Q4 2016 Production Report

RNS Number : 4084U
Hochschild Mining PLC
18 January 2017
 

   

__________________________________________________________________________________

 

18 January 2017  

 

Production Report for the 12 months ended 31 December 2016

 

 

Ignacio Bustamante, Chief Executive Officer said:

"We are pleased that we have achieved a historic production record for the Company whilst exceeding our annual production targets and maintaining our guidance on full year costs. This result includes a successful first full year contribution from our flagship low cost Inmaculada mine as well as Arcata's strongest performance for six years. In addition, we maintained our focus on debt reduction and used excess cash flow to materially reduce our leverage ratio, beyond the guidance provided for the year.

 

In 2017, we will continue our focus on cost effective organic growth with the start of production from the new Pablo vein as well as an increase in brownfield drilling as part of our recently announced exploration programme. We are also targeting a fifth consecutive year of production increases and, despite the rise in brownfield investment, cost control at all our mines will remain a priority."

 

Operational highlights

§ Record full year attributable production in 20161

17.3 million ounces of silver

246.1 thousand ounces of gold

35.5 million silver equivalent ounces, up 31% versus 2015 (27.0 million ounces)

479.6 thousand gold equivalent ounces (2015: 365.4 thousand ounces)

§ Inmaculada's first full year of production exceeded original forecast

163 thousand ounces of gold

4.9 million ounces of silver

229 thousand gold equivalent ounces

16.9 million silver equivalent ounces

§ 2016 all-in sustaining costs per silver equivalent ounce on track to meet $11.0-11.5 guidance

 

Strengthening financial position

§ Total cash of approximately $140 million as at 31 December 2016 ($84 million as at 31 December 2015)

§ $127 million of debt repaid in 2016

§ Net debt of approximately $183 million as at 31 December 2016 ($366 million as at 31 December 2015)

§ Current Net Debt/LTM EBITDA of approximately 0.55x as of 31 December 2016

 

2017 guidance

§ Record attributable production target of 37.0 million silver equivalent ounces (500 thousand gold equivalent ounces) exceeding previous guidance of 35.0 million ounces

§ All-in sustaining costs now expected to be $12.2-12.7 per silver equivalent ounce due increased brownfield exploration investment and forecast Pablo expenditure

Sustained control of underlying costs: Excluding the improved investment in brownfield exploration and one-off Pablo investments, all-in sustaining costs would be $11.5-12.0

Inmaculada costs expected to be $9.0-9.5 per silver equivalent ounce

§ Total sustaining and development capital expenditure expected to be approximately $120-130 million including $20 million to develop Pablo vein and its surrounding infrastructure

 

 

__________________________________________________________________________________

 

A conference call will be held at 2.00pm (London time) on Wednesday 18 January 2017 for analysts and investors. 

Dial in details as follows:

International Dial in: +44 (0) 20 3139 4830

UK Toll-Free Number: +44(0) 808 237 0030

Pin: 84813687#

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

International: +44 (0) 20 3426 2807

UK Toll Free: +44(0) 808 237 0026

Pin: 681591#

_________________________________________________________________________________

 

Overview

In Q4 2016, the Company delivered attributable production of 116.6 thousand gold equivalent ounces or 8.6 million silver equivalent ounces. This comprised of 4.1 million ounces of silver and 61.6 thousand ounces of gold. The total production for 2016 was a record 479.6 thousand gold equivalent ounces or 35.5 million silver equivalent ounces. This comprised 17.3 million ounces of silver and 246.1 thousand ounces of gold.

 

The Company reiterates that its all-in sustaining costs per silver equivalent ounce for 2016 is expected to be between $11.0 and $11.5.

 

TOTAL GROUP PRODUCTION

 

Q4 2016

Q3 2016

Q4 2015

12 mths

2016

12 mths

2015

Silver production (koz)

4,910

5,908

5,322

20,562

18,037

Gold production (koz)

74.29

78.91

82.87

292.63

213.37

Total silver equivalent (koz)

10,407

11,747

11,454

42,217

33,827

Total gold equivalent (koz)

140.63

158.75

154.78

570.50

457.12

Silver sold (koz)

4,996

6,011

5,866

21,091

17,263

Gold sold (koz)

75.02

77.85

96.61

298.96

187.39

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

                                     

ATTRIBUTABLE GROUP PRODUCTION

 

Q4 2016

Q3 2016

Q4 2015

12 mths

2016

12 mths

2015

Silver production (koz)

4,075

4,999

4,345

17,284

14,752

Gold production (koz)

61.57

66.38

68.44

246.08

166.02

Silver equivalent (koz)

8,631

9,911

9,410

35,493

27,037

Gold equivalent (koz)

116.64

133.94

127.16

479.64

365.37

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

 

Production

Inmaculada

Product

Q4 2016

Q3 2016

Q4 2015

12 mths

2016

12 mths

2015

Ore production (tonnes treated)

344,199

343,247

329,925

1,306,606

659,737

Average grade silver (g/t)

134

132

118

133

115

Average grade gold (g/t)

4.26

4.09

4.57

4.21

4.36

Silver produced (koz)

1,220

1,318

1,084

4,908

2,055

Gold produced (koz)

41.03

42.48

45.11

162.71

84.64

Silver equivalent (koz)

4,256

4,461

4,423

16,948

8,318

Gold equivalent (koz)

57.51

60.29

59.76

229.03

112.41

Silver sold (koz)

1,266

1,270

1,546

5,004

1,638

Gold sold (koz)

41.93

40.66

63.87

164.75

67.51

 

The Inmaculada flagship operation delivered another consistent quarter with gold production at 41,030 ounces and silver production of 1.2 million ounces (gold equivalent production of 58 thousand ounces) with grade and tonnage remaining strong throughout the period. Inmaculada has delivered a very successful first full year with production reaching a better than expected 229 thousand gold equivalent ounces (16.9 million silver equivalent ounces).

 

Arcata

Product

Q4 2016

Q3 2016

Q4 2015

12 mths

2016

12 mths

2015

Ore production (tonnes treated)

170,128

173,784

184,994

677,309

648,051

Average grade silver (g/t)

344

348

288

337

323

Average grade gold (g/t)

1.21

1.30

1.03

1.24

0.99

Silver produced (koz)

1,669

1,705

1,453

6,343

5,613

Gold produced (koz)

5.85

6.33

4.58

22.54

15.67

Silver equivalent (koz)

2,101

2,174

1,792

8,011

6,772

Gold equivalent (koz)

28.40

29.37

24.21

108.26

91.52

Silver sold (koz)

1,673

1,751

1,798

6,346

5,653

Gold sold (koz)

5.65

6.26

5.30

22.04

15.29

 

At Arcata, silver production in the fourth quarter was 1.7 million ounces with gold production of 5,850 ounces which resulted in silver equivalent production of 2.1 million ounces, a 17% improvement on the corresponding period of 2015 (Q4 2015: 1.8 million ounces). Tonnage and grades have been strong throughout the year in addition to better than expected silver recoveries. Overall in 2016, Arcata delivered its best year since 2010 with 8.0 million silver equivalent ounces produced, an 18% improvement on 2015 (2015: 6.8 million ounces).

 

Pallancata

Product

Q4 2016

Q3 2016

Q4 2015

12 mths

2016

12 mths

2015

Ore production (tonnes treated)

26,881

82,147

107,320

244,765

522,431

Average grade silver (g/t)

414

438

272

381

259

Average grade gold (g/t)

1.98

1.98

1.40

1.86

1.28

Silver produced (koz)

317

1,030

791

2,620

3,664

Gold produced (koz)

1.47

4.54

3.74

12.37

16.42

Silver equivalent (koz)

426

1,365

1,068

3,536

4,879

Gold equivalent (koz)

5.75

18.45

14.43

47.78

65.94

Silver sold (koz)

322

1,023

918

2,660

3,632

Gold sold (koz)

1.45

4.46

4.27

12.41

15.80

 

At Pallancata, production in Q4 was 317,000 ounces of silver and 1,470 ounces of gold bringing the silver equivalent total to 426,000 ounces. The significant reduction versus the third quarter was due to the previously announced road blockade by members of a local community which has halted output since early November 2016. Discussions with relevant parties, which have been facilitated by the Government, remain ongoing. Overall the mine produced 3.5 million silver equivalent ounces in 2016 reflecting a transitional year before the introduction of commercial production from the Pablo vein in 2017.

 

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

Product

Q4 2016

Q3 2016

Q4 2015

12 mths

2016

12 mths

2015

Ore production (tonnes treated)

146,892

140,366

154,642

536,024

532,488

Average grade silver (g/t)

418

469

453

444

448

Average grade gold (g/t)

6.32

6.44

6.63

6.28

6.36

Silver produced (koz)

1,704

1,855

1,994

6,691

6,706

Gold produced (koz)

25.95

25.57

29.44

95.01

96.64

Silver equivalent (koz)

3,624

3,747

4,172

13,721

13,857

Gold equivalent (koz)

48.97

50.64

56.38

185.42

187.25

Silver sold (koz)

1,734

1,967

1,604

7,081

6,340

Gold sold (koz)

26.00

26.47

23.17

99.76

88.79

 

 

San Jose has again proved to be a solid performer in the fourth quarter with production of 3.6 million silver equivalent ounces as increased tonnage mostly offset lower grades. Overall, the operation has enjoyed another successful year with production of 6.7 million ounces of silver and 95 thousand ounces of gold resulting in silver equivalent production of 13.7 million ounces in line with the 2015 result (13.9 million ounces).

 

In November 2015, the Argentinean government restored the right to receive a rebate from goods exported through Patagonian ports (previously cancelled in 2009) and was applicable to Hochschild at a rate of approximately 9% of the FOB value of its exports. However, in the fourth quarter of 2016 the benefit has once again been cancelled.               

 

Average realisable prices and sales

Average realisable precious metal prices in Q4 2016 (which are reported before the deduction of commercial discounts and include the effects of the existing hedging agreements) were $1,139/ounce for gold and $15.0/ounce for silver (Q4 2015: $1,116/ounce for gold and $15.0/ounce for silver). These average prices, which are lower than the average for the period, reflect the final adjustment of preliminary sales of concentrate, previously recognised at the time of shipping at higher spot prices.

 

For 2016 as a whole, average realisable precious metal prices were $1,216/ounce for gold and $17.1/ounce for silver (2015: $1,159/ounce for gold and $16.0/ounce for silver), in line with average market prices for the period.

 

Brownfield exploration

Exploration continued at Pablo in the fourth quarter with results expected to be disclosed at the Annual Results in March.

 

At Arcata, 3,445m of potential drilling was carried out at the extension of Tunel 4, Macarena and Roxana veins whilst at San Jose 3,214m of potential drill holes were executed at the Cerro Colorado hill with results pending.

 

Financial position

Total cash was approximately $140 million as at 31 December 2016 resulting in net debt of approximately $183 million.

 

Outlook

The overall production target for 2017 is 37.0 million silver equivalent ounces or 500 thousand gold equivalent ounces, which consists of:

 

2017 Production split

Operation

2017 Silver equivalent production (m oz approximate)

Inmaculada

17

Arcata

7

Pallancata

6

San Jose

7

 

The all-in sustaining cost per silver equivalent ounce in 2017 is expected to be between $12.2 and $12.7 which includes the previously announced increased budget for brownfield exploration as well as further expenditure on the development of the Pablo vein. Excluding the increased investment in resource growth as well as the one-off investment in Pablo infrastructure, the all-in sustaining cost forecast is between $11.5 and $12.0 per silver equivalent ounce.

 

2017 AISC split

Operation

2017 AISC ($/oz silver equivalent)

2017 AISC ($/oz silver equivalent)

Excluding growth investment

Inmaculada

9.5-10.0

9.0-9.5

Arcata

15.3-15.8

14.5-15.0

Pallancata

14.2-14.7

12.5-13.0

San Jose

12.8-13.3

12.5-13.0

 

 

 

The overall capital expenditure budget for 2017 is approximately $120-130 million allocated to sustaining and development expenditure and includes a $15 million investment in the expansion of the Inmaculada tailings dam as well as expenditure on the development of the Pablo vein ($20 million).

 

2017 Capital expenditure split

Operation

2017 Sustaining & development capital expenditure ($m)

Inmaculada

45-50

Arcata

20

Pallancata

20-25

San Jose

35

 

__________________________________________________________________________________

 

Enquiries:

 

Hochschild Mining plc

Charles Gordon                                                                                                                                               +44 (0)20 3709 3264

Head of Investor Relations

 

Hudson Sandler

Charlie Jack                                                                                                                                                     +44 (0)207 796 4133

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 four underground epithermal vein mines, three 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.

 

- ends -

 

1 All equivalent figures assume a gold/silver ratio of 74x.

 


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