Q3 2022 Production Report

RNS Number : 1015E

Hochschild Mining PLC

26 October 2022

 

 

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26 October 2022

Production Report for Q3 and the 9 months ended 30 September 2022

Ignacio Bustamante, Chief Executive Officer said:

"Operationally, the third quarter was our strongest yet in 2022 and we expect to meet both our full year production and our cost targets. We have also recently completed our submission in response to the Peruvian government's follow-up comments on Inmaculada's Modified Environmental Impact Assessment and currently expect a final decision before the year-end.

I am also delighted to announce a major discovery at our Pallancata deposit which, although just outside the existing permitted area, is expected to ensure the medium to long-term future of the mine. We are aiming to announce a preliminary Inferred resource in the next few weeks and will make a decision on the operation's short-term future in 2023.

Finally, we have made further solid progress at our Mara Rosa project in Brazil where we have reached 16% completion and remain on schedule and on budget with all key infrastructure, procurement and construction targets."  

Operational highlights

§ Strongest quarter year-to-date^[1]

o  52,713 ounces of gold

o  3.0 million ounces of silver

o  94,466 gold equivalent ounces

o  6.8 million silver equivalent ounces

§ Robust 9-month operational performance

o  149,073 ounces of gold

o  8.1 million ounces of silver

o  261,173 gold equivalent ounces

o  18.8 million silver equivalent ounces

§ On track to deliver full year attributable 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)

Exploration & Project Development highlights

§ Major medium-term brownfield discovery at Pallancata

o  High-grade structures with good widths drilled close to existing permitted area and existing operations

o  Estimated Inferred resource to be reported in next few weeks

§ Mara Rosa project in Brazil advancing on schedule and on budget - total project progress is 16%

§ Drilling completed at Snip - study results expected by year-end

Strong financial position

§ Total cash of approximately $169 million as at 30 September 2022 ($204 million as at 30 June 2022)

§ Net debt of approximately $151 million as at 30 September 2022 ($109 million as at 30 June 2022)

§ Current Net Debt/LTM EBITDA of approximately 0.55x as at 30 September 2022

ESG highlights

§ Lost Time Injury Frequency Rate of 1.11 (FY 2021: 1.26)^[2]

§ Accident Severity Index of 86 (FY 2021: 676)^[3]

§ Water consumption of 170lt/person/day (FY 2021: 193lt/person/day)

§ Domestic waste generation of 1.03 kg/person/day (FY 2021: 1.00kg/person/day)

§ ECO score of 5.38 out of 6 (FY 2021: 5.29)^[4] 

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A conference call will be held at 1.30pm (London time) on Wednesday 26 October 2022 for analysts and investors. 

Dial in details as follows:

UK Toll-Free Number: 0808 109 0700

International Dial in: [phone]

US/Canada Toll-Free Number: 866-966-5335

Pin: 7758425

Please dial into the call approximately ten minutes before the 1.30pm 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 Q3 2022, Hochschild Mining PLC (HOC.LN) (OTCMKTS: $HCHDF) ("Hochschild" or "the Company") delivered attributable production of 94,466 gold equivalent ounces or 6.8 million silver equivalent ounces, representing a 9% increase versus the second quarter of 2022 and featuring a strong period at the Inmaculada mine. Overall year-to-date attributable production is 261,173 gold equivalent ounces or 18.8 million silver equivalent ounces. 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

	Q3 2022	Q2 2022	Q3 2021	YTD 2022	YTD 2021
Silver production (koz)	3,858	3,346	3,833	9,964	10,854
Gold production (koz)	62.57	60.27	69.09	176.51	194.17
Total silver equivalent (koz)	8,364	7,685	8,807	22,673	24,834
Total gold equivalent (koz)	116.16	106.74	122.32	314.90	344.92
Silver sold (koz)	3,895	3,445	3,830	9,940	10,835
Gold sold (koz)	62.79	63.06	68.60	175.49	192.91

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

ATTRIBUTABLE GROUP PRODUCTION

	Q3 2022	Q2 2022	Q3 2021	YTD 2022	YTD 2021
Silver production (koz)	3,006	2,641	3,043	8,071	8,964
Gold production (koz)	52.71	49.13	58.25	149.07	164.51
Silver equivalent (koz)	6,802	6,179	7,237	18,804	20,809
Gold equivalent (koz)	94.47	85.82	100.51	261.17	289.02

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

Production

Inmaculada

Product	Q3 2022	Q2 2022	Q3 2021	YTD 2022	YTD 2021
Ore production (tonnes treated)	348,105	327,837	336,178	1,005,307	1,008,315
Average grade silver (g/t)	151	137	184	147	168
Average grade gold (g/t)	3.75	3.47	4.34	3.66	4.06
Silver produced (koz)	1,519	1,322	1,608	4,334	4,385
Gold produced (koz)	39.82	34.86	44.34	112.48	123.74
Silver equivalent (koz)	4,386	3,831	4,801	12,433	13,295
Gold equivalent (koz)	60.91	53.21	66.67	172.68	184.65
Silver sold (koz)	1,514	1,422	1,604	4,319	4,373
Gold sold (koz)	40.06	37.56	44.42	112.78	123.91

Third quarter production at Inmaculada was 39,819 ounces of gold and 1.5 million ounces of silver which amounts to a gold equivalent output of 60,911 ounces with higher-than-expected grades and recoveries contributing to a strong operational period. Year-to-date, Inmaculada's output is 172,677 gold equivalent ounces (Q3 YTD 2021: 184,650 gold equivalent ounces), placing Inmaculada in a strong position to meet its annual forecast of 233,000-239,000 ounces.

Pallancata

Product	Q3 2022	Q2 2022	Q3 2021	YTD 2022	YTD 2021
Ore production (tonnes treated)	145,212	134,276	113,451	404,269	402,453
Average grade silver (g/t)	149	154	188	155	223
Average grade gold (g/t)	0.64	0.69	0.79	0.69	0.84
Silver produced (koz)	601	586	612	1,768	2,612
Gold produced (koz)	2.63	2.69	2.63	8.03	9.91
Silver equivalent (koz)	790	780	801	2,346	3,326
Gold equivalent (koz)	10.97	10.83	11.13	32.58	46.19
Silver sold (koz)	593	584	622	1,754	2,621
Gold sold (koz)	2.60	2.66	2.62	7.96	9.91

In Q3, Pallancata produced 0.6 million ounces of silver and 2,633 ounces of gold bringing the silver equivalent total to 0.8 million, with grades lower than budgeted but in line with the two previous quarters. Overall, in the first nine months of the year, Pallancata has produced 2.3 million silver equivalent ounces (Q3 2021 YTD: 3.3 million ounces).

The brownfield exploration team expects to continue drilling a number of targets within the existing permitted area during the remainder of 2022. Depending on those results and the level of precious metal prices, Hochschild will make a decision on whether to place the mine on care and maintenance in 2023, while the Company secures the necessary permits to bring the new discovery into production.

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

Product	Q3 2022	Q2 2022	Q3 2021	YTD 2022	YTD 2021
Ore production (tonnes treated)	149,138	131,467	149,637	354,497	395,831
Average grade silver (g/t)	413	383	381	385	343
Average grade gold (g/t)	4.86	6.09	5.24	5.63	5.37
Silver produced (koz)	1,739	1,438	1,613	3,862	3,856
Gold produced (koz)	20.12	22.72	22.12	56.00	60.52
Silver equivalent (koz)	3,188	3,074	3,206	7,894	8,214
Gold equivalent (koz)	44.28	42.69	44.52	109.64	114.08
Silver sold (koz)	1,788	1,440	1,605	3,868	3,841
Gold sold (koz)	20.13	22.83	21.56	54.75	59.10

The San Jose mine enjoyed a solid quarter with silver grades higher than expected although this was partially offset by moderately lower than expected gold grades. Production in the period was 1.7 million ounces of silver and 20,120 ounces of gold which represents 3.2 million silver equivalent ounces. This therefore amounts to a nine-month total of 7.9 million silver equivalent ounces (Q3 2021 YTD: 8.2 million ounces).

Average realisable prices and sales

Average realisable precious metal prices in Q3 2022 (which are reported before the deduction of commercial discounts) were $1,667/ounce for gold and $20.4/ounce for silver (Q3 2021: $1,768/ounce for gold and $22.0/ounce for silver). For the first nine months of 2022, average realisable precious metal prices were $1,801/ounce for gold and $22.4/ounce for silver (Q3 YTD 2021: $1,771/ounce for gold and $24.8/ounce for silver).

Advanced Project: Mara Rosa

The Mara Rosa project in Brazil is progressing according to schedule and budget with total project progress at 16% and detailed engineering 90% complete.

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 500,000 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.

Earthworks

Site clearance for the processing plant and earthworks are at an advanced stage (72% and 67% respectively) whilst those for crushing and stockpiles are complete. In addition, sites for grinding, leaching, thickening and the main substation are expected to be finished by the end of October which will allow civil works to start before the rainy season. Site clearance and excavation work on the reservoir site has been completed with waterproofing scheduled to finish by the end of this month. Pre stripping activity is expected to start in November.

Procurement

Currently purchase orders have been issued for 89% of the project equipment. Deliveries are on schedule with key equipment such as the crusher, conveyor belts, HDPE pipes, aluminium cabling for the transmission lines and the wastewater treatment station equipment already received.

Processing plant

The civil works contractor arrived on site in September and is currently 50% mobilised with full deployment (materials, personnel, concrete station and other equipment) expected towards the end of November. Work on the foundations for the crushing and stockpile areas commenced on 3 October with expansion to other areas such as grinding, leaching, thickening and the substation expected following completion of the earthworks. The steel structure contract was awarded in September to a local construction company with materials set to arrive starting in December. Contracts for the leaching tanks and electromechanical assembly are expected to be awarded by the end of this month.

Infrastructure

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 will be finished by the end of the month while the main project drainage system will start construction shortly. In addition, a temporary warehouse has been completed to store equipment, steel and materials during construction.

Power supply will be provided by the building of a 67km, 138kv transmission line from the Porangatu substation with work currently 20% advanced and expected to be completed by June 2023.

Sustainability

Environmental controls to monitor construction work are being executed and reporting to local authorities. 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 culture, environmental, education and project history. The trail will be used as a learning tool by local schools among other local stakeholders. Local supplier and labour training programmes are continuing.

Development Project: Snip

The 10,300m drill programme was concluded during the quarter, with completion of the final "infill" and "potential" holes from both underground and surface. All core was logged and sent out for assay testing. Results received during the period 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

Processing plant designs, an updated resource model and the Tailings and Waste Rock Storage Facility designs were completed in Q3 with the full study remaining on track for completion by the end of the year.

Data collection for the Environmental Baseline programme continued, focusing on air, geochemistry, surface water quality and quantity (hydrology), noise and wildlife. In addition, the development of the Terrestrial Ecosystem Map began with studies on soils, terrain and vegetation. A groundwater drilling programme is planned for Q4 in preparation of a numerical hydrogeological model.

The Company hosted a leadership delegation from the Tahltan Central Government at the project site in August.

Brownfield exploration

Inmaculada

In Q3 2022, 2,550m of resource drilling and 250m of potential drilling was carried out. Selected results are below:

Vein	Results (resource drilling)
Josefa	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

During Q4, the programme will focus on 1,500m of resource drilling in the Josefa vein.

Pallancata

At Pallancata, 5,218m of resource drilling was carried out close to existing operations in the Virgen del Carmen Sur, Mateo Rina, and Thalia veins and outside the permitted area in the Marco West vein. The Company is pleased to announce a major discovery west of current operations. The new area, named Royropata is part of the extended Royropata system. Hochschild believes that the new zone contains a significant amount of high-grade silver and gold resources. Although not in the current permitted area, the Company believes that this new discovery has the potential to secure the medium-term future of the Pallancata mine. A preliminary Inferred resource is expected to be completed later in the fourth quarter. Selected results are below:

Vein	Results (resource drilling)
Marco W	DLRY-A07: 10.9m @ 1.0g/t Au & 265g/t Ag DLRY-A10: 17.6m @ 8.5g/t Au & 2,520g/t Ag DLRY-A11: 6.5m @ 6.6g/t Au & 1,994g/t Ag DLRY-A12: 2.4m @ 10.5g/t Au & 3,217g/t Ag DLRY-A13: 6.8m @ 4.1g/t Au & 1,003g/t Ag DLRY-A14: 3.7m @ 1.7g/t Au & 497g/t Ag
Laura	DLRY-A12: 0.8m @ 0.9g/t Au & 309g/t Ag DLRY-A14: 1.0m @ 1.1g/t Au & 290g/t Ag
Royropata 2	DLRY-A07: 0.8m @ 1.7g/t Au & 529g/t Ag DLRY-A11: 0.8m @ 4.3g/t Au & 1,229g/t Ag DLRY-A13: 1.0m @ 2.5g/t Au & 634g/t Ag
Mateo	DLMT-A06: 0.9m @ 0.9g/t Au & 382g/t Ag
Juan 2	DLMT-A06: 0.8m @ 1.8g/t Au & 525g/t Ag
Lucas	DLMT-A07: 1.2m @ 0.9g/t Au & 467g/t Ag

Finally, in Q4, 1,000m of potential drilling is planned within the operating area to define new targets.

San Jose

At San Jose, the brownfield team carried out 3,525m of potential drilling in the San Jose mine area within the Ayelen and Maura veins. Selected results are below:

Vein	Results (potential drilling)
Ayelen SE	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
New vein	SJD-2543: 1.3m @ 14.5g/t Au & 323g/t Ag SJD-2547: 1.0m @ 0.03g/t Au & 427g/t Ag SJD-2547: 0.3m @ 4.8g/t Au & 6,709g/t Ag SJD-2554: 0.8m @ 3.0g/t Au & 98g/t Ag SJD-2556: 0.8m @ 2.6g/t Au & 142g/t Ag

During Q4, the plan is to carry out 1,000m of drilling for new resources from the Ayelen SE and Olivia veins near the operating area.

Financial position

Total cash was approximately $169 million as at 30 September 2022 resulting in net debt of approximately $151 million.

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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) 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' of 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.

This announcement contains information which prior to its release could be considered inside information.

LEI: 549300JK10TVQ3CCJQ89

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[1] All equivalent figures assume a gold/silver ratio 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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