REG - Hochschild MiningPLC - Q4 2021 Production Report

Hochschild MiningAnnouncement

20/01/2022 07:05

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RNS Number : 0184Z  Hochschild Mining PLC  20 January 2022

 

 

 

 

 

_____________________________________________________________________________________

20 January 2022

 

 

Production Report for the 12 months ended 31 December 2021

 

 

 

Ignacio Bustamante, Chief Executive Officer said:

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

 

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

 

Operational highlights

§  Full year attributable production in line with forecasts(( 1  (#_ftn1) ))

o  221,419 ounces of gold

o  12.2 million ounces of silver

o  362,972 gold equivalent ounces

o  31.2 million silver equivalent ounces

§ Strong operational performance despite impact from Covid protocols in 2021

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

Exploration & Business Development highlights

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

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

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

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

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

Strong financial position

§ Total cash of approximately $387 million as at 31 December 2021 ($232
million as at 31 December 2020) 2  (#_ftn2)

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

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

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

2021 ESG highlights

§ Lost Time Injury Frequency Rate of 1.26 (2020: 1.38)(( 3  (#_ftn3) ))

§ Accident Severity Index of 676 (2020: 474)(( 4  (#_ftn4) ))

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

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

§ ECO score of 5.29 out of 6 (2020: 5.74)(( 5  (#_ftn5) ))

2022 guidance

§ Production target:

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

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

§ All-in sustaining costs target:

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

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

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

§ Brownfield exploration budget expected to be approximately $34 million

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

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

 

________________________________________________________________________________________

 

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

Dial in details as follows:

UK Toll-Free Number: 0800 279 6877

International Dial in: +44 (0)330 336 9601

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

Pin: 9235113#

 

A recording of the conference call will be available on demand on the
Company's website: www.hochschildmining.com (http://www.hochschildmining.com)

________________________________________________________________________________________

 

Overview

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

 

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

 

TOTAL GROUP PRODUCTION

                                Q4 2021  Q3 2021  Q4 2020  12 mths    12 mths

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

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

 

ATTRIBUTABLE GROUP PRODUCTION

                             Q4 2021  Q3 2021  Q4 2020  12 mths    12 mths

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

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

 

Production

Inmaculada

 Product                          Q4 2021             Q3 2021             Q4 2020             12 mths    12 mths

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

 

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

 

 

Pallancata

 Product                          Q4 2021                 Q3 2021                 Q4 2020                 12 mths    12 mths

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

 

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

 

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

 Product                             Q4 2021  Q3 2021  Q4 2020  12 mths    12 mths

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

 

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

 

Average realisable prices and sales

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

 

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

 

Brownfield exploration

Inmaculada

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

 

   Vein           Results (potential/resource drilling)
 Josefa           IMS-21-155: 1.1m @ 17.6g/t Au & 1,149g/t Ag

                  IMS-21-155: 1.2m @ 4.3g/t Au & 70g/t Ag

                  IMS-21-155: 7.8m @ 2.0g/t Au & 70g/t Ag

                  IMS-21-155: 1.0m @ 3.6g/t Au & 114g/t Ag

                  IMS-21-198: 2.3m @ 2.3g/t Au & 312g/t Ag

                  IMS-21-200: 4.9m @ 3.8g/t Au & 311g/t Ag
 Juliana NE       IMS-21-174: 4.9m @ 11.3g/t Au & 33g/t Ag

                  IMS-21-182: 1.2m @ 50.8g/t Au & 81g/t Ag

                  IMS-21-184: 3.5m @ 18.0g/t Au & 977g/t Ag
 Juliana NE Piso  IMS-21-174: 1.5m @ 3.3g/t Au & 172g/t Ag

 

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

 

Pallancata

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

 

         Results (potential drilling)

 Vein
 Laura   DLLAU-A01: 1.9m @ 1.5g/t Au & 473g/t Ag

         Including : 1.2m @ 2.1g/t Au & 655g/t Ag

         DLLAU-A03: 2.5m @ 0.8g/t Au & 332g/t Ag

         Including : 1.1m @ 1.1g/t Au & 537g/t Ag

         DLLAU-A01: 6.9m @ 10.7g/t Au & 208g/t Ag

         Including : 1.5m @ 1.2g/t Au & 336g/t Ag
 Demian  DLEP-A66 1.3m @ 2.6g/t Au & 696g/t Ag

         DLLAU-A03: 2.6m @ 1.0g/t Au & 307g/t Ag

         Including : 1.1m @ 1.8g/t Au & 602g/t Ag

 

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

 

San Jose

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

 

 Vein         Results (potential/resource drilling)
 Betania      SJD-2408: 2.6m @ 5.4g/t Au & 10g/t Ag

              SJD-2414: 3.0m @ 7.5g/t Au & 40g/t Ag
 Sig Betania  SJD-2408: 1.0m @ 6.1g/t Au & 11g/t Ag
 Jimena       SJD-2399: 1.4m @ 3.1g/t Au & 157g/t Ag

              SJD-2406: 0.8m @ 2.6g/t Au & 482g/t Ag

              SJD-2410: 6.4m @ 7,1g/t Au & 56g/t Ag

              SJD-2418: 2.6m @ 3.1g/t Au & 12g/t Ag

 

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

 

Financial position

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

 

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

 

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

 

Outlook

The overall attributable production target for 2022 is 360,000-375,000 gold
equivalent ounces or 26.0-27.0 million silver equivalent ounces. 6  (#_ftn6)

 

2022 Attributable production split

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

 

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

 

2022 AISC split

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

 

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

 

2022 Capital expenditure split

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

 

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

 

____________________________________________________________________________________

 

Enquiries:

 

Hochschild Mining PLC

Charles Gordon
 
 
                +44 (0)20 3709 3264

Head of Investor Relations

 

Hudson Sandler

Charlie
Jack
 
+44 (0)207 796 4133

Public Relations

_____________________________________________________________________________________

 

About Hochschild Mining PLC

Hochschild Mining PLC is a leading precious metals company listed on the
London Stock Exchange (HOCM.L / HOC LN) and crosstrades on the OTCQX Best
Market in the U.S. (HCHDF), with a primary focus on the exploration, mining,
processing and sale of silver and gold. Hochschild has over fifty years'
experience in the mining of precious metal epithermal vein deposits and
currently operates three underground epithermal vein mines, two located in
southern Peru and one in southern Argentina. Hochschild also has numerous
long-term projects throughout the Americas.

_____________________________________________________________________________________

 

Forward looking statements

This announcement may contain forward looking statements. By their nature,
forward looking statements involve risks and uncertainties because they relate
to events and depend on circumstances that will or may occur in the future.
Actual results, performance or achievements of Hochschild Mining PLC may, for
various reasons, be materially different from any future results, performance
or achievements expressed or implied by such forward looking statements.

 

The forward looking statements reflect knowledge and information available at
the date of preparation of this announcement. Except as required by the
Listing Rules and applicable law, the Board of Hochschild Mining PLC does not
undertake any obligation to update or change any forward looking statements to
reflect events occurring after the date of this announcement. Nothing in this
announcement should be construed as a profit forecast.

 

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

LEI: 549300JK10TVQ3CCJQ89

 

- ends -

 1  (#_ftnref1) Unless otherwise stated, 2021 equivalent figures calculated
using the previous Company gold/silver ratio of 86x. All 2022 forecasts assume
the average gold/silver ratio for 2021 of 72x

 2  (#_ftnref2) Includes $20 million investment in IPO of Aclara Resources
Inc.

 3  (#_ftnref3) Calculated as total number of accidents per million labour
hours.

(( 4  (#_ftnref4) ))Calculated as total number of days lost per million labour
hours.

 5  (#_ftnref5) The ECO Score is an internally designed Key Performance
Indicator measuring environmental performance in one number and encompassing
numerous fronts including management of waste water, outcome of regulatory
inspections and sound environmental practices relating to water consumption
and the recycling of materials.

 6  (#_ftnref6) All forecast equivalent figures assume a gold/silver ratio of
72x.

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