Hochschild Mining Interim Results

 

 

 

20 August 2014

 

 

 

 

Hochschild Mining plc

 

Interim Results for the six months ended 30 June 2014

 

 

Financial highlights[1]

· Revenue of $282.0 million (H1 2013: $308.6 million)

· Adjusted EBITDA of $94.3 million (H1 2013: $90.4 million)[2]

· Profit before net finance income, FX and tax of $25.7 million (H1 2013: $1.2 million)

· Profit before tax of $9.1 million (H1 2013: $(10.3 million))

· EPS of $(0.01) (H1 2013: $(0.10))

· Cashflow optimisation programme exceeding expectations - approx. $270 million of savings achieved[3]:

o Production costs reduced by $94 million versus initial 2013 guidance

o Administration costs reduced by $34 million versus 2012

o Sustaining capital expenditure reduced by $67 million versus initial 2013 guidance

o Exploration costs reduced by $53 million versus initial 2013 guidance

· Main operation all-in sustaining costs lowered by 16% to $16.8 per ounce (H1 2013: $19.9)[4]

· Cash balance of $225.6 million as at 30 June 2014

· Term sheet signed for $100 million medium term credit facility[5]

 

Operational highlights

· H1 2014 attributable production of 11.9 million silver equivalent ounces

· Progress continues at flagship Inmaculada project:

o 68% overall project completion; plant at 33%

o Mine development, infrastructure, energy and engineering targets almost complete

 

Outlook

· Inmaculada plant set to commence commissioning at end of 2014

· 2014 production target of 21.0 million attributable silver equivalent ounces on track

· 0-5% reduction in all-in sustaining costs expected for 2014 vs. 2013

 

$000, pre-exceptional unless stated	Six months to 30 June 2014	Six months to 30 June 2013	% change
Attributable silver production (koz)	8,526	7,665	11
Attributable gold production (koz)	55	64	(14)
Net Revenue[6]	282,012	308,577	(9)
Adjusted EBITDA	94,282	90,410	4
Profit from continuing operations before income tax	9,129	(10,277)	189
(Loss)/profit from continuing operations	(1,546)	(25,215)	94
(Loss)/profit from continuing operations (post-exceptional)	(11,749)	(38,427)	69
Earnings per share ($ pre-exceptional)	(0.01)	(0.10)	90
Earnings per share ($ post-exceptional)	(0.04)	(0.10)	60

 

Commenting on the results, Eduardo Hochschild, Executive Chairman, said:

"Hochschild has continued to operate in an uncertain precious metal pricing environment but the Board is encouraged that over the last year, the organisation as a whole, has responded with a programme of measures that has substantially exceeded our initial projections and places the Company in a far firmer financial position. We are now looking forward to the commissioning of our latest mine and a return to value accretive growth.

 

The Board recognises that whilst there has been a marked improvement in the Company's financial results, the current level of capital expenditure required by the Inmaculada project restricts the potential to pay an interim dividend. We remain committed to the long term principle of delivering shareholder returns and the Board intends to once again reassess the position subject to the overall full year financial results."

_______________________________________________________________________________________

A live conference call & audio webcast will be held at 2pm (London time) on Wednesday 20 August 2014 for analysts and investors. Details as follows:

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

http://www.media-server.com/m/p/6w42kwyd

 

Conference call dial in details:

UK: +44(0)20 3427 1914 (Please use the following confirmation code: 2818807).

                                                       

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

UK: +44 (0)20 3427 0598(Access code: 2818807)

 

The On Demand version of the webcast will be available within two hours after the end of the presentation and is accessible using the same webcast link.

_______________________________________________________________________________________

Enquiries:

Hochschild Mining plc

Charles Gordon                                                                          +44 (0)20 3714 9044

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 three underground epithermal vein mines, two located in southern Peru and one in southern Argentina. Hochschild also has numerous long-term projects throughout the Americas.

CHIEF EXECUTIVE OFFICER'S STATEMENT

I am pleased to report that the cash optimisation programme carried out over the last year has exceeded expectations and Hochschild is now in a much better position in today's lower precious metal price environment. As the interim results demonstrate, the Company has shown its resilience and discipline with improved profitability despite lower price levels. We have also continued to invest for the future, and I can report that progress has continued to be made with the construction of our key Inmaculada project. When this mine reaches full capacity next year it will herald a new phase of low cost growth for the Company.  

 

Hochschild's operational teams delivered a robust half, producing 11.9 million silver equivalent ounces at a much lower overall cost. Despite the average price of silver achieved falling by a further 11% year-on year, we have produced a 4% rise in first half EBITDA to just over $94 million, an impressive result reflecting the ongoing success of our cost reduction initiatives. The increase in finance costs is related to the bond issued in January to fund the construction of Inmaculada and the soon-to-be-repaid convertible bond due in October. However, once the new mine commences production and the convertible repaid, the significance of this charge will be less important. We were still able to deliver a turnaround in profit before tax from a significant loss last year to $9.1 million for this half. From an income tax standpoint, we were also impacted by a charge resulting from the Argentine peso devaluation and the consequent decrease in the value of our peso-denominated tax base. On a net basis, I am pleased that we have seen a strong improvement from last year's pre-exceptional loss of $25 million.

 

On the financing side, our balance sheet has sufficient capacity to complete the construction of Inmaculada and fund the convertible loan repayment due in October of this year. I am also pleased that we have recently demonstrated our financial flexibility with the signing of a term sheet for a $100 million medium term credit facility at advantageous rates which, subject to closing, will provide more financial short term support if required as we enter a key stage of development with capital expenditure at its peak. Local short term credit lines remain mostly undrawn. We have also taken advantage of short periods of commodity price improvement to hedge almost 30% of our production for 2014 in order to realise a degree of cashflow certainty whilst project construction is in progress.

 

The Inmaculada project itself has made good progress in the first half as it moves towards completion at the end of the year. The EPC contractor commenced construction of the plant early in the second quarter and achieved almost 33% completion by the end of July although progress has been impacted by poor weather earlier in the year and slower than expected on-site recruitment. We have also had a busy period in terms of the other deliverables with procurement of all main equipment complete and another three kilometres of tunneling and raise boring also carried out bringing the total achieved for the entire project to over 13 kilometres. In addition, work on the transmission lines is complete and connection to the national grid was achieved at the end of May.

 

We implemented the cashflow optimisation programme a year ago with a target of approximately $200 million of efficiencies spread over H2 2013 and the first half of 2014 and I can now report that we have exceeded expectations with approximately $270 million of savings from across the organisation. At the operational level, where we have realised over $90 million of efficiencies, we have improved our supply chain negotiations, optimised a wide array of workforce practices and implemented several initiatives to lower ongoing costs at both the mining and processing operations. Sustaining capital expenditure has also been significantly reduced with only $56 million spent year-to-date versus an original 2013 full year budget of $180 million. In administration, we have continued to achieve significant savings in professional fees, further headcount reductions and the minimisation of compensatory schemes and travel expenses. In addition, the exploration and Advanced Project teams have undergone a substantial reorganisation which has now delivered over $50 million of savings versus our original 2013 budget. We remain focused on the delivery of further efficiencies and are targeting opportunities from operational areas such as mine planning, metallurgy, dilution control and procurement.

 

In line with the achievements from the above programme, the operations have enjoyed another solid half in terms of production and costs. The three main operations, Arcata and Pallancata in Peru and San Jose in Argentina, improved their collective ounce contribution versus the same period of last year and we were also able to deliver a better than expected final production result from the now closed Ares mine. On the operational cost side, all-in sustaining costs (AISC) at our main operations were reduced by 16% to $16.8 per silver equivalent ounce versus the first half of last year although we do expect that a number of annual cost items to be processed in the second half will limit the overall 2014 reduction to our current forecast of 0-5%.

 

The short term outlook for our underlying markets remains uncertain but with the beginning of Inmaculada's operation imminent, the cash optimisation programme generating better than expected results and the financial position of the Company secure, I am confident that we can look forward to an exciting twelve months as our latest capital project delivers new growth for the Company and our shareholders.

 

Ignacio Bustamante

Chief Executive Officer

19 August 2014

 

OPERATING REVIEW

 

CURRENT OPERATIONS

Production

In the first half of 2014, the Company delivered attributable production of 11.9 million silver equivalent ounces, including 8.5 million ounces of silver and 55.5 thousand ounces of gold and is on track to meet its full year production target of 21.0 million attributable silver equivalent ounces.

 

Costs

The Company's all-in sustaining costs (AISC) at its main operations were reduced by 16% in H1 2014 to $16.8 per ounce driven by operational initiatives resulting from the cashflow optimisation programme, an ongoing decrease in industry cost inflation and grade improvements particularly in Peru.7 Unit cost per tonne at its main Peruvian operations was reduced to $74.0 (H1 2013: $75.5). In Argentina, unit cost per tonne was reduced by 13% to $200.0 (H1 2013: $229.9). Please see page 14 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	Six months to 30 June 2014	Six months to 30 June 2013	% change
Ore production (tonnes)	365,573	427,274	(14)
Average silver grade (g/t)	262	195	34
Average gold grade (g/t)	0.81	0.69	17
Silver produced (koz)	2,895	2,292	26
Gold produced (koz)	8.76	7.88	11
Silver equivalent produced (koz)	3,420	2,764	24
Silver sold (koz)	2,947	2,332	26
Gold sold (koz)	8.58	7.83	10
Unit cost ($/t)	82.2	83.4	(1)
Total cash cost ($/oz Ag co-product)[8]	12.5	13.8	(9)
All-in sustaining cost ($/oz)	17.9	22.3	(20)

 

Production and sales

At Arcata, total silver equivalent production in the first half of 2014 increased by 24% to 3.4 million ounces (H1 2013: 2.8 million ounces) driven by higher grades and recoveries resulting from a greater proportion of material from stopes and developments, partially replacing, as expected, volumes processed from the low-grade Macarena Waste Dam Deposit which was almost entirely depleted by the end of the half. Arcata also benefited (in the first quarter) from the processing of stock mined in 2013. Due to better commercial terms for concentrate versus dore in 2014, the Company has decided to produce only concentrate this year.

 

On the 8^th August 2014, the Arcata operation stopped production following strike action over 2014 remuneration arrangements. The dispute, initiated by one of the Peruvian labour unions, is expected to be declared illegal by the Ministry of Labour. A significant percentage of the workforce has now returned to work and the Company does not currently expect the dispute to impact the mine's full year production forecast.

 

 

Table Showing Contribution from Macarena Waste Dam Deposit

	H1 2014	H1 2013
Total
Tonnage	365,573	427,274
Average head grade gold (g/t)	0.81	0.69
Average head grade silver (g/t)	261.93	194.67
Macarena
Tonnage	38,366	144,350
Average head grade gold (g/t)	0.25	0.29
Average head grade silver (g/t)	63.35	93.25
Stopes and Developments
Tonnage	327,207	282,924
Average head grade gold (g/t)	0.88	0.90
Average head grade silver (g/t)	285.21	246.42

 

In H1 2014, the dore produced at Arcata was sold to INTL Commodities, Johnson Matthey, Auramet and HSBC whilst the concentrate produced at the operation was sold to Consorcio Minero, Trafigura and Glencore.

 

Costs

In H1 2014, the unit cost per tonne at Arcata at $82.2 per tonne was flat versus the same period last year with the overall effects of the ongoing cost savings initiatives partially offset by the planned fall in the processing of the low cost Macarena material. However, all-in sustaining costs fell by 20% to $17.9 per ounce (H1 2013: $22.3 per ounce) due to a decline in production costs and sustaining capex resulting from cashflow optimisation programme initiatives as well as better grades.

 

Exploration

In H1 2014, 4,331 metres of drilling were carried out at Arcata. A detailed surface mapping and sampling campaign has been completed covering the Tunel 4, Marciano, Veta D and Looby areas covering a total of 1,330 ha. A drilling campaign with the aim of adding new resources began in early May with five drill holes carried out at the Irma, Pamela and Paralelas veins. Significant intercepts during the half included:

 

Vein	Results
Pamela	DDH616-LM14 :1.36m at 1.16 g/t Au & 663.95 g/t Ag
Pamela Norte	DDH626-GE14: 1.47m at 1.66 g/t Au & 953.96 g/t Ag
Paralela 1	DDH587-LM14: 1.43m at 6.75 g/t Au & 985 g/t Ag
Paralela 2	DDH587-LM14: 1.02m at 2.93 g/t Au & 465 g/t Ag DDH617-LM14: 1.35m at 1.35 g/t Au & 242.53 g/t Ag
Paralela 3	DDH587-LM14: 1.00m at 4.02 g/t Au & 374 g/t Ag
Irma	DDH599-LM14: 1.74m at 0.23 g/t Au & 1,025 g/t Ag

 

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, Hochschild held a controlling interest of 60%, with International Minerals Corporation ("IMZ") as minority shareholder. 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	Six months to 30 June 2014	Six months to 30June 2013	% change
Ore production (tonnes)	523,695	523,824	-
Average silver grade (g/t)	264	253	4
Average gold grade (g/t)	1.12	1.13	(1)
Silver produced (koz)	3,588	3,534	2
Gold produced (koz)	12.84	14.11	(9)
Silver equivalent produced (koz)	4,358	4,380	(1)
Silver sold (koz)	3,615	3,590	1
Gold sold (koz)	13.11	13.67	(4)
Unit cost ($/t)	68.1	69.0	(1)
Total cash cost ($/oz Ag co-product)	10.1	10.6	(5)
All-in sustaining cost ($/oz)	15.3	17.9	(15)

 

Production and sales

At the 100% owned Pallancata operation, consistent tonnage and silver and gold grades led to similar production versus the first half of 2013. Total silver equivalent production was 4.4 million silver equivalent ounces (H1 2013: 4.4 million ounces).

 

In H1 2014, the silver/gold concentrate from Pallancata was sold to Teck Metals Ltd., LS-Nikko Copper Inc and Glencore. 

 

Costs

Cost per tonne at Pallancata decreased to $68.1 in H1 2014 versus the same period last year ($69.0 per tonne). As at Arcata, costs were positively impacted by the cashflow optimisation programme although the impact was partially offset by a higher proportion of mineral extracted using conventional methods due to narrower veins. All-in sustaining costs fell by 15% versus the same period of 2013 with the positive effects of the cash optimisation programme reducing sustaining and development capital expenditure as well as administrative expenses.

 

Exploration

In H1 2014, 3,939 metres of drilling were carried out at Pallancata. The first half programme, which focused on mapping and sampling a total of 1,200 ha, was concentrated on the Yurika, Jakeline, Pilar, Jessica, Emilia, Tatiana, Vianka, Isis and Huararani vein systems. New surface structures Tatiana, Vianca and Larisa have also been recognised. In addition, drilling has been ongoing at two holes in the Vianca-Claudia and Yurika vein systems. 

 

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 and commenced production in 2007. Hochschild holds a controlling interest of 51% and is the mine operator with McEwen Mining Inc (formerly Minera Andes Inc.) holding the remaining 49%.

 

San Jose summary*	Six months to 30 June 2014	Six months to 30 June 2013	% change
Ore production (tonnes)	276,663	249,195	11
Average silver grade (g/t)	385	430	(10)
Average gold grade (g/t)	5.60	6.57	(15)
Silver produced (koz)	2,975	2,926	2
Gold produced (koz)	43.91	46.69	(6)
Silver equivalent produced (koz)	5,610	5,728	(2)
Silver sold (koz)	3,004	2,880	4
Gold sold (koz)	43.25	44.79	(3)
Unit cost ($/t)	200.0	229.9	(13)
Total cash cost ($/oz Ag co-product)	12.9	14.9	(13)
All-in sustaining cost ($/oz)	17.3	20.4	(15)

^*The Company has a 51% interest in San Jose

 

Production and sales

At the San Jose operation, total silver equivalent production for the first half was 5.6 million ounces (H1 2013: 5.7 million ounces) with lower silver and gold grades offset by increased tonnage versus the first half of 2013.

 

In H1 2014, the dore produced at San Jose was sold to Argor Heraeus and Republic Metals whilst the concentrate produced at the operation was sold to Aurubis AG, LS-Nikko Copper Inc, Consorcio Minero and Trafigura.

 

Costs

At San Jose, unit cost per tonne decreased by 13% versus H1 2013 to $200.0. This was due to the impact of the cash 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. All-in sustaining costs were reduced by 15% versus the same period of 2013 with cash optimisation initiatives helping to reduce sustaining and development capital expenditure by some 23% year-on-year.

 

Exploration

In 2014, the 2,000 metre potential drilling campaign has been focused on the definition of the new Ayelen, Nuevo 1 and Karina veins as well as drilling in the Los Pinos area. The team has already completed detailed surface mapping and sampling over the Los Pinos vein and identified another structure, Los Pinitos In addition, mapping of the Coyi and Nueva Ramona Rubia veins has identified additional corridors for the next drilling campaigns to focus on whilst further structures have been identified in the Sigmoide sector (located to the north east side) and to the west in the El Retiro Zone 4.

 

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	Six months to 30 June 2014	Six months to 30 June 2013	% change
Ore production (tonnes)	167,331	149,828	12
Average silver grade (g/t)	110	71	55
Average gold grade (g/t)	2.34	2.52	(7)
Silver produced (koz)	525	328	60
Gold produced (koz)	11.46	11.84	(3)
Silver equivalent produced (koz)	1,213	1,038	17
Silver sold (koz)	518	334	55
Gold sold (koz)	11.00	11.97	(8)

 

Production and sales

The Company's Ares mine in Peru was closed in the second quarter with remaining production in the period delivering a better-than-expected total silver equivalent production of 626 thousand ounces (Q2 2013: 511 thousand ounces) driven by consistent grades. Total production for the first half was 1.2 million silver equivalent ounces (H1 2013: 1.0 million ounces)

 

100% of Ares' production is processed into dore, which was sold to Johnson Matthey and INTL Commodities in H1 2014.

 

Exploration

In 2014, exploration work has been focused on generating targets within the Ares-Arcata corridor and a 2,000 metre drilling campaign is taking place. A detailed surface mapping and sampling campaign has also been conducted at Ares North West covering an area of 55 ha which brings the total mapped area at the deposit to date to 3,731 ha.

 

Geological mapping to the south west of Ares is currently being carried out to identify drill targets for the next campaign with the required environmental permits in the process of being obtained.

 

PROJECT REVIEW

 

Inmaculada

At the Inmaculada project, the EPC contractor Graña y Montero started construction of the plant in late March and by the end of July, progress has reached almost 33%. Procurement of all main equipment has been completed and delivery to site is expected to be concluded by the end of August.

 

During the period, a further 2,226 metres of tunneling and 637 metres of raise boring were carried out with the total achieved for the entire project at 13,296 metres. Detailed engineering for the paste backfill is complete with filters, pumps and thickeners on order whilst work on the transmission lines has also finished with connection to the Peruvian national grid system carried out on 31 May 2014.

 

As of the end of June, mapping is being carried out at the Puquiopata and Huarmapata veins with a drilling campaign expected to follow. In addition, re-logging of the Angela vein system continues in order to optimise the geological model. The 2014 plan also includes a 5,000 metres drilling campaign in the Mayte vein corridor as well as near mine exploration at selected targets, in order to expand the current resources. A sampling and mapping campaign is also planned.

 

EXPLORATION REVIEW

 

The Company has an exploration budget of almost $30 million for 2014, representing 63,500 metres. This is being split between exploration work at the Company's existing operations, the Inmaculada Advanced Project and greenfield opportunities in Peru and Mexico. The main focus will continue to be on brownfield exploration.

 

In 2014, exploration work at the core operations is principally focused on identifying new potential and near-mine high grade areas to further improve the resource quality whilst at the Inmaculada Advanced Project, efforts are focused on identifying new potential high grade areas.

 

Hochschild's greenfield strategy for 2014 remains focused, as previously announced, on only the most promising prospects, specifically in Peru and Mexico.

 

Mexico

Pachuca

At the Pachuca Company Maker project in Mexico, the JV with Solitario Exploration & Royalty Corp has been focusing on the northwestern extension of the historical vein mining district. The 2014 plan includes testing the actual extensions of prior intercepts tested by the previous operator. A total 2,454 metres were drilled on 13 holes during the 2013 and 2014 campaigns. However, despite some drill holes showing economic gold and silver grades, continuous mineralisation could not be identified and therefore the project has been transferred back to Solitario.

 

Riverside Joint Venture

The exploration team has accepted two targets generated by Riverside, the JV partners in the western Sonora in Mexico. The projects are called Bohemia and Cajon and whereas Bohemia exhibits mineralised veins, orogenic type mineralisation has been observed at Cajon with highly frequent small mineralised veins off a detachment fault. Target definition is ongoing. Positive sampling campaigns have shown similar characteristics to the San Francisco mine, also in the Sonora district.

 

Peru

During the first half, the Company's exploration efforts in Peru focused on optimising the existing portfolio and reviewing any industry opportunities. One of these is the Corina project, located 15-20 km from the Selene plant and owned by Lara Exploration Ltd. The agreement drawn up includes an option giving Hochschild full ownership of the project over four years.

In addition, promising geochemical results have been obtained from the Ibel prospect in Peru.

FINANCIAL REVIEW

 

Key performance indicators   

(before exceptional items, unless otherwise indicated)

 

$000 unless otherwise indicated	Six months to 30 June 2014	Six months to 30 June 2013[9]	% change
Net Revenue[10]	282,012	308,577	(9)
Attributable silver production (koz)	8,526	7,665	11
Attributable gold production (koz)	55	64	(14)
Cash costs ($/oz Ag co-product)[11]	11.83	13.35	(11)
Cash costs ($/oz Au co-product)11	803	785	2
Total all-in sustaining costs ($/oz)	17.5	21.2	(17)
Main operation all-in sustaining costs ($/oz)	16.8	19.9	(16)
Adjusted EBITDA[12]	94,282	90,410	4
(Loss)/profit from continuing operations	(1,546)	(25,215)	94
(Loss)/profit from continuing operations (post exceptional)	(11,749)	(38,427)	69
Earnings per share (pre exceptional)	(0.01)	(0.10)	90
Earnings per share (post exceptional)	(0.04)	(0.10)	60
Cash flow from operating activities[13]	44,159	4,279	932

 

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 5% to $308.1 million in H1 2014 (H1 2013: $325.2 million) driven by the significant fall in precious metal prices.

 

Silver

Gross revenue from silver was broadly flat in H1 2014 versus the same period of 2013 at $206.8 million (H1 2013: $210.9 million) with lower metal prices offsetting the increase in the total amount of silver ounces sold which rose by 10% to 10,086 koz (H1 2013: 9,153 koz).

 

Gold

Gross revenue from gold decreased 11% in H1 2014 to $101.3 million (H1 2013: $114.3 million) also as a result of lower prices and also to some extent by a 9% decrease in gold sales with gold ounces sold in H1 2014 at 76.3 koz (H1 2013: 83.6 koz).

 

 

Gross average realised sales prices

The following table provides figures for average realised prices and ounces sold for H1 2014 and H1 2013:

 

Average realised prices	Six months to 30 June 2014	Six months to 30 June 2013
Silver ounces sold (koz)	10,086	9,153
Avg. realised silver price ($/oz)	20.5	23.0
Gold ounces sold (koz)	76.29	83.56
Avg. realised gold price ($/oz)	1,328	1,367

 

In March 2014, the Company signed agreements to hedge the sale of 2,000,000 ounces of silver at $22/ounce and 33,000 ounces of gold at $1,338/ounce, during the period from March to December 2014. Subsequently in June, the Company signed additional agreements to hedge the sale of a further 2,000,000 ounces of silver at $21/ounce, during the period from July to December 2014.

 

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 H1 2014, the Group recorded commercial discounts of $26.2 million (H1 2013: $16.6 million). This increase is explained the decision to sell 100% of production from Arcata as concentrate due to improved commercial terms. The ratio of commercial discounts to gross revenue in H1 2014 increased to 9% (H1 2013: 5%).

 

Net revenue

Net revenue decreased by 9% to $282.0 million (H1 2013: $308.6 million), comprising silver revenue of $186.2 million and gold revenue of $95.8 million. In H1 2014, silver accounted for 66% and gold 34% of the Company's consolidated net revenue compared to 64% and 36% respectively in H1 2013.

 

Revenue by mine

$000 unless otherwise indicated	Six months to 30 June 2014	Six months to 30 June 2013	% change
Silver revenue
Arcata	60,273	60,334	-
Ares	10,420	8,604	21
Pallancata	75,154	79,056	(5)
San Jose	60,930	62,431	(2)
Moris	30	475	(94)
Commercial discounts	(20,634)	(12,323)	67
Net silver revenue	186,173	198,577	(6)
Gold revenue
Arcata	11,308	11,686	(3)
Ares	14,391	17,825	(19)
Pallancata	17,555	18,166	(3)
San Jose	57,629	58,367	(1)
Moris	441	8,209	(95)
Commercial discounts	(5,517)	(4,285)	29
Net gold revenue	95,807	109,968	(13)
Other revenue[14]	32	32	-
Net revenue	282,012	308,577	(9)

 

Costs

Total pre-exceptional cost of sales decreased by 10% to $209.4 million in H1 2014 (H1 2013: $233.4 million). Direct production costs decreased by 14% in H1 2014, to $131.3 million (H1 2013: $153.0 million) principally due to the positive effects of the Company's ongoing cash optimisation programme. Depreciation in H1 2014 was $58.9 million (H1 2013: $65.0 million) with the decrease mainly due to lower future capex depreciation resulting from a lower level of metres expected to be developed in 2014. Other items, which principally includes workers' profit sharing, was $3.0 million in H1 2014 (H1 2013: $3.7 million) with change in inventories at $16.3 million in H1 2014 (H1 2013: $11.6 million).

 

$000	Six months to 30 June 2014	Six months to 30 June 2013	% Change
Direct production cost excluding depreciation	131,276	153,047	(14)
Depreciation in production cost	58,856	64,961	(9)
Other items	2,978	3,724	(20)
Change in inventories	16,311	11,639	40
Pre-exceptional Cost of Sales	209,421	233,371	(10)

 

Unit cost per tonne

The Company reported unit cost per tonne at its main operations of $102.8 in H1 2014, a reduction of 5% compared to H1 2013 (H1 2014: $107.7). For further explanation on the increase in unit cost per tonne please refer to page 6 of the Operating Review. 

 

Unit cost per tonne by operation[15]:

Operating unit ($/tonne)	Six months to 30 June 2014	Six months to 30 June 2013	% change
Main operations	102.8	107.7	(5)
Peru	74.0	75.5	(2)
Arcata	82.2	83.4	(1)
Pallancata	68.1	69.0	(1)
Argentina
San Jose	200.0	229.9	(13)
Others
Ares	117.8	145.9	(19)
Total	104.6	111.8	(6)

 

 

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]:

$000 unless otherwise indicated	Six months to 30 June 2014	Six months to 30 June 2013	% change
Group Cash Cost	187,672	199,474	(6)
(+) Cost of sales	209,421	233,371	(10)
(-) Depreciation in Cost of Sales	(62,761)	(67,462)	(7)
(+) Selling expenses	14,536	16,408	(11)
(+) Commercial deductions	26,476	17,157	54
Gold	5,529	4,301	29
Silver	20,947	12,856	63
Revenue	282,012	308,577	(9)
Gold	95,807	109,968	(13)
Silver	186,173	198,577	(6)
Others	32	32	-
Ounces Sold
Gold	76.3	83.6	(9)
Silver	10,086	9,153	10
Group Cash Cost ($/oz)
Co product Au	836	851	(2)
Co product Ag	12.3	14.0	(12)
By product Au	(255)	(143)	78
By product Ag	8.6	9.3	(8)

 

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]

 

Six months to 30 June 2014

$000 unless otherwise indicated	Arcata	Pallancata	San José	Main Operations	Other Operations	Corporate & Others	Total
(+) Production Cost excluding depreciation	29,059	34,779	49,838	113,676	17,600	-	131,276
(+) Other items in Cost of Sales	992	647	656	2,295	683	-	2,978
(+) Operating & Exploration capex for units	18,164	17,859	20,926	56,949	(5)	431	57,375
(+) Brownfield exploration expenses	214	629	91	934	(61)	688	1,561
(+) Administrative expenses (w/o depreciation)	2,144	2,947	4,063	9,154	166	10,709	20,029
(+) Royalties	-	897	-	897	262	-	1,159
Sub-Total	50,573	57,758	75,574	183,905	18,645	11,828	214,378
Ounces Produced (Ag Eq oz)	3,420	4,358	5,610	13,388	1,213	-	14,602
Sub-total  ($/oz)	14.8	13.3	13.5	13.7	15.4	-	14.7
(+) Commercial deductions	9,846	7,872	8,758	26,476	-	-	26,476
(+) Selling expenses	1,054	977	12,461	14,492	44	-	14,536
Sub-total	10,900	8,849	21,219	40,968	44	-	41,012
Ounces Sold (Ag Eq oz)	3,461	4,402	5,599	13,462	1,201	-	14,663
Sub-total  ($/oz)	3.1	2.0	3.8	3.0	0.04	-	2.8
Total cash cost ($/oz Ag Eq)	11.9	10.1	12.8	11.7	15.1	-	12.0
All-in sustaining costs ($/oz Ag Eq)	17.9	15.3	17.3	16.8	15.4	-	17.5

 

 

Six months to 30 June 2013

$000 unless otherwise indicated	Arcata	Pallancata	San José	Main Operations	Other Operations	Corporate & Others	Total
(+) Production Cost excluding depreciation	34,780	37,134	55,536	127,450	25,397	-	152,847
(+) Other items in Cost of Sales	(638)	18	4,547	3,927	(3)	-	3,924
(+) Operating & Exploration capex for units	22,816	25,580	27,156	75,552	3,715	1,316	80,583
(+) Brownfield exploration expenses	826	760	861	2,447	158	1,303	3,908
(+) Administrative expenses (w/o depreciation)	3,540	4,639	4,252	12,430	1,184	13,455	27,069
(+) Royalties	-	943	-	943	268	-	1,211
Sub-Total	61,324	69,074	92,352	222,749	30,719	16,074	269,542
Ounces Produced (Ag Eq oz)	2,764	4,380	5,728	12,872	1,411	-	14,283
Sub-total  ($/oz)	22.2	15.8	16.1	17.3	21.8	-	18.9
(+) Commercial deductions	133	8,121	8,891	17,145	12	-	17,157
(+) Selling expenses	134	1,368	14,809	16,311	97	-	16,408
Sub-total	267	9,489	23,700	33,456	109	-	33,565
Ounces Sold (Ag Eq oz)	2,802	4,410	5,568	12,779	1,388	-	14,167
Sub-total  ($/oz)	0.1	2.2	4.3	2.6	0.1	-	2.4
Total cash cost ($/oz Ag Eq)	12.4	10.6	14.7	12.8	18.1	-	13.3
All-in sustaining costs ($/oz Ag Eq)	22.3	17.9	20.4	19.9	21.9	-	21.2

 

Administrative expenses

Administrative expenses before exceptional items were reduced by 26% to $21.4 million (H1 2013: $29.0 million) primarily due to the ongoing impact of the cashflow optimisation programme. Post-exceptional administrative expenses in H1 2014 totalled $22.2 million.

 

Exploration expenses

In H1 2014, pre-exceptional exploration expenses, decreased by 71% to $8.2 million (H1 2013: $27.8 million) again due to the effects of the cashflow optimisation programme. Post-exceptional exploration expenses in H1 2014 totalled $8.7 million.

 

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 H1 2014, the Company capitalised $1.2 million relating to brownfield exploration compared to $0.3 million in H1 2013, bringing the total investment in exploration for 2013 to $9.4 million (H1 2013: $28.1 million). $79.6 million was also invested in the Company's Advanced and Growth Projects.

 

Selling expenses

Selling expenses were lower than H1 2013at $14.5 million (H1 2013: $16.4 million) as a result of lower prices. Selling expenses mainly consist of export duties at San Jose with export duties in Argentina levied at 10% of revenue for concentrate and 5% of revenue for dore.

 

Other income/expenses

Other income before exceptional items was $2.0 million (H1 2013: $3.5 million), whilst other expenses before exceptional items reached $4.8 million (H1 2013: $4.3 million) mainly due the new reserves tax in Argentina.

 

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 increased to $25.7 million (H1 2013: $1.2 million) as a result of the factors detailed above.

 

Adjusted EBITDA

Adjusted EBITDA increased by 4% despite lower silver and gold prices over the period to $94.3 million (H1 2013: $90.4 million) principally due to lower cost of sales and administrative expenses.

 

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	Six months to 30 June 2014	Six months to 30 June 2013	% change
Profit from continuing operations before exceptional items, net finance cost, foreign exchange loss and income tax	25,738	1,195	(2,054)
Operating margin	9%	0%
Depreciation and amortisation in cost of sales	62,761	67,462	(7)
Depreciation and amortisation in administrative expenses	1,324	1,969	(33)
Exploration expenses	8,175	27,770	(71)
Personnel and other exploration related fixed expenses	(3,716)	(7,986)	53
Adjusted EBITDA	94,282	90,410	(4)
Adjusted EBITDA margin	33%	29%

 

Finance income

Finance income before exceptional items of $1.8 million was reduced from H1 2013 ($5.3 million) mainly due to lower interest received on deposits and liquidity funds ($2.6 million) as well as lower dividends received from Gold Resource Corporation ($1.2 million).

 

Finance costs

Finance costs before exceptional items increased to $18.1 million in H1 2014 (H1 2013: $7.3 million) principally due to the interest due on $350 million of Senior Notes (issued in January 2014 via the Company's wholly owned subsidiary, Compañía Minera Ares S.A.C) with a coupon rate of 7.75% due for repayment in 2021.

 

Foreign exchange losses

The Group recognised a foreign exchange loss of $0.3 million (H1 2013: $15.4 million loss) as a result of exposures in currencies other than the functional currency.

 

Income tax

The Company's pre-exceptional income tax was $10.7 million (H1 2013: $14.9 million). H1 2014 income tax was negatively affected by the reduction of the local currency tax base in Argentina resulting from the devaluation of the Argentinean Peso (US$ 5.9 million).

 

Exceptional items

Exceptional items in H1 2014 totalled $(10.2) million after tax (H1 2013: $(13.2) million). The tables below detail the exceptional items excluding the exceptional tax effect that amounted to $2.3 million. 

 

Exceptional items in H1 2014 totalled ($12.5) million before tax (H1 2013: $38.4 million). This mainly comprises the following items: 

 

 

Negative exceptional items:

Main items	$000	Description of main items
Termination benefits	(4,916)	Termination benefits paid to the workers following the Ares mine unit closure ($3.5 million) and the ongoing cashflow optimisation programme restructuring (Administrative expenses: $0.9 million and Exploration expenses: $0.5 million)
Other expenses	(2,963)	Loss generated by the sale of the Group´s interest in Minas Santa María de Moris, S.A. de C.V. ("Moris") to Exploraciones y Desarrollos Regiomontanos, S.A. de C.V. and Arturo Préstamo Elizondo.
Impairment and write-off of non-financial assets (net)	(476)	Write off of assets in Compañía Minera Ares S.A.C. of $345,000 and Minera Santa Cruz S.A. of $131,000
Finance cost	(4,189)	Includes $3.3 million of transaction costs related to the Bridge Loan Facility and $1.7 million loss on disposal of GRC shares, partially offset by a net gain on the sale of part of the Group´s holding in Chaparral Gold Corp and Mirasol Resources Ltd of $547,000 and $201,000 respectively.

 

Cash flow & balance sheet review     

Cash flow:

$000 unless otherwise indicated	Six months to 30 June 2014	Six months to 30 June 2013	change
Net cash generated from operating activities	44,159	4,279	39,880
Net cash used in investing activities	(127,049)	(130,463)	3,414
Cash flows generated/(used) in financing activities	27,374	20,764	6,610
Net (decrease)/increase in cash and cash equivalents during the period	(55,516)	(105,420)	49,904

 

Operating cash flow increased from $4.3 million in H1 2013 to $44.2 million in H1 2014, mainly due to cost reductions. Net cash used in investing activities remained flat at $(127.0) million in H1 2014 from $(130.5) million in H1 2013 due to lower operational expenditures in line with the implementation of the cashflow optimisation programme during H1 2014 ($(56.9) million vs. $(79.3) million in H1 2013), offset by higher project capex at Inmaculada during H1 2014 ($(75.6) million vs. $(40.0) million in H1 2013. Finally, cash used in financing activities increased to $27.4 million from $20.8 million in H1 2013, primarily as a result of the proceeds from the $350 million Senior Notes, partially offset by repayment of the bridge loan facility ($270.0 million) and short term debt in Peru ($30.0 million) and Argentina. As a result, total cash generated increased from $(105.4) million in H1 2013 to $(55.5) million in H1 2014 ($49.9 million difference).

 

Working capital

$000 unless otherwise indicated	Six months to 30 June 2014	Six months to 30 June 2013
Trade and other receivables	194,265	155,682
Inventories	54,135	68,905
Net other financial assets / (liabilities)	5,207	(16,123)
Net Income tax receivable / (payable)	21,514	23,137
Trade and other payables and provisions	(181,641)	(173,740)
Working Capital	93,480	57,861

 

The Company's working capital position increased to $93.5 million in H1 2014 from $57.9 million in H1 2013. This was primarily explained by higher trade and other receivables ($38.6 million) due to longer concentrate sales collection periods at Arcata. Also, net other financial assets increased to $5.2 million in H1 2014 from $(16.1) million in H1 2013 due to recognised gain from hedge agreements.

 

Net cash

$000 unless otherwise indicated	Six months to 30 June 2014	Six months to 30 June 2013
Cash and cash equivalents	225,550	239,274
Long term borrowings	(354,512)	(107,944)
Short term borrowings[18]	(126,340)	(39,775)
Net cash/(debt)	(255,302)	91,555

  

The Group reported net cash of $(255.3) million as at 30 June 2014 (H1 2013: $91.6 million). Changes were driven by: i) lower cash and cash equivalents of $13.7 million due to the acquisition of International Minerals Corporation in 2013 ($271 million) and capex at Inmaculada ($134 million), partially offset by proceeds from the $350 million Senior Notes issued in January 2014 and the equity placing in October 2013 ($71.3 million); ii) higher long term borrowings resulting from the Senior Notes issue.

 

The Company's short-term borrowings are its $115 million convertible bond that has a current conversion price of £3.80 due in October 2014and short term debt raised in Argentina. 

 

Capital expenditure^[19] 

$000 unless otherwise indicated	Six months to 30 June 2014	Six months to 30 June 2013
Arcata	18,164	22,816
Ares	(5)	2,798
Selene	156	672
Pallancata	17,703	24,908
San Jose	20,926	27,156
Moris	-	917
Operations	56,949	79,267
Inmaculada	75,595	39,970
Crespo	2,467	11,177
Volcan	972	3,253
Azuca	578	3,194
Other	431	1,347
Total	136,987	138,208

 

H1 2014 capital expenditure of $137.0 million (H1 2013: $138.2 million) includes operating capex of $55.7 million, capitalised exploration costs of $1.2 million in respect of the Group's operating mines, $75.6 million capitalised in Inmaculada, $2.5 million capitalised in Crespo, $1.6 million in Azuca and Volcan, and administrative capital expenditure of $0.4 million.

 

RISKS

The principal risks and uncertainties facing the Company in respect of the year ended 31 December 2013 are set out in detail in the Risk Management section of the 2013 Annual Report and in Note 36 to the 2013 Consolidated Financial Statements.

 

The key risks disclosed in the 2013 Annual Report (available at www.hochschildmining.com) are categorised as:

 

o Financial risks which include commodity price risk and counterparty credit risk;

o Operational risks including the risks associated with operational performance, delivery of projects, business  interruption, exploration & reserve and resource replacement and personnel;

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

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

 

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

 

In terms of the changes in the profile of these risks, the Board recognises the heightened level of financial risk that results from the combination of (i) a volatile precious metals pricing environment and (ii) the Company's forthcoming commitments which include the maturity of the convertible bond in October and the capital demands of the Inmaculada project as it enters its final stages before production commences. 

 

The Company's risk management strategy overseen by the Board has prompted a number of actions taken by management to mitigate this risk which primarily include:

 

o implementation of the Cash Optimisation Plan which has led to material savings that are sustainable going forward; and

o the successful negotiation, subsequent to 30 June 2014, of a term sheet for the arrangement of a $100m medium term loan facility which, on closing, together with undrawn short-term credit lines, will provide the Company with further financial flexibility.

 

The Board expects that the Group's financial position will improve significantly after the commencement of production at Inmaculada which in addition to increasing the Group's total production, will increase margins given its lower costs of production relative to the Group's other mines. 

 

GOING CONCERN

 

Having considered cash flow projections under a number of gold and silver pricing scenarios which take into account, among other things, the convertible bond maturity and the expenditure required at Inmaculada on the one hand and the mitigating actions taken by management described above on the other hand, the Directors are satisfied that the Company has sufficient resources to continue in operation for the foreseeable future. Accordingly, adoption of the going concern basis in the preparation of the financial statements contained herein is considered to be appropriate. 

 

STATEMENT OF DIRECTORS' RESPONSIBILITIES

 

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

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

For and on behalf of the Board

Ignacio Bustamante
Chief Executive Officer

19 August 2014

 

INDEPENDENT REVIEW REPORT TO HOCHSCHILD MINING PLC

 

Introduction

We have been engaged by Hochschild Mining plc (the 'Company') to review the condensed set of financial statements in the half-yearly financial report for the six months ended  30 June 2014 which comprises the Interim condensed consolidated income statement, the Interim condensed consolidated statement of comprehensive income, the Interim condensed consolidated statement of financial position, the Interim condensed consolidated statement of cash flows, the Interim condensed consolidated statement of changes in equity and the related notes 1 to 19. We have read the other information contained in the half yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

 

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

 

Directors' Responsibilities

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

 

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

 

Our Responsibility

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

 

Scope of Review

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

 

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2014 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the Disclosure and Transparency Rules of the United Kingdom's Financial Conduct Authority.

 

Ernst & Young LLP
London
19 August 2014

 

Interim condensed consolidated income statement

 

		Notes		Six-months ended 30 June 2014 (Unaudited)							Six-months ended 30 June 2013 (Unaudited)
				Before exceptional items US$000			Exceptional items Note 6 US$000		Total US$000		Before exceptional items US$000		Exceptional items Note 6 US$000		Total US$000
Continuing operations
Revenue		4		282,012			-		282,012		308,577		-		308,577
Cost of sales		5		(209,421)			(3,511)		(212,932)		(233,371)		(200)		(233,571)
Gross profit				72,591			(3,511)		69,080		75,206		(200)		75,006
Administrative expenses				(21,355)			(868)		(22,223)		(29,039)		(1,006)		(30,045)
Exploration expenses				(8,175)			(537)		(8,712)		(27,770)		(1,911)		(29,681)
Selling expenses				(14,536)			-		(14,536)		(16,408)		-		(16,408)
Other income				2,030			-		2,030		3,501		-		3,501
Other expenses				(4,817)			(2,963)		(7,780)		(4,295)		-		(4,295)
Impairment and write-off of non-financial assets (net)				-			(476)		(476)		-		(61,930)		(61,930)
Profit/(loss) from continuing operations before net finance income/(cost), foreign exchange gain/(loss) and income tax				25,738			(8,355)		17,383		1,195		(65,047)		(63,852)
Share of post tax profit of associates and joint ventures accounted under the equity method				-			-		-		5,921		-		5,921
Finance income		7		1,813			-		1,813		5,311		-		5,311
Gain on transfer from investment accounted under the equity method to available-for-sale financial assets				-			-		-		-		107,942		107,942
Finance costs		7		(18,087)			(4,189)		(22,276)		(7,331)		(81,320)		(88,651)
Foreign exchange loss				(335)			-		(335)		(15,373)		-		(15,373)
(Loss)/profit from continuing operations before income tax				9,129			(12,544)		(3,415)		(10,277)		(38,425)		(48,702)
Income tax (expense)/benefit		8		(10,675)			2,341		(8,334)		(14,938)		25,213		10,275
(Loss)/profit for the period from continuing operations				(1,546)			(10,203)		(11,749)		(25,215)		(13,212)		(38,427)
Attributable to:
Equity shareholders of the Company				(2,469)			(10,161)		(12,630)		(34,406)		(49)		(34,455)
Non-controlling interests				923			(42)		881		9,191		(13,163)		(3,972)
				(1,546)			(10,203)		(11,749)		(25,215)		(13,212)		(38,427)
Basic and diluted earnings per ordinary share from continuing operations and for the period (expressed in U.S. dollars per share)				(0.01)			(0.03)		(0.04)		(0.10)		-		(0.10)

 

Interim condensed consolidated statement of comprehensive income

 

 

		Notes		Six-months ended 30 June
				2014 (Unaudited) US$000		2013 (Unaudited) US$000
Loss for the period				(11,749)		(38,427)
Other comprehensive income to be reclassified to profit or loss in subsequent periods:
Exchange differences on translating foreign operations				(79)		(910)
Change in fair value of available-for-sale financial assets				2,538		(77,289)
Recycling of the loss on available-for-sale financial assets				934		81,191
Change in fair value of cash flow hedges				4,294		-
Recycling of the gain on cash flow hedges				(2,189)		-
Deferred income tax relating to components of other comprehensive income				(631)		-
Other comprehensive gain for the period, net of tax				4,867		2,992
Total comprehensive (expense)/income for the period				(6,882)		(35,435)
Total comprehensive (expense)/income attributable to:
Equity shareholders of the Company				(7,763)		(31,463)
Non-controlling interests				881		(3,972)
				(6,882)		(35,435)

 

 

Interim condensed consolidated statement of financial position

 

		Notes		As at 30 June 2014  (Unaudited) US$000		As at 31 December 2013  US$000
ASSETS
Non-current assets
Property, plant and equipment		9		942,363		873,477
Evaluation and exploration assets		10		210,701		204,643
Intangible assets		10		43,713		43,683
Available-for-sale financial assets		11		40,075		51,658
Trade and other receivables				11,565		12,128
Deferred income tax assets				1,960		2,416
				1,250,377		1,188,005
Current assets
Inventories				54,135		69,556
Trade and other receivables				182,700		167,740
Income tax receivable				25,720		22,156
Other financial assets		12		5,207		-
Cash and cash equivalents		14		225,550		286,435
				493,312		545,887
Total assets				1,743,689		1,733,892
EQUITY AND LIABILITIES
Capital and reserves attributable to shareholders of the Parent
Equity share capital				170,389		170,389
Share premium				396,021		396,021
Treasury shares				(898)		(898)
Other reserves				(205,910)		(211,143)
Retained earnings				498,862		511,492
				858,464		865,861
Non-controlling interests				99,745		104,375
Total equity				958,209		970,236
Non-current liabilities
Trade and other payables				118		174
Borrowings		15		343,174		-
Provisions				83,558		79,649
Deferred income				23,000		22,000
Deferred income tax liabilities				95,781		93,505
				545,631		195,328
Current liabilities
Trade and other payables				90,730		119,222
Other financial liabilities		12		-		2,294
Borrowings		15		137,678		435,925
Provisions				7,235		9,573
Income tax payable				4,206		1,314
				239,849		568,328
Total liabilities				785,480		763,656
Total equity and liabilities				1,743,689		1,733,892

 

 

Interim condensed consolidated statement of cash flows

 

		Notes		Six-months ended 30 June
				2014 (Unaudited) US$000		2013 (Unaudited) US$000
Cash flows from operating activities
Cash generated from operations				56,477		19,695
Interest received				1,533		1,614
Interest paid				(6,021)		(3,303)
Payments of mine closure costs				(2,485)		(1,176)
Income tax paid				(5,345)		(12,551)
Net cash generated from operating activities				44,159		4,279
Cash flows from investing activities
Purchase of property, plant and equipment				(140,456)		(123,864)
Purchase of evaluation and exploration assets				(2,188)		(11,707)
Purchase of intangibles				(281)		(678)
Dividends received				414		4,098
Acquisition of subsidiary				-		(14,615)
Deferred income received related to San Felipe property				1,223		16,000
Proceeds from sale of available-for-sale financial assets				14,121		-
Proceeds from sale of property, plant and equipment				118		303
Net cash used in investing activities				(127,049)		(130,463)
Cash flows from financing activities
Proceeds of borrowings		15		357,812		33,114
Repayment of borrowings		15		(322,828)		(412)
Dividends paid		16		(7,610)		(16,318)
Capital contribution from non-controlling interest				-		4,380
Cash flows generated from financing activities				27,374		20,764
Net decrease in cash and cash equivalents during the period				(55,516)		(105,420)
Exchange difference				(5,369)		(14,250)
Cash and cash equivalents at beginning of period				286,435		358,944
Cash and cash equivalents at end of period		14		225,550		239,274