Q1 2022 Production Report

RNS Number : 2814J

Hochschild Mining PLC

26 April 2022

 

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26 April 2022

Production Report for the 3 months ended 31 March 2022

Ignacio Bustamante, Chief Executive Officer said:

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

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

Operational highlights

§ Q1 2022 attributable production^[1]

o  47,226 ounces of gold

o  2.4 million ounces of silver

o  80,889 gold equivalent ounces

o  5.8 million silver equivalent ounces

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

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

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

Project & Exploration highlights

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

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

§ 2022 brownfield drilling campaigns underway at all operations

ESG highlights

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

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

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

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

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

Strong financial position

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

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

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

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

International Dial in: [phone]; UK Toll-Free Number: 0800 279 6877; US/Canada Toll Free: 800-289-0720

Pin: 8158412

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

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

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Overview

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

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

TOTAL GROUP PRODUCTION

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

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

ATTRIBUTABLE GROUP PRODUCTION

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

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

Production

Inmaculada

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

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

 

Pallancata

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

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

San Jose (the Company has a 51% interest in San Jose)

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

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

Average realisable prices and sales

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

Advanced Project: Mara Rosa

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

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

Development project: Snip

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

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

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

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

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

Possible new veins were identified with the following results:

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

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

Development project: Volcan

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

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

Brownfield exploration

Inmaculada

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

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

Pallancata

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

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

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

 

San Jose

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

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

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

Financial position

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

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Enquiries:

Hochschild Mining PLC

Charles Gordon       [phone]

Head of Investor Relations

Hudson Sandler

Charlie Jack    [phone]

Public Relations

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About Hochschild Mining PLC

Hochschild Mining PLC is a leading precious metals company listed on the London Stock Exchange (HOCM.L / HOC LN) with a primary focus on the exploration, mining, processing and sale of silver and gold. Hochschild has over fifty years' experience in the mining of precious metal epithermal vein deposits and currently operates three underground epithermal vein mines, two located in southern Peru and one in southern Argentina. Hochschild also owns the Mara Rosa Advanced Project in Brazil as well as numerous long-term projects throughout the Americas.

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Forward looking statements

This announcement may contain forward looking statements. By their nature, forward looking statements involve risks and uncertainties because they relate to events and depend on circumstances that will or may occur in the future. Actual results, performance or achievements of Hochschild Mining PLC may, for various reasons, be materially different from any future results, performance or achievements expressed or implied by such forward looking statements.

The forward looking statements reflect knowledge and information available at the date of preparation of this announcement. Except as required by the Listing Rules and applicable law, the Board of Hochschild Mining PLC does not undertake any obligation to update or change any forward looking statements to reflect events occurring after the date of this announcement. Nothing in this announcement should be construed as a profit forecast.

Note

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

LEI: 549300JK10TVQ3CCJQ89

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

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

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

[4]The ECO Score is an internally designed Key Performance Indicator measuring environmental performance in one number and encompassing numerous fronts including management of waste water, outcome of regulatory inspections and sound environmental practices relating to water consumption and the recycling of materials.

 

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