Q4 2019 Production Report

RNS Number : 8048Z

Hochschild Mining PLC

15 January 2020

 

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15 January 2020

Production Report for the 12 months ended 31 December 2019

Ignacio Bustamante, Chief Executive Officer said:

"I am pleased to report that we have delivered a stronger than forecast final quarter. Consequently, the overall 2019 production figure of 38.7 million silver equivalent ounces is comfortably ahead of the 37.0 million ounce target and includes record contributions from our Inmaculada and San Jose mines. Furthermore, our costs for 2019 are expected to be in line with guidance. We have also substantially improved our financial position with strong free cashflow generation and the refinancing of our short-term debt with a new low cost $200 million loan.

At Inmaculada, we have continued to deliver exciting drill results that are further adding to the resource base. In addition, our 2020 brownfield drilling programme is set for an early start in Peru with the welcome news that we have secured permits to drill at the exciting Pablo Sur and Cochaloma targets close to Pallancata. We will provide updates on progress at these and other campaigns as our exploration programme advances."

Operational highlights

§   Strong full year attributable production in 2019¹

o  269,892 ounces of gold

o  16.8 million ounces of silver

o  477,400 gold equivalent ounces

o  38.7 million silver equivalent ounces (versus target of 37.0 million silver equivalent ounces)

§ Record production at Inmaculada: 260,126 gold equivalent ounces (2018: 244,445 ounces)

§ Record production at San Jose up 10% to 15.4 million silver equivalent ounces (2018: 14.0 million ounces)

§ All-in sustaining costs on track to meet guidance of $960-$1,000 per gold equivalent ounce ($11.8-12.3 per silver equivalent ounce) in 2019²

Exploration highlights

§ Further substantial high grade resources discovered at Inmaculada

§ Permits received for key Pablo Sur & Cochaloma exploration targets close to Pallancata with drilling campaigns set to commence in Q1 2020

Strong financial position

§ Total cash of approximately $166 million as at 31 December 2019 ($80 million as at 31 December 2018)

§ Refinancing of existing $150 million of short term debt with $200 million 5 year loan at LIBOR +1.15%

§ Net debt of approximately $34 million as at 31 December 2019 ($77 million as at 31 December 2018)

§ Current Net Debt/ LTM EBITDA of approximately 0.10x as at 31 December 2019

2020 guidance¹

§ Production target of 422,000 gold equivalent ounces (36.0 million silver equivalent ounces)

§ All-in sustaining costs expected to be $1,040-$1,080 per gold equivalent ounce ($12.1-12.5 per silver equivalent ounce)²

§ Total sustaining and development capital expenditure expected to be approximately $115-130 million including $22 million expansion of tailings storage facility at Inmaculada

§ 2020 brownfield exploration budget expected to be $36 million with greenfield and advanced project budget set at an additional $8 million

________________________________________________________________________________________

A conference call will be held at 2.00pm (London time) on Wednesday 15 January 2020 for analysts and investors. 

Dial in details as follows:

International Dial in: [phone]

UK Toll-Free Number: 0800 358 9473

Pin: 89367617#

A recording of the conference call will be available for one week following its conclusion, accessible from the following telephone number:

International: [phone]

UK Toll Free: 0800 358 2049

Pin: 301308050#

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Note: 2019 equivalent figures calculated using the previous Company gold/silver ratio of 81x. All 2020 forecasts assume the average gold/silver ratio for 2019 of 86x.

Overview

Hochschild delivered a solid quarter of attributable production with 110,679 gold equivalent ounces or 9.0 million silver equivalent ounces principally due to a better than expected performance from the Inmaculada mine. Overall 2019 attributable production was 38.7 million silver equivalent ounces (477,400 gold equivalent ounces), which was due to record years at Inmaculada and San Jose mostly offsetting the decision to place the Arcata mine on care and maintenance in early 2019.

The Company reiterates that its all-in sustaining cost per silver equivalent ounce for 2019 is expected to be in line with the guidance of $960-$1,000 per gold equivalent ounce ($11.8-12.3 per silver equivalent ounce).

TOTAL GROUP PRODUCTION

	Q4 2019	Q3 2019	Q4 2018	12 mths 2019	12 mths 2018
Silver production (koz)	4,641	5,284	5,791	20,163	22,720
Gold production (koz)	78.05	81.37	73.10	321.58	307.77
Total silver equivalent (koz)	10,963	11,876	11,712	46,210	47,650
Total gold equivalent (koz)	135.35	146.61	144.60	570.50	588.27
Silver sold (koz)	4,662	5,179	5,775	20,062	22,687
Gold sold (koz)	77.48	79.79	72.22	317.52	304.51

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

ATTRIBUTABLE GROUP PRODUCTION

	Q4 2019	Q3 2019	Q4 2018	12 mths  2019	12 mths 2018
Silver production (koz)	3,780	4,341	4,975	16,808	19,700
Gold production (koz)	64.02	67.80	60.50	269.89	260.44
Silver equivalent (koz)	8,965	9,833	9,875	38,669	40,795
Gold equivalent (koz)	110.68	121.40	121.92	477.40	503.64

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

Production

Inmaculada

Product	Q4 2019	Q3 2019	Q4 2018	12 mths  2019	12 mths 2018
Ore production (tonnes treated)	327,906	340,176	320,400	1,338,569	1,323,525
Average grade silver (g/t)	179	157	157	163	150
Average grade gold (g/t)	5.09	4.53	4.32	4.71	4.36
Silver produced (koz)	1,359	1,437	1,255	5,747	5,690
Gold produced (koz)	43.82	46.76	37.74	189.18	174.20
Silver equivalent (koz)	4,908	5,224	4,312	21,070	19,800
Gold equivalent (koz)	60.59	64.50	53.24	260.13	244.45
Silver sold (koz)	1,356	1,435	1,251	5,732	5,676
Gold sold (koz)	44.16	46.94	37.27	188.59	172.40

Inmaculada's fourth quarter production was 43,816 ounces of gold and 1.4 million ounces of silver, which amounts to gold equivalent production of 60,594 ounces with extracted grades being better than expected. Overall in 2019, Inmaculada has delivered record gold equivalent production of 260,126 ounces, a 6% improvement on 2018 (2018: 244,445 ounces) with the key factors being better than forecast extracted grades, steady tonnage and  a contribution from products in process from Q4 2018

Pallancata

Product	Q4 2019	Q3 2019	Q4 2018	12 mths  2019	12 mths 2018
Ore production (tonnes treated)	206,109	237,474	231,075	915,877	717,652
Average grade silver (g/t)	258	283	317	278	362
Average grade gold (g/t)	0.98	1.04	1.10	1.01	1.30
Silver produced (koz)	1,524	1,923	2,086	7,259	7,449
Gold produced (koz)	5.60	6.91	7.20	25.95	26.40
Silver equivalent (koz)	1,977	2,483	2,669	9,361	9,588
Gold equivalent (koz)	24.41	30.65	32.95	115.57	118.37
Silver sold (koz)	1,502	1,891	2,093	7,161	7,439
Gold sold (koz)	5.47	6.78	7.35	25.45	26.23

In Q4 2019, Pallancata produced 1.5 million ounces of silver and 5,597 ounces of gold bringing the silver equivalent total to 2.0 million ounces. The full year result was therefore 9.4 million silver equivalent ounces, broadly in line with the 2018 result (2018: 9.6 million ounces) and reflecting a full year of production from wider (and therefore higher tonnage) but lower grade veins.

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

Product	Q4 2019	Q3 2019	Q4 2018	12 mths  2019	12 mths 2018
Ore production (tonnes treated)	145,490	146,921	146,992	544,165	556,185
Average grade silver (g/t)	426	456	401	443	397
Average grade gold (g/t)	6.89	6.58	6.19	6.81	6.20
Silver produced (koz)	1,759	1,925	1,666	6,846	6,165
Gold produced (koz)	28.64	27.70	25.72	105.48	96.59
Silver equivalent (koz)	4,078	4,169	3,749	15,390	13,989
Gold equivalent (koz)	50.35	51.46	46.29	190.00	172.70
Silver sold (koz)	1,804	1,852	1,647	6,846	6,175
Gold sold (koz)	27.85	26.08	25.29	102.82	95.95

The San Jose operation, in southern Argentina, delivered a robust final quarter with grades and tonnage in line with expectations resulting in production of 1.8 million ounces of silver and 28,637 ounces of gold (4.1 million silver equivalent ounces). This brought the overall total for 2019 to a record 15.4 million silver equivalent ounces (2018: 14.0 million ounces), an impressive 10% increase versus 2018 mostly due to better than expected grades.

Arcata

Product	Q4 2019	Q3 2019	Q4 2018	12 mths  2019	12 mths 2018
Ore production (tonnes treated)	-	-	91,203	37,049	373,106
Average grade silver (g/t)	-	-	304	298	321
Average grade gold (g/t)	-	-	0.95	0.94	0.99
Silver produced (koz)	-	-	784	311	3,416
Gold produced (koz)	-	-	2.44	0.97	10.57
Silver equivalent (koz)	-	-	982	390	4,273
Gold equivalent (koz)	-	-	12.12	4.81	52.75
Silver sold (koz)	-	-	783	323	3,397
Gold sold (koz)	-	-	2.30	0.66	9.93

On 13 February 2019, Hochschild announced the suspension of operations at Arcata with the mine subsequently placed on temporary care and maintenance. There was consequently no output in H2 2019, thus production for the full year equalled Q1 2019 at 0.4 million silver equivalent ounces.

Average realisable prices and sales

Average realisable precious metal prices in Q4 2019 (which are reported before the deduction of commercial discounts) were $1,492/ounce for gold and $17.7/ounce for silver (Q4 2018: $1,263/ounce for gold and $15.2/ounce for silver).

For 2019 as a whole, average realisable precious metal prices were $1,414/ounce for gold and $16.5/ounce for silver (2018: $1,268/ounce for gold and $15.3/ounce for silver).

Brownfield exploration

Inmaculada

During Q4 2019, just over 10,000 metres of resource drilling was carried out in the Pilar, Salvador, Noelia, Susana Beatriz, Dora, Jose, and Sandra veins. Selected intercepts are detailed below:

Vein	Results (resource drilling)
Pilar	IMM-19-025: 2.1m @ 6.2g/t Au & 271g/t Ag IMM-19-028: 1.1m @ 1.9g/t Au & 69g/t Ag IMM-19-029: 1.0m @ 1.8g/t Au & 87g/t Ag IMM-19-032: 1.5m @ 2.5g/t Au & 250g/t Ag HUA-19-007: 1.7m @ 3.1g/t Au & 180g/t Ag HUA-19-008: 0.8m @ 3.6g/t Au & 150g/t Ag
Salvador	ANE-19-027: 0.8m @ 3.6g/t Au & 192g/t Ag ANE-19-028: 0.9m @ 7.8g/t Au & 357g/t Ag ANE-19-029: 0.9m @ 267g/t Au & 1,783g/t Ag ANE-19-031: 0.8m @ 5.5g/t Au & 700g/t Ag ANE-19-032: 1.6m @ 8.4g/t Au & 509g/t Ag ANE-19-035: 0.8m @ 29.6g/t Au & 794g/t Ag ANE-19-037: 1.5m @ 2.7g/t Au & 120g/t Ag HUA-19-006: 1.0m @ 8.4g/t Au & 534g/t Ag IMM-19-025: 1.4m @ 5.0g/t Au & 261g/t Ag IMM-19-032: 1.0m @ 2.2g/t Au & 168g/t Ag
Susana Beatriz	ANE-19-029: 1.8m @ 2.7g/t Au & 219g/t Ag ANE-19-030: 2.3m @ 3.1g/t Au & 253g/t Ag ANE-19-037: 2.2m @ 1.7g/t Au & 136g/t Ag HUA-19-006: 1.3m @ 3.3g/t Au & 272g/t Ag HUA-19-007: 1.5m @ 3.7g/t Au & 102g/t Ag HUA-19-008: 1.6m @ 3.3g/t Au & 122g/t Ag
Dora	IMM-19-025: 1.5m @ 13.6g/t Au & 682g/t Ag IMM-19-026: 3.0m @ 7.2g/t Au & 279g/t Ag IMM-19-030: 0.9m @ 6.9g/t Au & 231g/t Ag SP-19-0223: 1.5m @ 9.6g/t Au & 351g/t Ag SP-19-0238: 0.9m @ 6.0g/t Au & 235g/t Ag
Jose	MIL-19-033: 3.5m @ 2.6g/t Au & 12g/t Ag MIL-19-040: 1.6m @ 10.7g/t Au & 135g/t Ag MIL-19-047: 5.7m @ 3.8g/t Au & 119g/t Ag MIL-19-050: 1.6m @ 4.2g/t Au & 7g/t Ag MIL-19-052: 1.5m @ 2.3g/t Au & 40g/t Ag MIL-19-053: 0.9m @ 3.0g/t Au & 259g/t Ag MIL-19-058: 2.0m @ 4.3g/t Au & 146g/t Ag MIL-19-062: 0.6m @ 6.2g/t Au & 781g/t Ag MIL-19-063: 1.8m @ 3.8g/t Au & 191g/t Ag MIL-19-071: 0.9m @ 3.3g/t Au & 115g/t Ag MIL-19-083: 1.4m @ 3.8g/t Au & 97g/t Ag MIL-19-086: 3.7m @ 2.4g/t Au & 55g/t Ag
Sandra	MIL-19-042: 0.8m @ 3.9g/t Au & 151g/t Ag MIL-19-059: 3.6m @ 1.3g/t Au & 62g/t Ag MIL-19-060: 13.2m @ 3.0g/t Au & 148g/t Ag MIL-19-068: 1.5m @ 5.5g/t Au & 235g/t Ag MIL-19-074: 1.2m @ 8.0g/t Au & 155g/t Ag MIL-19-077: 1.8m @ 2.2g/t Au & 81g/t Ag MIL-19-079: 1.3m @ 8.0g/t Au & 349g/t Ag MIL-19-084: 1.6m @ 3.1g/t Au & 54g/t Ag MIL-19-088: 3.1m @ 5.7g/t Au & 323g/t Ag MIL-19-090: 1.4m @ 2.5g/t Au & 178g/t Ag

During Q4, the Company executed 37,000 metres of infill drilling at Inmaculada with 25,000 metres at the Millet vein, 3,000 metres in the Keyla vein and 1,500 metres in Angela. The brownfield team are currently conducting infill drilling at the Divina and Susana Beatriz veins with results pending.

Vein	Results (infill drilling)
Millet	MIL-19-051: 5.8m @ 3.8g/t Au & 138g/t Ag MIL-19-053: 9.2m @ 4.1g/t Au & 88g/t Ag MIL-19-056: 1.2m @ 8.2g/t Au & 804g/t Ag MIL-19-059: 10.5m @ 3.4g/t Au & 127g/t Ag MIL-19-060: 4.4m @ 11.0g/t Au & 432g/t Ag MIL-19-062: 1.6m @ 3.9g/t Au & 199g/t Ag MIL-19-072: 12.5m @ 4.5g/t Au & 51g/t Ag MIL-19-075: 2.5m @ 4.4g/t Au & 122g/t Ag MIL-19-080: 1.3m @ 3.5g/t Au & 263g/t Ag MIL-19-082: 3.3m @ 66.0g/t Au & 835g/t Ag MIL-19-088: 6.6m @ 4.7g/t Au & 184g/t Ag MIL-19-093: 3.1m @ 4.3g/t Au & 108g/t Ag MIL-19-096: 2.0m @ 5.9g/t Au & 79g/t Ag MIL-19-098: 9.9m @ 7.1g/t Au & 106g/t Ag
Alesandra	MIL-19-074: 7.3m @ 4.5g/t Au & 166g/t Ag MIL-19-077: 8.2m @ 3.4g/t Au & 189g/t Ag MIL-19-088: 0.8m @ 7.0g/t Au & 261g/t Ag SP-19-0284: 0.8m @ 12.8g/t Au & 25g/t Ag
Veronica	MIL-19-042: 1.8m @ 4.7g/t Au & 350g/t Ag MIL-19-045: 2.0m @ 21.3g/t Au & 2,373g/t Ag MIL-19-049: 1.3m @ 4.0g/t Au & 188g/t Ag MIL-19-053: 0.8m @ 8.6g/t Au & 55g/t Ag MIL-19-066: 0.8m @ 3.9g/t Au & 222g/t Ag MIL-19-082: 1.0m @ 5.4g/t Au & 10g/t Ag MIL-19-090: 2.2m @ 2.1g/t Au & 233g/t Ag MIL-19-096: 1.7m @ 3.8g/t Au & 113g/t Ag MIL-19-102: 0.9m @ 5.1g/t Au & 15g/t Ag

Pallancata

In Pallancata, 6,000 metres of potential and resource drilling were carried out inside the mine of which 3,700 metres were long drill holes to the Altzee, Royropata, Mercedes and additional as-yet-unnamed veins with the results indicating the continuation of the Rina 4 vein to the north-east. Also, in the Marco and Pablo vein zones, 2,400 metres of resource drilling was executed in the Juan, Simon and Andres structures with economic intercepts indicating new resources in this area.

Vein	Results (potential)
Rina	DLVC-A61: 0.8m @ 1.0g/t Au & 425g/t Ag
Simon	DLMARC-A17: 2.4m @ 1.2/t Au & 366g/t Ag

The Peruvian government recently granted the requisite permits for surface drilling to begin at the Pablo Sur and Cochaloma zones close to Pallancata. Later in January 2020, a 4,500m potential drilling programme will start at Pablo Sur whilst a 2,000m programme is also set for Cochaloma.

San Jose

At San Jose, 5,300 metres of potential drilling was carried out in Q4 at the Micaela, Ayelen extension, Kospi Norte and Tonio veins, as well as to the north-west at Aguas Vivas. In addition, almost 4,000 metres of resource drilling was executed around the current operations.

Vein	Results
Sigmoide Luli	SJD-2013: 0.9m @ 1.0g/t Au & 142g/t Ag SJD-2014: 4.1m @ 1.5g/t Au & 45g/t Ag
Luli Sur	SJD-2013: 3.1m @ 7.0g/t Au & 727g/t Ag SJD-2014: 0.8m @ 4.2g/t Au & 753g/t Ag
Shala	SJD-2013: 0.9m @ 1.2g/t Au & 90g/t Ag
Mara	SJD-2013: 1.0m @ 13.3g/t Au & 1,259g/t Ag
Ramal Luli	SJD-2014: 1.9m @ 2.7g/t Au & 43g/t Ag
Ramal Ayelen	SJD-2018: 1.6m @ 24.3g/t Au & 1,302g/t Ag
New vein	SJM-446: 2.0m @ 1.7g/t Au & 78g/t Ag

 

Ares

In Q4, 1,711m of potential drilling was carried at Ares following previous results from long drill holes. New structures were identified with grades but were generally narrow. New surveys east of the Victoria target are scheduled for 2020.

Vein	Results
Lula	DDHVIC-1901: 0.3m @ 0.4g/t Au & 124g/t Ag
New structure	DDHVIC-1901: 0.3m @ 3.7g/t Au & 737g/t Ag DDHVIC-1901: 0.3m @ 2.8g/t Au & 262g/t Ag DDHVIC-1902: 0.3m @ 1.8g/t Au & 56g/t Ag DDHVIC-1902: 0.9m @ 4.2g/t Au & 49g/t Ag DDHVIC-1902: 0.6m @ 1.9g/t Au & 31g/t Ag DDHVIC-1902: 0.3m @ 1.2g/t Au & 3g/t Ag DDHVIC-1902: 0.3m @ 1.4g/t Au & 146g/t Ag DDHVIC-1902: 0.4m @ 9.7g/t Au & 61g/t Ag DDHVIC-1902: 1.5m @ 4.8g/t Au & 13g/t Ag

Financial position

Total cash was approximately $166 million as at 31 December 2019 resulting in net debt of approximately $34 million (31 December 2018: $77 million).

On 17 December 2019, the Company closed a 5 year $200 million loan with Scotiabank ($100 million) and BBVA ($100 million) at an interest rate of LIBOR +1.15% with a 2 year grace period. The existing short term debt of $150 million was repaid and therefore the net increase in gross debt was $50 million.

Outlook³

The overall attributable production target for 2020 is 422,000 gold equivalent ounces or 36.0 million silver equivalent ounces.

2020 Production split

Operation	Gold production (oz approximate)	Silver production (m oz approximate)
Inmaculada	181,400	6.1
Pallancata	19,300	5.5
San Jose (100%)	93,300	6.5
Total	294,000	18.1

The all-in sustaining cost from operations in 2020 is expected to be between $1,040 and $1,080 per gold equivalent ounce (or $12.1 and $12.5 per silver equivalent ounce) which includes a $22 million project to expand the tailings storage facility at Inmaculada.

Operation	AISC ($/oz) Au Eq	AISC ($/oz) Ag Eq
Inmaculada	930-960	10.8-11.2
Pallancata	1,160-1,200	13.5-13.9
San Jose	1,150-1,190	13.4-13.8
Total from operations	1,040-1,080	12.1-12.5

The overall capital expenditure budget for 2020 is approximately $115-130 million allocated to sustaining and development expenditure. This includes a $22 million investment in the above-mentioned tailings storage facility expansion at Inmaculada.

2020 Capital expenditure split

Operation	Sustaining & development capital expenditure ($m)
Inmaculada	80-85
Pallancata	5-10
San Jose	30-35
Total	115-130

The brownfield exploration budget for 2020 is approximately $36 million with the greenfield and advanced project budget set at approximately $8 million and approximately $7 million for the recently-acquired BioLantanidos deposit in Chile.

________________________________________________________________________________________

Enquiries:

Hochschild Mining plc

Charles Gordon                                                                                                                                                                               [phone]

Head of Investor Relations

Hudson Sandler

Charlie Jack                                                                                                                                                                                      [phone]

Public Relations

________________________________________________________________________________________

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 has 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.

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 2019 equivalent figures calculated using the previous Company gold/silver ratio of 81x. All 2020 forecasts assume the average gold/silver ratio for 2019 of 86x.

² All in-sustaining costs from operations

³ Although forecasts are unchanged versus press release dated 22/11/2019, equivalent figures have been updated to assume the average gold/silver ratio for 2019 of 86x.

 

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