Brownfield development drives growth at Hochschild Mining

Hochschild Mining issued its production report for the year ended 31 December on Wednesday, reporting record full-year attributable production in 2018 with 260,436 ounces of gold.

The FTSE 250 company also reported 19.7 million ounces of silver, making for 526,650 gold equivalent ounces or 39.0 million silver equivalent ounces, compared to its revised target of 38.5 million silver equivalent ounces.

It saw record production at Inmaculada of 251,090 gold equivalent ounces, up from 239,479 ounces, while production at Pallancata rose 22% to 9.4 million silver equivalent ounces.

The company’s 2018 all-in sustaining costs were on track to meet positively revised guidance of between $940 and $970 per gold equivalent ounce, or $12.7 to $13.1 per silver equivalent ounce.

On the exploration front, Hochschild said brownfield drilling at Inmaculada added 95 million silver or 1.3 million gold equivalent ounces of inferred resources in 2018.

It said its brownfield programmes were set to continue at Inmaculada and San Jose in the first quarter of 2019, and at Pallancata in the second and third quarters, following receipt of permits.

Looking at the books, Hochschild said it had total cash of around $80m as at 31 December, down from $257m year-on-year, after a $50m debt repayment in the fourth quarter, and a temporary increase in its working capital of $10m.

A total of $198m of debt was repaid by the firm in 2018.

Net debt stood at around $76m as at 31 December, down from $103m a year earlier, with the company boasting a net debt-to-last 12 months EBITDA ratio of approximately 0.30x as at year-end.

Looking to 2019, Hochschild had set a production target of 457,000 gold equivalent ounces, or 37.0 million silver equivalent ounces, excluding Arcata.

The final decision on the future of Arcata was expected before the company’s full-year results in February.

Its all-in sustaining costs were expected to be between $960 and $1,000 per gold equivalent ounce, or $11.8 to $12.3 per silver equivalent ounce.

Total sustaining and development capital expenditure was expected to be between $130m and $140m, including $15m of mine development at Inmaculada to access newly-discovered veins.

Hochschild’s 2019 brownfield exploration budget was expected to be $27m, with its greenfield budget set at $10m.

“Hochschild has delivered a production increase in 2018 with output growing for the sixth consecutive year, again driven by a record performance from our Inmaculada mine and increased output from Pallancata,” said Hochschild Mining chief executive officer Ignacio Bustamante.

“Our costs for 2018 are expected to be in line with positively revised expectations and we maintain a robust financial position with a further $50 million of medium-term debt repaid in December.”

Bustamante noted that the company had a “very successful year” of brownfield exploration at Inmaculada, with more than 1.3 million gold equivalent ounces of inferred resources added from structures close to the current mining infrastructure.

“Geological prospects at Pallancata and San Jose remain strong and we can look forward to an exciting 2019 programme which has good potential to add significant low cost ounces to our resource base.”