
Construction of infrastructure for the main access route is
ongoing to allow delivery of materials and heavy equipment. A
preliminary drainage system that will guarantee access to critical
path areas was completed in Q4 whilst the main project drainage
system is 60% complete.
The power supply for the mine will be provided by the building
of a 67km, 138kv transmission line from the Porangatu substation
with work currently 45% advanced and expected to be completed by
June 2023.
Sustainability
Environmental controls to monitor construction work have been
implemented to ensure compliance with applicable permits. In
September, the "Knowledge Trail" was inaugurated with the presence
of local authorities and the Hochschild COO. The trail consists of
an open ecological area with 13 stations highlighting local
history, culture, archaeological and environmental information, and
project history. The trail will be used as a learning tool by local
schools among other local stakeholders and to date almost 500
people have visited. Local supplier and labour training programmes
are continuing with over 80 local suppliers already on standby.
Health and Safety
Hochschild's health and safety corporate standards are currently
being implemented at the project, including the introduction of the
Company's Seguscore safety indicator. The project has recently
surpassed one million injury-free working hours and year-to-date
Frequency and Severity Indexes are currently at zero. Finally,
Covid-19 prevention protocols are in place with no positive cases
recorded to date.
DEVELOPMENT PROJECT: SNIP
At the Snip project in British Columbia, Canada, exploration
recommenced during the first quarter of 2022, with approximately
2,500m drilled from underground. Work also began on the Preliminary
Economic Assessment (PEA), 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. In
addition, a new 2-year Environmental Baseline program was approved
and data collection began.
On 1 March 2022, Hochschild issued an updated mineral resource
estimate. 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. Following on
from that, approximately 10,300m was drilled from underground in
the second and third quarters. Results received during Q3 had the
following highlights:
Vein Results (Twin hole)
208 UG22-279: 4.3m @ 125.7g/t Au & 13g/t Ag
----------------------------------------
212 UG22-290: 2.1m @ 8.4g/t Au & 2g/t Ag
----------------------------------------
213 UG22-278: 2.3m @ 11.5g/t Au & 19g/t Ag
----------------------------------------
214 UG22-284: 4.5m @ 48.4g/t Au & 18g/t Ag
----------------------------------------
219 UG22-290: 3.8m @ 9.5g/t Au & 2g/t Ag
----------------------------------------
228 UG22-290: 2.5m @ 6.5g/t Au & 4g/t Ag
----------------------------------------
230 UG22-284: 4.1m @ 11.0g/t Au & 3g/t Ag
----------------------------------------
Vein Results (Infill hole)
215 UG22-317: 3.9m @ 33.4g/t Au & 3g/t Ag
---------------------------------------
219 UG22-330: 4.8m @ 45.1g/t Au & 14g/t Ag
---------------------------------------
219 UG22-332: 4.0m @ 12.8g/t Au & 2g/t Ag
---------------------------------------
231 UG22-300: 3.7m @ 9.2g/t Au & 8g/t Ag
---------------------------------------
240 UG22-334: 4.3m @ 31.7g/t Au & 9g/t Ag
---------------------------------------
A Communications and Engagement Agreement with the Tahltan
Central Government was signed at the beginning of 2022 with
constructive discussions between the two parties continuing
throughout the remainder of the year which included a project site
visit by a leadership delegation site in August.
At the end of the year, the PEA was completed by Ausenco.
Highlights are given below.
Mineral Resource Estimate (effective as of 20 June 2022)
Category Domain Tonnes Au Grade Total Au
(000) (g/t) Metal
Content
(000 oz)
-----------
Indicated Twin Main 3,847 9.8 1,217
----------- ------- ---------
Twin West 293 8.1 76
----------------------------- ------- ---------
Total Indicated 4,140 9.7 1,293
------- ---------
Inferred Twin Main 829 12.3 329
----------- ------- ---------
Twin West 207 11.0 73
----------------------------- ------- ---------
Total Inferred 1,036 12.1 402
------- ---------
Notes
1 These mineral resources are not mineral reserves and do not
have demonstrated economic viability.
2 The independent qualified person MRE, as defined by National
Instrument ("NI") 43-101 guidelines, is Marc Jutras P.Eng.,
M.A.Sc., Principal, Mineral Resources at Ginto Consulting Inc.
3 Follows CIM definitions (2014) for mineral resources.
4 Results are presented in-situ and undiluted and considered to
have reasonable prospects for economic extraction.
5 Reported for an underground scenario at a cut-off grade of 3.0 g/t
6 The number of tonnes and ounces were rounded to the nearest thousand.
7 Estimates are in total for the property and have not been
adjusted to reflect the proportion attributable to Hochschild on
the basis of its joint venture participation.
The update of the mineral resources of the project follows a
drilling campaign of 83 surface and underground holes carried out
in 2021 and 2022. The drill hole database is comprised of 3,507
historical drill holes and 415 holes drilled by Skeena from 2016 to
2021 and 69 holes drilled by Hochschild in 2022. The historical
holes were validated from a set of twin holes drilled by Skeena in
2021 and Hochschild in 2022.
Mining
The Snip Project contemplates the underground exploitation of
the Mineral Resources of both Twin Main and Twin West deposit at a
planned rate of 1,350 to 1,500 tpd over an eight-year period. Total
mineralised material in the Life of Mine (LOM) is 3.7mt @ 7.1 g/t
Au, with an average gold production of 100 koz per year. A
pre-production period of two years, including rehabilitation and
dewatering of existing tunnels and the ramp-up period in year two,
will allow for the start of full production beginning in year
three.
Processing
The process plant design is based on composite samples that
represent the underground mining plan. The circuit selected is a
gravity and whole ore leach process to produce gold doré bars. The
plant is designed for a through put of 1,350 tpd based on
availability of 92%. The metallurgical recovery is estimated at
96%. The process flowsheet consisted of: three-stage crushing and
ball mill grinding circuits; gravity and leach + carbon-in-leach
(L/CIL) circuits; desorption and carbon regeneration;
electrowinning and smelting; and cyanide destruction of tailings
using SO /air process.
Capital Costs
The total initial capital cost is C$346.5m and the life-of-mine
sustaining cost is C$239.9m. The initial capital costs are
summarised below:
Initial capital costs
Description C$m
Underground Mine 113.7
------
Process Plant 52.5
------
Tailings Storage Facility 35.4
------
Infrastructure 47.1
------
Total Direct Costs 248.7
------
Indirect costs 39.5
------
Contingency 58.3
------
Total 346.5
------
Project economics
The overall economics of the Project have been evaluated using a
gold price of US$1,700/oz, CAD/USD rate of 0.75 and a discount rate
of 5%. Snip's valuation has been estimated at C$183m post-tax NPV,
with an IRR of 17%. The payback period is expected to be 4 years
from the start of production.
Key project economics
Description Units Value
----------
Au Payable 000oz 797
----------
Processed Tonnes Mt 3.65
----------
Au Grade g/t 7.08
----------
After-tax valuation indicators
----------
Undiscounted cash flow C$m 373
----------
NPV@5% C$m 183
----------
Payback period years 4
----------
IRR % 17
----------
Project Capital (initial) C$m 347
----------
AISC C$/oz Au 1,081
----------
Termination
Due to the need to focus capital elsewhere in Hochschild's
portfolio, on 5 April 2023, the Company announced that it had given
notice to Skeena Resources Limited ("Skeena") to terminate the
option to earn-in a 60% interest in Snip. Termination of the option
became effective immediately and, as a result, Hochschild has no
liability to complete the Aggregate Expenditure Requirement.
In addition, Hochschild provided confirmation to Skeena that it
had satisfied the Minimum Annual Expenditure Requirement in respect
of the 12-month period that commenced on 14 October 2022.
Accordingly, no cash payment is due from Hochschild to Skeena under
the terms of the option agreement.
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.
During the year, work continued to advance the 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 advanced several trade-off studies
aimed at creating additional project value. The results of the
engineering work were outlined in a new PEA completed by Ausenco
with highlights, as follows:
-- Open pit mining with 293 Mt of mineralised material mined
over a 14 year mine life;
-- 451 Mt of waste mined during the life of mine (1.5:1 strip
ratio);
-- Processing of mineralised material by three-stages of
crushing followed by heap leaching and gold dore production;
-- Annual processing rate of 22 Mtpa producing an average of
350,000 oz per year of gold for the first five years and a life of
mine total of 3.82 million ounces of gold recovered;
-- Initial capital cost of $900 million and average
All-in-Sustaining Costs of $1,002/oz;
-- After tax net present value (5% @ $1,800/oz gold) of $826
million with IRR of 20.5%.
The Company is currently evaluating strategic alternatives for
Tiernan.
BROWNFIELD EXPLORATION: PALLANCATA ROYROPATA RESOURCE
In the third quarter of the year, Hochschild announce a major
discovery west of current operations at Pallancata. The new area,
named Royropata is part of the extended Royropata system.
An initial Inferred Mineral Resource Estimate for the Royropata
Zone to the west of the existing Pallancata mine was completed in
Q4. The Company estimates that the zone contains an Inferred
Mineral Resource of 1.88 million tonnes at an average grade of 667
g/t Ag and 2.42 g/t Au containing 51.2 million silver equivalent
("Ag Eq") ounces at a combined Ag Eq grade of 848 g/t (see table
below).
The programme started in 2019 with two long drill holes, with
the second drill hole intercepting 37.6m of quartz vein without
economic values. In 2022, after a period of geologic interpretation
and 9,800m of drilling, a new vein system, including the Marco
West, (the main structure) Laura, Demian, Royropata 1, and
Royropata 2 veins was discovered (see maps below). The Royropata
system is a tabular sinistral strike-slip fault filled by
hydrothermal quartz with crustiform, coloform, banded, and breccia
textures. The vein strikes 80-90deg and dips 60deg to 75deg to the
southeast, reaching 750m in length and 200m in depth. The host
rocks are dacitic tuffs, andesitic tuffs, and andesitic flow. The
contained minerals are mainly: pyrargyrite, proustite, argentite,
electrum, and pearceite-polybasite at the precious metal level. The
principal gangue mineral is quartz and carbonates and silicified
tuff fragments with an argillic alteration. The Marco vein remains
open to the southwest for another 900m according to the current
geological interpretation.
Audited Royropata Inferred Mineral Resource Estimate
Vein Tonnes Ag (g/t) Au (g/t) Ag Eq (g/t) Ag Eq (moz)
(k)
-------
Marco West 1,497 763 2.81 973 46.8
------- --------- --------- ------------
Laura 247 203 0.62 250 2.0
------- --------- --------- ------------
Royropata 2 80 495 1.48 606 1.6
------- --------- --------- ------------
Demian 27 444 1.55 560 0.5
------- --------- --------- ------------
Royropata 1 26 285 0.81 346 0.3
------- --------- --------- ------------
Total/Average 1,876 667 2.42 848 51.2
------- --------- --------- ------------
Notes
1 Mineral Resources are 100% attributable to Hochschild.
2 Metal prices used for the Mineral Resources calculations: Au: US$1,800/oz, Ag: US$24/oz.
3 AgEq = (Au x 75) + Ag.
4 AgEq Cut-off: 99 g/t AgEq.
5 Totals have been rounded to the appropriate number of significant figures.
2023 next steps
In 2023, the Company will develop the Mineral Resource including
infill drilling to convert the Inferred Minerals Resources to
Indicated and will also proceed with basic engineering as well as
the environmental permitting process, including baseline studies.
In addition, over the next few quarters, the brownfield team will
also target the upside potential in the Royropata zone, including
the extension of the Marco vein, the Royropata veins and the
Yanacochita and Bolsa structures according to ongoing permitting
progress. These veins are expected to add significant additional
resources.
EXPLORATION
Inmaculada
In the first half of the year, most of the drilling at
Inmaculada was potential drilling at the Huarmapata area and
resource drilling in the Josefa vein with the best results from
Josefa which them merited further drilling in the second half. In
addition, there was 2,900m of infill drilling in the Juliana,
Susana-Beatriz, Bety, Barbara and Noelia structures. Much of the
planned brownfield exploration work including surface drilling work
was curtailed in 2022 by a lack of permits.
Vein Results (resource drilling)
Josefa IMM22-139: 2.8m @ 1.9g/t Au & 43g/t Ag
IMM-22-172: 1.5m @ 6.1g/t Au & 186g/t Ag
------------------------------------------
Josefa Piso IMM-22-171A: 1.6m @ 8.5g/t Au & 104g/t
Ag
IMM-22-172: 0.8m @ 6.9g/t Au & 13g/t Ag
------------------------------------------
Cloty IMM-22-172: 0.8m @ 3.9g/t Au & 90g/t Ag
------------------------------------------
San Jose
During the year, 18,150 of potential drilling was executed
around the mine area and in the Saavedra area in the Ayelen, Ayelen
SE, Maura and Maura East veins, among others, in addition to 2,800m
of infill drilling in the Julia, Isabel, Odion, Molle and Perla
veins. The Company also started to explore the Ciclon project (700m
of drilling) further away in the Santa Cruz province.
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
SJD-2529: 2.4m @ 3.9g/t Au & 363g/t Ag
SJD-2531: 2.6m @ 10.0g/t Au & 1,321g/t
Ag
-----------------------------------------
Maura SJD-2554: 1.1m @ 4.7g/t Au & 102g/t Ag
SJD-2556: 0.8m @ 5.5/t Au & 103g/t Ag
SJD-2563: 1.3m @ 6.3g/t Au & 109g/t Ag
SJD-2570: 1.0m @ 15.1g/t Au & 123g/t Ag
SJD-2572: 2.5m @ 4.0g/t Au & 216g/t Ag
-----------------------------------------
Ciclon DCE22-02: 2.9m @ 1.0g/t Au & 615g/t Ag
-----------------------------------------
Olivia SJM-609: 1.1m @ 3.0g/t Au & 357g/t Ag
-----------------------------------------
In 2022 as a whole 19.3 million silver equivalent ounces have
been added to the San Jose resource base at a silver equivalent
grade of 983 grams per tonne.
FINANCIAL REVIEW
The reporting currency of Hochschild Mining PLC is U.S. dollars.
In discussions of financial performance, the Group removes the
effect of exceptional items, unless otherwise indicated, and in the
income statement results are shown both pre and post such
exceptional items. Exceptional items are those items, which due to
their nature or the expected infrequency of the events giving rise
to them, need to be disclosed separately on the face of the income
statement to enable a better understanding of the financial
performance of the Group and to facilitate comparison with prior
years.
Revenue
Gross revenue [8]
Gross revenue from continuing operations decreased by 10% to
$751.3 million in 2022 (2021: $831.0 million) mainly due to the
lower production and average realised silver price. Output was
mainly impacted by: lower expected grades in Pallancata and
Inmaculada; lower treated tonnage in San Jose due to Covid-related
employee absences in Q1 and a fire in the crushing area which
temporarily affected operations ; and lower treated tonnage in
Inmaculada resulting from the local and national disruption in Peru
in Q4. These were partially offset by a slightly higher average
realised gold price.
Gold
Gross revenue from gold in 2022 decreased to $435.1 million
(2021: $464.3 million) due to the 7% decrease in gold sales
resulting from lower gold produced at all operations. This was
partially offset by a 1% increase in the average realised gold
price.
Silver
Gross revenue from silver decreased in 2022 to $315.5 million
(2021: $366.2 million) mainly due to a 6% decrease in the average
realised silver price and lower silver production at Pallancata and
Inmaculada due to lower tonnage treated and grades.
Gross average realised sales prices
The following table provides figures for average realised prices
( before the deduction of commercial discounts) and ounces sold for
2022 and 2021:
Average realised prices Year ended Year ended
31 Dec 2022 31 Dec 2021
------------- -------------
Silver ounces sold (koz) 13,536 14,712
Avg. realised silver price ($/oz) 23.3 24.9
Gold ounces sold (koz) 242.89 260.71
Avg. realised gold price ($/oz) 1,791 1,781
----------------------------------- ------------- -------------
4.0 million silver ounces of 2022 production were hedged at
$26.86 per ounce, boosting the realised price. On 10 November 2021,
the Company hedged 3.3 million ounces of 2023 silver production at
$25.00 per ounce.
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 2022, the Group recorded
commercial discounts of $15.7 million (2021: $19.6 million) with
the fall explained by the decrease in production. The ratio of
commercial discounts to gross revenue in 2022 was 2%, in line with
2021.
Net revenue
Net revenue was $735.6 million (2021: $811.4 million),
comprising net gold revenue of $429.8 million (2021: $457.8
million) and net silver revenue of $305.2 million (2021: $353.1
million). In 2022, gold accounted for 58% and silver 42% of the
Company's consolidated net revenue (2021: gold 56% and silver
44%).
Reconciliation of gross revenue by mine to Group net revenue
$000 Year ended Year ended % change
31 Dec 2022 31 Dec 2021
------------- -------------
Silver revenue
Inmaculada 137,033 156,675 (13)
Pallancata 62,986 82,727 (24)
San Jose 115,477 126,790 (9)
Commercial discounts (10,334) (13,088) (21)
---------------------- ------------- ------------- ---------
Net silver revenue 305,162 353,104 (14)
---------------------- ------------- ------------- ---------
Gold revenue
Inmaculada 276,895 296,160 (7)
Pallancata 19,459 22,989 (15)
San Jose 138,782 145,187 (4)
Commercial discounts (5,335) (6,517) (18)
---------------------- ------------- ------------- ---------
Net gold revenue 429,801 457,819 (6)
---------------------- ------------- ------------- ---------
Other revenue 680 464 47
---------------------- ------------- ------------- ---------
Net revenue 735,643 811,387 (9)
---------------------- ------------- ------------- ---------
Cost of sales
Total cost of sales before exceptional items was $527.6 million
in 2022 (2021: $487.8 million). The direct production cost
excluding depreciation was higher at $384.2 million (2021: $323.4
million) mainly due to inflation impacting fuel, reagents and
supplies and the use of a higher proportion of conventional mining
methods . Depreciation in production cost decreased to $137.7
million (2021: $148.8 million) due to lower extracted volumes
across all operations. Fixed costs incurred during total or partial
production stoppages in Argentina and Peru were $8.0 million in
2022 (2021: $8.7 million).
$000 Year ended Year ended % change
31 Dec 2022 31 Dec 2021
------------- -------------
Direct production cost excluding
depreciation 384,183 323,418 19
Depreciation in production cost 137,747 148,842 (7)
Other items and workers profit
sharing 3,321 6,512 (49)
Fixed costs during operational
stoppages and reduced capacity 8,023 8,680 (8)
Change in inventories (5,631) 320 (1,860)
---------------------------------- ------------- ------------- ---------
Cost of sales 527,643 487,772 8
---------------------------------- ------------- ------------- ---------
Fixed costs during operational stoppages and reduced
capacity
$000 Year ended Year ended % Change
31 Dec 2022 31 Dec 2021
------------- -------------
Personnel 4,498 7,607 (41)
Third party services 3,090 995 211
Supplies 146 - -
Depreciation and amortisation 2 - -
Others 287 78 268
------------------------------- ------------- ------------- ---------
Cost of sales 8,023 8,680 (8)
------------------------------- ------------- ------------- ---------
Unit cost per tonne
The Company reported unit cost per tonne at its operations of
$158.7 per tonne in 2022, a 19% increase versus 2021 ($133.5 per
tonne) This was due to: higher costs at Inmaculada resulting from
using more semi-mechanised mining methods with a higher extraction
cost; higher costs at Pallancata due to the use of more
conventional mining methods; and higher costs in San Jose mainly
due to inflation and from expenditure related to the accessing and
mining of incremental resources.
Unit cost per tonne by operation (including royalties) [9] :
Operating unit ($/tonne) Year ended Year ended % change
31 Dec 2022 31 Dec 2021
------------- -------------
Peru 122.9 106.5 15
Inmaculada 118.7 99.2 20
Pallancata 131.9 124.8 6
-------------------------- ------------- ------------- ---------
Argentina
San Jose 285.0 229.0 24
-------------------------- ------------- ------------- ---------
Total 158.7 133.5 19
-------------------------- ------------- ------------- ---------
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]
Year ended 31 Dec 2022
$000 unless otherwise indicated Inmaculada Pallancata San Total
Jose
----------- ----------- ---------
Group cash cost 162,397 80,756 170,585 413,738
-------------------------------------- ----------- ----------- --------- ----------
(+) Cost of sales [11] 239,277 83,926 193,840 517,043
(-) Depreciation and amortisation in
cost of sales (80,633) (8,671) (47,123) (136,427)
(+) Selling expenses 796 622 12,614 14,032
(+) Commercial deductions [12] 2,957 4,879 11,254 19,090
Gold 2,131 969 4,630 7,730
Silver 826 3,910 6,624 11,360
-------------------------------------- ----------- ----------- --------- ----------
Revenue 413,928 77,566 243,469 734,963
-------------------------------------- ----------- ----------- --------- ----------
Gold 276,895 18,490 134,416 429,801
Silver 137,033 59,076 109,053 305,162
Ounces sold
----------- ----------- ---------
Gold 154.9 10.8 77.2 242.9
Silver 5,918 2,315 5,303 13,536
-------------------------------------- ----------- ----------- --------- ----------
Group cash cost ($/oz)
-------------------------------------- ----------- ----------- --------- ----------
Co product Au 701 1,789 1,220 996
Co product Ag 9.1 26.6 14.4 12.7
By product Au 158 1,652 711 400
By product Ag (19.7) 26.5 6.0 (1.8)
-------------------------------------- ----------- ----------- --------- ----------
Year ended 31 Dec 2021
$000 unless otherwise indicated Inmaculada Pallancata San Total
Jose
----------- ----------- ---------
Group cash cost 141,316 80,354 150,663 372,333
-------------------------------------- ----------- ----------- --------- ----------
(+) Cost of sales [13] 213,812 93,049 172,231 479,092
(-) Depreciation and amortisation in
cost of sales (76,372) (19,915) (49,195) (145,482)
(+) Selling expenses 616 620 14,195 15,431
(+) Commercial deductions [14] 3,260 6,600 13,432 23,292
Gold 2,164 1,034 5,717 8,915
Silver 1,096 5,566 7,715 14,377
-------------------------------------- ----------- ----------- --------- ----------
Revenue 452,835 99,116 258,972 810,923
-------------------------------------- ----------- ----------- --------- ----------
Gold 296,160 21,955 139,704 457,819
Silver 156,675 77,161 119,268 353,104
Ounces sold
----------- ----------- ---------
Gold 165.9 13.0 81.8 260.7
Silver 6,216 3,263 5,233 14,712
-------------------------------------- ----------- ----------- --------- ----------
Group cash cost ($/oz)
-------------------------------------- ----------- ----------- --------- ----------
Co product Au 557 1,366 993 806
Co product Ag 7.9 19.2 13.3 11.0
By product Au (99) (182) 289 19
By product Ag (25.3) 17.6 1.0 (6.4)
-------------------------------------- ----------- ----------- --------- ----------
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
Year ended 31 Dec 2022
$000 unless otherwise Inmaculada Pallancata San Main Corporate Total
indicated Jose Operations &
others
----------- ----------- -------- ------------ ----------
(+) Direct production cost
excluding depreciation 156,551 75,472 152,160 384,183 - 384,183
(+) Other items and workers
profit sharing in cost
of sales 1,777 1,544 - 3,321 - 3,321
(+) Operating and exploration
capex for units [16] 78,176 12,340 47,604 138,120 584 138,704
(+) Brownfield exploration
expenses 2,946 6,000 7,700 16,646 2,537 19,183
(+) Administrative expenses
(excl depreciation) 3,894 729 6,242 10,865 41,266 52,131
(+) Royalties and special
mining tax [17] 4,032 756 - 4,788 2,658 7,446
-------------------------------- ----------- ----------- -------- ------------ ---------- --------
Sub-total 247,376 96,841 213,706 557,923 47,045 604,968
-------------------------------- ----------- ----------- -------- ------------ ---------- --------
Au ounces produced 154,846 10,977 78,803 244,626 - 244,626
Ag ounces produced (000s) 5,936 2,368 5,292 13,596 13,596
Ounces produced (Ag Eq
000s oz) 17,085 3,158 10,966 31,209 - 31,209
-------------------------------- ----------- ----------- -------- ------------ ---------- --------
Sub-total ($/oz Ag Eq) 14.5 30.7 19.5 17.9 1.5 19.4
-------------------------------- ----------- ----------- -------- ------------ ---------- --------
(+) Commercial deductions 2,957 4,879 11,254 19,090 - 19,090
(+) Selling expenses 796 622 12,614 14,032 - 14,032
-------------------------------- ----------- ----------- -------- ------------ ---------- --------
Sub-total 3,753 5,501 23,868 33,122 - 33,122
-------------------------------- ----------- ----------- -------- ------------ ---------- --------
Au ounces sold 154,930 10,759 77,204 242,893 - 242,893
Ag ounces sold (000s) 5,918 2,315 5,303 13,536 - 13,536
Ounces sold (Ag Eq 000s
oz) 17,073 3,090 10,862 31,025 - 31,025
-------------------------------- ----------- ----------- -------- ------------ ---------- --------
Sub-total ($/oz Ag Eq) 0.2 1.8 2.2 1.1 - 1.1
-------------------------------- ----------- ----------- -------- ------------ ---------- --------
All-in sustaining costs
($/oz Ag Eq) 14.7 32.4 21.7 18.9 1.5 20.4
-------------------------------- ----------- ----------- -------- ------------ ---------- --------
All-in sustaining costs
($/oz Au Eq) 1,058 2,336 1,561 1,364 109 1,473
-------------------------------- ----------- ----------- -------- ------------ ---------- --------
Year ended 31 Dec 2021
$000 unless otherwise Inmaculada Pallancata San Main Corporate Total
indicated Jose operations &
others
----------- ----------- -------- ------------ ----------
(+) Direct production cost
excluding depreciation 134,110 66,859 122,449 323,418 - 323,418
(+) Other items and workers
profit sharing in cost
of sales 3,489 3,023 - 6,512 - 6,512
(+) Operating and exploration
capex for units [18] 76,512 14,526 41,325 132,363 1,735 134,098
(+) Brownfield exploration
expenses 3,276 5,993 9,654 18,923 3,658 22,581
(+) Administrative expenses
(excl depreciation) 4,909 1,075 6,104 12,088 38,783 50,871
(+) Royalties and special
mining tax [19] 5,190 1,136 - 6,326 5,916 12,242
-------------------------------- ----------- ----------- -------- ------------ ---------- --------
Sub-total 227,486 92,612 179,532 499,630 50,092 549,722
-------------------------------- ----------- ----------- -------- ------------ ---------- --------
Au ounces produced 165,730 13,045 83,615 262,390 - 262,390
Ag ounces produced (000s) 6,236 3,261 5,250 14,746 14,746
Ounces produced (Ag Eq
000s oz) 18,168 4,200 11,270 33,638 - 33,638
-------------------------------- ----------- ----------- -------- ------------ ---------- --------
Sub-total ($/oz Ag Eq) 12.5 22.1 15.9 14.9 1.4 16.3
-------------------------------- ----------- ----------- -------- ------------ ---------- --------
(+) Commercial deductions 3,260 6,600 13,432 23,292 - 23,292
(+) Selling expenses 616 620 14,195 15,431 - 15,431
-------------------------------- ----------- ----------- -------- ------------ ---------- --------
Sub-total 3,876 7,220 27,627 38,723 - 38,723
-------------------------------- ----------- ----------- -------- ------------ ---------- --------
Au ounces sold 165,857 13,027 81,831 260,715 - 260,714
Ag ounces sold (000s) 6,216 3,263 5,233 14,712 - 14,712
Ounces sold (Ag Eq 000s
oz) 18,158 4,201 11,124 33,483 - 33,483
-------------------------------- ----------- ----------- -------- ------------ ---------- --------
Sub-total ($/oz Ag Eq) 0.2 1.7 2.5 1.2 - 1.2
-------------------------------- ----------- ----------- -------- ------------ ---------- --------
All-in sustaining costs
($/oz Ag Eq) 12.7 23.8 18.4 16.0 1.5 17.5
-------------------------------- ----------- ----------- -------- ------------ ---------- --------
All-in sustaining costs
($/oz Au Eq) 917 1,711 1,325 1,153 105 1,258
-------------------------------- ----------- ----------- -------- ------------ ---------- --------
Administrative expenses
Administrative expenses were higher at $54.2 million (2021:
$51.9 million) mainly due to higher personnel expenses and travel
expenses, and administrative expenses related to the Mara Rosa
project.
Exploration expenses
In 2022, exploration expenses increased to $56.8 million (2021:
$39.9 million) mainly due to the Snip project's exploration
expenses of $20.8 million (2021: Nil), partially offset by lower
exploration expenses across all mines of $3.9 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 2022, the Company capitalised $0.7 million relating
to brownfield exploration compared to $6.1 million in 2021,
bringing the total investment in exploration for 2022 to $57.6
million (2021: $46.0 million).
Selling expenses
Selling expenses decreased to $14.0 million (2021: $15.4
million) mainly due to lower volumes sold in Argentina.
Other income/expenses
Other income before exceptional items was lower at $3.3 million
(2021: $8.4 million) mainly due to decreased gains on the sale of
equipment of $3.0 million and $2.0 million of higher income on the
recovery of provisions in 2021.
Other expenses before exceptional items were lower at $39.3
million (2021: $44.6 million) with the reduction mainly due to
lower increases in provision for mine closure of $17.8 million
(2021: $22.1 million), lower expenses from a voluntary redundancy
programme in Argentina of $1.3 million (2021: $8.3 million). These
were partially offset by: an increase in care and maintenance costs
to $7.4 million (H1 2021: $5.7 million); higher labour
contingencies in Argentina of $3.1 million (2021: $0.8 million);
increased provision for administrative fines of $1.6 million (2021:
$0.1 million), and the insurance deductible plus expenses not
covered by insurance relating to the fire in San Jose of $0.9
million.
Adjusted EBITDA
Adjusted EBITDA decreased by 35% to $249.6 million (2021: $382.8
million) mainly due to the decrease in revenue resulting from lower
gold and silver production, and the lower average realised silver
price. In addition, there was an increase in production costs
mainly due to inflation, higher mine development capex and the use
of a higher proportion of conventional mining methods.
Adjusted EBITDA is calculated as profit from continuing
operations before exceptional items, net finance costs, foreign
exchange losses and income tax plus non-cash items (depreciation
and amortisation and changes in mine closure provisions) and
exploration expenses other than personnel and other exploration
related fixed expenses.
$000 unless otherwise indicated Year ended Year ended % change
31 Dec 2022 31 Dec 2021
------------- -------------
Profit from continuing operations before exceptional items, net finance
income/(cost), foreign
exchange loss and income tax 45,190 179,438 (75)
Depreciation and amortisation in cost of sales 136,427 145,482 (6)
Depreciation and amortisation in administrative expenses and other expenses 2,135 2,184 (2)
Exploration expenses 56,826 39,848 43
Personnel and other exploration related fixed expenses (10,602) (7,099) 49
Other non-cash income, net [20] 19,629 22,958 (15)
----------------------------------------------------------------------------- ------------- ------------- ---------
Adjusted EBITDA 249,605 382,811 (35)
----------------------------------------------------------------------------- ------------- ------------- ---------
Adjusted EBITDA margin 34% 47% (28)
----------------------------------------------------------------------------- ------------- ------------- ---------
Finance income
Finance income before exceptional items of $5.2 million
increased from 2021 ($3.9 million) mainly due to higher interest on
deposits of $2.4 million (2021: $1.6 million).
Finance costs
Finance costs before exceptional items decreased from $32.1
million in 2021 to $21.8 million in 2022 principally due to: lower
foreign exchange transaction costs to acquire $5.2 million dollars
in Argentina of $5.0 million (2021: $15.3 million); the
capitalisation of $4.9 million interest expenses that are directly
attributable to the construction of Mara Rosa; and the cancelation
of the Libor rate swap of the refinanced $200 million medium-term
loan of $3.8 million in 2021. These effects were partially offset
by higher interest paid of $12.9 million in 2022 (2021: $5.7
million) mainly due to an additional $100 million medium-term loan
drawn down in December 2021 and higher interest rates, and the fair
value loss on financial investments of $2.1 million (2021: $0.8
million).
Foreign exchange (losses)/gains
The Group recognised a foreign exchange loss of $2.6 million
(2021: $2.4 million loss) as a result of exposures in currencies
other than the functional currency.
Income tax
The Company's pre-exceptional income tax charge was $17.6
million (2021: $81.3 million). The significant decrease in the
charge is mainly explained by lower profitability versus 2021.
The effective tax rate (pre-exceptional) for the period was
72.3% (2021: 54.7%), compared to the weighted average statutory
income tax rate of 35.6% (2021: 30.9%). The high effective tax rate
in 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 36.5%, Royalties and the Special Mining Tax
which increased the effective rate by 21.8%; partially offset by
the effect of foreign exchange in Peru and Argentina decreasing the
rate by 19.2%.
Exceptional items
Exceptional items in 2022 totalled a $1.9 million loss after tax
(2021: $3.7 million loss after tax) related to: the impairment of
the investment in Aclara Resources Inc. of $9.9 million; the
reversal of impairment loss in Pallancata of $15.5 million
resulting from the new resources discovered in the Royropata zone;
and the impairment of the Azuca project's evaluation and
exploration costs of $4.2 million.
The tax effect of these exceptional items was a $3.3 million tax
loss (2021: $15.1 million tax gain). The net attributable loss of
exceptional items was $1.9 million.
Cash flow and balance sheet review
Cash flow:
$000 Year ended Year ended Change
31 Dec 31 Dec 2021
2022
----------- -------------
Net cash generated from operating
activities 102,918 282,520 (179,602)
Net cash used in investing activities (337,580) (183,434) (154,146)
Cash flows generated generated/(used
in) from financing activities (6,588) 59,307 (65,895)
Foreign exchange adjustment (1,695) (3,487) 1,792
------------------------------------------- ----------- ------------- ----------
Net increase in cash and cash equivalents
during the year (242,945) 154,906 (397,851)
------------------------------------------- ----------- ------------- ----------
Net cash generated from operating activities decreased from
$282.5 million in 2021 to $102.9 million in 2022 mainly due to
lower Adjusted EBITDA of $249.6 million (2021: $382.8 million), and
an increased working capital position.
Net cash used in investing activities increased from $183.4
million in 2021 to $337.6 million in 2022 mainly due to the
acquisition cost of Mara Rosa and subsequent capex of $193.2
million. This effect was partially offset by the purchase of Aclara
shares for $20.0 million in 2021, and lower foreign exchange
transaction costs to acquire dollars in Argentina of $5.0 million
(2021: $15.3 million).
Cash from financing activities decreased to an outflow of $6.6
million from an inflow of $59.3 million in 2021, primarily due to
the additional medium-term loan of $100.0 million drawn down in
December 2021, partially offset by proceeds from Minera Santa Cruz
stock market promissory notes of $14.5 million, and lower dividends
to non-controlling interest of $0.3 million (2021: $9.8
million).
Working capital
$000 As at As at
31 December 2022 31 December 2021
------------------
Trade and other receivables 85,408 69,749
Inventories 61,440 49,184
Derivative financial assets/(liabilities) 2,186 14,073
Income tax payable, net 7,100 (22,322)
Trade and other payables (144,102) (133,482)
Provisions (24,177) (32,058)
------------------------------------------- ------------------ ------------------
Working capital (12,145) (54,856)
------------------------------------------- ------------------ ------------------
The Group's working capital position increased by $42.7 million
from $(54.9) million to $(12.1) million. The key drivers of the
increase were: higher income tax payable of $29.4 million; higher
trade and other receivables of $15.7 million; and lower derivative
financial assets of $11.9 million.
Net (debt)/cash
$000 unless otherwise indicated As at As at
31 December 31 December 2021
2022
-------------
Cash and cash equivalents 143,844 386,789
Non-current borrowings (275,000) (300,000)
Current borrowings [21] (43,989) (499)
--------------------------------- ------------- ------------------
Net cash / (net debt) (175,145) 86,290
--------------------------------- ------------- ------------------
The Group's reported net debt position was $175.1 million as at
31 December 2022 (31 December 2021: net cash of $86.3 million). The
decrease is mainly explained by: the acquisition cost of Mara Rosa
and subsequent construction capex of $193.2 million; the Snip
project's exploration expenses of $19.6 million; and temporary
changes in working capital.
$000 Year ended Year ended
31 Dec 2022 31 Dec 2021
-------------
Inmaculada 78,176 76,512
Pallancata 13,518 14,250
San Jose 50,112 43,666
Operations 141,806 134,428
-------------
Mara Rosa 193,218 -
Aclara - 11,476
Other 4,842 7,957
------------ ------------- -------------
Total 339,866 153,861
------------ ------------- -------------
2022 capital expenditure of $339.9 million (2021: $153.9
million) mainly comprised the acquisition cost of Mara Rosa and
subsequent capex of $193.2 million and operational capex of $141.8
million (2021: $134.4 million). Operational capex was higher mainly
due to higher capex for development work at Pallancata to access
newly economic resources which have further extended the mine life,
and higher mine development capital expenditure in San Jose.
STATEMENT OF DIRECTORS' RESPONSIBILITIES
The Directors confirm that to the best of their knowledge:
o the financial statements, prepared in accordance with the
applicable set of accounting standards, give a true and fair view
of the assets, liabilities, financial position and profit or loss
of the Company and the undertakings included in the consolidation
taken as a whole; and
o the Management report includes a fair review of the
development and performance of the business and the position of the
Company and the undertakings included in the consolidation taken as
a whole, together with a description of the principal risks and
uncertainties that they face.
Consolidated income statement
For the year ended 31 December 2022
Year ended 31 December Year ended 31 December
2022 2021
=================================== ===================================
Exceptional Exceptional
Before items Before items
exceptional (note exceptional (note
items 11) Total items 11) Total
Notes US$000 US$000 US$000 US$000 US$000 US$000
====================== ===== =========== =========== ========= =========== =========== =========
Revenue 5 735,643 - 735,643 811,387 - 811,387
----------------------- ----- ----------- ----------- --------- ----------- ----------- ---------
Cost of sales 6 (527,643) - (527,643) (487,772) (22,511) (510,283)
----------------------- ----- ----------- ----------- --------- ----------- ----------- ---------
Gross profit 208,000 - 208,000 323,615 (22,511) 301,104
----------------------- ----- ----------- ----------- --------- ----------- ----------- ---------
Administrative expenses 7 (54,158) - (54,158) (51,905) - (51,905)
----------------------- ----- ----------- ----------- --------- ----------- ----------- ---------
Exploration expenses 8 (56,826) - (56,826) (39,848) - (39,848)
----------------------- ----- ----------- ----------- --------- ----------- ----------- ---------
Selling expenses 9 (14,032) - (14,032) (15,431) - (15,431)
----------------------- ----- ----------- ----------- --------- ----------- ----------- ---------
Other income 12 3,340 - 3,340 8,435 37,461 45,896
----------------------- ----- ----------- ----------- --------- ----------- ----------- ---------
Other expenses 12 (39,302) - (39,302) (44,565) (1,503) (46,068)
----------------------- ----- ----------- ----------- --------- ----------- ----------- ---------
(Impairment)/reversal
of
impairment and
write-off
of non-current assets,
net (1,832) 11,363 9,531 (863) (24,846) (25,709)
----------------------- ----- ----------- ----------- --------- ----------- ----------- ---------
Profit/(loss) before
net
finance income/(cost),
foreign
exchange loss and
income
tax 45,190 11,363 56,553 179,438 (11,399) 168,039
----------------------- ----- ----------- ----------- --------- ----------- ----------- ---------
Share of loss of an
associate 19 (1,677) (9,923) (11,600) (169) - (169)
----------------------- ----- ----------- ----------- --------- ----------- ----------- ---------
Finance income 13 5,211 - 5,211 3,946 - 3,946
----------------------- ----- ----------- ----------- --------- ----------- ----------- ---------
Finance costs 13 (21,776) - (21,776) (32,061) - (32,061)
----------------------- ----- ----------- ----------- --------- ----------- ----------- ---------
Foreign exchange loss,
net (2,622) - (2,622) (2,424) - (2,424)
----------------------- ----- ----------- ----------- --------- ----------- ----------- ---------
Profit/(loss) from
before
income tax 24,326 1,440 25,766 148,730 (11,399) 137,331
----------------------- ----- ----------- ----------- --------- ----------- ----------- ---------
Income tax
(expense)/benefit 14 (17,581) (3,353) (20,934) (81,280) 15,055 (66,225)
----------------------- ----- ----------- ----------- --------- ----------- ----------- ---------
Profit/(loss) for the
year 6,745 (1,913) 4,832 67,450 3,656 71,106
----------------------- ----- ----------- ----------- --------- ----------- ----------- ---------
Attributable to:
---------------------- ----- ----------- ----------- --------- ----------- ----------- ---------
Equity shareholders of
the
Parent 4,874 (1,913) 2,961 69,567 7,367 76,934
----------------------- ----- ----------- ----------- --------- ----------- ----------- ---------
Non-controlling
interests 1,871 - 1,871 (2,117) (3,711) (5,828)
----------------------- ----- ----------- ----------- --------- ----------- ----------- ---------
6,745 (1,913) 4,832 67,450 3,656 71,106
---------------------- ----- ----------- ----------- --------- ----------- ----------- ---------
Basic earnings/(loss)
per
ordinary share for the
year
(expressed in US
dollars
per share) 15 0.01 - 0.01 0.14 0.01 0.15
----------------------- ----- ----------- ----------- --------- ----------- ----------- ---------
Diluted earnings/(loss)
per ordinary share for
the
year (expressed in US
dollars
per share) 15 0.01 - 0.01 0.13 0.01 0.14
Consolidated statement of comprehensive income
For the year ended 31 December 2022
Year ended
31 December
===================
2022 2021
Notes US$000 US$000
======================================================= ====== ======== ========
Profit for the year 4,832 71,106
-------------------------------------------------------- ------ -------- --------
Other comprehensive income that might be reclassified
to profit or loss in subsequent periods, net
of tax:
------------------------------------------------------- ------ -------- --------
38(a),
Net (loss)/gain on cash flow hedges 38(g) (16,929) 25,028
-------------------------------------------------------- ------ -------- --------
Deferred tax benefit/(charge) on cash flow hedges 30 4,994 (7,383)
-------------------------------------------------------- ------ -------- --------
Exchange differences on translating foreign operations (12,739) (21,282)
-------------------------------------------------------- ------ -------- --------
Cumulative exchange differences gain transferred
to the income statement on disposal of foreign
operations 4 - 9,995
-------------------------------------------------------- ------ -------- --------
Share of other comprehensive income/(loss) of
an associate 19 1,283 (9)
-------------------------------------------------------- ------ -------- --------
(23,391) 6,349
------------------------------------------------------- ------ -------- --------
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') 20 (152) 261
-------------------------------------------------------- ------ -------- --------
(152) 261
------------------------------------------------------- ------ -------- --------
Other comprehensive (loss)/income for the year,
net of tax (23,543) 6,610
-------------------------------------------------------- ------ -------- --------
Total comprehensive (loss)/income for the year (18,711) 77,716
-------------------------------------------------------- ------ -------- --------
Total comprehensive (loss)/income attributable
to :
------------------------------------------------------- ------ -------- --------
Equity shareholders of the Parent (20,582) 83,544
-------------------------------------------------------- ------ -------- --------
Non-controlling interests 1,871 (5,828)
-------------------------------------------------------- ------ -------- --------
(18,711) 77,716
------------------------------------------------------- ------ -------- --------
Consolidated statement of financial position
As at 31 December 2022
As at As at
31 December 31 December
2022 2021
Notes US$000 US$000
================================================== ===== ============ ============
ASSETS
-------------------------------------------------- ----- ------------ ------------
Non-current assets
-------------------------------------------------- ----- ------------ ------------
Property, plant and equipment 16 926,913 738,119
--------------------------------------------------- ----- ------------ ------------
Evaluation and exploration assets 17 123,462 123,304
--------------------------------------------------- ----- ------------ ------------
Intangible assets 18 19,328 18,094
--------------------------------------------------- ----- ------------ ------------
Investment in an associate 19 33,242 43,559
--------------------------------------------------- ----- ------------ ------------
Financial assets at fair value through OCI 20 509 661
--------------------------------------------------- ----- ------------ ------------
Financial assets at fair value through profit
and loss 21 1,015 3,155
--------------------------------------------------- ----- ------------ ------------
Trade and other receivables 22 6,498 2,470
--------------------------------------------------- ----- ------------ ------------
Derivative financial assets 38(a) - 5,042
--------------------------------------------------- ----- ------------ ------------
Deferred income tax assets 30 4,213 484
--------------------------------------------------- ----- ------------ ------------
1,115,180 934,888
-------------------------------------------------- ----- ------------ ------------
Current assets
-------------------------------------------------- ----- ------------ ------------
Inventories 23 61,440 49,184
--------------------------------------------------- ----- ------------ ------------
Trade and other receivables 22 85,408 69,749
--------------------------------------------------- ----- ------------ ------------
Derivative financial assets 38(a) 2,186 14,073
--------------------------------------------------- ----- ------------ ------------
Income tax receivable 14 9,226 32
--------------------------------------------------- ----- ------------ ------------
Cash and cash equivalents 24 143,844 386,789
--------------------------------------------------- ----- ------------ ------------
302,104 519,827
-------------------------------------------------- ----- ------------ ------------
Total assets 1,417,284 1,454,715
--------------------------------------------------- ----- ------------ ------------
EQUITY AND LIABILITIES
-------------------------------------------------- ----- ------------ ------------
Capital and reserves attributable to shareholders
of the Parent
-------------------------------------------------- ----- ------------ ------------
Equity share capital 29 9,061 226,506
--------------------------------------------------- ----- ------------ ------------
Share premium 29 - 438,041
--------------------------------------------------- ----- ------------ ------------
Other reserves (238,800) (217,657)
--------------------------------------------------- ----- ------------ ------------
Retained earnings 886,980 248,664
--------------------------------------------------- ----- ------------ ------------
657,241 695,554
-------------------------------------------------- ----- ------------ ------------
Non-controlling interests 65,475 63,890
--------------------------------------------------- ----- ------------ ------------
Total equity 722,716 759,444
--------------------------------------------------- ----- ------------ ------------
Non-current liabilities
-------------------------------------------------- ----- ------------ ------------
Trade and other payables 25 1,623 2,815
--------------------------------------------------- ----- ------------ ------------
Borrowings 27 275,000 300,000
--------------------------------------------------- ----- ------------ ------------
Provisions 28 123,506 116,835
--------------------------------------------------- ----- ------------ ------------
Deferred income tax liabilities 30 80,045 87,228
--------------------------------------------------- ----- ------------ ------------
480,174 506,878
-------------------------------------------------- ----- ------------ ------------
Current liabilities
-------------------------------------------------- ----- ------------ ------------
Trade and other payables 25 144,102 133,482
--------------------------------------------------- ----- ------------ ------------
Borrowings 27 43,989 499
--------------------------------------------------- ----- ------------ ------------
Provisions 28 24,177 32,058
--------------------------------------------------- ----- ------------ ------------
Income tax payable 14 2,126 22,354
--------------------------------------------------- ----- ------------ ------------
214,394 188,393
-------------------------------------------------- ----- ------------ ------------
Total liabilities 694,568 695,271
--------------------------------------------------- ----- ------------ ------------
Total equity and liabilities 1,417,284 1,454,715
--------------------------------------------------- ----- ------------ ------------
These financial statements were approved by the Board of
Directors on 19 April 2023 and signed on its behalf by:
Ignacio Bustamante
Chief Executive Officer
19 April 2023
Consolidated statement of cash flows
For the year ended 31 December 2022
Year ended
31 December
====================
2022 2021
Notes US$000 US$000
===================================================== ===== ========= =========
Cash flows from operating activities
----------------------------------------------------- ----- --------- ---------
Cash generated from operations 34 144,271 319,588
------------------------------------------------------ ----- --------- ---------
Interest received 2,409 1,938
------------------------------------------------------ ----- --------- ---------
Interest paid 27 (12,962) (5,720)
------------------------------------------------------ ----- --------- ---------
Payment of mine closure costs 28 (10,409) (9,083)
------------------------------------------------------ ----- --------- ---------
Income tax, special mining tax and mining royalty
paid 1 (20,391) (22,021)
------------------------------------------------------ ----- --------- ---------
Net cash generated from operating activities 102,918 284,702
------------------------------------------------------ ----- --------- ---------
Cash flows from investing activities
----------------------------------------------------- ----- --------- ---------
Purchase of property, plant and equipment (210,372) (130,965)
------------------------------------------------------ ----- --------- ---------
Purchase of evaluation and exploration assets 17 (122,988) (21,398)
------------------------------------------------------ ----- --------- ---------
Purchase of intangibles (353)
------------------------------------------------------ ----- --------- ---------
Purchase of financial assets at fair value through
OCI 20 - (7)
------------------------------------------------------ ----- --------- ---------
Purchase of investment in associate - (19,995)
------------------------------------------------------ ----- --------- ---------
Purchase of financial assets at fair value through
profit and loss 21 - (3,308)
------------------------------------------------------ ----- --------- ---------
Purchase of Argentinian bonds 13 (10,204) (33,469)
------------------------------------------------------ ----- --------- ---------
Proceeds from sale of Argentinian bonds 13 5,248 18,133
------------------------------------------------------ ----- --------- ---------
Proceeds from sale of financial assets at fair
value through OCI 20 - 9
------------------------------------------------------ ----- --------- ---------
Proceeds from sale of financial assets at fair
value though profit and loss 21 - 4,726
------------------------------------------------------ ----- --------- ---------
Proceeds from sale of property, plant and equipment 1,089 3,393
------------------------------------------------------ ----- --------- ---------
Cash and cash equivalent of demerged entity 4 - (553)
------------------------------------------------------ ----- --------- ---------
Net cash used in investing activities (337,580) (183,434)
------------------------------------------------------ ----- --------- ---------
Cash flows from financing activities
----------------------------------------------------- ----- --------- ---------
Proceeds from borrowings 27 28,911 105,954
------------------------------------------------------ ----- --------- ---------
Repayment of borrowings 27 (11,557) (14,793)
------------------------------------------------------ ----- --------- ---------
Payment of lease liabilities 26 (1,639) (2,182)
------------------------------------------------------ ----- --------- ---------
Dividends paid to non-controlling interests 31 (286) (9,832)
------------------------------------------------------ ----- --------- ---------
Dividends paid 31 (22,017) (22,022)
------------------------------------------------------ ----- --------- ---------
Cash flows (used in)/generated from financing
activities (6,588) 57,125
------------------------------------------------------ ----- --------- ---------
Net (decrease)/increase in cash and cash equivalents
during the year (241,250) 158,393
------------------------------------------------------ ----- --------- ---------
Exchange difference (1,695) (3,487)
------------------------------------------------------ ----- --------- ---------
Cash and cash equivalents at beginning of year 386,789 231,883
------------------------------------------------------ ----- --------- ---------
Cash and cash equivalents at end of year 24 143,844 386,789
------------------------------------------------------ ----- --------- ---------
1 Taxes paid have been offset with value added tax (VAT) credits of US$nil (2021:US$3,478,000).
Consolidated statement of changes in equity
For the year 31 December 2022
Other reserves
========= =================================================================================
Fair Share
value of other
reserve comprehensive
of loss Capital
financial of an and reserves
assets associate attributable
at fair US$000 Unrealised Share- to
Equity value Cumulative gain/ based Total shareholders
share Share through Dividends translation (loss) Merger payment other Retained of the Non-controlling Total
capital premium OCI expired adjustment on hedges reserve reserve reserves earnings Parent interests equity
Notes US$000 US$000 US$000 US$000 US$000 US$000 US$000 US$000 US$000 US$000 US$000 US$000 US$000
================= ===== ========= ========= ========== ============= ========= =========== ========== ========= ======= ========= ========= ============ =============== --------
Balance at 1
January
2021 226,506 438,041 (205) - 99 (13,876) (4,169) (210,046) 2,533 (225,664) 287,652 726,535 79,550 806,085
------------------ ----- --------- --------- ---------- ------------- --------- ----------- ---------- --------- ------- --------- --------- ------------ --------------- --------
Other
comprehensive
income/(expense) - - 261 (9) - (11,287) 17,645 - - 6,610 - 6,610 - 6,610
------------------ ----- --------- --------- ---------- ------------- --------- ----------- ---------- --------- ------- --------- --------- ------------ --------------- --------
Profit for the
year - - - - - - - - - - 76,934 76,934 (5,828) 71,106
------------------ ----- --------- --------- ---------- ------------- --------- ----------- ---------- --------- ------- --------- --------- ------------ --------------- --------
Total
comprehensive
income/
(expense) for the
year - - 261 (9) - (11,287) 17,645 - - 6,610 76,934 83,544 (5,828) 77,716
------------------ ----- --------- --------- ---------- ------------- --------- ----------- ---------- --------- ------- --------- --------- ------------ --------------- --------
Sale of financial
assets
at fair value
through
OCI 20 - - 18 - - - - - - 18 (18) - - -
------------------ ----- --------- --------- ---------- ------------- --------- ----------- ---------- --------- ------- --------- --------- ------------ --------------- --------
Dividends 31 - - - - - - - - - - (22,022) (22,022) - (22,022)
------------------ ----- --------- --------- ---------- ------------- --------- ----------- ---------- --------- ------- --------- --------- ------------ --------------- --------
In specie
dividends - - - - - - - - - - (94,945) (94,945) - (94,945)
------------------ ----- --------- --------- ---------- ------------- --------- ----------- ---------- --------- ------- --------- --------- ------------ --------------- --------
Dividends to non -
controlling
interests 31 - - - - - - - - - - - (9,832) (9,832)
------------------ ----- --------- --------- ---------- ------------- --------- ----------- ---------- --------- ------- --------- --------- ------------ --------------- --------
Share-based
payments 29(c) - - - - - - - - 2,442 2,442 - 2,442 - 2,442
------------------ ----- --------- --------- ---------- ------------- --------- ----------- ---------- --------- ------- --------- --------- ------------ --------------- --------
Forfeiture of
share options 29(c) - - - - - - - - (1,063) (1,063) 1,063 - - -
------------------ ----- --------- --------- ---------- ------------- --------- ----------- ---------- --------- ------- --------- --------- ------------ --------------- --------
Balance at 31
December
2021 226,506 438,041 74 (9) 99 (25,163) 13,476 (210,046) 3,912 (217,657) 248,664 695,554 63,890 759,444
------------------ ----- --------- --------- ---------- ------------- --------- ----------- ---------- --------- ------- --------- --------- ------------ --------------- --------
Other
comprehensive
income/(expense) - - (152) 1,283 - (12,739) (11,935) - - (23,543) - (23,543) - (23,543)
------------------ ----- --------- --------- ---------- ------------- --------- ----------- ---------- --------- ------- --------- --------- ------------ --------------- --------
Profit for the
year - - - - - - - - - - - 2,961 2,961 1,871 4,832
------------------ ----- --------- --------- ---------- ------------- --------- ----------- ---------- --------- ------- --------- --------- ------------ --------------- --------
Total
comprehensive
income/
(expense) for the
year - - (152) 1,283 - - (12,739) (11,935) - - (23,543) 2,961 (20,582) 1,871 (18,711)
------------------ ----- --------- --------- ---------- ------------- --------- ----------- ---------- --------- ------- --------- --------- ------------ --------------- --------
Dividends 31 - - - - - - - - - - - (22,017) (22,017) - (22,017)
------------------ ----- --------- --------- ---------- ------------- --------- ----------- ---------- --------- ------- --------- --------- ------------ --------------- --------
Dividends paid to
non
-
controlling
interests 31 - - - - - - - - - - - - - (286) (286)
------------------ ----- --------- --------- ---------- ------------- --------- ----------- ---------- --------- ------- --------- --------- ------------ --------------- --------
Issuance of
deferred
bonus shares 29 303,268 - - - - - - - - - (303,268) - - -
------------------ ----- --------- --------- ---------- ------------- --------- ----------- ---------- --------- ------- --------- --------- ------------ --------------- --------
Cancelation of
deferred
bonus shares 29 (303,268) - - - - - - - - - 303,268 - - -
------------------ ----- --------- --------- ---------- ------------- --------- ----------- ---------- --------- ------- --------- --------- ------------ --------------- --------
Cancelation of
share
premium account 29 - (438,041) - - - - - - - - 438,041 - - -
------------------ ----- --------- --------- ---------- ------------- --------- ----------- ---------- --------- ------- --------- --------- ------------ --------------- --------
Nominal value
reduction 29 (217,445) - - - - - - - - - 217,445 - - -
------------------ ----- --------- --------- ---------- ------------- --------- ----------- ---------- --------- ------- --------- --------- ------------ --------------- --------
Share-based
payments 29(c) - - - - - - - - 4,286 4,286 - 4,286 - 4,286
------------------ ----- --------- --------- ---------- ------------- --------- ----------- ---------- --------- ------- --------- --------- ------------ --------------- --------
Forfeiture of
share options 29(c) - - - - - - - - (1,886) (1,886) 1,886 - - -
------------------ ----- --------- --------- ---------- ------------- --------- ----------- ---------- --------- ------- --------- --------- ------------ --------------- --------
Balance at 31
December
2022 9,061 - (78) 1,274 99 (37,902) 1,541 (210,046) 6,312 (238,800) 886,980 657,241 65,475 722,716
------------------ ----- --------- --------- ---------- ------------- --------- ----------- ---------- --------- ------- --------- --------- ------------ --------------- --------
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2022
1 Corporate information
Hochschild Mining PLC (hereinafter "the Company") 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.
The ultimate controlling party of the Company is Mr Eduardo
Hochschild whose beneficial interest in the Company and its
subsidiaries (together 'the Group' or 'Hochschild Mining Group') is
38.32% and it is held through Pelham Investment Corporation
("Pelham"), a Cayman Islands company.
On 8 November 2006, the Company's shares were admitted to the
Official List of the UKLA (United Kingdom Listing Authority) and to
trading on the London Stock Exchange.
The Group's principal business is the mining, processing and
sale of silver and gold. 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,
United States, Canada, Brazil and Chile at various stages of
development.
These consolidated financial statements were approved for issue
by the Board of Directors on 19 April 2023.
The Group's subsidiaries are as follows:
Equity interest
at
31 December
===================
Country of 2022 2021
Company Principal activity incorporation % %
==================================== =================== ================ ======= ======
Hochschild Mining (Argentina)
Corporation S.A. 1 Holding company Argentina 100 100
---------------------------------------- ----------------------- -------------------- ------- ------
MH Argentina S.A.2 Exploration office Argentina 100 100
---------------------------------------- ----------------------- -------------------- ------- ------
Minera Santa Cruz S.A.1 and Production of
10 gold and silver Argentina 51 51
---------------------------------------- ----------------------- -------------------- ------- ------
Minera Hochschild Chile S.C.M.
3 Exploration Chile 100 100
---------------------------------------- ----------------------- -------------------- ------- ------
Andina Minerals Chile SpA (formerly
Andina Minerals Chile Ltd.)
3 Exploration Chile 100 100
---------------------------------------- ----------------------- -------------------- ------- ------
Southwest Minerals (Yunnan)
Inc. 4 Exploration China 100 100
---------------------------------------- ----------------------- -------------------- ------- ------
Hochschild Mining Holdings England and
Limited 5 Holding company Wales 100 100
---------------------------------------- ----------------------- -------------------- ------- ------
Hochschild Mining Ares (UK) Administrative England and
Limited 5 office Wales 100 100
---------------------------------------- ----------------------- -------------------- ------- ------
Southwest Mining Inc. 4 Exploration Mauritius 100 100
---------------------------------------- ----------------------- -------------------- ------- ------
Southwest Minerals Inc. 4 Exploration Mauritius 100 100
---------------------------------------- ----------------------- -------------------- ------- ------
Minera Hochschild Mexico, S.A.
de C.V. 6 Exploration Mexico 100 100
---------------------------------------- ----------------------- -------------------- ------- ------
Hochschild Mining (Peru) S.A.
4 Holding company Peru 100 100
---------------------------------------- ----------------------- -------------------- ------- ------
CompañÃa Minera Ares Production of
S.A.C. 4 gold and silver Peru 100 100
---------------------------------------- ----------------------- -------------------- ------- ------
CompañÃa Minera Arcata Production of
S.A. 4 gold and silver Peru 99.1 99.1
---------------------------------------- ----------------------- -------------------- ------- ------
Empresa de Transmisión
Aymaraes S.A.C. 4 Power transmission Peru 100 100
---------------------------------------- ----------------------- -------------------- ------- ------
Minera Antay S.A.C. 4 Exploration Peru 100 100
---------------------------------------- ----------------------- -------------------- ------- ------
Hochschild Mining (US) Inc.
7 Holding company USA 100 100
---------------------------------------- ----------------------- -------------------- ------- ------
Hochschild Mining Canada Corp
8 Exploration Canada 100 100
---------------------------------------- ----------------------- -------------------- ------- ------
Hochschild Mining Brazil Holdings
Corp. (formerly 1334940 BC)
8 Holding company Canada 100 100
---------------------------------------- ----------------------- -------------------- ------- ------
Tiernan Gold Corp. 8 Holding company Canada 100 0
---------------------------------------- ----------------------- -------------------- ------- ------
Amarillo Mineracao do Brasil
Ltda. 9 Exploration Brazil 100 0
---------------------------------------- ----------------------- -------------------- ------- ------
1 Registered address: Av. Santa Fe 2755, floor 9, Buenos Aires, Argentina.
2 Registered address: Sargento Cabral 124, Comodoro Rivadavia,
Provincia de Chubut, Argentina.
3 Registered address: Av. Apoquindo 4775 of 1002, Comuna Las
Condes, Santiago de Chile, Chile.
4 Registered address: La Colonia 180, Santiago de Surco, Lima, Peru.
5 Registered address: 17 Cavendish Square, London, W1G0PH, United Kingdom.
6 Registered address: Calle Aguila Real No 122, Colonia Carolco,
Monterrey, Nuevo Leon, CP 64996, Mexico.
7 Registered address: 1025 Ridgeview Dr. 300, Reno, Nevada 89519, USA.
8 Registered address: Suite 1700, Park Place, 666 Burrard Street, Vancouver BC, V6C 2X8.
9 Registered address: Fazenda Invernada s/n, Zona Rural, Mara
Rosa - Goiás - Brazil, CEP: 76.490-000.
10 The Group has a 51% interest in Minera Santa Cruz S.A.
(Minera Santa Cruz), while the remaining 49% is held by a
non-controlling interest. The significant financial information in
respect of this subsidiary before intercompany eliminations as at
and for the years ended 31 December 2022 and 2021 is as
follows:
As at 31 December
======================================================== ======================
2022 2021
US$000 US$000
======================================================== ========== ==========
Non-current assets 159,703 157,629
--------------------------------------------------------- ---------- ----------
Current assets 99,997 89,923
--------------------------------------------------------- ---------- ----------
Non-current liabilities (67,710) (68,667)
--------------------------------------------------------- ---------- ----------
Current liabilities (61,230) (51,354)
--------------------------------------------------------- ---------- ----------
Equity (130,760) (127,531)
--------------------------------------------------------- ---------- ----------
Cash and cash equivalents 15,473 25,942
--------------------------------------------------------- ---------- ----------
Revenue 243,469 258,972
--------------------------------------------------------- ---------- ----------
Depreciation and amortisation (50,967) (52,069)
--------------------------------------------------------- ---------- ----------
Interest income 652 1,558
--------------------------------------------------------- ---------- ----------
Interest expense (4,364) (3,196)
--------------------------------------------------------- ---------- ----------
Income tax 7,761 (13,550)
--------------------------------------------------------- ---------- ----------
Profit for the year and total comprehensive income 3,811 (11,891)
--------------------------------------------------------- ---------- ----------
Net cash generated from operating activities 18,085 62,614
--------------------------------------------------------- ---------- ----------
Net cash used in investing activities (47,197) (43,667)
--------------------------------------------------------- ---------- ----------
Net cash (used in)/generated from financing activities 18,643 (30,900)
--------------------------------------------------------- ---------- ----------
(Loss)/profit attributable to non-controlling interests in the
consolidated income statement, non-controlling interest in the
consolidated statement of financial position, and dividends
declared to non-controlling interests in the consolidated statement
of changes in equity are solely related to Minera Santa Cruz.
2 Significant accounting policies
(a) Basis of preparation
The consolidated financial statements of the Group have been
prepared in accordance with UK adopted International Accounting
Standards.
The basis of preparation and accounting policies used in
preparing the consolidated financial statements for the years ended
31 December 2022 and 2021 are set out below. The consolidated
financial statements have been prepared on a historical cost basis
except for the revaluation of certain financial instruments that
are measured at fair value at the end of each reporting period, as
explained below. These accounting policies have been consistently
applied, except for the effects of the adoption of new and amended
accounting standard.
The financial statements are presented in US dollars (US$) and
all monetary amounts are rounded to the nearest thousand ($000)
except when otherwise indicated.
Changes in accounting policy and disclosures
The accounting policies adopted in the preparation of the
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. Other
amendments and interpretations apply for the first time in 2022,
but do not have an impact on the consolidated financial statements
of the Group. The Group has not early adopted any other standard,
interpretation or amendment that has been issued but is not yet
effective.
Standards, interpretations and amendments to existing standards
that are not yet effective and have not been previously adopted by
the Group
Certain new standards, amendments and interpretations to
existing standards have been published and are mandatory for the
Group's accounting periods beginning on or after 1 January 2023 or
later periods but which the Group has not previously adopted. These
have not been listed as they are not expected to impact the
Group.
(b) Judgements in applying accounting policies and key sources of estimation uncertainty
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.
Significant areas of estimation uncertainty and critical
judgements made by management in preparing the consolidated
financial statements include:
Significant estimates:
-- Useful lives of assets for depreciation and amortisation
purposes - note 2(f).
Estimates are required to be made by management as to the useful
lives of assets. For depreciation calculated under the unit
of-production method, estimated recoverable reserves and resources
are used in determining the depreciation and/or amortisation of
mine-specific assets. This results in a depreciation/amortisation
charge proportional to the depletion of the anticipated remaining
life-of-mine production. Each item's life, which is assessed
annually, has regard to both its physical life limitations and to
present assessments of economically recoverable reserves and
resources of the mine property at which the asset is located. These
calculations require the use of estimates and assumptions,
including the amount of recoverable reserves and resources. Changes
are accounted for prospectively.
-- Ore reserves and resources - note 2(h).
There are numerous uncertainties inherent in estimating ore
reserves and resources. Assumptions that are valid at the time of
estimation may change significantly when new information becomes
available. Changes in the forecast prices of commodities, exchange
rates, production costs or recovery rates may change the economic
status of reserves and resources and may, ultimately, result in the
reserves and resources being updated.
-- Recoverable values of mining assets - notes 2(k), 16, 17 and 18.
The values of the Group's mining assets are sensitive to a range
of characteristics unique to each mine unit. Key sources of
estimation for all assets include uncertainty around ore reserve
estimates and cash flow projections. In performing impairment
reviews, the Group assesses the recoverable amount of its operating
assets principally with reference to fair value less costs of
disposal, assessed using discounted cash flow models. The Group
uses two approaches to estimate the fair value less costs of
disposal, depending on the circumstances: (i) the traditional
approach, which uses a single cash flow projection, and (ii) the
expected cash flow approach, which uses multiple,
probability-weighted cash flow projections. As at 31 December 2022,
the impairment reviews for the Group's operating assets were
performed using a traditional approach, with the exception of
Inmaculada where the Group used an expected cash flow approach. To
determine the fair value less costs of disposal of exploration
assets the Group uses the value-in-situ methodology. This
methodology applies a realisable 'enterprise value' to unprocessed
mineral resources per ounce of resources.
There is judgement involved in determining the assumptions that
are considered to be reasonable and consistent with those that
would be applied by market participants. Significant estimates used
include future gold and silver prices, future capital requirements,
reserves and resources volumes, production costs and the
application of discount rates which reflect the macro-economic risk
in Peru and Argentina, as applicable. Judgement is also required in
determining the risk factor that will be applied by market
participants to take into account the water restrictions imposed by
the Chilean government over the Volcan cash-generating unit.
Changes in these assumptions will affect the recoverable amount of
the property, plant and equipment, evaluation and exploration
assets, and intangibles.
-- Mine closure costs - notes 2(o) and 28(1).
The Group assesses its mine closure cost provision annually.
Significant estimates and assumptions are made in determining the
provision for mine closure cost as there are numerous factors that
will affect the ultimate liability. These factors include estimates
of the extent and costs of rehabilitation activities, technological
changes, regulatory changes, cost increases, mine life and changes
in discount rates. Those uncertainties may result in future actual
expenditure differing from the amounts currently provided. The
provision at the balance sheet date represents management's best
estimate of the present value of the future closure costs required.
In July 2021, the mine closure law for the province of Santa Cruz
in Argentina was published, establishing a period of 180 business
days to present the Mine Closure Plan. The regulation has not been
published as of the date of the financial statements. The Group
considers the mine closure provision in San Jose to be largely
aligned with Argentinean's new law, subject to further review once
regulation is published.
-- Valuation of financial instruments - note 38
The valuation of certain Group assets and liabilities reflects
the changes to certain assumptions used in the determination of
their value, such as future gold and silver prices(note 38).
-- Non market performance conditions on LTIP 2021 and LTIP 2022- note 29(c)
There are two parts to the performance conditions attached to
LTIP awards: 50% is subject to the Company's TSR ranking relative
to a tailored peer group of mining companies, 50% is subject to
internal KPIs split equally between: (i) 3-year growth of the
Company's Measured and Indicated Resources (MIR) per share
(calculated on an enterprise value basis), and (ii) average outcome
of the annual bonus scorecard in respect of 2021, 2022 and 2023,
regarding LTIP 2021, and 2022, 2023 and 2024, regarding LTIP 2022,
calculated as the simple mean of the three scorecard outcomes.
Critical judgements:
-- Income tax - notes 2(t), 2(u), 14, 30 and 36(a).
Judgement is required in determining whether deferred tax assets
are recognised on the statement of financial position. Deferred tax
assets, including those arising from un-utilised tax losses require
management to assess the likelihood that the Group will generate
taxable earnings in future periods, in order to utilise recognised
deferred tax assets. Estimates of future taxable income are based
on forecast cash flows from operations and the application of
existing tax laws in each jurisdiction. To the extent that future
cash flows and taxable income differ significantly from estimates,
the ability of the Group to realise the net deferred tax assets
recorded at the balance sheet date could be impacted. The Group
analyses the possibility of generating profit in all the companies
and determines the recognition of deferred tax. No deferred tax
asset is recognised in the holding and exploration entities as they
are not expected to generate any profit to settle the temporary
difference (refer to note 30).
Judgement is also required when determining the recognition of
tax liabilities as the tax treatment of some transactions cannot be
finally determined until a formal resolution has been reached by
the tax authorities. Tax liabilities are also recorded for
uncertain exposures which can have an impact on both deferred and
current tax. Tax benefits are not recognised unless it is probable
that the benefit will be obtained and tax liabilities are
recognised if it is probable that a liability will arise (refer to
note 36(a)). The final resolution of these transactions may give
rise to material adjustments to the income statement and/or
cashflow in future periods. The Group reviews each significant tax
liability or benefit each period to assess the appropriate
accounting treatment.
-- Life of mine ("LOM").
There are several aspects which are determined by the life of
mine, such as ore reserves and resources, recoverable values of
mining assets, mine rehabilitation provision and depreciation. The
life of mine for an operation is specified in the relevant
Environmental Impact Assessment ("EIA") which is amended from time
to time as more resources at the mine are identified. EIAs are
permits which are granted in the ordinary course of business to the
mining industry. While the processing of such permits may be
subject to delays, the Group has never had an EIA denied. A crucial
element of Peru's legal framework is the principle of
predictability which, in essence, means that if the legal
requirements for any given permit have been satisfied, the State
cannot l awfully deny the granting of the permit. Taking this into
consideration, as well as the Group's operational experience, the
Group believes that permits will be secured such that operations
can continue without interruption. In the unlikely scenario that
this does not occur, there could be material changes to those items
in the financial statements that are determined by the life of
mine.
-- Determination of functional currencies - note 2(e).
The determination of functional currency requires management
judgement, particularly where there may be several currencies in
which transactions are undertaken and which impact the economic
environment in which the entity operates. In Argentina, the
exchange control restrictions limit the companies to hold US$
dollars but do not restrict carrying out transactions in US
dollar.
-- Recognition of evaluation and exploration assets and transfer
to development costs - notes 2(g), 16 and 17.
Judgement is required in determining when the future economic
benefit of a project can reasonably be regarded as assured, at
which point evaluation and exploration expenses are capitalised.
This includes the assessment of whether there is sufficient
evidence of the probability of the existence of economically
recoverable minerals to justify the commencement of capitalisation
of costs; the timing of the end of the exploration phase, the start
of the development phase; and the commencement of the production
phase. For this purpose, the future economic benefit of the project
can reasonably be regarded as assured when the Board authorises
management to conduct a feasibility study, mine-site exploration is
being conducted to convert resources to reserves, or mine-site
exploration is being conducted to confirm resources, all of which
are based on supporting geological information.
-- Pandemic expenses
The Group analyses the effect of pandemics in its operations and
accounting treatment, because they generate stoppages, low capacity
production and incremental costs. In the case of COVID -19, the
fixed "normal" production costs during stoppages are recognised as
expenses and are not considered as costs 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
berecognised as exceptional expenses, consideration has been made
as to whether they meet the criteria as set out in the Group's
accounting policy (note 2(z)), in particular regarding the expected
infrequency of the events that have given rise to them.
The pandemic can be considered a single protracted globally
pervasive event with a financial impact over a number of reporting
periods. Management initial expectation was that these cost would
ceased to be incurred at the end of 2020 or early 2021, and whilst
the majority of the costs have reduced over time as a result of the
efficiencies made to the health protocols and logistics required to
operate throughout the pandemic, some residual costs continue to be
incurred to date. In order to provide the users of the financial
statements with a better understanding of the financial performance
of the Group in the year, and to facilitate comparison with the
prior period, we have considered it appropriate to continue to
disclose separately as exceptional these incremental Covid-related
cost up to December 2021.
Following the outbreak of the Omicron variant, the virus appears
to have shifted into an endemic phase. Consequently, these costs
will no longer be presented as exceptional items from 2022 and will
form part of the underlying profits.
-- Climate change
- General
The Group is in the process of completing a climate change risk
assessment and strategy and developing an action plan to
continually reduce operational energy, GHG emissions and water
consumption, with the ultimate aim of reaching net zero GHG
emissions. As a result, the Group is currently unable to determine
the full future economic impact of this strategy on their business
model and operational plans and therefore the potential impacts are
not fully incorporated in these financial statements.
In addition, societal expectations are driving government action
that may impose further requirements and cost on companies in the
future. Therefore risks associated with climate change could, over
time impose changes that may potentially impact (among other
things) capital expenditure, mine closure provisions and production
costs. However, currently the financial statements cannot capture
such possible future outcomes as these are not yet known. With
regards to the calculation of those items in the financial
statements that rely on life of mine calculations (such as
impairments, deferred tax and depreciation), it should be
highlighted that as an underground mining company, Hochschild
Mining's operating assets have much lower lives than conventional
open-pit mining companies. As such, by virtue of the longer-term
time horizon of the physical risks of climate change, the financial
impact on such items will be less pronounced than may otherwise be
expected.
The adoption of the Group's climate change strategy and the
implementation of climate-change regulations in the countries where
the Group operates may impact the Group's significant judgements
and key estimates and could result in material changes to financial
results and the carrying values of certain assets and liabilities
in future reporting periods.
- Physical risks
As previously stated, the Group is progressing work to assess
the potential impact of physical risks of climate change. Given the
ongoing nature of the Group's physical risk assessment process,
reflecting adaptation risk in the Group's operating plans, and
associated asset valuations, is currently limited. As the Group
progresses its adaptation strategy, the identification of
additional risks or the detailed development of the Group's
response may result in material changes to financial results and
the carrying values of assets and liabilities in future reporting
periods.
-- Acquiring a subsidiary or a group of assets - note 4(b).
In identifying a business combination (note 2(c)) 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 the Amarillo Gold Group (note 4(b)).
The transaction was accounted as a purchase of assets as no
systems, processes or outputs were acquired, with the main asset
acquired being the Mara Rosa project which is in a development
stage.
(c) Basis of consolidation
The consolidated financial statements set out the Group's
financial position, performance and cash flows as at 31 December
2022 and 31 December 2021 and for the years then ended,
respectively.
Subsidiaries are those entities controlled by the Group
regardless of the amount of shares owned by the Group. Control is
achieved when the Group is exposed, or has rights, to variable
returns from its involvement with the investee and has the ability
to affect those returns through its power over the investee.
Non-controlling interests' rights to safeguard their interest are
fully considered in assessing whether the Group controls a
subsidiary. Specifically, the Group controls an investee if, and
only if, the Group has:
-- power over the investee (i.e. existing rights that give it
the current ability to direct the relevant activities of the
investee);
-- exposure, or rights, to variable returns from its involvement
with the investee; and
-- the ability to use its power over the investee to affect its returns.
Generally, there is a presumption that a majority of voting
rights result in control. To support this presumption and when the
Group has less than a majority of the voting or similar rights of
an investee, the Group considers all relevant facts and
circumstances in assessing whether it has power over an investee,
including:
-- the contractual arrangement with the other vote holders of the investee;
-- rights arising from other contractual arrangements; and
-- the Group's voting rights and potential voting rights.
The Group re-assesses whether or not it controls an investee if
facts and circumstances indicate that there are changes to one or
more of the three elements of control.
Basis of consolidation
Subsidiaries are consolidated from the date of their
acquisition, being the date on which the Group obtains control, and
continue to be consolidated until the date that such control
ceases.
Assets, liabilities, income and expenses of a subsidiary
acquired or disposed of during the year are included in the
consolidated financial statements from the date the Group gains
control until the date the Group ceases to control the
subsidiary.
Profit or loss and each component of OCI are attributed to the
equity holders of the parent of the Group and to the
non-controlling interests, even if this results in the
non-controlling interests having a deficit balance. When necessary,
adjustments are made to the financial statements of subsidiaries to
bring their accounting policies in line with the Group's accounting
policies. All intra-group assets and liabilities, equity, income,
expenses and cash flows relating to transactions between members of
the Group are eliminated in full on consolidation.
A change in the ownership interest of a subsidiary, without loss
of control, is accounted for as an equity transaction, affecting
retained earnings. If the Group loses control over a subsidiary, it
(i) derecognises the assets (including goodwill) and liabilities of
the subsidiary; (ii) derecognises the carrying amount of any
non-controlling interest ('NCI'); (iii) derecognises the cumulative
translation differences, recorded in equity; (iv) recognises the
fair value of the consideration received; (v) recognises the fair
value of any investment retained; (vi) recognises any surplus or
deficit in profit or loss; and (vii) reclassifies the parent's
share of components previously recognised in other comprehensive
income to profit or loss or retained earnings, as appropriate.
An NCI represents the equity in a subsidiary not attributable,
directly and indirectly, to the parent company and is presented
separately within equity in the consolidated statement of financial
position, separately from equity attributable to owners of the
parent.
Losses within a subsidiary are attributable to the NCI even if
that results in a deficit balance.
Business combinations
Business combinations are accounted for using the acquisition
method. The cost of an acquisition is measured as the aggregate of
the consideration transferred, measured at acquisition date fair
value and the amount of any NCI in the acquiree. The choice of
measurement of NCI, either at fair value or at the proportionate
share of the acquiree's identifiable net assets, is determined on a
transaction by transaction basis. Acquisition costs incurred are
expensed and included in administrative expenses.
Goodwill is initially measured at cost, being the excess of the
aggregate of the consideration transferred and the amount
recognised for the NCI, and any interest previously held, over the
net identifiable assets acquired and the liabilities assumed.
Assets acquired and liabilities assumed in transactions separate to
the business combinations, such as the settlement of pre existing
relationships or post-acquisition remuneration arrangements, are
accounted for separately from the business combination in
accordance with their nature and applicable IFRSs. Identifiable
intangible assets meeting either the contractual-legal or the
separability criteria are recognised separately from goodwill.
Contingent liabilities representing a present obligation are
recognised if the acquisition date fair value can be measured
reliably.
(d) Going concern
The Group's business activities, its future development and the
factors likely to affect its performance and position are set out
in the 2022 Annual Report's Strategic Report. The financial
position of the Group, its cash flows, liquidity position and
borrowings are described in the Financial Review on pages 14 to 19
and discussion of the Group's viability on the occurrence of
certain scenarios is provided in the Viability Statement in the
2022 Annual Report. In addition, note 38 to the financial
statements includes the Group's objectives, policies and processes
for managing its capital; its financial risk management objectives;
details of its financial instruments; and its exposure to credit
risk and liquidity risk.
The Directors have also considered any additional risks to
liquidity posed by the polarised political climate in Peru
resulting in a heightened level of risk of social conflict with
some local communities seeking to take advantage of the situation
and increasing their economic demands. As a result, social
conflicts have increased with numerous mining companies facing
invasions at their mine sites and road blockades which have
disrupted operations. The impeachment of President Castillo in
December 2022 exacerbated these fragile social conditions with
widespread protests challenging the legitimacy of Dina Boluarte's
appointment.
A key element of the Group's sustainability strategy is active
engagement with local communities to build sustainable relations
such that the risk of disruption to operating activities is
mitigated and there is continuous production from the Inmaculada
and Pallancata mines based in Peru. Details of specific initiatives
pursued during the year can be found in the 2022 Annual Report's
Sustainability Report. In the year-to date, there has been no loss
of production as a result of community-led action.
The Directors' going concern assessment is supported by future
cash flow forecasts. As stated earlier, the Company awaits the
decision from the Peruvian authorities with regards to the modified
Environmental Impact Assessment ("MEIA") for Inmaculada for which a
decision is expected in H1 2023. The Company is optimistic that
such approval will be forthcoming. On the assumption of the MEIA
being approved, the Directors have reviewed Group liquidity,
including cash resources and borrowings (refer to note 27 on
details of the US$300 million medium-term loan) and related
covenant forecasts to assess whether the Group is able to continue
in operation for the period to 31 May 2024 (the 'Going Concern
Period') which is a period of at least 12 months from the date of
these financial statements.
In line with their usual practice, the Directors considered the
impact of a number of potential downside scenarios on the Group's
future cash flows and liquidity position and debt covenant
compliance. The scenarios were further reviewed under varying
precious metal price assumptions. Within these scenarios, given the
current social climate in Peru, consideration was also given to the
potential impact of operational disruption and cost increases.
More specifically, the scenarios reviewed by the Directors
included a base case (the 'Base Scenario'), reflecting (among other
things), approval of the MEIA, budgeted production for 2023,
life-of-mine plans for Inmaculada, Pallancata and San Jose, and
precious metal prices of $1,714/oz for gold and $20.4/oz for
silver, being the average analysts' consensus in December 2022 (the
'Assumed Prices') for the next 13 months. The forecast financing
cashflows assumed that the newly negotiated US$200 million
medium-term committed loan will be available for use, following
approval of the MEIA.
The Directors also considered 'Downside' and 'Remote' cases
which took into account a combination of circumstances. The former
assumes a four-week suspension of all operations and community
relations-related cost increases. The latter assumes the cumulative
impact of the Downside Case and precious metal prices which are 10%
lower than the Assumed Prices and a 5% reduction in costs to offset
a low-price environment. Those prices would be significantly below
current spot prices. After taking the financial benefits of the
newly negotiated $200m committed loan into account, all scenarios
indicate that the Group has sufficient liquidity and is covenant
compliant for 13 months from the date of its report.
Whilst the Group remains optimistic that the MEIA approval will
be forthcoming, the decision of the authorities has not yet been
made and so the outcome is uncertain and outside of the Group's
control. The Directors therefore also considered a MEIA denial case
(the 'Denial Scenario'), reflecting that production from Inmaculada
will stop at the end of the year until a revised MEIA is approved.
This is not expected to be for more than 3 years. As the Group's
flagship operation, the suspension of Inmaculada would have a
material impact on revenues leading to insufficient liquidity to
support the Group's operation. Therefore, as a contingency measure,
the Company has adopted mitigation plans to preserve cash including
reducing administrative costs including through headcount
reductions, hedging a higher proportion of production from
Inmaculada for the remainder of 2023 and from Mara Rosa in 2024 and
deferring capital expenditure.
As part of the Denial Scenario, the Directors have made 2
significant assumptions to optimise cash and in forming an
assessment on the Group's ability to continue as going concern:
i. A restructuring of the existing $300 million Medium Term Loan
deferring repayments until Inmaculada resumes operations; and
ii. The successful completion of a $50 million equity financing
with existing shareholders
(collectively 'Refinancing Actions').
The principal lenders are informed of these measures and are
supportive.
The Directors reviewed the cash flow forecasts and liquidity
position as well as debt covenant compliance after executing the
Refinancing Actions within the Denial Scenario. Consistent with the
Base Scenario, the Directors considered the impact of a number of
potential downside scenarios to the Denial Scenario on the Group's
future cash flows and liquidity position as well as debt covenant
compliance. The scenarios were further reviewed under lower
precious metal price assumptions. Within these scenarios, given the
current social climate in Peru, consideration was also given to the
potential impact of operational disruption.
The Denial Scenario was also analysed under different sets of
assumptions which included a base case reflecting (among other
things), budgeted production for 2023 adjusted for the suspension
of Inmaculada, life-of-mine plans for Inmaculada, Pallancata and
San Jose, significantly reduced corporate expenses and precious
metal prices at the Assumed Prices for the next 13 months. The
forecast financing cashflows assumed that the Refinancing Actions
would be successfully completed such that the Group would continue
through the going concern period to 31 May 2024.
The Directors also considered 'Downside' and 'Remote' versions
of the Denial Scenario which modelled the impact of a combination
of circumstances, after taking into account the financial benefits
of the Refinancing Actions. The former assumes a four-week
suspension of all operations and the latter assumes the cumulative
impact of the Downside Case and precious metal prices which are 10%
lower than the Assumed Prices and a 5% reduction in costs to offset
a low-price environment. Those prices would be significantly below
current spot prices. All scenarios indicate that the Group is
covenant compliant and remains liquid for 13 months from the date
of approval of the annual financial statements.
Having held discussions with its major shareholder and
management having held discussions with its lenders, the Directors
have a reasonable expectation that the potential Refinancing
Actions would proceed successfully, although there can be no
certainty of that outcome.
Accordingly, the securing of the MEIA and the Refinancing
Actions under the Denial Scenario each represent a material
uncertainty that may cast significant doubt on the Group's ability
to continue as a going concern to 31 May 2024.
After consideration of these material uncertainties, and on the
assumption that the Group is able to secure approval of the
Inmaculada MEIA or, where it cannot, the Group is able to
successfully complete the Refinancing Actions, the Directors have a
reasonable expectation that the Group and the Company have adequate
resources to continue in operational existence during the Going
Concern Period. Accordingly, they continue to adopt the going
concern basis of accounting in preparing the annual financial
statements.
(e) Currency translation
The functional currency for each entity in the Group is
determined by the currency of the primary economic environment in
which it operates. For the holding companies and operating entities
this currency is US dollars and for the other entities it is the
local currency of the country in which it operates. The Group's
financial information is presented in US dollars, which is the
Company's functional currency. Transactions denominated in
currencies other than the functional currency of the entity are
initially recorded in the functional currency using the exchange
rate prevailing at the date of the transaction. Monetary assets and
liabilities denominated in foreign currencies are remeasured at the
exchange rate prevailing at the statement of financial position
date. Exchange gains and losses on settlement of foreign currency
transactions which are translated at the rate prevailing at the
date of the transactions, or on the translation of monetary assets
and liabilities which are translated at period-end exchange rates,
are taken to the income statement. Non-monetary assets and
liabilities denominated in foreign currencies that are stated at
historical cost are translated to the functional currency at the
foreign exchange rate prevailing at the date of the transaction.
Exchange differences arising from monetary items that are part of a
net investment in a foreign operation are recognised in equity and
transferred to income on disposal of such net investment.
Subsidiary financial statements expressed in their corresponding
functional currencies are translated into US dollars by applying
the exchange rate at period-end for assets and liabilities and the
transaction date exchange rate for income statement items. The
resulting difference on consolidation is included as a cumulative
translation adjustment in equity. On disposal of a foreign
operation, the component of OCI relating to that particular foreign
operation is reclassified to profit or loss.
(f) Property, plant and equipment
Property, plant and equipment is stated at cost or deemed cost
less accumulated depreciation and impairment losses. Cost comprises
its purchase price and directly attributable costs of acquisition
or construction required to bring the asset to the condition
necessary for the asset to be capable of operating in the manner
intended by management. Economical and physical conditions of
assets have not changed substantially over this period.
The cost less residual value of each item of property, plant and
equipment is depreciated over its useful life. Each item's
estimated useful life has been assessed with regard to both its own
physical life limitations and the present assessment of
economically recoverable reserves and resources of the mine
property at which the item is located. Estimates of remaining
useful lives are made on a regular basis for all mine buildings,
machinery and equipment, with annual reassessments for major items.
Depreciation is charged to cost of production on a units of
production basis for mine buildings and installations and plant and
equipment used in the mining production process, or charged
directly to the income statement over the estimated useful life of
the individual asset on a straight-line basis when not related to
the mining production process. Changes in estimates, which mainly
affect units of production calculations, are accounted for
prospectively. Depreciation commences when assets are available for
use. Land is not depreciated.
An asset's carrying amount is written-down immediately to its
recoverable amount if the asset's carrying amount is greater than
its estimated recoverable amount.
Gains and losses on disposals are determined by comparing the
net proceeds with the carrying amount and are recognised within
other income/expenses, in the income statement.
The expected useful lives under the straight-line method are as
follows:
Years
===========================================================================
Buildings
3
to
33
Plant and equipment
5 to 10
Vehicles 5
===========================================================================
Borrowing costs directly attributable to the acquisition or
construction of an asset that necessarily takes a substantial
period of time to be ready for its intended use are capitalised as
part of the cost of the asset. All other borrowing costs are
expensed where incurred. For borrowings associated with a specific
asset, the actual rate on that borrowing is used. Otherwise, a
weighted average cost of borrowing is used. The Group capitalises
the borrowing costs related to qualifying assets with a value of
US$1,000,000 or more, considering that the substantial period of
time to be ready is six or more months.
Mining properties and development costs
Purchased mining properties are recognised as assets at their
cost of acquisition or at fair value if purchased as part of a
business combination. Costs associated with developments of mining
properties are capitalised.
Mine development costs are, upon commencement of commercial
production, depreciated using the units of production method based
on the estimated economically recoverable reserves and resources to
which they relate.
When a mine construction project moves into the production
stage, the capitalisation of certain mine construction costs ceases
and costs are either regarded as part of the cost of inventory or
expensed, except for costs which qualify for capitalisation
relating to mining asset additions or improvements, underground
mine development or mineable reserve development. In addition, the
revenue generated from the sale of the inventory produced during
the pre-operating stage is recognised as a deduction of the costs
capitalised for this project.
Construction in progress and capital advances
Assets in the course of construction are capitalised as a
separate component of property, plant and equipment. Once the asset
moves into the production phase, the cost of construction is
transferred to the appropriate category. Construction in progress
is not depreciated. Capital advances to suppliers related to the
purchase of property, plant and equipment are disclosed in
construction in progress.
Subsequent expenditure
Expenditure incurred to replace a component of an item of
property, plant and equipment is capitalised separately with the
carrying amount of the component being written-off. Other
subsequent expenditure is capitalised if future economic benefits
will arise from the expenditure. All other expenditure including
repairs and maintenance expenditures are recognised in the income
statement as incurred.
(g) Evaluation and exploration assets
Evaluation and exploration expenses are capitalised when the
future economic benefit of the project can reasonably be regarded
as assured. Exploration and evaluation costs related to projects in
the development phase are capitalised as assets from the date that
the Board authorises management to conduct a feasibility study.
Expenditure is transferred to mine development costs once the
work completed to date supports the future development of the
property and such development receives appropriate approval.
Costs incurred in converting inferred resources to indicated and
measured resources (of which reserves are a component) are
capitalised as incurred. Costs incurred in identifying inferred
resources are expensed as incurred.
(h) Determination of ore reserves and resources
The Group estimates its ore reserves and mineral resources based
on information compiled by internal competent persons. Reports to
support these estimates are prepared each year and are stated in
conformity with the 2012 Joint Ore Reserves Committee (JORC)
code.
It is the Group's policy to have the report audited annually by
a Competent Person. Reserves and resources are used in the units of
production calculation for depreciation as well as the
determination of the timing of mine closure cost and impairment
analysis.
(i) Investment in associates
An associate is an entity over which the Group has significant
influence. Significant influence is the power to participate in the
financial and operating policy decisions of the investee, but is
not control or joint control over those policies.
The considerations made in determining significant influence are
similar to those necessary to determine control over subsidiaries.
The Group's investment in its associate are accounted for using the
equity method.
Under the equity method, the investment in an associate is
initially recognised at cost. The carrying amount of the investment
is adjusted to recognise changes in the Group's share of net assets
of the associate since the acquisition date. Goodwill relating to
the associate is included in the carrying amount of the investment
and is not tested for impairment separately.
The statement of profit or loss reflects the Group's share of
the results of operations of the associate. Any change in OCI of
those investees is presented as part of the Group's OCI. In
addition, when there has been a change recognised directly in the
equity of the associate, the Group recognises its share of any
changes, when applicable, in the statement of changes in equity.
Unrealised gains and losses resulting from transactions between the
Group and the associate are eliminated to the extent of the
interest in the associate.
The aggregate of the Group's share of profit or loss of an
associate is shown on the face of the statement of profit or loss
outside operating profit and represents profit or loss after tax
and non-controlling interests in the subsidiaries of the
associate.
The financial statements of the associate are prepared for the
same reporting period as the Group. When necessary, adjustments are
made to bring the accounting policies in line with those of the
Group.
After application of the equity method, the Group determines
whether it is necessary to recognise an impairment loss on its
investment in its associate. At each reporting date, the Group
determines whether there is objective evidence that the investment
in the associate is impaired. If there is such evidence, the Group
calculates the amount of impairment as the difference between the
recoverable amount of the investment and its carrying value, and
then recognises the loss within 'Share of profit of an associate'
in the statement of profit or loss.
Upon loss of significant influence over the associate, the Group
measures and recognises any retained investment at its fair value.
Any difference between the carrying amount of the associate upon
loss of significant influence and the fair value of the retained
investment and proceeds from disposal is recognised in profit or
loss.
(j) Intangible assets
Right to use energy of transmission line
Transmission line costs represent the investment made by the
Group to construct the transmission line on behalf of the
government to be granted the right to use it. This is an asset with
a finite useful life equal to that of the mine to which it relates
and that is amortised applying the units of production method for
that mine.
Water permits
Water permits are recorded at cost and allow the Group to
withdraw a specified amount of water from the ground for
reasonable, beneficial uses. This is an asset with an indefinite
useful life (note 18(2)).
Legal rights
Legal rights correspond to expenditures required to give the
Group the right to use a property for the surface exploration work,
development and production. This is an asset with a finite useful
life equal to that of the mine to which it relates and that is
amortised applying the units of production method for that
mine.
Other intangible assets
Other intangible assets are primarily computer software which
are capitalised at cost and are amortised on a straight-line basis
over their useful life of three years.
(k) Impairment of non-financial assets
Assets that have an indefinite useful life are not subject to
amortisation and are tested annually for impairment.
The carrying amounts of property, plant and equipment and
evaluation and exploration assets are reviewed for impairment if
events or changes in circumstances indicate that the carrying value
may not be recoverable. If there are indicators of impairment, an
exercise is undertaken to determine whether the carrying values are
in excess of their recoverable amount. Such review is undertaken on
an asset by asset basis, except where such assets do not generate
cash flows independent of other assets, and then the review is
undertaken at the cash-generating unit level.
The assessment requires the use of estimates and assumptions
such as long-term commodity prices, discount rates, future capital
requirements, reserves and resources volumes (reflected in the
production volume). Changes in these assumptions will affect the
recoverable amount of the property, plant and equipment and
evaluation and exploration assets.
If the carrying amount of an asset or its cash-generating unit
(CGU) exceeds the recoverable amount, an impairment provision is
recorded to reflect the asset at the lower amount. Impairment
losses are recognised in the income statement.
Calculation of recoverable amount
The recoverable amount of assets is the greater of their value
in use (VIU) and fair value less costs of disposal (FVLCD) to sell.
FVLCD is based on an estimate of the amount that the Group may
obtain in a sale transaction on an arm's length basis. VIU is based
on estimated future cash flows discounted to their present value
using a discount rate that reflects current market assessments of
the time value of money and the risks specific to the asset. For an
asset that does not generate cash inflows largely independent of
those from other assets, the recoverable amount is determined for
the cash-generating unit to which the asset belongs.
In performing impairment reviews, the Group assesses the
recoverable amount of its operating assets principally with
reference to fair value less costs of disposal, assessed using
discounted cash flow models. The Group uses two approaches to
estimate the fair value less costs of disposal, depending on the
circumstances: (i) the traditional approach, which uses a single
cash flow projection, and (ii) the expected cash flow approach,
which uses multiple, probability-weighted cash flow projections. As
at 31 December 2022, the impairment reviews for the Group's
operating assets were performed using a traditional approach, with
the exception of Inmaculada where the Group used an expected cash
flow approach. To determine the fair value less costs of disposal
of exploration assets the Group uses the value-in-situ methodology.
This methodology applies a realisable 'enterprise value' to
unprocessed mineral resources per ounce of resources.
The recoverable values of the CGUs and advanced exploration
projects are determined using a FVLCD methodology. FVLCD for CGUs
was determined using a combination of level 2 and level 3 inputs.
The FVLCD of the producing and developing stage mine assets is
determined using a discounted cash flow model (note 16) and for the
advanced exploration projects is determined using a discounted cash
flow model or a comparative valuation analysis methodology (notes
17 and 18(2)), to estimate the amount that would be paid by a
willing third party in an arm's length transaction.
Reversal of impairment
An impairment loss is reversed if there has been a change in the
estimates used to determine the recoverable amount. An impairment
loss is reversed only to the extent that the asset's carrying
amount does not exceed the carrying amount that would have been
determined, net of depreciation or amortisation, if no impairment
loss had been recognised.
(l) Inventories
Inventories are valued at the lower of cost or net realisable
value. Cost is determined using the weighted average method.
The cost of work in progress and finished goods (ore
inventories) is based on the cost of production. For this purpose,
the costs of production include:
-- costs, materials and contractor expenses which are directly
attributable to the extraction and processing of ore;
-- depreciation of property, plant and equipment used in the
extraction and processing of ore; and
-- related production overheads (based on normal operating capacity).
Net realisable value is the estimated selling price in the
ordinary course of business, less applicable variable selling
expenses.
(m) Trade and other receivables
Current trade receivables are carried at the original invoice
amount less provision made for impairment of these receivables. Non
current receivables are stated at amortised cost. A provision for
impairment of trade receivables is established using the expected
credit loss impairment model according IFRS 9. The amount of the
provision is the difference between the carrying amount and the
recoverable amount and this difference is recognised in the income
statement. The revaluation of provisionally priced contracts stated
in 2(q) is recorded as trade receivables.
(n) Share capital
Ordinary shares are classified as equity. Any excess above the
par value of shares received upon issuance of those shares is
classified as share premium. In the case the excess above par value
is available for distribution, it is classified as merger reserve
and then transferred to retained earnings. The Group had the merger
reserve available for distribution within retained earnings.
(o) Provisions
Provisions are recognised when the Group has a present
obligation (legal or constructive) as a result of a past event, it
is probable that an outflow of resources will be required to settle
the obligation and a reliable estimate can be made of the amount of
the obligation (note 28). If the effect of the time value of money
is material, provisions are determined by discounting the expected
future cash flows at a pre-tax rate that reflects current market
assessments of the time value of money and, where appropriate, the
risks specific to the liability. Where discounting is used, the
increase in the provision due to the passage of time is recognised
as a finance cost.
Mine closure cost
Provisions for mine closure costs are made in respect of the
estimated future costs of closure and restoration and for
environmental rehabilitation costs (which include the dismantling
and demolition of infrastructure, removal of residual materials and
remediation of disturbed areas) in the accounting period when the
related environmental disturbance occurs. The provision is
discounted and the unwinding of the discount is included in finance
costs. At the time of establishing the provision, a corresponding
asset is capitalised and is depreciated over future production from
the mine to which it relates. The provision is reviewed on an
annual basis for changes in cost estimates, discount rates and
operating lives of the mines.
Changes to estimated future costs are recognised in the
statement of financial position by adjusting the mine closure cost
liability and the related asset originally recognised. If, for
mature mines, the related mine assets net of mine closure cost
provisions exceed the recoverable value, that portion of the
increase is charged directly to the income statement. Similarly, if
reductions to the estimated costs exceed the carrying value of the
mine asset, that portion of the decrease is credited directly to
the income statement. For closed sites, changes to estimated costs
are recognised immediately in the income statement.
Workers' profit sharing and other employee benefits
In accordance with Peruvian legislation, companies in Peru must
provide for workers' profit sharing equivalent to 8% of taxable
income in each year. This amount is charged to the income statement
within personnel expenses (note 10) and is considered deductible
for income tax purposes. The Group has no pension or retirement
benefit schemes.
Other
Other provisions are accounted for when the Group has a legal or
constructive obligation for which it is probable there will be an
outflow of resources for which the amount can be reliably
estimated.
(p) Share-based payments
Cash-settled transactions
The fair value of cash-settled share plans is recognised as a
liability over the vesting period of the awards. Movements in that
liability between reporting dates are recognised as personnel
expenses. The fair value of the awards is taken to be the market
value of the shares at the date of award adjusted by a factor for
anticipated relative Total Shareholder Return (TSR) performance.
Fair values are subsequently remeasured at each reporting date to
reflect the number of awards expected to vest based on the current
and anticipated TSR performance.
Equity-settled transactions
The cost of equity-settled transactions is determined by the
fair value at the date when the grant is made using an appropriate
valuation model and is recognised, together with a corresponding
increase in other reserves in equity, over the period in which the
performance and/or service conditions are fulfilled. The cumulative
expense recognised for equity-settled transactions at each
reporting date until the vesting date reflects the extent to which
the vesting period has expired and the Group's best estimate of the
number of equity instruments that vest. The income statement
expense for a period represents the movement in cumulative expense
recognised as at the beginning and end of that period and is
recognised in personnel expenses (note 10).
Service and non-market performance conditions are not taken into
account when determining the grant date fair value of awards, but
the likelihood of the conditions being met is assessed as part of
the Group's best estimate of the number of equity instruments that
will ultimately vest. Market performance conditions are reflected
within the grant date fair value. Any other conditions attached to
an award, but without an associated service requirement, are
considered to be non-vesting conditions. Non-vesting conditions are
reflected in the fair value of an award and lead to an immediate
expensing of an award unless there are also service and/or
performance conditions. No expense is recognised for awards that do
not ultimately vest because non-market performance and/or service
conditions have not been met. Where awards include a market or
non-vesting condition, the transactions are treated as vested
irrespective of whether the market or non-vesting condition is
satisfied, provided that all other performance and/or service
conditions are satisfied. When the terms of an equity-settled award
are modified, the minimum expense recognised is the grant date fair
value of the unmodified award, provided the original vesting terms
of the award are met. An additional expense, measured as at the
date of modification, is recognised for any modification that
increases the total fair value of the share-based payment
transaction, or is otherwise beneficial to the employee. Where an
award is cancelled by the entity or by the counterparty, any
remaining element of the fair value of the award is expensed
immediately through profit or loss.
(q) Revenue recognition
The Group is involved in the production and sale of gold and
silver from dore and concentrate containing both gold and silver.
Dore bars are either sold directly to customers or are sent to a
third-party for further refining into gold and silver before they
are sold. Concentrate is sold directly to customers.
Revenue from contracts with costumers is recognised when control
of the goods or services are transferred to the customer at an
amount that reflects the consideration to which the Group expects
to be entitled in exchange for those goods or services. Revenue
excludes any applicable sales taxes.
The revenue is subject to adjustment based on inspection of the
product by the customer. Revenue is initially recognised on a
provisional basis using the Group's best estimate of contained gold
and silver. Any subsequent adjustments to the initial estimate of
metal content are recorded in revenue once they have been
determined.
In addition, certain sales are 'provisionally priced' where the
selling price is subject to final adjustment at the end of a
period, normally ranging from 15 to 120 days after the start of the
delivery process to the customer, based on the market price at the
relevant quotation point stipulated in the contract. Revenue is
initially recognised when the conditions set out above have been
met, using market prices at that date. The price exposure is
considered to be an adjustment and hence separated from the sales
contract at each reporting date. The provisionally priced metal is
revalued based on the forward selling price for the quotational
period stipulated in the contract until the quotational period
ends. The selling price of gold and silver can be measured reliably
as these metals are actively traded on international exchanges. The
revaluation of provisionally priced contracts is recorded as
revenue.
Commercial discounts related to the refining, recovery and
treatment of minerals are presented netted from sales.
A proportion of the Group's sales are sold under CIF Incoterms,
whereby the Group is responsible for providing freight/shipping
services (as principal) after the date that the Group transfers
control of the metal in concentrate to its customers. The Group,
therefore, has separate performance obligations for
freight/shipping services which are provided solely to facilitate
sale of the commodities it produces.
Other Incoterms commonly used by the Group are FOB, where the
Group has no responsibility for freight or insurance once control
of the products has passed at the loading port, and Delivered at
Place (DAP) where control of the goods passes when the product is
delivered to the agreed destination. For arrangements which have
these Incoterms, the only performance obligations are the provision
of the product at the point where control passes.
For CIF arrangements, the transaction price (as determined
above) is allocated to the metal in concentrate and
freight/shipping services using the relative stand-alone selling
price method. Under these arrangements, a portion of consideration
may be received from the customer in cash at, or around, the date
of shipment under a provisional invoice. Therefore, some of the
upfront consideration that relates to the freight/shipping services
yet to be provided, is deferred. It is then recognised as revenue
over time using an output method (being days of
shipping/transportation elapsed) to measure progress towards
complete satisfaction of the service as this best represents the
Group's performance. This is on the basis that the customer
simultaneously receives and consumes the benefits provided by the
Group as the services are being provided. The costs associated with
these freight/shipping services are also recognised over the same
period of time as incurred.
Income from services provided to related parties (note 32) is
recognised in revenue when services are provided.
Deferred revenue results when cash is received in advance of
revenue being earned. Deferred revenue is recorded as a liability
until it is earned. Once earned, the liability is reduced and
revenue is recorded. The Group analyses when revenue is earned or
deferred.
(r) Contingencies
A contingent liability is a possible obligation depending on
whether some uncertain future event occurs, or a present obligation
where payment is not probable or the amount cannot be measured
reliably. Contingent liabilities are not recognised in the
financial statements and are disclosed in notes to the financial
statements unless their occurrence is remote (note 36).
A contingent asset is a possible asset that arises from past
events, and whose existence will be confirmed only by the
occurrence or non-occurrence of one or more uncertain future events
not wholly within the control of the entity. Contingent assets are
not recognised in the financial statements, but are disclosed in
the notes if their recovery is deemed probable (note 36).
(s) Finance income and costs
Finance income and costs comprise interest expense on
borrowings, the accumulation of interest on provisions, interest
income on funds invested, unwind of discount, and gains and losses
from the change in fair value of derivative instruments.
Interest income is recognised as it accrues, taking into account
the effective yield on the asset.
(t) Income tax
Income tax for the year comprises current and deferred tax.
Income tax is recognised in the income statement except to the
extent that it relates to items charged or credited directly to
equity, in which case it is recognised in equity.
Current tax expense is the expected tax payable on the taxable
income for the year, using tax rates enacted at the statement of
financial position date, and any adjustment to tax payable in
respect of previous years.
Deferred tax is provided using the balance sheet liability
method, providing for temporary differences between the carrying
amounts of assets and liabilities for financial reporting purposes
and the amounts used for taxation purposes, with the following
exceptions:
-- where the temporary difference arises from the initial
recognition of goodwill or of an asset or liability in a
transaction that is not a business combination that at the time of
the transaction affects neither accounting nor taxable profit or
loss; and
-- in respect of taxable temporary differences associated with
investments in subsidiaries and associates, where the timing of the
reversal of the temporary differences can be controlled and it is
probable that the temporary differences will not reverse in the
foreseeable future.
Deferred tax assets and liabilities are measured at the tax
rates that are expected to apply to the period when the asset is
realised or the liability is settled based on the tax rates (and
tax laws) that have been enacted or substantively enacted at the
statement of financial position date.
A deferred tax asset is recognised only to the extent that it is
probable that future taxable profits will be available against
which the asset can be utilised. Deferred tax assets are reduced to
the extent that it is no longer probable that the related tax
benefit will be realised.
(u) Uncertain tax positions
An estimated tax liability is recognised when the Group has a
present obligation as a result of a past event, it is probable that
the Group will be required to settle that obligation and a reliable
estimate can be made of the amount of the obligation. The liability
is the best estimate of the consideration required to settle the
present obligation at the balance sheet date, taking into account
risks and uncertainties surrounding the obligation. Separate
liabilities for interest and penalties are also recorded if
appropriate.
Movements in interest and penalty amounts in respect of tax
liability are not included in the tax charge, but are disclosed in
the income statement. Tax liabilities are based on management's
interpretation of country-specific tax law and the likelihood of
settlement. This involves a significant amount of judgement as tax
legislation can be complex and open to different interpretation.
Management uses in-house tax experts, professional firms and
previous experience when assessing tax risks. Where actual tax
liabilities differ from the liabilities, adjustments are made which
can have a material impact on the Group's profits for the year.
Refer to note 36(a) for specific tax contingencies.
(v) Leases
Right-of-use assets (note 26)
The Group recognises right-of-use assets at the commencement
date of the lease (i.e., the date the underlying asset is available
for use). Right-of-use assets are measured at cost, less any
accumulated depreciation and impairment losses, and adjusted for
any remeasurement of lease liabilities. The cost of right-of-use
assets includes the amount of lease liabilities recognised, initial
direct costs incurred, and lease payments made at or before the
commencement date less any lease incentives received. The
right-of-use asset is depreciated over the shorter of the asset's
useful life and the lease term on a straight-line basis.
Right-of-use assets are subject to impairment.
Lease liabilities
At the commencement date of the lease, the Group recognises
lease liabilities measured at the present value of lease payments
to be made over the lease term. The lease payments include fixed
payments (including in-substance fixed payments) less any lease
incentives receivable, and amounts expected to be paid under
residual value guarantees. The lease payments also include the
exercise price of a purchase option reasonably certain to be
exercised by the Group and payments of penalties for terminating a
lease, if the lease term reflects the Group exercising the option
to terminate. The variable lease payments are recognised as expense
in the period in which the event or condition that triggers the
payment occurs.
In calculating the present value of lease payments, the Group
uses the incremental borrowing rate at the lease commencement date
if the interest rate implicit in the lease is not readily
determinable. After the commencement date, the amount of lease
liabilities is increased to reflect the accretion of interest, and
reduced for the lease payments made. In addition, the carrying
amount of lease liabilities is remeasured if there is a
modification, a change in the lease term, a change in the
in-substance fixed lease payments or a change in the assessment to
purchase the underlying asset.
Short-term leases and leases of low-value assets
The Group applies the short-term lease recognition exemption to
its short-term leases of machinery and equipment (i.e., those
leases that have a lease term of twelve months or less from the
commencement date and do not contain a purchase option). It also
applies the lease of low-value assets recognition exemption to
leases of office equipment that are considered of low value (i.e.,
below US$5,000). Lease payments on short-term leases and leases of
low-value assets are recognised as expense on a straight-line basis
over the lease term.
(w) Financial instruments
A financial instrument is any contract that gives rise to a
financial asset of one entity and a financial liability or equity
instrument of another entity.
Financial assets
Initial recognition and measurement
Financial assets are classified, at initial recognition, as
subsequently measured at amortised cost, fair value through other
comprehensive income (OCI), and fair value through profit or
loss.
The classification of financial assets at initial recognition
depends on the financial asset's contractual cash flow
characteristics and the Group's business model for managing
them.
The Group's business model for managing financial assets refers
to how it manages its financial assets in order to generate cash
flows. The business model determines whether cash flows will result
from collecting contractual cash flows, selling the financial
assets, or both.
Purchases or sales of financial assets that require delivery of
assets within a time frame established by regulation or convention
in the market place (regular way trades) are recognised on the
trade date, i.e., the date that the Group commits to purchase or
sell the asset.
Subsequent measurement
For purposes of subsequent measurement, the Group's financial
assets are classified in the following categories:
- Financial assets at amortised cost (debt instruments)
The Group measures financial assets at amortised cost if both of
the following conditions are met:
-- The financial asset is held within a business model with the
objective to hold financial assets in order to collect contractual
cash flows, and
-- The contractual terms of the financial asset give rise on
specified dates to cash flows that are solely payments of principal
and interest on the principal amount outstanding
Financial assets at amortised cost are subsequently measured
using the effective interest (EIR) method and are subject to
impairment. Gains and losses are recognised in profit or loss when
the asset is derecognised, modified or impaired.
The Group's financial assets at amortised cost includes trade
receivables.
- Financial assets designated at fair value through OCI (equity instruments)
Upon initial recognition, the Group can elect to classify
irrevocably its equity investments as equity instruments designated
at fair value through OCI when they meet the definition of equity
under IAS 32 Financial Instruments: Presentation and are not held
for trading. The classification is determined on an
instrument-by-instrument basis.
Financial assets designated at fair value through OCI are
carried in the statement of financial position at fair value with
net changes in fair value recognised in the OCI. Gains and losses
on these financial assets are never recycled to profit or loss.
Dividends are recognised as other income in the statement of profit
or loss when the right of payment has been established, except when
the Group benefits from such proceeds as a recovery of part of the
cost of the financial asset, in which case, such gains are recorded
in OCI. Equity instruments designated at fair value through OCI are
not subject to impairment assessment.
The Group has listed and non-listed equity investments under
this category.
- Financial assets at fair value through profit or loss
Financial assets at fair value through profit or loss include
financial assets held for trading, financial assets designated upon
initial recognition at fair value through profit or loss, or
financial assets mandatorily required to be measured at fair value.
Financial assets are classified as held for trading if they are
acquired for the purpose of selling or repurchasing in the near
term. Derivatives, including separated embedded derivatives, are
also classified as held for trading unless they are designated as
effective hedging instruments. Financial assets with cash flows
that are not solely payments of principal and interest are
classified and measured at fair value through profit or loss,
irrespective of the business model. Notwithstanding the criteria
for debt instruments to be classified at amortised cost or at fair
value through OCI, as described above, debt instruments may be
designated at fair value through profit or loss on initial
recognition if doing so eliminates, or significantly reduces, an
accounting mismatch.
Financial assets at fair value through profit or loss are
carried in the statement of financial position at fair value with
net changes in fair value recognised in the statement of profit or
loss.
The Group has listed equity investments and embedded derivatives
under this category. Dividends on listed equity investments are
also recognised as other income in the statement of profit or loss
when the right of payment has been established.
Derecognition
A financial asset (or, where applicable, a part of a financial
asset or part of a group of similar financial assets) is primarily
derecognised (i.e., removed from the Group's consolidated statement
of financial position) when:
-- The rights to receive cash flows from the asset have expired,
or
-- The Group has transferred its rights to receive cash flows
from the asset or has assumed an obligation to pay the received
cash flows in full without material delay to a third party under a
'pass-through' arrangement; and either (a) the Group has
transferred substantially all the risks and rewards of the asset,
or (b) the Group has neither transferred nor retained substantially
all the risks and rewards of the asset, but has transferred control
of the asset.
Impairment of financial assets
The Group recognises an allowance for expected credit losses
(ECLs) for all debt instruments not held at fair value through
profit or loss. ECLs are based on the difference between the
contractual cash flows due in accordance with the contract and all
the cash flows that the Group expects to receive, discounted at an
approximation of the original effective interest rate.
For trade receivables, the Group applies a simplified approach
in calculating ECLs. Therefore, the Group does not track changes in
credit risk, but instead recognises a loss allowance based on
lifetime ECLs at each reporting date.
Financial liabilities
Initial recognition and measurement
Financial liabilities are classified, at initial recognition, as
financial liabilities at fair value through profit or loss, loans
and borrowings, payables, or as derivatives designated as hedging
instruments in an effective hedge, as appropriate.
All financial liabilities are recognised initially at fair value
and, in the case of loans and borrowings and payables, net of
directly attributable transaction costs.
The Group's financial liabilities include trade and other
payables, loans and borrowings including bank overdrafts, and
derivative financial instruments.
Subsequent measurement
The measurement of financial liabilities depends on their
classification, as described below:
- Financial liabilities at fair value through profit or loss
Financial liabilities at fair value through profit or loss
include financial liabilities held for trading and financial
liabilities designated upon initial recognition as at fair value
through profit or loss.
- Loans and borrowings
This is the category most relevant to the Group. After initial
recognition, interest-bearing loans and borrowings are subsequently
measured at amortised cost using the EIR method. Gains and losses
are recognised in profit or loss when the liabilities are
derecognised as well as through the EIR amortisation process.
Amortised cost is calculated by taking into account any discount
or premium on acquisition and fees or costs that are an integral
part of the EIR. The EIR amortisation is included in finance costs
in the statement of profit or loss.
This category generally applies to interest-bearing loans and
borrowings.
Derecognition
A financial liability is derecognised when the obligation under
the liability is discharged or cancelled or expires. When an
existing financial liability is replaced by another from the same
lender on substantially different terms, or the terms of an
existing liability are substantially modified, such an exchange or
modification is treated as the derecognition of the original
liability and the recognition of a new liability. The difference in
the respective carrying amounts is recognised in the statement of
profit or loss.
Derivative financial instruments and hedge accounting
In 2021, the Group signed silver forward agreements.The silver
forward is being used to hedge the exposure to changes in the
cashflows of the silver commodity prices. Consequently, the Group
has opted to apply hedge accounting under the requirements of IFRS
9 Financial Instruments.
Initial recognition and subsequent measurement
These derivative financial instruments were initially recognised
at fair value on the date on which the derivative contract was
entered into and were subsequently remeasured at fair value.
Derivatives are carried as financial assets when the fair value is
positive and as financial liabilities when the fair value is
negative.
For the purpose of hedge accounting, hedges are classified as
cash flow hedges when hedging the exposure to variability in cash
flows that is either attributable to a particular risk associated
with a recognised asset or liability or a highly probable forecast
transaction or the foreign currency risk in an unrecognised firm
commitment.
At the inception of a hedge relationship, the Group formally
designates and documents the hedge relationship to which it wishes
to apply hedge accounting and the risk management objective and
strategy for undertaking the hedge.
The documentation includes identification of the hedging
instrument, the hedged item, the nature of the risk being hedged
and how the Group will assess whether the hedging relationship
meets the hedge effectiveness requirements (including the analysis
of sources of hedge ineffectiveness and how the hedge ratio is
determined). A hedging relationship qualifies for hedge accounting
if it meets all of the following effectiveness requirements:
-- There is 'an economic relationship' between the hedged item
and the hedging instrument.
-- The effect of credit risk does not 'dominate the value
changes' that result from that economic relationship.
-- The hedge ratio of the hedging relationship is the same as
that resulting from the quantity of the hedged item that the Group
actually hedges and the quantity of the hedging instrument that the
Group actually uses to hedge that quantity of hedged item
Changes in the fair value of derivatives designated as cash flow
hedges are recognised in other components of equity until changes
in the fair value of the hedged item are recognised in profit or
loss. However, the ineffective portion of the changes in the fair
value of such derivatives is recognised in profit or loss. The
Group uses cash flow hedges for hedging the exposure to variability
in silver prices.
The amounts that have been recognised in other components of
equity relating to such hedging instruments are reclassified to
profit or loss when the hedged transaction affects profit or
loss.
(x) Dividend distribution
Dividends on the Company's ordinary shares are recognised when
they have been appropriately authorised and are no longer at the
Company's discretion. Accordingly, interim dividends are recognised
when they are paid and final dividends are recognised when they are
declared following approval by shareholders at the Company's Annual
General Meeting.
(y) Cash and cash equivalents
Cash and cash equivalents are carried in the statement of
financial position at cost. For the purposes of the statement of
financial position, cash and cash equivalents comprise cash on hand
and deposits held with banks that are readily convertible into
known amounts of cash and which are subject to insignificant risk
of changes in value. For the purposes of the cash flow statement,
cash and cash equivalents, as defined above, are shown net of
outstanding bank overdrafts.
Liquidity funds are classified as cash equivalents if the amount
of cash that will be received is known at the time of the initial
investment and the risk of changes in value is considered
insignificant.
(z) Exceptional items
Exceptional items are those significant items which, due to
their nature or the expected infrequency of the events giving rise
to them, need to
be disclosed separately on the face of the income statement to
enable a better understanding of the financial performance of the
Group and facilitate comparison with prior years.
Exceptional items mainly include:
-- impairments or write-offs of assets, property, plant and
equipment and evaluation and exploration assets;
-- incremental cost due to pandemics which are not expected to be recurring;
-- gains or losses arising on the disposal of subsidiaries,
investments or property, plant and equipment;
-- any gain or loss resulting from restructuring within the Group;
-- the impact of infrequent labour action related to work
stoppages in mine units;
-- the penalties generated by the early termination of
agreements with providers or lenders of the Group;
-- the reversal of an accumulation of prior year's tax expenses
that resulted from an agreement with the government; and
-- the related tax impact of the above items.
(aa) Fair value measurement
The Group measures financial instruments, such as derivatives,
at each statement of financial position date.
Fair value is the price that would be received to sell an asset
or paid to transfer a liability in an orderly transaction between
market participants at the measurement date. The fair value
measurement is based on the presumption that the transaction to
sell the asset or transfer the liability takes place either:
-- In the principal market for the asset or liability, or
-- In the absence of a principal market, in the most
advantageous market for the asset or liability
The principal or the most advantageous market must be accessible
by the Group.
The fair value of an asset or a liability is measured using the
assumptions that market participants would use when pricing the
asset or liability, assuming that market participants act in their
best economic interest.
A fair value measurement of a non-financial asset takes into
account a market participant's ability to generate economic
benefits by using the asset in its highest and best use or by
selling it to another market participant that would use the asset
in its highest and best use. The Group uses valuation techniques
that are appropriate in the circumstances and for which sufficient
data are available to measure fair value, maximising the use of
relevant observable inputs and minimising the use of unobservable
inputs.
All assets and liabilities for which fair value is measured or
disclosed in the financial statements are categorised within the
fair value hierarchy, as described in note 38(e).
For assets and liabilities that are recognised in the financial
statements on a recurring basis at fair value, the Group determines
whether transfers have occurred between levels in the hierarchy by
re-assessing categorization (based on the lowest level input that
is significant to the fair value measurement as a whole) at the end
of each reporting period.
The Group determines the policies and procedures for both
recurring fair value measurement and unquoted financial assets, and
for non-recurring measurement.
At each reporting date, the Group analyses the movements in the
values of assets and liabilities which are required to be
re-measured or re-assessed as per the Group's accounting policies.
For this analysis, the Group verifies the major inputs applied in
the latest valuation by agreeing the information in the valuation
computation to contracts and other relevant documents.
The Group, in conjunction with its external valuers where
applicable, also compares the changes in the fair value of each
asset and liability with relevant external sources to determine
whether the change is reasonable.
For the purpose of fair value disclosures, the Group has
determined classes of assets and liabilities on the basis of the
nature, characteristics and risks of the asset or liability and the
level of the fair value hierarchy as explained above.
3 Segment reporting
The Group's activities are principally related to mining
operations which involve the exploration, production and sale of
gold and silver. Products are subject to the same risks and returns
and are sold through similar distribution channels. The Group
undertakes a number of activities solely to support mining
operations including power generation and services. Transfer prices
between segments are set at an arm's length basis in a manner
similar to that used for third parties. Segment revenue, segment
expense and segment results include transfers between segments at
market prices. Those transfers are eliminated on consolidation.
For internal reporting purposes, management takes decisions and
assesses the performance of the Group through
consideration of the following reporting segments:
-- Operating unit - San Jose, which generates revenue from the
sale of gold and silver (dore and concentrate).
-- Operating unit - Pallancata, which generates revenue from the
sale of gold and silver (concentrate).
-- Operating unit - Inmaculada, which generates revenue from the
sale of gold and silver (dore).
-- Exploration, which explores and evaluates areas of interest
in brownfield and greenfield sites with the aim of extending the
life of mine of existing operations and to assess the feasibility
of new mines. The exploration segment includes costs charged to the
profit and loss and capitalised as assets.
-- Other - includes the profit or loss generated by Empresa de
Transmisión Aymaraes S.A.C.
The Group's administration, financing, other activities
(including other income and expense), and income taxes are managed
at a corporate level and are not allocated to operating
segments.
Segment information is consistent with the accounting policies
adopted by the Group. Management evaluates the financial
information based on the adopted IFRS accounting policies in the
financial statements.
The Group measures the performance of its operating units by the
segment profit or loss that comprises gross profit, selling
expenses and exploration expenses.
Segment assets include items that could be allocated directly to
the segment.
(a) Reportable segment information
Adjustment
San and
Inmaculada Jose Pallancata Exploration Other1 eliminations Total
US$000 US$000 US$000 US$000 US$000 US$000 US$000
======================== ========== ======== ========== =========== ======= ============ =========
Year ended 31 December
2022
------------------------ ---------- -------- ---------- ----------- ------- ------------ ---------
Revenue from external
customers 413,899 243,958 78,429 - 680 736,966
-------------------------- ---------- -------- ---------- ----------- ------- ------------ ---------
Inter segment revenue - - - - 9,872 (9,872) -
-------------------------- ---------- -------- ---------- ----------- ------- ------------ ---------
Total revenue from
customers 413,899 243,958 78,429 - 10,552 (9,872) 736,966
-------------------------- ---------- -------- ---------- ----------- ------- ------------ ---------
Provisional pricing
adjustment 29 (489) (863) - - - (1,323)
-------------------------- ---------- -------- ---------- ----------- ------- ------------ ---------
Total revenue 413,928 243,469 77,566 - 10,552 (9,872) 735,643
-------------------------- ---------- -------- ---------- ----------- ------- ------------ ---------
Segment profit/(loss) 163,509 31,512 (8,789) (57,798) 8,323 385 137,142
-------------------------- ---------- -------- ---------- ----------- ------- ------------ ---------
Others2 (111,376)
-------------------------- ---------- -------- ---------- ----------- ------- ------------ ---------
Profit from operations
before income tax 25,766
-------------------------- ---------- -------- ---------- ----------- ------- ------------ ---------
Other segment
information
------------------------ ---------- -------- ---------- ----------- ------- ------------ ---------
Depreciation3 (78,553) (50,243) (9,046) (380) (4,264) - (142,486)
-------------------------- ---------- -------- ---------- ----------- ------- ------------ ---------
Amortisation (86) (724) - 39 (199) - (970)
-------------------------- ---------- -------- ---------- ----------- ------- ------------ ---------
Reversal of
impairment/(impairment)
and write-off of assets,
net (1) - 15,476 (5,346) (598) - 9,531
-------------------------- ---------- -------- ---------- ----------- ------- ------------ ---------
Assets
------------------------ ---------- -------- ---------- ----------- ------- ------------ ---------
Capital expenditure 78,176 50,112 13,518 196,792 1,268 - 339,866
-------------------------- ---------- -------- ---------- ----------- ------- ------------ ---------
Current assets 19,872 62,796 16,965 - 4,171 - 103,804
-------------------------- ---------- -------- ---------- ----------- ------- ------------ ---------
Other non-current assets 508,768 159,617 21,345 337,654 42,319 - 1,069,703
-------------------------- ---------- -------- ---------- ----------- ------- ------------ ---------
Total segment assets 528,640 222,413 38,310 337,654 46,490 - 1,173,507
-------------------------- ---------- -------- ---------- ----------- ------- ------------ ---------
Not reportable assets4 - - - - 243,777 - 243,777
-------------------------- ---------- -------- ---------- ----------- ------- ------------ ---------
Total assets 528,640 222,413 38,310 337,654 290,267 - 1,417,284
-------------------------- ---------- -------- ---------- ----------- ------- ------------ ---------
1 'Other' revenue relates to revenues earned by Empresa de Transmisión Aymaraes S.A.C.
2 Comprised of administrative expenses of US$54,158,000, other
income of US$3,340,000, other expenses of US$39,302,000, write-off
of assets (net) of US$1,832,000, reversal of impairment of
non-current assets net of US$11,363,000, share of losses of an
associate of US$11,600,000, finance income of US$5,211,000, finance
expense of US$21,776,000, and foreign exchange loss of
US$2,622,000.
3 Includes depreciation capitalised in the Crespo project
(US$284,000), San Jose unit (US$2,508,000), Mara Rosa project
(US$39,000), products in process (-US$403,000) and recognised
against the mine rehabilitation provision (US$970,000).
4 Not reportable assets are comprised of financial assets at
fair value through OCI of US$509,000, financial assets at fair
value through profit and loss of US$1,015,000, other receivables of
US$49,542,000, income tax receivable of US$9,226,000, deferred
income tax asset of US$4,213,000, investment in associates
US$33,242,000, derivative financial assets of US$2,186,000 and cash
and cash equivalents of US$143,844,000.
Adjustment
San and
Inmaculada Jose Pallancata Exploration Other1 eliminations Total
US$000 US$000 US$000 US$000 US$000 US$000 US$000
================== ========== ======== ========== =========== ======= ============= =========
Year ended 31
December
2021
------------------ ---------- -------- ---------- ----------- ------- ------------- ---------
Revenue from
external
customers 452,849 260,879 103,809 - 464 - 818,001
-------------------- ---------- -------- ---------- ----------- ------- ------------- ---------
Inter segment
revenue - - - - 9,225 (9,225) -
-------------------- ---------- -------- ---------- ----------- ------- ------------- ---------
Total revenue from
customers 452,849 260,879 103,809 - 9,689 (9,225) 818,001
-------------------- ---------- -------- ---------- ----------- ------- ------------- ---------
Provisional pricing
adjustment (14) (1,907) (4,693) - - - (6,614)
-------------------- ---------- -------- ---------- ----------- ------- ------------- ---------
Total revenue 452,835 258,972 99,116 - 9,689 (9,225) 811,387
-------------------- ---------- -------- ---------- ----------- ------- ------------- ---------
Segment
profit/(loss) 226,727 52,614 343 (40,520) 7,345 (684) 245,825
-------------------- ---------- -------- ---------- ----------- ------- ------------- ---------
Others2 (108,494)
-------------------- ---------- -------- ---------- ----------- ------- ------------- ---------
Profit from
operations
before income tax 137,331
-------------------- ---------- -------- ---------- ----------- ------- ------------- ---------
Other segment
information
------------------ ---------- -------- ---------- ----------- ------- ------------- ---------
Depreciation3 (75,524) (51,217) (22,618) (396) (5,795) - (155,550)
-------------------- ---------- -------- ---------- ----------- ------- ------------- ---------
Amortisation (108) (852) - (107) (51) - (1,118)
-------------------- ---------- -------- ---------- ----------- ------- ------------- ---------
Impairment and
write-off
of assets, net (326) (354) (24,940) - (89) (25,709)
-------------------- ---------- -------- ---------- ----------- ------- ------------- ---------
Assets
------------------ ---------- -------- ---------- ----------- ------- ------------- ---------
Capital expenditure 76,512 43,666 14,250 15,896 3,537 - 153,861
-------------------- ---------- -------- ---------- ----------- ------- ------------- ---------
Current assets 20,182 43,473 9,072 - 4,230 - 76,957
-------------------- ---------- -------- ---------- ----------- ------- ------------- ---------
Other non-current
assets 515,943 157,749 3,241 155,702 46,882 - 879,517
-------------------- ---------- -------- ---------- ----------- ------- ------------- ---------
Total segment assets 536,125 201,222 12,313 155,702 51,112 - 956,474
-------------------- ---------- -------- ---------- ----------- ------- ------------- ---------
Not reportable
assets4 - - - - 498,241 - 498,241
-------------------- ---------- -------- ---------- ----------- ------- ------------- ---------
Total assets 536,125 201,222 12,313 155,702 549,353 - 1,454,715
-------------------- ---------- -------- ---------- ----------- ------- ------------- ---------
1 'Other' revenue relates to revenues earned by Empresa de Transmisión Aymaraes S.A.C.
2 Comprised of administrative expenses of US$51,905,000, other
income of US$45,896,000, other expenses of US$46,068,000, write-off
of assets (net) of US$863,000, impairment of non-current assets of
US$24,846,000, share of losses of an associate of US$169,000,
finance income of US$3,946,000, finance expense of US$32,061,000,
and foreign exchange loss of US$2,424,000.
3 Includes depreciation capitalised in the Crespo project
(US$430,000), San Jose unit (US$2,341,000), products in process
(US$509,000) and recognised against the mine rehabilitation
provision (US$1,978,000).
4 Not reportable assets are comprised of financial assets at
fair value through OCI of US$661,000, financial assets at fair
value through profit and loss of US$3,155,000, other receivables of
US$44,446,000, income tax receivable of US$32,000, deferred income
tax asset of US$484,000, investment in associates US$43,559,000,
derivative financial assets of US$19,115,000 and cash and cash
equivalents of US$386,789,000.
(b) Geographical information
The revenue for the period based on the country in which the
customer is located is as follows:
Year ended
31 December
================
2022 2021
US$000 US$000
================== ======= =======
External customer
------------------ ------- -------
Switzerland 350,898 360,838
------------------- ------- -------
Canada 143,216 213,350
------------------- ------- -------
South Korea 126,321 135,162
------------------- ------- -------
Germany 51,033 47,014
------------------- ------- -------
Japan 14,490 26,151
------------------- ------- -------
Chile (88) 13,184
------------------- ------- -------
United Kingdom 20,428 7,982
------------------- ------- -------
Bulgaria 4,703
------------------- ------- -------
USA 27,481 -
------------------- ------- -------
China 1,167 -
------------------- ------- -------
Peru 697 3,003
------------------- ------- -------
Total 735,643 811,387
------------------- ------- -------
Inter-segment
------------------ ------- -------
Peru 9,872 9,225
------------------- ------- -------
Total 745,515 820,612
------------------- ------- -------
In the periods set out below, certain customers accounted for
greater than 10% of the Group's total revenues as detailed in the
following table:
Year ended 31 December
2022 Year ended 31 December 2021
================================= =================================
US$000 % Revenue Segment US$000 % Revenue Segment
================= ======= ========= ============= ======= ========= =============
Inmaculada Inmaculada
Argor Heraus 195,148 27% and San Jose 208,037 26% and San Jose
------------------ ------- --------- ------------- ------- --------- -------------
LS MnM (formerly Pallancata Pallancata
LS Nikko) 126,321 17% and San Jose 135,162 17% and San Jose
------------------ ------- --------- ------------- ------- --------- -------------
Asahi Refining
Canada 135,563 18% Inmaculada 198,254 24% Inmaculada
------------------ ------- --------- ------------- ------- --------- -------------
MKS Switzerland
S.A. 155,750 21% Inmaculada 152,801 19% Inmaculada
------------------ ------- --------- ------------- ------- --------- -------------
Non-current assets, excluding financial instruments and deferred
income tax assets, were allocated to the geographical areas in
which the assets are located as follows:
As at 31 December
===================
2022 2021
US$000 US$000
======================================================= ========== =======
Peru 668,353 665,839
-------------------------------------------------------- ---------- -------
Brazil 184,811 -
-------------------------------------------------------- ---------- -------
Argentina 159,617 157,750
-------------------------------------------------------- ---------- -------
Chile 56,867 55,922
-------------------------------------------------------- ---------- -------
Canada 55 6
-------------------------------------------------------- ---------- -------
Total non-current segment assets 1,069,703 879,517
-------------------------------------------------------- ---------- -------
Financial assets at fair value through OCI 509 661
-------------------------------------------------------- ---------- -------
Financial assets at fair value through profit and loss 1,015 3,155
-------------------------------------------------------- ---------- -------
Investment in associates 33,242 43,559
-------------------------------------------------------- ---------- -------
Trade and other receivables 6,498 2,470
-------------------------------------------------------- ---------- -------
Deferred income tax assets 4,213 484
-------------------------------------------------------- ---------- -------
Derivative financial instruments - 5,042
-------------------------------------------------------- ---------- -------
Total non-current assets 1,115,180 934,888
======================================================== ========== =======
4 Acquisitions and disposals
(a) Demerger of Aclara Resources Inc. ('Aclara')
Hochschild Mining Holdings Ltd ('HM Holdings'), a wholly owned
subsidary of the Group, had interests over a Chilean company named
REE UNO SpA. This entity holds the project Aclara (formerly named
Biolantanidos), which is located in the south of Chile, and is
currently focused on the development of the Penco module, which
will aim to produce a rare earth concentrate through a processing
plant that will be fed by clays from nearby deposits.
The Group separated the Aclara project from itsother businesses
dedicated to the extraction and production of gold and silver. For
this purpose, a new company named Aclara Resources Inc. located in
Canada (hereinafter, 'Aclara') was incorporated by the Group. The
investment held in REE UNO SpA was then transferred to Aclara .
A distribution of 70,606,502 Aclara Shares, representing 80% of
the Aclara Shares, was made to the holders of ordinary shares of
the Group by way of a dividend in specie (the "Demerger Dividend").
The approval of the Group's shareholders in respect of the Demerger
Dividend was granted at the Extraordinary General Meeting held on 5
November 2021. The Demerger Dividend was effected on 10 December
2021, shortly before the Aclara Initial Public Offering ('IPO') was
completed later that day.
Once the Aclara IPO was completed, Aclara became an independent
company listed on the Toronto Stock Exchange.
The ratio of Demerged Aclara Shares to the number of ordinary
shares in the Group was 70,606,502 to 513,875,563. Therefore, the
shareholders who were entitled to receive the Demerger Dividend
received 0.1374 Aclara Shares for each ordinary share in the Group.
The value of the Demerger Dividend was C$120,031,053 (equivalent to
US$94,945,000) in aggregate based on the offering price of C$1.70
per Aclara Share (the Offering Price).
HM Holdings retained 20% of the Aclara Shares. The investment
was recorded at initial recognition at fair value, based on the
Offering Price.
The fair value of the Demerger Dividend at the date of the
demerger and retained investment is therefore a level 1 fair value
measurement.
Immediately following the Demerger Dividend and pursuant to the
subscription agreement with Aclara dated 2 December 2021, HM
Holdings purchased 14,870,397 Aclara Shares at the Offering Price
for aggregate gross proceeds to Aclara of C$25,279,675 (equivalent
to US$19,996,000) .
The consolidated effect in the financial statements of the Group
as at 31 December 2021 was an exceptional gain of US$37,461,000
presented within other income .
Details of the net gain on demerger of Aclara as at 31 December
2021 are shown below:
US$000
--------------------------------------------------------- --------
Property, plant and equipment 507
---------------------------------------------------------- --------
Evaluation and exploration assets 70,311
---------------------------------------------------------- --------
Other non-current assets 2,668
---------------------------------------------------------- --------
Current assets 1,210
---------------------------------------------------------- --------
Current liabilities (3,465)
---------------------------------------------------------- --------
Aclara net assets and liabilities demerged 1 71,231
---------------------------------------------------------- --------
Net cash and cash equivalents demerged (553)
---------------------------------------------------------- --------
Net cash outflow from demerger of Aclara (553)
---------------------------------------------------------- --------
In specie dividends relating to Aclara demerger 94,945
---------------------------------------------------------- --------
Retained financial investments in associate 23,742
---------------------------------------------------------- --------
Net assets demerged (71,231)
---------------------------------------------------------- --------
Reclassification of foreign currency translation reserve (9,995)
---------------------------------------------------------- --------
Gain on demerger of Aclara 37,461
---------------------------------------------------------- --------
1 Considered in the exploration segment of the Group.
On completion of the demerger, the Group retained an 20%
interest in Aclara through the Aclara Resources Inc. investment
Company. An investment in associates of US$23,742,000 was
recognised on the Group's consolidated balance sheet as at 31
December 2021 in respect of this interest.
(b) Acquisition of 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 (note 18) 21
Evaluation and exploration assets (note 17) 107,362
Property, plant and equipment (note 16) 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
----------------------------------------------------------- -------
The Group recognises individual identifiable assets (and
liabilities) by allocating the cost of acquisition on the basis of
the relative fair values at the date of purchase:
Step 1: Identify assets and liabilities acquired, adjusting them
to the Group's accounting policies and presentation;
Step 2: Determine the purchase consideration; and
Step 3: Purchase Price Allocation: The consideration paid is
allocated to the fair value of the identifiable assets and
liabilities assumed with the remainder allocated to the mineral
property acquired.
The fair value at the time of acquisition is the amount for
which an asset could be exchanged, or a liability settled, between
knowledgeable, will- ing parties in an arm's-length
transaction.
5 Revenue
Year ended 31 December Year ended 31 December
2022 2021
================================================ ================================================
Revenue from Revenue from
customers customers
Goods Shipping Provisional Goods Shipping Provisional
sold services Total pricing Total sold services Total pricing Total
US$000 US$000 US$000 US$000 US$000 US$000 US$000 US$000 US$000 US$000
--------------------- ------- -------- ------- ----------- ------- ------- -------- ------- ----------- -------
Gold (from dore bars) 337,847 915 338,762 (11) 338,751 353,258 914 354,172 40 354,212
--------------------- ------- -------- ------- ----------- ------- ------- -------- ------- ----------- -------
Silver (from dore
bars) 183,381 696 184,077 57 184,134 207,022 804 207,826 (52) 207,774
--------------------- ------- -------- ------- ----------- ------- ------- -------- ------- ----------- -------
Gold (from
concentrates) 89,991 2,687 92,678 (1,628) 91,050 100,233 2,462 102,695 912 103,607
--------------------- ------- -------- ------- ----------- ------- ------- -------- ------- ----------- -------
Silver (from
concentrates) 117,534 3,235 120,769 259 121,028 150,140 2,704 152,844 (7,514) 145,330
--------------------- ------- -------- ------- ----------- ------- ------- -------- ------- ----------- -------
Services 680 - 680 - 680 464 - 464 - 464
--------------------- ------- -------- ------- ----------- ------- ------- -------- ------- ----------- -------
Total 729,433 7,533 736,966 (1,323) 735,643 811,117 6,884 818,001 (6,614) 811,387
--------------------- ------- -------- ------- ----------- ------- ------- -------- ------- ----------- -------
6 Cost of sales before exceptional items
Included in cost of sales are:
Year ended
31 December
================
2022 2021
US$000 US$000
======================================================== ======= =======
Depreciation and amortisation in cost of sales1 136,427 145,482
--------------------------------------------------------- ------- -------
Personnel expenses (note 10)2 121,203 101,682
--------------------------------------------------------- ------- -------
Mining royalty (note 37 ) 6,307 7,171
--------------------------------------------------------- ------- -------
Change in products in process and finished goods (5,631) 320
--------------------------------------------------------- ------- -------
Fixed costs at the operations during stoppages, reduced
capacity and excess absenteeism3 8,023 8,680
--------------------------------------------------------- ------- -------
1 The depreciation and amortisation in production cost is US$137,747,000 (2021: US$148,842,000).
2 Includes workers profit sharing of US$3,321,000 (2021:
US$6,512,000) and excludes personnel expenses of US$4,498,000
(2021: US$7,607,000) included within unallocated fixed cost at the
operations (see below).
3 Corresponds to the unallocated fixed cost accumulated as a
result of excess absenteeism and idle capacity. These costs mainly
include personnel expenses of US$4,498,000 (2021: US$7,607,000),
third party services of US$3,090,000 (2021: US$995,000), supplies
of US$146,000 (2021: US$nil), depreciation and amortisation of
US$2,000 (2021: US$nil) and other costs of US$287,000 (2021:
US$78,000).
7 Administrative expenses
Year ended
31 December
============
2022 2021
US$000 US$000
============================== ============ =======
Personnel expenses (note 10) 30,478 29,832
------------------------------- ------------ -------
Professional fees1 9,206 8,710
------------------------------- ------------ -------
Donations 445 587
------------------------------- ------------ -------
Lease rentals 1,218 1,301
------------------------------- ------------ -------
Third party services 630 302
------------------------------- ------------ -------
Communications 479 473
------------------------------- ------------ -------
Indirect taxes 2,077 2,057
------------------------------- ------------ -------
Depreciation and amortisation 1,844 1,823
------------------------------- ------------ -------
Depreciation of rights of use 184 226
------------------------------- ------------ -------
Technology and systems 1,391 1,207
------------------------------- ------------ -------
Security 821 956
------------------------------- ------------ -------
Other2 5,385 4,431
------------------------------- ------------ -------
Total 54,158 51,905
------------------------------- ------------ -------
1 Corresponds to audit fees of US$1,813,000 (2021.
US$1,373,000), legal fees of US$1,733,000 (2021: US$2,019,000), tax
and advisory fees of US$3,954,000 (2021: US$3,373,000), and other
professional fees of US$1,706,000 (2021: US$1,945,000).
2 Predominantly relates to advertising costs of US$376,000
(2021: US$372,000), insurance fees of US$888,000 (2021:
US$837,000), repair and maintenance of US$489,000 (2021:
US$326,000), supplies costs of US$237,000 (2021: US$102,000), tax
penalties of -US$660,000 (2021: US$1,476,000), travel expenses of
US$822,000 (2021: US$105,000) and personnel transportation of
US$165,000 (2021: US$108,000).
8 Exploration expenses
Year ended
31 December
================
2022 2021
US$000 US$000
================================= ======= =======
Mine site exploration1
--------------------------------- ------- -------
Arcata 877 2,189
---------------------------------- ------- -------
Ares 366 628
---------------------------------- ------- -------
Inmaculada 2,946 3,276
---------------------------------- ------- -------
Pallancata 6,000 5,993
---------------------------------- ------- -------
San Jose 7,700 9,653
---------------------------------- ------- -------
17,889 21,739
--------------------------------- ------- -------
Prospects2
--------------------------------- ------- -------
Peru 772 2,677
---------------------------------- ------- -------
USA 4,337 3,731
---------------------------------- ------- -------
Chile (77) (53)
---------------------------------- ------- -------
Canada4 19,632 51
---------------------------------- ------- -------
Brazil 1 -
---------------------------------- ------- -------
24,665 6,406
--------------------------------- ------- -------
Generative3
--------------------------------- ------- -------
Peru 783 3,263
---------------------------------- ------- -------
USA 97 11
---------------------------------- ------- -------
Mexico 313 861
---------------------------------- ------- -------
Brazil 2,301 -
---------------------------------- ------- -------
Chile - 177
---------------------------------- ------- -------
3,494 4,312
--------------------------------- ------- -------
Personnel (note 10 ) 7,535 6,368
---------------------------------- ------- -------
Others 3,067 731
---------------------------------- ------- -------
Depreciation right-of-use assets 176 292
---------------------------------- ------- -------
Total 56,826 39,848
---------------------------------- ------- -------
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.
4 Corresponds to the SNIP project managed by Hochschild Mining Canada Corp.
The Group determines the cash flows which relate to the
exploration activities of the companies engaged only in
exploration. Exploration activities incurred by Group operating
companies are not included since it is not practicable to separate
the liabilities related to the exploration activities of these
companies from their operating liabilities. Cash outflows on
exploration activities were US$26,318,000 in 2022 (2021:
US$12,163,000).
9 Selling expenses
Year ended
31 December
================
2022 2021
US$000 US$000
============================= ======= =======
Personnel expenses (note 10) 482 304
------------------------------ ------- -------
Warehouse services 1,328 1,392
------------------------------ ------- -------
Taxes1 10,344 11,765
------------------------------ ------- -------
Other2 1,878 1,970
------------------------------ ------- -------
Total 14,032 15,431
------------------------------ ------- -------
1 Corresponds to the export duties in Argentina.
2 Mainly corresponds to insurance expenses of US$337,000 (2021:
US$309,000), other professional fees of US$460,000 (2021:
US$561,000), analysis services of US$516,000 (2021: US$564,000),
and consumption of supplies of US$221,000 (US$212,000).
10 Personnel expenses
Year ended
31 December
================
2022 2021
US$000 US$000
================================== ======= =======
Salaries and wages 121,999 109,769
----------------------------------- ------- -------
Workers' profit sharing (note 28) 4,733 11,018
----------------------------------- ------- -------
Other legal contributions 27,866 23,792
----------------------------------- ------- -------
Statutory holiday payments 7,413 7,237
----------------------------------- ------- -------
Long Term Incentive Plan 3,002 1,783
----------------------------------- ------- -------
Termination benefits 5,468 6,470
----------------------------------- ------- -------
Other1 1,568 1,101
----------------------------------- ------- -------
Total1 172,049 161,170
----------------------------------- ------- -------
1 Mainly includes training expenses of US$1,219,000 (2021: US$1,061,000).
2 Includes exceptional personnel expenses amounting to US$nil
(2021: US$2,745,000) (refer to note 11(1)).
Personnel expenses are distributed as follows:
Year ended
31 December
================
2022 2021
US$000 US$000
============================================= ======= =======
Cost of sales1 125,701 111,613
---------------------------------------------- ------- -------
Administrative expenses 30,478 29,832
---------------------------------------------- ------- -------
Exploration expenses 7,535 6,368
---------------------------------------------- ------- -------
Selling expenses 482 304
---------------------------------------------- ------- -------
Other expenses2 5,802 11,579
---------------------------------------------- ------- -------
Capitalised as property, plant and equipment 2,051 1,474
---------------------------------------------- ------- -------
Total 172,049 161,170
---------------------------------------------- ------- -------
1 Personnel expenses related to unallocated fixed cost
accumulated as a result of excess absenteeism and idle capacity
included in cost of sales amount to US$4,498,000. Exceptional
personnel expenses included in cost of sales amount to US$nil
(2021: US$2,324,000).
2 Exceptional personnel expenses included in other expenses
amount to US$nil (2021: US$421,000).
The average number of employees for 2022 and 2021 were as
follows:
Year ended
31 December
==============
2022 2021
=============== ====== ======
Peru 2,177 2,057
---------------- ------ ------
Argentina 1,407 1,478
---------------- ------ ------
Chile 4 42
---------------- ------ ------
Brazil 88 -
---------------- ------ ------
Canada 13 -
---------------- ------ ------
United Kingdom 11 10
---------------- ------ ------
Total 3,700 3,587
---------------- ------ ------
11 Exceptional items
Exceptional items are those significant items which, due to
their nature or the expected infrequency of the events giving rise
to them, need to be disclosed separately on the face of the income
statement to enable a better understanding of the financial
performance of the Group and facilitate comparison with prior
years. Unless stated, exceptional items do not correspond to a
reporting segment of the Group.
Year ended Year ended
31 December 31 December
2022 2021
US$000 US$000
========================================================== ============ ============
Cost of sales
---------------------------------------------------------- ------------ ------------
Incremental costs due to Covid-19 pandemic 1 - (22,511)
----------------------------------------------------------- ------------ ------------
Total - (22,511)
----------------------------------------------------------- ------------ ------------
Other income
---------------------------------------------------------- ------------ ------------
Demerger of Aclara (note 4 (a)) - 37,461
----------------------------------------------------------- ------------ ------------
Total - 37,461
----------------------------------------------------------- ------------ ------------
Other expenses
---------------------------------------------------------- ------------ ------------
Incremental costs due to Covid-19 pandemic 1 - (1,503)
----------------------------------------------------------- ------------ ------------
Total - (1,503)
----------------------------------------------------------- ------------ ------------
Share of loss on an associate
---------------------------------------------------------- ------------ ------------
Impairment of Aclara Resources Inc. (2) (9,923) -
----------------------------------------------------------- ------------ ------------
Total (9,923) -
----------------------------------------------------------- ------------ ------------
(Impairment)/impairment reversal of non-financial assets,
net
---------------------------------------------------------- ------------ ------------
Impairment of non-financial assets 3 (4,199) (24,846)
----------------------------------------------------------- ------------ ------------
Reversal of impairment of non-financial assets 4 15,562 -
----------------------------------------------------------- ------------ ------------
Total 11,363 (24,846)
----------------------------------------------------------- ------------ ------------
Income tax (charge)/benefit 5 (3,353) 15,055
----------------------------------------------------------- ------------ ------------
Total (3,353) 15,055
----------------------------------------------------------- ------------ ------------
The exceptional items for the year ended 31 December 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
costs of sales and costs incurred by mine units in care and
maintenance and those related to corporate activities have been
presented within other expenses:
Year ended 31 December
==========================================
2022 2021
================================ ========= ========= ========= =========
Cost Other Cost Other
of sales expenses of sales expenses
US$000 US$000 US$000 US$000
================================ ========= ========= ========= =========
Third party services - - 16,032 873
---------------------------------- --------- --------- --------- ---------
Personnel expenses (note 10) - - 2,324 421
---------------------------------- --------- --------- --------- ---------
Consumption of medical supplies - - 1,327 120
---------------------------------- --------- --------- --------- ---------
Cleaning and food services - - 2,728 24
---------------------------------- --------- --------- --------- ---------
Depreciation and amortisation - - 37 29
---------------------------------- --------- --------- --------- ---------
Others - - 63 36
---------------------------------- --------- --------- --------- ---------
Total - - 22,511 1,503
---------------------------------- --------- --------- --------- ---------
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 31 December 2022 (refer to note 19).
3 Corresponds to the impairment related to the Azuca project of
US$4,199,000 (2021: corresponds to the impairment related to the
Pallancata mine Unit of US$24,846,000) (refer to notes 16 and
17).
4 Reversals of impairment related to the Pallancata mine unit (refer to notes 16 and 17).
5 The current tax credit generated by the incremental costs
arising from the Covid-19 pandemic of US$nil (2021: US$7,725,000)
and the deferred tax credit generated by the impairment of the
Azuca project of US$1,238,000 (2021: US$nil), net of the deferred
tax charge generated by the reversal of the impairment of the
Pallancata mine unit of US$4,591,000 (2021: deferred tax credit of
US$7,330,000).
12 Other income and other expenses before exceptional items
Year ended Year ended
31 December 31 December
2022 2021
============ ============
Before Before
exceptional exceptional
items items
US$000 US$000
=========================================================== ============ ============
Other income
----------------------------------------------------------- ------------ ------------
Gain on sale of property, plant and equipment 294 3,342
------------------------------------------------------------ ------------ ------------
Logistic services 218 7
------------------------------------------------------------ ------------ ------------
Income on recovery of expenses 337 418
------------------------------------------------------------ ------------ ------------
Recovery of provision of obsolescence of supplies
(note 23) - 2,338
------------------------------------------------------------ ------------ ------------
Recovery of previously written off account receivable 546 -
------------------------------------------------------------ ------------ ------------
Other1 1,945 2,330
------------------------------------------------------------ ------------ ------------
Total 3,340 8,435
------------------------------------------------------------ ------------ ------------
Other expenses
----------------------------------------------------------- ------------ ------------
Increase in provision for mine closure (note 28(1)) (17,797) (22,095)
------------------------------------------------------------ ------------ ------------
Provision of obsolescence of supplies (note 23) (422) (559)
------------------------------------------------------------ ------------ ------------
Care and maintenance expenses of Ares mine unit (3,291) (2,903)
------------------------------------------------------------ ------------ ------------
Write off of value added tax (159) (188)
------------------------------------------------------------ ------------ ------------
Corporate social responsibility contribution in Argentina2 (3,360) (3,911)
------------------------------------------------------------ ------------ ------------
Care and maintenance expenses of Arcata mine unit (4,207) (2,772)
------------------------------------------------------------ ------------ ------------
Voluntary retirement plan in Argentina3 (1,329) (8,263)
------------------------------------------------------------ ------------ ------------
Damage Inmaculada machine belt (1,321) -
------------------------------------------------------------ ------------ ------------
Depreciation right-of-use assets (105) (135)
------------------------------------------------------------ ------------ ------------
Contingency 4 (3,098) (794)
------------------------------------------------------------ ------------ ------------
Other 5 (4,213) (2,945)
------------------------------------------------------------ ------------ ------------
Total (39,302) (44,565)
------------------------------------------------------------ ------------ ------------
1 Mainly corresponds to the gain on sale of supplies of
US$480,000 (2021: gain recognised for the Mosquito project of
US$400,000).
2 Relates to a contribution in Argentina to the Santa Cruz
province calculated as a proportion of sales.
3 Related to payments made and the provision recognised under
voluntary retirement plan in Minera Santa Cruz.
4 Mainly related to contingencies in Minera Santa Cruz related
to new labor lawsuits.
5 Mainly corresponds to the expenses due to concessions of
US$nil (2021: US$179,000), loss on sale of supplies of US$nil
(2021: US$2,027,000), insurance of Minera Santa Cruz of US$941,000
(2021: US$nil), termination benefits in Pallancata mine unit of
US$987,000 (2021: US$nil).
13 Finance income and finance costs
Year ended Year ended
31 December 31 December
2022 2021
============ ============
US$000 US$000
============================================================= ============ ============
Finance income
------------------------------------------------------------- ------------ ------------
Interest on deposits and liquidity funds1 2,553 1,815
-------------------------------------------------------------- ------------ ------------
Interest on loans to related parties - 11
-------------------------------------------------------------- ------------ ------------
Interest income 2,553 1,826
-------------------------------------------------------------- ------------ ------------
Unwind of discount on mine rehabilitation (note 28) 1,931 2,038
-------------------------------------------------------------- ------------ ------------
Other 727 82
-------------------------------------------------------------- ------------ ------------
Total 5,211 3,946
-------------------------------------------------------------- ------------ ------------
Finance costs
------------------------------------------------------------- ------------ ------------
Interest on secured bank loans (note 27 ) (10,360) (5,951)
-------------------------------------------------------------- ------------ ------------
Other interest (1,551) (1,332)
-------------------------------------------------------------- ------------ ------------
Interest expense (11,911) (7,283)
-------------------------------------------------------------- ------------ ------------
Fair value loss on interest rate swap reclassified
from equity (note 38 (e)) - (5,521)
-------------------------------------------------------------- ------------ ------------
Loss on discount of other receivables2 (779) (632)
-------------------------------------------------------------- ------------ ------------
Loss from changes in the fair value of financial instruments
3 (7,096) (16,170)
-------------------------------------------------------------- ------------ ------------
Other (1,990) (2,455)
-------------------------------------------------------------- ------------ ------------
Total (21,776) (32,061)
-------------------------------------------------------------- ------------ ------------
1 Interest on deposits and liquidity funds of US$1,838,000 that
is directly attributable to the construction of Mara Rosa has been
recognised in property, plant and equipment as a reduction to
construction in progress and capital advances and mining properties
and development costs, and evaluation and exploration assets.
2 Mainly related to the effect of the discount of tax credits in
Argentina and Peru.
3 Represents the fair value change of US$2,140,000 on the C3
Metals Inc shares (note 21) (2021: fair value change of US$834,000
on the AGSC and C3 Metals Inc shares) and the foreign exchange
transaction costs of US$4,956,000 (2021: US$15,336,000) to acquire
US$5,248,000 dollars through the sale of bonds in Argentina (2021:
US$18,133,000).
14 Income tax expense
Year ended 31 December Year ended 31 December
2022 2021
================================== ===================================
Before Before
exceptional Exceptional exceptional Exceptional
items items Total items items Total
US$000 US$000 US$000 US$000 US$000 US$000
================================ ============ =========== ======= ============ =========== ========
Current corporate income tax
-------------------------------- ------------ ----------- ------- ------------ ----------- --------
Corporate income tax charge 18,253 - 18,253 53,965 (7,725) 46,240
--------------------------------- ------------ ----------- ------- ------------ ----------- --------
Prior year adjustment in Minera
Santa Cruz (2,353) (2,353)
--------------------------------- ------------ ----------- ------- ------------ ----------- --------
Withholding tax 276 - 276 689 - 689
--------------------------------- ------------ ----------- ------- ------------ ----------- --------
16,176 - 16,176 54,654 (7,725) 46,929
-------------------------------- ------------ ----------- ------- ------------ ----------- --------
Deferred taxation
-------------------------------- ------------ ----------- ------- ------------ ----------- --------
Origination and reversal of
temporary differences (note
30 ) (5,376) 3,353 (2,023) 26,885 (7,330) 19,555
--------------------------------- ------------ ----------- ------- ------------ ----------- --------
Prior year adjustment in Amarillo (664) - (664)
--------------------------------- ------------ ----------- ------- ------------ ----------- --------
Effect of change in income
tax rates1 - - - (12,501) - (12,501)
--------------------------------- ------------ ----------- ------- ------------ ----------- --------
(6,040) 3,353 (2,687) 14,384 (7,330) 7,054
-------------------------------- ------------ ----------- ------- ------------ ----------- --------
Corporate income tax 10,136 3,353 13,489 69,038 (15,055) 53,983
--------------------------------- ------------ ----------- ------- ------------ ----------- --------
Current mining royalties
-------------------------------- ------------ ----------- ------- ------------ ----------- --------
Mining royalty charge (note
37) 4,787 - 4,787 6,326 - 6,326
--------------------------------- ------------ ----------- ------- ------------ ----------- --------
Special mining tax charge (note
37) 2,658 - 2,658 5,916 - 5,916
--------------------------------- ------------ ----------- ------- ------------ ----------- --------
Total current mining royalties 7,445 - 7,445 12,242 - 12,242
--------------------------------- ------------ ----------- ------- ------------ ----------- --------
Total taxation charge/(credit)
in the income statement 17,581 3,353 20,934 81,280 (15,055) 66,225
--------------------------------- ------------ ----------- ------- ------------ ----------- --------
1 On 16 June 2021, the Argentinian government published the Law
27630 that establishes taxable net income brackets: up to 5Mm pesos
is 0%, more than 5Mm up to 50Mm pesos is 30%, and more than 50Mm
pesos is 35%. with effect from 1 January 2021. The UK Government
increased the rate of Corporation Tax to 25% on profits over
GBP250,000 from April 2023. There is no impact on the deferred tax
calculation of the Group arising from the change in the Corporation
Tax in the UK.
The weighted average statutory income tax rate was 39.2% for
2022 and 27.7% 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 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.
There were tax charges in relation to the cash flow hedge losses
(2021: gains) recognised in equity during the year ended 31
December 2022 of US$4,994,000 (2021: US$7,383,000).
The total taxation charge on the Group's profit before tax
differs from the theoretical amount that would arise using the
weighted average tax rate applicable to the consolidated profits of
the Group companies as follows:
As at 31 December
===================
2022 2021
US$000 US$000
--------------------------------------------------------- --------- --------
Profit from operations before income tax 25,766 137,331
---------------------------------------------------------- --------- --------
At average statutory income tax rate of 39.2% ( 2021:
27.7 %) 10,088 37,996
---------------------------------------------------------- --------- --------
Expenses not deductible for tax purposes 2,239 5,482
---------------------------------------------------------- --------- --------
Change in statutory income tax rate - 12,501
---------------------------------------------------------- --------- --------
Non-taxable income resulted from Aclara demerger - (7,118)
---------------------------------------------------------- --------- --------
Deferred tax recognised on special investment regime1 (2,412) (3,561)
---------------------------------------------------------- --------- --------
Movement in unrecognised deferred tax2 14,047 2,922
---------------------------------------------------------- --------- --------
Special mining tax and mining royalty deductible for
corporate income tax (2,196) (3,611)
---------------------------------------------------------- --------- --------
Current income tax adjustment in Minera Santa Cruz (2,353) -
---------------------------------------------------------- --------- --------
Tax credit adjustment from Amarillo (664) -
---------------------------------------------------------- --------- --------
Other 446 2,176
---------------------------------------------------------- --------- --------
Corporate income tax at average effective income tax
rate of 74.5% (2021: 34.1%) before foreign exchange
effect and withholding tax 19,195 46,787
---------------------------------------------------------- --------- --------
Special mining tax and mining royalty3 7,445 12,242
---------------------------------------------------------- --------- --------
Corporate income tax and mining royalties at average
effective income tax rate of 103.4% (2021: 43.0%) 26,640 59,029
---------------------------------------------------------- --------- --------
Foreign exchange rate effect4 (5,982) 6,507
---------------------------------------------------------- --------- --------
Corporate income tax and mining royalties at average
effective income tax rate of 80.2% (2021: 47.7%) before
withholding tax 20,658 65,536
---------------------------------------------------------- --------- --------
Withholding tax 276 689
---------------------------------------------------------- --------- --------
Total taxation charge in the income statement at average
effective tax rate 81.2% (2021: 48.2%) from operations 20,934 66,225
---------------------------------------------------------- --------- --------
1 Argentina benefits from a special investment regime that
allows for a super (double) deduction in calculating its taxable
profits for all costs relating to prospecting, exploration and
metallurgical analysis, pilot plants and other expenses incurred in
the preparation of feasibility studies for mining projects.
2 Includes the income tax charge on mine closure provision of
US$282,000 (2021: -US$1,325,000), the tax charge related to the
Inmaculada mine unit depreciation of US$787,000 (2021:
US$1,090,000), and the effect of not recognised tax losses of
US$10,811,000 (2021: US$3,157,000).
3 Corresponds to the impact of a mining royalty and special mining tax in Peru (note 37).
4 The foreign exchange effect is composed of US$2,847,000 profit
(2021: US$934,000 profit) from Argentina and a profit of
US$1,816,000 (2021: US$7,441,000 loss) from Peru and a profit of
US$1,315,000 from Brazil. This mainly corresponds to the foreign
exchange effect of converting tax bases and monetary items from
local currency to the corresponding functional currency. The main
contributor of the foreign exchange effect on the tax charge in
2022 is the devaluation of the Argentinian pesos (2021: Peruvian
soles).
The amounts after offset, as presented on the face of the
statement of financial position, are as follows:
As at 31 December
===================
2022 2021
US$000 US$000
==================================================== ======== =========
Current corporate income tax assets 1 9,226 32
----------------------------------------------------- -------- ---------
Current corporate income tax liabilities and mining
royalties 2 (2,126) (22,354)
----------------------------------------------------- -------- ---------
Total 7,100 (22,322)
----------------------------------------------------- -------- ---------
1 Mainly corresponds to the tax credit of Compañia Minera Ares
of US$5,643,000, Minera Santa Cruz of US$3,124,000 and Empresa de
Transmisión Aymaraes S.A.C. of US$422,000 (2021: Mainly corresponds
to the tax credit of Minera Hochschild Mexico of US$24,000)
2 Mainly corresponds to the mining royalties payables of
Compañia Minera Ares of US$2,079,000 (2021: Mainly corresponds to
the mining royalties payables of Compañia Minera Ares of
US$2,223,000 and the current corporate income tax liability of
Compañia Minera Ares of US$15,634,000, Minera Santa Cruz of
US$3,556,000 and Empresa de Transmisión Aymaraes S.A.C. of
US$872,000).
15 Basic and diluted earnings per share
Earnings per share ('EPS') is calculated by dividing profit for
the year attributable to equity shareholders of
the Parent by the weighted average number of ordinary shares issued during the year.
The Company has dilutive potential ordinary shares.
As at 31 December 2022 and 2021, EPS has been calculated as
follows:
As at 31 December
===================
2022 2021
=============================== ========= ========
Basic earnings per share
------------------------------- --------- --------
Before exceptional items (US$) 0.01 0.14
-------------------------------- --------- --------
Exceptional items (US$) - 0.01
-------------------------------- --------- --------
Total for the year (US$) 0.01 0.15
-------------------------------- --------- --------
Diluted earnings per share
------------------------------- --------- --------
Before exceptional items (US$) 0.01 0.13
-------------------------------- --------- --------
Exceptional items (US$) - 0.01
-------------------------------- --------- --------
Total for the year (US$) 0.01 0.14
-------------------------------- --------- --------
Profit before exceptional items and attributable to equity
holders of the Parent is derived as follows:
As at 31 December
===================
2022 2021
=========================================================== ======== =========
Profit attributable to equity holders of the Parent
(US$ 000 ) 2,961 76,934
------------------------------------------------------------ -------- ---------
Exceptional items after tax - attributable to equity
holders of the Parent (US$ 000 ) 1,913 (7,367)
------------------------------------------------------------ -------- ---------
Profit before exceptional items attributable to equity
holders of the Parent (US$ 000 ) 4,874 69,567
------------------------------------------------------------ -------- ---------
Profit before exceptional items attributable to equity
holders of the Parent for the purpose of diluted earnings
per share (US$ 000 ) 4,874 69,567
------------------------------------------------------------ -------- ---------
The following reflects the share data used in the basic and
diluted earnings per share computations:
As at 31 December
===================
2022 2021
=========================================================== ========= ========
Basic weighted average number of ordinary shares in
issue (thousands) 513,876 513,876
------------------------------------------------------------ --------- --------
Effect of dilutive potential ordinary shares related
to contingently issuable shares (thousands) 8,387 5,689
------------------------------------------------------------ --------- --------
Weighted average number of ordinary shares in issue
for the purpose of diluted earnings per share (thousands) 522,263 519,565
------------------------------------------------------------ --------- --------
16 Property, plant and equipment
Mining
properties
and Plant Construction
development and in progress
costs Land equipment Mine and capital
1 and and 1 and closure advances
4 buildings 2 Vehicles asset 4 and Total
US$000 US$000 US$000 5 US$000 US$000 7 US$000 US$000
===================== =========== ========= ========== ========= ======== ============ =========
Year ended 31
December
2022
--------------------- ----------- --------- ---------- --------- -------- ------------ ---------
Cost
--------------------- ----------- --------- ---------- --------- -------- ------------ ---------
At 1 January 2022 1,605,319 555,532 635,076 11,997 106,382 11,841 2,926,147
---------------------- ----------- --------- ---------- --------- -------- ------------ ---------
Additions 113,127 1,211 19,815 - - 67,294 201,447
---------------------- ----------- --------- ---------- --------- -------- ------------ ---------
Change in discount
rate
(note 28(1)) - - - - (13,490) - (13,490)
---------------------- ----------- --------- ---------- --------- -------- ------------ ---------
Change in mine closure
estimate (note 28(1)) - - - - 7,554 - 7,554
---------------------- ----------- --------- ---------- --------- -------- ------------ ---------
Disposals - - (1,143) (198) - (1) (1,342)
---------------------- ----------- --------- ---------- --------- -------- ------------ ---------
Write-offs 8 (1,524) (10) (9,805) - - (122) (11,461)
---------------------- ----------- --------- ---------- --------- -------- ------------ ---------
Acquisition of assets
(note 4 (b)) - 2,849 108 37 - 12,084 15,078
---------------------- ----------- --------- ---------- --------- -------- ------------ ---------
Foreign exchange
effect 3,670 (293) (13) (4) - (1,725) 1,635
---------------------- ----------- --------- ---------- --------- -------- ------------ ---------
Transfers and other
movements 3 102,615 4,493 7,060 470 - (12,517) 102,121
---------------------- ----------- --------- ---------- --------- -------- ------------ ---------
Initial recognition
6 - - - - 4,414 - 4,414
---------------------- ----------- --------- ---------- --------- -------- ------------ ---------
At 31 December 2022 1,823,207 563,782 651,098 12,302 104,860 76,854 3,232,103
---------------------- ----------- --------- ---------- --------- -------- ------------ ---------
Accumulated
depreciation
and impairment
--------------------- ----------- --------- ---------- --------- -------- ------------ ---------
At 1 January 2022 1,300,392 377,712 421,067 6,713 80,901 1,243 2,188,028
---------------------- ----------- --------- ---------- --------- -------- ------------ ---------
Depreciation for the
year 93,518 20,005 26,053 1,760 1,150 - 142,486
---------------------- ----------- --------- ---------- --------- -------- ------------ ---------
Disposals - - (350) (197) - - (547)
---------------------- ----------- --------- ---------- --------- -------- ------------ ---------
Write-offs 8 (376) (10) (9,243) - - - (9,629)
---------------------- ----------- --------- ---------- --------- -------- ------------ ---------
Impairment/(reversal
of impairment) net (9,942) (262) (3,774) (838) (329) - (15,145)
---------------------- ----------- --------- ---------- --------- -------- ------------ ---------
Foreign exchange
effect - - (10) - - - (10)
---------------------- ----------- --------- ---------- --------- -------- ------------ ---------
Transfers and other
movements 3 8 86 (23) 22 - (86) 7
---------------------- ----------- --------- ---------- --------- -------- ------------ ---------
At 31 December 2022 1,383,600 397,531 433,720 7,460 81,722 1,157 2,305,190
---------------------- ----------- --------- ---------- --------- -------- ------------ ---------
Net book amount at 31
December 2022 439,607 166,251 217,378 4,842 23,138 75,697 926,913
---------------------- ----------- --------- ---------- --------- -------- ------------ ---------
1 Within mining properties and development costs and plant and
equipment there are US$29,259,000 and US$6,741,000 related to the
Crespo CGU that is not currently being depreciated as the unit is
not operating pending the feasibility of the project and
considering that the depreciation method is units of
production.
2 Within plant and equipment, costs of US$394,746,000 are
subject to depreciation on a unit of production basis in line with
accounting policy on note 2(f) for which the accumulated
depreciation is US$255,508,000 and depreciation charge for the year
is US$11,622,000.
3 Transfers and other movements include US$102,119,000 that was
transferred from evaluation and exploration assets (Mara Rosa of
US$101,897,000 and San José of US$222,000) (note 17) as they are
related to convert resources in to reserves.
4 There were borrowing costs capitalised in property, plant and
equipment amounting to US$1,974,000
5 Vehicles include US$2,900,000 of right of use assets (note 26).
6 Recognition of the mine closure provision of the Mara Rosa
project located in Brazil.
7 Within construction in progress and capital advances there are
capital advances amounting to US$33,466,000, mainly related to Mara
Rosa project of US$31,889,000.
8 Corresponds to the write-off of property, plant and equipment
as long as they will no longer be used in the Group due to
obsolescence.
Mining
properties Construction
and Plant in progress
development and equipment Mine and capital
costs Land 1 and closure advances
1 and buildings 2 Vehicles asset 4 and Total
US$000 US$000 US$000 5 US$000 US$000 6 US$000 US$000
============= ============ ============= ============= ========= ======== ============ =========
Year ended 31
December
2021
------------- ------------ ------------- ------------- --------- -------- ------------ ---------
Cost
------------- ------------ ------------- ------------- --------- -------- ------------ ---------
At 1 January
2021 1,514,704 530,784 612,620 10,654 107,740 33,320 2,809,822
-------------- ------------ ------------- ------------- --------- -------- ------------ ---------
Additions 89,551 735 16,373 6,095 - 19,709 132,463
-------------- ------------ ------------- ------------- --------- -------- ------------ ---------
Change in
discount rate
(note 28(1)) - - - - (2,344) - (2,344)
-------------- ------------ ------------- ------------- --------- -------- ------------ ---------
Change in mine
closure
estimate
(note 28(1)) - - - - 986 - 986
-------------- ------------ ------------- ------------- --------- -------- ------------ ---------
Disposals - - (1,430) (5,654) - - (7,084)
-------------- ------------ ------------- ------------- --------- -------- ------------ ---------
Write-offs - - (7,529) (419) - - (7,948)
-------------- ------------ ------------- ------------- --------- -------- ------------ ---------
Demerger
Aclara (note
4) - (201) (432) - - - (633)
-------------- ------------ ------------- ------------- --------- -------- ------------ ---------
Foreign
exchange
effect - (21) (158) - - - (179)
-------------- ------------ ------------- ------------- --------- -------- ------------ ---------
Transfers and
other
movements 3 1,064 24,235 15,632 1,321 - (41,188) 1,064
-------------- ------------ ------------- ------------- --------- -------- ------------ ---------
At 31 December
2021 1,605,319 555,532 635,076 11,997 106,382 11,841 2,926,147
-------------- ------------ ------------- ------------- --------- -------- ------------ ---------
Accumulated
depreciation
and
impairment
------------- ------------ ------------- ------------- --------- -------- ------------ ---------
At 1 January
2021 1,188,404 352,088 396,155 8,754 75,919 839 2,022,159
-------------- ------------ ------------- ------------- --------- -------- ------------ ---------
Depreciation
for the
year 95,308 24,188 29,080 2,593 4,381 - 155,550
-------------- ------------ ------------- ------------- --------- -------- ------------ ---------
Disposals - - (1,392) (5,515) - - (6,907)
-------------- ------------ ------------- ------------- --------- -------- ------------ ---------
Write-offs - - (6,676) (409) - - (7,085)
-------------- ------------ ------------- ------------- --------- -------- ------------ ---------
Demerger
Aclara (note
4) - - (126) - - - (126)
-------------- ------------ ------------- ------------- --------- -------- ------------ ---------
Foreign
exchange
effect - - (126) - - - (126)
-------------- ------------ ------------- ------------- --------- -------- ------------ ---------
Impairment 16,643 1,506 4,575 1,201 601 - 24,526
-------------- ------------ ------------- ------------- --------- -------- ------------ ---------
Transfers and
other
movements 3 37 (70) (423) 89 - 404 37
-------------- ------------ ------------- ------------- --------- -------- ------------ ---------
At 31 December
2021 1,300,392 377,712 421,067 6,713 80,901 1,243 2,188,028
-------------- ------------ ------------- ------------- --------- -------- ------------ ---------
Net book
amount at 31
December 2021 304,927 177,820 214,009 5,284 25,481 10,598 738,119
-------------- ------------ ------------- ------------- --------- -------- ------------ ---------
1 Within mining properties and development costs and plant and
equipment there are US$28,947,000 and US$6,742,000 related to the
Crespo CGU that is not currently being depreciated as the unit is
not operating pending the feasibility of the project and
considering that the depreciation method is units of
production.
2 Within plant and equipment, costs of US$391,152,000 are
subject to depreciation on a unit of production basis in line with
accounting policy on note 2(f) for which the accumulated
depreciation is US$248,187,000 and depreciation charge for the year
is US$15,377,000.
3 Transfers and other movements include US$1,027,000 that was
transferred from evaluation and exploration assets (note 17), as
they are related to convert resources in to reserves.
4 There were borrowing costs capitalised in property, plant and equipment amounting to US$37,000.
5 Vehicles include US$3,258,000 of right of use assets (note 26).
6 Within construction in progress and capital advances there are
capital advances amounting to US$1,064,000.
The delay on the government decision on Inmaculada MEIA
constitutes a trigger for impairment as at 31 December 2022.
The company used an expected cash flow approach, assigning
probabilities to the following possible scenarios regarding the
government decision on Inmaculada's MEIA: (i) MEIA is approved,
(ii) MEIA is denied, reapplication is needed and consequently
Inmaculada is placed in care and maintenance by end of 2023,
resuming operations in H2 2026. Management considers scenario (i)
as the most likely one, and scenario (ii) to have a probability of
less than 25% of occurrence. The valuation test performed over
Inmaculada CGU, using a probability weighted approach, resulted in
no impairment. If the probability of occurrence of scenario (ii)
was higher than 25%, an impairment charge would be required for
Inmaculada.
The recoverable value of the Inmaculada CGU was determined using
a fair value less costs of disposal (FVLCD) methodology. FVLCD was
determined using a combination of level 2 and level 3 inputs, which
result in fair value measurements categorised in its entirety as
level 3 in the fair value hierarchy, to construct a discounted cash
flow model to estimate the amount that would be paid by a willing
third party in an arm's length transaction.
Real prices US$ per oz. 2023 2024 2025 2026 2027 2028-2038
========================= ====== ====== ====== ====== ====== ==========
Gold 1,716 1,711 1,603 1,545 1,466 1,561
------------------------- ------ ------ ------ ------ ------ ----------
Silver 20.3 20.7 19.6 20.6 23.3 20.8
------------------------- ------ ------ ------ ------ ------ ----------
Inmaculada
========================== ===========
Discount rate (post-tax) 5.2%
--------------------------- -------------
31 December 2022 (US$000) Inmaculada
==================================== ===========
Current carrying value of CGU, net
of deferred tax 443,447
------------------------------------- -----------
Sensitivity analysis
Other than as disclosed below, management believes that no
reasonably possible change in any of the key assumptions above
would cause the carrying value of any of its cash generating units
to exceed its recoverable amount.
A change in any of the key assumptions would have the following
impact:
Inmaculada San
Jose
======================================= ===========
Gold and silver prices (decrease by
10%) (175,112) (53,746)
Gold and silver prices (increase by
10%) 171,794 54,557
Production costs (increase by 10%) (96,669) (49,831)
Production costs (decrease by 10%) 94,693 49,831
Production volume (decrease by 10%) (73,298) (78,936)
Production volume (increase by 10%) 73,099 78,941
Post tax discount rate (increase by
3%) (69,003) (7,749)
Post tax discount rate (decrease by
3%) 91,717 8,793
Capital expenditure (increase by 10%) (35,584) (11,608)
Capital expenditure (decrease by 10%) 35,582 11,608
========================================= =========== ---------
As at 31 December 2022, management determined that the newly
discovered area Royropata, west of current operations at
Pallancata, was a trigger for reversal of impairment. The new area
is estimated to contain 51.2 million silver equivalent ("Ag Eq")
ounces. These new resources, constitute a significant change in the
estimates used to determine the asset's recoverable amount since
the last impairment loss was recognised as at 31 December 2021.
The valuation test performed over the Pallancata GCU resulted in
a reversal of impairment recognised as at December 31, 2022 of
US$15,145,000 in property, plant and equipment, and US$417,000 in
evaluation and exploration assets).
The recoverable value of the Pallancata CGU was determined using
a fair value less costs of disposal (FVLCD) methodology. FVLCD was
determined using a combination of level 2 and level 3 inputs, which
result in fair value measurements categorised in its entirety as
level 3 in the fair value hierarchy, to construct a discounted cash
flow model to estimate the amount that would be paid by a willing
third party in an arm's length transaction.
Real prices US$ per oz. 2026 2027 2028
========================= ====== ====== ======
Gold 1,545 1,466 1,561
-------------------------- ------ ------ ------
Silver 20.6 23.3 20.8
-------------------------- ------ ------ ------
Pallancata
============= ==================================================================================================
Discount rate
(post-tax) 5.1%
-------------- ----------------------------------------------------------------------------------------------------
31 December 2022 (US$000) Pallancata
==================================== ===========
Current carrying value of CGU, net
of deferred tax 21,345
------------------------------------- -----------
Sensitivity analysis
Given that Pallancata's recoverable value is significantly
higher than the reversal of impairment amount recognised, there is
no reasonably possible change in any of the key assumptions that
would decrease the reversal of impairment amount recognised.
2021
As at 31 December 2021, management determined that there was a
trigger of impairment in the Pallancata mine unit due to lower
grades production and the need of an increase of capital
expenditure to access new low grade areas and extend the life of
mine by one year to 2023.
The impairment test performed over the Pallancata CGU resulted
in an impairment charge recognised as at 31 December 2021 amounting
to US$24,846,000 (US$24,526,000 in property, plant and equipment,
and US$320,000 in evaluation and exploration assets).
No indicators of impairment or reversal of impairment were
identified in the other CGUs, which includes other exploration
projects.
The recoverable value of the Pallancata CGU was determined using
a fair value less costs of disposal (FVLCD) methodology. FVLCD was
determined using a combination of level 2 and level 3 inputs, which
result in fair value measurements categorised in its entirety as
level 3 in the fair value hierarchy, to construct a discounted cash
flow model to estimate the amount that would be paid by a willing
third party in an arm's length transaction.
The key assumptions on which management has based its
determination of FVLCD and the associated recoverable values
calculated are gold and silver prices, future capital requirements,
production costs, reserves and resources volumes (reflected in the
production volume), and the discount rate.
Real prices US$ per oz. 2022 2023
========================= ====== ======
Gold 1,764 1,669
-------------------------- ------ ------
Silver 23.5 22.3
-------------------------- ------ ------
Pallancata
============= ==================================================================================================
Discount rate
(post-tax) 3.3%
-------------- ----------------------------------------------------------------------------------------------------
The period of 2 years were used to prepare the cash flow
projections of the Pallancata mine unit which is in line with their
life of mine.
31 December 2021 (US$000) Pallancata
==================================== ===========
Current carrying value of CGU, net
of deferred tax 3,241
------------------------------------- -----------
17 Evaluation and exploration assets
Mara Aclara
Rosa (formerly
Azuca Crespo US$000 Biolantanidos) Volcan Others Total
US$000 US$000 US$000 US$000 US$000 US$000
===================== ======= ======= =========== =============== ======== ======= =========
Cost
--------------------- ------- ------- ----------- --------------- -------- ------- ---------
Balance at 1 January
2021 83,264 28,926 - 68,804 96,520 19,983 297,497
---------------------- ------- ------- ----------- --------------- -------- ------- ---------
Additions 580 2,421 - 11,349 953 6,095 21,398
---------------------- ------- ------- ----------- --------------- -------- ------- ---------
Demerger (note 4 (a)) - - - (70,311) - - (70,311)
---------------------- ------- ------- ----------- --------------- -------- ------- ---------
Disposals - - - (122) - - (122)
---------------------- ------- ------- ----------- --------------- -------- ------- ---------
Foreign exchange
effect - - - (9,720) (16,222) - (25,942)
---------------------- ------- ------- ----------- --------------- -------- ------- ---------
Transfers to property
plant and equipment
(note 16) - - - - - (1,064) (1,064)
---------------------- ------- ------- ----------- --------------- -------- ------- ---------
Balance at 31 December
2021 83,844 31,347 - - 81,251 25,014 221,456
---------------------- ------- ------- ----------- --------------- -------- ------- ---------
Additions 506 1,086 11,733 - 1,607 694 15,626
---------------------- ------- ------- ----------- --------------- -------- ------- ---------
Acquisition (note 4
b) - - 107,362 - - - 107,362
---------------------- ------- ------- ----------- --------------- -------- ------- ---------
Foreign exchange
effect - - (14,492) - (992) - (15,484)
---------------------- ------- ------- ----------- --------------- -------- ------- ---------
Transfers to property
plant and equipment
(note 16) - - (101,897) - - (230) (102,127)
---------------------- ------- ------- ----------- --------------- -------- ------- ---------
Transfer to
intangibles - - (1,927) - - - (1,927)
---------------------- ------- ------- ----------- --------------- -------- ------- ---------
Balance at 31 December
2022 84,350 32,433 779 - 81,866 25,478 224,906
---------------------- ------- ------- ----------- --------------- -------- ------- ---------
Accumulated
impairment
--------------------- ------- ------- ----------- --------------- -------- ------- ---------
Balance at 1 January
2021 45,876 9,878 - - 44,381 5,241 105,376
---------------------- ------- ------- ----------- --------------- -------- ------- ---------
Impairment - - - - - 320 320
---------------------- ------- ------- ----------- --------------- -------- ------- ---------
Foreign exchange
effect - - - - (7,507) - (7,507)
---------------------- ------- ------- ----------- --------------- -------- ------- ---------
Transfers to property,
plant and equipment
(note 16) - - - - - (37) (37)
---------------------- ------- ------- ----------- --------------- -------- ------- ---------
Balance at 31 December
2021 45,876 9,878 - - 36,874 5,524 98,152
---------------------- ------- ------- ----------- --------------- -------- ------- ---------
Impairment/(reversal
of impairment) net 4,199 - - - - (417) 3,782
---------------------- ------- ------- ----------- --------------- -------- ------- ---------
Foreign exchange
effect - - - - (482) - (482)
---------------------- ------- ------- ----------- --------------- -------- ------- ---------
Transfers to property,
plant and equipment
(note 16) - (8) (8)
---------------------- ------- ------- ----------- --------------- -------- ------- ---------
Balance at 31 December
2022 50,075 9,878 - - 36,392 5,099 101,444
---------------------- ------- ------- ----------- --------------- -------- ------- ---------
Net book value as at
31 December 2021 37,968 21,469 - - 44,377 20,517 123,304
---------------------- ------- ------- ----------- --------------- -------- ------- ---------
Net book value as at
31 December 2022 34,275 22,555 779 - 45,474 20,379 123,462
---------------------- ------- ------- ----------- --------------- -------- ------- ---------
At 31 December 2022, the Group has recorded an reversal of
impairment with respect to evaluation and exploration assets of the
Pallancata mine unit of US$417,000 and an impairment of the Azuca
project of US$4,199,000 (2021: impairment with respect to
evaluation and exploration assets of the Pallancata mine unit of
US$320,000). The calculation of the recoverable values of the
Pallancata mine unit is detailed in note 16.
There were borrowing costs capitalised in evaluation and
exploration assets of US$1,087,000 (2021: US$nil).
18 Intangible assets
Transmission Water Software Legal
line1 permits2 licences rights3 Total
US$000 US$000 US$000 US$000 US$000
======================================== ============ ========== ========= ======== =======
Cost
---------------------------------------- ------------ ---------- --------- -------- -------
Balance at 1 January 2021 22,157 26,583 1,906 8,580 59,226
----------------------------------------- ------------ ---------- --------- -------- -------
Foreign exchange effect - (4,499) - - (4,499)
----------------------------------------- ------------ ---------- --------- -------- -------
Disposals - - (17) - (17)
----------------------------------------- ------------ ---------- --------- -------- -------
Balance at 31 December 2021 22,157 22,084 1,889 8,580 54,710
----------------------------------------- ------------ ---------- --------- -------- -------
Foreign exchange effect - (289) - 71 (218)
----------------------------------------- ------------ ---------- --------- -------- -------
Additions - - 353 - 353
----------------------------------------- ------------ ---------- --------- -------- -------
Transfers - - 6 1,927 1,933
----------------------------------------- ------------ ---------- --------- -------- -------
Balance at 31 December 2022 22,157 21,795 2,248 10,578 56,778
----------------------------------------- ------------ ---------- --------- -------- -------
Accumulated amortisation and impairment
---------------------------------------- ------------ ---------- --------- -------- -------
Balance at 1 January 2021 16,708 12,686 1,890 6,378 37,662
----------------------------------------- ------------ ---------- --------- -------- -------
Amortisation for the year4 843 - 8 267 1,118
----------------------------------------- ------------ ---------- --------- -------- -------
Disposals - - (17) - (17)
----------------------------------------- ------------ ---------- --------- -------- -------
Foreign exchange effect - (2,147) - - (2,147)
----------------------------------------- ------------ ---------- --------- -------- -------
Balance at 31 December 2021 17,551 10,539 1,881 6,645 36,616
----------------------------------------- ------------ ---------- --------- -------- -------
Amortisation for the year4 719 - 164 87 970
----------------------------------------- ------------ ---------- --------- -------- -------
Transfers - - 1 - 1
---------------------------------------- ------------ ---------- --------- -------- -------
Foreign exchange effect - (137) - - (137)
----------------------------------------- ------------ ---------- --------- -------- -------
Balance at 31 December 2022 18,270 10,402 2,046 6,732 37,450
----------------------------------------- ------------ ---------- --------- -------- -------
Net book value as at 31 December
2021 4,606 11,545 8 1,935 18,094
----------------------------------------- ------------ ---------- --------- -------- -------
Net book value as at 31 December
2022 3,887 11,393 202 3,846 19,328
----------------------------------------- ------------ ---------- --------- -------- -------
1 The transmission line is amortised using the units of
production method. At 31 December 2022 the remaining amortisation
period is approximately 7 years (2021: 7 years) in line with the
life of the mine.
2 Corresponds to the acquisition of water permits of Andina
Minerals Group ("Andina"). These permits have an indefinite life
according to Chilean law. The Group used a discounted cash flow
approach to determine the fair value less costs of disposal. The
model is based on the Preliminary Economic Assessment (PEA) (2021:
to determine the fair value less costs of disposal of the Volcan
cash-generating unit, which includes the water permits held by the
Group, the Group used the value-in-situ methodology. This
methodology applies a realisable 'enterprise value' to unprocessed
mineral resources which was US$7.15 per gold equivalent ounce of
resources at 31 December 2021. The risk adjusted enterprise value
figure has been determined using a combination of level 2
(enterprise values and gold prices) and level 3 inputs (unprocessed
mineral resources and risk factor) which result in a fair value
measurement categorised in its entirety as level 3 in the fair
value hierarchy, to estimate the amount that would be paid by a
willing third party in an arm's length transaction, taking into
account the water restrictions imposed by the Chilean
government).
3 Legal rights correspond to expenditures required to give the
Group the right to use a property for the surface exploration work,
development and production. At 31 December 2022 the remaining
amortisation period is from 2 to 14 years (2021: 1.5 to 11.5
years).
4 The amortisation for the period is included in cost of sales
and administrative expenses in the income statement.
The carrying amount of the Volcan CGU, which includes the water
permits, is reviewed annually to determine whether it is in excess
of its recoverable amount. No impairments were recognised in 2022
and 2021. The estimated recoverable amount is not materially
different than its carrying value.
Key assumptions value per in-situ
2021
================================================== =====
Risk adjusted value per in-situ (gold equivalent
ounce) US$ 7.15
---------------------------------------------------- -----
US$000 2022 2021
=================================== ======= =======
Current carrying value Volcan CGU 56,867 55,922
------------------------------------ ------- -------
The estimated recoverable amount is not materially different
than its carrying value.
Sensitivity analysis
Other than as disclosed below, management believes that no
reasonably possible change in any of the key assumptions above
would cause the carrying value exceed its recoverable amount.
A change in the value in situ assumption could cause an
impairment loss or reversal of impairment to be recognised as
follows:
Approximate (impairment)/reversal of impairment 2021
resulting from the following changes (US$000)
================================================= =========
Value per in-situ ounce (20% decrease) (13,661)
--------------------------------------------------- ---------
Value per in-situ ounce (20% increase) 13,661
--------------------------------------------------- ---------
Risk factor (increase by 5%) (5,254)
--------------------------------------------------- ---------
Risk factor (decrease by 5%) 5,254
--------------------------------------------------- ---------
19 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 31 December 2022 amounted
to US$7,679,000 (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 31 As at 31
December December
2022 2021
US$000 US$000
-------------------------------------------------- --------- ---------
Current assets 67,291 91,320
Non-current assets 90,271 68,126
Current liabilities (3,674) (3,185)
Non-current liabilities (1) -
Equity 153,887 156,261
Group's share in equity (20%) 30,777 31,252
Fair value adjustment allocated to the evaluation
and exploration assets on initial recognition(1) 12,388 12,307
Impairment(2) (9,923) -
---------------------------------------------------
Group's carrying amount of the investment
20% 33,242 43,559
--------------------------------------------------- --------- ---------
Summarised consolidated statement of profit
and loss
Revenue - -
Administrative expenses (5,261) (324)
Exploration expenses (3,642) (510)
Finance income 648 -
Finance cost (18) (17)
Foreign exchange loss (111) (479)
Loss from operations for the period (8,384) (1,330)
--------------------------------------------------- --------- ---------
Loss from operation for the period (2021:
from incorporation) (8,384) (847)
--------------------------------------------------- --------- ---------
Group's share of loss for the period (1,677) (169)
--------------------------------------------------- --------- ---------
Other comprehensive profit/(loss) that may
be reclassified to profit or loss in subsequent
periods, net of tax
Exchange differences on translating foreign
operations 6,417 (4,526)
Total comprehensive profit/(loss) for the
period 6,417 (4,526)
Total comprehensive profit/(loss) (2021: from
incorporation) 6,417 (46)
--------------------------------------------------- --------- ---------
Group's share of comprehensive profit/(loss)
for the period 1,283 (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$61,940,000
(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).
The movement of investment in associate is as follows:
Year ended
31 December
================
2022 2021
US$000 US$000
==================================================== ======= =======
Beginning balance 43,559 -
----------------------------------------------------- ------- -------
Initial recognition - 43,737
----------------------------------------------------- ------- -------
Impairment (9,923) -
----------------------------------------------------- ------- -------
Share of loss for the period (1,677) (169)
----------------------------------------------------- ------- -------
Share of comprehensive profit/(loss) for the period 1,283 (9)
----------------------------------------------------- ------- -------
Ending balance 33,242 43,559
----------------------------------------------------- ------- -------
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 31 December 2022, after
recognising the changes in the Group's share of net assets of the
associate and the impairment charge is US$33,242,000 (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 31 December 2022 and 31 December 2021.
20 Financial assets at fair value through OCI
Year ended
31 December
================
2022 2021
US$000 US$000
================================== ======= =======
Beginning balance 661 402
----------------------------------- ------- -------
Acquisitions1 - 7
----------------------------------- ------- -------
Fair value change recorded in OCI (152) 261
----------------------------------- ------- -------
Disposals2 - (9)
----------------------------------- ------- -------
Ending balance 509 661
----------------------------------- ------- -------
1 Corresponds to the purchase of 47,625 shares of Austral Gold (US$7,000).
2 Corresponds to the sale of 51,857 shares of Revelo Resources
Corp. with a fair value at the date of sale of US$9,000 generating
a loss on disposal of US$18,000 that was recycled to retained
earnings.
The Group made the election at initial recognition to measure
the below equity investments at fair value through OCI as they are
not held for trading. The fair value at 31 December 2022 and 31
December 2021 is as follows:
US$000
==========
2022 2021
======================================================== ==== ====
Listed equity investments:
-------------------------------------------------------- ---- ----
Power Group Projects Corp (formerly Cobalt Power Group) 6 12
--------------------------------------------------------- ---- ----
Austral Gold 1 3
--------------------------------------------------------- ---- ----
Skeena Resources Limited 160 312
--------------------------------------------------------- ---- ----
Empire Petroleum Corp. 342 334
--------------------------------------------------------- ---- ----
Total listed equity investments 509 661
--------------------------------------------------------- ---- ----
Total non-listed equity investments - -
-------------------------------------------------------- ---- ----
Total 509 661
--------------------------------------------------------- ---- ----
Fair value of the listed shares is determined by reference to
published price quotations in an active market and they are
categorised as level 1. The fair value of non-listed equity
investments is determined based on financial information available
of the companies and they are categorised as level 3.
21 Financial assets at fair value through profit and loss
Year ended
31 December
================
2022 2021
US$000 US$000
==================================================== ======= =======
Beginning balance 3,155 5,407
----------------------------------------------------- ------- -------
Acquisitions1 - 3,308
----------------------------------------------------- ------- -------
Fair value change recorded in profit and loss (note
13(2)) (2,140) (834)
----------------------------------------------------- ------- -------
Disposals2 - (4,726)
----------------------------------------------------- ------- -------
Ending balance 1,015 3,155
----------------------------------------------------- ------- -------
1 Corresponds to 25,001,540 shares of C3 Metals Inc. received in
payment of the sale of the Jasperoide property in Peru.
2 During 2021 the Group sold 1,687,401 shares of AGSC,
classified as financial assets at fair value through profit and
loss, with a fair value at the date of the sale of US$4,726,000,
generating a loss on disposal of US$681,000 which was recognised
within finance costs.
The below equity investments are classified at fair value
through profit and loss as they are held for trading. The fair
value at 31 December 2022 and 31 December 2021 is as follows:
US$000
==============
2022 2021
=========================== ====== ======
Listed equity investments:
--------------------------- ------ ------
C3 Metals Inc. 1,015 3,155
---------------------------- ------ ------
1,015 3,155
--------------------------- ------ ------
Fair value of the listed shares is determined by reference to
published price quotations in an active market and they are
categorised as level 1.
22 Trade and other receivables
As at 31 December
==========================================
2022 2021
================================================== ==================== ====================
Non-current Current Non-current Current
US$000 US$000 US$000 US$000
-------------------------------------------------- ----------- ------- ----------- -------
Trade receivables1 - 41,031 - 26,496
--------------------------------------------------- ----------- ------- ----------- -------
Advances to suppliers - 2,242 - 5,119
--------------------------------------------------- ----------- ------- ----------- -------
Duties recoverable from exports of Minera
Santa Cruz2 224 - 184 -
--------------------------------------------------- ----------- ------- ----------- -------
Receivables from related parties (note
32 (a) ) - 774 - 224
--------------------------------------------------- ----------- ------- ----------- -------
Loans to employees 502 215 531 257
--------------------------------------------------- ----------- ------- ----------- -------
Interest receivable - 238 - 95
--------------------------------------------------- ----------- ------- ----------- -------
Receivable from Kaupthing, Singer and Friedlander
Bank3 - - - 3
--------------------------------------------------- ----------- ------- ----------- -------
Tax claims 130 6,442 47 2,103
--------------------------------------------------- ----------- ------- ----------- -------
Other4 1,520 11,294 1,493 5,963
--------------------------------------------------- ----------- ------- ----------- -------
Assets classified as receivables 2,376 62,236 2,255 40,260
--------------------------------------------------- ----------- ------- ----------- -------
Prepaid expenses 764 4,309 174 6,047
--------------------------------------------------- ----------- ------- ----------- -------
Value Added Tax (VAT)5 3,358 18,863 41 23,442
--------------------------------------------------- ----------- ------- ----------- -------
Total 6,498 85,408 2,470 69,749
--------------------------------------------------- ----------- ------- ----------- -------
The fair values of trade and other receivables approximate their
book value.
1 Net of a provision for impairment of trade receivables from
customers in Peru of US$1,333,000 (2021: US$1,277,000).
2 Relates to export benefits through the Patagonian Port and
silver refunds in Minera Santa Cruz, discounted over 18 months
(2021: 18 and 24 months) at a rate of 26.58% (2021: 15.55%) for
dollars denominated amounts and 68.50% (2021: 40.17%) for
Argentinian pesos. The loss on the unwinding of the discount is
recognised within finance expense (2021: finance expense).
3 Net of a provision for impairment of receivables of US$176,000
(2021: US$197,000).
4 Mainly corresponds to account receivables from contractors for
the sale of supplies of US$2,311 ,000 (2021: US$2,164,000) , loan
to third parties of US$772,000 (2021: US$790,000), and claim
receivable of US$1,242,000 (2021: US$1,165,000), net of a provision
for impairment of receivables of US$1,004,000 (2021:
US$947,000).
5 Primarily relates to US$12,672,000 (2021: US$17,053,000) of
VAT receivable related to the San Jose project that will be
recovered through future sales of gold and silver and also through
the sale of these credits to third-parties by Minera Santa Cruz. It
also includes the VAT of Minera Ares of US$4,875,000 (2021:
US$5,570,000), and Amarillo Mineracao do Brasil of US$3,360,000
(2021: US$nil). The VAT is valued at its recoverable amount.
Movements in the provision for impairment of receivables:
Individually
impaired
US$000
======================== ============
At 1 January 2021 7,111
------------------------- ------------
Write- off (4,476)
------------------------- ------------
Foreign exchange effect (214)
------------------------- ------------
At 31 December 2021 2,421
------------------------- ------------
Change for the year 35
------------------------- ------------
Foreign exchange effect 57
------------------------- ------------
At 31 December 2022 2,513
------------------------- ------------
As at 31 December 2022 and 2021, none of the financial assets
classified as receivables (net of impairment) were past due.
23 Inventories
As at 31 December
===================
2022 2021
US$000 US$000
=========================================== ========= ========
Finished goods valued at cost 446 220
-------------------------------------------- --------- --------
Products in process valued at cost 8,952 3,547
-------------------------------------------- --------- --------
Products in process accrual valued at cost 7,272 7,534
-------------------------------------------- --------- --------
Supplies and spare parts 47,358 41,021
-------------------------------------------- --------- --------
64,028 52,322
------------------------------------------- --------- --------
Provision for obsolescence of supplies (2,588) (3,138)
-------------------------------------------- --------- --------
Total 61,440 49,184
-------------------------------------------- --------- --------
Finished goods include concentrate. Products in process include
stockpile and concentrate (2021: stockpile).
The Group either sells dore bars as a finished product or if it
is commercially advantageous to do so, delivers the bars for
refining into gold and silver ounces which are then sold. In the
latter scenario, the dore bars are classified as products in
process. At 31 December 2022 and 2021 the Group had no dore on hand
included in products in process.
Concentrate is sold to smelters, but in addition could be used
as a product in process to produce dore.
Products in process accrual valued at cost include stockpile
(2021: stockpile).
As part of the Group's short-term financing policies, it
acquires pre-shipment loans which are guaranteed by the sales
contracts. The Group has contracts as at 31 December 2022 of
US$2,161,000 (2021: US$nil) (refer to note 27).
The amount of expense recognised in profit and loss related to
the consumption of inventory of supplies, spare parts and raw
materials is US$118,520,000 (2021: US$109,191,000).
Movements in the provision for obsolescence comprise an increase
in the provision of US$422,000 (2021: US$559,000) and the reversal
of US$nil related to supplies and spare parts, that had been
provided for (2021: US$2,338,000).
24 Cash and cash equivalents
As at 31 December
===================
2022 2021
US$000 US$000
======================================================= ========= ========
Cash in hand 922 1,065
-------------------------------------------------------- --------- --------
Current demand deposit accounts1 53,697 86,058
-------------------------------------------------------- --------- --------
Time deposits2 89,225 299,666
-------------------------------------------------------- --------- --------
Cash and cash equivalents considered for the statement
of cash flows (note 2(y)) 143,844 386,789
-------------------------------------------------------- --------- --------
Cash and cash equivalents comprise cash on hand and deposits
held with banks that are readily convertible into known amounts of
cash and which are subject to insignificant risk of changes in
value.
The fair value of cash and cash equivalents approximates their
book value. The Group has US$200,000,000 of undrawn medium-term
debt facility that will become available on receipt of the
Inmaculada MEIA approval.
1 Relates to bank accounts which are freely available and bear interest.
2 These deposits have an average maturity of 18 days (2021: average of 18 days).
25 Trade and other payables
As at 31 December
==========================================
2022 2021
==================== ====================
Non-current Current Non-current Current
US$000 US$000 US$000 US$000
========================================== =========== ======= =========== =======
Trade payables1 - 88,817 - 78,695
------------------------------------------- ----------- ------- ----------- -------
Salaries and wages payable2 - 28,755 - 30,850
------------------------------------------- ----------- ------- ----------- -------
Dividends payable - 32 - 31
------------------------------------------- ----------- ------- ----------- -------
Taxes and contributions - 10,287 1 9,607
------------------------------------------- ----------- ------- ----------- -------
Guarantee deposits3 - 8,623 - 5,773
------------------------------------------- ----------- ------- ----------- -------
Mining royalties (note 37) - 1,211 - 1,505
------------------------------------------- ----------- ------- ----------- -------
Accounts payable to related parties (note
32 (a) ) - 622 - 284
------------------------------------------- ----------- ------- ----------- -------
Lease liabilities (note 26) 1,239 1,637 2,814 1,597
------------------------------------------- ----------- ------- ----------- -------
Other4 384 4,118 - 5,140
------------------------------------------- ----------- ------- ----------- -------
Total 1,623 144,102 2,815 133,482
------------------------------------------- ----------- ------- ----------- -------
The fair value of trade and other payables approximate their
book values.
1 Trade payables relate mainly to the acquisition of materials,
supplies and contractors' services. These payables do not accrue
interest and no guarantees have been granted.
2 Salaries and wages payable relates to remuneration payable. At
31 December 2022, there were Board members remuneration payable of
US$69,000 (2021: US$170,000) and no long-term incentive plan
payable (2021: US$nil).
3 Guarantee deposits made by the contractors of the Group to
guarantee the fulfilment of their tasks. The guarantee will be
returned to the contractor at the end of the service and when it is
verified that it has been completed correctly.
4 Mainly due to the accrual of the 6 days of production from 26
to 31 December 2022.
26 Leases
The Group has lease contracts for vehicles used in its
operations and administrative offices. Leases of motor vehicles
generally have lease terms of three years. The Group's obligations
under its leases are secured by the lessor's title to the leased
assets.
The Group also has certain leases of assets with lease terms of
twelve months or less and leases of office equipment with low
value. The Group applies the short-term lease and lease of
low-value assets recognition exemptions for these leases.
The following are the amounts recognised in profit or loss
related to the leases according IFRS 16 and the other leases that
the Group has not capitalised:
As at 31 December
===================
2022 2021
US$000 US$000
========================================================= ========= ========
Depreciation expense for right-of-use assets (1,112) (1,969)
----------------------------------------------------------- --------- --------
Interest expense on lease liabilities (104) (42)
----------------------------------------------------------- --------- --------
Expense relating to short-term leases (included
in cost of sales, administrative, exploration and
other expenses) (1,679) (2,751)
----------------------------------------------------------- --------- --------
Expense relating to leases of low-value assets (included
in cost of sales, administrative, exploration and
other expenses) (1,355) (1,031)
----------------------------------------------------------- --------- --------
Variable lease payments (included in cost of sales
and exploration expenses) (7,643) (5,643)
----------------------------------------------------------- --------- --------
Total amount recognised in profit or loss (11,893) (11,436)
----------------------------------------------------------- --------- --------
The Group had total cash outflows for leases of US$12,316,000 in
2022 (2021: US$11,606,000). There were additions to right-of-use
assets and lease liabilities during the year of US$nil (2021:
US$6,046,000). The future cash outflows relating to leases that
have not yet commenced are US$2,950,000 (2021: US$
US$4,587,000).
The movement in IFRS 16 lease liabilities in the year is as
follows:
As at
1 Interest As at
January Additions Repayments expense 31 December
2022 US$000 US$000 US$000 US$000 2022 US$000
====================== ============ ========= ========== ======== ============
Lease liabilities 4,411 - (1,639) 104 2,876
----------------------- ------------ --------- ---------- -------- ------------
Less: current balance (1,597) (1,637)
----------------------- ------------ --------- ---------- -------- ------------
Non-current balance 2,814 1,239
----------------------- ------------ --------- ---------- -------- ------------
27 Borrowings
As at 31 December
================================================================
2022 2021
=============================== ===============================
Effective Effective
interest Non-current Current interest Non-current Current
rate US$000 US$000 rate US$000 US$000
-------------------------------------------------------- --------- ----------- ------- --------- ----------- -------
Secured bank loans (a)
-------------------------------------------------------- --------- ----------- ------- --------- ----------- -------
47.25%
and
* Pre-shipment loans in Minera Santa Cruz (note 23) 48.00% - 2,161 - - -
--------------------------------------------------------- --------- ----------- ------- --------- ----------- -------
* Mid-term Bank loans 7.74% 275,000 27,328 2.17% 300,000 499
--------------------------------------------------------- --------- ----------- ------- --------- ----------- -------
Other loans (b)
-------------------------------------------------------- --------- ----------- ------- --------- ----------- -------
* Stock market promissory note in Minera Santa Cruz - - 14,500 - - -
--------------------------------------------------------- --------- ----------- ------- --------- ----------- -------
Total 275,000 43,989 300,000 499
--------------------------------------------------------- --------- ----------- ------- --------- ----------- -------
(a) Secured bank loans:
Medium-term bank loans:
In December 2019, a five-year credit agreement was signed
between Minera Ares and Scotiabank Peru S.A.A., The Bank of Nova
Scotia and BBVA Securities Inc, with Hochschild Mining PLC as
guarantor. The US$200,000,000 medium term loan was payable on equal
quarterly instalments from the second anniversary of the loan with
an interest rate of Libor three months plus 1.15% payable quarterly
until maturity on 13 December 2024. In September 2021, the Group
negotiated with the same counterpart a US $ 200,000,0000 loan to
replace the original loan, plus an additional US $ 100,000,000
optional loan. US $ 200,000,000 was withdrawn on 21 September 2021,
and the optional US $ 100,000,000 loan was withdrawn on 1 December
2021. The maturity was extended until September 2026, and the
interest rate increased to 3-month USD Libor plus a spread of
1.65%. A structuring fee of US$900,000 was paid to the lender and
additional US$193,000 was incurred as transaction costs. In
addition, a commitment fee of US$120,000 was paid for the period
that the optional US $100,000,000 loan remained undrawn. This was
considered a substantial modification to the terms of the loan, and
consequently, it was treated as an extinguishment of the loan which
resulted in the derecognition of the existing liability and
recognition of a new liability. The associated costs and fees
incurred have been recognised as part of the loss on the
extinguishment.
The Group has US$200,000,000 of undrawn medium-term debt
facility that will become available on receipt of the Inmaculada
MEIA approval.
(b) Other loans:
Stock market promissory note:
From August to November 2022 Minera Santa Cruz signed 15 stock
market promissory notes with Max Capital, a finance advisory
company located in Argentina, amounting to US$15,500,000. The
expiration date of the notes is from December 2022 to November
2023. During the year 2022 the Group repaid US$1,000,000. The
balance as at 31 December 2022 is US$14,500,000.
(c) Capitalised borrowing costs:
Interest expense of US$4,899,000 that is directly attributable
to the construction of Mara Rosa (US$4,786,000) and CompañÃa Minera
Ares S.A.C. (US$113,000) has been capitalised and is included in
property, plant and equipment within construction in progress and
capital advances (US$1,140,000) and mining property and development
costs (US$1,804,000), and exploration and evaluation assets
(US$1,955,000).
The carrying value including accrued interests payable as at 31
December 2022 is US$302,328,000. The maturity of non-current
borrowings is as follows:
As at 31 December
===================
2022 2021
US$000 US$000
====================== ========= ========
Between 1 and 2 years 100,000 25,000
----------------------- --------- --------
Between 2 and 5 years 175,000 275,000
----------------------- --------- --------
Over 5 years - -
---------------------- --------- --------
Total 275,000 300,000
----------------------- --------- --------
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 31 December as at 31 December
==================== ====================
2022 2021 2022 2021
US$000 US$000 US$000 US$000
=================== ========= ========= ========= =========
Secured bank loans 302,328 300,499 283,677 296,122
-------------------- --------- --------- --------- ---------
Total 302,328 300,499 283,677 296,122
-------------------- --------- --------- --------- ---------
The movement in borrowings during the year is as follows:
As at
1 As at
January Additions Repayments Reclassifications 31 December
2022 US$000 US$000 US$000 US$000 2022 US$000
============================= ============ ========= ========== ================= ============
Current
----------------------------- ------------ --------- ---------- ----------------- ------------
Bank loans - 13,411 (10,557) 23,839 26,693
------------------------------ ------------ --------- ---------- ----------------- ------------
Stock market promissory note - 15,500 (1,000) - 14,500
------------------------------ ------------ --------- ---------- ----------------- ------------
Accrued interest 499 10,360 (12,962) 4,899 2,796
------------------------------ ------------ --------- ---------- ----------------- ------------
499 39,271 (24,519) 28,738 43,989
----------------------------- ------------ --------- ---------- ----------------- ------------
Non-current
----------------------------- ------------ --------- ---------- ----------------- ------------
Bank loans 300,000 - - (25,000) 275,000
------------------------------ ------------ --------- ---------- ----------------- ------------
300,000 - - (25,000) 275,000
----------------------------- ------------ --------- ---------- ----------------- ------------
28 Provisions
Long
Provision Term Workers
for mine Incentive profit
closure1 Plan2 sharing Contingencies3 Total
US$000 US$000 US$000 US$000 US$000
======================== ========= ========== ======== ============== ========
At 1 January 2021 126,397 1,126 5,389 1,625 134,537
------------------------- --------- ---------- -------- -------------- --------
Additions - (659) 11,018 2,164 12,523
------------------------- --------- ---------- -------- -------------- --------
Accretion (note 13) (2,038) - - - (2,038)
------------------------- --------- ---------- -------- -------------- --------
Change in discount rate (1,627) - - - (1,627)
------------------------- --------- ---------- -------- -------------- --------
Change in estimates 22,364 - - - 22,364
------------------------- --------- ---------- -------- -------------- --------
Foreign exchange effect - - (525) (290) (815)
------------------------- --------- ---------- -------- -------------- --------
Utilisation (1,978) - - - (1,978)
------------------------- --------- ---------- -------- -------------- --------
Payments (9,083) - (4,990) - (14,073)
------------------------- --------- ---------- -------- -------------- --------
At 31 December 2021 134,035 467 10,892 3,499 148,893
------------------------- --------- ---------- -------- -------------- --------
Less: current portion (19,670) - (10,892) (1,496) (32,058)
------------------------- --------- ---------- -------- -------------- --------
Non-current portion 114,365 467 - 2,003 116,835
------------------------- --------- ---------- -------- -------------- --------
At 1 January 2022 134,035 467 10,892 3,499 148,893
------------------------- --------- ---------- -------- -------------- --------
Additions - (467) 4,733 1,813 6,079
------------------------- --------- ---------- -------- -------------- --------
Accretion (note 13) (1,931) - - - (1,931)
------------------------- --------- ---------- -------- -------------- --------
Change in discount rate (17,849) - - - (17,849)
------------------------- --------- ---------- -------- -------------- --------
Change in estimates 34,124 - - - 34,124
------------------------- --------- ---------- -------- -------------- --------
Foreign exchange effect - - 322 434 756
------------------------- --------- ---------- -------- -------------- --------
Utilisation (970) - - - (970)
------------------------- --------- ---------- -------- -------------- --------
Payments (10,409) - (11,000) (10) (21,419)
------------------------- --------- ---------- -------- -------------- --------
At 31 December 2022 137,000 - 4,947 5,736 147,683
------------------------- --------- ---------- -------- -------------- --------
Less: current portion (17,668) - (4,947) (1,562) (24,177)
------------------------- --------- ---------- -------- -------------- --------
Non-current portion 119,332 - - 4,174 123,506
------------------------- --------- ---------- -------- -------------- --------
1 The provision represents the discounted values of the
estimated cost to decommission and rehabilitate the mines at the
expected date of closure of each of the mines. The present value of
the provision has been calculated using a real pre-tax annual
discount rate, based on a US Treasury bond of an appropriate tenure
adjusted for the impact of inflation as at 31 December 2022 and
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 discount rate used was 0.95% (2021: -2.09%).
Expected cash flows will be over a period from one to 21 years
(2021: over a period from one to 17 years).
Based on the internal and external reviews of mine
rehabilitation estimates, the provision for mine closure increased
by US$34,124,000 due to increase in the Ares mine unit of
US$10,509,000, the Arcata mine unit of US$1,671,000, the San Jose
mine unit of US$7,901,000, the Matarani unit of US$19,000, the
Azuca project of US$1,000, the Crespo project of US$5,000, the
Pallancata mine unit of US$58,000 and the Sipan mine unit of
US$12,858,000, net of the decrease in the Selene mine unit of
US$2,882,000 and the Inmaculada mine unit of US$430,000, and the
initial recognition of the Mara Rosa project of USS$4,414,000
(2021: increase by US$22,364,000 due to increase in the Selene mine
unit of US$14,032,000, the Sipan mine unit of US$3,103,000, the
Arcata mine unit of US$2,620,000, the Ares mine unit of
US$1,623,000, the Inmaculada mine unit of US$369,000 and the San
José mine unit of US$640,000, net of the decrease of the Matarani
unit of US$2,000, the Azuca project of US$9,000, the Crespo project
of US$9,000 and the Pallancata mine unit of US$3,000).
A net charge of US$17,797,000 related to changes in estimates
(US$22,156,000) and discount rates (-US$4,359,000) for mines
already closed were recognised directly in the income statement
(2021: net charge of US$22,095,000 related to changes in estimates
(US$21,378,000) and discount rates (US$717,000) for mines already
closed were recognised directly in the income statement).
A net credit of US$5,936,000 related to changes in estimates
(US$7,554,000) and discount rates (-US$13,490,000) for mines,
projects and units that are not already closed were recognised
directly in the property, plant and equipment in the statement of
financial position (2021: net credit of US$1,358,000 related to
changes in estimates (US$986,000) and discount rates (US$2,344,000)
for mines, projects and units that are not already closed were
recognised directly in the property, plant and equipment in the
statement of financial position).
Utilisation for the year corresponds to depreciation of certain
assets which are used as part of mine rehabilitation. This has been
recognised against the mine rehabilitation provision.
The decrease in the accretion from 2021 (US$2,038,000) to 2022
(US$1,931,000) is explained because the Group is closer to the
budget execution periods and the discount rates used for 2021 were
more negatives than those of 2022.
A change in any of the following key assumptions used to
determine the provision would have the following impact:
US$000
---------------------------------------------------------- --------
Closure costs (increase by 10%) increase of provision 13,700
----------------------------------------------------------- --------
Discount rate (increase by 0.5%) (decrease of provision) (8,137)
----------------------------------------------------------- --------
An element of mine closure planning can be water management
which relates to the treatment of contact water. The cost of this
water processing could continue for a number of years after closure
activities have been completed and is therefore, potentially,
exposed to long-term climate change. Mine planning for Hochschild's
operating assets takes into account mine-closure activities. In the
case of the now-closed Sipan mine, due to the specific
characteristics of the closed mine components, contact water
treatment is ongoing. According to our most recent approved Mine
Closure Plan (July 2021), Sipan will be the subject of ongoing
treatment until 2030 or until baseline water quality conditions
have been met. As at the date of approval of these financial
statements, the impact of climate change on Sipan's mine closure
planning is not expected to be material.
2 Corresponds to the provision related to awards granted under
the Long-Term Incentive Plan ('LTIP') to designated personnel of
the Group. Includes the 2020 awards, granted in February 2020,
payable in February 2023, as 50% in cash (refer to note 29(c)).
Only employees who remain in the Group's employment on the vesting
date will be entitled to vested awards, subject to exceptions
approved by the Remuneration Committee of the Board. There are two
parts to the performance conditions attached to LTIP awards: 70% is
subject to the Company's TSR ranking relative to a tailored peer
group of mining companies, and 30% is subject to the Company's TSR
ranking relative to the constituents of the FTSE 350 mining index.
The liability for the LTIP paid in cash is measured, initially and
at the end of each reporting period until settled, at the fair
value of the awards, by applying the Monte Carlo pricing model,
taking into account the terms and conditions on which the awards
were granted, and the extent to which the employees have rendered
services to date. The net decrease to the provision of US$467,000
(2021: US$659,000 net decrease) have been recorded as
administrative expenses -US$442,000 (2021: -US$630,000) and
exploration expenses -US$25,000 (2021: -US$29,000). The final
result of the benefit was nil.
The following tables list the inputs to the last Monte Carlo
model used for the LTIPs as at 31 December 2021:
LTIP 2020
======================== ============
31 December
2021
For the period ended US$000
======================== ============
Dividend yield (%) 2.37
---------------------------- ------------
Expected volatility (%) 3.70
---------------------------- ------------
Risk-free interest rate
(%) 0.02
---------------------------- ------------
Expected life (years) 1
---------------------------- ------------
Weighted average share
price (pence GBP) 179.61
---------------------------- ------------
The expected volatility reflects the assumption that the
historical volatility over a period similar to the life of the
awards and is indicative of future trends, which may not
necessarily be the actual outcome. The outcome of the LTIP 2020 as
at 31 December 2022 was US$nil.
3 Mainly corresponds to contingencies in Minera Santa Cruz due
to new labor lawsuits.
29 Equity
(a) Share capital and share premium
Issued share capital
The issued share capital of the Company as at 31 December 2022
is as follows:
Issued
===========================
Class of shares Number Amount
----------------------------------- ----------- ------------
Ordinary shares (1 pence per share) 513,875,563 GBP5,138,756
----------------------------------- ----------- ------------
The issued share capital of the Company as at 31 December 2021
is as follows:
Issued
=============================
Class of shares Number Amount
------------------------------------ ----------- --------------
Ordinary shares (25 pence per share) 513,875,563 GBP128,468,891
------------------------------------ ----------- --------------
At 31 December 2022 and 2021, all issued shares with a par value
of 1 pence and 25 pence each respectively were fully paid (2022:
weighted average of US$0.018 per share, 2021: weighted average of
US$0.441 per share).
The movement in share capital of the Company from 1 January 2021
to 31 December 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 31 December 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 distributable merger
reserve, within retained earnings, 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:
(a) the cancellation of the Bonus Shares with the sum arising on
the cancellation being credited to the Company's retained earnings
reserve;
(b) the reduction of the Company's share premium account to nil
and crediting the corresponding amount to the Company's retained
earnings reserve; and
(c) the reduction in the nominal value of the Ordinary Shares
from 25 pence per Ordinary Share to 1 pence per Ordinary Share,
(d) (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.
Rights attached to ordinary shares
At general meetings of the Company, on a show of hands and on a
poll, every member who is present in person or subject to the
below, by proxy, has one vote for every share of which they are the
holder/proxy. However, in the case of a vote on a show of hands
where a proxy has been appointed by more than one member, the proxy
has one vote for and one vote against if the proxy has been
instructed by one or more members to vote for the resolution and by
one or more members to vote against the resolution.
(b) Treasury shares
Treasury shares represent the cost of Hochschild Mining PLC
shares purchased in the market and held by the trustee of the
Hochschild Mining Employee Share Trust to satisfy the award of
conditional shares under the Group's Enhanced Long Term Incentive
Plan granted to the CEO (note 2(o)).
The movement in treasury shares are as follows:
-- On 30 March 2020, the Group purchased 182,941 shares for a
total consideration of GBP234,000 (equivalent to US$292,000).
-- On 30 March 2020, 182,941 Treasury shares with a value of
US$292,000 (being the cost incurred to acquire the shares) were
transferred to the CEO of the Group with respect to the Enhanced
Long term Incentive Plan.
At 31 December 2022 and 31 December 2021 the balance of treasury
shares is nil.
(c) Other reserves
Fair value reserve of financial assets at fair value through
OCI
In accordance with IFRS 9, the Group made the decision to
classify its investments in listed and unlisted companies as
financial assets at fair value through OCI. The increase/decrease
in the fair value, net of the related deferred tax liability, is
taken directly to this account where it will remain until disposal,
when the cumulative unrealised gains and losses are recycled
through retained earnings.
Cumulative translation adjustment
The cumulative translation adjustment account is used to record
exchange differences arising from the translation of the financial
statements of subsidiaries with a functional currency different to
the reporting currency of the Group.
Merger reserve
The merger reserve represents the difference between the value
of the net assets of the Cayman Holding Companies (Ardsley,
Garrison, Larchmont and Hochschild Mining (Peru)) acquired under
the Share Exchange Agreement and the nominal value of the shares
issued in consideration of such acquisition. In addition a merger
reserve was generated by certain share placing transactions made by
the Group after the IPO. The merger reserve available for
distribution is disclosed within retained earnings.
Cash flow hedges
Changes in the fair value of derivatives designated as cash flow
hedges, which are held to hedge the exposure to variability in cash
flows of the hedged items, are recognised in other components of
equity until changes in the fair value of the hedged item are
recognised in profit or loss. The Group uses cash flow hedges for
hedging the exposure to variability in silver prices.
Share-based payment reserve
The share-based payment reserve is used to recognise the value
of equity-settled share-based payment transactions provided to
employees, as a part of their remuneration.
(i) Long term incentive plan ('LTIP')
On 11 February 2019 the Group approved the grant of 2019 LTIP
awards, on 19 February 2020 the Group approved the grant of 2020
LTIP awards, on 26 May 2021 the Group approved the grant of 2021
LTIP awards and on 23 February 2022 the Group approved the grant of
2022 LTIP awards. The 2019 and 2020 awards give a right to receive
a cash payment equivalent to the 50% of the prize (cash-settled
transaction) (refer to note 28(2)), and the other 50% will be used
to acquire shares of the Company (equity-settled transaction).
The vesting of the 2021 LTIP and 2022 LTIP awards are subject to
the following performance conditions: 50% on Hochschild's 3-year
total shareholder return ("TSR") and 50% on Internal Key
Performance Indicators (KPIs) measured during the same period. The
performance period will be from 1 January 2021 to 31 December 2023
and 1 January 2022 to 31 December 2024 respectively. The award will
vest in May 2024 and in February 2025 respectively.
The whole of any vested LTIP award will be deferred in the
Company shares for two years. The award will lapse if the
beneficiary ceases to be an employee of the Group other than as a
good leaver or on death.
Further details on the design of the LTIP award are included in
the Directors' Remuneration Report.
The fair value of the option based on the TSR was determined
using the Monte Carlo model. The following tables list the inputs
to the Monte Carlo model used for the 2019 LTIP, 2020 LTIP, 2021
LTIP and 2022 LTIP:
LTIP LTIP LTIP LTIP
2022 2021 2020 2019
====================== ======== ======== ====== ======
Dividend yield (%) 5.73 2.37 0.87 1.46
------------------------ -------- -------- ------ ------
Expected volatility
(%) 3.97 3.71 3.19 2.90
------------------------ -------- -------- ------ ------
Risk-free interest
rate (%) 4.13 0.23 0.51 0.42
------------------------ -------- -------- ------ ------
Expected life (years) 2.3 2 2.5 2.4
------------------------ -------- -------- ------ ------
Weighted average
share price (pence
GBP) 141.46 221.99 179.61 161.37
------------------------ -------- -------- ------ ------
The 50% subject to internal KPIs is split equally between:
i) 3-year growth of the Company's Measured and Indicated
Resources (MIR) per share (excluding Volcan), The 3-year MIR growth
was projected using a normal distribution based on historical data,
and factoring in the additional growth expected from acquisitions,
and
ii) average outcome of the annual bonus scorecard in respect of
2021, 2022 and 2023 for 2021 LTIP, and 2022, 2023 and 2024 for 2022
LTIP calculated as the simple mean of the three scorecard
outcomes.
Probabilities assigned to each possible outcome, based on
historical data and management judgement.
The remaining contract life is nil years (2021: 0.1 years), 0.1
years (2021: 1.1 years), 1.4 years (2021: 2.4 years) and 2.2 years
for the 2019 LTIP, 2020 LTIP, 2021 LTIP and 2022 LTIP
respectively.
The movement in other reserves is as follows:
LTIP LTIP LTIP LTIP LTIP
2018 2019 2020 2021 2022
US$000 US$000 US$000 US$000 US$000
================================= ======= ======= ======= ======= =======
Balance at 1 January 2021 920 1,175 438 - -
---------------------------------- ------- ------- ------- ------- -------
Expense recognised in the period 143 623 509 1,167 -
---------------------------------- ------- ------- ------- ------- -------
Forfeiture of share options (1,063) - - - -
---------------------------------- ------- ------- ------- ------- -------
Balance at 31 December 2021 - 1,798 947 1,167 -
---------------------------------- ------- ------- ------- ------- -------
Expense recognised in the period - 88 509 1,478 1,395
Forfeiture of share options - (1,886) - - -
---------------------------------- ------- ------- ------- ------- -------
Balance at 31 December 2022 - - 1,456 2,645 1,395
---------------------------------- ------- ------- ------- ------- -------
No shares vested during the period (2021: nil).
(ii) 2022 bonus of employees
The Group agreed to partially pay the 2022 bonus by an issuance
of shares. The total amount that will be paid in shares is
US$816,000.
30 Deferred income tax the net deferred income tax assets/(liabilities) are as follows:
As at 31 December
===================
2022 2021
US$000 US$000
=========================================== ========= ========
Beginning of the year (86,744) (72,307)
-------------------------------------------- --------- --------
Income statement credit/(charge) (note 14) 2,687 (7,054)
-------------------------------------------- --------- --------
Equity credit/(charge) 8,167 (7,383)
-------------------------------------------- --------- --------
Deferred tax recognised for payment 58 -
-------------------------------------------- --------- --------
End of the year (75,832) (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 movement in deferred income tax assets and liabilities
before offset during the year is as follows:
Differences Provisional
in cost Mine pricing
of PP&E development adjustment Others Total
US$000 US$000 US$000 US$000 US$000
================================= =========== ============ =========== ======= =======
Deferred income tax liabilities
--------------------------------- ----------- ------------ ----------- ------- -------
At 1 January 2021 39,521 84,952 696 3,647 128,816
---------------------------------- ----------- ------------ ----------- ------- -------
Income statement charge/(credit) 6,108 (67) (752) (495) 4,794
---------------------------------- ----------- ------------ ----------- ------- -------
At 31 December 2021 45,629 84,885 (56) 3,152 133,610
---------------------------------- ----------- ------------ ----------- ------- -------
Income statement charge 1,281 4,630 359 1,627 7,897
---------------------------------- ----------- ------------ ----------- ------- -------
Equity charge 362 - - - 362
---------------------------------- ----------- ------------ ----------- ------- -------
At 31 December 2022 47,272 89,515 303 4,779 141,869
---------------------------------- ----------- ------------ ----------- ------- -------
Differences Provision
in cost for mine
of PP&E closure Mine development Tax losses Others(1) Total
US$000 US$000 US$000 US$000 US$000 US$000
=============================== =========== ========= ================ ============ ========= =======
Deferred income tax assets
------------------------------- ----------- --------- ---------------- ------------ --------- -------
At 1 January 2021 20,130 25,384 474 - 10,521 56,509
-------------------------------- ----------- --------- ---------------- ------------ --------- -------
Income statement (charge)/credit (7,333) 5,082 (109) - 100 (2,260)
-------------------------------- ----------- --------- ---------------- ------------ --------- -------
Equity charge - - - - (7,383) (7,383)
-------------------------------- ----------- --------- ---------------- ------------ --------- -------
At 31 December 2021 12,797 30,466 365 - 3,238 46,866
-------------------------------- ----------- --------- ---------------- ------------ --------- -------
Income statement credit/(charge) 1,747 1,048 (1,021) 2,483 5,780 10,037
-------------------------------- ----------- --------- ---------------- ------------ --------- -------
Equity credit - - 1,377 1,855 5,902 9,134
-------------------------------- ----------- --------- ---------------- ------------ --------- -------
At 31 December 2022 14,544 31,514 721 4,338 14,920 66,037
-------------------------------- ----------- --------- ---------------- ------------ --------- -------
1 Credit/(charge) in the year mainly related to silver forward
of US$645,000 (2021: silver forward of US$5,634,000), statutory
holiday provision of US$1,157,000 (2021: US$1,121,000) and long
term incentive plan of US$1,512,000 (2021: US$746,000).
The amounts after offset, as presented on the face of the
statement of financial position, are as follows:
As at 31 December
===================
2022 2021
US$000 US$000
================================ ========= ========
Deferred income tax assets 4,213 484
--------------------------------- --------- --------
Deferred income tax liabilities (80,045) (87,228)
--------------------------------- --------- --------
Total (75,832) (86,744)
--------------------------------- --------- --------
Unrecognised tax losses expire in the following years:
As at 31 December*
====================
2022 2021
US$000 US$000
======================== ========= =========
Recognised
------------------------ --------- ---------
Expire after four years 12,759 --
------------------------ --------- ---------
12,759 --
------------------------ --------- ---------
Unrecognised
------------------------ --------- ---------
Expire after four years 191,051 167,273
------------------------- --------- ---------
191,051 167,273
------------------------ --------- ---------
Total 203,810 167,273
------------------------- --------- ---------
Other unrecognised deferred income tax assets comprise (gross
amounts):
As at 31 December
===================
2022 2021
US$000 US$000
============================ ========= ========
Provision for mine closure1 8,191 7,887
----------------------------- --------- --------
1 This relates to provision for mine closure expenditure which
is expected to be incurred in periods in which taxable profits are
not expected to be available to offset the expenditure.
Unrecognised deferred tax liability on retained earnings
At 31 December 2022 and 2021, there was no recognised deferred
tax liability for taxes that would be payable on the unremitted
earnings of certain of the Group's subsidiaries as the intention is
that these amounts are permanently reinvested.
31 Dividends
2022 2021
US$000 US$000
======================================================= ======= =======
Dividends paid and proposed during the year
------------------------------------------------------- ------- -------
Equity dividends on ordinary shares:
------------------------------------------------------- ------- -------
Final dividend for 2021 : 2.335 US cents per share (
2020: 2.335 US cents per share) 11,998 12,002
-------------------------------------------------------- ------- -------
Interim dividend for 2022 : 1.95 US cents per share
( 2021: 1.95 US cents per share) 10,019 10,020
-------------------------------------------------------- ------- -------
Total dividends paid in cash 22,017 22,022
-------------------------------------------------------- ------- -------
Dividends in specie paid with Aclara shares (note 4
(a)) - 94,945
-------------------------------------------------------- ------- -------
Total dividends paid on ordinary shares 22,017 116,967
-------------------------------------------------------- ------- -------
Proposed dividends on ordinary shares:
------------------------------------------------------- ------- -------
Final dividend for 2022: nil US cents per share (2021:
2.335 US cents per share) - 11,998
-------------------------------------------------------- ------- -------
Dividends declared to non-controlling interests: 0.002
US$ per share ( 2021 : 0.058 US$ per share) 286 9,832
-------------------------------------------------------- ------- -------
Total dividends declared to non-controlling interests 286 9,832
-------------------------------------------------------- ------- -------
Dividends paid in 2022 to non-controlling interests amounted to
US$286,000 (2021: US$9,832,000).
In August 2021, the Board became aware of an issue concerning
technical compliance with the Companies Act 2006 in relation to the
2017 final dividend, the 2018 interim and final dividends, the 2019
interim dividend, and the 2020 interim and final dividends (the
"Relevant Dividends"). In particular, the Relevant Dividends were
paid to shareholders when the Company did not have adequate
distributable reserves.
Significant corrective transactions (namely, a capital reduction
and dividend distribution by the Company's wholly-owned subsidiary,
Hochschild Mining Holdings Limited) were implemented by the Company
in September 2021, shortly after discovery of the issue. Had these
internal corporate transactions been implemented prior to the
payment of the 2017 final dividend, adequate distributable reserves
would have been available to the Company.
As previously reported, the Board put resolutions to
shareholders at a General Meeting to i) complete the rectification
of this past issue and ii) increase further, to the extent
practicable, the level of Distributable Reserves available to the
Company.
Dividends per share
The interim dividend paid in September 2022 was US$10,019,000
(1.95 US cents per share). There is no proposed final dividend in
respect of the year ending 31 December 2022.
32 Related-party balances and transactions
(a) Related-party accounts receivable and payable
The Group had the following related-party balances and
transactions during the years ended 31 December 2022 and 2021. The
related parties are companies owned or controlled by the main
shareholder of the Parent company or associates.
Accounts receivable Accounts payable
as at 31 December as at 31 December
===================== ====================
2022 2021 2022 2021
US$000 US$000 US$000 US$000
=============================== ========== ========= ========= =========
Current related party balances
------------------------------- ---------- --------- --------- ---------
Cementos Pacasmayo S.A.A.1 733 217 249 152
-------------------------------- ---------- --------- --------- ---------
Tecsup2 - 1 352 115
-------------------------------- ---------- --------- --------- ---------
Universidad UTEC2 - - 5 5
-------------------------------- ---------- --------- --------- ---------
REE UNO SpA3 30 6 - -
-------------------------------- ---------- --------- --------- ---------
Aclara Resources Inc3 9 - - 12
-------------------------------- ---------- --------- --------- ---------
Aclara Resources Peru S.A.C. 3 2 - 16 -
-------------------------------- ---------- --------- --------- ---------
Total 774 224 622 284
-------------------------------- ---------- --------- --------- ---------
1 The account receivable relates to reimbursement of expenses
paid by the Group on behalf of Cementos Pacasmayo S.A.A, an entity
controlled by Eduardo Hochschild. The account payable relates to
the payment of rentals.
2 Peruvian not-for-profit educational institutions controlled by Eduardo Hochschild.
3 Associated companies of the Aclara Group (refer to notes 4(a)
and 19).
As at 31 December 2022 and 2021, all accounts are, or were,
non-interest bearing.
No security has been granted or guarantees given by the Group in
respect of these related party balances.
Principal transactions between affiliates are as follows:
Year ended
================
2022 2021
US$000 US$000
============================================================= ======= =======
Expenses
------------------------------------------------------------- ------- -------
Expense recognised for the rental paid to Cementos Pacasmayo
S.A.A. (376) (403)
-------------------------------------------------------------- ------- -------
Expense technical services from Tecsup (418) (292)
-------------------------------------------------------------- ------- -------
Income from reimbursement of expenses of Cementos Pacasmayo
S.A.A. 494 729
-------------------------------------------------------------- ------- -------
Income from administrative services to REE UNO SpA 248 -
-------------------------------------------------------------- ------- -------
Transactions between the Group and these companies are at an
arm's length basis.
(b) Compensation of key management personnel of the Group
Year ended
31 December
================
Compensation of key management personnel (including 2022 2021
Directors) US$000 US$000
---------------------------------------------------- ------- -------
Short-term employee benefits 7,121 7,509
----------------------------------------------------- ------- -------
Long Term Incentive Plans 1,174 776
----------------------------------------------------- ------- -------
Total compensation paid to key management personnel 8,295 8,285
----------------------------------------------------- ------- -------
This amount includes the remuneration paid to the Directors of
the Parent Company of the Group of US$4,228,000 (2021:
US$3,967,000).
(c) Related Party Transaction
Participation of Pelham Investment Corporation in the IPO of
Aclara
As announced by the Company on 3rd December 2021, Pelham
Investment Corporation ("Pelham"), a company controlled by the
Chairman, Eduardo Hochschild, entered into a subscription agreement
with Aclara on 2 December 2021 pursuant to which Pelham agreed to
purchase, on a prospectus exempt basis in Canada, 22,791,399 Aclara
shares at a price of C$1.70 per share (the "Offering Price"). In
addition, Pelham subscribed for 9,855,660 Aclara shares at the
Offering Price as part of the IPO. These share acquisitions, which
are in addition to the Aclara shares acquired by Pelham as part of
the demerger dividend, constitute a smaller related party
transaction for the purposes of the UK Listing Rules. Accordingly,
as also announced, the Company obtained a written confirmation from
a sponsor that the terms of the smaller related party transaction
were fair and reasonable as far as the shareholders of the Company
are concerned.
33 Auditor's remuneration
The auditor's remuneration for services provided to the Group
during the years ended 31 December 2022 and 2021 is as follows:
Amounts paid
to Ernst &
Young
in the year
ended
31 December
================
2022 2021
US$000 US$000
------------------------------------- ------- -------
Audit fees pursuant to legislation 1 1,181 1,206
-------------------------------------- ------- -------
Audit-related assurance services 95 130
-------------------------------------- ------- -------
Other assurance services 2 - 176
-------------------------------------- ------- -------
Total 1,276 1,512
-------------------------------------- ------- -------
1 The total fee includes statutory audit fee of US$416,000 in
respect of local statutory audits of subsidiaries (2021:
US$417,000)
2 Includes US$164,000 for assurance services (including comfort
letters) in relation to the spin-off of Aclara and US$12,000 for
assurance services over the Group's environmental ECO score.
In 2022 and 2021, all fees are included in administrative
expenses.
34 Notes to the statement of cash flows
As at 31 December
===================
2022 2021
US$000 US$000
========================================================== ========= ========
Reconciliation of loss for the year to net cash generated
from operating activities
---------------------------------------------------------- --------- --------
Profit for the year 4,832 71,106
----------------------------------------------------------- --------- --------
Adjustments to reconcile Group loss to net cash inflows
from operating activities
---------------------------------------------------------- --------- --------
Depreciation (note 3(a)) 139,088 150,292
----------------------------------------------------------- --------- --------
Amortisation of intangibles (note 18) 970 1,118
----------------------------------------------------------- --------- --------
Write-off of assets (note 16) 1,832 863
----------------------------------------------------------- --------- --------
Provision of doubtful receivable 35 -
----------------------------------------------------------- --------- --------
Impairment /(reversal of impairment) of assets (note
11) (11,363) 24,846
----------------------------------------------------------- --------- --------
Gain on demerger of Aclara (note 4 (a)) (37,461)
----------------------------------------------------------- --------- --------
Loss from changes in the fair value of financial assets
at fair value through profit and loss (note 21) 2,140 834
----------------------------------------------------------- --------- --------
Share of post-tax losses of associates 11,600 169
----------------------------------------------------------- --------- --------
Gain on sale of property, plant and equipment (294) (3,342)
----------------------------------------------------------- --------- --------
Provision and recovery for obsolescence of supplies
(note 12 and 23) 422 (1,779)
----------------------------------------------------------- --------- --------
Increase of provision for mine closure (note 12) 17,797 22,095
----------------------------------------------------------- --------- --------
Finance income (note 13) (5,211) (3,946)
----------------------------------------------------------- --------- --------
Finance costs (note 13) 21,776 32,061
----------------------------------------------------------- --------- --------
Income tax expense (note 14) 20,934 66,225
----------------------------------------------------------- --------- --------
Other 12,507 7,742
----------------------------------------------------------- --------- --------
Increase/(decrease) of cash flows from operations due
to changes in assets and liabilities
---------------------------------------------------------- --------- --------
Trade and other receivables (52,972) (13,734)
----------------------------------------------------------- --------- --------
Income tax receivable (5) (3,501)
----------------------------------------------------------- --------- --------
Other financial assets and liabilities 4,956 15,336
----------------------------------------------------------- --------- --------
Inventories (13,081) (4,534)
----------------------------------------------------------- --------- --------
Trade and other payables (6,632) (9,542)
----------------------------------------------------------- --------- --------
Provisions (5,060) 4,740
----------------------------------------------------------- --------- --------
Cash generated from operations 144,271 319,588
----------------------------------------------------------- --------- --------
35 Commitments
(a) Mining rights purchase options
During the ordinary course of business, the Group enters into
agreements to carry out exploration under concessions held by third
parties. Generally, under the terms of these agreements, the Group
has the option to acquire the concession or invest in the entity
holding the concession. In order to exercise these options the
Group must satisfy certain financial and other obligations during
the term of the agreement. The options lapse in the event that the
Group does not meet its financial obligations. At any point in
time, the Group may cancel the agreements without penalty, except
where specified below. These agreements are not under
non-cancellable/irrevocable clauses.
The Group continually reviews its requirements under the
agreements and determines, on an annual basis, whether to proceed
with its financial commitment. Based on management's current
intention regarding these projects, the commitments at the
statement of financial position date are as follows:
As at 31 December
===================
2022 2021
US$000 US$000
============================================ ========= ========
Commitment for the subsequent twelve months - 12,583
--------------------------------------------- --------- --------
More than one year 4,747 66,218
--------------------------------------------- --------- --------
(b) Capital commitments
For the year
ended
31 December
================
2022 2021
US$000 US$000
========== ======= =======
Peru 1,563 24,946
----------- ------- -------
Argentina 3,687 13,812
----------- ------- -------
Brazil 13,412 -
----------- ------- -------
18,662 38,758
---------- ------- -------
36 Contingencies
As at 31 December 2022 the Group is subject to various claims
which arise in the ordinary course of business. No provision has
been made in the financial statements and none of these claims are
currently expected to result in any material loss to the Group.
(a) Taxation
Fiscal periods remain open to review by the tax authorities for
four years in Peru, five years in Argentina and Mexico, ten years
in Brazil and three years in Chile, preceding the year of review.
During this time the authorities have the right to raise additional
tax assessments including penalties and interest. Under certain
circumstances, reviews may cover longer periods.
Because a number of fiscal periods remain open to review by the
tax authorities, coupled with the complexity of the Group and the
transactions undertaken by it, there remains a risk that
significant additional tax liabilities may arise. As at 31 December
2022, the Group had exposures totalling US$20,713,000 (2021:
US$20,622,000).
When the Tax authority challenges the deductibility of certain
expenses the Group reassess the case internally and externally,
with the support of a third-party professional to determine the
probability of success and, depending on the result, makes the
decision whether or not to continue with the claim. Notwithstanding
this risk, the Directors believe that management's interpretation
of the relevant legislation and assessment of taxation is
appropriate and that it is probable that the Group's tax and
customs positions will be sustained in the event of a challenge by
the tax authorities. Consequently, the Directors consider that no
tax liability is required to be recognised in respect of these
claims or risks.
( b) Guarantees
The Group is required to provide guarantees in Peru in respect
of environmental restoration and decommissioning obligations. The
Group has provided for the estimated cost of these activities (see
note 28(1)).
37 Mining royalties
Peru
In accordance with Peruvian legislation, owners of mining
concessions must pay a mining royalty for the exploitation of
metallic and non--metallic resources. Mining royalties have been
calculated with rates ranging from 1% to 3% of the value of mineral
concentrate or equivalent sold, based on quoted market prices.
In October 2011 changes came into effect for mining companies,
with the following features:
a) Introduction of a Special Mining Tax ('SMT'), levied on
mining companies at the stage of exploiting mineral resources. The
additional tax is calculated by applying a progressive scale of
rates ranging from 2% to 8.4%, of the quarterly operating
profit.
b) Modification of the mining royalty calculation, which
consists of applying a progressive scale of rates ranging from 1%
to 12%, of the quarterly operating profit. The former royalty was
calculated on the basis of monthly sales value of mineral
concentrates. The SMT and modified mining royalty are accounted for
as an income tax in accordance with IAS 12 "Income Taxes".
c) For companies that have mining projects benefiting from tax
stability regimes, mining royalties are calculated and recorded as
they were previously, applying an additional new special charge on
mining that is calculated using progressive scale rates, ranging
from 4% to 13.12% of quarterly operating profit.
As at 31 December 2022, the amount payable as under the new
mining royalty and the SMT amounted to US$1,234,000 (2021:
US$1,341,000) and US$845,000 (2021: US$882,000) respectively. The
new mining royalty and SMT are reported as 'Income tax payable' in
the Statement of Financial Position. The amount recorded in the
income statement was US$4,787,000 (2021: US$6,326,000) of new
mining royalty and US$2,658,000 (2021: US$5,916,000) of SMT, both
classified as income tax.
Argentina
In accordance with Argentinian legislation, Provinces (being the
legal owners of the mineral resources) are entitled to collect
royalties from mine operators. For San Jose, the mining royalty
applicable to dore and concentrate is 3% of the pit-head value. As
at 31 December 2022, the amount payable as mining royalties
amounted to US$1,211,000 (2021: US$1,505,000). The amount recorded
in the income statement as cost of sales was US$6,307,000 (2021:
US$7,171,000).
38 Financial risk management
The Group is exposed to a variety of risks and uncertainties
which may have a financial impact on the Group and which also
impact the achievement of social, economic and environmental
objectives. These risks include strategic, commercial, operational
and financial risks and are further categorised into risk areas to
facilitate consolidated risk reporting across the Group.
The Group has made significant developments in the management of
the Group's risk environment which seeks to identify and, where
appropriate, implement the controls to mitigate the impact of the
Group's significant risks. This effort is supported by a Risk
Committee with the participation of the CEO, the Vice Presidents,
and the head of the internal audit function. The Risk Committee is
responsible for implementing the Group's policy on risk management
and internal control in support of the Company's business
objectives, and monitoring the effectiveness of risk management
within the organisation.
(a) Commodity price risk
Silver and gold prices have a material impact on the Group's
results of operations. Prices are significantly affected by changes
in global economic conditions and related industry cycles.
Generally, producers of silver and gold are unable to influence
prices directly; therefore, the Group's profitability is ensured
through the control of its cost base and the efficiency of its
operations.
The Group's policy is generally to remain hedge-free. However,
management continuously monitors silver and gold prices and
reserves the right to take the necessary action, where appropriate
and within Board approved parameters, to mitigate the impact of
this risk.
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 cashflows 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 31 December 2022 and 31
December 2021 are as follows:
31 December 2022
US$000
==================== =======
Current assets 2,186
Non-current assets -
--------------------
2,186
-------------------- -------
The effect recorded is as follows:
US$000
==================================== =======
Income statement - revenue 20,428
Equity - Unrealised loss on hedges 16,929
------------------------------------ -------
31 December 2021
US$000
==================== =======
Current assets 5,042
Non-current assets 14,073
--------------------
19,115
-------------------- -------
The effect recorded is as follows:
US$000
==================================== =======
Income statement - revenue 7,982
Equity - Unrealised gain on hedges 19,115
------------------------------------ -------
The sensitivity to a reasonable movement in the commodity
prices, with all other variables held constant, determined as a
+/-10% change in prices -US$5,475,000/ US$9,848,000 effect on
OCI.
The Group has price adjustments arising from the sale of
concentrate and dore which were provisionally priced at the time
the sale was recorded (refer to note 5). 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
Year ounces of: US$000
===== ============== ==============
Gold +/-10% +/-165
2022 Silver+/-10% +/-138
------ --------------- --------------
Gold +/-10% +/-95
2021 Silver+/-10% +/-757
------ --------------- --------------
(b) Foreign currency risk
The Group produces silver and gold which are typically priced in
US dollars. A proportion of the Group's costs are incurred in
Peruvian nuevos soles, Argentinian pesos, Brazilian reais, sterling
pounds, Canadian dollars, Chilean pesos, and Mexican pesos.
Accordingly, the Group's financial results may be affected by
exchange rate fluctuations between the US dollar and the local
currency. The long-term relationship between commodity prices and
currencies in the countries in which the Group operates provides a
certain degree of natural protection. The Group does not use
derivative instruments to manage its foreign currency risks.
The following table demonstrates the sensitivity of financial
assets and liabilities, at the reporting date, denominated in their
respective currencies, to a reasonably possible change in the US
dollar exchange rate, with all other variables held constant, of
the Group's profit before tax and the Group's equity.
Increase/ Effect
decrease on profit
in US$/other before Effect
currencies' tax on equity
Year rate US$000 US$000
====================== ============= ========== ==========
2022
---------------------- ------------- ---------- ----------
Pounds sterling +/-10% -/+155 -
----------------------- ------------- ---------- ----------
Argentinian pesos +/-10% -/+3,775 -
----------------------- ------------- ---------- ----------
Mexican pesos +/-10% +/-1,821 -
----------------------- ------------- ---------- ----------
Peruvian nuevos soles +/-10% -/+15,326 -
----------------------- ------------- ---------- ----------
Reais +/-10% -/+7,230 -
----------------------- ------------- ---------- ----------
Canadian dollars +/-10% -/+461 +/-17
----------------------- ------------- ---------- ----------
Chilean pesos +/-10% +/-763 -
----------------------- ------------- ---------- ----------
2021
---------------------- ------------- ---------- ----------
Pounds sterling +/-10% -/+248 -
----------------------- ------------- ---------- ----------
Argentinian pesos +/-10% -/+3,084 -
----------------------- ------------- ---------- ----------
Mexican pesos +/-10% +/-1,879 -
----------------------- ------------- ---------- ----------
Peruvian nuevos soles +/-10% -/+3,663 -
----------------------- ------------- ---------- ----------
Canadian dollars +/-10% -/+270 +/-32
----------------------- ------------- ---------- ----------
Chilean pesos +/-10% -/+82 -
----------------------- ------------- ---------- ----------
(c) Credit risk
Credit risk arises from debtors' inability to make payment of
their obligations to the Group as they become due (without taking
into account the fair value of any guarantee or pledged assets).
The Group is primarily exposed to credit risk as a result of
commercial activities and non--compliance, by counterparties, in
transactions in cash which are primarily limited to cash balances
deposited in banks and accounts receivable at the statement of
financial position date.
Counterparty credit exposure based on commercial activities,
including trade and other receivables, embedded derivatives, hedge
instruments and cash balances in banks as at 31 December 2022 and
31 December 2021:
% collected
As at as at As at % collected
31 December 19 April 31 December as at
2022 2023 2021 21 February
Summary commercial partners US$000 US$000 US$000 2022
============================ ============ =========== ============ ============
Trade receivables 42,364 73% 27,773 74%
----------------------------- ------------ ----------- ------------ ------------
Other receivables include advances to suppliers and receivables
from contractors for the sale of supplies. There is no credit risk
on these amounts as the Group can withhold the balances that it
owes the suppliers or contractors for their services.
As at As at
31 December 31 December
2022 2021
Cash and cash equivalents - Credit rating 1 US$000 US$000
============================================ ============ ============
A+ 55,847 60,000
--------------------------------------------- ------------ ------------
A 1,066 -
--------------------------------------------- ------------ ------------
A- 2,436 142,740
--------------------------------------------- ------------ ------------
A2 42,091 -
--------------------------------------------- ------------ ------------
AA2 8 -
--------------------------------------------- ------------ ------------
Aa3 8,000 -
--------------------------------------------- ------------ ------------
Baa1 109 -
--------------------------------------------- ------------ ------------
BB- 10,505 -
--------------------------------------------- ------------ ------------
BBB+ 60 171,328
--------------------------------------------- ------------ ------------
BBB 5,210 -
--------------------------------------------- ------------ ------------
BBB- 4,419 -
--------------------------------------------- ------------ ------------
Caa1 1 -
--------------------------------------------- ------------ ------------
NA 14,092 12,721
--------------------------------------------- ------------ ------------
Total 143,844 386,789
--------------------------------------------- ------------ ------------
1 Represents the long-term credit rating as at 3 January 2023 (2021: 3 January 2022).
As at 31 December 2022, the credit rating of the counterparty of
the silver forward hedges is A- (31 December 2021 is A-).
To manage the credit risk associated with commercial activities,
the Group took the following steps:
-- Active use of prepayment/advance clauses in sales contracts.
-- Delaying delivery of title and/or requiring advance payments
to reduce exposure timeframe (potential delay in sales
recognition).
-- Maintaining as diversified a portfolio of clients as possible.
To manage credit risk associated with cash balances deposited in
banks, the Group took the following steps:
-- Increasing banking relationships with large, established and
well-capitalised institutions in order to secure access to credit
and to diversify credit risk.
-- Limiting exposure to financial counterparties according to Board approved limits.
-- Investing cash in short-term, highly liquid and low risk instruments (term deposits mainly).
-- Increase the utilisation of UK bank accounts.
Receivable balances are monitored on an ongoing basis and the
result of the Group's exposure to bad debts is recognised in the
consolidated income statement. The maximum exposure is the carrying
amount as disclosed in notes 22, 24 and 38(e).
The Group's risk assessment procedures includes customer
analysis and reviewing financial counterparties. For further
details refer to the Commentary section of the Commercial
Counterparty risk in the Risk management and Viability Report.
(d) Equity risk on financial instruments
The Group acquires financial instruments in connection with
strategic alliances with third parties. The Group constantly
monitors the fair value of these instruments in order to decide
whether or not it is convenient to dispose of these investments.
The disposal decision is also based on management's intention to
continue with the strategic alliance, the tax implications and
changes in the share price of the investee.
At 31 December 2022 the sensitivity to reasonable movements in
the share price of financial assets at fair value through OCI of
+/- 25% with all other variables held constant is +/-US$127,000
(2021: +/-US$165,000) recognised in equity. The sensitivity to
reasonable movements in the share price of financial assets at fair
value through profit and loss of +/- 25% with all other variables
held constant is +/-US$254,000 (2021: +/-US$789,000) recognised in
the consolidated statement of profit and loss.
(e) 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.
As at 31 December 2022 and 2021, the Group held the following
financial instruments measured at fair value:
31 December Level Level Level
2022 1 2 3
US$000 US$000 US$000 US$000
================================ =========== ======= ======= =======
Assets measured at fair value
-------------------------------- ----------- ------- ------- -------
Equity shares (notes 20 and 21) 1,524 1,524
--------------------------------- ----------- ------- ------- -------
Trade receivables (note 22) 42,364 42,364
--------------------------------- ----------- ------- ------- -------
Derivative financial assets 2,186 2,186
--------------------------------- ----------- ------- ------- -------
31 December Level Level Level
2021 1 2 3
US$000 US$000 US$000 US$000
================================ =========== ======= ======= =======
Assets measured at fair value
-------------------------------- ----------- ------- ------- -------
Equity shares (notes 20 and 21) 3,816 3,816
--------------------------------- ----------- ------- ------- -------
Trade receivables (note 22) 27,773 27,773
--------------------------------- ----------- ------- ------- -------
Derivative financial assets 19,115 19,115
--------------------------------- ----------- ------- ------- -------
During the period ending 31 December 2022 and 2021, there were
no transfers between these levels.
The reconciliation of the financial instruments categorised as
level 3 is as follows:
Trade
receivables/
price
adjustments
US$000
================================================= =============
Balance at 1 January 2021 45,353
--------------------------------------------------- -------------
Net change in trade receivables from goods sold (12,969)
--------------------------------------------------- -------------
Changes in fair value of price adjustments (note
5) (6,614)
--------------------------------------------------- -------------
Realised price adjustments during the year 2,003
--------------------------------------------------- -------------
Balance at 31 December 2021 27,773
--------------------------------------------------- -------------
Net change in trade receivables from goods sold 8,063
--------------------------------------------------- -------------
Changes in fair value of price adjustments (note
5) (1,323)
--------------------------------------------------- -------------
Realised price adjustments during the year 7,851
--------------------------------------------------- -------------
Balance at 31 December 2022 42,364
--------------------------------------------------- -------------
The impact of the hedging instrument and hedge item on the
statement of financial position is, as follows:
Change
Silver Average in fair
ounces price value of Change in
US$/ounce hedging fair value
instrument of hedged
used for item used
Line item Carrying measuring for measuring
in the statement amount ineffectiveness ineffectiveness
of of hedging for the for the
financial instrument period period
position US$000 US$000 US$000
=============== ======== =========== ================= =========== ================ ================
2022
--------------- -------- ----------- ----------------- ----------- ---------------- ----------------
Derivative
Silver forward 3.3 financial
contracts million 25.00 asset 2,186 1,541 1,541
--------------- -------- ----------- ----------------- ----------- ---------------- ----------------
2021
--------------- -------- ----------- ----------------- ----------- ---------------- ----------------
Derivative
Silver forward 7.5 financial
contracts million 26.03 asset 19,115 13,476 13,476
--------------- -------- ----------- ----------------- ----------- ---------------- ----------------
The hedging gain recognised in OCI before tax on silver forward
hedges is equal to the change in fair value of the hedged item
attributable to the hedged risk used for measuring effectiveness.
There is no ineffectiveness recognised in profit or loss.
Impact of hedging on equity
Set out below is the reconciliation of each component of equity
and the analysis of other comprehensive income:
Interest
rate Silver
swap forward Total
US$000 US$000 US$000
Balance at 1 January 2021 (4,169) - (4,169)
--------------------------------------------------- -------- -------- --------
Reclassification adjustments for items
included in the income statement on realisation:
-------------------------------------------------- -------- -------- --------
Transfer to silver sales (revenue) - (7,982) (7,982)
--------------------------------------------------- -------- -------- --------
Transfer to finance costs 5,521 - 5,521
--------------------------------------------------- -------- -------- --------
Revaluation arising on the year 392 27,097 27,489
--------------------------------------------------- -------- -------- --------
Movement in deferred tax (1,744) (5,639) (7,383)
--------------------------------------------------- -------- -------- --------
Balance at 31 December 2021 - 13,476 13,476
--------------------------------------------------- -------- -------- --------
Reclassification adjustments for items
included in the income statement on realisation:
-------------------------------------------------- -------- -------- --------
Transfer to silver sales (revenue) - (20,428) (20,428)
--------------------------------------------------- -------- -------- --------
Revaluation arising on the year - 3,499 3,499
--------------------------------------------------- -------- -------- --------
Movement in deferred tax - 4,994 4,994
--------------------------------------------------- -------- -------- --------
Balance at 31 December 2022 - 1,541 1,541
--------------------------------------------------- -------- -------- --------
(f) Liquidity risk
Liquidity risk arises from the Group's inability to obtain the
funds it requires to comply with its commitments, including the
inability to sell a financial asset quickly enough and at a price
close to its fair value. Management constantly monitors the Group's
level of short- and medium-term liquidity, and their access to
credit lines, in order to ensure appropriate financing is available
for its operations.
The table below categorises the undiscounted cash flows of
Group's financial liabilities into relevant maturity groupings
based on the remaining period as at the statement of financial
position to the contractual maturity date. Interest cash flows have
been calculated using the spot rate at year end.
Less Between Between
than 1 and 2 and Over
1 year 2 years 5 years 5 years Total
US$000 US$000 US$000 US$000 US$000
========================= ======= ======== ======== ======== =======
At 31 December 2022
------------------------- ------- -------- -------- -------- -------
Trade and other payables 125,192 1,623 - - 126,815
-------------------------- ------- -------- -------- -------- -------
Borrowings 61,133 116,729 193,885 - 371,747
-------------------------- ------- -------- -------- -------- -------
Total 186,325 118,352 193,885 - 498,562
-------------------------- ------- -------- -------- -------- -------
At 31 December 2021
------------------------- ------- -------- -------- -------- -------
Trade and other payables 118,110 1,637 1,177 - 120,924
-------------------------- ------- -------- -------- -------- -------
Borrowings 5,644 30,597 285,387 - 321,628
-------------------------- ------- -------- -------- -------- -------
Total 123,754 32,234 286,564 - 442,552
-------------------------- ------- -------- -------- -------- -------
1 The interest rate swap settles the difference between the
fixed and floating interest rate on a net basis on a quarterly
basis.
(g) Interest rate risk
The Group has financial assets and liabilities which are exposed
to interest rate risk. Changes in interest rates primarily impact
loans and borrowings by changing either their fair value (fixed
rate debt) or their future cash flows (variable rate debt). The
Group does not have a formal policy of determining how much of its
exposure should be at fixed or at variable rates. However, at the
time of taking new loans or borrowings, management applies its
judgement to decide whether it believes that a fixed or variable
rate borrowing would be more favourable to the Group over the
expected period until maturity.
As at 31 December 2022
==================================================
Between Between
Within 1 and 2 and Over
1 year 2 years 5 years 5 years Total
US$000 US$000 US$000 US$000 US$000
============== ======== ======== ========= ======== =========
Fixed rate
-------------- -------- -------- --------- -------- ---------
Assets 89,225 - - - 89,225
--------------- -------- -------- --------- -------- ---------
Liabilities (16,661) - - - (16,661)
--------------- -------- -------- --------- -------- ---------
Floating rate
-------------- -------- -------- --------- -------- ---------
Liabilities (27,328) (100,00) (175,000) - (302,328)
--------------- -------- -------- --------- -------- ---------
As at 31 December 2021
===============================================
Between Between
Within 1 and 2 and Over
1 year 2 years 5 years 5 years Total
US$000 US$000 US$000 US$000 US$000
============== ======= ======== ========= ======== =======
Fixed rate
-------------- ------- -------- --------- -------- -------
Assets 299,666 - - - 299,666
--------------- ------- -------- --------- -------- -------
Floating rate
-------------- ------- -------- --------- -------- -------
Liabilities (499) (25,000) (275,000) - 300,499
--------------- ------- -------- --------- -------- -------
Interest on financial instruments classified as floating rate is
re-priced at intervals of less than one year. Interest on financial
instruments classified as fixed rate is fixed until the maturity of
the instrument. The other financial instruments of the Group that
are not included in the above tables are non-interest bearing and
are therefore not subject to interest rate risk.
The sensitivity to a reasonable movement in the interest rate,
with all other variables held constant, of the financial
instruments with a floating rate, determined as a +/-20bps change
in interest rates has a -/+US$600,000 effect on profit before tax
(2021: -/+US$600,000). The Group is exposed to fluctuations in
market interest rates.
This assumes that the amount remains unchanged from that in
place at 31 December 2022 and 2021 and that the change in interest
rates is effective from the beginning of the year. In reality, the
floating rate will fluctuate over the year and interest rates will
change accordingly.
Derivative financial liabilities - Interest rate swap
On 14 February 2020, the Group and JP Morgan Chase Bank, N.A.
entered into an interest rate swap with a notional amount equal to
the principal of the medium-term loan whereby the Group paid a
fixed rate of at 2.534% and received interest at a variable rate
equal to Libor+1.15% on the notional amount from 17 March 2020 to
17 December 2024. The interest rate swap was used to hedge the
exposure to changes in the cashflows of the Group's variable rate
medium-term loan. In accordance with IFRS 9, this derivative
instrument was categorised as a cash flow hedge at the inception of
the hedging relationship, and on an ongoing basis, the Group
assessed whether a hedging relationship meets the hedge
effectiveness requirements. At a minimum, an entity shall perform
the ongoing assessment at each reporting date or upon a significant
change in the circumstances affecting the hedge effectiveness
requirements, whichever comes first. The assessment relates to
expectations about hedge effectiveness and is therefore only
forward-looking.
The Group has established a ratio of 1:1 for the hedging
relationship as the underlying risk of the interest rate swap is
identical to the hedged risk component. The hedging instrument and
the hedged item have values move in the opposite direction due to
the same risk and, therefore, that there is an economic
relationship between the hedged item and the instrument coverage as
the terms of the interest rate swap match the terms of the fixed
rate loan (i.e., notional amount, maturity and payment dates). That
said, it is observed that the effectiveness tests comply with the
requirements of IFRS 9 and conclude that the hedging strategy is
highly effective. There is no ineffectiveness recognised in profit
or loss.
The fair value of the interest rate swap was calculated using a
discounted cash flow model applying a combination of level 1 (USD
swap curve and USD zero yield curve) and level 2 inputs. This
approach results in the fair value measurement categorised in its
entirety as level 2 in the fair value hierarchy.
The Group repaid the interest rate swap on 21 September 2021
paying US$3,774,000. The Group do not have any interest rate swap
in 2022.
The effect recorded was as follows:
US$000
================================= ======
Income statement - Finance costs 5,521
------------------------------------- ------
Equity - Cash flow hedge reserve 5,913
------------------------------------- ------
(h) Capital risk management
The Group's objectives when managing capital are to safeguard
the Group's ability to continue as a going concern in order to
provide returns for shareholders, benefits for other stakeholders,
and to maintain an optimal capital structure to reduce the cost of
capital. Management considers as part of its capital, the financial
sources of funding from shareholders and third parties (notes 27
and 29).
In 2022 the Group received proceeds from borrowings of
US$28,911,000 (2021: US$105,954,000) whilst US$11,557,000 (2021:
US$14,793,000) was repaid. In addition, in 2022 the Group closed a
US$200,000,000 medium term committed debt facility with Scotiabank
and BBVA. The facility is available and subject to obtaining
Inmaculada's MEIA
Management also retains the right to fund operations (fully
owned and with joint venture partners) with a mix of equity and
joint venture partners' debt.
39 Subsequent events
(a) Hedges
In April 2023, the Group entered into the following hedges to
increase cash flow certainty for the rest of the year and during
the construction of Mara Rosa and its first year of production:
-- 29,250 ounces of 2023 gold production at $2,047 per ounce; and
-- 27,600 ounces of 2024 gold production at $2,100.
(b) Termination of Snip Option
On 4 April 2023, the Company terminated the option to earn-in a
60% interest in the Snip project. Termination of the option became
effective immediately and, as a result, the Company has no
liability to complete the Aggregate Expenditure Requirement.
In addition, the Company provided confirmation to Skeena that it
had satisfied the Minimum Annual Expenditure Requirement in respect
of the 12-month period that commenced on 14 October 2022.
Accordingly, no cash payment is due under the terms of the option
agreement.
Profit by operation 1
(Segment report reconciliation) as at 31 December 2022
Consolidation
adjustment
Group (US$000) Inmaculada San Jose Pallancata and others Total/HOC
========================================= ========== ========= ========== ============= =========
Revenue 413,928 243,469 77,566 680 735,643
------------------------------------------- ---------- --------- ---------- ------------- ---------
Cost of sales (pre consolidation) (249,623) (199,343) (85,733) 7,056 (527,643)
=========================================== ========== ========= ========== ============= =========
Consolidation adjustment 6,732 (243) 567 (7,056) -
------------------------------------------- ---------- --------- ---------- ------------- ---------
Cost of sales (post consolidation) (242,891) (199,586) (85,166) - (527,643)
------------------------------------------- ---------- --------- ---------- ------------- ---------
Production cost excluding depreciation (156,551) (152,160) (75,472) - (384,183)
------------------------------------------- ---------- --------- ---------- ------------- ---------
Depreciation in production
cost (79,760) (48,484) (9,503) - (137,747)
------------------------------------------- ---------- --------- ---------- ------------- ---------
Workers profit sharing (1,777) - (1,544) - (3,321)
------------------------------------------- ---------- --------- ---------- ------------- ---------
Other items (2,525) (5,003) (495) - (8,023)
------------------------------------------- ---------- --------- ---------- ------------- ---------
Change in inventories (2,278) 6,061 1,848 - 5,631
=========================================== ========== ========= ========== ============= =========
Gross profit 164,305 44,126 (8,167) 7,736 208,000
------------------------------------------- ---------- --------- ---------- ------------- ---------
Administrative expenses - - - (54,158) (54,158)
------------------------------------------- ---------- --------- ---------- ------------- ---------
Exploration expenses - - - (56,826) (56,826)
------------------------------------------- ---------- --------- ---------- ------------- ---------
Selling expenses (796) (12,614) (622) - (14,032)
------------------------------------------- ---------- --------- ---------- ------------- ---------
Other income/(expenses) - - - (35,962) (35,962)
------------------------------------------- ---------- --------- ---------- ------------- ---------
Operating profit before impairment 163,509 31,512 (8,789) (139,210) 47,022
------------------------------------------- ---------- --------- ---------- ------------- ---------
Reversal impairment/(impairment)
and write-off of non-current
assets, net - - - 9,531 9,531
------------------------------------------- ---------- --------- ---------- ------------- ---------
Share of post-tax losses from
associate - - - (11,600) (11,600)
------------------------------------------- ---------- --------- ---------- ------------- ---------
Finance income - - - 5,211 5,211
------------------------------------------- ---------- --------- ---------- ------------- ---------
Finance costs - - - (21,776) (21,776)
------------------------------------------- ---------- --------- ---------- ------------- ---------
Foreign exchange loss - - - (2,622) (2,622)
------------------------------------------- ---------- --------- ---------- ------------- ---------
Profit/(loss) from operations
before
income tax 163,509 31,512 (8,789) (160,466) 25,766
------------------------------------------- ---------- --------- ---------- ------------- ---------
Income tax expense - - - (20,934) (20,934)
------------------------------------------- ---------- --------- ---------- ------------- ---------
Profit/(loss) for the year
from operations 163,509 31,512 (8,789) (181,400) 4,832
------------------------------------------- ---------- --------- ---------- ------------- ---------
1 On a post-exceptional basis.
RESERVES AND RESOURCES
Ore reserves and mineral resources estimates
Hochschild Mining PLC reports its mineral resources and reserves
estimates in accordance with the Australasian Code for Reporting of
Exploration Results, Mineral Resources and Ore Reserves 2012
edition ("the JORC Code"). This establishes minimum standards,
recommendations and guidelines for the public reporting of
exploration results and mineral resources and reserves estimates.
In doing so it emphasises the importance of principles of
transparency, materiality and confidence. The information on ore
reserves and mineral resources on pages 89 to 91 were prepared by
or under the supervision of Competent Persons (as defined in the
JORC Code). Competent Persons are required to have sufficient
relevant experience and understanding of the style of
mineralisation, types of deposits and mining methods in the area of
activity for which they are qualified as a Competent Person under
the JORC Code. The Competent Person must sign off their respective
estimates of the original mineral resource and ore reserve
statements for the various operations and consent to the inclusion
of that information in this report, as well as the form and context
in which it appears.
Hochschild Mining PLC employs its own Competent Person who has
audited all the estimates set out in this report. Hochschild Mining
Group companies are subject to a comprehensive programme of audits
which aim to provide assurance in respect of ore reserve and
mineral resource estimates. These audits are conducted by Competent
Persons provided by independent consultants. The frequency and
depth of an audit depends on the risks and/or uncertainties
associated with that particular ore reserve and mineral resource,
the overall value thereof and the time that has lapsed since the
previous independent third-party audit.
The JORC Code requires the use of reasonable economic
assumptions. These include long-term commodity price forecasts
(which, in the Group's case, are prepared by ex-house specialists
largely using estimates of future supply and demand and long-term
economic outlooks).
Ore reserve estimates are dynamic and are influenced by changing
economic conditions, technical issues, environmental regulations
and any other relevant new information and therefore these can vary
from year-to-year. Mineral resource estimates can also change and
tend to be influenced mostly by new information pertaining to the
understanding of the deposit and secondly the conversion to ore
reserves.
The estimates of ore reserves and mineral resources are shown as
at 31 December 2022, unless otherwise stated. Mineral resources
that are reported include those mineral resources that have been
modified to produce ore reserves. All tonnage and grade information
has been rounded to reflect the relative uncertainty in the
estimates; there may therefore be small differences. The prices
used for the reserves calculation were: Au Price: US$1,800 per
ounce and Ag Price: US$24.0 per ounce.
ATTRIBUTABLE METAL RESERVES AS AT 31 DECEMBER 2022
Proved
and probable Ag Au Ag Au Ag Eq
Reserve category (t) (g/t) (g/t) (moz) (koz) (moz)
----------------- ------------- ------- ------ ------ ------- ------
OPERATIONS (1)
----------------- ------------- ------- ------ ------ ------- ------
Inmaculada
Proved 1,150,208 178 4.1 6.6 152.2 18.0
Probable 4,061,192 149 3.5 19.4 456.6 53.7
------------------ ------------- ------- ------ ------ ------- ------
Total 5,211,400 155 3.6 26.0 608.8 71.7
------------------ ------------- ------- ------ ------ ------- ------
Pallancata
Proved 260,868 236 1.1 2.0 9.0 2.7
Probable 83,149 199 1.2 0.5 3.2 0.8
------------------ ------------- ------- ------ ------ ------- ------
Total 344,017 227 1.1 2.5 12.1 3.4
------------------ ------------- ------- ------ ------ ------- ------
San Jose
Proved 261,412 337 5.9 2.8 50.0 6.6
Probable 218,141 346 6.9 2.4 48.2 6.0
------------------ ------------- ------- ------ ------ ------- ------
Total 479,553 341 6.4 5.3 98.2 12.6
------------------ ------------- ------- ------ ------ ------- ------
Mara Rosa
Proved 11,791,000 - 1.2 - 455.8 34.2
Probable 12,014,000 - 1.2 - 446.2 33.5
------------------ ------------- ------- ------ ------ ------- ------
Total 23,805,000 - 1.2 - 902.0 67.6
------------------ ------------- ------- ------ ------ ------- ------
GRAND TOTAL
Proved 13,463,488 26 1.5 11.4 666.9 61.4
Probable 16,376,482 43 1.8 22.4 954.3 94.0
------------------ ------------- ------- ------ ------ ------- ------
TOTAL 29,839,970 35 1.7 33.8 1,621.2 155.4
------------------ ------------- ------- ------ ------ ------- ------
Note: Where reserves are attributable to a joint venture
partner, reserve figures reflect the Company's ownership only.
Includes discounts for ore loss and dilution.
1 Operations were audited by P&E Consulting.
ATTRIBUTABLE METAL RESOURCES AS AT 31 DECEMBER 2022(1,2)
Tonnes Ag Au Ag Eq Ag Au Ag Eq
Resource category (t) (g/t) (g/t) (g/t) (moz) (koz) (moz)
------------------ ----------- ------ ------ ------ ------ -------- -----------
OPERATIONS
------------------ ----------- ------ ------ ------ ------ -------- -----------
Inmaculada
Measured 1,942,000 184 4.39 514 11.5 274.2 32.1
Indicated 5,651,000 158 3.79 442 28.6 688.2 80.2
------------------- ----------- ------ ------ ------ ------ -------- -----------
Total 7,593,000 164 3.94 460 40.1 962.3 112.3
------------------- ----------- ------ ------ ------ ------ -------- -----------
Inferred 11,272,000 96 2.49 283 34.9 902.2 102.5
------------------- ----------- ------ ------ ------ ------ -------- -----------
Pallancata
Measured 1,409,000 296 1.36 398 13.4 61.5 18.0
Indicated 706,000 238 1.11 321 5.4 25.1 7.3
------------------- ----------- ------ ------ ------ ------ -------- -----------
Total 2,115,000 277 1.27 372 18.8 86.6 25.3
------------------- ----------- ------ ------ ------ ------ -------- -----------
Inferred 3,702,000 452 1.70 579 53.8 202.7 69.0
------------------- ----------- ------ ------ ------ ------ -------- -----------
San Jose
Measured 701,760 483 8.07 1,088 10.9 182.0 24.6
Indicated 467,160 386 6.66 885 5.8 100.0 13.3
Total 1,168,920 444 7.50 1,007 16.7 282.0 37.9
Inferred 1,051,110 404 5.99 854 13.7 202.5 28.8
Mara Rosa
Measured 13,600,000 - 1.20 90 - 510.0 38.3
Indicated 18,700,000 - 1.10 83 - 640.0 48.0
------------------- ----------- ------ ------ ------ ------ -------- -----------
Total 32,300,000 - 1.10 83 - 1,150.0 86.3
------------------- ----------- ------ ------ ------ ------ -------- -----------
Inferred 100,000 - 0.52 39 - 1.7 0.1
------------------- ----------- ------ ------ ------ ------ -------- -----------
GROWTH PROJECTS
------------------ ----------- ------ ------ ------ ------ -------- -----------
Crespo
Measured 5,211,000 47 0.47 82 7.9 78.6 13.8
Indicated 17,298,000 38 0.40 68 20.9 222.5 37.6
------------------- ----------- ------ ------ ------ ------ -------- -----------
Total 22,509,000 40 0.42 71 28.8 301.0 51.4
------------------- ----------- ------ ------ ------ ------ -------- -----------
Inferred 775,000 46 0.57 88 1.1 14.2 2.2
------------------- ----------- ------ ------ ------ ------ -------- -----------
Azuca
Measured 191,000 244 0.77 302 1.5 4.7 1.9
Indicated 6,859,000 187 0.77 244 41.2 168.8 53.8
------------------- ----------- ------ ------ ------ ------ -------- -----------
Total 7,050,000 188 0.77 246 42.7 173.5 55.7
------------------- ----------- ------ ------ ------ ------ -------- -----------
Inferred 6,946,000 170 0.89 237 37.9 199.5 52.9
------------------- ----------- ------ ------ ------ ------ -------- -----------
Volcan
Measured 123,979,000 - 0.700 53 - 2,792.0 209.4
Indicated 339,274,000 - 0.643 48 - 7,013.0 526.0
------------------- ----------- ------ ------ ------ ------ -------- -----------
Total 463,253,000 - 0.658 49 - 9,804.0 735.3
------------------- ----------- ------ ------ ------ ------ -------- -----------
Inferred 75,018,000 - 0.516 39 - 1,246.0 93.5
------------------- ----------- ------ ------ ------ ------ -------- -----------
Arcata
Measured 834,000 438 1.35 539 11.7 36.1 14.4
Indicated 1,304,000 411 1.36 512 17.2 56.9 21.5
------------------- ----------- ------ ------ ------ ------ -------- -----------
Total 2,138,000 421 1.35 523 29.0 93.0 35.9
------------------- ----------- ------ ------ ------ ------ -------- -----------
Inferred 3,533,000 371 1.26 465 42.1 142.6 52.8
------------------- ----------- ------ ------ ------ ------ -------- -----------
GRAND TOTAL
------------------ ----------- ------ ------ ------ ------ -------- -----------
Measured 147,867,760 12 0.83 74 57.0 3,939.1 352.4
------------------- ----------- ------ ------ ------ ------ -------- -----------
Indicated 390,259,160 9 0.71 63 119.2 8,914.4 787.7
------------------- ----------- ------ ------ ------ ------ -------- -----------
Total 538,126,920 10 0.74 66 176.1 12,852.5 1,140.1
------------------- ----------- ------ ------ ------ ------ -------- -----------
Inferred 102,397,110 56 0.88 122 183.4 2,911.4 401.8
------------------- ----------- ------ ------ ------ ------ -------- -----------
1 Prices used for resources calculation: Au: $1,800/oz and Ag: $24.0/oz and Ag/Au ratio of 75x.
2 Tables represents 100 % of the Mineral Resource. Resources are inclusive of Reserves.
CHANGE IN ATTRIBUTABLE RESERVES AND RESOURCES
Percentage December December
attributable 2021 2022
Ag equivalent content December Att. Att
(million ounces) Category 2022 (1) . (1) Net difference % change
---------------------- --------- ------------- -------- -------- -------------- --------
Inmaculada Resource 100% 235.4 214.8 (20.6) (8.7%)
Reserve 87.0 71.7 (15.3) (17.6%)
---------- ------------- -------- -------- -------------- --------
Pallancata Resource 100% 45.2 94.3 49.0 108.4%
Reserve 9.2 3.4 (5.7) (62.6%)
---------- ------------- -------- -------- -------------- --------
San Jose Resource 51% 64.9 66.7 1.8 2.8%
Reserve 18.8 12.6 (6.2) (33.0%)
---------- ------------- -------- -------- -------------- --------
Mara Rosa Resource 100% - 86.4 86.4 -
Reserve - 67.6 67.6 -
Crespo Resource 100% 53.6 53.6 - -
Reserve - - - -
---------------------- --------- ------------- -------- -------- -------------- --------
Azuca Resource 100% 108.6 108.6 - -
Reserve - - - -
---------------------- --------- ------------- -------- -------- -------------- --------
Volcan Resource 100% 716.2 828.8 112.6 15.7%
Reserve - - - -
---------------------- --------- ------------- -------- -------- -------------- --------
Arcata Resource 100% 88.7 88.7 - -
Reserve - - - -
---------------------- --------- ------------- -------- -------- -------------- --------
Total Resource 1,312.6 1,541.9 229.3 17.5%
Reserve 115.0 155.4 40.4 35.1%
---------- --------------------- ------------- -------- -------- -------------- --------
1 Attributable reserves and resources based on the Group's
percentage ownership of its joint venture projects.
SHAREHOLDER INFORMATION
Company website
Hochschild Mining PLC Interim and Annual Reports and results
announcements are available via the internet on our website at
www.hochschildmining.com. Shareholders can also access the latest
information about the Company and press announcements as they are
released, together with details of future events and how to obtain
further information.
Registrars
The Registrars can be contacted as follows for information about
the AGM, shareholdings, and dividends and to report changes in
personal details:
BY POST
Link Asset Services, The Registry, 34 Beckenham Road, Beckenham,
Kent BR3 4TU.
BY TELEPHONE
If calling from the UK: 0371 664 0300 (calls cost 12p per minute
plus your phone company's access charge. Lines are open
9.00am-5.30pm Mon to Fri excluding public holidays in England and
Wales).
If calling from overseas: +44 371 664 0300 (Calls charged at the
applicable international rate).
17 Cavendish Square
London
W1G 0PH
United Kingdom
[1] Revenue presented in the financial statements is disclosed
as net revenue and is calculated as gross revenue less commercial
discounts plus services revenue
(2) Please see the Financial Review page 17 for a definition of
Adjusted EBITDA
[3] 2022 and 2021 equivalent figures calculated using the
previous Company gold/silver ratio of 72x. All 2022 forecasts
assume the average 2022 gold/silver ratio of 83x.
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.
[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 Fixed costs during operational stoppages
and reduced capacity of $8.0 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 $8.7 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] Operating capex from San Jose does not include capitalised
DD&A resulting from mine equipment utilised for mine
developments
[17] Royalties arising from revised royalty tax schemes
introduced in 2011 and included in income tax line
[18] Operating capex from San Jose does not include capitalised
DD&A resulting from mine equipment utilised for mine
developments
[19] Royalties arising from revised royalty tax schemes
introduced in 2011 and included in income tax line
[20] Adjusted EBITDA has been presented before the effect of
significant non-cash (income)/expenses related to changes in mine
closure provisions which were $22.1 million in 2021 and $16.1
million in 2020, and the write-off of property, plant and
equipment
[21] Includes pre-shipment loans and short term interest
payables
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