12 March 2014
Hochschild Mining plc
Preliminary Results for the twelve months ended 31 December 2013
Financial highlights[1]
· Revenue of $622.2 million (2012: $818.0 million)
· Adjusted EBITDA of $195.5 million (2012: $384.8 million)
· EPS of $(0.15) (2012: $0.19)
· Cash balance of $291.0 million & short term borrowings reduced to $17.8 million[2]
· Full year dividend suspended
· Minority investments valued at $52.4 million[3]
· Cashflow optimisation programme already delivered $145 million of savings[4]:
o Production costs reduced by $48 million versus initial guidance
o Administration costs reduced by $19 million versus 2012
o Sustaining capital expenditure reduced by $33 million versus initial guidance
o Exploration costs reduced by $25 million versus initial guidance
Acquisition & Refinancing highlights
· Key acquisition of Pallancata and Inmaculada minorities completed
o Consolidates minority shareholding in assets already controlled and operated by Hochschild
o Inmaculada set to reduce average unit cost
· Corporate refinancing completed in January 2014
o 7.75% $350 million Senior Notes issued due 2021
Operational highlights
· Full year production of 20.5 million attrib. silver equivalent ounces achieved, exceeding 20.0 million target
· Main operation all-in sustaining costs lowered by 14% to $18.6 per ounce[5];
· Inmaculada project set to begin commissioning in Q4 2014
o Plant construction on track with all key equipment delivered
o Mine development, infrastructure, energy and engineering targets significantly developed
· Resource life-of-mine increased to 10.0 years
2014 Outlook
· 2014 production target set at 21.0 million attributable silver equivalent ounces
· 2.0 million silver ounces sold forward for 2014 at $22 per ounce; 33,000 gold ounces sold forward for 2014 at $1,338 per ounce
· 0-5% reduction in all-in sustaining costs expected for 2014
· Sustaining capital expenditure expected to be $130 million
· Exploration and geology budget set at approximately $30 million
$000, pre-exceptional unless stated |
Year ended 31 Dec 2013 |
Year ended 31 Dec 2012 |
% change |
Attributable silver production (koz) |
13,588 |
13,550 |
(-) |
Attributable gold production (koz) |
116 |
112 |
4 |
Net Revenue[6] |
622,158 |
817,952 |
(24) |
Adjusted EBITDA[7] |
195,463 |
384,791 |
(49) |
(Loss)/profit from continuing operations |
(42,103) |
128,581 |
(133) |
(Loss)/profit from continuing operations (post-exceptional) |
(128,677) |
126,866 |
(201) |
Earnings per share ($ pre-exceptional) |
(0.15) |
0.19 |
(179) |
Earnings per share ($ post-exceptional) |
(0.36) |
0.19 |
(289) |
Commenting on the results, Ignacio Bustamante, CEO, said:
"In 2013, Hochschild reacted quickly to a very negative market environment by initiating a wide-ranging cost savings programme to preserve the Company's operating profitability and, whilst maintaining production levels, capitalised on a weak market environment to consolidate our ownership in our most valuable assets. We were also able to reorganise the Company's financial position, leaving us in an advantageous position to deliver value enhancing growth. We can now look forward to a key year of construction at the Inmaculada project which, when commissioned at the end of 2014, will signal the start of four years of production growth."
____________________________________________________________________________
A presentation will be held for analysts & investors at 9.30am (UK time) on Wednesday 12 March 2014 at Holborn Bars, 138-142 Holborn, London, EC1N 2NQ.
For a live webcast of the presentation please visit our website:
www.hochschildmining.com
Conference call dial in details:
UK: +44(0)20 3427 1900 (Please quote confirmation code 7501261) _________________________________________________________________________
Enquiries:
Hochschild Mining plc
Charles Gordon +44 (0)20 7907 2934
Head of Investor Relations
RLM Finsbury
Charles Chichester +44 (0)20 7251 3801
Public Relations
_________________________________________________________________________
About Hochschild Mining plc:
Hochschild Mining plc is a leading precious metals company listed on the London Stock Exchange (HOCM.L / HOC LN) with a primary focus on the exploration, mining, processing and sale of silver and gold. Hochschild has almost fifty years' experience in the mining of precious metal epithermal vein deposits and currently operates four underground epithermal vein mines, three located in southern Peru and one in southern Argentina. Hochschild also has numerous long-term projects throughout the Americas.
CHAIRMAN'S STATEMENT
2013 Overview
2013 proved to be a challenging year due to the considerable drop in gold and silver prices but also presented significant opportunities that we were able to capitalise on through the acquisition of International Minerals ("IMZ"). We believe that the fundamental case for stronger precious metal prices remains in place due to the financial difficulties in the world´s biggest economies continuing to threaten the confidence in currencies, and our observation of a growing scarcity of new world class assets in the precious metals universe. However, the markets have been ruthless in imposing a short term lower price environment.
In the first half of the year, the industry was confronted with extreme falls in precious metals prices that far exceeded existing market forecasts. In response and within a very short space of time, our management team initiated a comprehensive cashflow optimisation programme and we have already seen some very positive results with improvements in margins ensuring a better second half of the year and better prospects for 2014. However, notwithstanding another year of very solid operational performance, given the prevailing market conditions and ahead of sizeable capital expenditure on our flagship Inmaculada project, the Board proposes to not reinstate the dividend until the Company´s cash position improves.
The price fall provided Hochschild with a value enhancing opportunity that will allow us, not only to improve our cost position in the short term, but also to grow the Company in a precious metals market in which we truly believe. In September, we announced the acquisition of IMZ, a company that owned the 40% minority stakes in our Pallancata mine and Inmaculada project. It is my firm belief that our management have chosen an opportune stage in the cycle to execute the acquisition of assets we know extremely well and already control.
In line with the IMZ transaction, Hochschild also undertook a broad corporate refinancing initiative in order to meet the cost of the acquisition, fully support the Company's anticipated remaining capital expenditure at Inmaculada and to provide capacity to satisfy the upcoming convertible bond maturity towards the end of this year. It is a great credit to our whole team that at a time of unprecedented industry volatility, we retained the focus to deliver a complex re-financing package that places the Company in an excellent position to capitalise on a period of opportunistic growth.
In addition, one of the key consequences of the dramatic price falls was the necessity to reduce discretionary expenditure and refocus the exploration programme for the year, reducing the budget and prioritising the most promising prospects. The Board remains convinced by the importance of the ongoing exploration strategy to the future growth potential of the Company but recognises the need to adjust the financial commitment depending on the stage in the cycle.
Outlook
The short term outlook for the precious metals markets remains uncertain. However, the Company continues to believe that the long term fundamentals for both silver and gold will eventually reassert themselves. I am confident that, despite a difficult 2013, we have the proven operational and geological expertise, an improving cost position, solid balance sheet and an experienced management team to navigate volatile markets and deliver profitable production into the future.
Operating Responsibly
Our commitment to our people, the communities and the environment remains at the core of our business model. During 2013, the Company produced its first standalone Sustainability Report demonstrating our commitment to informing our stakeholders of our progress in this area. Our ability to operate in a way that respects the environment is supported by our reporting systems which continue to be certified compliant with the international standard, ISO14001. We have also made further progress with our key Travelling Doctor and Teacher Leader initiatives and I am proud that our flagship Digital Chalhuanca project has been recognised externally for its innovation and as an example of successful public/private collaboration. Further details of all of these initiatives will be provided in the Annual Report.
In 2013, we made an unprecedented level of improvement in our safety record with a 37% reduction in the Group's accident frequency rate and a 43% reduction in the accident severity rate. However, as impressive as these figures are, we must continue with our efforts as there were two fatalities at our operations during 2013. We consider each accident to be avoidable and for this reason the management team are in the process of implementing a behaviour-based safety programme that will encourage our people to value safety above all else and continue improving the safety culture.
Board Changes
In acknowledgement of the Board's own contribution to the cashflow optimisation programme, we announced in July reductions in Directors' remuneration and the size of the Board. I would like to convey my gratitude to both Fred Vinton and Rupert Pennant-Rea for their longstanding support and commitment.
These changes to the composition of the Board necessitated a review of our non-executive succession plans and I wish to record my appreciation to Sir Malcolm Field for delaying his retirement from the Board and for his ongoing support as Enrico Bombieri succeeds to the role of Senior Independent Director
On a final note, I wish to thank the entire Hochschild team for their contributions and our shareholders for their continued support in what will be remembered as a tough year but one from which I believe we have emerged in a stronger position.
Eduardo Hochschild
Executive Chairman
11 March 2014
CHIEF EXECUTIVE OFFICER'S STATEMENT
2013 presented Hochschild Mining with an unprecedented level of gold and silver price declines prompting the management team to implement a series of measures throughout the Company. The actions taken were aimed at conserving capital and to position the Company to operate profitably at all stages of the precious metals cycle while delivering our key growth project in 2014. The strategy remains focused on creating value for shareholders by optimising current operations, focusing on exploration and pursuing opportunistic, early-stage acquisitions and is underpinned by our commitment to operate responsibly.
Strategic progress
We announced in September a strategic milestone for Hochschild by consolidating ownership in Pallancata, currently our biggest cash flow generator and in Inmaculada, our most exciting growth project. The transaction represented an important low risk opportunity to increase our exposure to our attractive Southern Peru Cluster, reduce our overall operating cost position and to potentially enhance our cash flow generating potential at no additional ongoing administrative cost. At the same time, we announced the launch of a re-financing process which we successfully completed in January 2014 with our inaugural senior note offering raising approximately $350 million at a highly competitive rate against a backdrop of extremely difficult markets for the mining industry. We remain in a solid financial position with capacity to fund the remaining Inmaculada project capital expenditure as well as the convertible bond maturity later in 2014 whilst retaining flexibility to continue to pursue our strategic priorities.
The construction of the Inmaculada project is clearly the strategic focus for 2014 with the Company commencing significant production increases with the aim of reaching a target of almost 35 million ounces by 2017. In September, we received, as expected, the mill construction permit from the Peruvian government, signalling the start of the crucial final phase of this key project's development. In this regard, we have made excellent progress in 2013 with significant steps made in procurement, infrastructure, engineering and, importantly, mine development and commissioning is set to begin at the end of the year. After a ramp-up period, the average annual production for the life of mine is set at approximately 12 million silver equivalent ounces per annum. Initial production is scheduled to be sourced from one single wide vein (Angela) with reduced dilution and overall operating costs and sustaining capital expenditure expected to be the lowest of all of Hochschild's operating assets.
As previously announced, the strategy with regard to the Crespo Advanced Project was revised in the light of the acquisition of IMZ, resulting in the decision to delay the project in order to better sequence capital allocation with this move postponing approximately $80 million of remaining project expenditure.
The key area of operational focus during the last nine months has been our organisational reaction to the precious metal price falls that occurred during H1. With a plan initially prepared during the budgeting process towards the end of 2012, we were able to rapidly implement our cashflow optimisation programme. This resulted in the identification of almost $200 million of cash savings within the business, encompassing operating costs, sustaining capital expenditure, administrative costs and a refocused exploration programme. The overall exploration budget was reduced from $77 million to approximately $50 million and the greenfield programme, in particular, was significantly reduced with the focus narrowed to the most promising prospects.
The brownfield exploration programme, which has been so successful over the last few years, also continued with the focus on improvements in our resource base. Attributable resources increased by 8% to almost 1.3 billion silver equivalent ounces with the overall resource life-of-mine now at a comfortable 10 years. In line with the reduction in discretionary expenditure, we have also scaled back exploration work at the Volcan gold project in Chile although we can look forward to a new geological model of the porphyry system early this year and remain excited by the long term potential of this project which already has almost 10 million ounces of gold resources.
Other key individual initiatives included significant cuts to administrative and exploration headcount, renegotiation with suppliers and contractors, the temporary suspension of work at the Azuca project and $33 million of reductions to sustaining capital expenditure in 2013. As a team, we are confident that, although the full annualised effects of the programme will only be evident through 2014, the strong improvements already achieved in the Company's underlying profitability allied with the concurrent fall in industry cost inflation, leave the Company in a much more robust position to withstand any further price volatility.
2013 overview
It is particularly pleasing that, despite all the volatility in the industry and the cashflow optimisation measures in place within the Company, Hochschild met the annual production target for the seventh year in a row producing 20.5 million silver equivalent ounces and therefore exceeding the 20.0 million ounce target. Both Pallancata in Peru and San Jose in Argentina enjoyed a very solid operational performance and at Arcata, the team have skilfully handled the complicated flow of reserve grade material from an increasing number of stopes and the low grade, low cost material from the Macarena waste dam which is now almost exhausted. Hochschild will continue to adhere to its policy of mining close to the average reserve grade at its core operations throughout the cycle. The two ageing operations, Ares in Peru and Moris in Mexico have now finally reached the end of their lives with Moris already closed and Ares scheduled to cease operations towards the middle of the year.
A number of the cost savings initiatives from our cashflow optimisation programme started to have a positive effect on the overall cost performance of the Company during the second half of the year. In addition, although 2013 began with continuing industry cost inflation, this began to subside as the year went on and allied to unanticipated devaluation in both the Peruvian Sol and the Argentinean Peso, Hochschild was able to achieve year-on-year reductions in 'all-in sustaining costs' ("AISC") at our main operations of around 14%. This is expected to continue into 2014 with further reductions forecast although the quantum is expected to be lower at between 0-5% on an AISC basis, notwithstanding any further major local currency devaluation.
Hochschild has achieved a resilient set of financial results, in particular in the second half, with the 30% fall in the average silver price received in 2013 leading to a decline in Revenue to $622.2m. Pre-exceptional EBITDA was at $195.5 million but with the second half much improved by the Company's cost savings initiatives and representing 54% of the total under a significantly lower average price received. Pre-exceptional EPS was $(15) cents per share but, again, the second half saw Hochschild reduce the loss to only 5 cents per share. The cash balance is currently $291.0 million with minority investments valued at just over $52 million which takes into account two sales from our non-core investment in Gold Resource Corporation.
Outlook
Hochschild's production target for 2014 is 21.0 million attributable silver equivalent ounces. This increase is explained by the inclusion of the remaining 40% of Pallancata following the completion of the IMZ acquisition, offsetting the effect of the closure of Moris and the significant fall in the contribution from Ares. Management will continue to be focused on implementing measures to further optimise costs, expenses and capex. 2014 also promises to be a year of peak project capital expenditure as we focus our efforts on beginning commissioning the now 100% owned Inmaculada project by the year end marking a new chapter of growth for the Company. However, in order to provide the Company with a degree of cashflow certainty in a crucial year of investment and with precious metal prices remaining volatile, Hochschild has forward sold four million ounces of silver equivalent production. This does not reflect our view of the long term direction of precious metal prices but increases our short term confidence as we invest in the future extraction of sustainable low cost ounces from Inmaculada.
We remain committed to an exploration-led long term growth strategy and the budget of almost $30 million for 2014 reflects a belief that our extensive pipeline of both brownfield, greenfield projects and current operations offer not only optionality but further scope for creating value at all stages of the investment cycle.
The entire Hochschild organisation has had to endure a very difficult 2013 with a significant number of job losses throughout the Company and therefore the management team is grateful for the resilience and commitment shown by all our teams in making an important contribution to an exciting future for Hochschild Mining. Although 2014 is expected to be a transitional year for us, I am confident that we are in a stronger position with a key acquisition completed, a clean financial structure, strong growth prospects and a focus on project delivery.
Ignacio Bustamante
Chief Executive Officer
11 March 2014
OPERATING REVIEW
2013 Highlights
· Full year production of 20.5 million attributable silver equivalent ounces achieved, exceeding guidance
· Main operation all-in sustaining costs reduced by 14% in 2013
· Excellent progress at Inmaculada Advanced Project with mill permit received from Peruvian government and on track to begin commissioning at the end of 2014
CURRENT OPERATIONS
Production
In 2013, Hochschild has once again successfully exceeded its full year production target, delivering attributable production of 20.5 million silver equivalent ounces, including 13.6 million ounces of silver and 116 thousand ounces of gold. Hochschild's production target for 2014 is 21.0 million attributable silver equivalent ounces. The increase is explained by the inclusion of the remaining 40% of Pallancata following the completion of the IMZ acquisition offsetting the effect of the closure of Moris and a significant reduction in the contribution from the ageing Ares operation which is also set to close in H1 2014.
Costs
Although significant industry inflation persisted in the first few months of the year, the Company's all-in sustaining costs at its main operations were reduced by 14% in 2013 to $18.6 per ounce driven by operational initiatives resulting from the cashflow optimisation programme, devaluation of local operating currencies and a subsequent fall in industry cost inflation. Unit cost per tonne at its main Peruvian operations was reduced to $74.2 (2012: $75.1). In Argentina, unit cost per tonne increased by 4% to $210.0 (2012: $202.2). Please see page 19 of the Financial Review for further details on costs.
Main operations
Arcata: Peru
The 100% owned Arcata underground operation is located in the Department of Arequipa in southern Peru. It commenced production in 1964.
Arcata summary |
Year ended 31 Dec 2013 |
Year ended 31 Dec 2012 |
% change |
Ore production (tonnes) |
900,861 |
773,498 |
16 |
Average silver grade (g/t) |
217 |
271 |
(20) |
Average gold grade (g/t) |
0.74 |
0.83 |
(11) |
Silver produced (koz) |
4,984 |
5,526 |
(10) |
Gold produced (koz) |
16.83 |
17.27 |
(3) |
Silver equivalent produced (koz) |
5,994 |
6,562 |
(9) |
Silver sold (koz) |
4,924 |
5,236 |
(6) |
Gold sold (koz) |
15.95 |
15.94 |
- |
Unit cost ($/t) |
81.3 |
86.3 |
(6) |
Total cash cost ($/oz Ag co-product)[8] |
12.7 |
14.5 |
(12) |
All-in sustaining cost ($/oz) |
20.9 |
23.9 |
(13) |
Production and sales
Full year silver equivalent production at Arcata in 2013 was 6.0 million ounces (2012: 6.6 million ounces), slightly lower than 2012 as a result of lower grades from stopes and developments in line with the Company's policy of mining close to average reserve grade. Tonnage was higher than that of 2012 due to the planned increase in volumes processed from the low grade Macarena waste dam deposit, facilitated by the 500 tonne per day capacity expansion at the Arcata plant (completed in H2 2012). Macarena tonnage continued in the second half and after the expected processing of a small volume in Q1 2014 is now considered to be exhausted and will be replaced by tonnage from stopes and developments in 2014. In addition, production at Arcata included the decrease in ounces recovered as a result of processing 100% of Arcata's concentrate into Doré.
Table Showing Contribution from Macarena Waste Dam Deposit
|
12 mths 2013 |
12 mths 2012 |
Total |
|
|
Tonnage |
900,861 |
773,498 |
Average head grade gold (g/t) |
0.74 |
0.83 |
Average head grade silver (g/t) |
217 |
271 |
Macarena |
|
|
Tonnage |
290,226 |
133,825 |
Average head grade gold (g/t) |
0.29 |
0.30 |
Average head grade silver (g/t) |
88 |
105 |
Stopes and Developments |
|
|
Tonnage |
610,635 |
639,673 |
Average head grade gold (g/t) |
0.95 |
0.94 |
Average head grade silver (g/t) |
278 |
306 |
In 2013, the silver/gold doré from Arcata was sold to Johnson Matthey, Standard Bank, HSBC Bank, Argor Heraeus INTL Commodities and Auramet Trading.
Costs
In 2013, the unit cost per tonne at Arcata was materially better than expectations, decreasing by 6% versus the same period last year to $81.3 per tonne, despite continuing industry inflation at the start of the year. This was mainly due to the overall effects of the cost savings initiatives initiated towards the end of the first half of the year as well as the processing of higher volumes of low cost Macarena material and a significant local currency weakening versus expectations.
Resource life and Brownfield exploration
The resource life of Arcata stands at 11.6 years as at 31 December 2013. In 2013, a total of 10,899 metres of drilling was carried out at Arcata. The exploration programme in the first half of the year focused on the definition of new high-grade structures from known vein systems (potential drilling), and a new geological interpretation of the Ares-Arcata corridor that identified high-grade structures. In addition, diamond drilling was conducted at the Pamela, Blanca 2, Baja 2, Tunel 3, Ramal Leslie, Tunel 4, Irma and Blanca veins. Significant intercepts included:
Vein |
Results |
Pamela |
DDH425-LM13: 1.41m at 7.83 g/t Au & 2,028 Ag DDH399-GE13: 1.76m at 6.19 g/t Au & 1,479 Ag DDH389-GE13: 1.00m at 2.84 g/t Au & 1,208 Ag |
Blanca 2 |
DDH373-EX13: 1.17m at 0.33 g/t Au & 1,295 Ag |
Baja |
DDH434-S13: 1.90m at 3.10 g/t Au & 612 Ag |
Baja 2 |
DDH427-S13: 1.60m at 2.8 g/t Au & 1,901 Ag |
Tunel 3 |
DDH401-GE13: 0.78m 1.82 g/t Au & 1,213 Ag |
Tunel 4 |
DDH506-LM13: 1.20m at 1.65 g/t Au & 1,054 Ag |
Irma |
DDH492-GE13: 1.18m at 0.75 g/t Au & 5,029 g/t Ag |
Blanca |
DDH526-LM13: 1.09m at 3.24 g/t Au &1,146 g/t Ag |
In 2014, the 25,000 metre exploration and drilling programme at Arcata will focus on the potential, near mine and inferred resource exploration, focusing on the definition of new high grade structures from known vein systems.
Pallancata: Peru
The 100% owned Pallancata silver/gold property is located in the Department of Ayacucho in southern Peru, approximately 160 kilometres from the Arcata operation. Pallancata commenced production in 2007 and up until December 2013 was a joint venture, in which Hochschild held a controlling interest of 60% with International Minerals Corporation ("IMZ"). Following the purchase of IMZ, Hochschild now owns 100% of the operation. Ore from Pallancata is transported 22 kilometres to the Selene plant for processing.
Pallancata summary* |
Year ended 31 Dec 2013 |
Year ended 31 Dec 2012 |
% change |
Ore production (tonnes) |
1,088,712 |
1,094,250 |
(1) |
Average silver grade (g/t) |
264 |
256 |
3 |
Average gold grade (g/t) |
1.13 |
1.09 |
4 |
Silver produced (koz) |
7,628 |
7,441 |
3 |
Gold produced (koz) |
27.83 |
26.23 |
6 |
Silver equivalent produced (koz) |
9,298 |
9,014 |
3 |
Silver sold (koz) |
7,567 |
7,280 |
4 |
Gold sold (koz) |
26.67 |
25.07 |
6 |
Unit cost ($/t) |
68.3 |
67.2 |
2 |
Total cash cost ($/oz Ag co-product) |
10.3 |
11.4 |
(10) |
All-in sustaining cost ($/oz) |
16.7 |
19.5 |
(14) |
Production and sales
Overall in 2013, Pallancata enjoyed a very solid year of production, delivering silver equivalent production of 9.3 million ounces (2012: 9.0 million) with higher average grades the result of a higher proportion of material from stopes.
In 2013, the silver/gold concentrate from Pallancata was sold to Teck Metals Ltd., LS-Nikko Copper Inc and Glencore.
Costs
Unit cost per tonne at Pallancata also enjoyed a better 2013 than expected increasing by only 2% in 2013, to $68.3 despite continuing industry inflation at the start of the year. As at Arcata, costs were positively impacted by the cashflow optimisation programme as well as the higher than expected depreciation of the local currency. Further positive pressure resulted from lower personnel and supply costs as a higher proportion of mineral was extracted using mechanised methods.
Resource life and Brownfield exploration
The resource life of the Pallancata operation has been increased substantially in 2013 to 8.2 years as at 31 December 2013. During 2013, a total of 20,972 metres of diamond drilling was carried out over the course of the year (2012: 50,326 metres). Both infill and potential drilling were carried out at Pallancata during the year, to further delineate inferred resources and to test new possible vein extensions.
The Yurika West vein mapping programme continued, and identified major structural lineaments trending NE-EW associated with silicified hydrothermal breccias. New gold-rich high-grade structures were identified in the northern part of the district with resource development drilling continuing at the Yurika and Charo veins. Step-out drilling was conducted in the Teresa vein with strong silicification results and towards the end of the year, mapping campaigns focused on the south side of Pallancata (at the Sonia, San Angela, Virgen del Carmen, Lilina and Debora veins) with total coverage for the whole year of 1,164 ha.
Significant intercepts included:
Vein |
Results |
Yurika |
DLYU-A08: 1.02m at 17.86 g/t Au & 1,702 g/t Ag DLYU-A16: 2.17m at 11.17 g/t Au & 949 g/t Ag DLYU-A20: 2.75m at 6.35 g/t Au & 931 g/t Ag DLYU-A12: 0.91m at 6.72 g/t Au & 539 g/t Ag |
Luisa |
DLLU-A134: 1.96m at 1.11 g/t Au & 727 g/t Ag DLLU-A136: 1.17m at 1.09 g/t Au & 420 g/t Ag |
Yanely |
DLYU-A02: 0.82m at 33.91 g/t Au & 326 g/t Ag |
Nine |
DLRI-A107: 1.35m at 4.19 g/t Au & 1,026 g/t Ag |
Rina NW (Charo) |
DLRI-A97: 0.88m at 2.92 g/t Au & 617 g/t Ag |
In 2014, the 25,000 metre exploration programme at Pallancata will focus on increasing life-of-mine through drilling in the Yurika, Charo, Mercedes and Sonia veins with potential drilling set to be targeting the Mercedes, Jacqueline, San Cayetano, Charo, Paola and Rina veins.
San Jose: Argentina
The San Jose silver/gold mine is located in Argentina, in the province of Santa Cruz, 1,750 kilometres south-southwest of Buenos Aires. San Jose commenced production in 2007 and is a joint venture with McEwen Mining Inc (formerly Minera Andes Inc.). Hochschild holds a controlling interest of 51% of the joint venture and is the mine operator.
San Jose summary* |
Year ended 31 Dec 2013 |
Year ended 31 Dec 2012 |
% change |
Ore production (tonnes) |
536,937 |
509,851 |
5 |
Average silver grade (g/t) |
425 |
417 |
2 |
Average gold grade (g/t) |
6.42 |
5.79 |
11 |
Silver produced (koz) |
6,357 |
5,953 |
7 |
Gold produced (koz) |
98.83 |
85.77 |
15 |
Silver equivalent produced (koz) |
12,286 |
11,099 |
11 |
Silver sold (koz) |
6,278 |
5,897 |
6 |
Gold sold (koz) |
94.76 |
84.29 |
12 |
Unit cost ($/t) |
210.0 |
202.2 |
4 |
Total cash cost ($/oz Ag co-product) |
13.4 |
14.4 |
(7) |
All-in sustaining cost ($/oz) |
19.0 |
22.1 |
(14) |
*The Company has a 51% interest in San Jose
Production and sales
2013 has been a strong year for the San Jose operation with silver equivalent production up 11% to 12.3 million ounces (2012: 11.1 million) driven by increased tonnages and increased grades, in particular gold. Higher tonnage was explained by the 10% plant capacity increase completed in December 2012 with higher grades resulting from incorporation of new high grade reserves into the mine plan.
In 2013, the dore produced at San Jose was sold to Argor Heraeus and Republic Metals whilst the concentrate produced at the operation was sold to Teck Metals ltd., Aurubis AG, LS-Nikko Copper Inc, Consorcio Minero and Glencore.
Costs
At San Jose, unit cost per tonne rose by only 4% versus 2012 to $210.0. The increase was slightly below the 2013 revised guidance of 5-10% due to the impact of the cashflow optimisation initiatives and a stronger than expected devaluation of the Argentine peso offsetting the effects of continuing high local inflation and a number of brief stoppages at the mine during the first half.
Resource life and Brownfield exploration
The resource life of San Jose stands at 11.8 years as at 31 December 2013. The key event in exploration at the mine was the incorporation of various surrounding properties, from both Hochschild and McEwen Mining, into the Minera Santa Cruz JV.
For much of 2013 the exploration programme at San Jose focused on the geological mapping of the district area and identifying new structures, with new high-grade structures identified in the northern part of the district. A total of 10,529 metres of diamond drilling was completed during 2013. In addition, new structures were identified in the Juanita vein system located in the south of the property. Drilling was conducted on the Huevos Verdes, Emilia and Juanita veins with detailed surface mapping and sampling being completed over the Colorado Grande, Juanita, Saavedra and Tres Colores areas. Significant intercepts included:
Vein |
Results |
Ramal Huevos Verdes |
SJD-1387: 0.87m at 70.03 g/t Au & 2060 g/t Ag SJD-1387: 0.73m at 2.08 g/t Au & 234 g/t Ag |
Emilia |
SJD-1393: 5.00m at 40.08 g/t Au & 882 g/t Ag SJD-1398: 1.50m at 4.28 g/t Au & 152 g/t Ag |
Antonella |
SJD-1450: 0.70m at 2.27 g/t Au & 210 g/t Ag |
Kospi SE |
SJD-1408: 1.00m at 7.42 g/t Au & 522 g/t Ag |
In 2014, the 2,000 metre potential drilling campaign will focus on the definition of the new Ayelen, Nuevo 1 and Karina veins as well as drilling in the Los Pinos area.
Other operations
Ares: Peru
The Ares mine, which commenced production in 1998, is a 100% owned operation located approximately 25 kilometres from Hochschild's Arcata mine in southern Peru.
Ares summary |
Year ended 31 Dec 2013 |
Year ended 31 Dec 2012 |
% change |
Ore production (tonnes) |
329,095 |
336,423 |
(2) |
Average silver grade (g/t) |
82 |
54 |
52 |
Average gold grade (g/t) |
2.39 |
2.65 |
(10) |
Silver produced (koz) |
757 |
481 |
57 |
Gold produced (koz) |
23.40 |
26.28 |
(11) |
Silver equivalent produced (koz) |
2,162 |
2,058 |
5 |
Silver sold (koz) |
761 |
473 |
61 |
Gold sold (koz) |
23.25 |
25.75 |
(10) |
Production and sales
The Company's ageing Ares mine in Peru continued to operate in 2013, delivering total silver equivalent production of 2.2 million silver equivalent ounces a 5% improvement on the 2012 figure of 2.1 million ounces. Ares is currently expected to cease production in H1 2014. The Company continues to monitor production closely at Ares to ensure the extraction of profitable ounces during the last few months of its mine life.
100% of Ares' production is processed into dore, all of which was sold to Johnson Matthey in 2013.
Brownfield exploration
The exploration programme at Ares in 2013 focused on the exploration of potential mineralisation in the extensions of known veins and the definition of new high-grade structures. In addition, exploration continued at the Isabel, Paola, Karina and Victoria veins. In the Paola, Falla Marion and Ares West veins, surface mapping and sampling was conducted over an area of 3,567 ha. A new geophysical survey was also completed.
In 2014, geological work will continue to generate targets within the Ares-Arcata corridor and a 2000 metre drilling campaign is planned.
Moris: Mexico
The 100% owned Moris mine, is an open pit mine and is located in the district of Chihuahua, Mexico.
Moris summary |
Year ended 31 Dec 2013 |
Year ended 31 Dec 2012 |
% change |
Ore production (tonnes) |
- |
- |
- |
Average silver grade (g/t) |
- |
- |
- |
Average gold grade (g/t) |
- |
- |
- |
Silver produced (koz) |
27 |
43 |
(37) |
Gold produced (koz) |
8.33 |
8.79 |
(5) |
Silver equivalent produced (koz) |
527 |
570 |
(8) |
Silver sold (koz) |
26 |
42 |
(38) |
Gold sold (koz) |
7.93 |
8.74 |
(9) |
Production and sales
Despite mine production at Moris having ceased in September 2011, in 2013 continued leaching of the pads produced a further 527 thousand silver equivalent ounces (2012: 570 thousand ounces). However, towards the end of the year the Moris operation was finally closed and subsequently transferred to a local third party.
In 2013, the gold/silver dore produced at Moris was sold to Johnson Matthey, INTL Commodities and Auramet Trading.
Brownfield exploration
Exploration work at Moris during 2013 continued to focus on identifying new economic structures and the completion of the potential geological model of the property to identify new drill targets. Two new structures were discovered to the north of the original mine location including the Los Alamos area, and preliminary data suggested significant mineralisation in the surrounding extensions of the veins. However, the final conclusion was that no further work was needed in the area.
PROJECT REVIEW
Hochschild started 2013 with one Advanced Project, Inmaculada and three Growth Projects, Crespo, Azuca and Volcan. Following the significant price declines towards the middle of the year, the Company renewed its commitment to the flagship Inmaculada project. The acquisition of the IMZ minorities, completed in December 2013, gave the Company 100% of this project which is expected to contribute, after a ramp-up period, almost 12 million silver equivalent ounces on average per annum with the start of commissioning due towards the end 2014.
The strategy with regards to Crespo has been revised and in early October 2013, the Company announced plans to delay the project in order to better sequence overall Company capital allocation, with the focus now firmly on the construction of the Inmaculada project and the acquisition of the IMZ minorities. This is expected to postpone approximately $80 million of remaining Crespo project expenditure. Despite the prioritisation of Inmaculada, Crespo remains an important component of the company's portfolio of development assets. It is management's intention that in the event that precious metals markets show sustained improvement, this would allow the Company to re-allocate capital to the Crespo project and potentially re-initiate development sooner than would be otherwise anticipated.
The Volcan gold project in Chile, acquired following the acquisition of Andina Minerals Inc in November 2012, also had its budgeted exploration capital expenditure reduced as part of the Company's cashflow optimisation programme. However, Hochschild remains excited by the potential for this long term project, which has almost 10 million ounces of gold resources and will continue with desktop geological work in the first part of 2014.
Although a portion of drilling was completed at Azuca during the first half, work has since ceased and the project is now on hold. The Company remains excited by the potential of this large mineralised district but capital allocation is now refocused on more advanced projects.
Inmaculada
Inmaculada is a 20,000 hectare gold-silver project located in the Company's existing operational cluster in southern Peru and is 100% owned and controlled by Hochschild, following the acquisition of the remaining 40% from IMZ stake in December 2013.
Following the announcement on 20 September 2013 that the Peruvian government had approved the mill construction permit for the Inmaculada project, work began in Q4 on the construction of the plant with major site clearance and earthworks ongoing throughout the quarter. Procurement of the main plant equipment is also almost complete with only lime slakers still to be delivered. These are expected in March.
The detailed civil and underground engineering continued throughout the year and is close to completion with mine development plans updated in line with a recently completed and approved mine schedule. In addition, the detailed engineering for the electricity transmission line was also completed during the first half, and procurement commenced and was completed in the third quarter. Tests were also successfully carried out on the main equipment and electrical substations.
Underground mine development progressed well during 2013 with almost 5.7km of tunneling and 1.8km of raised boring carried out during the year bringing the total to over 10.4km achieved since the project's commencement. In addition, the project's infrastructure requirements also made good progress with construction of the camp now complete, and the main access road expected to be finished in the first quarter of 2014.
The exploration drilling programme in and around the Inmaculada project continued in 2013. Surface exploration drilling was completed, with one drill rig in operation to test geophysical anomalies and alteration lineaments parallel to the Mirella vein, and to test the NE extension of the Martha vein. In addition, a new potential high-grade vein, Mayte, was intercepted. In the second half of the year surface mapping and sampling campaigns started over the Huarmapata 3 area identifying a high sulphidation system with advanced argillic alteration.
During the year, a total of 4,796 metres were drilled in Shakira, Mirella, Susana, Angela, Roxana and Mayte veins, with significant results including:
Vein |
Results |
Mayte |
MIR13-003: 1.51m at 2.37 g/t Au & 9 g/t Ag |
Mirella |
MIR13-001: 1.53m at 4.21 g/t Au & 72 g/t Ag |
Shakira |
SHK13-003: 1.10m at 4.10 g/t Au & 10 g/t Ag |
Martha |
MIR13-001: 0.20m at 31.02 g/t Au & 3,269 g/t Ag |
Roxana |
MIR13-003: 0.88m at 5.96 g/t Au & 330 g/t Ag |
In 2014, the exploration programme will involve a 5,000 metre programme consisting of potential drilling in the Mayte vein corridor as well as near mine exploration at selected targets , in order to expand the number of current resources.
Crespo
Crespo is 100% owned by Hochschild and is located in the Company's existing operating cluster in southern Peru. This has the potential to be a relatively simple open pit project with high gold recovery rates, and as with the Inmaculada project, will benefit from operational synergies due to its proximity to the Company's existing operations. The project has an estimated total capital expenditure of approximately $110 million for a 6,850 tonne per day operation with an average annual production of 2.7 million silver equivalent ounces.
Work continued on the Crespo project up until the decision to delay the development in the third quarter. In the first half of the year, the detailed integration engineering continued and was completed in Q3 2013. Basic and detailed engineering for the mine also progressed as did construction of the new access road to the mine site which was completed in December.
With regards to the permit application process, the surface land agreement for the project was approved by the local community on 11 January 2013 and the underground water study was approved in Q2 2013. In addition, in July, the Company received the Environmental Impact Study ('EIS') permit. Hochschild also submitted the project's construction permit application at the end of February and received positive feedback from the Peruvian government and currently remains under evaluation.
Although exploration work ceased altogether in the third quarter, in the first half of the year district surface exploration was carried out and a new high sulphidation target, Jackelin, was identified. Furthermore, surface geochemistry sampling programmes were completed, with gold and silver anomalies reported.
Volcan
Exploration was not scheduled at the long term Volcan project for 2013. However, work continued throughout the second half in line with the refocused exploration budget and comprised systematic relogging of 56,331 metres of the Andina Minerals drill core in order to construct a more robust geological model of the porphyry system which is expected to be completed in the first half of this year.
Azuca
In H1 2013, a total of 13,108 metres of diamond drilling were completed at Azuca although these campaigns at Azuca were subsequently halted in late April following the decision to place the project on hold.
EXPLORATION REVIEW
In 2013, investment in exploration totalled $51.9 million and 91,429 metres of drilling was completed at the Company's brownfield, Advanced and Growth Projects and greenfield projects. As part of Hochschild's cashflow optimisation programme, initiated as a response to the volatility in precious metal prices towards the middle of the year, the Company conducted a detailed review of discretionary elements of its exploration budget with the result that the Company reduced its 2013 exploration budget from the original $77 million forecast. Exploration at the Company's main operations focused on the development of potential resources as opposed to increasing resource life-of-mine, reflecting the Company's confidence in their long term sustainability. In addition, the Company's greenfield exploration programme was significantly curtailed to concentrate only on the Company's most promising prospects.
The 2014 budget, representing 63,500 metres, will be split between exploration work at the Company's existing operations, Advanced Projects and greenfield opportunities in Peru and Mexico. The main focus will continue to be brownfield exploration.
In 2014, exploration work at the core operations will be mainly focused on identifying new potential and near mine high grade areas to further improve the resource quality whilst at the Inmaculada Advanced Project, efforts will be focused on identifying new potential high grade areas.
Exploration at Company Maker projects will include continued drilling and further analysis and at the Company's Medium Scale projects work will continue to develop those high-quality, early stage projects that have the potential to move through the pipeline to production. Hochschild also aims to continue its generative programme to conduct further exploration on the Company's extensive land package of premium geological properties.
Mines and Advanced Projects exploration
Approximately 33% of the exploration budget was invested in mines and Advanced and Growth Project exploration in 2013.
Greenfield exploration
In 2013, approximately 41% of the 2013 exploration budget was invested in the Company's greenfield programme, with the proportion set to be 17% in 2014. In 2013, a total of 27,958 metres was drilled at the Company's greenfield projects.
Company Makers
Valeriano
At the Valeriano Company Maker project, a total of 6,669 metres were drilled during 2013 to further test at depth, the porphyry copper and gold mineralisation encountered in the 2012 drilling campaign. The exploration confirmed the discovery of a potentially significant porphyry Cu - Au deposit at depth. However, there are no plans for further drilling in 2014 until market conditions improve.
Pachuca
The Pachuca project is located in Mexico and was added to the Company's project pipeline as a Company Maker project in Q2 2013. The Pachuca property encompasses approximately 19,000 hectares of mineral rights in and around the Pachuca silver-gold mining district. Historic production from the Pachuca district totals approximately 1.4 billion ounces of silver and over 7.0 million ounces of gold, making it one of the largest silver-gold districts in the world.
The JV with Solitario Exploration & Royalty Corp (TSX: SLR) has been focusing on the northwestern extension of the historical vein mining district. Following extensive geological mapping and geochemical sampling along the vein systems, almost half of the 5,000 metre programme has already been drilled during November and December. The assay results from the Escondida vein have shown some significant intersections and a new reinterpretation of the data has led to further drilling focus on the Sorpresa vein, a splay off the Escondida vein, with a potential extension of 2km. In light of this progress, a further 3,000 metres of drilling is scheduled for 2014.
La Falda
At the La Falda Company Maker project in Chile, four holes were completed in the drilling campaign, totaling 2,605 metres. Surface exploration was held to identify new drill targets but no further work has been scheduled for 2014, or until market conditions improve.
Potrero
At the Potrero Company Maker project in Chile, drilling commenced in January 2013 and centred around known mineralised structures as well as to the North East along the projected strike of the mineralisation. During the first quarter, a total of 2,763 metres of diamond drilling were completed and significant gold anomalies were reported. No further drilling campaign has been scheduled for 2014.
Mercurio
In 2013, a total of 2,898 metres of drilling were carried out at the Mercurio Company Maker project in Mexico focused on the Barite zone. As a result of the cashflow optimisation programme, the project area was significantly refocused to the more prospective north-western Barite area. Soil sampling has delineated a zone of Au mineralisation, which will be followed up by a geochemistry grid over the relevant area. No further drilling has been scheduled for 2014.
Baborigame
At the Baborigame Company Maker project in Mexico, exploration drilling commenced in March 2013. Drilling was carried out on the Cebolla target to test for mineralisation following the indication of gold mineralisation from surface geochemistry. A total of 4,018 metres of diamond drilling were completed in the quarter. No further work has been scheduled for 2014, or until market conditions improve.
Julieta
At the Julieta project, Hochschild completed a 2,000 metres diamond drill programme during Q4 2013. The programme was aimed at testing the hydrothermal breccias found during the surface reconnaissance of the area. Seven drill holes were completed in December 2013 employing two rigs. Favorable alteration was encountered throughout the volcanic sequence in six of the holes, some of which show lengthy anomalous gold intercepts. The seventh hole cut a wide mineralised hydrothermal breccia with locally significant gold mineralization although the extent of this breccia body has not been determined. Significant results from the drill programme are summarised below:
Results |
DDHJU-1303: from 145 to 338 // 189m at 0.16 g/t Au |
DDHJU-1307: from 182 to 252 // 70m at 0.33 g/t Au |
DDHJU-1307: from 195 to 207 // 12m at 1.07 g/t Au |
Riverside Joint Venture
Hochschild has supplied Riverside with additional funding to carry out further target generation on the Clemente project in the northern part of the state of Sonora, Mexico. The funding will be used for further mapping, geochemistry and trenching work in order to better delineate drill targets within the highly prospective mega shear. This JV agreement continues into 2014.
Medium Scale projects
Farallón
At the Farallon Medium Scale project in Peru, the first stage of exploration drilling was completed in Q1 2013 with three drill holes and a total of 1,257 metres of drilling completed. Results have indentified multiple intercepts of quartz veins and veinlets with sphalerite, galena and chalcopyrite up to one metre in width, associated with tensional structures. No further work has been scheduled for 2014, or until market conditions improve.
Cuello Cuello
At the Cuello Cuello Medium Scale project in Peru, during H1 2013, a total of 310 metres were drilled. This was the second drilling programme carried out at the property and near surface mineralised structures were again intersected, and two structural trends were identified. Metallurgical tests on ore show that some areas of the deposit are amenable to cyanide leaching with good recoveries. The Company is currently evaluating the economics of the project before defining the next phase of the exploration programme although no further work has been scheduled for 2014.
Fresia
At the Fresia Medium Scale project, a town hall meeting was held in the project area, whereby the Company´s plans for the upcoming drill programme in the area were presented to the local communities and authorities. The successful completion of this process allows the Company to proceed with filing an application for an exploration drill permit for the project. A 1,500 metre programme is scheduled to begin in Q2 2014.
San Martin
At the San Martin Medium Scale project in Peru, a total of 3,003 metres of exploration drilling were carried out to explore the continuity of quartz veins outside of the Rhyodacite dome. Drilling holes intercepted structures with good mineralisation including sphalerite, galena, ruby silver and high grade gold and silver mineralisation. No further work has been scheduled for 2014, or until market conditions improve.
Ibel
At the Ibel Medium Scale project in Peru, surface mapping and sampling has identified at least five distinct exploration targets, including a large gold-bearing hydrothermal breccia with consistent anomalous gold values over an area measuring 1.5km x 300 metres. No further work has been scheduled for 2014, or until market conditions improve.
FINANCIAL REVIEW
Key performance indicators
(before exceptional items, unless otherwise indicated)
$000 unless otherwise indicated |
Year ended 31 Dec 2013 |
Year ended 31 Dec 2012 |
% change |
Net Revenue[9] |
622,158 |
817,952 |
(24) |
Attributable silver production (koz) |
13,588 |
13,550 |
(-) |
Attributable gold production (koz) |
116 |
112 |
(4) |
Cash costs ($/oz Ag co-product)[10] |
12.31 |
13.41 |
(8) |
Cash costs ($/oz Au co-product) 24 |
748 |
735 |
2 |
Total all-in sustaining costs ($/oz) |
19.9 |
23.8 |
(16) |
Main operation all-in sustaining costs ($/oz) |
18.6 |
21.7 |
(14) |
Adjusted EBITDA[11] |
195,463 |
384,791 |
(49) |
(Loss)/profit from continuing operations |
(42,103) |
128,581 |
(133) |
(Loss)/profit from continuing operations (post exceptional) |
(128,677) |
126,866 |
(201) |
Earnings per share (pre exceptional) |
(0.15) |
0.19 |
(179) |
Earnings per share (post exceptional) |
(0.36) |
0.19 |
(289) |
Cash flow from operating activities[12] |
64,674 |
254,879 |
(75) |
Resource life of mine (years) |
10.0 |
9.8 |
2 |
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
Gross revenue from continuing operations decreased 24% to $658.2 million in 2013 (2012: $869.1 million) driven by the significant fall in precious metal prices.
Silver
Gross revenue from silver decreased 28% in 2013 to $432.5 million (2012: $599.4 million) as a result of lower prices offsetting the increase in the total amount of silver ounces sold which rose by 3% to 19,555 koz (2012:18,928 koz).
Gold
Gross revenue from gold decreased 16% in 2013 to $225.6 million (2011: $269.2 million) also as a result of lower prices although offset to some extent by a 5% increase in gold sales - the total amount of gold ounces sold in 2013 at 168.6 koz (2012: 160.0 koz).
Gross average realised sales prices
The following table provides figures for average realised prices and ounces sold for 2013 and 2012:
Average realised prices |
Year ended
31 Dec 2013 |
Year ended
31 Dec 2012 |
|
Silver ounces sold (koz) |
19,555 |
18,928 |
|
Avg. realised silver price ($/oz) |
22.12 |
31.6 |
|
Gold ounces sold (koz) |
168.56 |
159.8 |
|
Avg. realised gold price ($/oz) |
1,338 |
1,684 |
|
Commercial discounts
Commercial discounts refer to refinery treatment charges, refining fees and payable deductions for processing concentrates, and are discounted 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 2013, the Group recorded commercial discounts of $36.1 million (2012: $51.2 million). This decrease is explained by lower prices and a lower volume of concentrate sold in 2013, mainly as a result of the Arcata dore project. The ratio of commercial discounts to gross revenue in 2013 remained at 6% (2012: 6%).
Net revenue
Net revenue decreased by 24% to $622.2 million (2012: $818.0 million), comprising silver revenue of $405.5 million and gold revenue of $216.6 million. In 2013 silver accounted for 65% and gold 35% of the Company's consolidated net revenue compared to 68% and 32% respectively in 2012.
Revenue by mine
$000 unless otherwise indicated |
Year ended 31 Dec 2013 |
Year ended 31 Dec 2012 |
% change |
Silver revenue |
|
|
|
Arcata |
115,522 |
165,464 |
(30) |
Ares |
17,712 |
14,653 |
21 |
Pallancata |
163,394 |
232,503 |
(30) |
San Jose |
135,291 |
184,635 |
(27) |
Moris |
650 |
1,315 |
(51) |
Commercial discounts |
(27,050) |
(40,784) |
(34) |
Net silver revenue |
405,519 |
557,786 |
(27) |
Gold revenue |
|
|
|
Arcata |
22,271 |
26,850 |
(17) |
Ares |
32,650 |
42,927 |
(24) |
Pallancata |
35,189 |
42,620 |
(17) |
San Jose |
123,905 |
142,151 |
(13) |
Moris |
11,597 |
14,616 |
(21) |
Commercial discounts |
(9,036) |
(9,528) |
(5) |
Net gold revenue |
216,576 |
259,636 |
(17) |
Other revenue[13] |
63 |
530 |
(88) |
Net revenue |
622,158 |
817,952 |
(24) |
Costs
Total pre-exceptional cost of sales increased 11% to $466.8 million in 2013 (2012: $420.3 million). The direct production cost increased by 3% in 2013, to $311.7 million (2012: $301.5 million) mainly as a result of an increase in tonnage treated mainly in Arcata and San José as a result of plant expansions. Depreciation in 2013 was $144.1 million (2012: $121.2 million), with the increase mainly due to full depreciation of the Ares operation, depreciation of new tailings dams at Arcata as well as a higher future capex depreciation resulting from the increasing cost to convert resources into reserves in all operating units. Other items, which principally includes workers' profit sharing, was $7.0 million in 2013 (2012: $15.4 million) and change in inventories which was $3.9 million in 2013 (2012: $(17.7) million).
$000 |
Year ended
31 Dec 2013 |
Year ended
31 Dec 2012 |
% Change |
Direct production cost excluding depreciation |
311,699 |
301,476 |
3 |
Depreciation in production cost |
144,137 |
121,156 |
19 |
Other items |
7,004 |
15,401 |
(55) |
Change in inventories |
3,926 |
(17,708) |
(122) |
Pre-exceptional Cost of Sales |
466,766 |
420,325 |
11 |
Unit cost per tonne
The Company reported unit cost per tonne at its main operations of $103.2 in 2013, flat compared to 2012 (2012: $103.2). For further explanation on the increase in unit cost per tonne please refer to page 7 of the Operating Review.
Unit cost per tonne by operation (including royalties)[14]:
Operating unit ($/tonne) |
Year ended 31 Dec 2013 |
Year ended 31 Dec 2012 |
% change |
Main operations |
103.2 |
103.2 |
- |
Peru |
74.2 |
75.1 |
(1) |
Arcata |
81.3 |
86.3 |
(6) |
Pallancata[15] |
68.3 |
67.2 |
2 |
Argentina |
210.0 |
202.2 |
4 |
San Jose |
210.0 |
202.2 |
4 |
Others |
128.3 |
138.4 |
(7) |
Ares |
128.3 |
138.4 |
(7) |
Total |
106.1 |
107.8 |
(2) |
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[16]:
$000 unless otherwise indicated |
Year ended 31 Dec 2013 |
Year ended 31 Dec 2012 |
% change |
Group Cash Cost |
387,686 |
392,825 |
(1) |
(+) Cost of sales |
466,766 |
420,325 |
11 |
(-) Depreciation in Cost of Sales |
(144,923) |
(117,627) |
23 |
(+) Selling expenses |
28,785 |
39,460 |
(27) |
(+) Commercial deductions |
37,058 |
51,197 |
(28) |
Gold |
9,065 |
9,552 |
(5) |
Silver |
27,993 |
41,645 |
(33) |
Revenue |
622,158 |
817,952 |
(24) |
Gold |
216,576 |
259,636 |
(17) |
Silver |
405,519 |
557,786 |
(27) |
Others |
63 |
530 |
(88) |
Ounces Sold |
19,724 |
19,088 |
3 |
Gold |
168.6 |
159.8 |
6 |
Silver |
19,555 |
18,928 |
3 |
Group Cash Cost ($/oz) |
|
|
|
Co product Au |
801 |
781 |
3 |
Co product Ag |
12.9 |
14.2 |
(9) |
By product Au |
(272) |
(1,293) |
(79) |
By product Ag |
8.3 |
6.5 |
28 |
Cash costs are calculated based on pre-exceptional figures. 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[17]
Year ended 31 Dec 2013
$000 unless otherwise indicated |
Arcata |
Pallancata |
San José |
Main Operations |
Other Operations |
Corporate & Others |
Total |
(+) Production Cost excluding depreciation |
72,706 |
75,321 |
112,764 |
260,791 |
50,908 |
- |
311,699 |
(+) Other items in Cost of Sales |
-638 |
571 |
7,074 |
7,007 |
-3 |
- |
7,004 |
(+) Operating & Exploration capex for units |
43,255 |
44,356 |
56,502 |
144,113 |
4,715 |
2,510 |
151,338 |
(+) Brownfield exploration expenses |
2,052 |
2,149 |
1,795 |
5,996 |
581 |
3,201 |
9,778 |
(+) Administrative expenses (w/o depreciation) |
6,469 |
11,472 |
8,589 |
26,530 |
2,983 |
22,274 |
51,787 |
(+) Royalties |
- |
1,822 |
- |
1,822 |
522 |
- |
2,344 |
Sub-Total |
123,844 |
135,691 |
186,724 |
446,259 |
59,706 |
27,985 |
533,950 |
Ounces Produced (Ag Eq oz) |
5,994 |
9,298 |
12,286 |
27,578 |
2,689 |
- |
30,267 |
Sub-total ($/oz) |
20.7 |
14.6 |
15.2 |
16.2 |
22.2 |
|
17.6 |
(+) Commercial deductions |
920 |
16,788 |
19,335 |
37,043 |
15 |
- |
37,058 |
(+) Selling expenses |
325 |
2,369 |
25,899 |
28,593 |
192 |
- |
28,785 |
Sub-total |
1,245 |
19,157 |
45,234 |
65,636 |
207 |
- |
65,843 |
Ounces Sold (Ag Eq oz) |
5,881 |
9,167 |
11,963 |
27,011 |
2,658 |
- |
29,669 |
Sub-total ($/oz) |
0.2 |
2.1 |
3.8 |
2.4 |
0.1 |
|
2.2 |
Total cash cost ($/oz Ag Eq) |
12.2 |
10.3 |
13.5 |
12.1 |
19.0 |
- |
12.7 |
All-in sustaining costs ($/oz Ag Eq) |
20.9 |
16.7 |
19.0 |
18.6 |
22.3 |
- |
19.9 |
Year ended 31 Dec 2012
$000 unless otherwise indicated |
Arcata |
Pallancata |
San José |
Main Operations |
Other Operations |
Corporate & Others |
Total |
(+) Production Cost excluding depreciation |
65,522 |
72,101 |
106,621 |
244,244 |
55,002 |
2,230 |
301,476 |
(+) Other items in Cost of Sales |
6,691 |
4,686 |
- |
11,377 |
4,024 |
- |
15,401 |
(+) Operating & Exploration capex for units |
52,791 |
56,871 |
71,188 |
180,850 |
8,322 |
604 |
189,776 |
(+) Brownfield exploration expenses |
4,467 |
4,062 |
5,788 |
14,317 |
1,820 |
6,976 |
23,113 |
(+) Administrative expenses (w/o depreciation) |
7,109 |
13,723 |
9,957 |
30,790 |
3,800 |
36,120 |
70,710 |
(+) Royalties |
- |
3,267 |
- |
3,267 |
567 |
- |
3,834 |
Sub-Total |
136,580 |
154,710 |
193,554 |
484,845 |
73,535 |
45,930 |
604,310 |
Ounces Produced (Ag Eq oz) |
6,562 |
9,014 |
11,099 |
26,676 |
2,628 |
- |
29,304 |
Sub-total ($/oz) |
20.8 |
17.2 |
17.4 |
18.2 |
28.0 |
|
20.6 |
(+) Commercial deductions |
16,512 |
17,398 |
17,287 |
51,197 |
- |
- |
51,197 |
(+) Selling expenses |
2,381 |
3,523 |
33,457 |
39,361 |
99 |
- |
39,460 |
Sub-total |
18,893 |
20,921 |
50,744 |
90,558 |
99 |
- |
90,657 |
Ounces Sold (Ag Eq oz) |
6,192 |
8,784 |
10,955 |
25,931 |
2,585 |
- |
28,516 |
Sub-total ($/oz) |
3.1 |
2.4 |
4.6 |
3.5 |
- |
- |
3.2 |
Total cash cost ($/oz Ag Eq) |
14.1 |
10.9 |
14.2 |
13.1 |
22.5 |
|
14.0 |
All-in sustaining costs ($/oz Ag Eq) |
23.9 |
19.5 |
22.1 |
21.7 |
28.0 |
|
23.8 |
Administrative expenses
Administrative expenses before exceptional items decreased by 25% to $54.4 million (2012: $73.0 million) primarily due to the impact of the cashflow optimisation programme. Post-exceptional administrative expenses in 2013 totaled $56.8 million and include an expense of $2.4 million due to termination benefits paid to employees following the restructuring as part of the above mentioned cashflow optimisation programme.
Exploration expenses
In 2013, pre-exceptional exploration expenses, decreased by 34% to $42.9 million (2012: $64.6 million). Post-exceptional exploration expenses in 2013 totaled $46.3 million and include an expense of $3.5 million due to termination benefits paid to employees following the restructuring as part of the Company's cashflow optimisation programme.
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 category. In 2013, the Company capitalised $1.7 million relating to brownfield exploration compared to $15.9 million in 2012, bringing the total investment in exploration for 2013 to $44.6 million (2012: $80.5 million). In addition, $7.4 million was invested in the Company's Advanced and Growth Projects.
Selling expenses
Selling expenses were lower than 2012at $28.8 million (2012: $39.5 million) as a result of lower prices. Selling expenses mainly consist of export duties at San Jose (export duties in Argentina are levied at 10% of revenue for concentrate and 5% of revenue for dore).
Other income/expenses
Other income before exceptional items was $4.0 million (2012: $8.7 million), mainly reflecting a $1.7 million export tax credit in Argentina. Other expenses before exceptional items reached $15.6 million (2012: $9.5 million) mainly due to an increase in mine closure provisions of $5.5m and the new reserves tax in Argentina of $2.5 million.
Profit from continuing operations before exceptional items, net finance costs, foreign exchange loss and income tax
Profit from continuing operations before exceptional items, net finance costs and income tax decreased to $17.7 million (2012: $219.8 million) as a result of the factors detailed above.
Adjusted EBITDA
Adjusted EBITDA decreased by 49% over the period to $195.5 million (2012: $384.8 million) driven primarily by significantly lower silver prices.
Adjusted EBITDA is calculated as profit from continuing operations before exceptional items, net finance costs and income tax plus depreciation and exploration expenses other than personnel and other exploration related fixed expenses.
$000 unless otherwise indicated |
Year ended 31 Dec 2013 |
Year ended 31 Dec 2012 |
% change |
Profit from continuing operations before exceptional items, net finance cost, foreign exchange loss and income tax |
17,730 |
219,768 |
(92) |
Operating margin |
3% |
27% |
|
Depreciation and amortisation in cost of sales |
144,923 |
117,627 |
23 |
Depreciation and amortisation in administrative expenses |
2,638 |
2,285 |
15 |
Exploration expenses |
42,871 |
64,612 |
(34) |
Personnel and other exploration related fixed expenses |
(12,699) |
(19,501) |
(35) |
Adjusted EBITDA |
195,463 |
384,791 |
(49) |
Adjusted EBITDA margin |
31% |
47% |
|
Impact of investment in associate
The Company's pre-exceptional share of the profit/(loss) after tax of associates totaled $5.9 million in 2013
(2012: $6.5 million). In both 2013 and 2012, the Company's share of post tax profits/(losses) in associates reflects profits related to its holdings in Gold Resource Corporation ('GRC').
Since March 2013, the Company no longer recognised this profit due to the loss of significant influence with regards to its investment in GRC, and its resulting reclassification from an associate to an available-for-sale asset.
Finance income
Finance income before exceptional items of $10.7 million was higher than that of 2012 (2012: $2.0 million) mainly due to interest received on deposits and liquidity funds ($6.8 million) and dividends received from Gold Resource Corporation (considered as available-for-sale financial asset since 27 March 2013 ($3.6 million).
Finance costs
Finance costs before exceptional items decreased by 9% to $11.7 million in 2013 (2012: $12.9 million).
At 31 Dec 2013, the Group had no outstanding positions on currency or commodity hedges.
Foreign exchange losses
The Group recognised a foreign exchange loss of $19.8 million (2012: $1.2 million loss). This loss is principally the result of the impact of a devaluation of the Peruvian Sol versus the US Dollar on cash deposits held in Peru. This impact will be more than offset by the positive effects of the local currency weakening on the Company's unit costs and capital expenditure programme.
Income tax
The Company's pre-exceptional income tax was $45.0 million (2012: $85.5 million). The reduction is mainly explained by lower metal prices reflected in a reduced pre-exceptional profit before income tax ($2.9 million in 2013 vs. $214.1 million in 2012). This effect was partially offset by the devaluation of the Peru and Argentina local currencies which generated a negative impact of $(30.4) million in income tax.
Exceptional items
Exceptional items in 2013 totalled $(86.6) million after tax (2012: $(1.7) million). The tables below detail the exceptional items excluding the exceptional tax effect that amounted to $35.9 million.
Exceptional items in 2013 totalled ($122.5) million before tax (2012: $1.9 million). This mainly comprises the following items:
Positive exceptional items:
Main items |
$000 |
Description of main items |
Other income |
2,442 |
Gain on sale of exploration concessions in Peru |
Gain on transfer from investment accounted for under the equity method to available-for-sale financial assets |
107,942 |
Gain on the reclassification of GRC shares from an investment accounted for under equity method to an available-for-sale financial asset of $107.9 million, as a result of ceasing to have the ability to exercise significant influence over GRC. |
|
2,417 |
Adjustment of fair value of International Mineral Corporation (IMZ) shares as a result of the IMZ acquisition |
Negative exceptional items:
Main items |
$000 |
Description of main items |
Termination benefits |
(8,273) |
Termination benefits paid to employees between April and September 2013, following the restructuring plan approved by management during the first half of 2013 (Cost of Sales: $2.5 million, administrative expense: $2.4 million and exploration expenses: $3.5 million) |
Other expenses |
(90,671) |
Impairment of the San Jose mine unit of $40.9 million, the Azuca project of $30.3 million, the Crespo project $29.1 millio, the Ares unit $3.8m and $1.0 million of write-off of PP&E; and reversal of impairment of the San Felipe property of $14.4 million. |
Finance cost |
(136,353) |
The impairment of investments in GRC of $105.3 million, IMZ of $12.9 million and other Available-for-Sale assets of $11.4 million. Also includes $4.7 million of transaction costs related to the Bridge Loan Facility and the undrawn Suyamarca Medium Term loan. Also includes $7.8 million of loss on disposal of GRC shares. |
Cash flow & balance sheet review
Cash flow:
$000 unless otherwise indicated |
Year ended 31 Dec 2013 |
Year ended 31 Dec 2012 |
Change |
Net cash generated from operating activities |
64,674 |
254,879 |
(190,205) |
Net cash used in investing activities |
(218,113) |
(427,869) |
209,756 |
Cash flows generated/(used) in financing activities |
99,830 |
(94,842) |
194,672 |
Net (decrease)/increase in cash and cash equivalents during the period |
(53,609) |
(267,832) |
214,223 |
Operating cash flow decreased from $254.9 million in 2012 to $64.7 million in 2013, mainly due to significantly lower silver prices. Net cash used in investing activities decreased to $(218.1) million in 2013 from $(427.9) million in 2012 mainly due to (i) lower capital expenditures in line with the implementation of the cashflow optimisation programme during 2013 ($(246.6) million vs. $(297.5) million in 2012), (ii) Andina Minerals Inc acquisition ($90.1 million) in 2012, (iii) proceeds from deferred income related to the sale of San Felipe ($16.0 million) in 2013 and (iv) proceeds from the sale of Gold Resource Corporation shares ($33.5 million) in 2013. Finally, cash used in financing activities increased to $99.8 million from $(94.8) million in 2012, primarily as a result of the bridge loan facility disbursed in 2013 ($270.0 million), proceeds from equity placing ($71.9 million) and lower dividends paid in 2013 ($18.5 million vs. $62.5 million paid in 2012). This effects were partially offset by the acquisition of IMZ minority interest in 2013 ($271 million) As a result, total cash generated increased from $(267.8) million in 2012 to $(53.6) million in 2013 ($214.2 million difference).
Working capital
$000 unless otherwise indicated |
Year ended 31 Dec 2013 |
Year ended 31 Dec 2012 |
Trade and other receivables |
179,868 |
174,786 |
Inventories |
69,556 |
76,413 |
Net other financial assets / (liabilities) |
(2,294) |
(6,741) |
Net Income tax receivable / (payable) |
20,842 |
(4,459) |
Trade and other payables and provisions |
(208,618) |
(252,823) |
Working Capital |
59,354 |
(12,824) |
The Company's working capital position increased to $59.4 million in 2013 from $(12.8) million in 2012. This was primarily explained by higher income tax receivables ($25.3 million) due to lower tax provision in line with lower prices; and by lower provisions ($(44.2) million) resulted from lower personnel bonus provisions and workers profit sharing provisions in 2013.
Net cash
$000 unless otherwise indicated |
Year ended
31 Dec 2013 |
Year ended
31 Dec 2012 |
Cash and cash equivalents |
286,435 |
358,944 |
Long term borrowings |
- |
(106,850) |
Short term borrowings[18] |
(435,925) |
(6,973) |
Net cash/(debt) |
(149,490) |
245,121 |
The Group reported net cash of $(149.5) million as at 31 December 2013 (2012: $245.1 million). This was primarily driven by the acquisition of International Minerals Corporation in 2013 and lower cash generated as a result of the drop of metal prices.
The Company's short-term borrowings are its convertible bond that has a current conversion price of £3.80 due in October 2014, the bridge loan facility ($270.0 million) refinanced in January 2014 with a $350 million 7-year Senior Unsecured bond, and short term debt raised in Peru and Argentina.
Capital expenditure[19]
$000 unless otherwise indicated |
Year ended
31 Dec 2013 |
Year ended
31 Dec 2012 |
Arcata |
43,255 |
52,791 |
Ares |
3,783 |
7,476 |
Selene |
1,364 |
1,152 |
Pallancata |
42,992 |
55,719 |
San Jose |
56,502 |
71,188 |
Moris |
932 |
846 |
Operations |
148,828 |
189,172 |
Inmaculada |
98,614 |
96,060 |
Crespo |
21,469 |
17,984 |
Volcan |
4,312 |
86,631 |
Azuca |
4,741 |
12,476 |
Other |
3,614 |
18,062 |
Total |
281,578 |
420,385 |
2013 capital expenditure of $281.6 million (2012: $420.4 million) includes operating capex of $147.3 million, capitalised exploration costs of $1.7 million in respect of the Group's operating mines, $98.6 million capitalised in Inmaculada, $21.5 capitalised in Crespo, $9.0 million in Azuca and Volcan, and administrative capital expenditure of $3.6 million.
Capital expenditure at Arcata was lower in 2013 without the effect of two important projects completed in 2012: the plant capacity increase and the Doré project. In addition, the implementation of the cashflow optimisation programme also reduced capex. In Pallancata and San Jose, lower capital expenditure is mainly due to reduced mine development as well as the above-mentioned cashflow optimisation programme.
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.
Statement of Directors' responsibilities
The Directors confirm that to the best of their knowledge:
- 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
- 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 2013
|
|
Year ended 31 December 2013 |
|
Year ended 31 December 2012 |
|
Notes |
Before exceptional items US$000 |
|
Exceptional items US$000 |
|
Total
US$000 |
|
Before exceptional items
US$000 |
|
Exceptional items
US$000 |
|
Total
US$000 |
Continuing operations |
|
|
|
|
|
|
|
|
|
|
|
|
Revenue |
3,5 |
622,158 |
|
- |
|
622,158 |
|
817,952 |
|
- |
|
817,952 |
Cost of sales |
6 |
(466,766) |
|
(2,466) |
|
(469,232) |
|
(420,325) |
|
- |
|
(420,325) |
Gross profit |
|
155,392 |
|
(2,466) |
|
152,926 |
|
397,627 |
|
- |
|
397,627 |
Administrative expenses |
7 |
(54,425) |
|
(2,351) |
|
(56,776) |
|
(72,995) |
|
- |
|
(72,995) |
Exploration expenses |
8 |
(42,871) |
|
(3,456) |
|
(46,327) |
|
(64,612) |
|
- |
|
(64,612) |
Selling expenses |
9 |
(28,785) |
|
- |
|
(28,785) |
|
(39,460) |
|
- |
|
(39,460) |
Other income |
11 |
3,974 |
|
2,442 |
|
6,416 |
|
8,733 |
|
1,099 |
|
9,832 |
Other expenses |
|
(15,555) |
|
- |
|
(15,555) |
|
(9,525) |
|
- |
|
(9,525) |
Impairment and write-off of assets net |
11 |
- |
|
(90,671) |
|
(90,671) |
|
- |
|
(245) |
|
(245) |
Profit/(loss) from continuing operations before net finance income/(cost), foreign exchange loss and income tax |
|
17,730 |
|
(96,502) |
|
(78,772) |
|
219,768 |
|
854 |
|
220,622 |
Share of post-tax profit/(losses)
of associates and joint ventures
accounted for under equity method |
11,18 |
5,921 |
|
- |
|
5,921 |
|
6,456 |
|
(1,376) |
|
5,080 |
Finance income |
11,12 |
10,675 |
|
2,417 |
|
13,092 |
|
1,988 |
|
- |
|
1,988 |
Gain on transfer from investment accounted for under the equity method to available-for-sale financial assets |
|
- |
|
107,942 |
|
107,942 |
|
- |
|
- |
|
- |
Finance costs |
11,12 |
(11,697) |
|
(136,353) |
|
(148,050) |
|
(12,870) |
|
(1,334) |
|
(14,204) |
Foreign exchange loss |
|
(19,753) |
|
- |
|
(19,753) |
|
(1,212) |
|
- |
|
(1,212) |
(Loss)/profit from continuing
operations before income tax |
|
2,876 |
|
(122,496) |
|
(119,620) |
|
214,130 |
|
(1,856) |
|
212,274 |
Income tax (expense)/benefit |
13 |
(44,979) |
|
35,922 |
|
(9,057) |
|
(85,549) |
|
141 |
|
(85,408) |
(Loss)/profit for the year from continuing operations |
|
(42,103) |
|
(86,574) |
|
(128,677) |
|
128,581 |
|
(1,715) |
|
126,866 |
Attributable to: |
|
|
|
|
|
|
|
|
|
|
|
|
Equity shareholders of the Company |
|
(50,345) |
|
(72,738) |
|
(123,083) |
|
64,830 |
|
(1,759) |
|
63,071 |
Non-controlling interests |
|
8,242 |
|
(13,836) |
|
(5,594) |
|
63,751 |
|
44 |
|
63,795 |
|
|
(42,103) |
|
(86,574) |
|
(128,677) |
|
128,581 |
|
(1,715) |
|
126,866 |
Basic and diluted (loss)/earnings per ordinary share
from continuing operations for the year (expressed in US dollars per share) |
14 |
(0.15) |
|
(0.21) |
|
(0.36) |
|
0.19 |
|
- |
|
0.19 |
Consolidated statement of comprehensive income
For the year ended 31 December 2013
|
|
Year ended 31 December |
|
Notes |
2013
US$000 |
|
2012
US$000 |
(Loss)/profit for the year |
|
(128,677) |
|
126,866 |
Other comprehensive income to be reclassified to profit or loss in subsequent periods: |
|
|
|
|
Exchange differences on translating foreign operations |
|
(842) |
|
268 |
Change in fair value of available-for-sale financial assets |
19 |
(125,932) |
|
(9,269) |
Recycling of the loss on available-for-sale financial assets |
|
130,286 |
|
266 |
Deferred income tax relating to components of other comprehensive income |
13 |
- |
|
615 |
Other comprehensive gain/(loss) for the period, net of tax |
|
3,512 |
|
(8,120) |
Total comprehensive (expense)/income for the year |
|
(125,165) |
|
118,746 |
Total comprehensive (expense)/income attributable to: |
|
|
|
|
Equity shareholders of the Company |
|
(119,571) |
|
54,951 |
Non-controlling interests |
|
(5,594) |
|
63,795 |
|
|
(125,165) |
|
118,746 |
Consolidated statement of financial position
As at 31 December 2013
|
Notes |
As at
31 December 2013
US$000 |
|
As at
31 December 2012
US$000 |
ASSETS |
|
|
|
|
Non-current assets |
|
|
|
|
Property, plant and equipment |
15 |
873,477 |
|
636,555 |
Evaluation and exploration assets |
16 |
204,643 |
|
396,557 |
Intangible assets |
17 |
43,683 |
|
43,903 |
Investments accounted for under equity method |
18 |
- |
|
78,188 |
Available-for-sale financial assets |
19 |
51,658 |
|
30,609 |
Trade and other receivables |
20 |
12,128 |
|
8,613 |
Deferred income tax assets |
|
2,416 |
|
856 |
|
|
1,188,005 |
|
1,195,281 |
Current assets |
|
|
|
|
Inventories |
21 |
69,556 |
|
76,413 |
Trade and other receivables |
20 |
167,740 |
|
166,173 |
Income tax receivable |
|
22,156 |
|
23,023 |
Other financial assets |
22 |
- |
|
150 |
Cash and cash equivalents |
23 |
286,435 |
|
358,944 |
|
|
545,887 |
|
624,703 |
Total assets |
|
1,733,892 |
|
1,819,984 |
EQUITY AND LIABILITIES |
|
|
|
|
Capital and reserves attributable to shareholders of the Parent |
|
|
|
|
Equity share capital |
|
170,389 |
|
158,637 |
Share premium |
|
396,021 |
|
395,928 |
Treasury shares |
|
(898) |
|
(898) |
Other reserves |
|
(211,143) |
|
(214,946) |
Retained earnings |
|
511,492 |
|
720,011 |
|
|
865,861 |
|
1,058,732 |
Non-controlling interests |
|
104,375 |
|
264,518 |
Total equity |
|
970,236 |
|
1,323,250 |
Non-current liabilities |
|
|
|
|
Trade and other payables |
24 |
174 |
|
- |
Borrowings |
25 |
- |
|
106,850 |
Provisions |
26 |
79,649 |
|
76,550 |
Deferred income |
24(3) |
22,000 |
|
- |
Deferred income tax liabilities |
|
93,505 |
|
95,715 |
|
|
195,328 |
|
279,115 |
Current liabilities |
|
|
|
|
Trade and other payables |
24 |
119,222 |
|
149,585 |
Other financial liabilities |
22 |
2,294 |
|
6,891 |
Borrowings |
25 |
435,925 |
|
6,973 |
Provisions |
26 |
9,573 |
|
26,688 |
Income tax payable |
|
1,314 |
|
27,482 |
|
|
568,328 |
|
217,619 |
Total liabilities |
|
763,656 |
|
496,734 |
Total equity and liabilities |
|
1,733,892 |
|
1,819,984 |
These financial statements were approved by the Board of Directors on 11 March 2014 and signed on its behalf by:
Ignacio Bustamante
Chief Executive Officer
11 March 2014
Consolidated statement of cash flows
For the year ended 31 December 2013
|
|
Year ended 31 December |
|
Notes |
2013
US$000 |
|
2012
US$000 |
Cash flows from operating activities |
|
|
|
|
Cash generated from operations |
|
116,084 |
|
344,119 |
Interest received |
|
6,236 |
|
2,614 |
Interest paid |
|
(10,292) |
|
(9,987) |
Payment of mine closure costs |
26 |
(4,781) |
|
(3,667) |
Tax paid |
|
(42,573) |
|
(78,200) |
Net cash generated from operating activities |
|
64,674 |
|
254,879 |
Cash flows from investing activities |
|
|
|
|
Purchase of property, plant and equipment |
|
(248,335) |
|
(297,537) |
Purchase of evaluation and exploration assets |
|
(10,781) |
|
(46,903) |
Purchase of intangibles |
|
(1,625) |
|
- |
Acquisition of subsidiary |
4(b) |
(14,615) |
|
(96,332) |
Dividends received |
|
2,423 |
|
- |
Dividends received from associates |
|
3,385 |
|
8,454 |
Proceeds from deferred income |
24(3) |
17,593 |
|
4,000 |
Proceeds from sale of available-for-sale financial assets |
|
33,498 |
|
- |
Proceeds from sale of property, plant and equipment |
|
344 |
|
449 |
Net cash used in investing activities |
|
(218,113) |
|
(427,869) |
Cash flows from financing activities |
|
|
|
|
Proceeds from borrowings |
|
440,010 |
|
53,500 |
Repayment of borrowings |
|
(116,701) |
|
(93,221) |
Transaction costs of borrowings |
|
(9,145) |
|
- |
Acquisition of non-controlling interest |
|
(272,127) |
|
- |
Proceeds from issue of ordinary shares |
|
71,916 |
|
- |
Dividends paid |
27 |
(18,503) |
|
(62,467) |
Capital contribution from non-controlling interests |
|
4,380 |
|
7,346 |
Cash flows generated/(used) in financing activities |
|
99,830 |
|
(94,842) |
Net decrease in cash and cash equivalents during the year |
|
(53,609) |
|
(267,832) |
Exchange difference |
|
(18,900) |
|
(705) |
Cash and cash equivalents at beginning of year |
|
358,944 |
|
627,481 |
Cash and cash equivalents at end of year |
23 |
286,435 |
|
358,944 |
Consolidated statement of changes in equity
For the year 31 December 2013
|
|
|
|
|
|
|
|
|
|
Other reserves |
|
|
|
|
|
|
|
|
|
|
Notes |
|
Equity share capital US$000 |
|
Share premium US$000 |
|
Treasury shares US$000 |
|
Unrealised gain/
(loss) on available-for-sale financial assets
US$000 |
|
Bond
equity component (note 25(b)) US$000 |
|
Cumulative translation adjustment US$000 |
|
Merger reserve US$000 |
|
Share- based payment reserve US$000 |
|
Total
Other reserves US$000 |
|
Retained earnings US$000 |
|
Capital and reserves attributable to shareholders
of the Parent
US$000 |
|
Non-controlling interests
US$000 |
|
Total
equity
US$000 |
Balance
at 1 January 2012 |
|
|
|
158,637 |
|
395,928 |
|
(898) |
|
5,058 |
|
8,432 |
|
(10,715) |
|
(210,046) |
|
154 |
|
(207,117) |
|
677,218 |
|
1,023,768 |
|
195,299 |
|
1,219,067 |
Other comprehensive (loss)/income |
|
|
|
- |
|
- |
|
- |
|
(8,388) |
|
- |
|
268 |
|
- |
|
- |
|
(8,120) |
|
- |
|
(8,120) |
|
- |
|
(8,120) |
Profit for the year |
|
|
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
63,071 |
|
63,071 |
|
63,795 |
|
126,866 |
Total comprehensive income for 2012 |
|
|
|
- |
|
- |
|
- |
|
(8,388) |
|
- |
|
268 |
|
- |
|
- |
|
(8,120) |
|
63,071 |
|
54,951 |
|
63,795 |
|
118,746 |
Capital contribution from non-controlling interest |
|
|
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
39,568 |
|
39,568 |
CEO LTIP |
|
|
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
291 |
|
291 |
|
- |
|
291 |
|
- |
|
291 |
Expiration of dividends |
|
|
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
733 |
|
733 |
Dividends |
|
27 |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
(20,278) |
|
(20,278) |
|
- |
|
(20,278) |
Dividends paid to non-controlling interests |
|
27 |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
(34,877) |
|
(34,877) |
Balance
at 31 December 2012 |
|
|
|
158,637 |
|
395,928 |
|
(898) |
|
(3,330) |
|
8,432 |
|
(10,447) |
|
(210,046) |
|
445 |
|
(214,946) |
|
720,011 |
|
1,058,732 |
|
264,518 |
|
1,323,250 |
Other comprehensive (loss)/income |
|
|
|
- |
|
- |
|
- |
|
4,354 |
|
- |
|
(842) |
|
- |
|
- |
|
3,512 |
|
- |
|
3,512 |
|
- |
|
3,512 |
Loss for the year |
|
|
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
(123,083) |
|
(123,083) |
|
(5,594) |
|
(128,677) |
Total comprehensive income/(loss)
for 2013 |
|
|
|
- |
|
- |
|
- |
|
4,354 |
|
- |
|
(842) |
|
- |
|
- |
|
3,512 |
|
(123,083) |
|
(119,571) |
|
(5,594) |
|
(125,165) |
Capital contribution from non-controlling interest |
|
|
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
4,380 |
|
4,380 |
Purchase of shares from non-controlling interest |
|
4(a) |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
(135,368) |
|
(135,368) |
|
(148,185) |
|
(283,553) |
Issuance of shares |
|
|
|
11,752 |
|
93 |
|
- |
|
- |
|
- |
|
- |
|
60,071 |
|
- |
|
60,071 |
|
- |
|
71,916 |
|
- |
|
71,916 |
Transfer to retained earnings |
|
|
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
(60,071) |
|
- |
|
(60,071) |
|
60,071 |
|
- |
|
- |
|
- |
CEO LTIP |
|
|
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
291 |
|
291 |
|
- |
|
291 |
|
- |
|
291 |
Expiration of dividends |
|
|
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
(38) |
|
(38) |
Dividends |
|
27 |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
(10,139) |
|
(10,139) |
|
- |
|
(10,139) |
Dividends paid to non-controlling interests |
|
27 |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
(10,706) |
|
(10,706) |
Balance
at 31 December 2013 |
|
|
|
170,389 |
|
396,021 |
|
(898) |
|
1,024 |
|
8,432 |
|
(11,289) |
|
(210,046) |
|
736 |
|
(211,143) |
|
511,492 |
|
865,861 |
|
104,375 |
|
970,236 |
1 Notes to the consolidated financial statements
For the year ended 31 December 2013
The financial information for the year ended 31 December 2013 and 2012 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 2013 and 2012 have been extracted from the consolidated financial statements of Hochschild Mining plc for the year ended 31 December 2013 which have been approved by the directors on 11 March 2014 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
The accounting policies adopted in the preparation of the consolidated financial statements are consistent with those applied in the preparation of the consolidated financial statement for the year ended 31 December 2012, except for the adoption of the following standards and interpretations:
· IFRS 13 "Fair value measurement", applicable for annual periods beginning on or after 1 January 2013
IFRS 13 establishes a single source of guidance under IFRS for all fair value measurements. IFRS 13 does not change when an entity is required to use fair value, but rather provides guidance on how to measure fair value under IFRS when fair value is required or permitted. The amendment affects disclosure but has no impact on the Group's financial position and performance.
· IAS 1 "Financial statements presentation - Presentation of items in other comprehensive income", applicable for annual periods beginning on or after 1 July 2012
The amendments to IAS 1 change the grouping of items presented in other comprehensive income. Items that could be reclassified (or recycled) to profit and loss at a future point in time would be presented separately from items that will never be reclassified. The amendment affects presentation only and has no impact on the Group's financial position and performance.
· IAS 19 "Employee benefits (amendment)", applicable for annual periods beginning on or after 1 January 2013
The IASB has issued numerous amendments to IAS 19. These range from fundamental changes such as removing the corridor mechanism and the concept of expected returns on plan assets to simple clarifications and re-wording. The application of this new standard has no impact on the Group's financial position or performance.
· IFRIC 20 "Stripping costs in the production phase of a surface mine", applicable for annual periods beginning on or after 1 January 2013
This interpretation applies to waste removal (stripping) costs incurred in surface mining activity, during the production phase of the mine. There can be two benefits accruing to the entity from the stripping activity: usable ore that can be used to produce inventory and improved access to further quantities of material that will be mined in future periods. When the benefit from the stripping activity is the production of inventory, an entity is required to account for the stripping activity costs as part of the cost of inventory. When the benefit is the improved access to ore, the entity recognises these costs as a non-current asset only if certain criteria are met, which is referred to as the stripping activity asset. The amendment has no material impact on the Group's financial position and performance.
· "Improvements to IFRSs (issued in May 2012)", applicable for annual periods beginning on or after 1 January 2013
The IASB issued improvements to IFRSs, including IAS 1 Presentation of Financial Statements, IAS 16 Property Plant and Equipment, IAS 32 Financial Instruments, Presentation, and IAS 34 Interim Financial Reporting.
The Group made an assessment of the changes and determined there is no significant impact in its financial position and performance
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 the same 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 on 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. 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 - Ares, which generates revenue from the sale of gold and silver
· Operating unit - Arcata, which generates revenue from the sale of gold, silver and concentrate
· Operating unit - Pallancata, which generates revenue from the sale of concentrate
· Operating unit - San Jose, which generates revenue from the sale of gold, silver, concentrate and dore
· Operating unit - Moris, which generates revenue from the sale of gold and silver
· 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 expenses reflected through profit and loss and capitalised as assets
· Other - includes the profit or loss generated by Empresa de Transmisión Callalli S.A.C. (a power generation company), HMX, S.A. de C.V. (a service company in Mexico), Empresa de Transmisión Aymaraes S.A.C. (a power generation company), and the Selene mine, that closed in 2009 and which, as a consequence, is not considered to be a reportable segment.
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 International Financial Reporting Standards (IFRS) as adopted for use in the European Union.
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
|
|
Ares
US$000 |
|
Arcata US$000 |
|
Pallancata US$000 |
|
San Jose US$000 |
|
Moris
US$000 |
|
ExplorationUS$000 |
|
Other1
US$000
|
|
Adjustment
and
eliminations
US$000 |
|
Total
US$000 |
Year ended
31 December 2013 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue from
external customers |
|
50,362 |
|
136,968 |
|
181,795 |
|
240,723 |
|
12,247 |
|
- |
|
63 |
|
- |
|
622,158 |
Inter segment revenue |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
8,796 |
|
(8,796) |
|
- |
Total revenue |
|
50,362 |
|
136,968 |
|
181,795 |
|
240,723 |
|
12,247 |
|
- |
|
8,859 |
|
(8,796) |
|
622,158 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment profit/(loss) |
|
(3,515) |
|
31,710 |
|
49,357 |
|
44,142 |
|
1,430 |
|
(50,894) |
|
4,037 |
|
1,547 |
|
77,814 |
Others2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(185,284) |
Profit from continuing operations before
income tax |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(107,470) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other segment information |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation3 |
|
(8,723) |
|
(31,044) |
|
(50,222) |
|
(52,790) |
|
(1,757) |
|
(1,927) |
|
(3,151) |
|
- |
|
(149,614) |
Amortisation |
|
- |
|
- |
|
- |
|
(1,300) |
|
- |
|
(441) |
|
- |
|
- |
|
(1,741) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditure |
|
3,783 |
|
43,255 |
|
44,356 |
|
56,502 |
|
932 |
|
119,671 |
|
13,079 |
|
- |
|
281,578 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets |
|
13,211 |
|
14,009 |
|
34,735 |
|
73,844 |
|
1,269 |
|
1,874 |
|
316 |
|
- |
|
139,258 |
Other non-current assets |
|
1,328 |
|
142,618 |
|
149,057 |
|
217,344 |
|
12 |
|
594,263 |
|
29,331 |
|
- |
|
1,133,953 |
Total segment assets |
|
14,539 |
|
156,627 |
|
183,792 |
|
291,188 |
|
1,281 |
|
596,137 |
|
29,647 |
|
- |
|
1,273,211 |
Not reportable assets4 |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
472,831 |
|
- |
|
472,831 |
Total assets |
|
14,539 |
|
156,627 |
|
183,792 |
|
291,188 |
|
1,281 |
|
596,137 |
|
502,478 |
|
- |
|
1,746,042 |
1 'Other' revenue primarily relates to revenues earned by HMX S.A. de C.V. for services provided to the Moris mine, and the Mexican exploration activities.
2 Comprised of administrative expenses of US$56,776,000, other income of US$6,416,000, other expenses of US$15,555,000, impairment and write-off of assets of US$78,521,000, share of gains of associates and joint ventures of US$5,921,000, gain on transfer from onvestments accounted under the equity method to available-for-sale financial assets of US$107,942,000, finance income of US$13,092,000, finance expense of US$148,050,000, and foreign exchange loss of US$19,753,000.
3 Includes US$28,000, US$613,000 and US$1,158,000 of depreciation capitalised in San Jose mine unit, the Crespo project and the Inmaculada project respectively.
4 Not reportable assets are comprised of available-for-sale financial assets of US$51,658,000, other receivables of US$110,166,000, income tax receivable of US$22,156,000, deferred income tax assets of US$2,416,000 and cash and cash equivalents of US$286,435,000.
3 Segment reporting (continued)
(a) Reportable segment information
|
|
Ares
US$000 |
|
Arcata US$000 |
|
Pallancata US$000 |
|
San Jose US$000 |
|
Moris
US$000 |
|
ExplorationUS$000 |
|
Other1
US$000
|
|
Adjustment
and
eliminations
US$000 |
|
Total
US$000 |
Year ended
31 December 2013 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue from
external customers |
|
50,362 |
|
136,968 |
|
181,795 |
|
240,723 |
|
12,247 |
|
- |
|
63 |
|
- |
|
622,158 |
Inter segment revenue |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
8,796 |
|
(8,796) |
|
- |
Total revenue |
|
50,362 |
|
136,968 |
|
181,795 |
|
240,723 |
|
12,247 |
|
- |
|
8,859 |
|
(8,796) |
|
622,158 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment profit/(loss) |
|
(3,515) |
|
31,710 |
|
49,357 |
|
44,142 |
|
1,430 |
|
(50,894) |
|
4,037 |
|
1,547 |
|
77,814 |
Others2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(185,284) |
Profit from continuing operations before
income tax |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(107,470) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other segment information |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(8,723) |
|
(31,044) |
|
(50,222) |
|
(52,790) |
|
(1,757) |
|
(1,927) |
|
(3,151) |
|
- |
|
(149,614) |
Amortisation |
|
- |
|
- |
|
- |
|
(1,300) |
|
- |
|
(441) |
|
- |
|
- |
|
(1,741) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditure |
|
3,783 |
|
43,255 |
|
44,356 |
|
56,502 |
|
932 |
|
119,671 |
|
13,079 |
|
- |
|
281,578 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets |
|
13,211 |
|
14,009 |
|
34,735 |
|
73,844 |
|
1,269 |
|
1,874 |
|
316 |
|
- |
|
139,258 |
Other non-current assets |
|
1,328 |
|
142,618 |
|
149,057 |
|
217,344 |
|
12 |
|
594,263 |
|
29,331 |
|
- |
|
1,133,953 |
Total segment assets |
|
14,539 |
|
156,627 |
|
183,792 |
|
291,188 |
|
1,281 |
|
596,137 |
|
29,647 |
|
- |
|
1,273,211 |
Not reportable assets4 |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
472,831 |
|
- |
|
472,831 |
Total assets |
|
14,539 |
|
156,627 |
|
183,792 |
|
291,188 |
|
1,281 |
|
596,137 |
|
502,478 |
|
- |
|
1,746,042 |
1 'Other' revenue primarily relates to revenues earned by HMX S.A. de C.V. for services provided to the Moris mine, and the Mexican exploration activities.
2 Comprised of administrative expenses of US$56,776,000, other income of US$6,416,000, other expenses of US$15,555,000, impairment and write-off of assets of US$78,521,000, share of gains of associates and joint ventures of US$5,921,000, gain on transfer from onvestments accounted under the equity method to available-for-sale financial assets of US$107,942,000, finance income of US$13,092,000, finance expense of US$148,050,000, and foreign exchange loss of US$19,753,000.
3 Includes US$28,000, US$613,000 and US$1,158,000 of depreciation capitalised in San Jose mine unit, the Crespo project and the Inmaculada project respectively.
4 Not reportable assets are comprised of available-for-sale financial assets of US$51,658,000, other receivables of US$110,166,000, income tax receivable of US$22,156,000, deferred income tax assets of US$2,416,000 and cash and cash equivalents of US$286,435,000.
3 Segment reporting (continued)
(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 |
|
|
2013
US$000 |
|
2012
US$000 |
External customer |
|
|
|
|
USA |
|
148,201 |
|
118,409 |
Peru |
|
91,781 |
|
63,769 |
Canada |
|
53,664 |
|
104,509 |
Germany |
|
4,901 |
|
75,202 |
Switzerland |
|
149,452 |
|
154,200 |
United Kingdom |
|
38,697 |
|
40,664 |
Mexico |
|
- |
|
480 |
Korea |
|
135,100 |
|
260,719 |
Japan |
|
362 |
|
- |
Total |
|
622,158 |
|
817,952 |
Inter-segment |
|
|
|
|
Peru |
|
3,122 |
|
1,324 |
Mexico |
|
5,674 |
|
5,177 |
Total |
|
630,954 |
|
824,453 |
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 2013 |
|
Year ended 31 December 2012 |
|
|
US$000 |
|
% Revenue |
|
Segment |
|
US$000 |
|
% Revenue |
|
Segment |
LS Nikko |
|
135,100 |
|
22% |
|
Pallancata and San Jose |
|
234,066 |
|
29% |
|
Pallancata
and San Jose |
Argor Heraus |
|
105,730 |
|
17% |
|
Ares, Arcata and San Jose |
|
121,122 |
|
15% |
|
San Jose |
Johnson Matthey Inc. |
|
70,547 |
|
11% |
|
Ares, Arcata and Moris |
|
25,194 |
|
3% |
|
Ares, Arcata, Moris and San Jose |
Teck Metals Ltd. (formerly Teck Cominco Metals Ltd) |
|
53,664 |
|
9% |
|
Pallancata and San Jose |
|
104,509 |
|
13% |
|
Pallancata
and San Jose |
3 Segment reporting (continued)
Non-current assets, excluding financial instruments and income tax assets, were allocated based on the geographical area where the assets are located as follows:
|
|
As at 31 December |
|
|
2013
US$000 |
|
2012
US$000 |
Peru |
|
746,211 |
|
684,471 |
Argentina |
|
217,415 |
|
251,935 |
Mexico |
|
40,591 |
|
27,075 |
Chile |
|
117,466 |
|
113,387 |
United Kingdom |
|
120 |
|
78,335 |
Total non-current segment assets |
|
1,121,803 |
|
1,155,203 |
Available-for-sale financial assets |
|
51,658 |
|
30,609 |
Trade and other receivables |
|
12,128 |
|
8,613 |
Deferred income tax assets |
|
2,416 |
|
856 |
Total non-current assets |
|
1,188,005 |
|
1,195,281 |
4 Acquisitions and disposals
(a) Acquisition of Non-controlling interest
Minera Suyamarca S.A.C.
On October 2013, Hochschild Mining entered into a binding agreement to acquire the 40% interests held by International Minerals Corporation ("IMZ") in Minera Suyamarca S.A.C., which holds the Pallancata mine and Inmaculada Advanced Project in Peru (the "Peruvian Assets"). The transaction was executed by way of a court-approved Plan of Arrangement under the Business Corporations Act (Yukon) ("the Canadian Act"). Prior to the Acquisition, Hochschild held a 60% interest in the Peruvian Assets.
IMZ was a Canadian public company headquartered in Scottsdale, Arizona, with interests in gold and silver properties, both producing and under development, in Peru and the USA. The company was listed on the Toronto and Swiss stock exchanges under the symbol "IMZ" and quoted on the Frankfurt stock exchange under the symbol "MIW". 117,636,376 common shares were issued and outstanding, of which 3,755,746 shares (3.2%) were owned by Hochschild.
As a condition to the completion of the acquisition, IMZ transferred all of its assets (other than the Peruvian Assets) and all of its liabilities (other than the liabilities related to the Peruvian Assets), to Chaparral Gold. The IMZ internal re-organisation was effected pursuant to the terms of a master re-organisation agreement among IMZ, Chaparral Gold and the directly-held, non-Peruvian subsidiaries of IMZ.
In connection with the acquisition, each IMZ shareholder (other than Hochschild or its affiliates) received a cash payment of $2.38 per IMZ share (for aggregate cash consideration of $271 million) and each IMZ shareholder (including Hochschild and its affiliates) received one common share of Chaparral Gold Corp ("Chaparral Gold") per IMZ share.
Hochschild (through a newly established Canadian acquisition subsidiary, HOC Holdings Canada Inc.) acquired 100% of the shares of IMZ (which, at the point of acquisition, held only the Peruvian Assets and liabilities related to the Peruvian Assets) that it did not already own by way of the plan of arrangement under the Canadian Act. IMZ was delisted on 20 December 2013.
IMZ is 100% owner of Minera Oro Vega S.A.C. ("MOV"). MOV is 40% owner of Minera Suyamarca S.A.C and 100% owner of Minera Qorihuayta S.A.C., all registered in Peru.
In compliance with the Group´s accounting policy, the difference between the consideration paid and the carrying value of the non-controlling interest at the acquisition date has been recognised in retained earnings as follows:
|
|
US$000 |
Cash and cash equivalents (US$2.38 per share) |
|
(271,036) |
Cash and cash equivalents (transaction costs paid) |
|
(1,091) |
Transaction costs pending of payment |
|
(4,264) |
Available-for-sale financial assets (note 19) |
|
(8,939) |
Net assets received from Minera Oro Vega S.A.C |
|
1,777 |
Total consideration |
|
(283,553) |
Non-controlling interest |
|
148,185 |
Retained earnings |
|
(135,368) |
(b) Acquisition of assets
Andina Minerals Inc
On 8 November 2012, the Group made a CAD$0.80 per share all-cash offer for all of the issued and outstanding common
shares of Andina Minerals Inc ('Andina'), a TSX-V listed gold exploration company with projects in Chile, for a total consideration of C$103,416,870. The Board of Directors of Andina unanimously recommended that its shareholders vote in favour of the transaction.
Andina's major asset, the 100% owned Volcan project, includes the Dorado area.
Andina was based in Alberta, Canada and was the 100% owner of Quitovac Mining Company Limited and Andina Holdings Inc, both based in Canada. Andina Holdings Inc owned 99.99% of Andina Minerals Chile Limitada, based in Santiago, Chile. The Chilean company owned two properties: Encrucijada and Volcan and 50% of Sociedad Contractual Minera Pampa Buenos Aires.
At 31 December 2012, the Group had paid US$90,156,869, for 112,124,252 common shares of Andina, representing an 81.4% interest on a fully diluted basis (86.7% basic basis ). As a result of the acquisition the Group incurred directly attributable transaction costs of US$11,441,742. The Group recognised a liability of US$13,787,427 in respect of the Group´s commitment to acquire 17,146,835 remaining shares as at 31 December 2012.
The fair value total cost of assets acquired and liabilities assumed comprise the following:
|
US$000 |
Cash and cash equivalents |
3,190 |
Trade and other receivables |
543 |
Evaluation and exploration assets |
86,301 |
Property, plant and equipment |
330 |
Water permits |
26,583 |
Total assets |
116,947 |
Accounts payable and other liabilities |
1,559 |
Total liabilities |
1,559 |
Net assets acquired |
115,388 |
|
|
Cash consideration |
90,157 |
Liability to acquire non-controlling interests |
13,788 |
Transaction costs |
11,443 |
Total |
115,388 |
|
|
Cash paid to acquire controlling interest |
90,157 |
Transaction costs paid |
9,365 |
Less cash acquired |
(3,190) |
Net cash flow on acquisition |
96,332 |
Based on the Group´s ownership interest as at 31 December 2012, the Group was deemed to have control over Andina and therefore consolidated it as a subsidiary undertaking from that date. The transaction was recognised as an asset acquisition, and the fair value of the net assets acquired was US$115,388,000.
The outstanding balance at 31 December 2012 of US$13,787,427 was paid between January 2013 (US$4,268,605) and February 2013 (US$9,518,822). The Group completed the acquisition on 20 February 2013. The total consideration was settled in cash.
During 2013 the Group´s 50% interest in Sociedad Contractual Minera Pampa Buenos Aires was transferred to Iron Creek Chile (BVI) Ltd. and all the Canadian companies were dissolved.
5 Revenue
|
Year ended 31 December |
|
2013
US$000 |
|
2012
US$000 |
Gold (from dore bars) |
112,855 |
|
124,581 |
Silver (from dore bars) |
179,773 |
|
153,509 |
Gold (from concentrate) |
103,721 |
|
135,055 |
Silver (from concentrate) |
225,746 |
|
404,277 |
Services |
63 |
|
530 |
Total |
622,158 |
|
817,952 |
Included within revenue is a loss of US$29,866,952 relating to provisional pricing adjustments representing the change in the fair value of embedded derivatives (2012: loss of US$4,015,265) arising on sales of concentrates and dore (refer to note 2(r) and footnote 1 of note 22).
6 Cost of sales
Included in cost of sales are:
|
Year ended 31 December |
|
2013
US$000 |
|
2012
US$000 |
Depreciation and amortisation |
146,918 |
|
124,387 |
Personnel expenses (note 10) |
124,834 |
|
121,775 |
Mining royalty (note 30) |
8,293 |
|
9,672 |
Change in products in process and finished goods |
3,926 |
|
(17,708) |
7 Administrative expenses
|
Year ended 31 December |
|
2013
US$000 |
|
2012
US$000 |
Personnel expenses (note 10 and 11(1)) |
28,445 |
|
40,006 |
Professional fees |
5,553 |
|
6,180 |
Social and community welfare expenses1 |
3,216 |
|
6,459 |
Lease rentals |
1,925 |
|
1,510 |
Travel expenses |
1,342 |
|
2,443 |
Communications |
834 |
|
990 |
Indirect taxes |
3,044 |
|
3,723 |
Depreciation and amortisation |
2,638 |
|
2,285 |
Technology and systems |
1,092 |
|
828 |
Security |
1,083 |
|
991 |
Supplies |
243 |
|
238 |
Other |
7,361 |
|
7,342 |
Total |
56,776 |
|
72,995 |
1 Represents amounts expended by the Group on social and community welfare activities surrounding its mining units.
8 Exploration expenses
|
Year ended 31 December |
|
2013
US$000 |
|
2012
US$000 |
Mine site exploration1 |
|
|
|
Arcata |
2,052 |
|
4,467 |
Ares |
452 |
|
1,507 |
Sipan |
600 |
|
1,415 |
Pallancata |
2,149 |
|
4,062 |
San Jose |
1,795 |
|
5,788 |
Moris |
129 |
|
313 |
|
7,177 |
|
17,552 |
Prospects2 |
|
|
|
Peru |
1,459 |
|
4,795 |
Argentina |
294 |
|
1,028 |
Mexico |
3,504 |
|
6,605 |
Chile |
12,696 |
|
9,580 |
|
17,953 |
|
22,008 |
Generative3 |
|
|
|
Peru |
3,502 |
|
4,798 |
Argentina |
53 |
|
141 |
Mexico |
1,157 |
|
497 |
Chile |
330 |
|
115 |
|
5,042 |
|
5,551 |
Personnel (note 10 and 11(1)) |
12,302 |
|
13,865 |
Others |
3,853 |
|
5,636 |
Total |
46,327 |
|
64,612 |
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 very 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 following table lists the liabilities (generally payables) outstanding at the year-end, which relate to the exploration activities of Group companies engaged only in exploration. Liabilities related to 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.
|
As at 31 December |
|
2013
US$000 |
|
2012
US$000 |
Liabilities related to exploration activities |
1,636 |
|
2,082 |
Cash flows on exploration activities are as follows:
|
As at 31 December |
|
2013
US$000 |
|
2012
US$000 |
Payments |
23,441 |
|
27,285 |
9 Selling expenses
|
Year ended 31 December |
|
2013
US$000 |
|
2012
US$000 |
Transportation of dore, concentrate and maritime freight |
4,256 |
|
5,745 |
Sales commissions |
1,050 |
|
2,264 |
Personnel expenses (note 10) |
210 |
|
374 |
Warehouse services |
3,256 |
|
3,918 |
Taxes |
16,596 |
|
23,323 |
Other |
3,417 |
|
3,836 |
Total |
28,785 |
|
39,460 |
10 Personnel expenses1
|
Year ended 31 December |
|
2013
US$000 |
|
2012
US$000 |
Salaries and wages |
128,225 |
|
129,208 |
Workers' profit sharing |
(737) |
|
18,487 |
Other legal contributions |
24,641 |
|
21,084 |
Statutory holiday payments |
7,860 |
|
7,600 |
Long Term Incentive Plan |
(1,127) |
|
7,891 |
Termination benefits |
10,487 |
|
975 |
Other |
6,584 |
|
13,079 |
Total |
175,933 |
|
198,324 |
1 Personnel expenses are distributed in cost of sales, administrative expenses, exploration expenses, selling expenses and capitalised as property plant and equipment amounting to US$124,834,000 (2012: US$121,775,000), US$28,445,000 (2012: US$40,006,000), US$12,302,000 (2012: US$13,865,000), US$210,000 (2012: US$374,000) and US$10,142,000 (2012: US$22,304,000) respectively.
Average number of employees for 2013 and 2012 were as follows:
|
As at 31 December |
|
2013 |
|
2012 |
Peru |
3,226 |
|
3,011 |
Argentina |
1,227 |
|
1,226 |
Mexico |
122 |
|
135 |
Chile |
38 |
|
40 |
United Kingdom |
12 |
|
12 |
Total |
4,625 |
|
4,424 |
11 Pre-tax exceptional items
|
Year ended
31 December
2013
US$000 |
|
Year ended
31 December
2012
US$000 |
Cost of sales |
|
|
|
Termination benefits1 |
(2,466) |
|
- |
Total |
(2,466) |
|
- |
Administrative expenses |
|
|
|
Termination benefits1 |
(2,351) |
|
- |
Total |
(2,351) |
|
- |
Exploration expenses |
|
|
|
Termination benefits1 |
(3,456) |
|
- |
Total |
(3,456) |
|
- |
Other income |
|
|
|
Termination benefits2 |
- |
|
1,099 |
Gain on sale of property, plant and equipment |
2,442 |
|
- |
Total |
2,442 |
|
1,099 |
Impairment and write-off of assets (net) |
|
|
|
Impairment and write-off of assets3 |
(105,071) |
|
(484) |
Reversal of write-off and impairment of assets4 |
14,400 |
|
239 |
Total |
(90,671) |
|
(245) |
Share of post-tax losses of associates and joint ventures accounted under equity method5 |
- |
|
(1,376) |
Total |
- |
|
(1,376) |
Finance income |
|
|
|
Gain from changes in the fair value of financial instruments6 |
2,417 |
|
- |
Total |
2,417 |
|
- |
Gain on transfer from investment accounted under the equity method to available-for-sale financial assets7 |
107,942 |
|
- |
Total |
107,942 |
|
- |
Finance costs |
|
|
|
Amortisation of transaction costs on secure bank loans8 |
(1,072) |
|
- |
Transaction costs on bank loans9 |
(2,577) |
|
- |
Loss from changes in the fair value of financial instruments10 |
(124,899) |
|
(1,334) |
Loss on sale of available-for-sale financial assets11 |
(7,805) |
|
- |
Total |
(136,353) |
|
(1,334) |
1 Termination benefits paid to workers between April and September 2013 following the restructuring plan approved by management during the first half of 2013, amounting to US$8,273,000.
2 Reversal of the provision of termination benefits for the workers of the Moris mine of US$1,099,000. At 30 September 2012 the restructuring plan agreed at 31 December 2011 was not in effect, and Moris was still in operation.
3 As at 31 December 2013 corresponds to the impairment of the San José mine unit of US$40,869,000, the Azuca project of US$30,290,000, the Crespo project of US$29,150,000 and the Ares unit of US$3,771,000, and to the write-off of assets of US$991,000. As at 31 December 2012 mainly corresponds to the write-off of assets in Compañía Minera Ares of US$471,000.
4 As at 31 December 2013 corresponds to the reversal of the impairment of San Felipe property of US$14,400,000. As at 31 December 2012 corresponds to the reversal of the write-off recorded in 2010 related to the 100% dore project at the San Jose mine.
5 Corresponds to the loss from dilution related to Gold Resource Corp. investment (note 18).
6 Corresponds to the recycling of the unrealised gain generated by the shares of International Minerals Corporation, due to the acquisition (refer to note 4(a)).
7 Gain on the reclassification of Gold Resource Corp ('GRC') shares from an investment accounted for under the equity method to an available-for-sale financial asset of US$107,942,000, as a result of the Company ceasing to have the ability to exercise significant influence (refer to note 18).
8 Corresponds to the attributable issue cost of the syndicated loan granted to Compania Minera Ares S.A.C. (note 25), disclosed as an exceptional item as it is a significant one off expense.
9 Corresponds to the write-off of transaction costs related to bank loans facilities never drawn by Minera Suyamarca S.A.C. disclosed as an exceptional item as it is a significant one off expense.
10 As at 31 December 2013 corresponds to the impairment of investments in Gold Resource Corp. of US$105,298,000, International Minerals of US$12,920,000, Pembrook Mining Corp. of US$5,745,000, Mariana Resources Ltd. of US$281,000, Northern Superior Resources Inc. of US$422,000, Iron Creek Capital Corp. of US$207,000, Empire Petroleum Corp. of US$22,000 and Brionor Resources of US$4,000. As at 31 December 2012 mainly corresponds to the impairment of Iron Creek Capital Corp, Brionor Resources and Empire Petroleum Corp of US$1,043,671, US$105,000 and US$8,000 respectively.
11 Corresponds to the loss on sale of part of the Group's holding in Gold Resource Corp. of US$7,805,000. The Group sold 3,375,000 and 1,800,000 shares on 11 July 2013 and 12 December 2013, respectively.
12 Finance income and finance costs before exceptional items
|
Year ended
31 December 2013
Before
exceptional
items
US$000 |
|
Year ended
31 December 2012
Before
exceptional
items
US$000 |
Finance income |
|
|
|
Interest on deposits and liquidity funds |
6,751 |
|
1,429 |
Interest on loans to non-controlling interests (note 20) |
- |
|
123 |
Interest income |
6,751 |
|
1,552 |
Dividends |
3,551 |
|
- |
Other |
373 |
|
436 |
Total |
10,675 |
|
1,988 |
Finance costs |
|
|
|
Interest on secured bank loans (note 25) |
(4,633) |
|
(1,924) |
Interest on convertible bond (note 25) |
(4,594) |
|
(8,956) |
Interest expense |
(9,227) |
|
(10,880) |
Unwind of discount rate |
(1,267) |
|
(731) |
Loss from changes in the fair value of financial instruments |
(220) |
|
- |
Other |
(983) |
|
(1,259) |
Total |
(11,697) |
|
(12,870) |
13 Income tax expense
|
Year ended 31 December 2013 |
|
Year ended 31 December 2012 |
|
Before
exceptional
items
US$000 |
|
Exceptional items
US$000 |
|
Total
US$000 |
|
Before
exceptional
items
US$000 |
|
Exceptional
items
US$000 |
|
Total
US$000 |
Current corporate income tax from
continuing operations |
|
|
|
|
|
|
|
|
|
|
|
Current corporate income tax charge |
10,971 |
|
(752) |
|
10,219 |
|
48,285 |
|
- |
|
48,285 |
Current mining royalty charge (note 30) |
2,344 |
|
- |
|
2,344 |
|
3,834 |
|
- |
|
3,834 |
Current special mining tax charge (note 30) |
905 |
|
- |
|
905 |
|
4,256 |
|
- |
|
4,256 |
Withholding taxes |
(641) |
|
- |
|
(641) |
|
1,571 |
|
- |
|
1,571 |
|
13,579 |
|
(752) |
|
12,827 |
|
57,946 |
|
- |
|
57,946 |
Deferred taxation |
|
|
|
|
|
|
|
|
|
|
|
Origination and reversal of temporary differences from continuing operations |
31,400 |
|
(35,170) |
|
(3,770) |
|
28,627 |
|
(141) |
|
28,486 |
Recognition of deferred tax not
previously recognised following
a change in estimate/outlook |
- |
|
- |
|
- |
|
(1,024) |
|
- |
|
(1,024) |
|
31,400 |
|
(35,170) |
|
(3,770) |
|
27,603 |
|
(141) |
|
27,462 |
Total taxation charge in the income statement |
44,979 |
|
(35,922) |
|
9,057 |
|
85,549 |
|
(141) |
|
85,408 |
The weighted average statutory income tax rate was 28.5% for 2013 and 32.4% for 2012. 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.
The tax related to items charged or credited to equity is as follows:
|
As at 31 December |
|
2013
US$000 |
|
2012
US$000 |
Deferred taxation: |
|
|
|
Deferred income tax relating to fair value gains on available-for-sale financial assets |
- |
|
(615) |
Total tax charge in the statement of other comprehensive income |
- |
|
(615) |
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 |
|
2013
US$000 |
|
2012
US$000 |
Loss/(profit) from continuing operations before income tax |
(119,620) |
|
212,274 |
At average statutory income tax rate of 28.4% (2012: 32.4%) |
(34,140) |
|
68,814 |
Expenses not deductible for tax purposes |
2,685 |
|
4,163 |
Non-taxable income1 |
(1,366) |
|
(275) |
Utilisation of losses in respect of deferred tax not previously recognised2 |
(2,214) |
|
(1,024) |
Non-taxable share of gains of associates |
(1,377) |
|
(1,181) |
Net deferred tax assets generated in the year not recognised |
15,262 |
|
6,795 |
Deferred tax recognised on special investment regime |
(4,246) |
|
(2,481) |
Derecognition of deferred income tax assets |
- |
|
615 |
Withholding tax |
(641) |
|
1,571 |
Special mining tax and mining royalty2 |
3,249 |
|
8,090 |
Foreign exchange rate effect3 |
30,366 |
|
(1,303) |
Other |
1,479 |
|
1,624 |
At average effective income tax rate of -11.8% (2012: 40.2%) |
9,057 |
|
85,408 |
Taxation charge attributable to continuing operations |
9,057 |
|
85,408 |
Total taxation charge in the income statement |
9,057 |
|
85,408 |
1 Mainly corresponds to dividends received from Gold Resource Corp. and International Minerals Corporation (2012: Mainly corresponds to the reversal of accrued non deductible personnel expenses recorded in 2011).
2 Corresponds to the impact of the new mining royalty and special mining tax in Peru (note 30).
3 Mainly corresponds to the foreign exchange effect from converting tax bases and monetary items from local currency to the functional currency.
14 Basic and diluted (loss)/earnings per share
(Loss)/earnings per share ('EPS') is calculated by dividing profit for the year attributable to equity shareholders of the Company by the weighted average number of ordinary shares issued during the year.
The Company has dilutive potential ordinary shares.
|
As at 31 December |
|
2013 |
|
2012 |
Basic (loss)/earnings per share from continuing operations |
|
|
|
Before exceptional items (US$) |
(0.15) |
|
0.19 |
Exceptional items (US$) |
(0.21) |
|
- |
Total for the year and from continuing operations (US$) |
(0.36) |
|
0.19 |
Diluted (loss)/earnings per share from continuing operations |
|
|
|
Before exceptional items (US$) |
(0.15) |
|
0.19 |
Exceptional items (US$) |
(0.21) |
|
- |
Total for the year and from continuing operations (US$) |
(0.36) |
|
0.19 |
Net (loss)/profit from continuing operations before exceptional items and attributable to equity holders of the parent is derived as follows:
|
As at 31 December |
|
2013 |
|
2012 |
(Loss)/profit for the year from continuing operations (US$000) |
(128,677) |
|
126,866 |
Less non-controlling interests (US$000) |
5,594 |
|
(63,795) |
(Loss)/profit attributable to equity holders of the parent - continuing operations (US$000) |
(123,083) |
|
63,071 |
Exceptional items after tax - attributable to equity holders of the parent (US$000) |
72,738 |
|
1,759 |
(Loss)/profit from continuing operations before exceptional items attributable to equity holders
of the parent (US$000) |
(50,345) |
|
64,830 |
Interest on convertible bond (US$000)1 |
- |
|
- |
Diluted (loss)/profit from continuing operations before exceptional items attributable to equity
holders of the parent (US$000) |
(50,345) |
|
64,830 |
The following reflects the share data used in the basic and diluted (loss)/earnings per share computations:
|
As at 31 December |
|
2013 |
|
2012 |
Basic weighted average number of ordinary shares in issue (thousands) |
345,225 |
|
338,022 |
Dilutive potential ordinary shares related to convertible bond (thousands)1 |
- |
|
- |
Diluted weighted average number of ordinary shares in issue and dilutive potential
ordinary shares (thousands) |
345,225 |
|
338,022 |
1 The potential ordinary shares related to the convertible bond have not been included in the calculation of diluted EPS for 2013 and 2012 as they have an anti dilutive effect.
15 Property, plant and equipment
|
Mining properties and development
costs
US$000 |
|
Land and buildings US$000 |
|
Plant and equipment
US$000 |
|
Vehicles US$000 |
|
Mine
closure
asset
US$000 |
|
Construction in progress and capital advances US$000 |
|
Total
US$000 |
Year ended 31 December 2013 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost |
|
|
|
|
|
|
|
|
|
|
|
|
|
At 1 January 2013 |
540,324 |
|
179,940 |
|
313,457 |
|
5,360 |
|
67,356 |
|
119,381 |
|
1,225,818 |
Additions |
141,504 |
|
2,823 |
|
49,700 |
|
323 |
|
- |
|
73,421 |
|
267,771 |
Change in discount rate |
- |
|
- |
|
- |
|
- |
|
(1,481) |
|
- |
|
(1,481) |
Disposals |
- |
|
- |
|
(724) |
|
(43) |
|
- |
|
- |
|
(767) |
Write-offs |
(321) |
|
(57) |
|
(7,089) |
|
(150) |
|
- |
|
- |
|
(7,617) |
Change in mine closure estimate |
- |
|
- |
|
- |
|
- |
|
8,487 |
|
- |
|
8,487 |
Transfers and other movements |
(50) |
|
37,377 |
|
15,611 |
|
1,021 |
|
- |
|
(56,419) |
|
(2,460) |
Transfers from evaluation and
exploration assets |
188,323 |
|
- |
|
- |
|
- |
|
- |
|
- |
|
188,323 |
Foreign exchange |
- |
|
- |
|
124 |
|
- |
|
- |
|
- |
|
124 |
At 31 December 2013 |
869,780 |
|
220,083 |
|
371,079 |
|
6,511 |
|
74,362 |
|
136,383 |
|
1,678,198 |
Accumulated depreciation
and impairment |
|
|
|
|
|
|
|
|
|
|
|
|
|
At 1 January 2013 |
306,443 |
|
87,679 |
|
146,823 |
|
2,574 |
|
44,808 |
|
936 |
|
589,263 |
Depreciation for the year |
96,862 |
|
20,377 |
|
29,316 |
|
989 |
|
2,070 |
|
- |
|
149,614 |
Write-offs |
(41) |
|
(9) |
|
(5,567) |
|
(110) |
|
- |
|
- |
|
(5,727) |
Disposals |
- |
|
- |
|
(351) |
|
(14) |
|
- |
|
- |
|
(365) |
Impairment2 |
42,080 |
|
5,883 |
|
8,520 |
|
204 |
|
1,547 |
|
3,899 |
|
62,133 |
Transfers from evaluation and exploration assets |
7,418 |
|
- |
|
- |
|
- |
|
- |
|
- |
|
7,418 |
Transfers and other movements |
15 |
|
6,993 |
|
(3,350) |
|
2 |
|
- |
|
(1,337) |
|
2,323 |
Foreign exchange |
- |
|
- |
|
62 |
|
- |
|
- |
|
- |
|
62 |
At 31 December 2013 |
452,777 |
|
120,923 |
|
175,453 |
|
3,645 |
|
48,425 |
|
3,498 |
|
804,721 |
Net book amount at 31 December 2013 |
417,003 |
|
99,160 |
|
195,626 |
|
2,866 |
|
25,937 |
|
132,885 |
|
873,477 |
1 The carrying value of plant and equipment held under finance leases at 31 December 2013 was US$539,627 (2012: US$991,230). Additions during
the year included US$Nil (2012: US$Nil) of plant and equipment under finance leases. Leased assets are pledged as security for the related finance lease.
2 There were borrowing costs capitalised in property, plant and equipment amounting to US$5,736,000 (2012:US$Nil). The capitalisation rate used was 9.45%.
3 The Group recorded an impairment of US$450,000 with respect to the Azuca project, US$22,535,000 with respect to the Crespo project, US$35,377,000 with respect to the San Jose mine unit and US$3,771,000 with respect to the Ares mine unit. These impairment charges arose primarily as a result of decreases in the prices of silver and gold and were determined using the fair value less costs to dispose (FVLCD) methodology. FVLCD was determined using a discounted cash flow model to estimate the amount that would be paid by a willing third party in an arm's length transaction. Any variation in the key assumptions would either result in further impairment or a reduction of the impairment.
15 Property, plant and equipment (continued)
|
Mining properties and development
costs
US$000 |
|
Land and buildings US$000 |
|
Plant and equipment
US$000 |
|
Vehicles US$000 |
|
Mine
closure
asset
US$000 |
|
Construction in progress and capital advances US$000 |
|
Total
US$000 |
Year ended 31 December 2012 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost |
|
|
|
|
|
|
|
|
|
|
|
|
|
At 1 January 2012 |
382,556 |
|
143,764 |
|
264,948 |
|
4,614 |
|
63,185 |
|
70,836 |
|
929,903 |
Additions |
148,148 |
|
4,337 |
|
34,469 |
|
98 |
|
|
|
103,319 |
|
290,371 |
Change in discount rate |
- |
|
- |
|
- |
|
- |
|
688 |
|
- |
|
688 |
Disposals |
- |
|
(62) |
|
(5,135) |
|
(314) |
|
- |
|
- |
|
(5,511) |
Write-offs |
- |
|
- |
|
(1,289) |
|
(31) |
|
- |
|
- |
|
(1,320) |
Change in mine closure estimate |
- |
|
- |
|
- |
|
- |
|
3,483 |
|
- |
|
3,483 |
Transfers and other movements |
455 |
|
31,901 |
|
20,429 |
|
991 |
|
- |
|
(54,774) |
|
(998) |
Transfers from evaluation and
exploration assets |
9,165 |
|
- |
|
- |
|
- |
|
- |
|
- |
|
9,165 |
Foreign exchange |
- |
|
- |
|
35 |
|
2 |
|
- |
|
- |
|
37 |
At 31 December 2012 |
540,324 |
|
179,940 |
|
313,457 |
|
5,360 |
|
67,356 |
|
119,381 |
|
1,225,818 |
Accumulated depreciation
and impairment |
|
|
|
|
|
|
|
|
|
|
|
|
|
At 1 January 2012 |
233,103 |
|
70,750 |
|
118,832 |
|
2,091 |
|
42,637 |
|
936 |
|
468,349 |
Depreciation for the year |
73,340 |
|
16,975 |
|
31,974 |
|
701 |
|
2,171 |
|
- |
|
125,161 |
Write-offs |
- |
|
- |
|
(811) |
|
(18) |
|
- |
|
- |
|
(829) |
Disposals |
- |
|
(46) |
|
(3,190) |
|
(200) |
|
- |
|
- |
|
(3,436) |
Foreign exchange |
- |
|
- |
|
18 |
|
- |
|
- |
|
- |
|
18 |
At 31 December 2012 |
306,443 |
|
87,679 |
|
146,823 |
|
2,574 |
|
44,808 |
|
936 |
|
589,263 |
Net book amount at 31 December 2012 |
233,881 |
|
92,261 |
|
166,634 |
|
2,786 |
|
22,548 |
|
118,445 |
|
636,555 |
16 Evaluation and exploration assets
|
Azuca
US$000 |
|
Crespo
US$000 |
|
Inmaculada US$000 |
|
San Felipe US$000 |
|
Dorado US$000 |
|
Others
US$000 |
|
Total
US$000 |
Cost |
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at 1 January 2012 |
58,353 |
|
65,418 |
|
108,677 |
|
55,950 |
|
- |
|
28,156 |
|
316,554 |
Additions |
12,326 |
|
1,777 |
|
8,085 |
|
- |
|
86,301 |
|
21,525 |
|
130,014 |
Foreign exchange |
- |
|
276 |
|
- |
|
- |
|
- |
|
- |
|
276 |
Transfers from/to property, plant and equipment |
125 |
|
144 |
|
- |
|
- |
|
- |
|
(8,509) |
|
(8,240) |
Balance at 31 December 2012 |
70,804 |
|
67,615 |
|
116,762 |
|
55,950 |
|
86,301 |
|
41,172 |
|
438,604 |
Additions |
4,736 |
|
179 |
|
965 |
|
- |
|
4,300 |
|
2,006 |
|
12,186 |
Foreign exchange |
- |
|
(512) |
|
- |
|
- |
|
- |
|
- |
|
(512) |
Write- off |
- |
|
- |
|
- |
|
- |
|
(26) |
|
(4) |
|
(30) |
Transfers from/(to) property plant and equipment |
- |
|
(38,106) |
|
(117,727) |
|
- |
|
- |
|
(32,490) |
|
(188,823) |
Balance at 31 December 2013 |
75,540 |
|
29,176 |
|
- |
|
55,950 |
|
90,575 |
|
10,684 |
|
261,925 |
Accumulated impairment |
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at 1 January 2012 |
22 |
|
9,904 |
|
- |
|
30,950 |
|
- |
|
1,171 |
|
42,047 |
Balance at 31 December 2012 |
22 |
|
9,904 |
|
- |
|
30,950 |
|
- |
|
1,171 |
|
42,047 |
Impairment2 |
29,840 |
|
5,507 |
|
- |
|
(14,400) |
|
- |
|
1,706 |
|
22,653 |
Transfers from property, plant and equipment |
- |
|
(6,281) |
|
- |
|
|
|
- |
|
(1,137) |
|
(7,418) |
Balance at 31 December 2013 |
29,862 |
|
9,130 |
|
- |
|
16,550 |
|
- |
|
1,740 |
|
57,282 |
Net book value as at 31 December 2012 |
70,782 |
|
57,711 |
|
116,762 |
|
25,000 |
|
86,301 |
|
40,001 |
|
396,557 |
Net book value as at 31 December 2013 |
45,678 |
|
29,046 |
|
- |
|
39,400 |
|
90,575 |
|
8,944 |
|
204,643 |
1 There were no borrowing costs capitalised in evaluation and exploration assets.
2 The Group recorded an mpairment with respect to the Azuca project of US$29,840,000 , the Crespo project of US$5,507,000 and the San Jose mine unit of US$1,706,000, and partially reversed the impairment of the San Felipe project of US$14,400,000. These impairment charges arose primarily as a result of decreases in the prices of silver and gold and were determined using the fair value less costs to dispose (FVLCD) methodology. FVLCD was determined using a discounted cash flow model to estimate the amount that would be paid by a willing third party in an arm's length transaction. Any variation in the key assumptions would either result in further impairment or a reduction of the impairment.
17 Intangible assets
|
Goodwill
US$000 |
|
Transmission
line1
US$000 |
|
Water permits2
US$000 |
|
Software
licences
US$000 |
|
Legal rights3 US$000 |
|
Total
US$000 |
Cost |
|
|
|
|
|
|
|
|
|
|
|
Balance at 1 January 2012 |
2,091 |
|
22,157 |
|
- |
|
1,260 |
|
- |
|
25,508 |
Additions |
- |
|
- |
|
26,583 |
|
5 |
|
- |
|
26,588 |
Transfer |
- |
|
- |
|
- |
|
72 |
|
- |
|
72 |
Balance at 31 December 2012 |
2,091 |
|
22,157 |
|
26,583 |
|
1,337 |
|
- |
|
52,168 |
Additions |
- |
|
- |
|
- |
|
- |
|
1,621 |
|
1,621 |
Transfer |
- |
|
- |
|
- |
|
11 |
|
4,783 |
|
4,794 |
Balance at 31 December 2013 |
2,091 |
|
22,157 |
|
26,583 |
|
1,348 |
|
6,404 |
|
58,583 |
Accumulated amortisation |
|
|
|
|
|
|
|
|
|
|
|
Balance at 1 January 2012 |
- |
|
5,686 |
|
- |
|
1,050 |
|
- |
|
6,736 |
Amortisation for the year4 |
- |
|
1,452 |
|
- |
|
77 |
|
- |
|
1,529 |
Balance at 31 December 2012 |
- |
|
7,138 |
|
- |
|
1,127 |
|
- |
|
8,265 |
Amortisation for the year4 |
- |
|
1,213 |
|
- |
|
87 |
|
441 |
|
1,741 |
Impairment of the period5 |
2,091 |
|
1,671 |
|
- |
|
24 |
|
1,108 |
|
4,894 |
Balance at 31 December 2013 |
2,091 |
|
10,022 |
|
- |
|
1,238 |
|
1,549 |
|
14,900 |
Net book value as at 31 December 2012 |
2,091 |
|
15,019 |
|
26,583 |
|
210 |
|
- |
|
43,903 |
Net book value as at 31 December 2013 |
- |
|
12,135 |
|
26,583 |
|
110 |
|
4,855 |
|
43,683 |
1 The transmission line is amortised using the units of production method. At 31 December 2013 the remaining amortisation period is 10 years.
2 Corresponds to the acquisition of water permits of Andina Minerals Group ("Andina") (refer to note 4(b)). They have an indefinite life according the Chilean law.
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 2013 the remaining amortisation period is 12 years.
4 The amortisation for the period is included in cost of sales and administrative expenses in the income statement.
5 The Group recorded an impairment in relation to all of the goodwill of US$2,091,000 and other intangibles of US$1,695,000 related to the San Jose mine unit, and US$1,108,000 related to the Crespo project. These impairment charges arose primarily as a result of decreases in the prices of silver and gold and were determined using the fair value less costs to dispose (FVLCD) methodology. FVLCD was determined using a discounted cash flow model to estimate the amount that would be paid by a willing third party in an arm's length transaction. Any variation in the key assumptions would either result in further impairment or a reduction of the impairment (not in the case of the goodwill).
The carrying amount of goodwill and water permits is reviewed annually to determine whether it is in excess of its recoverable amount.
In the case of the goodwill, the fair value less cost of disposal is determined at the cash-generating unit level, in this case being the San Jose, by discounting the expected cash flows estimated by management over the life of the mine.
(a) Goodwill:
The calculation of fair value less cost of disposal is most sensitive to the following assumptions:
· Commodity prices - Commodity prices of gold and silver are based on prices considered in the Group's 2013 forecast (2012: 2013 budget) and external market consensus forecasts. The prices considered in the 2013 (2012) impairment tests were:
Year |
2013 |
|
2014 |
|
2015 |
|
2016 |
|
2017 |
|
2018 |
|
2019 |
|
2020-2024 |
2013 - Gold - US$/oz |
1,343.9 |
|
1,405.9 |
|
1,379.3 |
|
1,319.3 |
|
1,272.1 |
|
1,272.1 |
|
1,272.1 |
|
1,272.1 |
2013 - Silver - US$/oz |
21.2 |
|
25.0 |
|
23.5 |
|
20.7 |
|
22.3 |
|
22.3 |
|
22.3 |
|
22.3 |
2012 - Gold - US$/oz |
1,823.0 |
|
1,723.0 |
|
1,550.0 |
|
1,411.0 |
|
1,411.0 |
|
1,411.0 |
|
1,411.0 |
|
1,411.0 |
2012 - Silver - US$/oz |
35.0 |
|
31.0 |
|
29.0 |
|
26.0 |
|
26.0 |
|
26.0 |
|
26.0 |
|
26.0 |
· Estimation of reserves and resources - Reserves and resources are based on management's estimates using appropriate exploration and evaluation techniques;
· Production volumes and grades - Tonnage produced was estimated at plant capacity with 12 days of maintenance per year (2012: 12 days);
· Capital expenditure - The cash flows for each mining unit include capital expenditures to maintain the mine and to convert resources to reserves;
· Operating costs - Costs are based on historical information from previous years and current mining conditions;
· Discount rates - The cash flows are discounted at real pre-tax rates that reflect the current market assessments of the time value of money and the risks specific to the cash-generating unit. These rates are based on the weighted average cost of capital specific to each cash-generating unit. The pre-tax discount rate used in the 2013 impairment test was 23.77% (2012: 25.59%).
· As at 31 December 2012, management believed that the following changes to the main assumptions would have caused the carrying value of the cash generating unit (including the goodwill) to equal its recoverable amount. Therefore, any higher deviation would have caused the carrying value of goodwill to exceed its recoverable amount resulting in the recognition of an impairment provision. As goodwill has been fully impaired during the year ended 31 December 2013, no such analysis has been prepared as at 31 December 2013.
Assumption |
|
|
2012
Variation |
Gold price |
|
|
(19.3)% |
Silver price |
|
|
(15.5)% |
Reserves and resources |
|
|
(109.6)% |
Costs |
|
|
17.7% |
Discount rates |
|
|
99.4% |
Cash flows used for impairment tests were based on the annual 2013 forecast. The starting point in all cases was January 2013. Individual cash flows are based on the annual 2013 forecast and an estimated set of reserves and resources as of December 2012 provided by the Exploration and Operations teams. In addition, in respect of subsequent years, the Group makes the necessary conservative adjustments to accurately reflect the nature of each operation. In the case of revenue, production figures were estimated assuming reserve grade (after extracted tonnage) and full capacity. In the case of operating expenses, all figures are based on the 2013 forecast. Future capital expenditure is based on the 2013 forecast, excluding one-off expenses and considering the Operations team's view of developments and infrastructure, according to the estimated set of reserves and resources.
Headroom for the 2012 impairment test was US$92,349,000
Water permits:
In the case of the water permits the Group applied a value in situ methodology, which applies a realisable 'enterprise value' to unprocessed mineral resources. The methodology is used to determine the fair value less costs of disposal of the Andina cash-generating unit, which includes the water permits held by the Group. The enterprise value used in the calculation performed at 31 December 2013 was US$13.60 per gold equivalent ounce of resources. The enterprise value figures are based on observable external market information.
Headroom for the 2013 impairment test was US$14,172,000.
A change in key assumptions on which the recoverable amount of the Andina cash-generating unit was determined could cause the unit´s carrying value to exceed its recoverable amount.
18 Investments accounted under equity method
Gold Resource Corp.
The Group has an interest in Gold Resource Corp.("GRC"), which is involved in the exploration for and production of gold and silver in Mexico. The company is incorporated under the laws of the State of Colorado, USA, where the principal executive offices are located. The operations are conducted through two wholly-owned subsidiaries, located in Mexico, Don David Gold S.A. de C.V. and Golden Trump Resources S.A. de C.V.
On 27 March 2013 equity accounting for the investment was discontinued as a result of developments during the period which resulted in the Group concluding that it no longer had the ability to influence significantly that company´s strategic, operational and financial direction. The investment in GRC was reclassified as an available-for-sale financial asset. As of 27 March 2013 the Group had a 27.77% interest in GRC.
The following table summarises the financial information of the Group's investment in GRC:
|
|
Year ended 31 December |
|
|
2013
US$000 |
|
2012
US$000 |
Share of the associate's statement of financial position: |
|
|
|
|
Current assets |
|
- |
|
17,872 |
Non-current assets |
|
- |
|
51,002 |
Current liabilities |
|
- |
|
(3,742) |
Non-current liabilities |
|
- |
|
(11,300) |
Net assets |
|
- |
|
53,832 |
Goodwill on acquisition |
|
- |
|
24,356 |
Share of the associate's revenue, profit and loss: |
|
|
|
|
Revenue |
|
11,750 |
|
33,737 |
Profit1 |
|
5,921 |
|
5,080 |
Carrying amount of the investment |
|
- |
|
78,188 |
1 Share of the associate's profit in 2013 includes (1) a pre-exceptional gain from the Group's share of GRC´s results for the period in which it exercised significant influence of US$5,921,000 (2012: US$6,456,000) and (2) an exceptional loss from dilution of US$Nil (2012: US$1,376,000).
19 Available-for-sale financial assets
|
|
Year ended 31 December |
|
|
2013
US$000 |
|
2012
US$000 |
Beginning balance |
|
30,609 |
|
40,769 |
Additions1 |
|
1,119 |
|
- |
Impairment |
|
- |
|
(891) |
Fair value change recorded in equity |
|
(125,932) |
|
(9,269) |
Reclassification from investments accounted under the equity method2 |
|
189,418 |
|
- |
Disposals3 |
|
(33,498) |
|
- |
Other4 |
|
(10,058) |
|
- |
Ending balance |
|
51,658 |
|
30,609 |
1 Represents 3,755,746 shares of Chaparral Gold Corp. received due to the Group´s 3.2% interest in International Minerals Corporation (refer to note 4(a))
2 Reclassification of the Group's Gold Resource Corp. shares from an associate accounted for under the equity method to an available-for-sale financial asset on 27 March 2013. Equity accounting of the investment was discontinued as a result of developments during the period that led the Company to conclude that it no longer had the ability to influence significantly that company's strategic, operational and financial direction. Consequently, the asset is now recognised as an available-for-sale asset at fair value.
3 Sale of 3,375,000 and 1,800,000 share sof Gold Resource Corp on 11 July 2013 and 12 December 2013 respectively.
4 In connection with the acquisition of the non-controlling interest of Minera Suyamarca S.A.C. the Group disposed of its 3,755,746 shares of International Minerals Corporation (IMZ) and received 3,755,746 class A shares of IMZ, recognising them as investment in subsidiary and consequently eliminating them in consolidation (refer to note 4(a)).
Available-for-sale financial assets include the following:
|
|
Year ended 31 December |
|
|
2013
US$000 |
|
2012
US$000 |
Equity securities - quoted Canadian companies |
|
2,030 |
|
17,800 |
Equity securities - quoted US companies1 |
|
42,883 |
|
23 |
Equity securities - quoted British companies |
|
745 |
|
777 |
Equity securities - unquoted2 |
|
6,000 |
|
12,009 |
Total |
|
51,658 |
|
30,609 |
1 Primarily includes Gold Resource Corp shares of US$42,817,000 (2012: US$Nil).
2 Includes Pembrook Mining Corp and ECI Exploration and Mining Inc. shares.
The fair value of the listed shares is determined by reference to published price quotations in an active market.
The investments in unlisted shares (Pembrook Mining Corp. and ECI Exploration and Mining Inc.) were recognised at cost less any recognised impairment losses given that there is not an active market for these investments. The investment in ECI Exploration and Mining Inc. is fully impaired.
Available-for-sale financial assets are denominated in the following currencies:
|
|
2013
US$000 |
|
2012
US$000 |
Canadian dollars |
|
8,030 |
|
29,809 |
US dollars |
|
42,883 |
|
23 |
Pounds sterling |
|
745 |
|
777 |
Total |
|
51,658 |
|
30,609 |
20 Trade and other receivables
|
|
As at 31 December |
|
|
2013 |
|
2012 |
|
|
Non-current
US$000 |
|
Current
US$000 |
|
Non-current
US$000 |
|
Current
US$000 |
Trade receivables |
|
- |
|
69,702 |
|
- |
|
88,435 |
Advances to suppliers |
|
- |
|
22,667 |
|
- |
|
17,916 |
Credit due from exports of Minera Santa Cruz |
|
5,776 |
|
- |
|
5,609 |
|
2,578 |
Due from non-controlling interests1 |
|
- |
|
- |
|
- |
|
2,224 |
Receivables from related parties |
|
- |
|
111 |
|
- |
|
1,017 |
Loans to employees |
|
2,030 |
|
909 |
|
2,276 |
|
1,608 |
Interest receivable |
|
- |
|
600 |
|
- |
|
85 |
Receivable from Kaupthing, Singer and Friedlander Bank |
|
- |
|
294 |
|
- |
|
361 |
Other |
|
2,638 |
|
19,115 |
|
102 |
|
6,575 |
Provision for impairment2 |
|
- |
|
(5,084) |
|
- |
|
(3,819) |
Financial assets classified as receivables |
|
10,444 |
|
108,314 |
|
7,987 |
|
116,980 |
Prepaid expenses |
|
755 |
|
11,602 |
|
626 |
|
10,237 |
Value Added Tax (VAT)3 |
|
929 |
|
47,824 |
|
- |
|
38,956 |
Total |
|
12,128 |
|
167,740 |
|
8,613 |
|
166,173 |
The fair values of trade and other receivables approximate their book value.
1 Corresponds to an amount receivable from Iron Creek Capital Corp.
2 Includes the provision for impairment of trade receivable from a customer in Peru of US$1,108,000 (2012: US$1,108,000), the impairment of deposits in Kaupthing, Singer and Friedlander of US$294,000 (2012: US$361,000) and other receivables of US$3,682,000 (2012: US$2,350,000).
3 This includes an amount of US$17,807,000 (2012: US$18,736,000) VAT paid related to the San Jose project that will be recovered through future sales of gold and silver by Minera Santa Cruz S.A. It also includes the VAT of Minera Suyamarca of US$10,639,000 (2012: US$6,388,000), Compañía Minera Ares S.A.C. of US$11,005,000 (2012: US$8,574,000) and Minas Santa María de Moris of US$3,108,000 (2012: US$2,445,000). The VAT is valued at its recoverable amount.
Movements in the provision for impairment of receivables:
|
|
Individually
impaired
US$000 |
|
At 1 January 2012 |
|
2,406 |
|
Provided for during the year |
|
1,567 |
|
Released during the year |
|
(154) |
|
At 31 December 2012 |
|
3,819 |
|
Provided for during the year |
|
1,485 |
|
Released during the year |
|
(220) |
|
At 31 December 2013 |
|
5,084 |
|
As at 31 December, the ageing analysis of financial assets classified as receivables net of impairment is as follows:
|
|
|
|
|
|
Past due but not impaired |
Year |
|
Total
US$000 |
|
Neither past due nor impaired
US$000 |
|
Less than
30 days US$000 |
|
30 to
60 days US$000 |
|
61 to
90 days US$000 |
|
91 to
120 days
US$000
|
|
Over
120 days US$000 |
2013 |
|
118,758 |
|
118,758 |
|
- |
|
- |
|
- |
|
- |
|
- |
2012 |
|
124,967 |
|
124,967 |
|
- |
|
- |
|
- |
|
- |
|
- |
21 Inventories
|
|
As at
31 December 2013
US$000 |
|
As at
31 December 2012
US$000 |
Finished goods |
|
7,871 |
|
4,874 |
Products in process |
|
21,246 |
|
28,162 |
Raw materials |
|
2 |
|
1 |
Supplies and spare parts |
|
47,118 |
|
49,021 |
|
|
76,237 |
|
82,058 |
Provision for obsolescence of supplies |
|
(6,681) |
|
(5,645) |
Total |
|
69,556 |
|
76,413 |
Finished goods include ounces of gold and silver, dore and concentrate. Dore is an alloy containing a variable mixture of silver, gold and minor impurities delivered in bar form to refiners and is considered a product in process. The refined products are then sold to the customers and/or refiners. Concentrate is a product containing sulphides with a variable content of base and precious metals and is sold to smelters.
The amount of dore on hand at 31 December 2013 included in products in process is US$697,000 (2012: US$9,370,000).
As part of the Group's short-term financing policies, it acquires pre-shipment loans which are guaranteed by the sales contracts.
The amount of expense recognised in profit and loss related to the consumption of inventory of supplies, spare parts and raw materials is US$94,235,000 (2012: US$85,651,000).
Movements in the provision for obsolescence comprise an increase in the provision of US$1,832,000 (2012: US$3,608,000) and the reversal of US$Nil relating to the sale of supplies and spare parts, that had been provided for (2012: US$504,000).
The amount of income relating to the reversal of the inventory provision is US$90,000 (2012: US$Nil).
22 Other financial assets and liabilities
|
|
As at 31 December |
|
|
2013
US$000 |
|
2012
US$000 |
Other financial assets |
|
|
|
|
Warrants in Iron Creek Capital Corp. |
|
- |
|
1 |
Bonds |
|
- |
|
149 |
Total financial assets at fair value through profit or loss |
|
- |
|
150 |
Other financial liabilities |
|
|
|
|
Embedded derivatives1 |
|
2,294 |
|
6,891 |
Total financial liabilities at fair value through profit or loss |
|
2,294 |
|
6,891 |
1 Sales of concentrate and certain gold and silver volumes are provisionally priced at the time the sale is recorded. The price is then adjusted after an agreed period of time (usually linked to the length of time it takes for the smelter to refine and sell the concentrate or for the refiner to process the dore into gold and silver), with the Group either paying or receiving the difference between the provisional price and the final price. This price exposure is considered to be an embedded derivative in accordance with IAS 39 'Financial Instruments: Recognition and Measurement'. The gain or loss that arises on the fair value of the embedded derivative is recorded in 'Revenue' (refer to note 5).
23 Cash and cash equivalents
|
|
As at 31 December |
|
|
2013
US$000 |
|
2012
US$000 |
Cash at bank |
|
454 |
|
322 |
Liquidity funds1 |
|
8,751 |
|
72,803 |
Current demand deposit accounts2 |
|
62,259 |
|
61,654 |
Time deposits3 |
|
214,971 |
|
224,165 |
Cash and cash equivalents considered for the statement of cash flows4 |
|
286,435 |
|
358,944 |
The fair value of cash and cash equivalents approximates their book value. The Group does not have undrawn borrowing facilities available in the future for operating activities or capital commitments.
1 The liquidity funds are mainly invested in certificates of deposit, commercial papers and floating rate notes with a weighted average maturity of 8 days as at 31 December 2013 (2012: average of 5 days). In addition, liquidity funds include US Treasury bonds amounting to US$Nil (2012: US$49,967,000).
2 Relates to bank accounts which are freely available and bear interest.
3 These deposits have an average maturity of 27 days (2012: Average of 36 days).
4 Funds deposited in Argentinean institutions are effectively restricted for transfer to other countries and are invested locally. Included within cash and cash equivalents at 31 December 2013 is US$29,112,000 (2012: US$25,452,000), which is not readily available for use in subsidiaries outside of Argentina.
24 Trade and other payables
|
|
As at 31 December |
|
|
2013 |
|
2012 |
|
|
Non-
current
US$000 |
|
Current
US$000 |
|
Non-
current
US$000 |
|
Current
US$000 |
Trade payables1 |
|
- |
|
73,339 |
|
- |
|
76,012 |
Salaries and wages payable2 |
|
- |
|
18,620 |
|
- |
|
31,935 |
Dividends payable |
|
- |
|
4,584 |
|
- |
|
2,242 |
Taxes and contributions |
|
- |
|
8,264 |
|
- |
|
9,077 |
Accrued expenses |
|
- |
|
- |
|
- |
|
383 |
Guarantee deposits |
|
- |
|
7,266 |
|
- |
|
6,325 |
Mining royalty (note 30) |
|
- |
|
840 |
|
- |
|
1,630 |
Deferred income3 |
|
- |
|
- |
|
- |
|
4,000 |
Amount payable to non-controlling interest4 |
|
- |
|
- |
|
- |
|
13,787 |
Accounts payable to related parties (note 30) |
|
- |
|
16 |
|
- |
|
- |
Other |
|
174 |
|
6,293 |
|
- |
|
4,194 |
Total |
|
174 |
|
119,222 |
|
- |
|
149,585 |
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 were as follows:
|
|
2013
US$000 |
|
2012 US$000 |
Remuneration payable |
|
17,885 |
|
26,404 |
Board members' remuneration |
|
152 |
|
581 |
Executive Long Term Incentive Plan |
|
583 |
|
4,950 |
Total |
|
18,620 |
|
31,935 |
3 Deferred income represents non-refundable advance receipts in respect of an option granted to a third party to acquire the Group´s San Felipe project in Mexico. On August 2013 the Group signed an amendment to extend the option for the third party to purchase the San Felipe project to 31 October 2015. Due to the significance of the amount advanced the Group deemed it appropriate to disclose the amount separately on the face of the consolidated statement of financial position for the year 2013. A further US$22,000,000 payment is expected to be made by the third party to fulfil the option agreement and acquire a full interest in the project.
4 Amount payable to complete the purchase of Andina Minerals Inc non-controlling shareholders' interests (note 4(b)).
25 Borrowings
|
|
As at 31 December |
|
|
2013 |
|
2012 |
|
|
Effective
interest rate |
|
Non-
current
US$000 |
|
Current
US$000 |
|
Effective
interest rate |
|
Non-
current
US$000 |
|
Current
US$000 |
Secured bank loans (a) |
|
|
|
|
|
|
|
|
|
|
|
|
Pre-shipment loans in Minera Santa Cruz (note 21) |
|
|
|
- |
|
24,122 |
|
- |
|
- |
|
- |
Pre-shipment loans in Minera Suyamarca S.A.C.(note 21) |
|
|
|
- |
|
30,053 |
|
- |
|
- |
|
- |
Leasing agreement with Banco de Credito
del Peru |
|
- |
|
- |
|
- |
|
3.5% |
|
- |
|
336 |
Leasing agreement with Banco Interamericano de Finanzas |
|
- |
|
- |
|
- |
|
6% |
|
- |
|
24 |
Syndicated loan |
|
25.26% |
|
- |
|
265,877 |
|
- |
|
- |
|
- |
Convertible bond payable (b) |
|
8.26% |
|
- |
|
115,873 |
|
8.26% |
|
106,850 |
|
6,613 |
Total |
|
|
|
- |
|
435,925 |
|
|
|
106,850 |
|
6,973 |
(a) Secured bank loans:
Leasing agreements:
The following table demonstrates the present value and maturity of future minimum lease payments as at 31 December 2013 and 2012:
|
|
As at 31 December |
|
|
2013
US$000 |
|
2012
US$000 |
Not later than one year |
|
- |
|
360 |
Between 1 and 2 years |
|
- |
|
- |
Between 2 and 5 years |
|
- |
|
- |
Total |
|
- |
|
360 |
The following table reconciles the total minimum lease payments and their present values as at 31 December 2013 and 2012:
|
|
As at 31 December |
|
|
2013
US$000 |
|
2012
US$000 |
Present value of leases |
|
- |
|
360 |
Future interest |
|
- |
|
4 |
Total minimum lease payments |
|
- |
|
364 |
The carrying amount of net lease liabilities approximate their fair value.
Syndicated loan:
Loan facility with a syndicate of lenders with Bank of America acting as the Administrative Agent. Total secured term loan facility of US$340,000,000 that accrued an effective interest rate of 25.26% and is guaranteed by a group of subsidiaries headed by Hochschild Mining plc. The balance at 31 December 2013 is comprised of the carrying value of US$265,560,000 determined in accordance with the effective interest method plus accrued interest payable of US$317,000. The loan was repaid on 23 January 2014.
Upon initial recognition, the syndicated loan was recorded at a value of US$263,432,000, representing a principal of US$270,000,000 less transaction costs of US$6,568,000.
(b) Convertible bond payable
Relates to the placement of US$115,000,000 of senior unsecured convertible bonds, due 2014, which are convertible into ordinary shares of Hochschild Mining plc. The Group expect to settle the convertible bond in cash. The bonds have a coupon of 5.75% per annum payable semi-annually on 28 January and 28 July of each year. The issuer has the option to call the bonds on or after 20 October 2012 until maturity in the event the trading price of the ordinary shares exceeds 130% of the conversion price over a certain period. In addition, the Group has the right to redeem the bonds if, at any time, the aggregate principal amount of the bonds outstanding is equal to or less than 15% of the aggregate principal amount of the bonds initially issued.
The following information has to be considered for conversion of the bonds into ordinary shares:
· Conversion Price: GBP 3.80;
· Fixed Exchange Rate: US$1.59/GBP 1.00.
The balance at 31 December 2013 is comprised of the carrying value of US$113,118,000 determined in accordance with the effective interest method plus accrued interest payable of US$2,755,000.
Upon initial recognition, the convertible bonds were recorded at a value of US$ 103,827,000, representing a principal of US$115,000,000 less transaction costs of US$2,741,000 and the bond equity component of $8,432,000.
The maturity of non-current borrowings is as follows:
|
|
As at 31 December |
|
|
2013
US$000 |
|
2012
US$000 |
Between 1 and 2 years |
|
- |
|
106,850 |
Between 2 and 5 years |
|
- |
|
- |
Over 5 years |
|
- |
|
- |
Total |
|
- |
|
106,850 |
The carrying amount of current borrowings differs their fair value only with respect to differences arising under the effective interest rate calculations described above. The carrying amount and fair value of the non‑current borrowings are as follows:
|
|
Carrying amount
as at 31 December |
|
Fair value
as at 31 December |
|
|
2013
US$000 |
|
2012
US$000 |
|
2013
US$000 |
|
2012
US$000 |
Secured bank loans |
|
- |
|
- |
|
- |
|
- |
Convertible bond payable |
|
- |
|
106,850 |
|
- |
|
112,867 |
Total |
|
- |
|
106,850 |
|
- |
|
112,867 |
26 Provisions
|
Provision
for mine closure1
US$000 |
|
Workers'
profit
sharing2
US$000 |
|
Long Term Incentive
Plan3
US$000 |
|
Contingent
consideration4
US$000° |
|
Other
US$000 |
|
Total
US$000 |
At 1 January 2012 |
73,625 |
|
29,831 |
|
3,655 |
|
32,378 |
|
3,373 |
|
142,862 |
Additions |
- |
|
18,487 |
|
7,322 |
|
- |
|
1,041 |
|
26,850 |
Accretion |
123 |
|
- |
|
- |
|
- |
|
- |
|
123 |
Change in discount rate |
769 |
|
- |
|
- |
|
- |
|
- |
|
769 |
Change in estimates5 |
3,362 |
|
- |
|
- |
|
- |
|
- |
|
3,362 |
Payments |
(3,667) |
|
(30,893) |
|
- |
|
(32,222) |
|
- |
|
(66,782) |
Amounts transferred to payables |
- |
|
- |
|
(4,950) |
|
- |
|
- |
|
(4,950) |
Foreign exchange |
2 |
|
1,124 |
|
- |
|
(156) |
|
34 |
|
1,004 |
At 31 December 2012 |
74,214 |
|
18,549 |
|
6,027 |
|
- |
|
4,448 |
|
103,238 |
Less current portion |
(4,105) |
|
(18,549) |
|
(1,211) |
|
- |
|
(2,823) |
|
(26,688) |
Non-current portion |
70,109 |
|
- |
|
4,816 |
|
- |
|
1,625 |
|
76,550 |
At 1 January 2013 |
74,214 |
|
18,549 |
|
6,027 |
|
- |
|
4,448 |
|
103,238 |
Additions |
- |
|
- |
|
- |
|
- |
|
1,171 |
|
1,171 |
Accretion |
224 |
|
- |
|
- |
|
- |
|
- |
|
224 |
Change in discount rate |
(1,481) |
|
- |
|
- |
|
- |
|
- |
|
(1,481) |
Change in estimates |
14,0055 |
|
(427) |
|
(2,960) |
|
- |
|
- |
|
10,618 |
Payments |
(4,781) |
|
(17,645) |
|
(651) |
|
- |
|
(83) |
|
(23,160) |
Amounts transferred to payables |
- |
|
- |
|
(537) |
|
- |
|
- |
|
(537) |
Foreign exchange |
(32) |
|
(103) |
|
- |
|
- |
|
(716) |
|
(851) |
At 31 December 2013 |
82,149 |
|
374 |
|
1,879 |
|
- |
|
4,820 |
|
89,222 |
Less current portion |
(6,311) |
|
(374) |
|
- |
|
- |
|
(2,888) |
|
(9,573) |
Non-current portion |
75,838 |
|
- |
|
1,879 |
|
- |
|
1,932 |
|
79,649 |
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 quantitative easing as at 31 December 2013 and 2012 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 rates used are from 0.29% to 0.56%.
2 Corresponds to the legal and voluntary workers' profit sharing of the Group. Legal workers' profit sharing represents 8% of taxable income of Peruvian companies. Voluntary workers' profit sharing is determined by the Group taking into account the market conditions of employment. The balance of the provision as at 31 December 2013 is: (i) Legal US$374,000 (2012: US$5,788,000), (ii) Voluntary US$Nil (2012: US$12,761,000).
3 Corresponds to the provision related to awards granted under the Long Term Incentive Plan to designated personnel of the Group. Includes the following benefits: (i) 2013 awards, granted in March 2013, payable in March 2016 (ii) 2012 awards, granted in March 2012, payable in March 2015. Only employees who remain in the Group's employment on the vesting date will be entitled to a cash payment, subject to exceptions approved by the Remuneration Committee of the Board. The provision represents the discounted values of the estimated cost of the long-term employee benefit. In 2013 there is a provision of US$-2,960,000 (2012: US$7,322,000) that is disclosed under administrative expenses US$-1,698,000 (2012: US$5,420,000), exploration expenses US$-244,000 (2012: US$843,000) and capitalised as evaluation and exploration expenses US$-1,018,000 (2012: US$1,059,000). The amount of US$537,000 corresponds to the Exploration incentive Plan award and was transferred to salary and wages payable as the performance period ended at 31 December 2012 (note 24(2)).
4 This contingent consideration provision relates to International Minerals Corporation's discounted share of Hochschild's commitment to fund the first $100,000,000 needed to plan, develop and construct mining operations within the Inmaculada property. The amount of US$32,222,000 was settled as a capital contribution from non-controlling interest (refer to consolidated statement of changes in equity).
5 Based on the 2013 and 2012 internal review of mine rehabilitation budgets, an increase of US$14,005,000 (2012: US$3,362,000) was recognised.
27 Dividends paid and proposed
|
|
2013
US$000 |
|
2012
US$000 |
Declared and paid during the year |
|
|
|
|
Equity dividends on ordinary shares: |
|
|
|
|
Final dividend for 2012: US$0.03 (2011: US$0.03) |
|
10,139 |
|
10,139 |
Interim dividend for 2013: US$Nil (2012: US$0.03) |
|
- |
|
10,139 |
Dividends declared to non-controlling interests: US$0.03 and US$0.05 (2012: US$0.18 and 0.08) |
|
6,197 |
|
32,690 |
Dividends declared and paid |
|
16,336 |
|
52,968 |
Dividends declared to non-controlling interests: US$0.03 (2012: US$0.08) |
|
4,509 |
|
2,187 |
Dividends declared and not paid |
|
4,509 |
|
2,187 |
Total dividends declared |
|
20,845 |
|
55,155 |
Proposed for approval by shareholders at the AGM |
|
|
|
|
Final dividend for 2013: US$Nil (2012: US$0.03) |
|
- |
|
10,139 |
Dividends per share
A final dividend in respect of the year ended 31 December 2012 of US$0.03 per share, amounting to a total dividend of US$10,139,237 was approved by shareholders at the Annual General Meeting held on 30 May 2013. The Directors of the Company have not declared a dividend in respect of the year ended 31 December 2013.
28 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 2013 and 2012. The related parties are companies owned or controlled by the main shareholder of the parent company, joint ventures or associates.
|
|
Accounts receivable
as at 31 December |
|
Accounts payable
as at 31 December |
|
|
2013
US$000 |
|
2012
US$000 |
|
2013
US$000 |
|
2012
US$000 |
Current related party balances |
|
|
|
|
|
|
|
|
Cementos Pacasmayo S.A.A. |
|
111 |
|
139 |
|
16 |
|
- |
Gold Resource Corp (note 18) |
|
- |
|
878 |
|
- |
|
- |
Total |
|
111 |
|
1,017 |
|
16 |
|
- |
As at 31 December 2013 and 2012, all other 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 |
|
|
2013
US$000 |
|
2012
US$000 |
Income |
|
|
|
|
Dividend recognised for Gold Resource Corp. investment (note 18) |
|
2,633 |
|
10,093 |
Expenses |
|
|
|
|
Expense recognised for the rental paid to Cementos Pacasmayo S.A.A. |
|
(164) |
|
(164) |
Transactions between the Group and these companies are on an arm's length basis.
29 Related-party balances and transactions (continued)
(b) Compensation of key management personnel of the Group
|
|
As at 31 December |
Compensation of key management personnel (including Directors) |
|
2013
US$000 |
|
2012
US$000 |
Short-term employee benefits |
|
5,781 |
|
6,742 |
Termination benefits |
|
77 |
|
- |
Long Term Incentive Plan |
|
(434) |
|
2,789 |
Workers' profit sharing |
|
- |
|
44 |
Others |
|
1 |
|
556 |
Total compensation paid to key management personnel |
|
5,425 |
|
10,131 |
This amount includes the remuneration paid to the Directors of the parent company of the Group of US$4,410,956 (2012: US$5,467,700), out of which US$193,831 (2012: US$199,606) relates to pension payments.
(c) Participation in placing by Inversiones Pacasmayo S.A. ("IP SA")
IP SA, a company controlled by Eduardo Hochschild, participated in a placing of the Company's Ordinary Shares ("Shares") in October 2013 by subscribing for 16,905,066 Shares at a price of 155p per Share.
30 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.
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.
d) In the case of the Arcata mine unit, the company quit the tax stability agreement, but has mantained the agreement for the mining royalties, such that the Arcata unit, is liable for the new SMT but the mining royalties remain payable at the same rate as they were, before the modification in 2011.
As at 31 December 2013, the amount payable as under the former mining royalty (for the Arcata mining unit), the new mining royalty (for the Ares and Pallancata mining units), and the SMT amounted to US$389,000 (2012: US$835,000), US$629,000 (2012: US$1,089,000), and US$148,000 (2012: US$1,051,000) respectively. The former mining royalty is recorded as 'Trade and other payables', and the new mining royalty and SMT as 'Income tax payable' in the Statement of Financial Position. The amount recorded in the income statement was US$1,784,000 (2012: US$3,224,000) representing the former mining royalty, classified as cost of sales, US$2,344,000 (2012: US$3,834,000) of new mining royalty and US$904,000 (2012: US$4,256,000) 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 request royalties from mine operators. For San Jose, the mining royalty was originally fixed at 1.85% of the pit-head value of the production where the final product is dore and 2.55% where the final product is mineral concentrate or precipitates. In October 2012 a new provincial law was passed, which increased the mining royalty applicable to dore and concentrate to 3% of the pit-head value. Since November 2012 Minera Santa Cruz S.A. has been paying and expensing the increased 3% royalty although it has filed an administrative claim against the new law. As at 31 December 2013, the amount payable as mining royalties amounted to US$451,000 (2012: US$795,000). The amount recorded in the income statement was US$6,509,000 (2012: as cost of sales of US$6,448,000).
On 13 June 2013, the congress of the Province of Santa Cruz passed Law No. 3318, which created a tax on mining reserves. Accordingly, the owners of mining concessions located in the Province of Santa Cruz must pay a tax on mining reserves at a rate of 1%, calculated at the end of each year and determined according to the international price of metals at that date. This law was later regulated by the Provincial Government Decree No. 1252/2013 and by the Provincial Tax Authority Disposition No. 084/2013. According to these regulations, the tax applies only on "measured reserves" and certain deductions (related to the production cost) apply. Minera Santa Cruz S.A. (an affiliate of Hochschild Mining plc) is affected by this tax, and therefore, has been paying it. On 20 December 2013, Minera Santa Cruz S.A. filed before the Argentine Supreme Court a legal claim against the tax on mining reserves. Such legal claim challenges the legality of the tax on mining reserves arguing its unconstitutionality on the grounds that it violates the Federal Mining Policy created by national law No. 24.196. As at 31 December 2013, the amount payable as tax on mining reserves was US$1,381,000 recorded as 'Trade and other payables'. The amount recorded in the income statement was US$2,453,000 as other expenses.
31 Subsequent events
· On 1 January 2014, following the acquisition of International Minerals Corporation (note 4(a)), the Group proceeded with the merger of Compañía Minera Ares S.A.C. and Minera Suyamarca S.A.C.
· On 23 January 2014, the Group completed an offering of US$350,000,000 of Senior Notes with a coupon rate of 7.750% due for repayment in 2021 via its wholly owned subsidiary, Compañía Minera Ares S.A.C. The Notes were offered only to qualified institutional buyers under Rule 144A under the Securities Act and to non-U.S. persons outside the United States in reliance on Regulation S of the Securities Act. The Notes are guaranteed by Hochschild Mining plc and certain of its subsidiaries. The net proceeds from the sale of the Notes was used to repay the outstanding borrowings under the Syndicated Loan (see note 25) in full, plus accrued and unpaid interest, and to pay related fees and expenses.
· On 28 February 2014 the Group sold its interest in Minas Santa María de Moris, S.A. de C.V. ("Moris") to Exploraciones y Desarrollos Regiomontanos, S.A. de C.V. ("EDR") and Arturo Préstamo Elizondo ("APE"). The terms of the transaction stipulate that:
o the Group is entitled to a 1% net smelter return over the Moris concessions; and
o EDR and APE will assume all costs associated with the mine and plant rehabilitation obligations.
The transaction does not include the cash balances of Moris, which will be transferred to the Group.
The transaction resulted in a loss of US$2,963,000.
· In March 2014, the Group signed agreements with Citibank N.A., Goldman Sachs International and JP Morgan to hedge the sale of 1,000,000 ounces of silver at US$22 per ounce, 1,000,000 ounces of silver at US$22 per ounce and 3,300 ounces of gold at US$1,338.45 per ounce, during the period from March to December 2014.
Profit by operation¹
(Segment report reconciliation) as at 31 December 2013
|
Company (US$ 000) |
Ares |
Arcata |
Pallancata |
San Jose |
Moris |
Consolidation adjustment and others |
Total/HOC |
|
|
Revenue |
50,362 |
136,968 |
181,795 |
240,723 |
12,247 |
63 |
622,158 |
|
|
Cost of sales (Pre consolidation) |
(53,684) |
(104,933) |
(130,034) |
(170,682) |
(10,817) |
918 |
(469,232) |
|
|
Consolidation adjustment |
647 |
1,253 |
(2,821) |
3 |
- |
918 |
- |
|
|
Cost of sales (Post consolidation) |
(54,331) |
(106,186) |
(127,213) |
(170,685) |
(10,817) |
- |
(469,232) |
|
|
Production cost excluding depreciation |
(42,521) |
(73,128) |
(75,934) |
(114,053) |
(8,529) |
- |
(314,165) |
|
|
Depreciation in production cost |
(9,029) |
(32,038) |
(50,142) |
(51,173) |
(1,755) |
- |
(144,137) |
|
|
Other items |
3 |
638 |
(571) |
(7,074) |
- |
- |
(7,004) |
|
|
Change in inventories |
(2,784) |
(1,658) |
(566) |
1,615 |
(533) |
- |
(3,926) |
|
|
Gross profit |
(3,322) |
32,035 |
51,761 |
70,041 |
1,430 |
981 |
152,926 |
|
|
Administrative expenses |
- |
- |
- |
- |
- |
(56,776) |
(56,776) |
|
|
Exploration expenses |
- |
- |
- |
- |
- |
(46,327) |
(46,327) |
|
|
Selling expenses |
(193) |
(325) |
(2,404) |
(25,899) |
- |
36 |
(28,785) |
|
|
Other income/expenses |
- |
- |
- |
- |
- |
(9,139) |
(9,139) |
|
|
Operating profit before impairment |
(3,515) |
31,710 |
49,357 |
44,142 |
1,430 |
(111,225) |
11,899 |
|
|
Impairment of assets |
- |
- |
- |
- |
- |
(90,671) |
(90,671) |
|
|
Investments under equity method |
- |
- |
- |
- |
- |
5,921 |
5,921 |
|
|
Finance income |
- |
- |
- |
- |
- |
121,034 |
121,034 |
|
|
Finance costs |
- |
- |
- |
- |
- |
(148,050) |
(148,050) |
|
|
FX loss |
- |
- |
- |
- |
- |
(19,753) |
(19,753) |
|
|
Profit/(loss) from continuing operations before income tax |
(3,515) |
31,710 |
49,357 |
44,142 |
1,430 |
(242,744) |
(119,620) |
|
|
Income tax |
- |
- |
- |
- |
- |
(9,057) |
(9,057) |
|
|
Profit/(loss) for the year from continuing operations |
(3,515) |
31,710 |
49,357 |
44,142 |
1,430 |
(251,801) |
(128,677) |
|
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 2004 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 65 to 69 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 2013, 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$1,200 per ounce and Ag Price: US$20 per ounce.
Attributable metal reserves as at 31 December 2013
Reserve category |
|
Proved and probable
(t) |
|
Ag
(g/t) |
|
Au
(g/t) |
|
Ag
(moz) |
|
Au
(koz) |
|
Ag Eq
(moz) |
MAIN OPERATIONS¹ |
|
|
|
|
|
|
|
|
|
|
|
|
Arcata |
|
|
|
|
|
|
|
|
|
|
|
|
Proved |
|
803,568 |
|
324 |
|
0.9 |
|
8.4 |
|
23.7 |
|
9.8 |
Probable |
|
1,205,831 |
|
304 |
|
0.8 |
|
11.8 |
|
32.7 |
|
13.7 |
Total |
|
2,009,399 |
|
312 |
|
0.9 |
|
20.1 |
|
56.4 |
|
23.5 |
Pallancata |
|
|
|
|
|
|
|
|
|
|
|
|
Proved |
|
1,742,995 |
|
251 |
|
1.2 |
|
14.1 |
|
64.9 |
|
18.0 |
Probable |
|
1,121,338 |
|
241 |
|
1.1 |
|
8.7 |
|
39.6 |
|
11.1 |
Total |
|
2,864,332 |
|
247 |
|
1.1 |
|
22.8 |
|
104.5 |
|
29.0 |
San Jose |
|
|
|
|
|
|
|
|
|
|
|
|
Proved |
|
484,606 |
|
597 |
|
7.8 |
|
9.3 |
|
121.8 |
|
16.6 |
Probable |
|
440,167 |
|
426 |
|
6.2 |
|
6.0 |
|
87.1 |
|
11.2 |
Total |
|
924,773 |
|
515 |
|
7.0 |
|
15.3 |
|
208.9 |
|
27.9 |
Main operations total |
|
|
|
|
|
|
|
|
|
|
|
|
Proved |
|
3,031,169 |
|
326 |
|
2.2 |
|
31.7 |
|
210.5 |
|
44.4 |
Probable |
|
2,767,336 |
|
298 |
|
1.8 |
|
26.5 |
|
159.4 |
|
36.1 |
Total |
|
5,798,505 |
|
312 |
|
2.0 |
|
58.2 |
|
369.9 |
|
80.4 |
OTHER OPERATIONS |
|
|
|
|
|
|
|
|
|
|
|
|
Ares |
|
|
|
|
|
|
|
|
|
|
|
|
Proved |
|
76,997 |
|
148 |
|
2.1 |
|
0.4 |
|
5.2 |
|
0.7 |
Probable |
|
19,085 |
|
184 |
|
1.6 |
|
0.1 |
|
1.0 |
|
0.2 |
Total |
|
96,082 |
|
155 |
|
2.0 |
|
0.5 |
|
6.2 |
|
0.9 |
ADVANCED PROJECTS |
|
|
|
|
|
|
|
|
|
|
|
|
Inmaculada2 |
|
|
|
|
|
|
|
|
|
|
|
|
Proved |
|
3,840,000 |
|
106 |
|
3.4 |
|
13.1 |
|
424.7 |
|
38.6 |
Probable |
|
3,960,000 |
|
134 |
|
3.3 |
|
17.0 |
|
424.5 |
|
42.5 |
Total |
|
7,800,000 |
|
120 |
|
3.4 |
|
30.1 |
|
849.2 |
|
81.1 |
Group total |
|
|
|
|
|
|
|
|
|
|
|
|
Proved |
|
6,948,166 |
|
202 |
|
2.9 |
|
45.2 |
|
640.4 |
|
83.6 |
Probable |
|
6,746,421 |
|
201 |
|
2.7 |
|
43.6 |
|
584.8 |
|
78.7 |
TOTAL |
|
13,694,587 |
|
202 |
|
2.8 |
|
88.9 |
|
1,225.2 |
|
162.4 |
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 Main operations were audited by P&E Consulting.
2 Inmaculada reserves as published in the Feasibility Study released on 11 January 2012. Prices used for reserves calculation: Au: $1,100/oz and Ag: $18/oz.
Attributable metal resources as at 31 December 2013
Resource category |
|
Tonnes (t) |
|
Ag (g/t) |
|
Au (g/t) |
|
Zn (%) |
|
Pb (%) |
|
Cu (%) |
|
Ag Eq (g/t) |
|
Ag (moz) |
|
Au (koz) |
|
Ag Eq (moz) |
|
Zn (kt) |
|
Pb (kt) |
|
Cu (kt) |
MAIN OPERATIONS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Arcata |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Measured |
|
1,451,282 |
|
456 |
|
1.35 |
|
- |
|
- |
|
- |
|
537 |
|
21.3 |
|
63.0 |
|
25.1 |
|
- |
|
- |
|
- |
Indicated |
|
2,233,235 |
|
368 |
|
1.31 |
|
- |
|
- |
|
- |
|
446 |
|
26.4 |
|
93.7 |
|
32.0 |
|
- |
|
- |
|
- |
Total |
|
3,684,517 |
|
403 |
|
1.32 |
|
- |
|
- |
|
- |
|
482 |
|
47.7 |
|
156.7 |
|
57.1 |
|
- |
|
- |
|
- |
Inferred |
|
3,489,726 |
|
309 |
|
1.14 |
|
- |
|
- |
|
- |
|
377 |
|
34.7 |
|
127.9 |
|
42.4 |
|
- |
|
- |
|
- |
Pallancata |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Measured |
|
3,384,579 |
|
340 |
|
1.57 |
|
- |
|
- |
|
- |
|
434 |
|
37.0 |
|
170.6 |
|
47.3 |
|
- |
|
- |
|
- |
Indicated |
|
1,307,053 |
|
293 |
|
1.34 |
|
- |
|
- |
|
- |
|
374 |
|
12.3 |
|
56.2 |
|
15.7 |
|
- |
|
- |
|
- |
Total |
|
4,691,631 |
|
327 |
|
1.50 |
|
- |
|
- |
|
- |
|
417 |
|
49.3 |
|
226.8 |
|
63.0 |
|
- |
|
- |
|
- |
Inferred |
|
3,943,208 |
|
284 |
|
1.41 |
|
- |
|
- |
|
- |
|
369 |
|
36.0 |
|
179.0 |
|
46.7 |
|
- |
|
- |
|
- |
San Jose |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Measured |
|
777,207 |
|
640 |
|
8.85 |
|
- |
|
- |
|
- |
|
1,171 |
|
16.0 |
|
221.1 |
|
29.3 |
|
- |
|
- |
|
- |
Indicated |
|
1,465,734 |
|
448 |
|
6.71 |
|
- |
|
- |
|
- |
|
850 |
|
21.1 |
|
316.0 |
|
40.1 |
|
- |
|
- |
|
- |
Total |
|
2,242,941 |
|
515 |
|
7.45 |
|
- |
|
- |
|
- |
|
962 |
|
37.1 |
|
537.2 |
|
69.3 |
|
- |
|
- |
|
- |
Inferred |
|
944,372 |
|
455 |
|
7.23 |
|
- |
|
- |
|
- |
|
889 |
|
13.8 |
|
219.6 |
|
27.0 |
|
- |
|
- |
|
- |
Main operations total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Measured |
|
5,616,068 |
|
412 |
|
2.52 |
|
- |
|
- |
|
- |
|
563 |
|
74.3 |
|
454.8 |
|
101.6 |
|
- |
|
- |
|
- |
Indicated |
|
5,006,022 |
|
372 |
|
2.90 |
|
- |
|
- |
|
- |
|
546 |
|
59.9 |
|
466.0 |
|
87.8 |
|
- |
|
- |
|
- |
Total |
|
10,619,090 |
|
393 |
|
2.70 |
|
- |
|
- |
|
- |
|
555 |
|
134.1 |
|
920.7 |
|
189.4 |
|
- |
|
- |
|
- |
Inferred |
|
8,377,307 |
|
314 |
|
1.95 |
|
- |
|
- |
|
- |
|
431 |
|
84.5 |
|
526.5 |
|
116.1 |
|
- |
|
- |
|
- |
OTHER OPERATIONS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ares |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Measured |
|
523,206 |
|
184 |
|
5.82 |
|
- |
|
- |
|
- |
|
533 |
|
3.1 |
|
97.9 |
|
9.0 |
|
- |
|
- |
|
- |
Indicated |
|
152,060 |
|
199 |
|
3.02 |
|
- |
|
- |
|
- |
|
380 |
|
1.0 |
|
14.8 |
|
1.9 |
|
- |
|
- |
|
- |
Total |
|
675,266 |
|
187 |
|
5.19 |
|
- |
|
- |
|
- |
|
499 |
|
4.1 |
|
112.6 |
|
10.8 |
|
- |
|
- |
|
- |
Inferred |
|
414,112 |
|
171 |
|
3.74 |
|
- |
|
- |
|
- |
|
395 |
|
2.3 |
|
49.7 |
|
5.3 |
|
- |
|
- |
|
- |
Other operations total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Measured |
|
523,206 |
|
184 |
|
5.82 |
|
- |
|
- |
|
- |
|
533 |
|
3.1 |
|
97.9 |
|
9.0 |
|
- |
|
- |
|
- |
Indicated |
|
152,060 |
|
199 |
|
3.02 |
|
- |
|
- |
|
- |
|
380 |
|
1.0 |
|
14.8 |
|
1.9 |
|
- |
|
- |
|
- |
Total |
|
675,266 |
|
187 |
|
5.19 |
|
- |
|
- |
|
- |
|
499 |
|
4.1 |
|
112.6 |
|
10.8 |
|
- |
|
- |
|
- |
Inferred |
|
414,112 |
|
171 |
|
3.74 |
|
- |
|
- |
|
- |
|
395 |
|
2.3 |
|
49.7 |
|
5.3 |
|
- |
|
- |
|
- |
ADVANCED/GROWTH PROJECTS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Inmaculada1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Measured |
|
3,283,431 |
|
128 |
|
4.10 |
|
- |
|
- |
|
- |
|
374 |
|
13.5 |
|
432.8 |
|
39.4 |
|
- |
|
- |
|
- |
Indicated |
|
3,782,818 |
|
159 |
|
4.05 |
|
- |
|
- |
|
- |
|
402 |
|
19.3 |
|
492.3 |
|
48.9 |
|
- |
|
- |
|
- |
Total |
|
7,066,249 |
|
144 |
|
4.07 |
|
- |
|
- |
|
- |
|
389 |
|
32.8 |
|
925.1 |
|
88.3 |
|
- |
|
- |
|
- |
Inferred |
|
4,937,776 |
|
152 |
|
3.91 |
|
- |
|
- |
|
- |
|
387 |
|
24.2 |
|
620.0 |
|
61.4 |
|
- |
|
- |
|
- |
1 Inmaculada resources as published in the Feasibility Study released on 11 January 2012. Prices used for resources calculation: Au: $1,100/oz and Ag: $18/oz.
Attributable metal resources as at 31 December 2013 (continued)
Resource category |
|
Tonnes (t) |
|
Ag (g/t) |
|
Au (g/t) |
|
Zn (%) |
|
Pb (%) |
|
Cu (%) |
|
Ag Eq (g/t) |
|
Ag (moz) |
|
Au (koz) |
|
Ag Eq
(moz) |
|
Zn (kt) |
|
Pb (kt) |
|
Cu (kt) |
ADVANCED/GROWTH PROJECTS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Crespo2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Measured |
|
5,211,058 |
|
47 |
|
0.47 |
|
- |
|
- |
|
- |
|
75 |
|
7.9 |
|
78.6 |
|
12.6 |
|
- |
|
- |
|
- |
Indicated |
|
17,298,228 |
|
38 |
|
0.40 |
|
- |
|
- |
|
- |
|
62 |
|
21.0 |
|
222.5 |
|
34.3 |
|
- |
|
- |
|
- |
Total |
|
22,509,286 |
|
40 |
|
0.42 |
|
- |
|
- |
|
- |
|
65 |
|
28.8 |
|
301.0 |
|
46.9 |
|
- |
|
- |
|
- |
Inferred |
|
775,429 |
|
46 |
|
0.57 |
|
- |
|
- |
|
- |
|
80 |
|
1.1 |
|
14.2 |
|
2.0 |
|
- |
|
- |
|
- |
Azuca |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Measured |
|
190,602 |
|
244 |
|
0.77 |
|
- |
|
- |
|
- |
|
290 |
|
1.5 |
|
4.7 |
|
1.8 |
|
- |
|
- |
|
- |
Indicated |
|
6,858,594 |
|
187 |
|
0.77 |
|
- |
|
- |
|
- |
|
233 |
|
41.2 |
|
168.8 |
|
51.3 |
|
- |
|
- |
|
- |
Total |
|
7,049,197 |
|
188 |
|
0.77 |
|
- |
|
- |
|
- |
|
234 |
|
42.7 |
|
173.5 |
|
53.1 |
|
- |
|
- |
|
- |
Inferred |
|
6,946,341 |
|
170 |
|
0.89 |
|
- |
|
- |
|
- |
|
223 |
|
37.9 |
|
199.5 |
|
49.9 |
|
- |
|
- |
|
- |
Volcan3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Measured |
|
105,918,000 |
|
- |
|
0.738 |
|
- |
|
- |
|
- |
|
44 |
|
- |
|
2,511.0 |
|
150.7 |
|
- |
|
- |
|
- |
Indicated |
|
283,763,000 |
|
- |
|
0.698 |
|
- |
|
- |
|
- |
|
42 |
|
- |
|
6,367.0 |
|
382.0 |
|
- |
|
- |
|
- |
Total |
|
389,681,000 |
|
- |
|
0.709 |
|
- |
|
- |
|
- |
|
43 |
|
- |
|
8,878.0 |
|
532.7 |
|
- |
|
- |
|
- |
Inferred |
|
41,553,000 |
|
- |
|
0.502 |
|
- |
|
- |
|
- |
|
30 |
|
- |
|
671.0 |
|
40.3 |
|
- |
|
- |
|
- |
Advanced/Growth Projects total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Measured |
|
114,603,091 |
|
6 |
|
0.82 |
|
- |
|
- |
|
- |
|
56 |
|
22.9 |
|
3,027.1 |
|
204.5 |
|
- |
|
- |
|
- |
Indicated |
|
311,702,641 |
|
8 |
|
0.72 |
|
- |
|
- |
|
- |
|
52 |
|
81.5 |
|
7,250.6 |
|
516.5 |
|
- |
|
- |
|
- |
Total |
|
426,305,732 |
|
8 |
|
0.75 |
|
- |
|
- |
|
- |
|
53 |
|
104.3 |
|
10,277.6 |
|
721.0 |
|
- |
|
- |
|
- |
Inferred |
|
54,212,547 |
|
36 |
|
0.86 |
|
- |
|
- |
|
- |
|
88 |
|
63.2 |
|
1,504.7 |
|
153.5 |
|
- |
|
- |
|
- |
OTHER PROJECTS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jasperoide4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Measured |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
|
|
- |
|
- |
|
- |
Indicated |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
|
|
- |
|
- |
|
- |
Total |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
|
|
- |
|
- |
|
- |
Inferred |
|
12,187,270 |
|
- |
|
0.32 |
|
- |
|
- |
|
1.32 |
|
147 |
|
- |
|
126.8 |
|
57.6 |
|
- |
|
- |
|
161.2 |
San Felipe |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Measured |
|
1,393,716 |
|
69 |
|
0.02 |
|
7.12 |
|
3.10 |
|
0.39 |
|
315 |
|
3.1 |
|
0.9 |
|
14.1 |
|
99.3 |
|
43.1 |
|
5.5 |
Indicated |
|
1,354,261 |
|
82 |
|
0.06 |
|
6.14 |
|
2.73 |
|
0.31 |
|
295 |
|
3.6 |
|
2.4 |
|
12.9 |
|
83.2 |
|
37.0 |
|
4.2 |
Total |
|
2,747,977 |
|
76 |
|
0.04 |
|
6.64 |
|
2.92 |
|
0.35 |
|
305 |
|
6.7 |
|
3.3 |
|
27.0 |
|
182.4 |
|
80.1 |
|
9.7 |
Inferred |
|
1,257,731 |
|
84 |
|
0.05 |
|
6.18 |
|
2.26 |
|
0.19 |
|
283 |
|
3.4 |
|
1.9 |
|
11.5 |
|
77.8 |
|
28.5 |
|
2.3 |
Other projects total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Measured |
|
1,393,716 |
|
69 |
|
0.02 |
|
7.12 |
|
3.10 |
|
0.39 |
|
315 |
|
3.1 |
|
0.9 |
|
14.1 |
|
99.3 |
|
43.1 |
|
5.5 |
Indicated |
|
1,354,261 |
|
82 |
|
0.06 |
|
6.14 |
|
2.73 |
|
0.31 |
|
295 |
|
3.6 |
|
2.4 |
|
12.9 |
|
83.2 |
|
37.0 |
|
4.2 |
Total |
|
2,747,977 |
|
76 |
|
0.04 |
|
6.64 |
|
2.92 |
|
0.35 |
|
305 |
|
6.7 |
|
3.3 |
|
27.0 |
|
182.4 |
|
80.1 |
|
9.7 |
Inferred |
|
13,445,001 |
|
8 |
|
0.30 |
|
0.58 |
|
0.21 |
|
1.22 |
|
160 |
|
3.4 |
|
128.6 |
|
69.0 |
|
77.8 |
|
28.5 |
|
163.6 |
GRAND TOTAL |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Measured |
|
122,133,081 |
|
26 |
|
0.91 |
|
0.08 |
|
0.04 |
|
0.00 |
|
84 |
|
103.3 |
|
3,580.6 |
|
329.2 |
|
99.3 |
|
43.1 |
|
5.5 |
Indicated |
|
318,214,983 |
|
14 |
|
0.76 |
|
0.03 |
|
0.01 |
|
0.00 |
|
61 |
|
145.9 |
|
7,733.8 |
|
619.0 |
|
83.2 |
|
37.0 |
|
4.2 |
Total |
|
440,348,064 |
|
18 |
|
0.80 |
|
0.04 |
|
0.02 |
|
0.00 |
|
67 |
|
249.2 |
|
11,314.3 |
|
948.2 |
|
182.4 |
|
80.1 |
|
9.7 |
Inferred |
|
76,448,966 |
|
62 |
|
0.90 |
|
0.10 |
|
0.04 |
|
0.21 |
|
140 |
|
153.4 |
|
2,209.6 |
|
343.9 |
|
77.8 |
|
28.5 |
|
163.6 |
2 Prices used for resources calculation: Au: $1,300/oz and Ag: $23/oz.
3 Resources reported in the NI 43-101 Technical Report published by Andina Minerals, January 2011. Price used for resources calculation: Au: $950/oz.
4 The silver equivalent grade (147 g/t Ag Eq) has being calculated applying the following ratios, Cu/Ag=96.38 and Au/Ag=60
Change in total reserves and resources
Ag equivalent content (million ounces) |
|
Category |
|
December
2012 |
|
Production¹ |
|
Movements² |
|
December
2013 |
|
Net difference |
|
% change |
Arcata |
|
Resource |
|
106.4 |
|
- |
|
(6.9) |
|
99.4 |
|
(6.9) |
|
(6.5) |
|
|
Reserve |
|
25.6 |
|
7.6 |
|
5.5 |
|
23.5 |
|
(2.1) |
|
(8.2) |
Pallancata |
|
Resource |
|
110.7 |
|
- |
|
(1.0) |
|
109.7 |
|
(1.0) |
|
(0.9) |
|
|
Reserve |
|
37.0 |
|
11.6 |
|
3.7 |
|
29.0 |
|
(7.9) |
|
(21.4) |
San Jose |
|
Resource |
|
189.7 |
|
- |
|
(0.8) |
|
188.9 |
|
(0.8) |
|
(0.4) |
|
|
Reserve |
|
48.8 |
|
14.0 |
|
19.8 |
|
54.6 |
|
5.8 |
|
11.9 |
Main operations total |
|
Resource |
|
406.8 |
|
- |
|
(8.7) |
|
398.0 |
|
(8.7) |
|
(2.1) |
|
|
Reserve |
|
111.4 |
|
33.2 |
|
28.9 |
|
107.2 |
|
(4.2) |
|
(3.8) |
Ares |
|
Resource |
|
15.8 |
|
- |
|
0.3 |
|
16.1 |
|
0.3 |
|
1.7 |
|
|
Reserve |
|
2.6 |
|
2.4 |
|
0.6 |
|
0.9 |
|
-1.8 |
|
(67.9) |
Other operations total |
|
Resource |
|
15.8 |
|
- |
|
0.3 |
|
16.1 |
|
0.3 |
|
1.7 |
|
|
Reserve |
|
2.6 |
|
2.4 |
|
0.6 |
|
0.9 |
|
-1.8 |
|
(67.9) |
Inmaculada |
|
Resource |
|
149.7 |
|
- |
|
- |
|
149.7 |
|
- |
|
- |
|
|
Reserve |
|
48.8 |
|
- |
|
32.3 |
|
81.1 |
|
32.3 |
|
66.1 |
Crespo |
|
Resource |
|
48.9 |
|
- |
|
- |
|
48.9 |
|
- |
|
- |
|
|
Reserve |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
Azuca |
|
Resource |
|
103.0 |
|
- |
|
- |
|
103.0 |
|
- |
|
- |
|
|
Reserve |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
Volcan |
|
Resource |
|
572.9 |
|
- |
|
- |
|
572.9 |
|
- |
|
- |
|
|
Reserve |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
Advanced/Growth Projects total |
|
Resource |
|
874.5 |
|
- |
|
- |
|
874.5 |
|
- |
|
- |
|
|
Reserve |
|
48.8 |
|
- |
|
32.3 |
|
81.1 |
|
32.3 |
|
66.1 |
Jasperoide |
|
Resource |
|
57.6 |
|
- |
|
- |
|
57.6 |
|
- |
|
- |
|
|
Reserve |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
San Felipe |
|
Resource |
|
38.5 |
|
- |
|
- |
|
38.5 |
|
- |
|
- |
|
|
Reserve |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
Other projects total |
|
Resource |
|
96.0 |
|
- |
|
- |
|
96.0 |
|
- |
|
- |
|
|
Reserve |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
Total |
|
Resource |
|
1,393.1 |
|
|
|
(8.5) |
|
1,384.6 |
|
(8.5) |
|
(0.6) |
|
|
Reserve |
|
162.9 |
|
35.5 |
|
61.8 |
|
189.1 |
|
26.3 |
|
16.1 |
1 Depletion: reduction in reserves based on ore delivered to the mine plant.
2 Variation in reserves and resources due mainly to mine site exploration but also to price changes.
Change in attributable reserves and resources
Ag equivalent content (million ounces) |
|
Category |
|
Percentage attributable
December
2013 |
|
December
2012 Att.¹ |
|
December 2013
Att.¹ |
|
Net difference |
|
% change |
Arcata |
|
Resource |
|
100% |
|
106.4 |
|
99.4 |
|
(6.9) |
|
(6.5) |
|
|
Reserve |
|
|
|
25.6 |
|
23.5 |
|
(2.1) |
|
(8.2) |
Pallancata |
|
Resource |
|
100% |
|
66.4 |
|
109.7 |
|
43.3 |
|
65.2 |
|
|
Reserve |
|
|
|
37.0 |
|
29.0 |
|
(7.9) |
|
(21.4) |
San Jose |
|
Resource |
|
51% |
|
96.8 |
|
96.3 |
|
(0.4) |
|
(0.4) |
|
|
Reserve |
|
|
|
24.9 |
|
27.9 |
|
3.0 |
|
11.9 |
Main operations total |
|
Resource |
|
|
|
269.5 |
|
305.5 |
|
35.9 |
|
13.3 |
|
|
Reserve |
|
|
|
87.5 |
|
80.4 |
|
(7.1) |
|
(8.1) |
Ares |
|
Resource |
|
100% |
|
15.8 |
|
16.1 |
|
0.3 |
|
1.7 |
|
|
Reserve |
|
|
|
2.6 |
|
0.9 |
|
(1.8) |
|
(67.9) |
Other operations total |
|
Resource |
|
|
|
15.8 |
|
16.1 |
|
0.3 |
|
1.7 |
|
|
Reserve |
|
|
|
2.6 |
|
0.9 |
|
(1.8) |
|
(67.9) |
Inmaculada |
|
Resource |
|
100% |
|
89.8 |
|
149.7 |
|
59.9 |
|
66.7 |
|
|
Reserve |
|
|
|
48.8 |
|
81.1 |
|
32.3 |
|
66.1 |
Crespo |
|
Resource |
|
100% |
|
48.9 |
|
48.9 |
|
- |
|
- |
|
|
Reserve |
|
|
|
- |
|
- |
|
- |
|
- |
Azuca |
|
Resource |
|
100% |
|
103.0 |
|
103.0 |
|
- |
|
- |
|
|
Reserve |
|
|
|
- |
|
- |
|
- |
|
- |
Volcan |
|
Resource |
|
100% |
|
572.9 |
|
572.9 |
|
- |
|
- |
|
|
Reserve |
|
|
|
|
|
|
|
- |
|
- |
Advanced/Growth Projects total |
|
Resource |
|
|
|
814.6 |
|
874.5 |
|
59.9 |
|
7.3 |
|
|
Reserve |
|
|
|
48.8 |
|
81.1 |
|
32.3 |
|
66.1 |
Jasperoide |
|
Resource |
|
100% |
|
57.6 |
|
57.6 |
|
- |
|
- |
|
|
Reserve |
|
|
|
- |
|
- |
|
- |
|
- |
San Felipe |
|
Resource |
|
100% |
|
38.5 |
|
38.5 |
|
- |
|
- |
|
|
Reserve |
|
|
|
- |
|
- |
|
- |
|
- |
Other projects total |
|
Resource |
|
|
|
96.0 |
|
96.0 |
|
- |
|
- |
|
|
Reserve |
|
|
|
|
|
- |
|
- |
|
- |
Total |
|
Resource |
|
|
|
1,196.0 |
|
1,292.1 |
|
96.1 |
|
8.0 |
|
|
Reserve |
|
|
|
138.9 |
|
162.4 |
|
23.4 |
|
(9.8) |
1 Attributable reserves and resources based on the Group's percentage ownership of its joint venture projects.
Production
Total Group production1
|
Year ended 31 December 2013 |
Year ended 31 December 2012 |
% change |
Silver production (koz) |
19,754 |
19,443 |
2 |
Gold production (koz) |
175.22 |
164.34 |
7 |
Total silver equivalent (koz) |
30,267 |
29,304 |
3 |
Total gold equivalent (koz) |
504.45 |
488.40 |
3 |
Silver sold (koz) |
19,555 |
18,928 |
3 |
Gold sold (koz) |
168.56 |
159.79 |
5 |
1Total production includes 100% of all production, including production attributable to joint venture partners at San Jose and Pallancata.
Attributable Group production2
|
Year ended 31 December 2013 |
Year ended 31 December 2012 |
% change |
Silver production (koz) |
13,588 |
13,550 |
- |
Gold production (koz) |
115.7 |
111.82 |
3 |
Attrib. silver equivalent (koz) |
20,528 |
20,260 |
1 |
Attrib. gold equivalent (koz) |
342.13 |
337.66 |
1 |
2Attributable production includes 100% of all production from Arcata, Ares and Moris, 60% from Pallancata and 51% from San Jose.
2013 production by mine
Arcata
Product |
Year ended 31 December 2013 |
Year ended 31 December 2012 |
% change |
Ore production (tonnes) |
900,861 |
773,498 |
16 |
Average silver grade (g/t) |
217 |
271 |
(20) |
Average gold grade (g/t) |
0.74 |
0.83 |
(11) |
Silver produced (koz) |
4,984 |
5,526 |
(10) |
Gold produced (koz) |
16.83 |
17.27 |
(3) |
Silver equivalent produced (koz) |
5,994 |
6,562 |
(9) |
Silver sold (koz) |
4,924 |
5,236 |
(6) |
Gold sold (koz) |
15.95 |
15.94 |
- |
Ares
Product |
Year ended 31 December 2013 |
Year ended 31 December 2012 |
% change |
Ore production (tonnes) |
329,095 |
336,423 |
(2) |
Average silver grade (g/t) |
82 |
54 |
(52) |
Average gold grade (g/t) |
2.39 |
2.65 |
(10) |
Silver produced (koz) |
757 |
481 |
57 |
Gold produced (koz) |
23.40 |
26.28 |
(11) |
Silver equivalent produced (koz) |
2,162 |
2,058 |
5 |
Silver sold (koz)1 |
761 |
473 |
61 |
Gold sold (koz)2 |
23.25 |
25.75 |
(10) |
Pallancata3
Product |
Year ended 31 December 2013 |
Year ended 31 December 2012 |
% change |
Ore production (tonnes) |
1,088,712 |
1,094,250 |
(1) |
Average silver grade (g/t) |
264 |
256 |
3 |
Average gold grade (g/t) |
1.13 |
1.09 |
4 |
Silver produced (koz) |
7,628 |
7,441 |
3 |
Gold produced (koz) |
27.83 |
26.23 |
6 |
Silver equivalent produced (koz) |
9,298 |
9,014 |
3 |
Silver sold (koz) |
7,567 |
7,280 |
4 |
Gold sold (koz) |
26.67 |
25.07 |
6 |
3Until 20 Dec 2013 the Company had a 60% interest in Pallancata. Following completion of the International Minerals acquisition the Company now owns 100% of Pallancata.
San Jose4
Product |
Year ended 31 December 2013 |
Year ended 31 December 2012 |
% change |
Ore production (tonnes) |
536,937 |
509,851 |
5 |
Average silver grade (g/t) |
425 |
417 |
2 |
Average gold grade (g/t) |
6.42 |
5.79 |
11 |
Silver produced (koz) |
6,357 |
5,953 |
7 |
Gold produced (koz) |
98.83 |
85.77 |
15 |
Silver equivalent produced (koz) |
12,286 |
11,099 |
11 |
Silver sold (koz) |
6,278 |
5,897 |
6 |
Gold sold (koz) |
94.76 |
84.29 |
12 |
4The Company has a 51% interest in San Jose.
Moris
Product |
Year ended 31 December 2013 |
Year ended 31 December 2012 |
% change |
Ore production (tonnes) |
|
- |
- |
Average silver grade (g/t) |
|
- |
|
Average gold grade (g/t) |
|
- |
- |
Silver produced (koz) |
27 |
43 |
(37) |
Gold produced (koz) |
8.33 |
8.79 |
(5) |
Silver equivalent produced (koz) |
527 |
570 |
(8) |
Silver sold (koz) |
26 |
42 |
(38) |
Gold sold (koz) |
7.93 |
8.74 |
(9) |
Glossary
Ag Silver |
|
Adjusted EBITDA Adjusted EBITDA is calculated as profit from continuing operations before exceptional items, net finance costs and income tax plus depreciation and exploration expenses other than personnel and other exploration related fixed expenses. All-in sustaining costs (AISC) All-in sustaining cash cost per silver equivalent ounce is a non IFRS measure. It is calculated before exceptional items includes cost of sales less depreciation and change in inventories, administrative expenses, brownfield exploration, operating capex and royalties divided by silver equivalent ounces produced using a ratio of 60:1 (Au/Ag). Also includes commercial discounts and selling expenses divided by silver equivalent ounces sold using a ratio of 60:1 (Au/Ag). |
|
|
|
|
|
|
Au Gold |
|
Attributable after tax profit Profit for the year before dividends attributable to the equity shareholders of Hochschild Mining plc from continuing operations before exceptional items and after minority interest. |
|
|
Average head grade Average ore grade fed into the mill |
|
Board The Board of Directors of the Company |
|
Company Hochschild Mining plc |
|
CSR Corporate social responsibility |
|
Cu Copper |
|
Directors The Directors of the Company |
|
DNV Det Norske Veritas is an independent foundation with the purpose of safeguarding life, property, and the environment |
|
Dore Dore bullion is an impure alloy of gold and silver and is generally the final product of mining and processing; the dore bullion will be transported to be refined to high purity metal |
|
|
Dollar or $ United States dollars |
|
Effective Tax Rate Income tax expense as a percentage of profit from continuing operations before income tax |
|
EPS The per-share (using the weighted average number of shares outstanding for the period) profit available to equity shareholders of the Company from continuing operations after exceptional items |
|
|
eq equivalent |
|
Exceptional item Events that are significant and which, due to their nature or the expected infrequency of the events giving rise to them, need to be disclosed separately |
|
g/t Grammes per tonne |
|
GAAP Generally Accepted Accounting Principles |
|
Group Hochschild Mining plc and subsidiary undertakings |
|
IAS International Accounting Standards |
|
IASB International Accounting Standards Board |
|
IFRS International Financial Reporting Standards |
|
JV Joint venture |
|
koz Thousand ounces |
|
kt Thousand tonnes |
|
ktpa Thousand tonnes per annum |
|
Listing or IPO (Initial Public Offering) or Global Offer The listing of the Company's Ordinary Shares on the London Stock Exchange on 8 November 2006 |
|
LTI Lost Time Injury, meaning an occupational injury or illness that results in days away from work |
|
LTIFR Lost Time Injury Frequency Rate = LTI x 1,000,000/hours worked |
|
moz Million ounces |
|
Ordinary Shares Ordinary Shares of 25p each in the Company |
|
Pb Lead |
|
Spot or spot price The purchase price of a commodity at the current price, normally this is at a discount to the long-term contract price |
|
t tonne |
|
tpa tonnes per annum |
|
tpd tonnes per day |
|
Zn Zinc |
|
Shareholder information
Annual General Meeting ('AGM')
The AGM will be held at 9:30am on 22 May 2014 at the offices of Linklaters LLP, One Silk Street, London, EC2Y 8HQ.
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, dividends and to report changes in personal details:
- By post
Capita Registrars, The Registry, 34 Beckenham Road, Beckenham, Kent BR3 4TU
- By telephone
If calling from the UK: 0871 664 0300 (Calls cost 10p per minute plus network extras, lines are open 8.30am - 5.30pm Mon to Fri) If calling from overseas: +44 20 8639 3399
- By fax
+44 (0)1484 600 911
Investor relations
For investor enquiries please contact: Charles Gordon, by writing to the London Office address (see below), by phone on 020 7907 2933 or by email at [email protected].
Financial calendar
Annual General Meeting 22 May 2014
Half-yearly results announced 20 August 2014
London Office and Registered Office address
46 Albemarle Street
London
W1S 4JL
United Kingdom
Company Secretary
R D Bhasin
