Q4 2021 Production Report

RNS Number : 0184Z

Hochschild Mining PLC

20 January 2022

 

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20 January 2022

Production Report for the 12 months ended 31 December 2021

Ignacio Bustamante, Chief Executive Officer said:

"Our operations have delivered another strong quarter of production and we have once again successfully finished the year in line with guidance. Our brownfield exploration team has continued to add high grade ounces at Inmaculada and San Jose whilst we have hedged further production at Pallancata to ensure profitable production through 2023.

The fourth quarter was a very busy one in terms of business development and expanding our growth pipeline with the announcement of our exciting acquisition of Amarillo Gold and the exercise of our option to start earning-in a 60% interest in the promising Snip gold project in Canada. We look forward to advancing the development of both projects throughout 2022. Finally we were also pleased to complete the successful demerger and IPO of Aclara Resources Inc. towards the end of the year."

Operational highlights

§ Full year attributable production in line with forecasts^[1]

o  221,419 ounces of gold

o  12.2 million ounces of silver

o  362,972 gold equivalent ounces

o  31.2 million silver equivalent ounces

§ Strong operational performance despite impact from Covid protocols in 2021

§ 2021 all-in sustaining costs expected to meet $1,210-$1,250 per gold equivalent ounce guidance ($14.1-14.5 per silver equivalent ounce)

Exploration & Business Development highlights

§ Resources expected to increase by approximately 83 million silver equivalent ounces in 2021

§ Announcement of definitive agreement to acquire Amarillo Gold in Brazil; completion expected in Q1 2022

§ Option exercised to start earning-in 60% interest in Skeena Resources' Snip gold project

§ Completion of demerger & listing of Aclara Resources Inc. on the TSX

§ Volcan Gold project CEO appointed; 2022 work programme being developed

Strong financial position

§ Total cash of approximately $387 million as at 31 December 2021 ($232 million as at 31 December 2020) [2]

§ Increased medium-term debt by $100 million in December 2021 at competitive market rates

§ Net cash of approximately $87 million as at 31 December 2021 ($22 million as at 31 December 2020)

§ Current Net Cash/LTM EBITDA of approximately 0.227x as at 31 December 2021

2021 ESG highlights

§ Lost Time Injury Frequency Rate of 1.26 (2020: 1.38)^[3]

§ Accident Severity Index of 676 (2020: 474)^[4]

§ Water consumption of 193lt/person/day (2020: 231lt/person/day)

§ Domestic waste generation of 1.00 kg/person/day (2020: 1.18kg/person/day)

§ ECO score of 5.29 out of 6 (2020: 5.74)^[5]

2022 guidance

§ Production target:

o  335,000-345,000 gold equivalent ounces (28.8-29.7 million silver equivalent ounces) using 86x gold silver ratio

o  360,000-375,000 gold equivalent ounces (26.0-27.0 million silver equivalent ounces) using 72x gold silver ratio

§ All-in sustaining costs target:

o  $1,440-$1,480 per gold equivalent ounce ($16.8-17.2 per silver equivalent ounce) using 86x gold silver ratio

o  $1,330-$1,370 per gold equivalent ounce ($18.5-19.0 per silver equivalent ounce) using 72x gold silver ratio

§ Total sustaining and development capital expenditure expected to be approximately $150-160 million

§ Brownfield exploration budget expected to be approximately $34 million

§ Amarillo/Posse gold project capital expenditure in Brazil planned for $120 million

§ Greenfield budget of approximately $11 million; Snip investment expected to be approximately $9 million

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A conference call will be held at 1.30pm (London time) on Thursday 20 January 2022 for analysts and investors. 

Dial in details as follows:

UK Toll-Free Number: 0800 279 6877

International Dial in: [phone]

US/Canada Toll-Free Number: 800-289-0720

Pin: 9235113#

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 Q4 2021, Hochschild Mining PLC (HOC.LN) (OTCMKTS: $HCHDF) ("Hochschild" or "the Company") delivered attributable production of 94,222 gold equivalent ounces or 8.1 million silver equivalent ounces, virtually the same as the third quarter result. Overall 2021 attributable production was 362,972 gold equivalent ounces or 31.2 million silver equivalent ounces, in line with the Company's guidance and a strong increase of 25% versus the Covid-impacted 2020.

The Company expects that its all-in sustaining cost for 2021 will be in line with guidance of $1,210-$1,250 per gold equivalent ounce ($14.1-14.5 per silver equivalent ounce).

TOTAL GROUP PRODUCTION

	Q4 2021	Q3 2021	Q4 2020	12 mths  2021	12 mths  2020
Silver production (koz)	3,892	3,833	3,719	14,746	11,821
Gold production (koz)	68.22	69.09	65.67	262.39	207.08
Total silver equivalent (koz)	9,759	9,775	9,366	37,311	29,631
Total gold equivalent (koz)	113.48	113.66	108.91	433.85	344.54
Silver sold (koz)	3,877	3,830	3,803	14,712	11,846
Gold sold (koz)	67.80	68.60	66.57	260.71	207.77

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

ATTRIBUTABLE GROUP PRODUCTION

	Q4 2021	Q3 2021	Q4 2020	12 mths  2021	12 mths  2020
Silver production (koz)	3,209	3,043	3,187	12,174	9,808
Gold production (koz)	56.91	58.25	56.97	221.42	175.24
Silver equivalent (koz)	8,103	8,052	8,087	31,216	24,879
Gold equivalent (koz)	94.22	93.63	94.03	362.97	289.29

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

Production

Inmaculada

Product	Q4 2021	Q3 2021	Q4 2020	12 mths  2021	12 mths  2020
Ore production (tonnes treated)	341,577	336,178	340,854	1,349,892	948,937
Average grade silver (g/t)	191	184	152	174	154
Average grade gold (g/t)	4.03	4.34	4.23	4.05	4.33
Silver produced (koz)	1,850	1,608	1,393	6,236	4,034
Gold produced (koz)	41.99	44.34	43.55	165.73	129.17
Silver equivalent (koz)	5,461	5,421	5,138	20,488	15,143
Gold equivalent (koz)	63.50	63.04	59.75	238.24	176.09
Silver sold (koz)	1,843	1,604	1,404	6,216	4,020
Gold sold (koz)	41.95	44.42	44.05	165.86	129.70

Fourth quarter production at Inmaculada was 41,990 ounces of gold and 1.9 million ounces of silver, which amounts to a gold equivalent output of 63,504 ounces, with higher-than-expected recoveries contributing to another strong operational period. Overall in 2021, Inmaculada has delivered gold equivalent production of 238,238 ounces (2020: 176,086 ounces), with the increase versus 2020 due to the impact of two Covid-19 related stoppages during 2020. Grades and gold recoveries have proved to be higher than originally budgeted.

Pallancata

Product	Q4 2021	Q3 2021	Q4 2020	12 mths  2021	12 mths  2020
Ore production (tonnes treated)	128,228	113,451	186,454	530,681	519,611
Average grade silver (g/t)	177	188	231	212	247
Average grade gold (g/t)	0.85	0.79	0.81	0.84	0.87
Silver produced (koz)	648	612	1,241	3,261	3,679
Gold produced (koz)	3.14	2.63	4.37	13.05	12.93
Silver equivalent (koz)	918	838	1,617	4,382	4,790
Gold equivalent (koz)	10.68	9.75	18.80	50.96	55.70
Silver sold (koz)	642	622	1,287	3,263	3,654
Gold sold (koz)	3.12	2.62	4.56	13.03	12.80

In Q4, Pallancata produced 0.6 million ounces of silver and 3,137 ounces of gold bringing the silver equivalent total to 0.9 million, with treated tonnage slightly higher-than-expected but offset by lower grades. Overall in 2021, Pallancata produced 4.4 million silver equivalent ounces (2020: 4.8 million ounces) with the reduction versus the original forecast (5.4 -5.6 million ounces) due to the effects of lower-than-budgeted grades in line with the current declining production profile.

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

Product	Q4 2021	Q3 2021	Q4 2020	12 mths  2021	12 mths  2020
Ore production (tonnes treated)	143,398	149,637	110,019	539,229	401,202
Average grade silver (g/t)	346	381	345	344	357
Average grade gold (g/t)	5.77	5.24	5.62	5.47	5.63
Silver produced (koz)	1,393	1,613	1,085	5,250	4,108
Gold produced (koz)	23.10	22.12	17.75	83.62	64.99
Silver equivalent (koz)	3,380	3,515	2,611	12,440	9,697
Gold equivalent (koz)	39.30	40.88	30.36	144.66	112.76
Silver sold (koz)	1,392	1,605	1,112	5,233	4,172
Gold sold (koz)	22.73	21.56	17.97	81.83	65.28

The San Jose mine enjoyed another solid quarter with tonnage moderately better than expected although this was partially offset by lower-than-budgeted grades. Production in the period was 1.4 million ounces of silver and 23,097 ounces of gold which represents 3.4 million silver equivalent ounces. This amounts to a 2021 total of 12.4 million silver equivalent ounces (2020: 9.7 million ounces) with the increase versus 2020 reflecting Covid-related stoppages, which impacted the 2020 result. Grades were lower than budgeted for the year but practically offset by better than expected tonnage.

Average realisable prices and sales

Average realisable precious metal prices in Q4 2021 (which are reported before the deduction of commercial discounts) were $1,811/ounce for gold and $25.3/ounce for silver (Q4 2020: $1,869/ounce for gold and $26.2/ounce for silver).

For 2021 as a whole, average realisable precious metal prices were $1,781/ounce for gold and $24.9/ounce for silver (2020: $1,814/ounce for gold and $22.3/ounce for silver).

Brownfield exploration

Inmaculada

In Q4 2021, 3,830m of drilling for potential was carried out along with 4,686m of resource drilling. Selected results are below:

Vein	Results (potential/resource drilling)
Josefa	IMS-21-155: 1.1m @ 17.6g/t Au & 1,149g/t Ag IMS-21-155: 1.2m @ 4.3g/t Au & 70g/t Ag IMS-21-155: 7.8m @ 2.0g/t Au & 70g/t Ag IMS-21-155: 1.0m @ 3.6g/t Au & 114g/t Ag IMS-21-198: 2.3m @ 2.3g/t Au & 312g/t Ag IMS-21-200: 4.9m @ 3.8g/t Au & 311g/t Ag
Juliana NE	IMS-21-174: 4.9m @ 11.3g/t Au & 33g/t Ag IMS-21-182: 1.2m @ 50.8g/t Au & 81g/t Ag IMS-21-184: 3.5m @ 18.0g/t Au & 977g/t Ag
Juliana NE Piso	IMS-21-174: 1.5m @ 3.3g/t Au & 172g/t Ag

During the first quarter of 2022, the programme will focus on 2,100m of potential drilling in the west of the Angela North vein and in the north of the Eduardo vein zone.

Pallancata

At Pallancata, 10,619m of drilling for potential was carried out at the Mirian, San Javier and the continuation of the Pallancata vein to the north west as well as intercepting quartz-sulphide veins, Laura and Demian, trending to the north east. Selected results are below:

Vein	Results (potential drilling)
Laura	DLLAU-A01: 1.9m @ 1.5g/t Au & 473g/t Ag Including : 1.2m @ 2.1g/t Au & 655g/t Ag DLLAU-A03: 2.5m @ 0.8g/t Au & 332g/t Ag Including : 1.1m @ 1.1g/t Au & 537g/t Ag DLLAU-A01: 6.9m @ 10.7g/t Au & 208g/t Ag Including : 1.5m @ 1.2g/t Au & 336g/t Ag
Demian	DLEP-A66 1.3m @ 2.6g/t Au & 696g/t Ag DLLAU-A03: 2.6m @ 1.0g/t Au & 307g/t Ag Including : 1.1m @ 1.8g/t Au & 602g/t Ag

In Q1 2022, the schedule consists of 5,000m of potential drilling in the Laura-Demian veins as well as the Paola, Rina 4, Stockwork Veta Juliet, Stockwork  Pallancata Central and the Gracia veins.

San Jose

At San Jose, the brownfield team carried out 2,892m of drilling at the Saavedra area in the Betania, Jimena, Agostina veins and, in the San Jose mine itself, 1,471m in the Olivia and Karina veins. Selected results are below:

Vein	Results (potential/resource drilling)
Betania	SJD-2408: 2.6m @ 5.4g/t Au & 10g/t Ag SJD-2414: 3.0m @ 7.5g/t Au & 40g/t Ag
Sig Betania	SJD-2408: 1.0m @ 6.1g/t Au & 11g/t Ag
Jimena	SJD-2399: 1.4m @ 3.1g/t Au & 157g/t Ag SJD-2406: 0.8m @ 2.6g/t Au & 482g/t Ag SJD-2410: 6.4m @ 7,1g/t Au & 56g/t Ag SJD-2418: 2.6m @ 3.1g/t Au & 12g/t Ag

The drilling plan for the first quarter will focus on the western zone of the mine in the Olivia NW and Olivia NS structures. At Saavedra, an environmental permit is due before the programme can resume.

Financial position

Total cash was approximately $387 million as at 31 December 2021, resulting in net cash of approximately $87 million. This includes $20 million investment in the IPO of Aclara Resources Inc.

In September 2021, the Company signed an amendment to its existing $200 million loan with Scotiabank and BBVA. This incorporated an additional $100 million borrowing capacity and increased the maturity to five years with a two-year grace period at an interest rate of LIBOR +1.65%. On 1 December 2021, the Company drew down in full on the $100 million. 

In November 2021, the Company hedged 3.3 million ounces of silver for 2023 at an average price of $25.00 per ounce to protect cashflows in Peru. This will ensure profitable production from existing resources, mainly at Pallancata whilst the brownfield exploration team continues to look for additional near-term resources.

Outlook

The overall attributable production target for 2022 is 360,000-375,000 gold equivalent ounces or 26.0-27.0 million silver equivalent ounces. [6]

2022 Attributable production split

Operation	Oz Au Eq	Moz Ag Eq
Inmaculada	218,000-222,000	15.7-16.0
Pallancata	64,000-68,000	4.6-4.9
San Jose	79,000-85,000	5.7-6.1
Total	360,000-375,000	26.0-27.0

The all-in sustaining cost from operations in 2022 is expected to be between $1,330 and $1,370 per gold equivalent ounce (or $18.5 and $19.0 per silver equivalent ounce). Grades at Inmaculada are expected to be lower due to the inclusion into the mine plan of veins discovered between 2018 and 2020. It also includes a rise in mine development costs at Inmaculada and San Jose to access veins discovered in 2021 and increase reserves at San Jose. The impact of updating the gold/silver ratio is approximately $1.8 per silver equivalent ounce.

2022 AISC split

Operation	$/oz Au Eq	$/oz Ag Eq
Inmaculada	1,180-1,210	16.4-16.8
Pallancata	1,760-1,800	24.4-25.0
San Jose	1,370-1,410	19.0-19.6
Total from operations	1,330-1,370	18.5-19.0

The capital expenditure budget for 2022 is approximately $150-160 million allocated to sustaining and development expenditure. This includes the increased mine development costs at Inmaculada and San Jose and tailings dams capacity increases at Inmaculada and Pallancata. Capital expenditure at Pallancata also reflects an increase in development costs to access previously uneconomic zones now incorporated into the remodeled mine plan.

2022 Capital expenditure split

Operation	Sustaining & development capital expenditure ($m)
Inmaculada	87-92
Pallancata	20-22
San Jose (100%)	43-46
Total	150-160

The brownfield exploration budget for 2022 is approximately $34 million with the greenfield and advanced project budget set at approximately $9 million. The Posse gold project capital expenditure budget is set at $120 million with the expected investment in Snip budgeted at approximately $9 million. The Company is also developing a 2022 work programme for the Volcan gold project in Chile and has appointed a CEO for the project.

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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' 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.

LEI: 549300JK10TVQ3CCJQ89

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[1] Unless otherwise stated, 2021 equivalent figures calculated using the previous Company gold/silver ratio of 86x. All 2022 forecasts assume the average gold/silver ratio for 2021 of 72x

[2] Includes $20 million investment in IPO of Aclara Resources Inc.

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

^[4] Calculated as total number of days lost per million labour hours.

[5] 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.

[6] All forecast equivalent figures assume a gold/silver ratio of 72x.

 

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