REG - Hochschild MiningPLC - Final Results
23/02/2022 07:00
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RNS Number : 5049C Hochschild Mining PLC 23 February 2022
23 February 2022
Hochschild Mining plc
Preliminary Results
Year ended 31 December 2021
HOCHSCHILD MINING PLC RESULTS FOR YEAR ENDED 31 DECEMBER 2021
Hochschild delivers strong results and strategic progress
Significant 2021 financial performance
§ Strong balance sheet and financial performance despite continuing Covid-19
impact
§ Revenue of $811.4 million (2020: $621.8 million)(( 1 ))
§ Adjusted EBITDA of $382.8 million (2020: $270.9 million)(( 2 ))
§ Profit before income tax (pre-exceptional) of $148.7 million (2020: $85.8
million)
§ Profit before income tax (post-exceptional) of $137.3 million (2020: $62.9
million)
§ Basic earnings per share (pre-exceptional) of $0.14 (2020: $0.06)
§ Basic earnings per share (post-exceptional) of $0.15 (2020: $0.03)
§ Cash and cash equivalent balance of $386.8 million as at 31 December 2021
(2020: $231.9 million)
§ Net cash of $86.3 million as at 31 December 2021 (2020: net cash of $21.6
million)
§ Final proposed dividend of 2.3 cents per share ($12.0 million) bringing the
full-year total cash dividend to $22.0 million (2020: $32.6 million) 3
§ Dividend in specie of $94.9 million from Aclara demerger
2021 Operational strength(( 4 ))
§ All-in sustaining costs (AISC) from operations of $1,241 per gold
equivalent ounce (2020: $1,098) or $14.4 per silver equivalent ounce (2020:
$12.8) in line with full year cost guidance of $1,210-$1,250 per gold
equivalent ounce or $14.1-14.5 per silver equivalent ounce 5
§ Full year attributable production of 362,972 gold equivalent ounces (31.2
million silver equivalent ounces) in line with attributable production
guidance of 360,000-372,000 gold equivalent ounces (31.0-32.0 million silver
equivalent ounces)
§ Strong operational performance despite impact from Covid protocols in 2021
2021 Exploration & Business Development highlights
§ Resource additions on a 100% basis:
o 75 million silver equivalent ounces in 2021 using 72x gold silver ratio
o 83 million silver equivalent ounces in 2021 using 86x gold silver ratio
§ 2021 total reserves up 12% with reserve grade up approximately 19% versus
2020
§ 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 and listing of Aclara Resources Inc. on the TSX
§ Volcan gold project CEO appointed; 2022 work programme being developed
2021 ESG KPIs
§ Lost Time Injury Frequency Rate of 1.26 (2020: 1.38) 6
§ Accident Severity Index of 676 (2020: 474) 7
§ Safety KPIs exclude impact of June 2021 bus accident in line with
parameters adopted by Hochschild in 2018 with reference to guidance from
International Council on Mining and Metals
§ 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) 8
2022 outlook
§ 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
$000 unless stated Year ended Year ended % change
31 Dec 2021 31 Dec 2020
Attributable silver production (koz) 12,174 9,808 24
Attributable gold production (koz) 221 175 26
Revenue 811,387 621,827 30
Adjusted EBITDA 382,837 270,918 41
Profit from continuing operations (pre-exceptional) 67,450 36,192 86
Profit from continuing operations (post-exceptional) 71,106 20,426 248
Basic earnings per share (pre-exceptional) $ 0.14 0.06 133
Basic earnings per share (post-exceptional) $ 0.15 0.03 400
________________________________________________________________________________________
A presentation will be held for analysts and investors at 9.30am (UK time) on
Wednesday 23 February 2022 at the offices of Hudson Sandler,
25 Charterhouse Square, London, EC1M 6AE
The presentation and a link to the live audio webcast of the presentation
can be found at the Hochschild website:
www.hochschildmining.com (http://www.hochschildmining.com)
or:
https://webcasting.brrmedia.co.uk/broadcast/61ee86fe73640b735eff25bb
(https://webcasting.brrmedia.co.uk/broadcast/61ee86fe73640b735eff25bb)
To join the event via conference call, please see dial in details below:
UK Toll-Free Number: 0800 279 6877
International Dial in: +44 (0)330 336 9601
US/Canada Toll-Free Number: 800-289-0720
Pin: 3326250#
________________________________________________________________________________________
Enquiries:
Hochschild Mining plc
Charles Gordon
+44 (0)20 3709 3264
Head of Investor Relations
Hudson Sandler
Charlie Jack
+44 (0)20 7796 4133
Public Relations
________________________________________________________________________________________
Non-IFRS Financial Performance Measures
The Company has included certain non-IFRS measures in this news release. The
Company believes that these measures, in addition to conventional measures
prepared in accordance with IFRS, provide investors an improved ability to
evaluate the underlying performance of the Company. The non-IFRS measures are
intended to provide additional information and should not be considered in
isolation or as a substitute for measures of performance prepared in
accordance with IFRS. These measures do not have any standardised meaning
prescribed under IFRS, and therefore may not be comparable to other issuers.
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.
CHAIRMAN'S STATEMENT
2021 was a very demanding year for the Company due to the continued effects of
Covid-19 and challenges resulting from operating in jurisdictions with
increased political, regulatory and social risk. I am very proud of the
resilience and dedication demonstrated by all colleagues in successfully
delivering on our annual targets and ensuring our commitments to the
environment, our stakeholders and communities remain the utmost priority.
Hochschild is in a strong position strategically and in 2021 we made a number
of changes to our portfolio that lay the foundations for sustainable low-cost
growth in the near future.
However, I would like to first turn to an event that severely affected us in
June 2021. A tragic traffic accident took place in southern Peru involving our
transport contractor which claimed the lives of 26 people who worked at our
Pallancata operation. The entire organisation has been deeply upset by this
unprecedented incident and the management team ensured everything possible was
done to investigate its circumstances and provide a wide range of support to
everyone affected. We have worked with the local authorities and the
contractor with their respective accident investigations and have provided
whatever support we can with the aim of avoiding such incidents in the future.
Safety remains our highest priority and in 2021, we continued with the
implementation of the second stage of our safety plan, known as Safety 2.0.
The plan combines technical and people-focused approaches and, during the
year, we saw our risk management systems externally reviewed as well as the
development of an all-encompassing safety indicator - the "Seguscore". This
will help us to further embed a safety-first culture across our organisation.
As reported in the interim results, we regrettably suffered a fatal accident
at San Jose towards the end of the first quarter, and, in November a
contractor was fatally injured at the Aclara rare earths project. Further
details on these accidents will be provided in our 2021 Sustainability report.
I am very proud to report a strong environmental performance in 2021. For the
first time ever, four of our assets achieved the highest rating under our
internally designed ECO Score. This innovative indicator distils, in one
single number, numerous facets of environmental management. Furthermore, in
acknowledgement of our responsibilities to our stakeholders, we sought in 2021
to build on our environmental reporting practices. Our first standalone
Sustainability Report received external recognition and we look to build on
this success with numerous initiatives this year including, most notably, our
ambition to achieve Carbon Neutrality, which is well advanced and due to be
published later this quarter.
As Covid-19 eased in 2021, our community relations team was able to resume its
focus on our key local initiatives. In education, we donated almost 300
tablets to elementary schoolchildren close to our Inmaculada mine to enhance
learning. We were also able to continue implementing our strategy of
establishing digital centres to service the communities by establishing three
more in the Ayacucho region, in southern Peru. With regards to health and
nutrition, we co-ordinated home visits to promote early child development and
facilitated a Covid-19 vaccination programme for the elderly. We also launched
a project in a town close to Inmaculada, which seeks to enhance access to
water by installing equipment to collect and store water for domestic use.
Finally, among the many programmes promoting economic development, we provided
technical support to community-led agricultural activities as part of our
"Impulso Productivo" programme. You can find further details on our work in
the Sustainability Report.
In November, the Company faced an unprecedented situation when the Peruvian
Head of Cabinet published minutes of a meeting held in Ayacucho which
arbitrarily provided for the closure and withdrawal of certain mining
projects, including the Company's Pallancata and Inmaculada mines. It was
further announced that approvals would no longer be granted to authorize
additional mining, exploration, or expansion activities in relation to these
mines. However, the Government subsequently affirmed its commitment to
upholding the rule of law and acknowledged the continued rights of mining
companies to request extensions and modifications of existing permits for
mining and exploration activities. Whilst we never stopped operating, this
crisis exemplifies the country's current heightened political, regulatory and
social risk.
2021 was a crucial year for business development. In the second half, we
executed three different transactions that have reshaped our company into one
that is focused on delivering mid-term growth across a wider range of
jurisdictions in the Americas. In September, we exercised our option to start
earning-in a 60% interest in Skeena Resources' Snip gold project in British
Columbia. In November, we announced the acquisition of Amarillo Gold with its
Posse gold project in Brazil, which is due to commence production in 2024.
Both projects complement our current portfolio and, with Canada and Brazil, we
are entering two jurisdictions that have established and stable mining
histories. Finally, we were pleased to complete the demerger and listing on
the Toronto Stock Exchange of our Chilean rare earth business, renamed Aclara
Resources. With almost $100 million of capital raised concurrently, Aclara is
in a strong position to advance the Penco project and our confidence is
confirmed by our decision to retain a 20% stake.
Turning to our operations, we were once again able to deliver on our annual
production and cost targets despite our stringent Covid protocols remaining in
place throughout the year. In addition, precious metal prices remained strong,
and with our business continuing to generate robust free cashflow and the
additional liquidity provided by our increased loan, we are in a comfortable
position to finance the construction of the Posse project over the next two
years and advance Snip through the development phase.
Our brownfield programme also made excellent progress this year. The team made
significant discoveries at Inmaculada in the north west of the deposit which
they expect will add further high grade resources to the mine plan. At San
Jose, we have also added resources near to the current mine whilst at
Pallancata, we have been able to optimise the long term mine plan utilising
the existing resource base and have extended the life of the operation for a
further two years whilst we look for additional near-mine and regional
resource opportunities.
Sanjay Sarma stepped down from the Hochschild Board to join the board of
Aclara Resources on completion of the demerger. I would like to thank Sanjay
for the valuable and unique perspective he has brought to the Hochschild Board
discussions. I am delighted that Tracey Kerr joined the Hochschild Board on 10
December. She brings vast experience in areas of crucial importance to the
Company including geology, safety and sustainability. The Board and I look
forward to working closely with Tracey.
Outlook
2021 saw precious metal prices in a period of consolidation. Gold fell
slightly by 3.5% in the year and silver was much more volatile, down 11.5%
although this followed a 47% rise in 2020. However, the ongoing price strength
allied to reliable operational performance and good cost control has resulted
in high levels of profitability and continued good cashflow. We have
maintained a strong capital base and have managed the Company's balance sheet
and liquidity to ensure long-term financial stability. The Board is therefore
pleased to recommend a final dividend of 2.3 cents per share ($12.0 million).
Our Company is managed with a conviction that acting responsibly and with
integrity is the only way to build and manage a business over the long term.
We have a clear sense of our social purpose and a strong belief in our duty to
respect the dignity of everyone who works for us. In, addition, we have always
been committed to operating under the highest standards of corporate
citizenship, environmental and industry best practice whilst acting as a good
and supportive neighbour to the communities around us and recognising our
wider obligations to society as a whole. The Board and I would like to thank
all of our stakeholders for their contributions and continued support during
such a momentous period.
Eduardo Hochschild, Chairman
22 February 2022
CHIEF EXECUTIVE OFFICER'S STATEMENT
2021 has been an important year for our Company. We have taken decisive
strategic action to shape Hochschild's future and delivered strong operational
and financial results whilst continuing to operate responsibly and focus on
the implementation of our ESG strategy. I continue to be very proud of all our
people and their response to numerous challenges again posed by the pandemic
and also by a volatile political, economic and social environment in Peru.
Such solid operational delivery provides the foundation upon which, in the
second half of the year, we announced the acquisition of Amarillo Gold Corp.
in Brazil, exercised our option to start earning-in a 60% interest in the Snip
gold project in Canada and demerged our rare earths business, Aclara
Resources, and listed it on the Toronto Stock Exchange. We believe that these
strategic steps will underpin Hochschild's ability to grow shareholder value
over the next decade.
ESG
The tragic traffic accident of our transport contractor which the Chairman has
discussed in his statement was a shock for everyone in our Company. However,
our commitment to a broad suite of ESG initiatives remains absolute as part of
our focus on safety and responsibility towards the environment and our
stakeholders. Given the partially reduced dominance of Covid-19 in 2021, we
were able to resume our focus on the key pillars of our work with the local
communities with numerous and wide-ranging initiatives in education, digital
strategy, health and nutrition, access to safe sources of water, local
employment and procurement of local goods and services. On the environmental
front, we again achieved an excellent ECO score, enhanced our reporting by
participating in the Carbon Disclosure Project ('CDP') and early-adopting the
Task Force on Climate-Related Financial Disclosures ('TCFD') reporting
requirements, and we are currently working hard to complete our first
corporate strategy to become net zero carbon. During the year, we also
continued to invest in our safety risk-management system which will support
and complement the various programmes in our safety plan.
Operations
Hochschild's output in 2021 continued our good record in meeting annual
guidance. Overall production was 362,972 gold equivalent ounces (31.2 million
silver equivalent ounces) which was understandably substantially higher than
the Covid-impacted 2020 figure of 289,293 gold equivalent ounces (24.9 million
silver equivalent ounces). This was produced at an all-in sustaining cost of
$1,241 per gold equivalent ounce ($14.4 per silver equivalent ounce) which was
slightly higher than 2020 reflecting increased development capital
expenditure. Hochschild's flagship mine, Inmaculada had another strong year
producing 238,238 gold equivalent ounces (2020: 176,086 ounces) at $971 per
gold equivalent ounce.
At Pallancata, production in 2021 reflected the current focus on mine
development and brownfield exploration to extend the mine life but still had a
steady year delivering 4.4 million silver equivalent ounces (2020: 4.8 million
ounces) at a cost of $22.8 per silver equivalent ounce. In Argentina, San Jose
operated throughout the year but continued to experience Covid-related
restrictions on labour availability in the country limiting the Company's
ability to access certain planned mining zones and impacting grades.
Production was 12.4 million silver equivalent ounces (2020: 9.7 million
ounces) with costs at $16.7 per silver equivalent ounce.
Business Development
In October, we decided to exercise our option to start earning-in a 60%
interest in Skeena Resources' Snip project in Tahltan Territory of British
Columbia. This represented the first step in our strategy to add another
high-grade project with strong upside potential into our pipeline. Since
October, we have established a positive dialogue with the Tahltan Nation and
provincial authorities, designed an ambitious drill program for 2022, and
built a team to take over operations management at the project. It is an
exciting time for Hochschild as we build out our Canadian presence.
Also in October, we announced the demerger of our rare earths business, Aclara
Resources and its listing on the Toronto Stock Exchange. We believe that it
was the logical next step forward and that, as two standalone businesses, both
Hochschild and Aclara will have the greatest potential for delivering
long-term value creation. Each will have their own strategic focus on their
respective products, their own dedicated management teams, separated access to
capital and an independent valuation whilst maintaining a strategic
relationship that will allow Aclara to benefit from Hochschild's track record
on project execution and ESG. Furthermore, we felt that current and future
Hochschild shareholders will also benefit from retaining a meaningful stake in
a business that offers an exciting proposition in a high growth market. We
were pleased that the demerger and IPO was completed in December with almost
$100 million raised.
In November, we announced a definitive agreement to acquire Amarillo Gold for
a net acquisition cost of C$135 million ($106 million) with the key asset
being the flagship Posse gold project located in Goiás State, Brazil. The
acquisition enhances our project pipeline and is the result of a long-term
Company review process of a wide range of growth opportunities. Posse is an
attractive low-cost project with relatively near-term production and strong
exploration upside potential. With our significant experience in developing
precious metal deposits in the Americas, Hochschild is ideally placed to take
Posse to its next stage and generate strong sustainable value for the Company
and the project's local stakeholders as well as widening our focus in stable
mining jurisdictions in the Americas.
Exploration
Once again the brownfield programme focused on the surrounding areas of all
three of our mines and I am pleased to report that our team have had a
successful campaign and delivered resource increases at both Inmaculada and
San Jose. At Inmaculada, drilling in the Angela North and surrounding veins
yielded just over 850,000 gold equivalent ounces at higher grades than current
reserve grade whilst at San Jose we have added almost 13 million silver
equivalent ounces close to current operations. 9 At Pallancata, the team
completed a revised mine plan that incorporates the existing resource base and
therefore have been able to guarantee the mine's future for the next two years
at least. There remain some promising brownfield drill targets close to the
current mine and in the district as a whole which could secure the long-term
supply for the nearby Selene plant.
Financial position
A reliable production performance and strong price environment has resulted in
our balance sheet remaining in an enviable position with cash and cash
equivalents of $386.8 million at the end of December (2020: $231.9 million).
This is before the estimated net payment of C$135 million for Amarillo Gold
(due by the end of Q1 2022) and includes an additional $100 million
medium-term loan (drawn down in December 2021) and a $20 million investment in
the Aclara Resources Inc IPO. This has led to a net cash position of $86.3
million (31 December 2020: $21.6 million net cash).
Financial results
Total Group production was significantly higher versus 2020, which was
impacted by the Covid related stoppages, and consequently, combined with a 12%
rise in the silver price received, revenue increased to $811.4 million (2020:
$621.8 million). All-in sustaining costs were in line with guidance at $14.4
per silver equivalent ounce (2020: $12.8 per ounce). Adjusted EBITDA of $382.8
million (2020: $270.9 million) mostly reflects the increased production levels
and partially offset by increased cost of sales and administrative costs.
Pre-exceptional earnings per share of $0.14 (2020: $0.06 per share) includes
the impact of an increase in finance costs in Argentina and also of income tax
arising from the impact of local currency devaluation in Peru and Argentina
and the increased income tax rate in Argentina. Post-exceptional earnings per
share was higher at $0.15 (2020: $0.03 earnings per share) mainly due to the
exceptional gain on Aclara demerger of $37.5 million, partially offset by a
$24.9 million impairment of Pallancata and $24.1 million of Covid-19 response
initiatives which are also deemed to be exceptional as they were incremental
to the Group's regular business. The net after-tax effect of exceptional items
is $3.7 million.
Outlook
We expect attributable production in 2022 of between 360,000-375,000 gold
equivalent ounces (26.0 to 27.0.0 million silver equivalent ounces) assuming
the silver to gold ratio of 72:1 (the average ratio for 2021). This will be
driven by: 218,000-222,000 gold equivalent ounces from Inmaculada; an
attributable contribution of 5.7 to 6.1 million silver equivalent ounces from
San Jose; and 4.6-4.9 million ounces from Pallancata. All-in sustaining costs
for operations are expected at between $1,330 and $1,370 per gold equivalent
ounce ($18.5 to $18.9 per silver equivalent ounce). This forecast includes
lower grades at Inmaculada 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 budget for brownfield exploration is at approximately $34 million with the
greenfield and advanced project budget set at approximately $11 million. In
addition, a budget of approximately $9 million has been allocated to advancing
the Snip project in Canada with a project capex budget of $120 million
assigned to the Posse project in Brazil.
We have also recently begun to re-establish operations in Chile at our
100%-owned Volcan gold project. In 2022, we expect to complete a work
programme to optimise the business case for this substantial gold asset. In
parallel, the project is expected to be restructured into a newly established
Canadian company, named Tiernan Gold. Tiernan will be run by newly appointed
CEO, Greg McCunn and during the year, we will be evaluating different
strategic alternatives.
2022 promises to be another year of volatility and the world is not free from
the pandemic yet. However, throughout our history, Hochschild has shown an
ability to withstand operational, political and social challenges and we
believe that we have the correct long-term strategy to generate value for our
shareholders today while we transition the company for the future. Finally,
our commitment to a broad suite of ESG initiatives remains absolute as part of
our focus on safety and responsibility.
Ignacio Bustamante, Chief Executive Officer
22 February 2022
OPERATING REVIEW
OPERATIONS
Note: 2021 and 2020 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.
Production
In 2021, Hochschild delivered attributable production of 362,972 gold
equivalent ounces or 31.2 million silver equivalent ounces, in line with the
Company's forecasts but with the increase versus 2020 reflecting the impact in
2020 from Covid-related disruptions throughout the year.
The overall attributable production target for 2022 is 360,000-375,000 gold
equivalent ounces or 26.0-27.0 million silver equivalent ounces.
Total 2021 group production
Year ended Year ended
31 Dec 2021 31 Dec 2020
Silver production (koz)( ) 14,746 11,821
Gold production (koz)( ) 262.39 207.08
Total silver equivalent (koz) 37,311 29,631
Total gold equivalent (koz) 433.85 344.54
Silver sold (koz) 14,712 11,846
Gold sold (koz) 260.71 207.78
Total production includes 100% of all production, including production
attributable to Hochschild's minority shareholder at San Jose.
Attributable 2021 group production
Year ended Year ended
31 Dec 2021 31 Dec 2020
Silver production (koz)( ) 12,174 9,808
Gold production (koz)( ) 221.42 175.24
Silver equivalent (koz) 31,216 24,879
Gold equivalent (koz) 362.97 289.29
Attributable production includes 100% of all production from Inmaculada,
Pallancata and 51% from San Jose.
Attributable 2022 Production forecast 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
Costs
All-in sustaining cost from operations in 2021 was $1,241 per gold equivalent
ounce or $14.4 per silver equivalent ounce (2020: $1,098 per gold equivalent
ounce or $12.8 per silver equivalent ounce), higher than 2020 mainly as a
result of lower grades at Pallancata and San Jose and higher costs and capital
expenditure. Additional capital expenditure was also allocated to Pallancata
and Inmaculada to develop resources for increasing life-of-mine. These figures
do not include unabsorbed fixed costs from workers that were unable to work
during the Covid 19 crisis of $8.7 million (2020: $44.7 million; includes
fixed costs without depreciation from stoppages and operating at reduced
capacity), as well as $22.5 million (2020: $27.6 million) of exceptional
Covid-19 response initiatives.
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.
2022 AISC forecast split
Operation $/oz Au Eq $/oz Ag Eq
Inmaculada 1,180-1,210 16.4-16.8
Pallancata 1,760-1,800 24.4-25.0
San Jose 1,370-1,410 19.0-19.6
Total from operations 1,330-1,370 18.5-19.0
Inmaculada
The 100% owned Inmaculada gold/silver underground operation is located in the
Department of Ayacucho in southern Peru. It commenced operations in June 2015.
Inmaculada summary Year ended Year ended % change
31 Dec 2021 31 Dec 2020
Ore production (tonnes) 1,349,892 948,937 42
Average silver grade (g/t) 174 154 13
Average gold grade (g/t) 4.05 4.33 (6)
Silver produced (koz) 6,236 4,034 55
Gold produced (koz) 165.73 129.17 28
Silver equivalent produced (koz) 20,488 15,143 35
Gold equivalent produced (koz) 238.24 176.09 35
Silver sold (koz) 6,216 4,020 55
Gold sold (koz) 165.86 129.70 28
Unit cost ($/t) 99.2 95.1 4
Total cash cost ($/oz Au co-product) 557 576 (3)
All-in sustaining cost ($/oz Au Eq) 971 922 5
Production
The Inmaculada mine delivered gold equivalent production of 238,238 ounces
(2020: 176,086 ounces) in 2021, 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.
Costs
All-in sustaining costs were $971 per gold equivalent ounce (2020: $922 per
ounce) with the increase versus 2020 due to a considerable portion of capital
expenditure being deferred, including the tailings dam expansion, due to the
stoppages and also due to lower scheduled gold grades partially offset by
higher silver grades.
Pallancata
The 100% owned Pallancata silver/gold property is located in the Department of
Ayacucho in southern Peru. Pallancata commenced production in 2007. Ore from
Pallancata is transported 22 kilometres to the Selene plant for processing.
Pallancata summary Year ended Year ended % change
31 Dec 2021 31 Dec 2020
Ore production (tonnes) 530,681 519,611 2
Average silver grade (g/t) 212 247 (14)
Average gold grade (g/t) 0.84 0.87 (3)
Silver produced (koz) 3,261 3,679 (11)
Gold produced (koz) 13.05 12.93 1
Silver equivalent produced (koz) 4,382 4,790 (9)
Gold equivalent produced (koz) 50.96 55.70 (9)
Silver sold (koz) 3,263 3,654 (11)
Gold sold (koz) 13.03 12.80 2
Unit cost ($/t) 124.8 101.2 23
Total cash cost ($/oz Ag co-product) 19.2 13.1 47
All-in sustaining cost ($/oz Ag Eq) 22.8 15.6 46
Production
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.
Costs
All-in sustaining costs were at $22.8 per silver equivalent ounce (2020: $15.6
per ounce). Costs were increased versus 2020 mainly due to the use of more
conventional mining methods in 2021 and lower grades. The figure also included
new capital expenditure for development work to access newly economic
resources.
San Jose
The San Jose silver/gold mine is located in Argentina, in the province of
Santa Cruz, 1,750 kilometres south west of Buenos Aires. San Jose commenced
production in 2007. Hochschild holds a controlling interest of 51% and is the
mine operator. The remaining 49% is owned by McEwen Mining Inc.
San Jose summary Year ended Year ended % change
31 Dec 2021 31 Dec 2020
Ore production (tonnes) 539,229 401,202 34
Average silver grade (g/t) 344 357 (4)
Average gold grade (g/t) 5.47 5.63 (3)
Silver produced (koz) 5,250 4,108 28
Gold produced (koz) 83.62 64.99 29
Silver equivalent produced (koz) 12,440 9,697 28
Gold equivalent produced (koz) 144.66 112.76 28
Silver sold (koz) 5,233 4,172 25
Gold sold (koz) 81.83 65.28 25
Unit cost ($/t) 229.0 199.4 15
Total cash cost ($/oz Ag co-product) 13.3 11.1 20
All-in sustaining cost ($/oz Ag Eq) 16.7 14.6 14
Production
San Jose's 2021 total production was 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 higher than expected
tonnage.
Costs
All-in sustaining costs were at $16.7 per silver equivalent ounce (2020: $14.6
per ounce) with the rise driven by higher production costs, increased mine
development capex, higher exploration expenses and the purchase of new mining
equipment.
EXPLORATION
Inmaculada
In 2021, the exploration team carried out 9,169m of potential drilling and
39,424m of resource drilling mostly testing the newly discovered Angela North,
Juliana North East and Josefa structures. The key results are below:
Vein Results (potential/resource drilling)
Angela North IMS21-056: 5.9m @ 2.5g/t Au & 99g/t Ag
IMS21-062: 9.7m @ 91.7g/t Au & 3,013g/t Ag
IMS21-063: 2.1m @ 6.5g/t Au & 217g/t Ag
IMS21-065: 7.0m @ 3.7g/t Au & 198g/t Ag
IMS21-066: 2.4m @ 4.3g/t Au & 386g/t Ag
IMS21-067: 1.0m @ 2.4g/t Au & 234g/t Ag
IMS21-070: 1.5m @ 2.1g/t Au & 156g/t Ag
IMS21-071: 1.4m @ 3.6g/t Au & 123g/t Ag
IMS21-072: 2.0m @ 1.8g/t Au & 109g/t Ag
IMS21-075: 3.1m @ 5.5g/t Au & 341g/t Ag
IMS21-077: 2.7m @ 1.4g/t Au & 103g/t Ag
IMS21-078: 9.1m @ 14.1g/t Au & 424g/t Ag
IMS21-087: 5.6m @ 12.6g/t Au & 494g/t Ag
IMS21-069: 1.2m @ 7.1g/t Au & 533g/t Ag
IMS21-078: 9.7m @ 14.1g/t Au & 424g/t Ag
IMS21-085: 3.5m @ 5.2g/t Au & 149g/t Ag
IMS21-088: 3.7m @ 5.9g/t Au & 304g/t Ag
IMS21-089: 2.1m @ 1.9g/t Au & 109g/t Ag
IMS21-100: 1.4m @ 3.2g/t Au & 171g/t Ag
Juliana IMS21-079: 2.0m @ 12.8g/t Au & 527g/t Ag
IMS21-088: 1.4m @ 6.8g/t Au & 292g/t Ag
IMS21-174: 4.9m @ 11.3g/t Au & 33g/t Ag
IMS21-182: 1.2m @ 50.8g/t Au & 81g/t Ag
IMS21-184: 3.5m @ 18.0g/t Au & 977g/t Ag
IMS21-127: 1.0m @ 1.8g/t Au & 259g/t Ag
IMS21-127: 2.8m @ 2.2g/t Au & 115g/t Ag
IMS21-127: 0.9m @ 2.8g/t Au & 196g/t Ag
IMS21-149: 1.5m @ 8.7g/t Au & 62g/t Ag
IMS21-149: 0.9m @ 3.6g/t Au & 111g/t Ag
IMS21-155: 3.2m @ 7.5g/t Au & 774g/t Ag
IMS21-156: 1.6m @ 3.2g/t Au & 33g/t Ag
IMS21-156: 1.6m @ 3.2g/t Au & 31g/t Ag
IMS21-156: 2.1m @ 13.8g/t Au & 316g/t Ag
IMS21-150: 2.4m @ 20.7g/t Au & 1,255g/t Ag
IMS21-151: 1.9m @ 2.0g/t Au & 141g/t Ag
IMS21-058: 2.4m @ 1.3g/t Au & 119g/t Ag
IMS21-174: 1.3m @ 3.3g/t Au & 172g/t Ag
Josefa IMS21-155: 1.1m @ 17.6g/t Au & 1,149g/t Ag
IMS21-155: 1.2m @ 4.3g/t Au & 70g/t Ag
IMS21-155: 7.8m @ 2.0g/t Au & 70g/t Ag
IMS21-155: 1.0m @ 3.6g/t Au & 114g/t Ag
IMS21-198: 2.3m @ 2.3g/t Au & 312g/t Ag
IMS21-200: 4.9m @ 3.8g/t Au & 311g/t Ag
In 2021, 852,000 gold equivalent ounces have been added to the Inmaculada
inferred resource base at a gold equivalent grade of 7.5 grams per tonne.
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. Other key targets for 2022 are Josefa, Juliana NE,
Minascucho, Anomalia III and Anomalia IV.
Pallancata
At Pallancata, 19,390m of potential drilling was carried at the Pallancata
vein, the Falla NW, Pablo, Pablo Piso and Marco veins vein structures and then
later in the year at the Mirian, San Javier and the continuation of the
Pallancata vein to the north west. In addition, there was drilling at the
Pablo II target which intercepted quartz veins with grade and in the final
quarter there were intercepts in quartz-sulphide veins, Laura and Demian. Key
results are below:
Vein Results (potential drilling)
Pablo II DLEP-A64: 2.7m @ 0.4g/t Au & 93g/t Ag
DLEP-A65: 0.9m @ 0.7g/t Au & 222g/t Ag
Mirian DLVC-A62: 3.4m @ 1.4g/t Au & 314g/t Ag
Norca DLVC-A62: 1.0m @ 1.0g/t Au & 475g/t Ag
San Javier DLVC-A62: 1.1m @ 0.6g/t Au & 473g/t Ag
Pallancata NW DLPL-A969: 0.9m @ 1.6g/t Au & 181g/t Ag
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
DLLOL-A01: 6.9m @ 0.7g/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. Other main targets for
the year are expected to be Pablo West, Escarpa and Luisa.
San Jose
During 2021, the team carried out 11,455 m of potential drilling around the
Saavedra area in several veins the Escondida, Betania, Isabel, Jimena,
Agostina and Lucy veins as well as the North Telken area close to Cerro Negro.
6.673m of resource drilling was also executed targeting Escondida, and also in
the area close to the current mine in the Amelia, Huevos Verdes, Olivia and
Karina veins
Vein Results (potential/resource drilling)
Isabel SJD-2210: 1.2m @ 4.9g/t Au & 552g/t Ag
SJD-2211: 1.0m @ 3.7g/t Au & 376g/t Ag
SJD-2241: 1.0m @ 8.2g/t Au & 499g/t Ag
SJM-179: 1.3m @ 3.7g/t Au & 586g/t Ag
Ramal Isabel 1 SJD-2210: 0.8m @ 2.2g/t Au & 772g/t Ag
SJD-2241: 0.8m @ 1.6g/t Au & 337g/t Ag
Ramal Isabel 2 SJD-2241: 2.0m @ 1.1g/t Au & 309g/t Ag
Escondida SJM-529: 2.0m @ 62.5g/t Au & 5,571g/t Ag
SJD-2267: 1.4m @ 18.4g/t Au & 1,879g/t Ag
SJD-2273: 1.9m @ 2.5g/t Au & 284g/t Ag
SJD-2280: 1.2m @ 2.4g/t Au & 317g/t Ag
SJD-2280: 2.4m @ 2.7g/t Au & 305g/t Ag
Betania SJD-2328: 2.0m @ 5.5g/t Au & 6g/t Ag
SJD-2351: 1.1m @ 12.6g/t Au & 7g/t Ag
SJD-2371: 6.3m @ 44.4g/t Au & 34g/t Ag
SJD-2378: 1.9m @ 7.3g/t Au & 81g/t Ag
SJD-2408: 2.6m @ 5.4g/t Au & 10g/t Ag
SJD-2414: 3.4m @ 6.9g/t Au & 36g/t Ag
Sig Betania SJD-2408: 1.0m @ 6.1g/t Au & 11g/t Ag
Jimena SJD-2353: 2.4m @ 3.8g/t Au & 40g/t Ag
SJD-2372: 1.9m @ 14.5g/t Au & 342g/t Ag
SJD-2378: 2.0m @ 8.5g/t Au & 24g/t Ag
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
Agostina SJD-2378: 2.8m @ 5.1g/t Au & 13g/t Ag
Amelia SJD-2329: 3.0m @ 13.0g/t Au & 1,740g/t Ag
SJD-2342: 4.3m @ 14.9g/t Au & 1,381g/t Ag
SJD-2361: 0.9m @ 3.4g/t Au & 323g/t Ag
Tensional Huevos Verdes N SJD-2346: 1.8m @ 6.7g/t Au & 582g/t Ag
Olivia SJD-2385: 0.8m @ 2.6g/t Au & 196g/t Ag
SJM-547: 2.0m @ 7.8g/t Au & 366g/t Ag
In 2021 as a whole 12.7 million silver equivalent ounces have been added to
the San Jose resource base at a silver equivalent grade of 881 grams per
tonne.
The drilling plan for the first quarter of 2022 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.
GREENFIELD
Hochschild's strategy with regards to its greenfield exploration programme is
to maintain and drill a balanced portfolio of early-stage to advanced
opportunities using a combination of earn-in joint ventures, private
placements with junior exploration companies and the staking of properties.
Drilling in 2021 was carried out at: the Sarape project owned by Orogen in
Mexico; the Cooke Mountain gold project owned by Adamera Minerals Corp in
Washington, United States; the Condor project owned by a private company in
Peru; and the Currant project owned by Da Venda Gold in Nevada, United States.
Sarape was subsequently discarded. In addition, permitting work to drill in
the near future is also being completed at the SW Pipe project owned by NV
Gold Corp also in Nevada with drilling set to begin before the end of H1
2022. Permitting work has also continued at the Corvinon and Pampamali
projects in Peru.
Given the increased political risk in Peru and Chile, the greenfield team has
focused its exploration strategy primarily in North America to diversify
geographic risk. Four new projects have been optioned during the year from EMX
Royalties in Idaho and Nevada as well as the Red Rock prospect in Nevada from
a private owner.
SNIP
Project description
Snip was acquired by Skeena from Barrick Gold Corp. in July 2017 and consists
of one mining lease and eight mineral claims totalling approximately 4,546
hectares in the Liard Mining Division and is situated in Tahltan Territory.
The former Snip mine produced approximately one million ounces of gold from
1991 until 1999 at an average gold grade of 27.5 g/t. Since then, the project
has been improved with the recent construction of nearby infrastructure (paved
highway, hydro-electric facilities and ocean port facilities) and
substantially higher gold prices.
Underground drilling recommenced in late 2017 to explore for additional
mineralised shoots in a large shear structure. A maiden mineral resource was
announced in July 2020 including 244,000 ounces of gold in the indicated
category at an average grade of 14.0 g/t and 402,000 ounces of gold in the
inferred category at an average grade of 13.3 g/t. A Technical Report was
issued in September 2020.
Subsequent drill campaigns, totalling approximately 32,000 metres,
successfully:
· upgraded areas of existing Inferred resources from the Mineral
Resource Estimate to the Measured and Indicated categories;
· expanded the resource; and
· delineated additional mineralisation in previously unexplored
areas of the near-mine environment.
In September 2018, Skeena granted Hochschild an option to earn a 60% interest
in Snip over three years by spending twice the amount Skeena had spent since
it originally optioned the property from Barrick in March 2016. Up until the
exercise of the option, Skeena estimated that it had incurred approximately
C$50 million of expenditure on the project.
Terms of the option
The exercise of the HOC Option was also subject to the following terms:
· Hochschild must incur no less than C$7.5 million in exploration
or development expenditures on Snip in each year of the Option Period (which,
provided that Hochschild has incurred at least C$22.5 million on the project,
can be extended by a further year on payment of US$1 million to Skeena);
· On complying with the above, Hochschild must provide 60% of the
financial assurance required by governmental authorities for the Snip mining
properties; and
· Hochschild can terminate the HOC Option at any time (with no
liability to complete the aggregate spending requirement), but must make a
cash payment for any shortfall in the minimum annual spend (or pro-rated
minimum annual spend if terminated after the first anniversary of the notice
exercising the HOC Option).
2022 plans
In 2022, Hochschild plans on continuing the drill campaigns and initiating
selected studies and testwork. The Company plans on drilling approximately
10,000 metres from surface and underground during the year. Approximately 70%
of planned metres will be for infill and twin holes, and 30% for exploration.
A Pre-Feasibility Study will be undertaken during the year, using existing
resources and results from the 2022 programme, to trade-off a series of mining
and mineral processing opportunities identified at the project, and assess a
potential project development route to move to a Feasibility Study.
AMARILLO GOLD
On 30 November 2021, Hochschild announced that it had entered into a
definitive agreement to acquire Amarillo Gold Corporation at a net acquisition
cost of an estimated C$135 million.
The Transaction constitutes a Class 1 Transaction under the UK Listing Rules
due to the level of Posse's Proven and Probable Reserves relative to those of
Hochschild. As such, the Transaction is subject to Hochschild shareholder
approval as well as the approvals of Amarillo shareholders, the Canadian
court, regulatory authorities and the satisfaction of certain other customary
conditions. The Transaction has been unanimously recommended by the board of
directors of Amarillo and has the full support of Amarillo's major
shareholders, Baccarat Trade Investments Ltd. and Eric Sprott. The Hochschild
board believes the Transaction is in the best interests of Hochschild's and
unanimously intends to recommend that shareholders vote in favour of the
Transaction. Completion is expected to occur towards the end of this quarter.
Posse Overview
Posse is an open pit gold project located in Mara Rosa in the mining friendly
jurisdiction of Goiás State, Brazil. The brownfield project benefits from
existing infrastructure and attractive costs. Construction of certain
infrastructure is underway, with the project having received several of the
necessary installation licenses from state authorities in Goias during 2021
and 2022, including the licenses to install the power line and several mine
components (e.g. waste piles, low grade deposit). Hochschild has revised the
Posse mine plan contained in the August 2020 Definitive Feasibility Study, and
will include further details in a mineral expert's report to be incorporated
in the shareholder circular to be issued in the next few weeks.
Hochschild's Posse Mine Plan Forecasts
Initial Mine Life 10 years
Average Annual Production ~80koz Au (~100koz Au over the first four years)
Average Annual AISC US$750/oz Au - US$850/oz Au
Initial Capex US$180m - US$200m
Sustaining Capex ~US$40m
After-Tax NPV(5%) at US$1,600/oz Au US$150m - US$160m
After-Tax IRR at US$1,600/oz Au 18% - 20%
After-Tax NPV(5%) at US$1,800/oz Au US$200m - US$240m
After-Tax IRR at US$1,800/oz Au 24% - 26%
Posse NI 43-101 Proven and Probable Reserves
Tonnes Au Au
(Mt) (g/t) (koz)
Proven 11.8 1.20 456
Probable 12.0 1.16 446
Proven and Probable 23.8 1.18 902
Posse NI 43-101 Measured, Indicated and Inferred Resources
Tonnes Au Au
(Mt) (g/t) (koz)
Measured 14 1.2 510
Indicated 19 1.1 640
Measured and Indicated 32 1.1 1,200
Inferred 10 0.1 0.6 1.7
Exploration Potential Overview
Hochschild has identified compelling near-mine and regional exploration
opportunities for Posse and the Mara Rosa property. Posse is open down
plunge to the southwest, providing potential to extend the mine life near the
existing pit shell. There is also an opportunity to define multiple
satellite deposits along the 10km Posse structural trend including the Araras,
Speti 24 and Pastinho priority targets. Recent drilling has identified
Pastinho as a promising target with similar geological characteristics to
Posse and multiple parallel gold structures extending from the surface to
approximately 200 m of vertical depth while remaining open. In addition to the
2,500 hectares of mining concessions containing the Posse deposit and the
6,000 hectares of exploration concessions on the Posse structural trend,
Hochschild will acquire an additional 59,000 hectares of regional exploration
concessions on the Mara Rosa property.
VOLCAN
On 20 January 2002, Hochschild announced the appointment of Greg McCunn as CEO
of the Volcan gold project in Chile. Concurrently, the Board has approved a
work programme for 2022 which includes reestablishing operations in the
Copiapo province, updating the mineral resource estimate and exploring ways of
optimising the project development plan which are expected to be outlined in a
new technical report.
Hochschild is also expected to restructure the project into a newly
incorporated Canadian company (100%-owned by the Company) named 'Tiernan
Gold'. In parallel with completion of the technical report, the Company will
be evaluating strategic alternatives for Tiernan Gold.
FINANCIAL REVIEW
The reporting currency of Hochschild Mining plc is U.S. dollars. In
discussions of financial performance, the Group removes the effect of
exceptional items, unless otherwise indicated, and in the income statement
results are shown both pre and post such exceptional items. Exceptional items
are those items, which due to their nature or the expected infrequency of the
events giving rise to them, need to be disclosed separately on the face of the
income statement to enable a better understanding of the financial performance
of the Group and to facilitate comparison with prior years.
Revenue
Gross revenue 11
Gross revenue from continuing operations increased by 29% to $831.0 million in
2021 (2020: $641.5 million) mainly due to the rebound to a normal year of
operation following the production stoppages during 2020 resulting from the
Covid-19 crisis. In addition, there was a strong rise in the average realised
silver price.
In February 2021, the Company hedged 4 million ounces of 2021 silver
production at $27.10 per ounce and 4 million ounces of 2022 silver production
at $26.86 per ounce. On 10 November 2021, the Company hedged 3.3 million
ounces of 2023 silver production at $25.00 per ounce. During the year ended 31
December 2021, 4.0 million silver ounces were hedged at $27.10 per ounce,
boosting the realised price.
Gold
Gross revenue from gold in 2021 increased to $464.3 million (2020: $376.9
million) due to the 25% rise in gold sales resulting from the rebound of
production versus the Covid-19 impacted 2020. This was partially offset by a
2% fall in the average realised gold price.
Silver
Gross revenue from silver increased in 2021 to $366.2 million (2020: $264.5
million) due to a 24% rise in silver sales resulting from the rebound of
production versus the Covid-19 impacted 2020. This was significantly
augmented by a 12% rise in the average realised silver price.
Gross average realised sales prices
The following table provides figures for average realised prices (before the
deduction of commercial discounts) and ounces sold for 2021 and 2020:
Average realised prices Year ended Year ended
31 Dec 2021
31 Dec 2020
Silver ounces sold (koz) 14,712 11,846
Avg. realised silver price ($/oz) 24.9 22.3
Gold ounces sold (koz) 260.71 207.77
Avg. realised gold price ($/oz) 1,781 1,814
Commercial discounts
Commercial discounts refer to refinery treatment charges, refining fees and
payable deductions for processing concentrate, and are deducted from gross
revenue on a per tonne basis (treatment charge), per ounce basis (refining
fees) or as a percentage of gross revenue (payable deductions). In 2021, the
Group recorded commercial discounts of $19.6 million (2020: $19.7 million) in
line with 2020. The ratio of commercial discounts to gross revenue in 2021 was
2% (2020: 3%).
Net revenue
Net revenue was $811.4 million (2020: $621.8 million), comprising net gold
revenue of $457.8 million (2020: $370.1 million) and net silver revenue of
$353.1 million (2020: $251.6 million). In 2021, gold accounted for 56% and
silver 44% of the Company's consolidated net revenue (2020: gold 60% and
silver 40%).
Reconciliation of gross revenue by mine to Group net revenue
$000 Year ended Year ended % change
31 Dec 2021
31 Dec 2020
Silver revenue
Inmaculada 156,675 84,651 85
Pallancata 82,727 83,405 (1)
San Jose 126,790 96,472 31
Commercial discounts (13,088) (12,932) 1
Net silver revenue 353,104 251,596 40
Gold revenue
Inmaculada 296,160 230,255 29
Pallancata 22,989 24,154 (5)
San Jose 145,187 122,483 19
Commercial discounts (6,517) (6,810) (4)
Net gold revenue 457,819 370,082 24
Other revenue 464 149 211
Net revenue 811,387 621,827 30
Cost of sales
Total cost of sales before exceptional items was $487.8 million in 2021 (2020:
$397.8 million). The direct production cost excluding depreciation was higher
at $323.4 million (2020: $218.2 million) mainly due the Covid-19 related
stoppages affecting 2020. Abnormal costs during the phases of reduced
production capacity were $8.7 million (2020: $46.5 million). Depreciation in
production cost increased to $148.8 million (2020: $113.1 million) due to
higher extracted volumes across all operations, again mainly due to the
stoppages affecting 2020. Unallocated fixed costs from workers that were
unable to work during the Covid-19 crisis were $8.7 million (2020: $46.5
million; includes fixed costs from stoppages and operating at reduced
capacity), and are shown separately below.
$000 Year ended Year ended % Change
31 Dec 2021
31 Dec 2020
Direct production cost excluding depreciation 323,418 218,212 48
Depreciation in production cost 148,842 113,146 32
Other items and workers profit sharing 6,512 2,632 147
Fixed costs during operational stoppages and reduced capacity 8,680 46,480 (81)
Change in inventories 320 17,323 (98)
Cost of sales 487,772 397,793 23
Fixed costs during operational stoppages and reduced capacity
$000 Year ended Year ended % Change
31 Dec 2021
31 Dec 2020
Personnel 7,607 32,117 (76)
Third party services 995 8,948 (89)
Supplies - 1,698 -
Depreciation and amortisation - 1,818 -
Others 78 1,899 (96)
Cost of sales 8,680 46,480 (81)
Unit cost per tonne
The Company reported unit cost per tonne at its operations of $133.5 per tonne
in 2021, an 11% increase versus 2020 ($119.9 per tonne) This was due to:
higher costs in Inmaculada resulting from using more semi-mechanised mining
methods with a higher extraction cost; higher costs at Pallancata due to the
use of more conventional mining methods; and higher costs in San Jose from
expenditure related to the accessing and mining of incremental resources.
Unit cost per tonne by operation (including royalties) 12 :
Operating unit ($/tonne) Year ended Year ended % change
31 Dec 2021
31 Dec 2020
Peru 106.5 97.5 9
Inmaculada 99.2 95.1 4
Pallancata 124.8 101.2 23
Argentina
San Jose 229.0 199.4 15
Total 133.5 119.9 11
Cash costs
Cash costs include cost of sales, commercial deductions and selling expenses
before exceptional items, less depreciation included in cost of sales.
Cash cost reconciliation 13
Year ended 31 Dec 2021
$000 unless otherwise indicated Inmaculada Pallancata San Jose Total
Group cash cost 141,316 80,354 150,663 372,333
(+) Cost of sales 14 213,812 93,049 172,231 479,092
(-) Depreciation and amortisation in cost of sales (76,372) (19,915) (49,195) (145,482)
(+) Selling expenses 616 620 14,195 15,431
(+) Commercial deductions 15 3,260 6,600 13,432 23,292
Gold 2,164 1,034 5,717 8,915
Silver 1,096 5,566 7,715 14,377
Revenue 452,835 99,116 258,972 810,923
Gold 296,160 21,955 139,704 457,819
Silver 156,675 77,161 119,268 353,104
Ounces sold
Gold 165.9 13.0 81.8 260.7
Silver 6,216 3,263 5,233 14,712
Group cash cost ($/oz)
Co product Au 557 1,366 993 806
Co product Ag 7.9 19.2 13.3 11.0
By product Au (99) (182) 289 19
By product Ag (25.3) 17.6 1.0 (6.4)
Year ended 31 Dec 2020
$000 unless otherwise indicated Inmaculada Pallancata San Jose Total
Group cash cost 102,135 62,181 107,119 271,435
(+) Cost of sales 16 154,950 83,272 113,091 351,313
(-) Depreciation and amortisation in cost of sales (55,338) (28,608) (30,716) (114,662)
(+) Selling expenses 417 632 11,705 12,754
(+) Commercial deductions 17 2,106 6,885 13,039 22,030
Gold 117 1,102 5,715 6,934
Silver 1,989 5,783 7,324 15,096
Revenue 314,906 100,674 206,098 621,678
Gold 230,255 23,052 116,775 370,082
Silver 84,651 77,622 89,323 251,596
Ounces sold
Gold 129.7 12.8 65.3 207.8
Silver 4,020 3,654 4,172 11,846
Group cash cost ($/oz)
Co product Au 576 1,112 930 778
Co product Ag 6.8 13.1 11.1 9.3
By product Au 119 (1,658) 160 23
By product Ag (31.9) 10.4 (3.7) (8.9)
Co-product cash cost per ounce is the cash cost allocated to the primary metal
(allocation based on proportion of revenue), divided by the ounces sold of the
primary metal. By-product cash cost per ounce is the total cash cost minus
revenue and commercial discounts of the by-product divided by the ounces sold
of the primary metal.
All-in sustaining cost reconciliation 18
All-in sustaining cash costs per silver equivalent ounce
Year ended 31 Dec 2021
$000 unless otherwise indicated Inmaculada Pallancata San Jose Main Corporate & Total
operations others
(+) Direct production cost excluding depreciation 134,110 66,859 122,449 323,418 - 323,418
(+) Other items and workers profit sharing in cost of sales 3,489 3,023 - 6,512 - 6,512
(+) Operating and exploration capex for units 19 76,512 14,526 41,325 132,363 1,735 134,098
(+) Brownfield exploration expenses 3,276 5,993 9,653 18,923 3,658 22,581
(+) Administrative expenses (excl depreciation) 20 4,909 1,074 6,104 12,087 38,782 50,870
(+) Royalties and special mining tax 21 5,190 1,136 - 6,326 5,916 12,242
Sub-total 227,486 92,612 179,532 499,629 50,092 549,721
Au ounces produced 165,730 13,045 83,615 262,390 - 262,390
Ag ounces produced (000s) 6,236 3,261 5,250 14,746 14,746
Ounces produced (Ag Eq 000s oz) 20,488 4,382 12,440 37,311 - 37,311
Sub-total ($/oz Ag Eq) 11.1 21.1 14.4 13.4 - 14.7
(+) Commercial deductions 3,260 6,600 13,432 23,292 - 23,292
(+) Selling expenses 616 620 14,195 15,431 - 15,431
Sub-total 3,876 7,220 27,627 38,723 - 38,723
Au ounces sold 165,857 13,027 81,831 260,714 - 260,714
Ag ounces sold (000s) 6,216 3,263 5,233 14,712 - 14,712
Ounces sold (Ag Eq 000s oz) 20,480 4,383 12,270 37,133 - 37,133
Sub-total ($/oz Ag Eq) 0.2 1.6 2.3 1.0 - 1.0
All-in sustaining costs ($/oz Ag Eq) 11.3 22.8 16.7 14.4 1.3 15.8
All-in sustaining costs ($/oz Au Eq) 971 1,959 1,435 1,241 115 1,357
Not included in the figure are unabsorbed fixed costs from workers that were
unable to work during the Covid 19 crisis of $8.7 million (2020: $44.7
million; includes fixed costs without depreciation from stoppages and
operating at reduced capacity), as well as $22.5 million (2020: $27.6 million)
of exceptional Covid-19 response initiatives. These effects would have an
impact on the AISC from main operations of $0.2/oz Ag Eq and $0.6/oz Ag Eq
respectively (2020: $1.5/oz Ag Eq and $0.9/oz Ag Eq respectively).
Year ended 31 Dec 2020
$000 unless otherwise indicated Inmaculada Pallancata San Jose Main Corporate & others Total
operations
(+) Direct production cost excluding depreciation 86,874 51,534 79,804 218,212 - 218,212
(+) Other items and workers profit sharing in cost of sales 1,383 1,249 - 2,632 - 2,632
(+) Operating and exploration capex for units 22 62,128 7,506 21,681 91,315 447 91,762
(+) Brownfield exploration expenses 2,526 4,652 9,720 16,898 3,745 20,643
(+) Administrative expenses (excl depreciation) 3,768 1,205 5,590 10,563 30,533 41,096
(+) Royalties and special mining tax 23 3,098 990 - 4,088 3,119 7,206
Sub-total 159,777 67,136 116,795 343,707 37,592 381,299
Au ounces produced 129,173 12,925 64,987 207,085 - 207,085
Ag ounces produced (000s) 4,034 3,679 4,108 11,821 - 11,821
Ounces produced (Ag Eq 000s oz) 15,143 4,790 9,697 29,631 - 29,631
Sub-total ($/oz Ag Eq) 10.6 14.0 12.0 11.6 - 12.9
(+) Commercial deductions 2,106 6,885 13,039 22,030 - 22,030
(+) Selling expenses 417 632 11,705 12,754 - 12,754
Sub-total 2,523 7,517 24,744 34,784 - 34,784
Au ounces sold 129,697 12,798 65,280 207,776 - 207,776
Ag ounces sold (000s) 4,020 3,654 4,172 11,846 - 11,846
Ounces sold (Ag Eq 000s oz) 15,174 4,754 9,786 29,715 - 29,715
Sub-total ($/oz Ag Eq) 0.2 1.6 2.5 1.2 - 1.2
All-in sustaining costs ($/oz Ag Eq) 10.7 15.6 14.6 12.8 1.3 14.0
All-in sustaining costs ($/oz Au Eq) 922 1,341 1,253 1,098 109 1,208
Administrative expenses
Administrative expenses were increased by 20% to $51.9 million (2020: $43.3
million) due to increased professional fees of $3.7 million mainly linked to
M&A transactions, tax penalties of $1.5 million and higher legal workers
profit sharing provisions in Peru of $1.3 million.
Exploration expenses
In 2021, exploration expenses increased to $39.9 million (2020: $32.8 million)
due to the 2020 reduced execution of the greenfield and brownfield programme
as a result of the Covid-19 lockdown.
In addition, the Group capitalises part of its brownfield exploration, which
mostly relates to costs incurred converting potential resource to the Inferred
or Measured and Indicated categories. In 2021, the Company capitalised $6.1
million relating to brownfield exploration compared to $1.7 million in 2020,
bringing the total investment in exploration for 2021 to $46.0 million (2020:
$34.5 million).
Selling expenses
Selling expenses were increased to $15.4 million (2020: $12.8 million) mainly
due to higher volume sold and higher prices, principally due to the fact that
in Argentina, which levies export taxes, the San Jose operation was affected
by production stoppages in 2020.
Other income/expenses
Other income before exceptional items was higher at $8.4 million (2020: $3.6
million) mainly due to increased gains on the sale of equipment ($3.3 million)
and $1.0 million of higher income on the recovery of expenses and provisions.
Other expenses before exceptional items were higher at $44.6 million (2020:
$28.9 million) with the increase mainly due to: a voluntary redundancy
programme in Argentina of $8.3 million; mine provision increases of $22.1
million (2020: $16.1 million), and higher corporate social responsibility
contribution in Argentina of $3.9 million (2020: $2.7 million).
Adjusted EBITDA
Adjusted EBITDA increased by 41% to $382.8 million (2020: $270.9 million)
mainly due to the increase in revenue resulting from the rebound in production
following 2020 operational stoppages due to the Covid-19 crisis. In addition,
there was a significant increase in the average realised silver price. These
effects were partially offset by higher production costs and lower gold
prices.
Adjusted EBITDA is calculated as profit from continuing operations before
exceptional items, net finance costs, foreign exchange losses and income tax
plus non-cash items (depreciation and amortisation and changes in mine closure
provisions) and exploration expenses other than personnel and other
exploration related fixed expenses.
$000 unless otherwise indicated Year ended Year ended % change
31 Dec 2021
31 Dec 2020
Profit from continuing operations before exceptional items, net finance 179,438 107,837 66
income/(cost), foreign exchange loss and income tax
Depreciation and amortisation in cost of sales 145,482 116,480 25
Depreciation and amortisation in administrative expenses and other expenses 2,184 2,158 1
Exploration expenses 39,848 32,795 22
Personnel and other exploration related fixed expenses (7,099) (6,486) 9
Other non-cash income, net 24 22,958 18,134 27
Adjusted EBITDA 382,811 270,918 41
Adjusted EBITDA margin 47% 44%
Finance income
Finance income before exceptional items of $3.9 million decreased from 2020
($4.2 million) mainly due to the net effect of: a decrease of $1.1 million due
to change in the fair value of the Group's holding in Americas Gold &
Silver Corporation shares received as payment for the San Felipe project;
lower interest on deposits of $0.3 million; and lower income on discount of
credits of $0.3 million. This was partially offset by higher income due to the
unwinding of the discount on mine rehabilitation of $1.6 million.
Finance costs
Finance costs before exceptional items increased from $23.6 million in 2020 to
$32.1 million in 2021, principally due to: the cancelation of the Libor rate
swap of the refinanced $200 million medium-term loan ($3.8 million); the
refinancing cost of the medium-term loan ($1.8 million); and foreign exchange
transaction costs to acquire $18.1 million dollars in Argentina, which
resulted in a loss of $15.3 million (2020: $12.8 million).
Foreign exchange (losses)/gains
The Group recognised a foreign exchange loss of $2.4 million (2020: $2.6
million loss) as a result of exposures in currencies other than the
functional currency - the Peruvian sol and the Argentinean peso which both
depreciated in 2021.
Income tax
The Company's pre-exceptional income tax charge was $81.3 million (2020: $49.6
million). The significant rise in the charge is explained by the rebound in
profitability versus the Covid-impacted 2020. In addition, there was an
increase in the tax rate in Argentina to 35% impacting deferred income tax by
$12.5 million.
The effective tax rate (pre-exceptional) for the period was 54.7% (2020:
57.8%), compared to the weighted average statutory income tax rate of 30.9%
(2020: 30.8%). The high effective tax rate in 2021 versus the average
statutory rate is mainly explained by the impact of a higher income tax rate
in Argentina increasing the effective rate by 8.4%, Royalties and the Special
Mining Tax which increased the effective rate by 8.2%, local currency
devaluation in Peru increasing the rate by 5.0%, and the impact of
non-deductible expenses related to buying US dollars in Argentina increasing
the rate by 3.4%.
Exceptional items
Exceptional items in 2021 totalled a $3.7 million gain after tax (2020: $15.8
million loss after tax). Exceptional items in 2021 included: a gain on the
demerger of Aclara Resources of $37.5 million (non-taxable); impairment of the
Pallancata mining unit of $24.9 million; and $24.1 million of Covid-19
response initiatives distributed between cost of sales and other expenses
(2020: $31.2 million). Covid-19 response initiatives include: incremental
personnel expenses; Covid tests; accommodation whilst testing all workers for
active Covid-19 cases prior to travelling to mine units; and additional
transportation costs to facilitate social distancing. These items are
presented as exceptional as they are incremental to the Group's regular
business, resulting from initiatives to respond to the impact from Covid-19.
Given the current progress of the pandemic, the response expenses are not
expected to be recorded as exceptional items in the future.
Covid-19 response initiatives 25
$000 Peru Argentina Total
Personnel 2,743 2 2,745
Donations 1 3 4
Third party services 8,236 11,421 19,657
Others 1,381 227 1,680
Total 12,361 11,653 24,014
The tax effect of these exceptional items was a $15.1 million tax gain (2020:
$7.2 million tax gain). The total effective tax rate was 48.2% (2020: 68.0%).
The net attributable profit of exceptional items was $7.4 million.
Cash flow and balance sheet review
Cash flow:
$000 Year ended Year ended Change
31 Dec 2021
31 Dec 2020
Net cash generated from operating activities 282,520 195,374 86,137
Net cash used in investing activities (183,434) (112,229) (71,205)
Cash flows generated generated/(used in) from financing activities 59,307 (12,411) 71,718
Foreign exchange adjustment (3,487) (5,208) 2,730
Net increase in cash and cash equivalents during the year 154,906 65,526 89,380
Net cash generated from operating activities increased from $195.4 million in
2020 to $282.5 million in 2021 mainly due to higher Adjusted EBITDA of $382.8
million (2020: $270.9 million).
Net cash used in investing activities increased from $112.2 million in 2020 to
$183.4 million in 2021 mainly due to higher purchases of property, plant and
equipment, and evaluation and exploration assets; and the purchase of Aclara
shares for $20.0 million.
Cash from financing activities increased to an inflow of $59.3 million from an
outflow of $12.4 million in 2020, primarily due to the additional medium-term
loan of $100.0 million, partially offset by higher dividends to
non-controlling interest of $9.8 million (2020: $0.3 million) and lower
repayment of borrowings of $14.8 million (2020: $37.7 million).
Working capital
$000 As at As at
31 December 2021 31 December 2020
Trade and other receivables 69,749 78,196
Inventories 49,184 42,362
Derivative financial assets/(liabilities) 14,073 (1,500)
Income tax payable, net (22,322) (20,709)
Trade and other payables (133,482) (114,415)
Provisions (32,058) (25,504)
Working capital (54,856) (41,570)
The Group's working capital position declined in 2021 from $(41.6) million to
$(54.9) million. The key drivers were: higher trade and other payables of
$19.1 million; lower trade and other receivables of $8.5 million; and higher
provisions of $6.6 million. These effects were partially offset by: higher
derivative financial assets of $15.6 million mainly comprised of the position
on the Company's silver hedges; and higher inventories of $6.9 million.
Net cash
$000 unless otherwise indicated As at As at
31 December 2021 31 December 2020
Cash and cash equivalents 386,789 231,883
Non-current borrowings (300,000) (199,554)
Current borrowings 26 (499) (10,778)
Net cash 86,290 21,551
The Group's reported net cash position was $86.3 million as at 31 December
2021 (31 December 2020: net cash of $21.6 million). The Group benefited from
strong cashflow generation resulting from the high precious metal prices. In
2021, the company recorded an increase in borrowings resulting from the
drawing down of a further $100 million of the Company's revised medium-term
loan.
Capital expenditure(( 27 ))( )
$000 Year ended Year ended
31 Dec 2021
31 Dec 2020
Pallancata 14,250 7,506
San Jose 43,666 23,030
Inmaculada 76,512 62,128
Operations 134,428 92,664
Aclara 11,476 8,650
Other 7,957 6,610
Total 153,861 107,924
2021 capital expenditure of $153.9 million (2020: $107.9 million) mainly
comprised of operational capex of $134.4 million (2020: $92.8 million) with
the increase versus 2020 resulting from deferred capex at all operations in
2020 due to the impact of the Covid-19 pandemic and higher capex for
development work at Pallancata to access newly economic resources which have
further extended the mine life.
Forward looking Statements
This announcement contains certain forward looking statements, including such
statements within the meaning of Section 27A of the US Securities Act of 1933,
as amended, and Section 21E of the Securities Exchange Act of 1934, as
amended. In particular, such forward looking statements may relate to matters
such as the business, strategy, investments, production, major projects and
their contribution to expected production and other plans of Hochschild Mining
plc and its current goals, assumptions and expectations relating to its future
financial condition, performance and results.
Forward-looking statements include, without limitation, statements typically
containing words such as "intends", "expects", "anticipates", "targets",
"plans", "estimates" and words of similar import. 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 be
materially different from any future results, performance or achievements
expressed or implied by such forward looking statements. Factors that could
cause or contribute to differences between the actual results, performance or
achievements of Hochschild Mining plc and current expectations include, but
are not limited to, legislative, fiscal and regulatory developments,
competitive conditions, technological developments, exchange rate fluctuations
and general economic conditions. The Company cautions against undue reliance
on any forward looking statement or guidance, particularly in light of the
current economic climate and the significant volatility, uncertainty and
disruption caused by Covid-19. Past performance is no guide to future
performance and persons needing advice should consult an independent financial
adviser.
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, 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.
Statement of Directors' responsibilities
The Directors confirm that to the best of their knowledge:
o the financial statements, prepared in accordance with the applicable set
of accounting standards, give a true and fair view of the assets, liabilities,
financial position and profit or loss of the Company and the undertakings
included in the consolidation taken as a whole; and
o the Management report includes a fair review of the development and
performance of the business and the position of the Company and the
undertakings included in the consolidation taken as a whole, together with a
description of the principal risks and uncertainties that they face.
CONSOLIDATED INCOME STATEMENT
For the year ended 31 December 2021
Year ended 31 December 2021 Year ended 31 December 2020
Notes Before exceptional items US$000 Exceptional items Total Before exceptional items US$000 Exceptional items Total
US$000
US$000
(note 11) (note 11)
US$000 US$000
Continuing operations
Revenue 5 811,387 - 811,387 621,827 - 621,827
Cost of sales 6 (487,772) (22,511) (510,283) (397,793) (27,613) (425,406)
Gross profit 323,615 (22,511) 301,104 224,034 (27,613) 196,421
Administrative expenses 7 (51,905) - (51,905) (43,282) - (43,282)
Exploration expenses 8 (39,848) - (39,848) (32,795) - (32,795)
Selling expenses 9 (15,431) - (15,431) (12,754) - (12,754)
Other income 12 8,435 37,461 45,896 3,617 - 3,617
Other expenses 12 (44,565) (1,503) (46,068) (28,905) (3,613) (32,518)
Impairment and write-off of non-current assets, net (863) (24,846) (25,709) (2,078) 8,303 6,225
Profit/(loss) from continuing operations before net finance income/(cost), 179,438 (11,399) 168,039 107,837 (22,923) 84,914
foreign exchange loss and income tax
Share of loss of an associate 19 (169) - (169) - - -
Finance income 13 3,946 - 3,946 4,197 - 4,197
Finance costs 13 (32,061) - (32,061) (23,560) - (23,560)
Foreign exchange loss, net (2,424) - (2,424) (2,631) - (2,631)
Profit/(loss) from continuing 148,730 (11,399) 137,331 85,843 (22,923) 62,920
operations before income tax
Income tax (expense)/benefit 14 (81,280) 15,055 (66,225) (49,651) 7,157 (42,494)
Profit/(loss) for the year from continuing operations 67,450 3,656 71,106 36,192 (15,766) 20,426
Attributable to:
Equity shareholders of the Parent 69,567 7,367 76,934 31,962 (16,800) 15,162
Non-controlling interests (2,117) (3,711) (5,828) 4,230 1,034 5,264
67,450 3,656 71,106 36,192 (15,766) 20,426
Basic earnings/(loss) per ordinary share from continuing operations for the 15 0.14 0.01 0.15 0.06 (0.03) 0.03
year (expressed in US dollars per share)
Diluted earnings/(loss) per ordinary share from continuing operations for the 15 0.13 0.01 0.14 0.06 (0.03) 0.03
year (expressed in US dollars per share)
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the year ended 31 December 2021
Year ended 31 December
Notes 2021 2020
US$000
US$000
Profit for the year 71,106 20,426
Other comprehensive income that might be reclassified to profit or loss in
subsequent periods, net of tax:
Net gain/(loss) on cash flow hedges 25,028 (5,913)
Deferred tax (charge)/benefit on cash flow hedges (7,383) 1,744
Exchange differences on translating foreign operations (21,282) 159
Cumulative exchange difference loss transferred to the income statement on 4 9,995 -
disposal of foreign operations
Share of other comprehensive loss of an associate (9) -
6,349 (4,010)
Other comprehensive income that will not be reclassified to profit or loss in
subsequent periods, net of tax:
Net gain on equity instruments at fair value through other comprehensive 20 261 1,765
income ('OCI')
261 1,765
Other comprehensive income/(loss)for the year, net of tax 6,610 (2,245)
Total comprehensive income for the year 77,716 18,181
Total comprehensive income attributable to:
Equity shareholders of the Parent 83,544 12,917
Non-controlling interests (5,828) 5,264
77,716 18,181
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at 31 December 2021
Notes As at As at
31 December 2021
31 December 2020
US$000
US$000
ASSETS
Non-current assets
Property, plant and equipment 16 738,119 787,663
Evaluation and exploration assets 17 123,304 192,121
Intangible assets 18 18,094 21,564
Investment in an associate 19 43,559 -
Financial assets at fair value through OCI 20 661 402
Financial assets at fair value through profit and loss 21 3,155 5,407
Trade and other receivables 22 2,470 5,395
Derivative financial assets 5,042 -
Deferred income tax assets 28 484 1,009
934,888 1,013,561
Current assets
Inventories 23 49,184 42,362
Trade and other receivables 22 69,749 78,196
Derivative financial assets 14,073 -
Income tax receivable 32 59
Cash and cash equivalents 24 386,789 231,883
519,827 352,500
Total assets 1,454,715 1,366,061
EQUITY AND LIABILITIES
Capital and reserves attributable to shareholders of the Parent
Equity share capital 226,506 226,506
Share premium 438,041 438,041
Other reserves (217,657) (225,664)
Retained earnings 248,664 287,652
695,554 726,535
Non-controlling interests 63,890 79,550
Total equity 759,444 806,085
Non-current liabilities
Trade and other payables 25 2,815 205
Derivative financial liabilities - 4,503
Borrowings 26 300,000 199,554
Provisions 27 116,835 109,033
Deferred income tax liabilities 28 87,228 73,316
506,878 386,611
Current liabilities
Trade and other payables 25 133,482 114,415
Derivative financial liabilities - 1,500
Borrowings 26 499 10,778
Provisions 27 32,058 25,504
Deferred income - 400
Income tax payable 22,354 20,768
188,393 173,365
Total liabilities 695,271 559,976
Total equity and liabilities 1,454,715 1,366,061
These financial statements were approved by the Board of Directors on 22
February 2022 and signed on its behalf by:
Ignacio Bustamante
Chief Executive Officer
22 February 2022
CONSOLIDATED STATEMENT OF CASH FLOWS
For the year ended 31 December 2021
Year ended 31 December
Notes 2021 2020
US$000
US$000
Cash flows from operating activities
Cash generated from operations 319,588 208,999
Interest received 1,938 2,292
Interest paid 26 (5,720) (6,312)
Payment of mine closure costs 27 (9,083) (3,987)
Income tax, special mining tax and mining royalty paid1 (22,021) (5,618)
Net cash generated from operating activities 284,702 195,374
Cash flows from investing activities
Purchase of property, plant and equipment (130,965) (94,046)
Purchase of evaluation and exploration assets 17 (21,398) (13,287)
Purchase of financial assets at fair value through OCI 20 (7) -
Purchase of investment in associate 19 (19,995) -
Purchase of financial assets at fair value through profit and loss 21 (3,308) -
Purchase of Argentinian bonds 13 (33,469) (27,256)
Proceeds from sale of Argentinian bonds 13 18,133 14,486
Proceeds from sale of financial assets at fair value through OCI 20 9 7,522
Proceeds from sale of financial assets at fair value though profit and loss 21 4,726 -
Proceeds from sale of property, plant and equipment 3,393 352
Cash and cash equivalent of demerged entity (553) -
Net cash used in investing activities (183,434) (112,229)
Cash flows from financing activities
Proceeds from borrowings 26 105,954 48,520
Repayment of borrowings 26 (14,793) (37,717)
Payment of lease liabilities (2,182) (2,021)
Purchase of treasury shares - (292)
Dividends paid to non-controlling interests (9,832) (345)
Dividends paid 29 (22,022) (20,556)
Cash flows generated from/(used in) financing activities 57,125 (12,411)
Net increase in cash and cash equivalents during the year 158,393 70,734
Exchange difference (3,487) (5,208)
Cash and cash equivalents at beginning of year 231,883 166,357
Cash and cash equivalents at end of year 24 386,789 231,883
1 Taxes paid have been offset with value added tax (VAT) credits of
US$3,478,000 (2020:US$3,390,000).
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Other reserves
Notes Equity share capital US$000 Share premium US$000 Treasury shares US$000 Fair value reserve of financial assets at fair value through OCI Share of other comprehensive loss of Dividends expired US$000 Cumulative translation adjustment Unrealised gain/ Merger reserve US$000 Share- based payment reserve US$000 Total Retained earnings US$000 Capital and reserves attributable to shareholders Non-controlling interests Total
US$000 an associate US$000 US$000
other reserves US$000
of the Parent
US$000
equity
(loss) on hedges
US$000
US$000
US$000
Balance at 1 January 2020 226,506 438,041 - 18 - 99 (14,035) - (210,046) 2,164 (221,800) 290,263 733,010 74,631 807,641
Other comprehensive income/(expense) - - - 1,765 - - 159 (4,169) - - (2,245) - (2,245) - (2,245)
Profit for the year - - - - - - - - - - - 15,162 15,162 5,264 20,426
Total comprehensive income/ - - - 1,765 - - 159 (4,169) - - (2,245) 15,162 12,917 5,264 18,181
(expense) for the year
Sale of financial assets at fair 20 - - - (1,988) - - - - - - (1,988) 1,988 - - -
value through OCI
Exercise of share options - - 292 - - - - - - (1,087) (1,087) 795 - - -
Dividends - - - - - - - - - - - (20,556) (20,556) - (20,556)
Dividends to non - - - - - - - - - - - - - - (345) (345)
controlling interests
Purchase of treasury shares - - (292) - - - - - - - - - (292) - (292)
Share-based payments - - - - - - - - - 1,456 1,456 - 1,456 - 1,456
Balance at 31 December 2020 226,506 438,041 - (205) - 99 (13,876) (4,169) (210,046) 2,533 (225,664) 287,652 726,535 79,550 806,085
Other comprehensive income/(expense) - - - 261 (9) - (11,287) 17,645 - - 6,610 - 6,610 - 6,610
Profit for the year - - - - - - - - - - - 76,934 76,934 (5,828) 71,106
Total comprehensive income/ - - - 261 (9) - (11,287) 17,645 - - 6,610 76,934 83,544 (5,828) 77,716
(expense) for the year
Sale of financial assets at fair 20 - - - 18 - - - - - - 18 (18) - - -
value through OCI
Dividends - - - - - - - - - - - (22,022) (22,022) - (22,022)
In specie dividends - - - - - - - - - - - (94,945) (94,945) - (94,945)
Dividends to non - - - - - - - - - - - - - (9,832) (9,832)
controlling interests
Share-based payments - - - - - - - - - 2,442 2,442 - 2,442 - 2,442
Forfeiture of share options - - - - - - - - - (1,063) (1,063) 1,063 - - -
Balance at 31 December 2021 226,506 438,041 - 74 (9) 99 (25,163) 13,476 (210,046) 3,912 217,657 248,664 695,554 63,890 759,444
For the year 31 December 2021
1 Notes to the condensed consolidated financial statements
For the year ended 31 December 2021
The financial information for the year ended 31 December 2021 and 2020
contained in this document does not constitute statutory accounts as defined
in section 435 of the Companies Act 2006. The financial information for the
years ended 31 December 2021 and 2020 have been extracted from the
consolidated financial statements of Hochschild Mining plc for the year ended
31 December 2021 which have been approved by the directors on 22 February 2022
and will be delivered to the Registrar of Companies in due course. The
auditor's report on those financial statements was unqualified and did not
contain a statement under section 498 of the Companies Act 2006.
2 Significant accounting policies
Basis of preparation
The consolidated financial statements of the Group have been prepared in
accordance with UK adopted International Accounting Standards.
The basis of preparation and accounting policies used in preparing the
consolidated financial statements for the years ended 31 December 2021 are
consistent with those adopted and disclosed in the Group's financial
statements for the year ended 31 December 2020. The consolidated financial
statements have been prepared on a historical cost basis except for the
revaluation of certain financial instruments that are measured at fair value
at the end of each reporting period. There have been a number of amendments to
accounting standards and new interpretations, however these have not any
impact on the accounting policies, methods of computation or presentation
applied by the Group. Further details on new UK adopted International
Accounting Standards will be disclosed in the 2021 Annual Report and Accounts.
The financial statements are presented in US dollars (US$) and all monetary
amounts are rounded to the nearest thousand ($000) except when otherwise
indicated.
Going concern
The Group's business activities, its future development and the factors likely
to affect its performance and position are set out in the Strategic Report.
The financial position of the Group, its cash flows, liquidity position and
borrowings are described in the Financial Review and discussion of the Group's
viability on the occurrence of certain scenarios is provided in the Viability
Statement. In addition, the financial statements includes the Group's
objectives, policies and processes for managing its capital; its financial
risk management objectives; details of its financial instruments; and its
exposure to credit risk and liquidity risk.
Covid-19
The reduced impact of Covid-19 meant that Hochschild Mining was able to
benefit from a year of uninterrupted operations. The Company continues to take
a cautious approach and prioritises employee welfare by facilitating social
distancing at the operations, implementing testing, and taking other relevant
measures. The Company's Covid-19 Crisis Plan, which provides for numerous
mitigating measures to be adopted in response to an outbreak of infections,
can be implemented as required. At the time of writing, the number of new
Covid-19 cases in Peru and Argentina are falling from a recent peak due to the
Omicron variant and the Directors are confident that adequate mitigation steps
can be taken to prevent significant disruption to the business. The
Directors' assessment is naturally dependent on the continued progress in Peru
and Argentina with regards to their respective government's vaccination
rollout programmes and the effectiveness of these vaccines against new
variants of the virus.
Further information on the action taken by the Company in 2020, which
continued in 2021, can be found on pages 64 to 71 (Risk Management report) and
pages 6 to 7 of the 2020 Annual Report.
Socio-Political Developments
As described in the Risk Management report, in the run up to the Peruvian
Presidential elections in the first half of 2021 and following the
inauguration of the left-wing Castillo administration in late July 2021,
issues associated with mining have been the subject of increased public
debate. Particular aspects relate to mining companies' social license to
operate and the taxation of mining companies' revenues.
- Government/Legislative Action
In considering the possible
impact on the business by government action, the Directors note that, as
reported in the Risk Management report, the Peruvian Government intends to
submit a legislative bill to Congress to increases taxes on the mining sector
in Q1 2022 although no specific details have been announced.
- Social License
As a result of the election of
the Castillo administration, rural communities have become more active in
their demands to mine operators for economic and other forms of support.
The Company is committed to active engagement with local communities and
details of initiatives pursued during the year can be found in the
Sustainability Report. The Company's approach was recently acknowledged by
various stakeholders who conveyed formal expressions of support for the
Company in response to events in the Coracora district in Ayacucho in
November 2021.
Directors' Assessment
The Directors have reviewed Group liquidity, including cash resources and
borrowings (refer to note 26 on details of the US$300m Medium Term loan) and
related covenant forecasts to assess whether the Group is able to continue in
operation for the period to 31 March 2023 (the "Going Concern Period") which
is at least 12 months from the date of these financial statements. In line
with their usual practice, the Directors also considered the impact of a
number of potential downside scenarios on the Group's future cash flows and
liquidity position as well as debt covenant compliance. The scenarios were
further reviewed under varying precious metal price assumptions.
Within these scenarios, consideration was given to the potential impact of
Covid and the possible actions of government and other third parties.
More specifically, the scenarios reviewed by the Directors included a base
case (the 'Base Scenario'), reflecting (among other things) budgeted
production for 2022, Life of Mine plans for Inmaculada, Pallancata and San
Jose, a budget for Covid-related costs, the planned acquisition of Amarillo
Gold Corporation in Q1 2022 and average precious metal prices of $1,745/oz for
gold and $23.3/oz for silver, being the average analysts' consensus for the
next 15 months (the 'Assumed Prices'). The Directors also considered
"Severe" and "Remote" scenarios which took into account a combination of
circumstances which is considered by the Directors, to be unlikely. The former
takes into account, a four-week suspension of all operations and an increase
in royalties and taxes. The latter analyses the cumulative impact of the
Severe scenario and precious metal prices which are 20% lower than the Assumed
Prices. Those prices would be significantly below current spot prices. In
each scenario, it has been assumed that all employees remain on full pay and
that mitigating actions, while available, would not be necessary to maintain a
comfortable level of liquidity.
Under all three scenarios, the cash balance remained more than adequate for
the Group's forecast expenditure with sufficient headroom maintained to comply
with debt covenants. The results of a reverse stress test were also
considered.
Conclusion
After their review, the Directors have a reasonable expectation that the Group
and the Company have adequate resources to continue in operational existence
during the Going Concern Period. Accordingly, they continue to adopt the
going concern basis of accounting in preparing the annual financial
statements.
3 Segment reporting
The Group's activities are principally related to mining operations which
involve the exploration, production and sale of gold and silver. Products are
subject to the same risks and returns and are sold through similar
distribution channels. The Group undertakes a number of activities solely to
support mining operations including power generation and services. Transfer
prices between segments are set at an arm's length basis in a manner similar
to that used for third parties. Segment revenue, segment expense and segment
results include transfers between segments at market prices. Those transfers
are eliminated on consolidation.
For internal reporting purposes, management takes decisions and assesses the
performance of the Group through consideration of the following reporting
segments:
‒ Operating unit - San Jose, which generates revenue from the
sale of gold and silver (dore and concentrate).
‒ Operating unit - Pallancata, which generates revenue from the
sale of gold and silver (concentrate).
‒ Operating unit - Inmaculada, which generates revenue from the
sale of gold and silver (dore).
‒ Exploration, which explores and evaluates areas of interest in
brownfield and greenfield sites with the aim of extending the life of mine of
existing operations and to assess the feasibility of new mines. The
exploration segment includes costs charged to the profit and loss and
capitalised as assets.
‒ Other - includes the profit or loss generated by Empresa de
Transmisión Aymaraes S.A.C.
The Group's administration, financing, other activities (including other
income and expense), and income taxes are managed at a corporate level and are
not allocated to operating segments.
Segment information is consistent with the accounting policies adopted by the
Group. Management evaluates the financial information based on the adopted
IFRS accounting policies in the financial statements.
The Group measures the performance of its operating units by the segment
profit or loss that comprises gross profit, selling expenses and exploration
expenses.
Segment assets include items that could be allocated directly to the segment.
(a) Reportable segment information
Inmaculada US$000 San Jose US$000 Pallancata US$000 Exploration Other1 Adjustment Total
US$000
US$000
and
US$000
eliminations
US$000
Year ended 31 December 2021
Revenue from external customers 452,849 260,879 103,809 - 464 - 818,001
Inter segment revenue - - - - 9,225 (9,225) -
Total revenue from customers 452,849 260,879 103,809 - 9,689 (9,225) 818,001
Provisional pricing adjustment (14) (1,907) (4,693) - - - (6,614)
Total revenue 452,835 258,972 99,116 - 9,689 (9,225) 811,387
Segment profit/(loss) 226,727 52,614 343 (40,520) 7,345 (684) 245,825
Others2 - - - - - - (108,494)
Profit from continuing operations before income tax - - - - - - 137,331
Other segment information
Depreciation3 (75,524) (51,217) (22,618) (396) (5,795) - (155,550)
Amortisation (108) (852) - (107) (51) - (1,118)
Impairment and write-off of assets, net (326) (354) (24,940) - (89) (25,709)
Assets
Capital expenditure 76,512 43,666 14,250 15,896 3,537 - 153,861
Current assets 20,182 43,473 9,072 - 4,230 - 76,957
Other non-current assets 515,943 157,749 3,241 155,702 46,882 - 879,517
Total segment assets 536,125 201,222 12,313 155,702 51,112 - 956,474
Not reportable assets4 - - - - 498,241 - 498,241
Total assets 536,125 201,222 12,313 155,702 549,353 - 1,454,715
1 'Other' revenue relates to revenues earned by Empresa de Transmisión
Aymaraes S.A.C.
2 Comprised of administrative expenses of US$51,905,000, other income of
US$45,896,000, other expenses of US$46,068,000, write-off of assets (net) of
US$863,000, impairment of non-current assets of US$24,846,000, share of losses
of an associate of US$169,000, finance income of US$3,946,000, finance expense
of US$32,061,000, and foreign exchange loss of US$2,424,000.
3 Includes depreciation capitalised in the Crespo project (US$430,000),
and San Jose unit (US$2,341,000), products in process (US$509,000) and
recognised against the mine rehabilitation provision (US$1,978,000).
4 Not reportable assets are comprised of financial assets at fair value
through OCI of US$661,000, financial assets at fair value through profit and
loss of US$3,155,000, other receivables of US$44,446,000, income tax
receivable of US$32,000, deferred income tax asset of US$484,000, investment
in associates US$43,559,000, derivative financial assets of US$19,115,000 and
cash and cash equivalents of US$386,789,000.
Inmaculada US$000 San Jose Pallancata US$000 Exploration Other1 Adjustment Total
US$000
US$000
and
US$000
US$000
eliminations
US$000
Year ended 31 December 2020
Revenue from external customers 314,742 199,803 96,134 - 149 - 610,828
Inter segment revenue - - - - 6,918 (6,918) -
Total revenue from customers 314,742 199,803 96,134 - 7,067 (6,918) 610,828
Provisional pricing adjustment 164 6,295 4,540 - - - 10,999
Total revenue 314,906 206,098 100,674 - 7,067 (6,918) 621,827
Segment profit/(loss) 129,103 47,290 3,989 (33,436) 5,699 (1,773) 150,872
Others2 - - - - - - (87,952)
Profit from continuing operations before income tax - - - - - - 62,920
Other segment information
Depreciation3 (54,522) (31,238) (28,969) (406) (3,734) - (118,869)
Amortisation (82) (552) - (442) (39) - (1,115)
Impairment and write-off of assets, net (535) 7,750 (221) (720) (49) - 6,225
Assets
Capital expenditure 62,128 23,030 7,399 12,772 2,595 - 107,924
Current assets 14,613 43,735 24,692 - 4,675 - 87,715
Other non-current assets 516,505 166,887 33,784 232,135 52,037 - 1,001,348
Total segment assets 531,118 210,622 58,476 232,135 56,712 - 1,089,063
Not reportable assets4 - - - - 276,998 - 276,998
Total assets 531,118 210,622 58,476 232,135 333,710 - 1,366,061
1 'Other' revenue relates to revenues earned by Empresa de Transmisión
Aymaraes S.A.C.
2 Comprised of administrative expenses of US$43,282,000, other income of
US$3,617,000, other expenses of US$32,518,000, write-off of assets (net) of
US$2,078,000, reversal of impairment of non-current assets of US$8,303,000,
finance income of US$4,197,000, finance expense of US$23,560,000, and foreign
exchange loss of US$2,631,000.
3 Includes depreciation capitalised in the Crespo project (US$768,000),
San Jose unit (US$1,349,000) and products in process (US$168,000).
4 Not reportable assets are comprised of financial assets at fair value
through OCI of US$402,000, financial assets at fair value through profit and
loss of US$5,407,000, other receivables of US$38,238,000, income tax
receivable of US$59,000, deferred income tax asset of US$1,009,000, and cash
and cash equivalents of US$231,883,000.
(b) Geographical information
The revenue for the period based on the country in which the customer is
located is as follows:
Year ended 31 December
2021 2020
US$000
US$000
External customer
Switzerland 360,838 236,455
Canada 213,350 138,795
Korea 135,162 150,094
Germany 47,014 60,299
Japan 26,151 13,264
Chile 13,184 10,872
United Kingdom 7,982 -
Bulgaria 4,703 9,311
USA - 2,994
Peru 3,003 (257)
Total 811,387 621,827
Inter-segment
Peru 9,225 6,918
Total 820,612 628,745
In the periods set out below, certain customers accounted for greater than 10%
of the Group's total revenues as detailed in the following table:
Year ended 31 December 2021 Year ended 31 December 2020
US$000 % Revenue Segment US$000 % Revenue Segment
Argor Heraus 208,037 26% Inmaculada and San Jose 176,543 28% Inmaculada and San Jose
LS Nikko 135,162 17% Pallancata and San Jose 150,094 24% Pallancata and San Jose
Asahi Refining Canada 198,254 24% Inmaculada 121,048 19% Inmaculada
MKS Switzerland S.A. 152,801 19% Inmaculada 59,912 10% Inmaculada
Non-current assets, excluding financial instruments and deferred income tax
assets, were allocated to the geographical areas in which the assets are
located as follows:
As at 31 December
2021 2020
US$000
US$000
Peru 665,839 699,121
Argentina 157,750 166,887
Chile 55,922 135,340
Canada 6 -
Total non-current segment assets 879,517 1,001,348
Financial assets at fair value through OCI 661 402
Financial assets at fair value through profit and loss 3,155 5,407
Investment in associates 43,559 -
Trade and other receivables 2,470 5,395
Deferred income tax assets 484 1,009
Derivative financial instruments 5,042 -
Total non-current assets 934,888 1,013,561
4 Demerger of Aclara Resources Inc. ('Aclara')
Hochschild Mining Holdings Ltd ('HM Holdings'), a wholly-owned subsidary of
the Group had interests over a Chilean company named REE UNO SpA. This entity
holds the project Aclara (formerly named Biolantanidos), which is located in
the south of Chile, and is currently focused on the development of the Penco
module, which will aim to produce a rare earth concentrate through a
processing plant that will be fed by clays from nearby deposits.
The Group wanted to separate the Aclara project from their other businesses
dedicated to the extraction and production of gold and silver. For this
purpose, a new company named Aclara Resources Inc. located in Canada
(hereinafter, 'Aclara') was incorporated by the Group. The investment held in
REE UNO SpA was then transferred to Aclara.
A distribution of 70,606,502 Aclara Shares, representing 80% of the Aclara
Shares, was made to the holders of ordinary shares of the Group by way of a
dividend in specie (the "Demerger Dividend"). The approval of the Group's
shareholders in respect of the Demerger Dividend was granted at the
Extraordinary General Meeting held on 5 November 2021. The Demerger Dividend
was effected on 10 December 2021, shortly before the Aclara Initial Public
Offering ('IPO') was completed later that day.
Once the Aclara IPO was completed, Aclara became an independent company listed
on the Toronto Stock Exchange.
The ratio of Demerged Aclara Shares to the number of ordinary shares in the
Group was 70,606,502 to 513,875,563. Therefore, the shareholders who were
entitled to receive the Demerger Dividend received 0.1374 Aclara Shares for
each ordinary share in the Group.
The value of the Demerger Dividend is C$120,031,053 (equivalent to
US$94,945,000) in aggregate based on the offering price of C$1.70 per Aclara
Share (the Offering Price).
HM Holdings retained 20% of the Aclara Shares. The investment was recorded at
initial recognition at fair value, based on the Offering Price.
The fair value of the Demerger Dividend at the date of the demerger and
retained investment is therefore a level 1 fair value measurement.
Immediately following the Demerger Dividend and pursuant to the subscription
agreement with Aclara dated 2 December 2021, HM Holdings purchased 14,870,397
Aclara Shares at the Offering Price for aggregate gross proceeds to Aclara of
C$25,279,675 (equivalent to US$19,996,000).
The consolidated effect in the financial statements of the Group is an
exceptional gain of US$37,461,000 presented within other income .
Details of the net gain on demerger of Aclara are shown below:
US$000
Property, plant and equipment 507
Evaluation and exploration assets 70,311
Other non-current assets 2,668
Current assets 1,210
Current liabilities (3,465)
Aclara net assets and liabilities demerged(1) 71,231
Net cash and cash equivalents demerged (553)
Net cash outflow from demerger of Aclara (553)
In specie dividends relating to Aclara demerger 94,945
Retained financial investments in associate (note 19) 23,742
Net assets demerged (71,231)
Reclassification of foreign currency translation reserve (9,995)
Gain on demerger of Aclara 37,461
1 Considered in the exploration segment of the Group.
On completion of the demerger, the Group retained an 20% interest in Aclara
through the Aclara Resources Inc. investment Company. An investment in
associates of US$23,742,000 was recognised on the Group's consolidated balance
sheet in respect of this interest.
5 Revenue
Year ended 31 December 2021 Year ended 31 December 2020
Revenue from customers Revenue from customers
Goods sold US$000 Shipping services US$000 Total US$000 Provisional pricing US$000 Total US$000 Goods sold US$000 Shipping services US$000 Total US$000 Provisional pricing US$000 Total
US$000
Gold (from dore bars) 353,258 914 354,172 40 354,212 255,142 577 255,719 144 255,863
Silver (from dore bars) 207,022 804 207,826 (52) 207,774 101,195 383 101,578 62 101,640
Gold (from concentrates) 100,233 2,462 102,695 912 103,607 109,816 2,447 112,263 1,956 114,219
Silver (from concentrates) 150,140 2,704 152,844 (7,514) 145,330 138,669 2,450 141,119 8,837 149,956
Services 464 - 464 - 464 149 - 149 - 149
Total 811,117 6,884 818,001 (6,614) 811,387 604,971 5,857 610,828 10,999 621,827
6 Cost of sales before exceptional items
Included in cost of sales are:
Year ended 31 December
2021 2020
US$000
US$000
Depreciation and amortisation in cost of sales1 145,482 114,662
Personnel expenses (note 10)2 101,682 65,077
Mining royalty (note 31) 7,171 5,208
Change in products in process and finished goods 320 17,323
Fixed costs at the operations during stoppages, reduced capacity and excess 8,680 46,480
absenteeism3
1 The depreciation and amortisation in production cost is US$148,842,000
(2020: US$113,146,000).
2 Includes workers profit sharing of US$6,512,000 (2020: US$2,632,000) and
excludes personnel expenses of US$7,607,000 (2020: US$32,117,000) included
within unallocated fixed cost at the operations (see below).
3 Corresponds to the unallocated fixed cost accumulated as a result of
excess absenteeism (2020: during the stoppage and operation of the mine units
under reduced operating capacity) due to the Covid-19 pandemic. These costs
mainly include personnel expenses of US$7,607,000 (2020: US$32,117,000), third
party services of US$995,000 (2020: US$8,948,000), supplies of US$nil (2020:
US$1,698,000), depreciation and amortisation of US$nil (2020: US$1,818,000)
and other costs of US$78,000 (2020: US$1,899,000).
7 Administrative expenses
Year ended 31 December
2021 2020
US$000
US$000
Personnel expenses (note 10) 29,832 27,016
Professional fees 8,710 4,978
Donations 587 373
Lease rentals 1,301 1,353
Third party services 302 241
Communications 473 427
Indirect taxes 2,057 2,029
Depreciation and amortisation 1,823 1,723
Depreciation of rights of use 226 284
Technology and systems 1,207 1,063
Security 956 891
Other1 4,431 2,904
Total 51,905 43,282
1 Predominantly relates to advertising costs of US$372,000 (2020:
US$292,000), insurance fees of US$837,000 (2020: US$464,000), repair and
maintenance of US$326,000 (2020: US$314,000), supplies costs of US$102,000
(2020: US$42,000), tax penalties of US$1,476,000 (2020: US$55,000), travel
expenses of US$105,000 (2020: US$188,000) and personnel transportation of
US$108,000 (2020: US$115,000).
8 Exploration expenses
Year ended 31 December
2021 2020
US$000
US$000
Mine site exploration1
Arcata 2,189 990
Ares 628 940
Inmaculada 3,276 2,526
Pallancata 5,993 4,652
San Jose 9,653 9,720
21,739 18,828
Prospects2
Peru 2,677 1,731
USA 3,731 1,902
Chile (53) (211)
Canada 51 -
6,406 3,422
Generative3
Peru 3,263 2,331
USA 11 12
Mexico 861 974
Chile 177 437
4,312 3,754
Personnel (note 10) 6,368 5,905
Others 731 581
Depreciation right-of-use assets 292 305
Total 39,848 32,795
1 Mine-site exploration is performed with the purpose of identifying
potential minerals within an existing mine-site, with the goal of maintaining
or extending the mine's life.
2 Prospects expenditure relates to detailed geological evaluations in
order to determine zones which have mineralisation potential that is
economically viable
for exploration. Exploration expenses are generally incurred in the following
areas: mapping, sampling, geophysics, identification of local targets and
reconnaissance drilling.
3 Generative expenditure is early stage exploration expenditure related to
the basic evaluation of the region to identify prospects areas that have the
geological conditions necessary to contain mineral deposits. Related
activities include regional and field reconnaissance, satellite images,
compilation of public information and identification of exploration targets.
The Group determines the cash flows which relate to the exploration activities
of the companies engaged only in exploration. Exploration activities incurred
by Group operating companies are not included since it is not practicable to
separate the liabilities related to the exploration activities of these
companies from their operating liabilities. Cash outflows on exploration
activities were US$12,163,000 in 2021 (2020: US$6,176,000).
9 Selling expenses
Year ended 31 December
2021 2020
US$000
US$000
Personnel expenses (note 10) 304 303
Warehouse services 1,392 1,281
Taxes1 11,765 9,202
Other 1,970 1,968
Total 15,431 12,754
1 Corresponds to the export duties in Argentina.
10 Personnel expenses
Year ended 31 December
2021 2020
US$000
US$000
Salaries and wages 109,769 104,331
Workers' profit sharing (note 27) 11,018 4,986
Other legal contributions 23,792 22,158
Statutory holiday payments 7,237 6,214
Long Term Incentive Plan 1,783 1,764
Termination benefits 6,470 1,495
Other 1,101 752
Total(1) 161,170 141,700
1 Includes exceptional personnel expenses amounting to US$2,745,000
(2020: US$4,595,000) (refer to note 11(1)).
Personnel expenses are distributed as follows:
Year ended 31 December
2021 2020
US$000
US$000
Cost of sales1 111,613 101,404
Administrative expenses 29,832 27,016
Exploration expenses 6,368 5,905
Selling expenses 304 303
Other expenses2 11,579 4,255
Capitalised as property, plant and equipment 1,474 2,817
Total 161,170 141,700
1 Exceptional personnel expenses included in cost of sales amount to
US$2,324,000 (2020: US$4,210,000).
2 Exceptional personnel expenses included in other expenses amount to
US$421,000 (2020: US$385,000).
The average number of employees for 2021 and 2020 were as follows:
Year ended 31 December
2021 2020
Peru 2,057 1,897
Argentina 1,478 1,432
Chile 42 13
United Kingdom 10 10
Total 3,587 3,352
11 Exceptional items
Exceptional items are those significant items which, due to their nature or
the expected infrequency of the events giving rise to them, need to be
disclosed separately on the face of the income statement to enable a better
understanding of the financial performance of the Group and facilitate
comparison with prior years. Unless stated, exceptional items do not
correspond to a reporting segment of the Group.
Year ended Year ended
31 December
31 December
2021
2020
US$000
US$000
Cost of sales
Incremental costs due to Covid - 19 pandemic1 (22,511) (27,613)
Total (22,511) (27,613)
Other income
Demerger of Aclara (note 4) 37,461 -
Total 37,461 -
Other expenses
Incremental costs due to Covid-19 pandemic1 (1,503) (3,613)
Total (1,503) (3,613)
(Impairment)/impairment reversal of non-financial assets, net
Impairment of non-financial assets2 (24,846) -
Reversal of impairment of non-financial assets3 - 8,303
Total (24,846) 8,303
Income tax benefit4 15,055 7,157
Total 15,055 7,157
The exceptional items for the year ended 31 December 2021 and 2020 correspond
to:
1 Incremental production costs incurred in the operating mine units to
manage the Covid-19 pandemic have been presented within costs of sales and
costs incurred by mine units in care and maintenance and those related to
corporate activities have been presented within other expenses.
Year ended 31 December
2021 2020
Cost of sales US$000 Other expenses US$000 Cost of sales US$000 Other expenses US$000
Third party services 16,032 873 18,823 665
Personnel expenses (note 10) 2,324 421 4,210 385
Donations - - 124 1,365
Consumption of medical supplies 1,327 120 1,062 248
Cleaning and food services 2,728 24 1,493 59
Depreciation and amortisation 37 29 534 -
Others 63 36 1,367 891
Total 22,511 1,503 27,613 3,613
These costs have been incurred in respect of the implementation of the
necessary protocols including incremental third party services mainly related
to accommodation whilst testing all workers for active Covid-19 cases prior to
travelling to mine units, medical tests and additional transportation costs to
facilitate social distancing, personnel expenses mainly reflecting one-off
bonuses paid to those workers required to oversee critical processes during
period of suspension (occurred only in 2020), donations which includes the
value of equipment donated to assist the national effort in Peru to control
the pandemic as well as the donations to hardship funds administered by
educational institutions, UTEC and TECSUP (refer to note 30)).
The pandemic can be considered a single protracted globally pervasive
event with a financial impact over a number of reporting periods. Management
initial expectation was that these costs would cease to be incurred at the end
of 2020 or early 2021, and whilst the majority of the costs have reduced over
time as a result of the efficiencies made to the health protocols and
logistics required to operate throughout the pandemic, some residual costs
continue to be incurred to date.
In order to provide the users of the financial statements with a better
understanding of the financial performance of the Group in the year, and to
facilitate comparison with the prior period, we have considered it appropriate
to continue to disclose separately as exceptional these incremental
Covid-related cost up to December 2021.
Following the outbreak of the Omicron variant, the virus appears to have
shifted into an endemic phase. Consequently, these costs will no longer be
presented as exceptional items from 2022 and will form part of the underlying
profits.
2 Corresponds to the impairment related to the Pallancata mine unit in
Peru (refer to notes 16 and 17).
3 Reversals of impairment related to the San Jose mine unit (refer to
notes 16, 17 and 18).
4 The current tax credit generated by the incremental costs arising from
the Covid-19 pandemic of US$7,725,000 (2020: US$9,241,000) and the deferred
tax credit generated by the impairment of the Pallancata mine unit of
US$7,330,000 (2020: deferred tax charge generated by the reversal of the
impairment related to the San Jose mine unit of US$2,084,000).
12 Other income and other expenses before exceptional items
Year ended Year ended
31 December 2021
31 December 2020
Before Before
exceptional
exceptional
items
items
US$000
US$000
Other income
Gain on sale of property, plant and equipment (note 16) 3,342 231
Logistic services 7 336
Income on recovery of expenses 418 -
Recovery of provision of obsolescence of supplies (note 23) 2,338 1,921
Other1 2,330 1,129
Total 8,435 3,617
Other expenses
Increase in provision for mine closure (note 27(1)) (22,095) (16,056)
Provision of obsolescence of supplies (note 23) (559) -
Care and maintenance expenses of Ares mine unit (2,903) (2,578)
Write off of value added tax (188) (101)
Corporate social responsibility contribution in Argentina2 (3,911) (2,689)
Care and maintenance expenses of Arcata mine unit (2,772) (2,966)
Provision for impairment of receivables3 - (996)
Voluntary retirement plan in Argentina4 (8,263) -
Other5 (3,874) (3,519)
Total (44,565) (28,905)
1 Mainly corresponds to the gain recognised for the Mosquito project of
US$400,000 (2020: US$400,000).
2 Relates to a contribution in Argentina to the Santa Cruz province
calculated as a proportion of sales.
3 Mainly due to write-off of a claim receivable of US$996,000.
4 Related to payments made and the provision recognised under a voluntary
retirement plan in Minera Santa Cruz.
5 Mainly corresponds to the expenses due to concessions of US$179,000
(2020: US$295,000), depreciation expense for right-of-use assets of US$135,000
(2020: US$151,000), the loss on recovery of expenses of US$nil (2020:
US$158,000), loss on sale of supplies of US$2,027,000 (2020: US$1,312,000).
13 Finance income and finance costs
Year ended Year ended
31 December 2021
31 December 2020
US$000 US$000
Finance income
Interest on deposits and liquidity funds 1,815 2,106
Interest on loans to related parties 11 -
Interest income 1,826 2,106
Unwind of discount on mine rehabilitation (note 27) 2,038 387
Gain on discount of other receivables1 - 335
Gain from changes in the fair value of financial instruments2 - 1,057
Other 82 312
Total 3,946 4,197
Finance costs
Interest on secured bank loans (note 26) (5,951) (7,086)
Other interest (1,332) (684)
Interest expense (7,283) (7,770)
Fair value loss on interest rate swap reclassified from equity (5,521) (1,497)
Loss on discount of other receivables1 (632) -
Loss from changes in the fair value of financial instruments3 (16,170) (12,770)
Other (2,455) (1,523)
Total (32,061) (23,560)
1 Mainly related to the effect of the discount of tax credits in Argentina and
Peru.
2 Related to the fair value adjustment of the Americas Gold and Silver
Corporation (AGSC) shares.
3 Represents the fair value change of US$834,000 on the AGSC and C3 Metals Inc
shares (note 21) (2020: US$nil)) and the foreign exchange transaction costs of
US$15,336,000 (2020: US$12,770,000) to acquire US$18,133,000 dollars through
the sale of bonds in Argentina (2020: US$14,486,000).
14 Income tax expense
Year ended 31 December 2021 Year ended 31 December 2020
Before Exceptional items Total Before Exceptional Total
exceptional
US$000
US$000
exceptional
items
US$000
items
items
US$000
US$000
US$000
Current corporate income tax from continuing operations
Corporate income tax charge 53,965 (7,725) 46,240 31,551 (9,241) 22,310
Withholding tax 689 - 689 402 - 402
54,654 (7,725) 46,929 31,953 (9,241) 22,712
Deferred taxation
Origination and reversal of temporary differences from continuing operations 26,885 (7,330) 19,555 8,962 2,084 11,046
(note 28)
Effect of change in income tax rates1 (12,501) - (12,501) 1,529 - 1,529
14,384 (7,330) 7,054 10,491 2,084 12,575
Corporate income tax 69,038 (15,055) 53,983 42,444 (7,157) 35,287
Current mining royalties
Mining royalty charge (note 31) 6,326 - 6,326 4,088 - 4,088
Special mining tax charge (note 31) 5,916 - 5,916 3,119 - 3,119
Total current mining royalties 12,242 - 12,242 7,207 - 7,207
Total taxation charge/(credit) in the income statement 81,280 (15,055) 66,225 49,651 (7,157) 42,494
1 On 16 June 2021, the Argentinian government published the Law 27630 that
establishes taxable net income brackets: up to 5Mm pesos is 0%, more than 5Mm
up to 50Mm pesos is 30%, and more than 50Mm pesos is 35% with effect from 1
January 2021. The UK Government increased the rate of Corporation Tax to 25%
on profits over £250,000 from April 2023. There is no impact on the deferred
tax calculation of the Group arising from the change in the Corporation Tax in
the UK.
The weighted average statutory income tax rate was 27.7% for 2021 and 30.8%
for 2020. This is calculated as the average of the statutory tax rates
applicable in the countries in which the Group operates, weighted by the
profit/(loss) before tax of the Group companies in their respective countries
as included in the consolidated financial statements.
The change in the weighted average statutory income tax rate is due to a
change in the weighting of profit/(loss) before tax in the various
jurisdictions in which the Group operates partially offset by the increase in
the Argentinian tax rate.
There were tax charges in relation to the cash flow hedge gains (2020: losses)
recognised in equity during the year ended 31 December 2021 of US$7,383,000
(2020: US$1,744,000 credit).
The total taxation charge on the Group's profit before tax differs from the
theoretical amount that would arise using the weighted average tax rate
applicable to the consolidated profits of the Group companies as follows:
As at 31 December
2021 2020
US$000
US$000
Profit from continuing operations before income tax 137,331 62,920
At average statutory income tax rate of 27.7% (2020: 30.8%) 37,996 19,368
Expenses not deductible for tax purposes 5,482 5,251
Change in statutory income tax rate 12,501 (1,529)
Non-taxable income resulted from Aclara demerger (7,118) -
Deferred tax recognised on special investment regime1 (3,561) (2,870)
Movement in unrecognised deferred tax2 2,922 4,571
Special mining tax and mining royalty deductible for corporate income tax (3,611) (2,126)
Other 2,176 461
Corporate income tax at average effective income tax rate of 34.1% (2020: 46,787 23,126
36.8%) before foreign exchange effect and withholding tax
Special mining tax and mining royalty3 12,242 7,207
Corporate income tax and mining royalties at average effective income tax rate 59,029 30,333
of 43.0% (2020: 48.2%)
Foreign exchange rate effect4 6,507 11,759
Corporate income tax and mining royalties at average effective income tax rate 65,536 42,092
of 47.7% (2020: 66.9%) before withholding tax
Withholding tax 689 402
Total taxation charge in the income statement at average effective tax rate 66,225 42,494
48.2% (2020: 67.5%) from continuing operations
1 Argentina benefits from a special investment regime that allows for a
super (double) deduction in calculating its taxable profits for all costs
relating to prospecting, exploration and metallurgical analysis, pilot plants
and other expenses incurred in the preparation of feasibility studies for
mining projects.
2 Includes the income tax charge on mine closure provision of
-US$1,325,000 (2020: US$1,687,000), the tax charge related to the Inmaculada
mine unit depreciation of US$1,090,000 (2020: US$902,000), and the effect of
not recognised tax losses of US$3,157,000 (2020: US$1,982,000).
3 Corresponds to the impact of a mining royalty and special mining tax in
Peru (note 31).
4 The foreign exchange effect is composed of US$934,000 profit (2020:
US$1,584,000 loss) from Argentina and a loss of US$7,441,000 (2020:
US$10,175,000 loss) from Peru. This mainly corresponds to the foreign exchange
effect of converting tax bases and monetary items from local currency to the
corresponding functional currency. The main contributor of the foreign
exchange effect on the tax charge in 2021 is the devaluation of the Peruvian
soles (2020: Peruvian soles).
15 Basic and diluted earnings per share
Earnings per share ('EPS') is calculated by dividing profit for the year
attributable to equity shareholders of the Parent by the weighted average
number of ordinary shares issued during the year.
The Company has dilutive potential ordinary shares.
As at 31 December 2021 and 2020, EPS has been calculated as follows:
As at 31 December
2021 2020
Basic earnings/(loss) per share from continuing operations
Before exceptional items (US$) 0.14 0.06
Exceptional items (US$) 0.01 (0.03)
Total for the year and from continuing operations (US$) 0.15 0.03
Diluted earnings/(loss) per share from continuing operations
Before exceptional items (US$) 0.13 0.06
Exceptional items (US$) 0.01 (0.03)
Total for the year and from continuing operations (US$) 0.14 0.03
Profit from continuing operations before exceptional items and attributable to
equity holders of the Parent is derived as follows:
As at 31 December
2021 2020
Profit attributable to equity holders of the Parent - continuing operations 76,934 15,162
(US$000)
Exceptional items after tax - attributable to equity holders of the Parent (7,367) 16,800
(US$000)
Profit from continuing operations before exceptional items attributable to 69,567 31,962
equity holders of the Parent (US$000)
Profit from continuing operations before exceptional items attributable to 69,567 31,962
equity holders of the Parent for the purpose of diluted earnings per share
(US$000)
The following reflects the share data used in the basic and diluted earnings
per share computations:
As at 31 December
2021 2020
Basic weighted average number of ordinary shares in issue (thousands) 513,876 513,876
Effect of dilutive potential ordinary shares related to contingently issuable 5,689 600
shares (thousands)
Weighted average number of ordinary shares in issue for the purpose of diluted 519,565 514,476
earnings per share (thousands)
16 Property, plant and equipment
Mining properties and development Land and buildings US$000 Plant and equipment1and2 Vehicles(5) US$000 Mine Construction in progress and capital advances4 US$000 Total
costs1
US$000
closure
US$000
US$000
asset
US$000
Year ended 31 December 2021
Cost
At 1 January 2021 1,514,704 530,784 612,620 10,654 107,740 33,320 2,809,822
Additions 89,551 735 16,373 6,095 - 19,709 132,463
Change in discount rate (note 27(1)) - - - - (2,344) - (2,344)
Change in mine closure estimate (note 27(1)) - - - - 986 - 986
Disposals - - (1,430) (5,654) - - (7,084)
Write-offs - - (7,529) (419) - - (7,948)
Demerger Aclara (note 4) - (201) (432) - - - (633)
Foreign exchange effect - (21) (158) - - - (179)
Transfers and other movements3 1,064 24,235 15,632 1,321 - (41,188) 1,064
At 31 December 2021 1,605,319 555,532 635,076 11,997 106,382 11,841 2,926,147
Accumulated depreciation
and impairment
At 1 January 2021 1,188,404 352,088 396,155 8,754 75,919 839 2,022,159
Depreciation for the year 95,308 24,188 29,080 2,593 4,381 - 155,550
Disposals - - (1,392) (5,515) - - (6,907)
Write-offs - - (6,676) (409) - - (7,085)
Demerger Aclara (note 4) - - (126) - - - (126)
Foreign exchange effect - - (126) - - - (126)
Impairment 16,643 1,506 4,575 1,201 601 - 24,526
Transfers and other movements3 37 (70) (423) 89 - 404 37
At 31 December 2021 1,300,392 377,712 421,067 6,713 80,901 1,243 2,188,028
Net book amount at 31 December 2021 304,927 177,820 214,009 5,284 25,481 10,598 738,119
1 Within mining properties and
development costs and plant and equipment there are US$28,947,000 and
US$6,742,000 related to the Crespo CGU that is not currently being depreciated
as the unit is not operating pending the feasibility of the project and
considering that the depreciation method is units of production.
2 Within plant and equipment, costs of US$391,152,000 are subject to
depreciation on a unit of production basis in line with accounting policy for
which the accumulated depreciation is US$248,187,000 and depreciation charge
for the year is US$15,377,000.
3 Transfers and other movements include US$1,027,000 that was transferred
from evaluation and exploration assets (note 17).
4 There were borrowing costs capitalised in property, plant and equipment
amounting to US$37,000.
5 Vehicles include US$3,258,000 of right of use assets.
Mining properties and development Land and buildings US$000 Plant and equipment 1and2 Vehicles(5) US$000 Mine Construction in progress and capital advances4 US$000 Total
costs1
US$000
closure
US$000
US$000
asset
US$000
Year ended 31 December 2020
Cost
At 1 January 2020 1,449,374 529,081 610,955 11,748 99,696 15,196 2,716,050
Additions 62,442 118 6,431 - - 25,646 94,637
Initial recognition - - - - 235 - 235
Change in discount rate (note 28(1)) - - - - 5,385 - 5,385
Change in mine closure estimate (note 28(1)) - - - - 2,424 - 2,424
Disposals - (132) (1,870) (31) - - (2,033)
Write-offs - - (8,613) (1,127) - - (9,740)
Transfers and other movements3 2,888 1,717 5,717 64 - (7,522) 2,864
At 31 December 2020 1,514,704 530,784 612,620 10,654 107,740 33,320 2,809,822
Accumulated depreciation
and impairment
At 1 January 2020 1,119,462 334,065 384,155 7,310 74,834 947 1,920,773
Depreciation for the year 72,067 19,030 22,700 2,618 2,454 - 118,869
Disposals - (17) (1,867) (28) - - (1,912)
Write-offs - - (6,539) (1,123) - - (7,662)
Reversal of impairment (3,831) (1,101) (1,589) - (1,369) - (7,890)
Transfers and other movements3 706 111 (705) (23) - (108) (19)
At 31 December 2020 1,188,404 352,088 396,155 8,754 75,919 839 2,022,159
Net book amount at 31 December 2020 326,300 178,696 216,465 1,900 31,821 32,481 787,663
1 Within mining properties and development costs and plant and equipment
there are US$28,489,000 and US$6,718,000 related to the Crespo CGU that is not
currently being depreciated as the unit is not operating pending the
feasibility of the project.
2 Within plant and equipment, costs of US$381,456,000 are subject to
depreciation on a unit of production basis in line with accounting policy for
which the accumulated depreciation is US$230,709,000 and depreciation charge
for the year is US$10,289,000.
3 Transfers and other movements include US$2,828,000 that was transferred
from evaluation and exploration assets (note 17).
4 There were borrowing costs capitalised in property, plant and equipment
amounting to US$32,000.
5 Vehicles include US$410,00 of right of use assets.
2021
As at 31 December 2021, management determined that there was a trigger of
impairment in the Pallancata mine unit due to lower grades production and the
need of an increase of capital expenditure to access new low grade areas and
extend the life of mine by one year to 2023.
The impairment test performed over the Pallancata CGU resulted in an
impairment charge recognised as at 31 December 2021 amounting to US$24,846,000
(US$24,526,000 in property, plant and equipment, and US$320,000 in evaluation
and exploration assets).
No indicators of impairment or reversal of impairment were identified in the
other CGUs, which includes other exploration projects.
The recoverable value of the Pallancata CGUs was determined using a fair value
less costs of disposal (FVLCD) methodology. FVLCD was determined using a
combination of level 2 and level 3 inputs, which result in fair value
measurements categorised in its entirety as level 3 in the fair value
hierarchy, to construct a discounted cash flow model to estimate the amount
that would be paid by a willing third party in an arm's length transaction.
The key assumptions on which management has based its determination of FVLCD
and the associated recoverable values calculated are gold and silver prices,
future capital requirements, production costs, reserves and resources volumes
(reflected in the production volume), and the discount rate.
Real prices US$ per oz. 2022 2023
Gold 1,764 1,669
Silver 23.5 22.3
Pallancata
Discount rate (post tax) 3.3%
The period of 2 years were used to prepare the cash flow projections of the
Pallancata mine unit which is in line with their life of mine.
31 December 2021 (US$000) Pallancata
Current carrying value of CGU, net of deferred tax 3,241
Sensitivity analysis
As the Pallancata CGU was impaired at 31 December 2021, a negative change in
any of the key assumptions would not have an impact on the impairment charge
recognised. Given the short time left in the life of this mine, management
also believes that no reasonably possible change in any of the key assumptions
would decrease the impairment charge recognised, other than a positive change
in the gold and silver prices.
An increase of 10% in the gold and silver prices would decrease the impairment
charge recorded by US$5.6 million.
2020
In 2020, management determined that there was a trigger of impairment in the
San Jose mine unit due to the increase of the discount rate from 13.5% to
15.9%, mainly explained by the rise in country risk premium in Argentina. In
addition, the increase in the short and medium analysis consensus prices of
gold and silver in the year represented a trigger of impairment reversal for
the Pallancata and San Jose mine units as both of these CGUs have previously
been impaired.
The impairment test performed over the San Jose CGU resulted in a reversal of
impairment recognised as at 31 December 2020 amounted to US$8,303,000
(US$7,890,000 in property, plant and equipment, US$100,000 in evaluation and
exploration assets and US$313,000 in intangibles). The reversal of impairment
was mainly driven by an increase in the analysis consensus prices of silver
and gold which was partially offset by the impact of the increase in the
discount rate.
The result of the impairment test performed over the Pallancata CGU showed
that the recoverable value of Pallancata was supported by the carrying value,
and neither an impairment nor impairment reversal was recognised at 31
December 2020.
No indicators of impairment or reversal of impairment were identified in the
other CGUs, which includes other exploration projects.
The recoverable values of the San Jose and Pallancata CGUs were determined
using a fair value less costs of disposal (FVLCD) methodology.
The key assumptions on which management has based its determination of FVLCD
and the associated recoverable values calculated are gold and silver prices,
future capital requirements, production costs, reserves and resources volumes
(reflected in the production volume), and the discount rate.
Real prices US$ per oz. 2021 2022 2023 2024 Long-term
Gold 1,937 1,823 1,684 1,452 1,400
Silver 26.4 21.8 21.0 19.2 17.8
San Jose Pallancata
Discount rate (post tax) 5.9% 4.1%
The period of 6 and 2 years were used to prepare the cash flow projections of
San Jose mine unit and the Pallancata mine unit respectively which were in
line with their life of mine.
31 December 2020 (US$000) San Jose Pallancata
Current carrying value of CGU, net of deferred tax 127,500 35,481
The estimated recoverable values of the Group's CGUs are equal to, or not
materially different than, their carrying values.
Sensitivity analysis
Other than as disclosed below, management believes that no reasonably possible
change in any of the key assumptions above would cause the carrying value of
any of its cash generating units to exceed its recoverable amount.
A change in any of the key assumptions would have the following impact:
US$000
San Jose Pallancata
Gold and silver prices (decrease by 10%) (61,800) (12,200)
Gold and silver prices (increase by 5%) 7,700(1) 9,750(1)
Production costs (increase by 10%) (32,800) (4,700)
Production costs (decrease by 10%) 7,700(1) 4,700
Production volume (decrease by 10%) (11,800) -
Production volume (increase by 10%) 7,700(1) -
Post tax discount rate (increase by 3%)(2) (8,200) -
Post tax discount rate (decrease by 3%)(2) 7,700(1) -
Capital expenditure (increase by 10%) (10,300) -
Capital expenditure (decrease by 10%) 7,700(1) -
1 This represents the maximum impairment loss that could be reversed, as
it represents the carrying amount that would have been determined, net of
depreciation or amortisation, if no impairment loss had been recognised.
2 Management believed that a 3% change was a reasonably possible change in
the post-tax discount rate in Argentina. However, changes in the perception of
Argentina arising from political, social and financial disruption may give
rise to significant movement in the discount rate used in the assessment of
the San Jose CGU.
Management has also determined that the Group's CGUs are sensitive to future
stoppage of operations as a result of Covid-19. In the absence of any changes
to the current gold and silver prices projections or any of the other key
assumptions, we would expect the estimated recoverable amount of our CGUs
related to the San Jose and Pallancata mine units could be reduced by
US$8,900,000 and US$3,700,000 respectively, per month of stoppage.
17 Evaluation and exploration assets
Azuca Crespo Aclara (formerly Biolantanidos) US$000 Volcan Others Total
US$000
US$000
US$000
US$000
US$000
Cost
Balance at 1 January 2020 82,713 27,242 60,507 95,452 21,153 287,067
Additions 551 1,684 8,297 1,068 1,687 13,287
Transfers to property plant and equipment (note 16) - - - - (2,857) (2,857)
Balance at 31 December 2020 83,264 28,926 68,804 96,520 19,983 297,497
Additions 580 2,421 11,349 953 6,095 21,398
Demerger (note 4) - - (70,311) - - (70,433)
Disposals - - (122) - - (122)
Foreign exchange effect - - (9,720) (16,222) - (25,942)
Transfers to property plant and equipment (note 16) - - - - (1,064) (1,064)
Balance at 31 December 2021 83,844 31,347 - 81,251 25,014 221,456
Accumulated impairment
Balance at 1 January 2020 45,876 9,878 - 44,381 5,370 105,505
Impairment reversal - - - - (100) (100)
Transfers to property, plant and equipment (note 16) - - - - (29) (29)
Balance at 31 December 2020 45,876 9,878 - 44,381 5,241 105,376
Impairment - - - - 320 320
Foreign exchange effect - - - (7,507) - (7,507)
Transfers to property, plant and equipment (note 16) - (37) (37)
Balance at 31 December 2021 45,876 9,878 - 36,874 5,524 98,152
Net book value as at 31 December 2020 37,388 19,048 68,804 52,139 14,742 192,121
Net book value as at 31 December 2021 37,968 21,469 - 44,377 20,517 123,304
At 31 December 2021, the Group has recorded an impairment with respect to
evaluation and exploration assets of the Pallancata mine unit of US$320,000
(2020: reversal of impairment with respect to evaluation and exploration
assets of the San Jose mine unit of US$100,000). The calculation of the
recoverable values is detailed in note 16.
There were no borrowing costs capitalised in evaluation and exploration
assets.
18 Intangible assets
Transmission Water Software Legal rights3 US$000 Total
line1
permits2
licences
US$000
US$000
US$000
US$000
Cost
Balance at 1 January 2020 22,157 26,583 1,899 8,580 59,219
Transfer - - 7 - 7
Balance at 31 December 2020 22,157 26,583 1,906 8,580 59,226
Foreign exchange effect - (4,499) - - (4,499)
Disposals - - (17) - (17)
Balance at 31 December 2021 22,157 22,084 1,889 8,580 54,710
Accumulated amortisation and impairment
Balance at 1 January 2020 16,486 12,686 1,873 5,815 36,860
Amortisation for the year4 535 - 17 563 1,115
Reversal of impairment (313) - - - (313)
Balance at 31 December 2020 16,708 12,686 1,890 6,378 37,662
Amortisation for the year4 843 - 8 267 1,118
Disposals - - (17) - (17)
Foreign exchange effect - (2,147) - - (2,147)
Balance at 31 December 2021 17,551 10,539 1,881 6,645 36,616
Net book value as at 31 December 2020 5,449 13,897 16 2,202 21,564
Net book value as at 31 December 2021 4,606 11,545 8 1,935 18,094
1 The transmission line is amortised using the units of production method.
At 31 December 2021 the remaining amortisation period is approximately 7 years
(2020: 7 years) in line with the life of the mine. At 31 December 2020, the
Group recorded a reversal of impairment with respect to the transmission line
of the San Jose mine unit of US$313,000 (the calculation of the recoverable
values is detailed in note 16).
2 Corresponds to the acquisition of water permits of Andina Minerals Group
("Andina"). These permits have an indefinite life according to Chilean law. To
determine the fair value less costs of disposal of the Volcan cash-generating
unit, which includes the water permits held by the Group, the Group used the
value-in-situ methodology. This methodology applies a realisable
'enterprise value' to unprocessed mineral resources which was US$7.15 per gold
equivalent ounce of resources at 31 December 2021 (2020: US$7.40). The risk
adjusted enterprise value figure has been determined using a combination of
level 2 (enterprise values and gold prices) and level 3 inputs (unprocessed
mineral resources and risk factor) which result in a fair value measurement
categorised in its entirety as level 3 in the fair value hierarchy, to
estimate the amount that would be paid by a willing third party in an arm's
length transaction, taking into account the water restrictions imposed by the
Chilean government.
3 Legal rights correspond to expenditures required to give the Group the
right to use a property for the surface exploration work, development and
production. At 31 December 2021 the remaining amortisation period is from 1.5
to 11.5 years (2020: 2.5 to 12.5 years).
4 The amortisation for the period is included in cost of sales and
administrative expenses in the income statement.
The carrying amount of the Volcan CGU, which includes the water permits, is
reviewed annually to determine whether it is in excess of its recoverable
amount. No impairments were recognised in 2021 and 2020. The estimated
recoverable amount is not materially different than its carrying value.
Key assumptions
2021 2020
Risk adjusted value per in-situ (gold equivalent ounce) US$ 7.15 7.40
US$000 2021 2020
Current carrying value Volcan CGU 55,922 66,036
The estimated recoverable amount is not materially different than its carrying
value.
Sensitivity analysis
Other than as disclosed below, management believes that no reasonably possible
change in any of the key assumptions above would cause the carrying value
exceed its recoverable amount.
A change in the value in situ assumption could cause an impairment loss or
reversal of impairment to be recognised as follows:
Approximate (impairment)/reversal of impairment resulting from the 2021 2020
following changes (US$000)
Value per in-situ ounce (20% decrease) (13,661) (14,100)
Value per in-situ ounce (20% increase) 13,661 14,100
Risk factor (increase by 5%) (5,254) (5,400)
Risk factor (decrease by 5%) 5,254 5,400
19 Investment in an associate
Following the demerger of Aclara (refer to note 4), the Group retained a 20.0%
interest in Aclara Resources Inc., a listed company involved in the
exploration for rare-earth metals in Chile. The company was incorporated under
the laws of British Columbia, Canada, where the principal executive offices
are located. The operations are conducted through one wholly-owned subsidiary
named REE UNO SpA, located in Chile.
According to IFRS 10, when a parent loses control of a subsidiary, it must
recognise any investment retained in the former subsidiary at its fair value
at the date when control is lost. Any gain or loss on the transaction will be
recorded in profit and loss. This fair value will be accounted for the cost on
initial recognition of an investment in an associate. The fair value
recognised was US$23,742,000 (refer to note 4).
The Group's interest in Aclara is accounted for using the equity method in the
consolidated financial statements.
In addition, the Group purchased 14,870,397 shares for a total consideration
of US$19,995,000 to maintain the 20% interests after the IPO of Aclara.
At 31 December 2021, the Group holds 32,526,101 shares in Aclara, representing
20% interest in the Company. From 10 December 2021 Aclara is listed company
listed on the Toronto Stock Exchange and the fair value of the shares amounted
to US$37,080,000 as at 31 December 2021.
The following table summarises the financial information of the Group's
investment in Aclara Resources Inc.:
Year ended 31 December
2021
US$000
Current assets 91,320
Non-current assets 68,126
Current liabilities 3,185
Equity 156,261
Group's share in equity (20%) 31,252
Fair value adjustment allocated to the evaluation and exploration assets on 12,307
initial recognition
Group´s carrying amount of the investment 20% 43,559
Summarised consolidated statement of profit and loss
Revenue -
Administrative expenses (324)
Exploration expenses (510)
Finance cost (17)
Foreign exchange effect (479)
Loss from continuing operations for the year (1,330)
Loss from continuing operation from incorporation to 31 December 2021 (847)
Group's share of loss for the period (169)
Other comprehensive loss that may be reclassified to profit or loss in
subsequent periods, net of tax
Exchange differences on translating foreign operations (4,526)
Total comprehensive loss for the year (4,526)
Total comprehensive loss from incorporation to 31 December 2021 (46)
Group's share of comprehensive loss for the period (9)
At the moment of the acquisition of the associate, the loss of the period was
US$483,000 and the comprehensive loss for the period was US$4,480,000.
The carrying amount of the investment recognised the changes in the Group's
share of net assets of the associate since the acquisition date. The balance
as at 31 December 2021 is US$43,559,000.
No dividends were received from the associate during 2021.
20 Financial assets at fair value through OCI
Year ended 31 December
2021 2020
US$000
US$000
Beginning balance 402 6,159
Acquisitions1 7 -
Fair value change recorded in OCI 261 1,765
Disposals2 (9) (7,522)
Ending balance 661 402
1 Corresponds to the purchase of 47,625 shares of Austral Gold (US$7,000).
2 Corresponds to the sale of 51,857 shares of Revelo Resources Corp. with a
fair value at the date of sale of US$9,000 generating a loss on disposal of
US$18,000 that was recycled to retained earnings (2020: As the investments
were not considered to be strategic, the Group sold 452,200 shares of ASC,
7,399,331 shares of Skeena Resources Limited and 7,000,026 shares of Goldspot
Discoveries Inc. with a fair value at the date of sale of US$1,257,000,
US$5,337,000 and US$928,000, generating a gain on disposal of US$658,000,
US$1,091,000 and US$239,000 respectively).
The Group made the election at initial recognition to measure the below equity
investments at fair value through OCI as they are not held for trading. The
fair value at 31 December 2021 and 31 December 2020 is as follows:
US$000
2021 2020
Listed equity investments:
Power Group Projects Corp (formerly Cobalt Power Group) 12 27
Revelo Resources Corp. - 8
Austral Gold 3 -
Skeena Resources Limited 312 325
Empire Petroleum Corp. 334 42
Total listed equity investments 661 402
Total non-listed equity investments - -
Total 661 402
Fair value of the listed shares is determined by reference to published price
quotations in an active market and they are categorised as level 1. The fair
value of non-listed equity investments is determined based on financial
information available of the companies and they are categorised as level 3.
21 Financial assets at fair value through profit and loss
Year ended 31 December
2021 2020
US$000
US$000
Beginning balance 5,407 -
Acquisitions1 3,308 4,301
Fair value change recorded in profit and loss (note 13(3)) (834) 1,106
Disposals2 (4,726) -
Ending balance 3,155 5,407
1 Corresponds to 25,001,540 shares of C3 Metals Inc. received in payment
of the sale of the Jasperoide property in Peru (2020: corresponds to 1,687,401
shares of AGSC received as a payment for the balance receivable for the sale
of the San Felipe project recognised as an asset held for sale as at 31
December 2019).
2 During 2021 the Group sold 1,687,401 shares of AGSC, classified as
financial assets at fair value through profit and loss, with a fair value at
the date of the sale of US$4,726,000, generating a loss on disposal of
US$681,000 which was recognised within finance costs.
The below equity investments are classified at fair value through profit and
loss as they are held for trading.
The fair value at 31 December 2021 and 31 December 2020 is as follows:
US$000
2021 2020
Listed equity investments:
Americas Gold and Silver Corporation - 5,407
C3 Metals Inc. 3,155 -
3,155 5,407
Fair value of the listed shares is determined by reference to published price
quotations in an active market and they are categorised as level 1.
22 Trade and other receivables
As at 31 December
2021 2020
Non-current Current Non-current Current
US$000
US$000
US$000
US$000
Trade receivables - 27,773 - 45,353
Advances to suppliers - 5,119 - 4,045
Duties recoverable from exports of Minera Santa Cruz1 184 - 846 -
Receivables from related parties (note 30(a)) - 224 - 388
Loans to employees 531 257 603 101
Interest receivable - 95 - 126
Receivable from Kaupthing, Singer and Friedlander Bank - 200 - 201
Other2 1,540 9,013 1,519 10,298
Provision for impairment3 - (2,421) - (7,111)
Assets classified as receivables 2,255 40,260 2,968 53,401
Prepaid expenses 174 6,047 212 4,606
Value Added Tax (VAT)4 41 23,442 2,215 20,189
Total 2,470 69,749 5,395 78,196
The fair values of trade and other receivables approximate their book value.
1 Relates to export benefits through the Patagonian Port and silver
refunds in Minera Santa Cruz, discounted over 18 and 24 months (2020: 18 and
24 months) at a rate of 17.55% (2020: 14.03%) for dollars denominated amounts
and 40.17% (2020: 40.34%) for Argentinian pesos. The loss on the unwinding of
the discount is recognised within finance expense (2020: finance income).
2 Mainly corresponds to account receivables from contractors for the sale
of supplies of US$2,164,000 (2020: US$1,642,000), receivables from government
agencies of US$nil (2020: US$4,476,000), loan to third parties of US$790,000
(2020: US$512,000), claim receivable of US$1,165,000 (2020: US$1,269,000),
receivable from the sale of VAT in San José of US$nil (2020: US$1,222,000l)
and other tax claims of US$2,150,000 (2020: US$45,000).
3 Includes the provision for impairment of trade receivable from customers
in Peru of US$1,277,000 (2020: US$1,403,000), the impairment of deposits in
Kaupthing, Singer and Friedlander of US$197,000 (2020: US$201,000), the
impairment of the account receivables from government agencies of US$nil
(2020: US$4,476,000), the impairment of account receivable from third parties
of US$692,000 (2020: US$656,000) and other receivables of US$343,000 (2020:
US$375,000).
4 Primarily relates to US$17,053,000 (2020: US$9,747,000) of VAT
receivable related to the San Jose project that will be recovered through
future sales of gold and silver and also through the sale of these credits to
third-parties by Minera Santa Cruz. It also includes the VAT of Minera Ares of
US$5,570,000 (2020: US$9,154,000), REE UNO SpA of US$nil (2020; US$2,166,000)
and Empresa de Transmisión Aymaraes S.A.C. of US$nil (2020: US$590,000). The
VAT is valued at its recoverable amount.
Movements in the provision for impairment of receivables:
Individually
impaired
US$000
At 1 January 2020 6,766
Provided for during the year (note 12) 996
Foreign exchange effect (651)
At 31 December 2020 7,111
Write - off (4,476)
Foreign exchange effect (214)
At 31 December 2021 2,421
As at 31 December 2021 and 2020, none of the financial assets classified as
receivables (net of impairment) were past due.
23 Inventories
As at 31 December
2021 2020
US$000
US$000
Finished goods valued at cost 220 -
Products in process valued at cost 3,547 4,087
Products in process accrual 7,534 4,413
Supplies and spare parts 41,021 38,778
52,322 47,278
Provision for obsolescence of supplies (3,138) (4,916)
Total 49,184 42,362
Finished goods include ounces of gold and silver, dore and concentrate.
Products in process include stockpile (2020: stockpile).
The Group either sells dore bars as a finished product or if it is
commercially advantageous to do so, delivers the bars for refining into gold
and silver ounces which are then sold. In the latter scenario, the dore bars
are classified as products in process. At 31 December 2021 and 2020 the Group
had no dore on hand included in products in process.
Concentrate is sold to smelters, but in addition could be used as a product in
process to produce dore.
As part of the Group's short-term financing policies, it acquires pre-shipment
loans which are guaranteed by the sales contracts. The Group has contracts as
at 31 December 2021 of US$nil (2020: US$10,628,000) (refer to note 26).
The amount of expense recognised in profit and loss related to the consumption
of inventory of supplies, spare parts and raw materials is US$109,191,000
(2020: US$76,739,000).
Movements in the provision for obsolescence comprise an increase in the
provision of US$559,000 (2020: US$nil) and the reversal of US$2,338,000
related to supplies and spare parts, that had been provided for (2020:
US$1,921,000).
24 Cash and cash equivalents
As at 31 December
2021 2020
US$000
US$000
Cash at bank 1,065 1,198
Current demand deposit accounts1 86,058 79,834
Time deposits2 299,666 150,851
Cash and cash equivalents considered for the statement of cash flows 386,789 231,883
The fair value of cash and cash equivalents approximates their book value. The
Group does not have undrawn borrowing facilities available in the future for
operating activities or capital commitments.
1 Relates to bank accounts which are freely available and bear interest.
2 These deposits have an average maturity of 18 days (2020: average of 45
days).
25 Trade and other payables
As at 31 December
2021 2020
Non-current Current Non-current Current
US$000
US$000
US$000
US$000
Trade payables1 - 78,695 - 72,066
Salaries and wages payable2 - 30,850 - 26,580
Dividends payable - 31 - 34
Taxes and contributions 1 9,607 3 5,075
Guarantee deposits - 5,773 - 5,962
Mining royalties (note 31) - 1,505 - 315
Accounts payable to related parties (note 30(a)) - 284 - 266
Lease liabilities 2,814 1,597 - 617
Other - 5,140 202 3,500
Total 2,815 133,482 205 114,415
The fair value of trade and other payables approximate their book values.
1 Trade payables relate mainly to the acquisition of materials, supplies
and contractors' services. These payables do not accrue interest and no
guarantees have been granted.
2 Salaries and wages payable relates to remuneration payable. At 31
December 2021, there were Board members remuneration payable of US$170,000
(2020: US$151,000) and no long-term incentive plan payable (2020: US$nil).
26 Borrowings
As at 31 December
2021 2020
Effective Non-current Current Effective Non-current Current
interest rate
US$000
US$000
interest rate
US$000
US$000
Secured bank loans (a)
· Pre-shipment loans in Minera Santa Cruz (note 23) - - 28% to 35% - 10,628
· Bank loans 2.17% 300,000 499 1.5% 199,554 150
Total 300,000 499 199,554 10,778
(a) Secured bank loans:
Medium-term bank loans:
In December 2019, a five-year credit agreement was signed between Minera Ares
and Scotiabank Peru S.A.A., The Bank of Nova Scotia and BBVA Securities Inc,
with Hochschild Mining plc as guarantor. The US$200,000,000 medium term loan
was payable on equal quarterly instalments from the second anniversary of the
loan with an interest rate of Libor three months plus 1.15% payable quarterly
until maturity on 13 December 2024. In September 2021, the Group negotiated
with the same counterpart a US $ 200,000,0000 loan to replace the original
loan, plus an additional US $ 100,000,000 optional loan. US $ 200,000,000 was
withdrawn on 21 September 2021, and the optional US $ 100,000,000 loan was
withdrawn on 1 December 2021. The maturity was extended until September 2026,
and the interest rate increased to 3-month USD Libor plus a spread of 1.65%. A
structuring fee of US$900,000 was paid to the lender and additional US$193,000
was incurred as transaction costs. In addition, a commitment fee of US$120,000
was paid for the period that the optional US $100,000,000 loan remained
undrawn. This was considered a substantial modification to the terms of the
loan, and consequently, it was treated as an extinguishment of the loan which
resulted in the derecognition of the existing liability and recognition of a
new liability. The associated costs and fees incurred have been recognised
as part of the loss on the extinguishment.
The carrying value including accrued interests payable as at 31 December 2021
is US$300,499,000. The maturity of non-current borrowings is as follows:
As at 31 December
2021 2020
US$000
US$000
Between 1 and 2 years 25,000 66,666
Between 2 and 5 years 275,000 132,888
Over 5 years - -
Total 300,000 199,554
The carrying amount of the pre-shipment loans approximates their fair value.
The carrying amount and fair value of the mid-term loan are as follows:
Carrying amount Fair value
as at 31 December
as at 31 December
2021 2020 2021 2020
US$000
US$000
US$000
US$000
Secured bank loans 300,499 199,704 296,122 199,110
Total 300,499 199,704 296,122 199,110
The movement in borrowings during the year is as follows:
As at 1 January 2021 US$000 Additions US$000 Repayments US$000 Reclassifications US$000 As at 31 December 2021 US$000
Current
Bank loans 10,101 5,954 (14,793) (1,262) -
Accrued interest 677 5,951 (5,720) (409) 499
10,778 11,905 (20,513) (1,671) 499
Non-current
Bank loans 199,554 100,000 - 446 300,000
199,554 100,000 - 446 300,000
27 Provisions
Provision Long Term Incentive Workers profit sharing US$000 Other Total
US$000
US$000
for mine closure1 Plan2
US$000 US$000
At 1 January 2020 106,671 818 6,063 2,019 115,571
Additions 235 308 4,986 41 5,570
Accretion (note 13) (387) - - - (387)
Change in discount rate 7,129 - - - 7,129
Change in estimates 16,736 - - - 16,736
Foreign exchange effect - - (11) (435) (446)
Payments (3,987) - (5,649) - (9,636)
At 31 December 2020 126,397 1,126 5,389 1,625 134,537
Less: current portion (19,390) - (5,389) (725) (25,504)
Non-current portion 107,007 1,126 - 900 109,033
At 1 January 2021 126,397 1,126 5,389 1,625 134,537
Additions - (659) 11,018 2,164 12,523
Accretion (note 13) (2,038) - - - (2,038)
Change in discount rate (1,627) - - - (1,627)
Change in estimates 22,364 - - - 22,364
Foreign exchange effect - - (525) (290) (815)
Utilisation (1,978) - - - (1,978)
Payments (9,083) - (4,990) - (14,073)
At 31 December 2021 134,035 467 10,892 3,499 148,893
Less: current portion (19,670) - (10,892) (1,496) (32,058)
Non-current portion 114,365 467 - 2,003 116,835
1 The provision represents the discounted values of the estimated cost to
decommission and rehabilitate the mines at the expected date of closure of
each of the mines. The present value of the provision has been calculated
using a real pre-tax annual discount rate, based on a US Treasury bond of an
appropriate tenure adjusted for the impact of inflation as at 31 December 2021
and 2020 respectively, and the cash flows have been adjusted to reflect the
risk attached to these cash flows. Uncertainties on the timing for use of this
provision include changes in the future that could impact the time of closing
the mines, as new resources and reserves are discovered. The discount rate
used was -2.09% (2020:-1.58%). Expected cash flows will be over a period from
one to 17 years (2020: over a period from one to 17 years).
Based on the internal and external reviews of mine rehabilitation
estimates, the provision for mine closure increased by US$22,364,000 mainly
due to increase in the Selene mine unit of US$14,032,000 and Sipan mine unit
of US$3,103,000 (2020: increase by US$16,736,000 mainly due to increase in the
Ares mine unit of US$14,070,000 and San Jose mine unit of US$1,944,000).
A net charge of US$22,095,000 related to changes in estimates
(US$21,378,000) and discount rates (US$717,000) for mines already closed were
recognised directly in the income statement (2020: net charge of US$16,056,000
related to changes in estimates (US$14,312,000) and discount rates
(US$1,744,000) for mines already closed were recognised directly in the income
statement).
Utilisation for the year corresponds to depreciation of certain
assets which are used as part of mine rehabilitation. This has been recognised
against the mine rehabilitation provision.
The increase in the accretion from 2020 (US$387,000) to 2021
(US$2,038,000) is explained because the Group is closer to the budget
execution periods and the discount rates used for 2021 were more negatives
than those of 2021, hence the increase.
A change in any of the following key assumptions used to determine the
provision would have the following impact:
US$000
Closure costs (increase by 10%) increase of provision 13,404
Discount rate (increase by 0.5%) (decrease of provision) (7,426)
An element of mine closure planning can be water management which relates to
the treatment of contact water. The cost of this water processing could
continue for a number of years after closure activities have been completed
and is therefore, potentially, exposed to long-term climate change. Mine
planning for Hochschild's operating assets takes into account mine-closure
activities. In the case of the now-closed Sipan mine, due to the specific
characteristics of the closed mine components, contact water treatment is
ongoing. According to our most recent approved Mine Closure Plan (July
2021), Sipan will be the subject of ongoing treatment until 2025 or until
baseline water quality conditions have been met. As at the date of approval
of these financial statements, the impact of climate change on Sipan's mine
closure planning is not expected to be material.
2 Corresponds to the provision related to awards granted under the
Long-Term Incentive Plan ('LTIP') to designated personnel of the Group.
Includes the following benefits: (i) 2020 awards, granted in February 2020,
payable in February 2023, as 50% in cash, (ii) 2019 awards, granted in July
2019, payable in February 2022, as 50% in cash. Only employees who remain in
the Group's employment on the vesting date will be entitled to vested awards,
subject to exceptions approved by the Remuneration Committee of the Board.
There are two parts to the performance conditions attached to LTIP awards: 70%
is subject to the Company's TSR ranking relative to a tailored peer group of
mining companies, and 30% is subject to the Company's TSR ranking relative to
the constituents of the FTSE 350 mining index. The liability for the LTIP paid
in cash is measured, initially and at the end of each reporting period until
settled, at the fair value of the awards, by applying the Monte Carlo pricing
model, taking into account the terms and conditions on which the awards were
granted, and the extent to which the employees have rendered services to date.
The net decrease to the provision of US$659,000 (2020: US$308,000 net
increase) have been recorded as administrative expenses -US$630,000 (2020:
US$295,000) and exploration expenses -US$29,000 (2020: US$13,000).
The following tables list the inputs to the Monte Carlo model used for the
LTIPs as at 31 December 2021 and 2020, respectively:
LTIP 2019 LTIP 2020
For the period ended 31 December 2020 31 December 2021 31 December 2020
US$000
US$000
US$000
Dividend yield (%) 1.43 2.37 1.43
Expected volatility (%) 3.39 3.70 3.39
Risk-free interest rate (%) -0.12 0.02 -0.13
Expected life (years) 1 1 2
Weighted average share price (pence £) 161.37 179.61 179.61
The expected volatility reflects the assumption that the historical volatility
over a period similar to the life of the awards and is indicative of future
trends, which may not necessarily be the actual outcome. The outcome of the
2019 LTIP as at 31 December 2021 was $nil.
28 Deferred income tax
The changes in the net deferred income tax assets/(liabilities) are as
follows:
As at 31 December
2021 2020
US$000
US$000
Beginning of the year (72,307) (61,476)
Income statement credit (note 14) (7,054) (12,575)
Equity charge (7,383) 1,744
End of the year (86,744) (72,307)
Deferred income tax assets and liabilities are offset when there is a legally
enforceable right to offset current tax assets against current tax liabilities
and when the deferred income tax assets and liabilities relate to the same
fiscal authority.
The movement in deferred income tax assets and liabilities before offset
during the year is as follows:
Differences Mine development US$000 Provisional pricing adjustment US$000 Others Total
in cost
US$000
US$000
of PP&E
US$000
Deferred income tax liabilities
At 1 January 2020 36,770 81,768 353 4,283 123,174
Income statement charge/(credit) 2,751 3,184 343 (636) 5,642
At 31 December 2020 39,521 84,952 696 3,647 128,816
Income statement charge/(credit) 6,108 (67) (752) (495) 4,794
At 31 December 2021 45,629 84,885 (56) 3,152 133,610
Differences Provision Mine development Others(1) Total
in cost
for mine
US$000
US$000
US$000
of PP&E
closure
US$000
US$000
Deferred income tax assets
At 1 January 2020 31,044 21,380 584 8,690 61,698
Income statement (charge)/credit (10,914) 4,004 (110) 87 (6,933)
Equity credit - - - 1,744 1,744
At 31 December 2020 20,130 25,384 474 10,521 56,509
Income statement (charge)/credit (7,333) 5,082 (109) 100 (2,260)
Equity charge - - - (7,383) (7,383)
At 31 December 2021 12,797 30,466 365 3,238 46,866
1 Credit/(charge) in the year mainly related to silver forward of
US$7,383,000, (2020: interest rate swap of US$1,744,000), statutory holiday
provision of US$1,112,000 (2020: US$857,000), and long term incentive plan of
US$731,000 (2020: US$771,000).
The amounts after offset, as presented on the face of the statement of
financial position, are as follows:
As at 31 December
2021 2020
US$000
US$000
Deferred income tax assets 484 1,009
Deferred income tax liabilities (87,228) (73,316)
Total (86,744) (72,307)
Unrecognised tax losses expire in the following years:
As at 31 December
2021 2020
US$000
US$000
Expire after four years 167,273 171,527
167,273 171,527
Other unrecognised deferred income tax assets comprise (gross amounts):
As at 31 December
2021 2020
US$000
US$000
Provision for mine closure1 7,887 9,212
1 This relates to provision for mine closure expenditure which is expected
to be incurred in periods in which taxable profits are not expected to be
available to offset the expenditure.
Unrecognised deferred tax liability on retained earnings
At 31 December 2021 and 2020, there was no recognised deferred tax liability
for taxes that would be payable on the unremitted earnings of certain of the
Group's subsidiaries as the intention is that these amounts are permanently
reinvested.
29 Dividends
2021 2020
US$000
US$000
Dividends paid and proposed during the year
Equity dividends on ordinary shares:
Final dividend for 2020: 2.335 US cents per share (2019: nil US cents per 12,002 -
share)
Interim dividend for 2021: 1.95 US cents per share (2020: 4.000 US cents per 10,020 20,556
share)
Total dividends paid in cash 22,022 20,556
Dividends in specie paid with Aclara shares (note 4) 94,945
Total dividends paid on ordinary shares 116,967 20,556
Proposed dividends on ordinary shares:
Final dividend for 2021: 2.335 US cents per share (2020: 2.335 US cents per 12,000 12,002
share)
Dividends declared to non-controlling interests: 0.058 US$ per share (2020: 9,832 345
0.002 US$ per share)
Total dividends declared to non-controlling interests 9,832 345
Dividends paid in 2021 to non-controlling interests amounted to US$9,832,000
(2020: US$345,069).
In August 2021, the Board became aware of an issue concerning technical
compliance with the Companies Act 2006 in relation to the 2017 final dividend,
the 2018 interim and final dividends, the 2019 interim dividend, and the 2020
interim and final dividends (the "Relevant Dividends"). In particular, the
Relevant Dividends were paid to shareholders when the Company did not have
adequate distributable reserves.
Significant corrective transactions (namely, a capital reduction and dividend
distribution by the Company's wholly-owned subsidiary, Hochschild Mining
Holdings Limited) were implemented by the Company in September 2021, shortly
after discovery of the issue. Had these internal corporate transactions been
implemented prior to the payment of the 2017 final dividend, adequate
distributable reserves would have been available to the Company.
As previously reported, the Board intends to put resolutions to shareholders
at a General Meeting to i) complete the rectification of this past issue and
ii) increase further, to the extent practicable, the level of Distributable
Reserves available to the Company.
Dividends per share
The interim dividend paid in September 2021 was US$10,020,000 (1.954 US cents
per share). A dividend in specie amounting to US$94,945,000 was paid in
December 2021 (refer to note 4). A proposed dividend in respect of the year
ending 31 December 2021 of 2.335 US cents per share, amounting to a total
dividend of US$12,000,000, is subject to approval at the Annual General
Meeting to be held on 26 May 2022 and is not recognised as a liability as at
31 December 2021.
30 Related-party balances and transactions
(a) Related-party accounts receivable and payable
The Group had the following related-party balances and transactions during the
years ended 31 December 2021 and 2020. The related parties are companies owned
or controlled by the main shareholder of the Parent company or associates.
Accounts receivable Accounts payable
as at 31 December
as at 31 December
2021 2020 2021 2020
US$000
US$000
US$000
US$000
Current related party balances
Cementos Pacasmayo S.A.A.1 217 387 152 146
Tecsup2 1 1 115 120
Universidad UTEC2 - - 5 -
REE UNO SpA(3) 6 - - -
Aclara Resources Inc(3) - - 12 -
Total 224 388 284 266
1 The account receivable relates to reimbursement of expenses paid by the
Group on behalf of Cementos Pacasmayo S.A.A, an entity controlled by Eduardo
Hochschild. The account payable relates to the payment of rentals.
2 Peruvian not-for-profit educational institutions controlled by Eduardo
Hochschild.
3 Associated companies of the Aclara
Group (refer to notes 4 and 19).
As at 31 December 2021 and 2020, all accounts are, or were, non-interest
bearing.
No security has been granted or guarantees given by the Group in respect of
these related party balances.
Principal transactions between affiliates are as follows:
Year ended
2021 2020
US$000
US$000
Expenses
Expense recognised for the rental paid to Cementos Pacasmayo S.A.A. (403) (469)
Expense donations to Tecsup - (505)
Expense donations to Universidad UTEC - (875)
Expense technical services from Tecsup (292) (190)
Transactions between the Group and these companies are at an arm's length
basis.
(b) Compensation of key management personnel of the Group
Year ended 31 December
Compensation of key management personnel (including Directors) 2021 2020
US$000
US$000
Short-term employee benefits 7,509 7,330
Long Term Incentive Plans 776 808
Total compensation paid to key management personnel 8,285 8,138
This amount includes the remuneration paid to the Directors of the Parent
Company of the Group of US$3,967,000 (2020: US$3,821,000).
(c) Related Party Transaction
Participation of Pelham Investment Corporation in the IPO of Aclara
As announced by the Company on 3rd December 2021, Pelham Investment Corporation ("Pelham"), a company controlled by the Chairman, Eduardo Hochschild, entered into a subscription agreement with Aclara on 2 December 2021 pursuant to which Pelham agreed to purchase, on a prospectus exempt basis in Canada, 22,791,399 Aclara shares at a price of C$1.70 per share (the "Offering Price"). In addition, Pelham subscribed for 9,855,660 Aclara shares at the Offering Price as part of the IPO. These share acquisitions, which are in addition to the Aclara shares acquired by Pelham as part of the demerger dividend, constitute a smaller related party transaction for the purposes of the UK Listing Rules. Accordingly, as also announced, the Company obtained a written confirmation from a sponsor that the terms of the smaller related party transaction were fair and reasonable as far as the shareholders of the Company are concerned.
31 Mining royalties
Peru
In accordance with Peruvian legislation, owners of mining concessions must pay
a mining royalty for the exploitation of metallic and non‑metallic
resources. Mining royalties have been calculated with rates ranging from 1% to
3% of the value of mineral concentrate or equivalent sold, based on quoted
market prices.
In October 2011 changes came into effect for mining companies, with the
following features:
a) Introduction of a Special Mining Tax ('SMT'), levied on mining companies
at the stage of exploiting mineral resources. The additional tax is calculated
by applying a progressive scale of rates ranging from 2% to 8.4%, of the
quarterly operating profit.
b) Modification of the mining royalty calculation, which consists of applying
a progressive scale of rates ranging from 1% to 12%, of the quarterly
operating profit. The former royalty was calculated on the basis of monthly
sales value of mineral concentrates.
The SMT and modified mining royalty are accounted for as an income tax in
accordance with IAS 12 "Income Taxes".
c) For companies that have mining projects benefiting from tax stability
regimes, mining royalties are calculated and recorded as they were previously,
applying an additional new special charge on mining that is calculated using
progressive scale rates, ranging from 4% to 13.12% of quarterly operating
profit.
As at 31 December 2021, the amount payable as under the new mining royalty and the SMT amounted to US$1,341,000 (2020: US$1,544,000) and US$882,000 (2020: US$1,492,000) respectively. The new mining royalty and SMT are reported as 'Income tax payable' in the Statement of Financial Position. The amount recorded in the income statement was US$6,326,000 (2020: US$4,088,000) of new mining royalty and US$5,916,000 (2020: US$3,119,000) of SMT, both classified as income tax.
Argentina
In accordance with Argentinian legislation, Provinces (being the legal owners
of the mineral resources) are entitled to collect royalties from mine
operators. For San Jose, the mining royalty applicable to dore and concentrate
is 3% of the pit-head value. As at 31 December 2021, the amount payable as
mining royalties amounted to US$1,505,000 (2020: US$315,000). The amount
recorded in the income statement as cost of sales was US$7,171,000 (2020:
US$5,208,000).
32 Subsequent events
The Group entered into a definitive agreement with Amarillo Gold Corporation
("Amarillo") to acquire all of the issued and outstanding shares of Amarillo
at a price of C$0.40 per share in cash (the "Cash Offer"). Pursuant to the
Transaction, the Group will acquire a 100% interest in Amarillo's flagship
Posse gold project ("Posse") located in Goiás State, Brazil. The shareholders
of Amarillo will receive shares in a newly formed company, Lavras Gold Corp.,
which will hold a stake in the Lavras do Sul project, C$10 million of cash,
and a 2.0% net smelter revenue royalty on certain exploration properties owned
by Amarillo and located outside the current Posse resource and mine plan at
Amarillo's Mara Rosa property. The net acquisition cost to Hochschild,
including the Cash Offer, cash provided to Lavras Gold Corp. and Amarillo's
net cash is estimated to be C$135 million (approximately US$106 million).
Profit by operation(1)
(Segment report reconciliation) as at 31 December 2021
Group (US$000) Pallancata Inmaculada San Jose Consolidation adjustment and others Total/HOC
Revenue 99,116 452,835 258,972 464 811,387
Cost of sales (pre consolidation) (98,153) (225,492) (192,163) 5,525 (510,283)
Consolidation adjustment (210) 6,135 (400) (5,525) -
Cost of sales (post consolidation) (98,363) (219,357) (192,563) - (510,283)
Production cost excluding depreciation (66,859) (134,110) (122,449) - (323,418)
Depreciation in production cost (22,960) (76,828) (49,054) - (148,842)
Workers profit sharing (3,023) (3,489) - - (6,512)
Other items (5,314) (5,545) (20,332) - (31,191)
Change in inventories (207) 615 (728) - (320)
Gross profit 963 227,343 66,809 5,989 301,104
Administrative expenses - - - (51,905) (51,905)
Exploration expenses - - - (39,848) (39,848)
Selling expenses (620) (616) (14,195) - (15,431)
Other income/(expenses) - - - (172) (172)
Operating profit before impairment 343 226,727 52,614 (85,936) 193,748
Impairment and write-off of non-current assets - - - (25,709) (25,709)
Share of post-tax losses from associate - - - (169) (169)
Finance income - - - 3,946 3,946
Finance costs - - - (32,061) (32,061)
Foreign exchange loss - - - (2,424) (2,424)
Profit/(loss) from continuing operations before (142,353) 137,331
income tax
343 226,727 52,614
Income tax expenses - - - (66,225) (66,225)
Profit/(loss) for the year from continuing operations 343 226,727 52,614 (208,578) 71,106
1 On a post-exceptional basis.
RESERVES AND RESOURCES
Ore reserves and mineral resources estimates
Hochschild Mining plc reports its mineral resources and reserves estimates in
accordance with the Australasian Code for Reporting of Exploration Results,
Mineral Resources and Ore Reserves 2012 edition ("the JORC Code"). This
establishes minimum standards, recommendations and guidelines for the public
reporting of exploration results and mineral resources and reserves estimates.
In doing so it emphasises the importance of principles of transparency,
materiality and confidence. The information on ore reserves and mineral
resources on pages 57 to 59 were prepared by or under the supervision of
Competent Persons (as defined in the JORC Code). Competent Persons are
required to have sufficient relevant experience and understanding of the style
of mineralisation, types of deposits and mining methods in the area of
activity for which they are qualified as a Competent Person under the JORC
Code. The Competent Person must sign off their respective estimates of the
original mineral resource and ore reserve statements for the various
operations and consent to the inclusion of that information in this report, as
well as the form and context in which it appears.
Hochschild Mining plc employs its own Competent Person who has audited all the
estimates set out in this report. Hochschild Mining Group companies are
subject to a comprehensive programme of audits which aim to provide assurance
in respect of ore reserve and mineral resource estimates. These audits are
conducted by Competent Persons provided by independent consultants. The
frequency and depth of an audit depends on the risks and/or uncertainties
associated with that particular ore reserve and mineral resource, the overall
value thereof and the time that has lapsed since the previous independent
third-party audit.
The JORC Code requires the use of reasonable economic assumptions. These
include long-term commodity price forecasts (which, in the Group's case, are
prepared by ex-house specialists largely using estimates of future supply and
demand and long-term economic outlooks).
Ore reserve estimates are dynamic and are influenced by changing economic
conditions, technical issues, environmental regulations and any other relevant
new information and therefore these can vary from year-to-year. Mineral
resource estimates can also change and tend to be influenced mostly by new
information pertaining to the understanding of the deposit and secondly the
conversion to ore reserves.
The estimates of ore reserves and mineral resources are shown as at 31
December 2021, unless otherwise stated. Mineral resources that are reported
include those mineral resources that have been modified to produce ore
reserves. All tonnage and grade information has been rounded to reflect the
relative uncertainty in the estimates; there may therefore be small
differences. The prices used for the reserves calculation were: Au Price:
US$1,800 per ounce and Ag Price: US$26.0 per ounce.
ATTRIBUTABLE METAL RESERVES AS AT 31 DECEMBER 2021
Reserve category Proved and probable Ag Au Ag Au Ag Eq
(t)
(g/t)
(g/t)
(moz)
(koz)
(moz)
OPERATIONS¹
Inmaculada
Proved 1,637,395 168 4.1 8.9 213.8 24.3
Probable 5,002,635 140 3.3 22.5 527.4 60.5
Total 6,640,030 147 3.5 31.4 741.3 84.7
Pallancata
Proved 524,132 265 1.2 4.5 19.9 5.9
Probable 393,336 187 0.9 2.4 11.2 3.2
Total 917,468 231 1.1 6.8 31.1 9.1
San Jose
Proved 396,524 368 5.7 4.7 72.5 9.9
Probable 365,792 314 5.7 3.7 66.8 8.5
Total 762,315 342 5.7 8.4 139.4 18.4
GRAND TOTAL
Proved 2,558,050 219 3.7 18.0 306.3 40.1
Probable 5,761,763 154 3.3 28.6 605.5 72.2
TOTAL 8,319,813 174 3.4 46.6 911.8 112.2
Note: Where reserves are attributable to a joint venture partner, reserve
figures reflect the Company's ownership only. Includes discounts for ore loss
and dilution.
1 Operations were audited by P&E Consulting.
ATTRIBUTABLE METAL RESOURCES AS AT 31 DECEMBER 2021(1,2)
Resource category Tonnes Ag Au Ag Eq Ag Au Ag Eq
(t) (g/t) (g/t) (g/t) (moz) (koz) (moz)
OPERATIONS
Inmaculada
Measured 1,938,000 199 4.89 551 12.4 304.7 34.3
Indicated 5,987,000 160 3.88 440 30.8 747.6 84.6
Total 7,925,000 169 4.13 467 43.2 1,052.3 118.9
Inferred 11,989,000 102 2.57 286 39.2 988.7 110.3
Pallancata
Measured 1,273,000 330 1.50 439 13.5 61.6 17.9
Indicated 846,000 246 1.18 331 6.7 32.2 9.0
Total 2,119,000 297 1.38 396 20.2 93.7 27.0
Inferred 1,845,000 230 0.98 300 13.6 58.3 17.8
San Jose
Measured 790,500 481 7.67 1,034 12.2 195.0 26.3
Indicated 611,490 358 6.21 805 7.0 122.0 15.8
Total 1,401,990 427 7.04 934 19.3 317.0 42.1
Inferred 937,890 332 5.22 708 10.0 157.4 21.4
GROWTH PROJECTS
Crespo
Measured 5,211,000 47 0.47 81 7.9 78.6 13.6
Indicated 17,298,000 38 0.40 66 21.0 222.5 37.0
Total 22,509,000 40 0.42 70 28.8 301.0 50.5
Inferred 775,000 46 0.57 87 1.1 14.2 2.2
Azuca
Measured 191,000 244 0.77 299 1.5 4.7 1.8
Indicated 6,859,000 187 0.77 242 41.2 168.8 53.3
Total 7,050,000 188 0.77 243 42.7 173.5 55.2
Inferred 6,946,000 170 0.89 234 37.9 199.5 52.3
Volcan
Measured 105,918,000 - 0.738 53 - 2,513.1 180.9
Indicated 283,763,000 - 0.698 50 - 6,368.0 458.5
Total 389,681,000 - 0.709 51 - 8,881.1 639.4
Inferred 41,553,000 - 0.502 36 - 670.7 48.3
Arcata
Measured 834,000 438 1.34 535 11.7 36.1 14.3
Indicated 1,304,000 411 1.36 508 17.2 56.9 21.3
Total 2,138,000 421 1.35 519 29.0 92.9 35.6
Inferred 3,533,000 370 1.26 461 42.1 142.6 52.4
GRAND TOTAL
Measured 116,156,500 16 0.86 77 59.3 3,193.7 289.2
Indicated 316,668,490 12 0.76 67 123.9 7,717.9 679.6
Total 432,824,990 13 0.78 70 183.1 10,911.6 968.8
Inferred 67,578,890 66 1.03 140 143.9 2,231.4 304.6
1 Prices used for resources calculation: Au: $1,800/oz and Ag: $26.0/oz
and Ag/Au ratio of 72x.
2 Tables represents 100 % of the Mineral Resource. Resources are inclusive
of Reserves.
CHANGE IN ATTRIBUTABLE RESERVES AND RESOURCES
Ag equivalent content (million ounces) Category Percentage attributable December December 2021 Net difference % change
December
2020
Att.¹
2021
Att.¹
Inmaculada Resource 100% 195.8 229.3 33.5 17.1%
Reserve 79.3 84.7 5.4 6.9%
Pallancata Resource 100% 47.8 44.8 (3.0) (6.3%)
Reserve 7.1 9.1 2.0 27.8%
San Jose Resource 51% 65.2 63.4 (1.8) (2.7%)
Reserve 14.2 18.4 4.2 29.5%
Crespo Resource 100% 52.7 52.7 - -
Reserve - - - -
Azuca Resource 100% 107.5 107.5 - -
Reserve - - - -
Volcan Resource 100% 687.7 687.7 - -
Reserve - - - -
Arcata Resource 100% 88.0 88.0 - -
Reserve - - - -
Total Resource 1,244.7 1,273.4 28.7 2.3%
Reserve 100.6 112.2 11.6 11.5%
1 Attributable reserves and resources based on the Group's percentage
ownership of its joint venture projects.
SHAREHOLDER INFORMATION
Company website
Hochschild Mining plc Interim and Annual Reports and results announcements are
available via the internet on our website at www.hochschildmining.com.
Shareholders can also access the latest information about the Company and
press announcements as they are released, together with details of future
events and how to obtain further information.
Registrars
The Registrars can be contacted as follows for information about the AGM,
shareholdings, and dividends and to report changes in personal details:
BY POST
Link Asset Services, The Registry, 34 Beckenham Road, Beckenham, Kent BR3 4TU.
BY TELEPHONE
If calling from the UK: 0371 664 0300 (calls cost 12p per minute plus your
phone company's access charge. Lines are open 9.00am-5.30pm Mon to Fri
excluding public holidays in England and Wales).
If calling from overseas: +44 371 664 0300 (Calls charged at the applicable
international rate).
Currency option and dividend mandate
Shareholders wishing to receive their dividend in US dollars should contact
the Company's registrars to request a currency election form. This form should
be completed and returned to the registrars by 13 May 2022 in respect of the
2021 final dividend.
The Company's registrars can also arrange for the dividend to be paid directly
into a shareholder's UK bank account. To take advantage of this facility in
respect of the 2021 final dividend, a dividend mandate form, also available
from the Company's registrars, should be completed and returned to the
registrars by 13 May 2022. This arrangement is only available in respect of
dividends paid in UK pounds sterling. Shareholders who have already
completed one or both of these forms need take no further action.
Financial Calendar
Dividend dates 2022
Ex-dividend date 5 May
Record date 6 May
Deadline for return of currency election forms 13 May
Payment date 7 June
17 Cavendish Square
London
W1G 0PH
United Kingdom
1 Revenue presented in the financial statements is disclosed as net revenue
and is calculated as gross revenue less commercial discounts plus services
revenue
(2)Please see the Financial Review page 16 for a definition of Adjusted EBITDA
3 2020 figure includes the interim dividend of $20.6 million, a portion of
which relates to the 2019 final dividend of $12.0 differne million which was
withdrawn due to Covid-19
4 2021 and 2020 equivalent figures calculated using the previous Company
gold/silver ratio of 86x. All 2022 forecasts assume the average 2021
gold/silver ratio of 72x.
4All-in sustaining cost per (AISC) silver equivalent ounce: Calculated before
exceptional items and includes production cost excluding depreciation, other
items and workers profit sharing in cost of sales, administrative expenses
(excl depreciation), brownfield exploration, operating and exploration capex
and royalties and special mining tax (presented with income tax) divided by
silver or gold equivalent ounces produced, plus commercial deductions and
selling expenses divided by silver or gold equivalent ounces sold using a
gold/silver ratio of 86:1.
6 Calculated as total number of accidents per million labour hours
(( 7 ))Calculated as total number of days lost per million labour hours.
8 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.
9 Equivalent resource figures calculated using the gold/silver ratio of 72x.
1 Based on limited drilling at depth
11 Includes revenue from services
12 Unit cost per tonne is calculated by dividing mine and treatment
production costs (excluding depreciation) by extracted and treated tonnage
respectively
13 Cash costs are calculated to include cost of sales, commercial discounts
and selling expenses items less depreciation included in cost of sales
(( 14 ))Does not include Fixed costs during operational stoppages and reduced
capacity of $8.7 million
15 Includes commercial discounts (from the sales of concentrate) and
commercial discounts from the sale of dore
(( 16 ))Does not include Fixed costs during operational stoppages and reduced
capacity of $46.5 million
17 Includes commercial discounts (from the sales of concentrate) and
commercial discounts from the sale of dore
18 Calculated using a gold/silver ratio of 86:1 in line with 2020.
19 Operating capex from San Jose does not include capitalised DD&A
resulting from mine equipment utilised for mine developments
20 Administrative expenses does not include expenses from Aclara Resources
Inc ($236,000)
21 Royalties arising from revised royalty tax schemes introduced in 2011 and
included in income tax line
22 Operating capex from San Jose does not include capitalised DD&A
resulting from mine equipment utilised for mine developments
23 Royalties arising from revised royalty tax schemes introduced in 2011 and
included in income tax line
24 Adjusted EBITDA has been presented before the effect of significant
non-cash (income)/expenses related to changes in mine closure provisions which
were $22.1 million in 2021 and $16.1 million in 2020, and the write-off of
property, plant and equipment
25 Covid-19 response initiatives are distributed between cost of sales and
other expenses. Cost of sales mainly includes the expenses related to the
operating mine units (Inmaculada, Pallancata, San Jose) of $22.5 million.
Other expenses includes corporate expenses and expenses from non-operating
units of $1.5 million.
26 Includes pre-shipment loans and short term interest payables
27 Includes additions in property, plant and equipment and evaluation and
exploration assets (confirmation of resources) and excludes increases in the
expected closure costs of mine asset
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