9th Mar 2016 08:02
LONDON (Alliance News) - Hochschild Mining PLC Wednesday said it plans to grow production, lower costs and slash its budgets after completing its flagship Inmaculada project after reporting a huge pretax loss in 2015.
The precious metals producer, which is focused on high grade silver and gold deposits in Latin America, said its pretax loss swelled to USD256.2 million in 2015 from the USD68.2 million loss reported in 2014 following a significant amount of impairments being booked.
Net impairments and write-offs stood at USD207.1 million in 2015, booked against the Arcata, Volcan and Pallancata units and the Crespo, Azuca and San Felipe projects.
Excluding exceptional items, Hochschild's pretax loss amounted to USD46.0 million compared to the USD50.2 million loss last year.
Revenue in the year fell to USD469.1 million from USD493.0 million as silver production dropped 9% in the year whilst gold production rose 64%.
Full year production exceeded the company's guidance, coming at 27.0 million silver equivalent ounces. The flagship Inmaculada mine in southern Peru contributed 8.3 million of those silver equivalent ounces, which was also above target.
Hochschild said it reduced its all-in sustaining cash cost by 26% in 2015 to around USD12.9 per ounce, also lower than the company's target, whilst Inmaculada boasted an all-in cost of only USD7.3 per ounce, which is also lower than expected.
"Now that the company's key investment in the low cost Inmaculada project is complete and with strong operational performance at the mine, the outlook for the company is much brighter," said Chief Executive Ignacio Bustamante
This year, Hochschild is expecting to deliver "record" production of 32.0 million silver equivalent ounces and said its all-in cost will drop to around USD12.0 to USD12.5 per ounce, a narrower target from the previous USD12 to USD13 per ounce estimate. Inmaculada's all-in cost, however, will rise to a region of USD9 to USD10 per ounce, it said.
Importantly, Hochschild said its cashflow is protected this year from its hedging activities, with 15,000 ounces of gold hedged at USD1,244 per ounce. It also said there is a zero cost collar for 3.0 million ounces of silver with a floor price of USD14 per ounce and a cap of USD17.6 per ounce.
Overall, 55% of Hochschild's production in 2016 has been hedged.
"We expect that 2016 will mark the fourth year of increasing production and reducing costs," said the miner.
Hochschild will spend a total of USD100.0 million in capital expenditure in 2016, including USD10.0 million to develop the Pablo vein. That is a steep drop from the USD238.2 million spent in 2015, mainly on Inmaculada, and the USD321.1 million spent in 2014.
Net debt was significantly lower at the end of 2015, amounting to USD350.5 million from USD455.6 million at the end of 2014. The miner reported a cash balance of USD84.0 million, down from USD116.0 million.
By Joshua Warner; [email protected]; @JoshAlliance
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