_____________________________________________________________________________________

 

14 August 2019

 

Interim Results for the six months ended 30 June 2019

 

Financial highlights

§ Revenue of $354.5 million (H1 2018: $372.3 million)^[1]

§ Adjusted EBITDA of $153.7 million (H1 2018: $161.9 million)^[2]

§ Pre-exceptional profit before income tax of $41.5 million (H1 2018: $54.9 million)

§ Post-exceptional profit before income tax of $29.5 million (H1 2018: $38.6 million)

§ Adjusted basic earnings per share of $0.04 (H1 2018: $0.05)^[3]

§ Cash and cash equivalent balance of $95.4 million as at 30 June 2019 (31 December 2018: $79.7 million)

§ Gross debt of $157.8 million as at 30 June 2019 (31 December 2018: $157.1 million)

§ Net debt of $62.4 million as at 30 June 2019 (31 December 2018: $77.4 million)

§ Interim dividend of 2.0 cents per share totalling $10.2 million (H1 2018: 1.965 cents per share totalling $10.0 million)

H1 2019 operational delivery

§ All-in sustaining costs (AISC) from operations of $921 per gold equivalent ounce (H1 2018: $909 per ounce) or $11.4 per silver equivalent ounce (H1 2018: $11.2 per ounce)[4]

§ 2nd highest half-year of attributable production in Hochschild's history: 245,325 gold equivalent ounces or 19.9 million silver equivalent ounces (H1 2018: 256,939 gold equivalent ounces or 20.8 million silver equivalent ounces)

§ Record production of 135,033 gold equivalent ounces at Inmaculada (H1 2018: 134,789 ounces)

Exploration highlights

§ Several new veins discovered to the west of Angela at Inmaculada

§ Infill drilling ongoing at Inmaculada - Millet grade already increasing

§ Drilling started at Palca zone

§ New programmes scheduled for H2 at Cochaloma, Pablo Sur and Corina

H2 2019 outlook^[5]

§ On track to deliver overall 2019 production target of 457,000 gold equivalent ounces (37.0 million silver equivalent ounces)

§ 2019 all-in sustaining costs on track to meet $960-$1,000 per gold equivalent ounce guidance ($11.8-12.3 per silver equivalent ounce)

$000 unless stated	Six months to 30 June 2019	Six months to 30 June 2018	% change
Attributable silver production (koz)	8,687	9,674	(10)
Attributable gold production (koz)	138	138	-
Revenue	354,450	372,328	(5)
Adjusted EBITDA	153,734	161,906	(5)
Profit from continuing operations (pre-exceptional)	25,085	22,242	13
Profit from continuing operations (post-exceptional)	16,661	10,718	55
Basic earnings per share (pre-exceptional) $	0.04	0.05	(20)
Basic earnings per share (post-exceptional) $	0.03	0.03	-

 

 

 

IGNACIO BUSTAMANTE, CHIEF EXECUTIVE OFFICER SAID:

 

"Hochschild has delivered another strong first half operational performance with the second highest level of production in our history and solid cost control leaving us firmly on track to meet our 2019 goals. In parallel, we are in the middle of another busy period of brownfield exploration with new veins discovered at Inmaculada and the first campaign at the Palca zone already underway whilst further programmes are due in the second half at all our operations as well as in new areas such as Corina, Cochaloma and Pablo Sur. Healthy cashflow generation has continued to strengthen our balance sheet and we are therefore in a good position to execute our brownfield and greenfield strategy in addition to assessing acquisitions and investing in our innovation programme.

 

Safety

I am delighted to report that our Safety Culture Transformation Plan which was launched in 2017 is continuing to deliver positive results. This wide-ranging programme, which encompasses frequent training sessions at all levels and enhancements to our risk management systems, has undoubtedly contributed to the longest continuous period in our corporate history in which there have been zero lost time accidents - over 120 days. This is reflected in our safety frequency index for the first half of 0.51 (H1 2018: 2.1) which is the lowest of any six-month period since 2007. We will continue to implement decisively the Transformation Plan to underline our commitment to safety first.

 

Operations

Hochschild's output in the first half of 2019 was 245,325 gold equivalent ounces (19.9 million silver equivalent ounces) almost matching our record in H1 2018 (256,939 gold equivalent ounces) and this was achieved despite the absence of the Arcata mine which was placed on temporary care and maintenance in February 2019. This result was mainly due to consistent performance from all our mines and leaves us in a strong position to meet our full-year target of 457,000 gold equivalent ounces or 37.0 million silver equivalent ounces. Inmaculada delivered a record half-year production of 135,033 gold equivalent ounces (H1 2018: 134,789 ounces) driven by better than expected grades and also boosted by inventory in process at the beginning of the year leaving the mine well ahead of the run rate to meet its forecasted 241,000 gold equivalent ounces. All-in sustaining costs at $726 per gold equivalent ounce were lower than guidance reflecting the good operational performance of the mine. However, with ore grades normalising in the second half, we reiterate our full year cost guidance of $790-$830 per gold equivalent ounce.

 

At Pallancata, we have now shifted production over to the much wider Pablo vein and consequently output improved by almost 16% versus H1 2018 to 4.9 million silver equivalent ounces (H1 2018: 4.2 million ounces) with the mine's all-in sustaining cost at a competitive $12.3 per silver equivalent ounce (H1 2018: $11.7 per ounce). In Argentina, better than expected grades led to the reliable San Jose operation increasing production by 5% in the first half to 7.1 million silver equivalent ounces (H1 2018: 6.8 million ounces) with costs in line with expectations at $14.4 per silver equivalent ounce (H1 2018: $14.0 per ounce).

 

Exploration

The 2019 brownfield programme is underway and includes drilling in and around the Angela vein at Inmaculada with current results identifying new structures to the west which we expect to yield substantial additional resources. Furthermore, we are confident that infill drilling being carried out at the new veins discovered in 2018 will improve grade consistency. We have also begun a surface drill programme to the north-west of Inmaculada at the Palca zone, with early results demonstrating mineralisation and a significant number of further targets to be drilled in the second half. During this period, we can also look forward to campaigns at Cochaloma to the south-west, at Pablo Sur close to where we are currently mining and at the promising Corina zone to the north of the Selene plant, where we have already begun a 3,500 metre drilling programme. Finally, at San Jose we have carried out further exploration of the polymetallic Aguas Vivas deposit in the north-west and will focus in the second half on structures to the south of the San Jose mine and magnetometry work on the area near to Newmont Goldcorp's Cerro Negro deposit.

 

Financial results

Total Group production was moderately lower versus H1 2018 and with a 7% fall in the average silver price achieved only partially offset by a 2% rise in the gold price achieved, revenue reduced slightly to $354.5 million (H1 2018: $372.3 million). All-in sustaining costs were lower than expected at $11.4 per silver equivalent ounce (H1 2018: $11.2 per ounce) but the budgeted rise in exploration expenses and also in selling expenses (resulting from the reintroduction of export taxes in Argentina in Q3 2018) has led to Adjusted EBITDA of $153.7 million (H1 2018: $161.9 million). These increases in expenses were not fully offset by falling interest costs and a reduced tax charge and therefore pre-exceptional earnings per share were moderately lower at $0.04 (H1 2018: $0.05). Post-exceptional earnings per share was held steady at $0.03 (H1 2018: $0.03) mainly due to the payment of the premium of $11.4 million to redeem the senior notes in H1 2018 being offset by this year's exceptional costs of $11.9 million associated with the temporary closure of the Arcata mine in February 2019.

 

Financial position

Our balance sheet remains in a strong position with cash and cash equivalents of approximately $95.4 million at the end of June (31 December 2018: $79.7 million) and gross debt of $157.8 million (31 December 2018: $157.1 million). In July 2019, we were able to refinance $150.0 million of short term debt with local Peruvian banks resulting in a significant reduction in the average borrowing rate from 3.1% to 2%.

 

 

 

Outlook

In mid-June, the gold price started to rise significantly on the back of global uncertainty and a fall in the US dollar and reached levels not seen in six years. Silver also rose in July and therefore we expect the Company's second half cashflow generation to be healthy provided the price strength is maintained. However, we are also confident that Hochschild's ongoing solid operational performance, disciplined cost control and a strong balance sheet leave us in an advantageous position to execute a busy second half of brownfield and greenfield activity and continue to assess value accretive acquisitions. The Board is pleased to declare an interim dividend of 2.0 cents per share ($10.2 million) which reflects the ongoing successful strategic and operational performance."

 

 

_______________________________________________________________________________________

 

A live conference call & audio webcast will be held at 2.30pm (London time) on Wednesday 14 August 2019 for analysts and investors.

For a live webcast of the presentation please click on the link below:

 

https://webcasting.brrmedia.co.uk/broadcast/5cb0a5b9eb566331974d6a39

 

Conference call dial in details:

UK: +44 (0)330 336 9125 (Please use the following confirmation code: 6706139).

_______________________________________________________________________________________

 

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

_______________________________________________________________________________________

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.

 

 

 

OPERATING REVIEW

OPERATIONS

Note: silver/gold equivalent production figures assume a gold/silver ratio of 81:1.

 

Production

In H1 2019, Hochschild produced 245,325 gold equivalent ounces or 19.9 million silver equivalent ounces, the second highest in the Company's history. This was mainly due to solid performances from all the Company's mines especially at Inmaculada, where better than expected grades helped to deliver a record half-year of production.

 

Total group production

	Six months to 30 June 2019	Six months to 30 June 2018
Silver production (koz)	10,237	11,135
Gold production (koz)	162.16	160.47
Total silver equivalent (koz)	23,371	24,133
Total gold equivalent (koz)	288.53	297.94
Silver sold (koz)	10,221	11,067
Gold sold (koz)	160.25	158.01

Total production includes 100% of all production, including production attributable to Hochschild's minority shareholder at San Jose.

 

Attributable group production

	Six months to 30 June 2019	Six months to 30 June 2018
Silver production (koz)	8,687	9,674
Gold production (koz)	138.08	137.51
Silver equivalent (koz)	19,871	20,812
Gold equivalent (koz)	245.33	256.94

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

 

Costs

All-in sustaining cost from operations in H1 2019 was $921 per gold equivalent ounce or $11.4 per silver equivalent ounce (H1 2018: $909 per gold equivalent ounce or $11.2 per silver equivalent ounce). The Company is maintaining its guidance of all-in sustaining cost from operations in 2019 at between $960 and $1,000 per gold equivalent ounce (or $11.8 and $12.3 per silver equivalent ounce). Inmaculada's costs are expected to rise in the second half due to timing in the execution of sustaining and development capital expenditure and lower production.

 

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	Six months to 30 June 2019	Six months to 30 June 2018	% change
Ore production (tonnes)	670,487	670,713	-
Average silver grade (g/t)	157	153	3
Average gold grade (g/t)	4.62	4.58	1
Silver produced (koz)	2,950	3,115	(5)
Gold produced (koz)	98.61	96.33	2
Silver equivalent produced (koz)	10,938	10,918	-
Gold equivalent produced (koz)	135.03	134.79	-
Silver sold (koz)	2,942	3,108	(5)
Gold sold (koz)	97.48	95.35	2
Unit cost ($/t)	90.8	83.5	9
Total cash cost ($/oz Au co-product)	480	466	3
All-in sustaining cost ($/oz Au Eq)	726	631	15

 

Production

In the first half of 2019, Inmaculada produced 135,033 gold equivalent ounces, in line with the same period of 2018 (134,789 gold equivalent ounces), with the solid result reflecting steady tonnage, strong grades and a contribution from products in process from Q4 2018. 

 

Costs

All-in sustaining costs were lower than expectations at $726 per gold equivalent ounce (H1 2018: $631 per ounce). This was mostly due to the impact of higher than expected grades as well as the effect of the inventory in process (mentioned above). However, in the second half, costs are expected to normalise with sustaining and development capital expenditure scheduled to increase. Costs rose versus H1 2018 due to increased mine development costs to access the new vein discoveries and reduced low cost mineral from mine developments.

 

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 22km to the Selene plant for processing.

 

Pallancata summary	Six months to 30 June 2019	Six months to 30 June 2018	% change
Ore production (tonnes)	472,294	285,568	65
Average silver grade (g/t)	284	399	(29)
Average gold grade (g/t)	1.01	1.47	(31)
Silver produced (koz)	3,812	3,278	16
Gold produced (koz)	13.44	11.86	13
Silver equivalent produced (koz)	4,901	4,238	16
Gold equivalent produced (koz)	60.51	52.33	16
Silver sold (koz)	3,768	3,256	16
Gold sold (koz)	13.20	11.58	14
Unit cost ($/t)	80.9	101.9	(21)
Total cash cost ($/oz Ag co-product)	8.6	8.0	8
All-in sustaining cost ($/oz Ag Eq)	12.3	11.7	5

 

Production

Pallancata's output in H1 2019 was 4.9 million silver equivalent ounces, a 16% improvement on the corresponding period of 2018 (H1 2018: 4.2 million ounces), reflecting full production from the wider but lower grade Pablo vein.

 

Costs

All-in sustaining costs were better than guidance at $12.3 per silver equivalent ounce (H1 2018: $11.7 per ounce), mainly due to capital expenditure being second half weighted in 2019. The AISC figure increased versus H1 2018, as expected, in line with the full production from the wider, but lower-grade Pablo vein.

 

San Jose

The San Jose silver/gold mine is located in Argentina, in the province of Santa Cruz, 1,750km south west of Buenos Aires. San Jose commenced production in 2007. Hochschild holds a controlling interest of 51% in the mine and is the mine operator. The remaining 49% is owned by the minority interest, McEwen Mining Inc.

 

San Jose summary	Six months to 30 June 2019	Six months to 30 June 2018	% change
Ore production (tonnes)	251,753	264,341	(5)
Average silver grade (g/t)	446	407	10
Average gold grade (g/t)	6.89	6.34	9
Silver produced (koz)	3,162	2,982	6
Gold produced (koz)	49.14	46.86	5
Silver equivalent produced (koz)	7,143	6,778	5
Gold equivalent produced (koz)	88.18	83.68	5
Silver sold (koz)	3,189	2,955	8
Gold sold (koz)	48.89	46.00	6
Unit cost ($/t)	229.2	241.6	(5)
Total cash cost ($/oz Ag co-product)	9.3	10.6	(12)
All-in sustaining cost ($/oz Ag Eq)	14.4	14.0	3

 

Production

First half total production at San Jose was 7.1 million silver equivalent ounces, ahead of the same period of 2018 (H1 2018: 6.8 million ounces) due to better than expected grades.

 

 

 

Costs

All-in sustaining costs were $14.4 per silver equivalent ounce (H1 2018: $14.0 per ounce) with the increase versus the same period of last year due to the reintroduction of export taxes, local inflation and slightly reduced treated tonnage partially offset by the devaluation of the Argentinian peso and higher gold and silver grades.

 

Arcata

The 100% owned Arcata underground operation is located in the Department of Arequipa in southern Peru. It commenced production in 1964. In February 2019, Hochschild suspended operations at Arcata and placed it on temporary care and maintenance.

 

Arcata summary	Six months to 30 June 2019	Six months to 30 June 2018	% change
Ore production (tonnes)	37,049	188,522	(80)
Average silver grade (g/t)	298	326	9
Average gold grade (g/t)	0.94	1.01	(7)
Silver produced (koz)	311	1,760	(82)
Gold produced (koz)	0.97	5.42	(82)
Silver equivalent produced (koz)	390	2,199	(82)
Gold equivalent produced (koz)	4.81	27.15	(82)
Silver sold (koz)	322	1,748	(82)
Gold sold (koz)	0.67	5.08	(87)
Unit cost ($/t)	184.5	146.1	26
Total cash cost ($/oz Ag co-product)	20.5	14.7	39
All-in sustaining cost ($/oz Ag Eq)	22.4	18.8	19

 

Production

Production at Arcata in the first half was 0.4 million silver equivalent ounces (H1 2018: 2.2 million ounces).

 

EXPLORATION

Inmaculada

In the first half of 2019, almost 8,500m of potential resource drilling was carried out at the newly-discovered Susana Beatriz, Facundo and Salvador structures to the west of the Angela vein. Also, 9,172m of resource drilling was executed at the Angela and the newly discovered PIlar vein.

 

Vein	Results (potential resource drilling)
Salvador	ANG-19-012: 2.1m @ 41.0g/t Au & 480g/t Ag
Susana Beatriz	ANE-19-010: 4.2m @ 2.9g/t Au & 280g/t Ag IMM-19-001: 1.5m @ 8.1g/t Au & 114g/t Ag IMM-19-002: 2.5m @ 2.5g/t Au & 105g/t Ag
Lady	IMS-19-003: 1.1m @ 6.3g/t Au & 58g/t Ag
Facundo	HUA-19-001: 3.1m @ 6.0g/t Au & 136g/t Ag
M.Mamani	MM-19-001: 1.0m @ 2.2g/t Au & 155g/t Ag

 

Vein	Results (resource drilling)
Salvador	ANE-19-010: 0.8m @ 16.7g/t Au & 349g/t Ag ANE-19-011: 0.8m @ 20.7g/t Au & 667g/t Ag ANE-19-013: 0.8m @ 5.9g/t Au & 399g/t Ag IMM-19-001: 1.1m @ 31.9g/t Au & 5,053g/t Ag IMM-19-007: 0.6m @ 3.6g/t Au & 98g/t Ag
Pilar	ANG-18-023: 0.5m @ 5.0g/t Au & 236g/t Ag ANG-19-011A: 2.3m @ 7.4g/t Au & 250g/t Ag ANG-19-012: 2.2m @ 41.0g/t Au & 480g/t Ag IMM-19-001: 1.1m @ 31.9g/t Au & 5,053g/t Ag IMM-19-003: 1.9m @ 1.4g/t Au & 110g/t Ag IMM-19-008: 1.5m @ 3.7g/t Au & 203g/t Ag IMM-19-011: 3.1m @ 4.4g/t Au & 192g/t Ag IMM-19-014: 11.0m @ 18.2g/t Au & 773g/t Ag HUA-19-003: 1.4m @ 19.4g/t Au & 438g/t Ag

 

Infill drilling commenced in the first half targeting the Millet vein which was discovered in 2018. Results to date have already increased the resource grade by over 20% with results below:

 

Vein

Results (infill drilling)

Millet

MIL-19-001: 0.9m @ 1.7g/t Au & 80g/t Ag MIL-19-002: 4.5m @ 2.6g/t Au & 204g/t Ag MIL-19-003: 2.8m @ 3.6g/t Au & 153g/t Ag MIL-19-004: 1.3m @ 0.9g/t Au & 42g/t Ag MIL-19-005: 0.9m @ 3.2g/t Au & 25g/t Ag MIL-19-006: 4.2m @ 0.8g/t Au & 67g/t Ag MIL-19-007: 2.7m @ 7.0g/t Au & 129g/t Ag MIL-19-008: 1.5m @ 2.5g/t Au & 139g/t Ag MIL-19-009: 2.0m @ 4.8g/t Au & 557g/t Ag MIL-19-010: 5.0m @ 3.3g/t Au & 104g/t Ag MIL-19-011: 0.9m @ 2.0g/t Au & 37g/t Ag MIL-19-012: 6.8m @ 2.4g/t Au & 81g/t Ag MIL-19-013: 1.2m @ 1.3g/t Au & 8g/t Ag MIL-19-014: 2.0m @ 3.8g/t Au & 342g/t Ag MIL-19-015: 1.2m @ 0.9g/t Au & 97g/t Ag MIL-19-016: 5.9m @ 1.9g/t Au & 88g/t Ag MIL-19-017: 1.4m @ 2.0g/t Au & 344g/t Ag MIL-19-018: 1.2m @ 1.4g/t Au & 30g/t Ag MIL-19-019: 4.6m @ 1.3g/t Au & 67g/t Ag MIL-19-020: 1.2m @ 0.2g/t Au & 52g/t Ag MIL-19-021: 2.6m @ 9.4g/t Au & 184g/t Ag MIL-19-022: 4.0m @ 1.2g/t Au & 61g/t Ag MIL-19-023: 3.5m @ 3.1g/t Au & 208g/t Ag MIL-19-024: 1.0m @ 2.8g/t Au & 213g/t Ag MIL-19-025: 5.8m @ 2.9g/t Au & 174g/t Ag MIL-19-026: 6.2m @ 2.1g/t Au & 167g/t Ag MIL-19-027: 5.1m @ 2.7g/t Au & 264g/t Ag MIL-19-028: 3.0m @ 2.7g/t Au & 162g/t Ag MIL-19-029: 4.0m @ 2.9g/t Au & 470g/t Ag MIL-19-030: 0.7m @ 1.4g/t Au & 67g/t Ag MIL-19-031: 2.3m @ 1.6g/t Au & 113g/t Ag MIL-19-032: 2.5m @ 1.7g/t Au & 133g/t Ag MIL-19-033: 3.3m @ 3.0g/t Au & 14g/t Ag MIL-19-034: 1.4m @ 0.7g/t Au & 41g/t Ag MIL-19-035: 3.0m @ 2.7g/t Au & 77g/t Ag MIL-19-036: 2.3m @ 2.1g/t Au & 71g/t Ag MIL-19-037: 2.8m @ 4.5g/t Au & 509g/t Ag MIL-19-038: 1.0m @ 1.0g/t Au & 93g/t Ag MIL-19-039: 0.8m @ 0.9g/t Au & 68g/t Ag MIL-19-040: 3.5m @ 3.0g/t Au & 111g/t Ag MIL-19-041: 0.6m @ 0.2g/t Au & 347g/t Ag

 

The drilling programme in the second half will focus mainly on 7,000m of resource drilling with the main targets of the Susana Beatriz, Salvador, Facundo, Laidy and Rosy veins. It will also include 1,200m of potential drilling in the Rosy and Lady structures. In addition, infill drilling will continue at the Millet, Divina and other veins discovered in 2018 with completion scheduled for early in the fourth quarter.

 

Pallancata

At Pallancata, 817m of potential resources were drilled from the Mariel and Pablo veins with results pending from the Mariel target.

 

Vein	Results (potential resource drilling)
Pablo	DLEP-A49: 3.4m @ 1.4g/t Au & 553g/t Ag

 

Drilling in the Pablo Sur area is scheduled for the second half along with the programme at Cochaloma to the south. Superficial work has also been completed at the Huachuilca target to the north of the Selene plant and drilling is expected for the fourth quarter.

 

Palca

The Palca drilling programme started late in the half with potential resource drilling in the Roxana, Santa Beatriz and Prometida structures. Early results confirm mineralisation with 200m of depth. The key result was obtained from the Prometida vein.

 

Vein	Results (potential resource drilling)
Roxana	PLC-195-001: 1.8m @ 1.0g/t Au & 27g/t Ag PLC-195-004: 0.8m @ 1.0g/t Au & 33g/t Ag
Santa Beatriz	PLC-195-001: 1.2m @ 0.7g/t Au & 13g/t Ag
Prometida	PLC-195-006: 2.9m @ 5.0g/t Au & 35g/t Ag

 

For the second half, 3,810m of drilling is scheduled for the Blanca, Alejandra, Rafaela, Escondida, Escandalosa and Kimberly targets.

 

 

 

San Jose

At San Jose, potential drilling was executed at the Aguas Vivas system as well as at the Pluma 19 structure, the south-east Kospi projection and East and West Antonella. The intercepted structures at Aguas Vivas correspond to an intermediate sulphidation system with associated grades of zinc and lead.

 

Vein	Results (potential resource drilling)
Aguas Vivas	SJD-1627: 3.0m @ 0.1g/t Au, 43/t Ag, 0.2% Cu, 8.2% Pb & 5.5% Zn SJD-1686: 1.1m @ 3.6g/t Au, 85g/t Ag, 0.1% Cu, 19.0% Pb & 10.3% Zn SJD-1703: 1.4m @ 0.2g/t Au, 55g/t Ag, 0.6% Pb & 1.9% Zn SJD-1720: 0.8m @ 2.4g/t Au, 9g/t Ag SJD-1851: 3.4m @ 0.3g/t Au, 44g/t Ag, 1.2% Cu, 4.6% Pb & 6.4% Zn SJD-1853: 1.1m @ 0.4g/t Au, 98g/t Ag, 1.6% Cu, 5.3% Pb & 4.2% Zn SJD-1855: 2.8m @ 0.9g/t Au, 9g/t Ag, 0.2% Cu, 0.7% Pb & 1.4% Zn SJD-1857: 0.9m @ 1.6g/t Au, 18g/t Ag, 0.1% Cu, 2.7% Pb & 2.2% Zn SJD-1865: 1.3m @ 0.4g/t Au, 12g/t Ag, 0.2% Cu, 2.1% Pb & 3.9% Zn SJD-1870: 1.1m @ 5.0g/t Au, 64g/t Ag, 0.4% Cu, 2.3% Pb & 3.9% Zn
Antonella	SJM-429: 3.9m @ 8.1g/t Au & 239/t Ag

 

During the second half, the programme will focus on the Antonella structure and on the south-east Kospi projection. Also, a magnetometry study will be performed on the extension of Cerro Negro structures covering a total area of 14.3km².

 

Arcata

At Arcata, a Titan geophysical programme and geological mapping for new targets has concluded and a drilling plan is scheduled for the third quarter of 2019.

 

Corina

During the half, final permits were obtained for the drilling programme planned for the Corina zone, approximately 15km to the north-east of the Selene plant. A 2,700m drilling campaign has recently commenced with results expected later in the year.

 

GREENFIELD AND BUSINESS DEVELOPMENT

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. To date, options have been secured on properties across the Americas including: the Snip mine in Canada owned by Skeena Resources; the Agni and Indra projects in Chile owned by Mirasol Resources; the Ferguson Mountain and Mars projects in Nevada owned by Renaissance Gold; the BP, Bellview and Horsethief projects in Nevada owned by Alianza Gold and the Stateline vein district in Nevada optioned from KA Gold.

 

A 2,000m Reverse Circulation (RC) drilling programme has already started at Ferguson Mountain whilst at the nearby Mars project, a 2,500m RC campaign is due for later in August as is a similar programme at the Agni-Indra projects. At Snip, the aim is to drill a further 9,000m by the year end.

 

Finally, the Company has also secured an option on the Condor project located in Arequipa (Peru) close to the Arcata operation with permitting and access rights currently being progressed. 

 

 

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 periods. 

 

Revenue

Gross revenue[6]

Gross revenue from continuing operations decreased by 5% to $366.5 million in H1 2019 (H1 2018: $386.4 million) due to a fall in the average realised silver price and in ounces sold of silver in line with reduced production. These effects were marginally offset by an increase in the realised gold price.

 

Gold

Gross revenue from gold in H1 2019 increased slightly to $213.0 million (H1 2018: $206.9 million) due to a small increase in the average realised gold price.

 

Silver

Gross revenue fell in H1 2019 to $153.5 million (H1 2018: $179.5 million) due to a 7% decline in the average silver price received as well as a reduction in the amount of silver ounces sold. This was mostly as a result of the absence of material production from the predominantly silver-producing Arcata mine, which was placed on care and maintenance in February 2019.

 

Gross average realised sales prices

The following table provides figures for average realised prices (before the deduction of commercial discounts) and ounces sold for H1 2019 and H1 2018:

 

Average realised prices	Six months to 30 June 2019	Six months to 30 June 2018
Silver ounces sold (koz)	10,221	11,067
Avg. realised silver price ($/oz)	15.0	16.2
Gold ounces sold (koz)	160.25	158.01
Avg. realised gold price ($/oz)	1,329	1,309

 

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 H1 2019, the Group recorded commercial discounts of $12.1 million (H1 2018: $14.2 million) with the decrease explained by the significant reduction in production from the concentrate-only Arcata mine. The ratio of commercial discounts to gross revenue in H1 2019 was 3% (H1 2018: 4%).

 

Net revenue[7]

Net revenue was $354.5 million (H1 2018: $372.3 million), comprising net gold revenue of $209.4 million (H1 2018: $203.4 million) and net silver revenue of $144.9 million (H1 2018: $168.8 million). In H1 2019, gold accounted for 59% and silver for 41% of the Company's consolidated net revenue (H1 2018: gold 55% and silver 45%).

 

Revenue by mine[8]

$000	Six months to 30 June 2019	Six months to 30 June 2018	% change
Silver revenue
Arcata	4,970	28,550	(83)
Inmaculada	43,359	50,242	(14)
Pallancata	57,114	52,537	9
San Jose	48,087	48,186	-
Commercial discounts	(8,618)	(10,746)	(20)
Net silver revenue	144,912	168,769	(14)
Gold revenue
Arcata	889	6,668	(87)
Inmaculada	127,315	125,432	2
Pallancata	18,275	14,962	22
San Jose	66,483	59,792	11
Commercial discounts	(3,524)	(3,499)	1
Net gold revenue	209,438	203,355	3
Other revenue	100	204	(51)
Net revenue[9]	354,450	372,328	(5)

 

Costs

Total cost of sales was $252.8 million in H1 2019 (H1 2018: $267.3 million). The direct production cost excluding depreciation was lower at $158.4 million (H1 2018: $174.0 million) mainly due to the reduced production costs from Arcata which was placed on care and maintenance in early 2019 as well as costs savings at San Jose due to the ongoing devaluation of the Argentinian peso. This was partially offset by higher costs due to increased production volumes at Pallancata (ramp-up of the Pablo vein). Depreciation in production cost increased to $90.4 million (H1 2018: $82.9 million) due to higher extracted volumes at Pallancata partially offset by the increased life-of-mine at Inmaculada. Other items, which principally includes personnel-related provisions and stoppage costs (at San Jose) was relatively flat at $1.1 million in H1 2019 (H1 2018: $0.9 million). Change in inventories was $2.9 million in H1 2019 (H1 2018: $9.4 million) due to a reduction in products in process and finished goods.

 

$000	Six months to 30 June 2019	Six months to 30 June 2018	% change
Direct production cost excluding depreciation	158,444	173,967	(9)
Depreciation in production cost	90,371	82,949	9
Other items	1,135	939	21
Change in inventories	2,881	9,404	(69)
Cost of sales	252,831	267,259	(5)

 

Unit cost per tonne

The Company reported unit cost per tonne at its operations of $114.7 per tonne in H1 2019, a 8% decrease versus H1 2018 ($124.5 per tonne) due to good cost control, increased mined tonnage at Pallancata and the depreciation of the Argentine peso more than offsetting inflation in Argentina.

 

Unit cost per tonne by operation (including royalties)[10]:

Operating unit ($/tonne)	Six months to 30 June 2019	Six months to 30 June 2018	% change
Peru[11]	86.6	98.7	(12)
Inmaculada	90.8	83.5	9
Pallancata	80.9	101.9	(21)
Arcata	184.5	146.1	26
Argentina
San Jose	229.2	241.6	(5)
Total	114.7	124.5	(8)

 

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[12]:

$000 unless otherwise indicated	Six months to 30 June 2019	Six months to 30 June 2018	% change
Group cash cost	185,735	199,140	(7)
(+) Cost of sales	252,831	267,259	(5)
(-) Depreciation and amortisation in cost of sales	(91,322)	(86,579)	5
(+) Selling expenses	10,480	2,504	319
(+) Commercial deductions[13]	13,746	15,956	(14)
Gold	3,636	3,595	1
Silver	10,110	12,361	(18)
Revenue	354,450	372,328	(5)
Gold	209,438	203,355	3
Silver	144,912	168,769	(14)
Others	100	204	(51)
Ounces sold
Gold	160.2	158.0	1
Silver	10,221	11,067	(8)
Group cash cost ($/oz)
Co product Au	685	689	(1)
Co product Ag	7.4	8.2	(10)
By product Au	192	114	68
By product Ag	(2.7)	(0.7)	286

 

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

All-in sustaining cash costs per silver equivalent ounce

 

Six months to 30 June 2019

$000 unless otherwise indicated	Inmaculada	Pallancata	San José	Main operations	Arcata	Corporate & others	Total
(+) Production cost excluding depreciation	58,598	36,603	56,430	151,631	6,813	-	158,444
(+) Other items in cost of sales	278	290	567	1,135	-	-	1,135
(+) Operating and exploration capex for units	31,025	14,456	21,527	67,008	48	1,258	68,314
(+) Brownfield exploration expenses	3,110	1,483	5,404	9,997	795	2,180	12,972
(+) Administrative expenses (excl depreciation)	1,651	675	3,247	5,573	49	16,353	21,975
(+) Royalties and special mining tax[14]	1,714	701	-	2,414	51	1,132	3,597
Sub-total	96,376	54,208	87,175	237,758	7,756	20,923	266,437
Au ounces produced	98,608	13,444	49,137	161,188	966	-	162,155
Ag ounces produced (000s)	2,950	3,812	3,162	9,925	311	-	10,237
Ounces produced (Ag Eq 000s oz)	10,938	4,901	7,143	22,982	390	-	23,371
Sub-total ($/oz Ag Eq)	8.8	11.1	12.2	10.3	19.9	-	11.4
(+) Commercial deductions	1,358	5,596	6,016	12,970	776	-	13,746
(+) Selling expenses	315	474	9,545	10,334	146	-	10,480
Sub-total	1,673	6,070	15,561	22,304	922	-	24,226
Au ounces sold	97,484	13,200	48,891	159,575	674	-	160,248
Ag ounces sold (000s)	2,942	3,768	3,189	9,899	322	-	10,221
Ounces sold (Ag Eq 000s oz)	10,838	4,837	7,150	22,824	377	-	23,201
Sub-total ($/oz Ag Eq)	0.2	1.3	2.2	1.0	2.4	-	1.0
All-in sustaining costs ($/oz Ag Eq)	9.0	12.3	14.4	11.4	22.4	-	12.4
All-in sustaining costs ($/oz Au Eq)[15]	726	997	1,165	921	1,811	-	1,008

 

Six months to 30 June 2018

$000 unless otherwise indicated	Arcata	Inmaculada	Pallancata	San José	Main operations	Corporate & others	Total
(+) Production cost excluding depreciation	27,610	54,939	30,087	61,331	173,967	-	173,967
(+) Other items in cost of sales	-	-	-	939	939	-	939
(+) Operating and exploration capex for units	7,328	24,551	12,453	20,414	64,746	30	64,776
(+) Brownfield exploration expenses	1,126	314	645	1,962	4,047	1,340	5,387
(+) Administrative expenses (excl depreciation)	302	1,726	617	3,540	6,184	14,764	20,948
(+) Royalties and special mining tax	-	1,755	627	-	2,383	1,771	4,154
Sub-total	36,366	83,285	44,429	88,186	252,266	17,905	270,171
Au ounces produced	5,418	96,329	11,862	46,859	160,468	-	160,468
Ag ounces produced (000s)	1,760	3,115	3,728	2,982	11,135	-	11,135
Ounces produced (Ag Eq 000s oz)	2,199	10,918	4,238	6,778	24,133	-	24,133
Sub-total ($/oz Ag Eq)	16.5	7.6	10.5	13.0	10.5	-	11.2
(+) Commercial deductions	4,493	1,442	4,709	5,312	15,956	-	15,956
(+) Selling expenses	465	252	376	1,411	2,504	-	2,504
Sub-total	4,958	1,694	5,085	6,723	18,460	-	18,460
Au ounces sold	5,080	95,354	11,582	45,997	158,013	-	158,013
Ag ounces sold (000s)	1,748	3,108	3,256	2,955	11,067	-	11,067
Ounces sold (Ag Eq 000s oz)	2,160	10,832	4,194	6,680	23,866	-	23,866
Sub-total ($/oz Ag Eq)	2.3	0.2	1.2	1.0	0.8	-	0.8
All-in sustaining costs ($/oz Ag Eq)	18.8	7.8	11.7	14.0	11.2		12.0
All-in sustaining costs ($/oz Au Eq)	1,525	631	947	1,135	909	-	969

 

Administrative expenses

Administrative expenses increased by 6% to $23.0 million (H1 2018: $21.7 million) primarily due to higher personnel costs and the increase in innovation-related expenses.

 

Exploration expenses

In H1 2019, exploration expenses increased to $18.6 million (H1 2018: $13.0 million) in line with the overall rise in the Company's investment in brownfield and greenfield exploration. In addition, the Group capitalises part of its brownfield exploration, which mostly relates to costs incurred converting potential resources to the Inferred or Measured and Indicated categories. In H1 2019, the Company capitalised $2.4 million relating to brownfield exploration compared to $4.9 million in H1 2018, bringing the total investment in exploration for H1 2019 to $20.9 million (H1 2018: $18.0 million). 

 

Selling expenses

Selling expenses increased to $10.5 million (H1 2018: $2.5 million) principally due to the reintroduction of export taxes in Argentina from September 2018 ($8.1 million).

 

 

 

Other income/expenses

Other income was lower at $4.5 million (H1 2018: $4.9 million) mainly due to a reduction in export credits in Argentina partially offset by higher income from logistics services.

 

Other expenses before exceptional items were slightly higher at $8.8 million (H1 2018: $7.9 million) mainly due to an increase in mine closure provisions.

 

Adjusted EBITDA

Adjusted EBITDA decreased by 5% to $153.7 million (H1 2018: $161.9 million) primarily due to the 7% fall in the average silver price and the reintroduction of export taxes in Argentina in September 2018.

 

Adjusted EBITDA is calculated as profit from continuing operations before exceptional items, net finance costs and income tax plus non-cash items (depreciation and changes in mine closure provisions) and exploration expenses other than personnel and other exploration related fixed expenses.

 

$000 unless otherwise indicated	Six months to 30 June 2019	Six months to 30 June 2018	% change
Profit from continuing operations before exceptional items, net finance cost, foreign exchange (loss)/gain and income tax	44,693	64,628	(31)
Depreciation and amortisation in cost of sales	91,322	86,579	5
Depreciation and amortisation in administrative expenses	1,167	743	57
Exploration expenses	18,552	13,048	42
Personnel and other exploration related fixed expenses	(3,087)	(2,786)	11
Other non-cash income, net [16]	1,087	(306)	(455)
Adjusted EBITDA	153,734	161,906	(5)
Adjusted EBITDA margin	43%	43%

 

Finance income

Finance income before exceptional items was $1.4 million (H1 2018: $1.1 million) with the main reason for the small increase in H1 2019 being the lower gain on discount of tax credits in Argentina ($0.5 million).

 

Finance costs

Finance costs before exceptional items decreased from $6.5 million in H1 2018 to $3.5 million in H1 2019, principally due to the reduction in the interest payments resulting from the repayment of the Company's Senior Notes in H1 2018.

 

Foreign exchange losses

The Group recognised a foreign exchange loss of $1.1 million (H1 2018: $4.3 million loss) as a result of exposures in currencies other than the functional currency - the Argentinean peso which again significantly depreciated in H1 2019 and the Peruvian sol which appreciated during the period.

 

Income tax

The Company's pre-exceptional income tax charge was $16.4 million (H1 2018: $32.7 million). The substantial decrease in the charge is explained by the Company's decrease in profitability in the period and the impact of local currency devaluation in Argentina and Peru in H1 2018.

 

The effective tax rate (pre-exceptional) for the period was 39.5% (H1 2018: 59.5%), compared to the weighted average statutory tax rate of 30.5% (H1 2018: 31.2%). The increase is explained by royalties and the Special Mining Tax resulting in a charge of $3.6 million (H1 2018: $4.1 million), increasing the rate by 8.7% (H1 2018: 7.6%).

 

In H1 2019, there was no material impact from local currency devaluation. In H1 2018, the impact was $8.7 million, increasing the rate further by 15.9%.

 

Exceptional items

Exceptional items in H1 2019 totalled an $8.4 million loss after tax (H1 2018: $11.5 million loss after tax). Exceptional items included the payment of termination benefits due to the restructuring process generated by the temporary suspension of operations at the Arcata mine unit ($11.9 million) partially offset by the associated exceptional tax effect. H1 2018 included the premium and other financial expenses related to the repayment of the Compañia Minera Ares bond in January 2018 (US$16.3 million), partially offset by the exceptional tax effect.

 

 

 

Cash flow and balance sheet review         

Cash flow:

$000	Six months to 30 June 2019	Six months to 30 June 2018	Change
Net cash generated from operating activities	100,500	117,176	(16,676)
Net cash used in investing activities	(70,281)	(64,050)	(6,231)
Cash flows used in financing activities	(13,796)	(164,639)	150,843
Net increase/(decrease) in cash and cash equivalents during the period	16,423	(111,513)	127,936

 

Net cash generated from operating activities decreased from $117.2 million in H1 2018 to $100.5 million in H1 2019 mainly due to lower Adjusted EBITDA of $153.7 million (H1 2018: $161.9 million) and higher exploration expenses of $18.6 million (H1 2018: $13.0 million).

 

Net cash used in investing activities increased to $70.3 million in H1 2019 from $64.1 million in H1 2018 mainly due to higher operational capex and in particular mine development at the new veins found at Inmaculada.

 

Cash used in financing activities fell to $13.8 million in H1 2019 from $164.6 million in H1 2018, mainly as due to the effect of the net repayment of borrowings of $146.3 million in H1 2018, and the payment of lease liabilities of $1.3 million in H1 2019, and lower payment of dividends to non-controlling interests of $5.6 million. In H1 2018, debt restructuring consisted of the repayment of the Company's Senior Notes ($294.8 million) and $3.0 million of short term debt in Argentina. This was partially offset by new short-term loans of $100.0 million which were secured to repurchase the Senior Notes. In both periods, the Company paid $10 million of dividends to its own shareholders and also to McEwen Mining ($2.2 million in H1 2019 and $7.8 million in H1 2018).

 

Working capital

$000	As at 30 June 2019	As at 31 December 2018
Trade and other receivables	102,951	84,187
Inventories	49,776	58,035
Other financial assets	47	47
Income tax receivable/(payable), net	13,507	17,462
Trade and other payables	(122,013)	(126,262)
Provisions	(102,722)	(97,793)
Working capital	(58,454)	(64,324)

 

The Group's working capital position in H1 2019 increased by $5.9 million from $(64.3) million to $(58.5) million. The key drivers of the increase were: higher trade receivables of $18.8 million and lower trade payables of $4.2 million. These effects were partially offset by higher provisions of $4.9 million, lower inventories of $8.3 million and lower income tax receivable of $4.0 million.

 

Net debt

$000 unless otherwise indicated	As at 30 June 2019	As at 31 December 2018
Cash and cash equivalents	95,443	79,704
Long term borrowings	-	(50,000)
Short term borrowings[17]	(157,820)	(107,067)
Net debt	(62,377)	(77,363)

 

The Group's reported net debt position was $62.4 million as at 30 June 2019 (31 December 2018: $77.4 million). The decrease in net debt is mainly a result of the net cash generation in the period. The Company's total debt position remained similar in both periods.

 

Capital expenditure^[18] 

$000	Six months to 30 June 2019	Six months to 30 June 2018
Arcata	48	7,328
Pallancata	14,456	12,453
San Jose	22,553	21,279
Inmaculada	31,025	24,551
Operations	68,082	65,611
Other	2,749	1,645
Total	70,831	67,256

 

H1 2019 capital expenditure of $70.8 million (H1 2018: $67.3 million) mainly comprised of operational capex of $68.1 million (H1 2018: $65.6 million) with the small increase versus H1 2018 resulting from increased capex at Inmaculada and Pallancata due to a rise in new mine developments partially offset by the almost total capex reduction at Arcata which was placed on temporary care and maintenance in February 2019.

 

 

 

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.

 

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. 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.

 

 

 

 

 

RISKS

The principal risks and uncertainties facing the Company in respect of the year ended 31 December 2018 are set out in detail in the Risk Management & Viability section of the 2018 Annual Report and in Note 35 to the 2018 Consolidated Financial Statements.

 

The key risks disclosed in the 2018 Annual Report (available at www.hochschildmining.com) are categorised as:

 

o  Financial risks comprising commodity price risk and commercial counterparty risk;

o  Operational risks including the risks associated with operational performance, business interruption, information security and cybersecurity, exploration & reserve and resource replacement and personnel risks;

o  Macro-economic risks which include political, legal and regulatory risks; and

o  Sustainability risks including risks associated with health and safety, environmental and community relations.

 

These risks continue to apply to the Company in respect of the remaining six months of the financial year. 

 

RELATED PARTY TRANSACTIONS

There were no significant related parties transactions during the six month period ended 30 June 2019.

 

GOING CONCERN

The Company's business activities, together with the factors likely to affect future development, performance and position are set out in the Operating Review.  The financial position of the Company, its cash flow and liquidity position are described in the Financial Review.

 

The Directors believe that the financial resources available at the date of the issue of these condensed interim financial statements are sufficient for the Company to manage its business risks successfully.

 

The Company's forecasts and projections, taking into account reasonably possible changes in operational performance and in particular the price of gold and silver, and other mitigating actions described in the Risks section above, show that there are reasonable expectations that the Company will be able to operate on funds currently held and those generated internally, for the foreseeable future. In doing so, the Company makes assumptions on the expected renewal of facilities where it is considered highly probable.

 

After making enquiries and considering the above, the Directors have a reasonable expectation that the Company has adequate resources to continue in operational existence for the foreseeable future and consider the going concern basis of accounting to be appropriate. As a result they continue to adopt the going concern basis of accounting in preparing the condensed interim financial statements.

 

STATEMENT OF DIRECTORS' RESPONSIBILITIES

The Directors confirm that, to the best of their knowledge, the interim condensed consolidated financial statements have been prepared in accordance with IAS 34 "Interim Financial Reporting" as adopted by the European Union and that the interim management report includes a fair review of the information required by Disclosure Guidance and Transparency Rules 4.2.7R and 4.2.8R.

 

A list of current Directors and their functions is maintained on the Company's website.

 

For and on behalf of the Board

 

Ignacio Bustamante
Chief Executive Officer

13 August 2019

 

 

INDEPENDENT REVIEW REPORT TO HOCHSCHILD MINING PLC

Introduction

We have been engaged by Hochschild Mining PLC (the 'Company') to review the condensed set of financial statements in the half-yearly financial report for the six months ended  30 June 2019 which comprises the Interim condensed consolidated income statement, the Interim condensed consolidated statement of comprehensive income, the Interim condensed consolidated statement of financial position, the Interim condensed consolidated statement of cash flows, the Interim condensed consolidated statement of changes in equity and the related notes 1 to 23. We have read the other information contained in the half yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

 

This report is made solely to the Company in accordance with guidance contained in International Standard on Review Engagements 2410 (UK and Ireland) "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company, for our work, for this report, or for the conclusions we have formed.

 

Directors' Responsibilities

The half-yearly financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half-yearly financial report in accordance with the Disclosure Guidance and Transparency Rules of the United Kingdom's Financial Conduct Authority.

 

As disclosed in note 2, the annual financial statements of the Group are prepared in accordance with International Financial Reporting Standards as adopted by the European Union. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with International Accounting Standard 34, "Interim Financial Reporting", as adopted by the European Union.

 

Our Responsibility

Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.

 

Scope of Review

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

 

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2019 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the Disclosure Guidance and Transparency Rules of the United Kingdom's Financial Conduct Authority.

 

Ernst & Young LLP
London
13 August 2019

 

 

Interim condensed consolidated income statement

 

		Notes		Six-months ended 30 June 2019 (Unaudited)										Six-months ended 30 June 2018 (Unaudited)
				Before exceptional items     US$000		Exceptional items Note 9 US$000				Total US$000				Before exceptional items     US$000				Exceptional items  Note 9 US$000				Total US$000
Continuing operations
Revenue		4		354,450			-				354,450				372,328				-				372,328
Cost of sales		5		(252,831)			-				(252,831)				(267,259)				-				(267,259)
Gross profit				101,619			-				101,619				105,069				-				105,069
Administrative expenses				(23,021)			-				(23,021)				(21,691)				-				(21,691)
Exploration expenses		6		(18,552)			-				(18,552)				(13,048)				-				(13,048)
Selling expenses		7		(10,480)			-				(10,480)				(2,504)				-				(2,504)
Other income		8		4,471			-				4,471				4,949				-				4,949
Other expenses		8		(8,827)			(11,949)				(20,776)				(7,946)				-				(7,946)
Write-off of non-financial assets				(517)			-				(517)				(201)				-				(201)
Profit/(loss)  from continuing operations before net finance income/(cost), foreign exchange loss and income tax				44,693			(11,949)				32,744				64,628				-				64,628
Finance income		10		1,424			-				1,424				1,088				-				1,088
Finance costs		10		(3,504)			-				(3,504)				(6,482)				(16,346)				(22,828)
Foreign exchange loss				(1,146)			-				(1,146)				(4,334)				-				(4,334)
Profit/(loss) from continuing operations before income tax				41,467			(11,949)				29,518				54,900				(16,346)				38,554
Income tax (expense)/benefit		11		(16,382)			3,525				(12,857)				(32,658)				4,822				(27,836)
Profit/(loss) for the period from continuing operations				25,085			(8,424)				16,661				22,242				(11,524)				10,718
Attributable to:
Equity shareholders of the Company				22,319			(8,424)				13,895				24,438				(11,524)				12,914
Non-controlling interests				2,766			-				2,766				(2,196)				-				(2,196)
				25,085			(8,424)				16,661				22,242				(11,524)				10,718
Basic earnings per ordinary share from continuing operations and for the period (expressed in U.S. dollars per share)				0.04			(0.01)				0.03				0.05				(0.02		)		0.03
Diluted earnings per ordinary share from continuing operations and for the period (expressed in U.S. dollars per share)				0.04			(0.01)				0.03				0.05				(0.02)				0.03

 

 

 

Interim condensed consolidated statement of comprehensive income

 

 

				Six-months ended 30 June
				2019 (Unaudited) US$000		2018 (Unaudited) US$000
Profit for the period				16,661		10,718
Other comprehensive income that may be reclassified to profit or loss in subsequent periods; net of tax:
Exchange differences on translating foreign operations				(17)		39
Sub total				(17)		39
Other comprehensive income that will not be reclassified to profit or loss in subsequent periods; net of tax
Net gain/(loss) on equity instruments at fair value through other comprehensive income				1,484		(1,647)
Sub total				1,484		(1,647)
Other comprehensive profit/(loss) for the period, net of tax				1,467		(1,608)
Total comprehensive income for the period				18,128		9,110
Total comprehensive income attributable to:
Equity shareholders of the Company				15,362		11,306
Non-controlling interests				2,766		(2,196)
				18,128		9,110

 

 

 

 

 

 

Interim condensed consolidated statement of financial position

 

		Notes		As at 30 June 2019  (Unaudited) US$000		As at 31 December 2018  US$000
ASSETS
Non-current assets
Property, plant and equipment		12		834,444		849,172
Evaluation and exploration assets		13		159,095		155,241
Intangible assets				23,298		24,363
Financial assets at fair value through OCI				7,459		5,296
Trade and other receivables				4,584		5,451
Other financial assets		14		47		47
Deferred income tax assets		15		1,680		1,504
				1,030,607		1,041,074
Current assets
Inventories				49,776		58,035
Trade and other receivables				98,367		78,736
Income tax receivable				16,880		20,733
Cash and cash equivalents		16		95,443		79,704
				260,466		237,208
Total assets				1,291,073		1,278,282
EQUITY AND LIABILITIES
Capital and reserves attributable to shareholders of the Parent
Equity share capital		19		225,409		225,409
Share premium		19		438,041		438,041
Other reserves				(219,602)		(223,156)
Retained earnings				281,438		278,995
				725,286		719,289
Non-controlling interests				73,769		71,003
Total equity				799,055		790,292
Non-current liabilities
Trade and other payables				3,427		787
Borrowings		17		-		50,000
Provisions				96,688		94,640
Deferred income		18		32,536		31,966
Deferred income tax liabilities		15		73,154		71,231
				205,805		248,624
Current liabilities
Trade and other payables				118,586		125,475
Borrowings		17		157,820		107,067
Provisions				6,034		3,153
Deferred income		18		400		400
Income tax payable				3,373		3,271
				286,213		239,366
Total liabilities				492,018		487,990
Total equity and liabilities				1,291,073		1,278,282

 

 

 

Interim condensed consolidated statement of cash flows

 

				Six-months ended 30 June
		Notes		2019 (Unaudited) US$000		2018 (Unaudited) US$000
Cash flows from operating activities
Cash generated from operations		22		105,310		141,411
Interest received				785		1,343
Interest paid		17		(1,598)		(24,751)
Payment of mine closure costs				(1,386)		(1,422)
Income tax (paid)/received				(2,611)		595
Net cash generated from operating activities				100,500		117,176
Cash flows from investing activities
Purchase of property, plant and equipment				(67,231)		(57,120)
Purchase of evaluation and exploration assets				(3,854)		(6,003)
Purchase of intangibles				(2)		(1,897)
Purchase of financial assets at fair value to OCI		14		(500)		(120)
Proceeds from deferred income		18		750		1,000
Proceeds from sale of financial assets at fair value to OCI				424		32
Proceeds from sale of property, plant and equipment		12		132		58
Net cash used in investing activities				(70,281)		(64,050)
Cash flows from financing activities
Proceeds from borrowings		17		63,500		157,500
Repayment of borrowings		17		(63,500)		(303,775)
Purchase of treasury shares		19		(309)		(579)
Payment of lease liabilities		2(b)		(1,275)		-
Dividends paid to shareholders		20		(10,002)		(10,000)
Dividends paid to non-controlling interests		20		(2,210)		(7,785)
Cash flows used in financing activities				(13,796)		(164,639)
Net increase/(decrease) in cash and cash equivalents during the period				16,423		(111,513)
Impact of foreign exchange				(684)		(3,796)
Cash and cash equivalents at beginning of period				79,704		256,988
Cash and cash equivalents at end of period		16		95,443		141,679