Hochschild Mining beats production targets

Hochschild Mining confirmed a strong production year in 2015 after extracting 9.4m silver equivalent ounces in the final quarter, also confirming that its all-in sustaining costs (AISC) of between $13 and $14.

Final-quarter production was comprised of 4.3m ounces of silver and 68,400 ounces of gold, as the new low-cost Inmaculada mine performed strongly.

This brought the total for 2015 to 27.0m silver equivalent ounces, comprising 14.8m ounces of silver and 166,000 ounces of gold.

For 2016, the attributable production target has been set at 32.0m silver equivalent ounces, with all-in sustaining costs expected to be $12-13 per silver equivalent ounce thanks to costs at Inmaculada costs of $9-10.

Developing the new 'Pablo' vein will cost around $10m to take total sustaining and development capital expenditure to around $100m.

Following the £100m rights issue in the fourth quarter of last year, net debt stood at $366m at year-end, with total cash of close to $83m.

Chief executive Ignacio Bustamante said 2015 exceeded management's expectations. "We are building on this positive momentum by focusing on delivering low cost production from Pablo which we expect will further demonstrate our brownfield potential and ability to deliver strong cash flow generation from our existing assets.

"In addition, the recent regulatory and economic policy changes in Argentina offer a promising future for our high grade San Jose mine which, supported by the solid operational performance, is now in a good position to improve its cashflow contribution."

He also hailed the 20% reduction in debt since the half-year, with the maturities of the bulk of the remaining debt also "adequately profiled".

Analyst Yuen Low at Shore Capital said it was a good year in terms of production but full-year AISC "unfortunately... implies very narrow margins indeed".

Shares in Hochschild were up 4.1% to 41.11p by 0945 GMT on Wednesday.