Last checked at 2 Jun 2011 11:52
2 June 2011
2011 Annual General Meeting
Address to Shareholders
Hochschild Mining plc ("Hochschild") held its Annual General Meeting for shareholders in London today. Eduardo Hochschild, Executive Chairman, made the following remarks:
"I am happy to report that Hochschild Mining plc delivered a record performance in 2010. Although it was once again a difficult year for the global economy, precious metals performed very strongly with silver in particular rising just over 80%. In this strong pricing environment, the Company met its operational expectations, strengthened its financial position and undertook some key strategic steps to secure our future growth path and delivering further value for our shareholders.
To give you a quick results snapshot: production was in line with expectations at 26.4 attributable silver equivalent ounces with unit costs rising by 16% at the underground operations, a creditable performance in such an inflationary industry environment. Group Revenue, as a result, climbed by nearly 40% to a record US$752 million with EBITDA up 59% at $397 million and pre-exceptional earnings per share rising by 65% to 28 cents per share.
With that in mind, the Board is recommending an increase in the final dividend by 50% to three cents per share which reflects our strong balance sheet position, and the anticipated healthy future cashflows of the Group. We believe the proposed increase reflects capital availability and our desire to provide a yield to shareholders whilst continuing to respect the growth requirements of the business.
During 2010, the Board appointed a new management team led by Ignacio Bustamante as Chief Executive Officer, and Ramón Barúa as Chief Financial Officer. I believe that the realigned Company focus on growth through exploration heralds the beginning of a new era for Hochschild in which our excellent asset base, combined with an immense talent pool, will unlock consistent and profitable precious metal production growth. The 40% increase in our exploration budget to $70 million for this year, is firm evidence of our commitment to this strategy and our confidence in the potential of our current project pipeline which now contains 3 advanced projects, 12 Medium Scale projects and 8 potential Company Makers.
Our team has great confidence in the potential of the Company to develop this aggressive exploration strategy and, allied to this, they have promoted a disciplined approach to the assessment of acquisitions. In this regard, the key announcements in 2010 were the progression of our 100% owned Azuca and Crespo projects, and the acquisition of a controlling stake in the Inmaculada project, all of which are located at the core of our Southern Peru cluster. We have already announced a very sizeable increase in grades and resources at Inmaculada, which in our view highlights the tremendous potential at this deposit which is due to start production by the end of 2013.
Early this year we completed the sale of our stake in Lake Shore Gold which represented a 34% gain on our original average purchase price. This decision is in line with the disciplined M&A approach I mentioned just now with any potential deals being required to deliver early stage assets with strong geological potential and high value accretion but also giving us a clear path to control. In our view, such strict criteria will not stop us from continuing to make value-enhancing bolt-on acquisitions going forward.
It is also worth reminding you that our 25% investment in Gold Resource Corporation, in which we have invested a total of $67 million, is currently valued at approximately $400 million.
I mentioned Inmaculada and during this year we can look forward to further crucial steps in its development as well as at our other advanced projects at Azuca and Crespo. These three have the potential to expand our production base by a minimum of 12 million profitable ounces per year from the end of 2013. Of course, in 2010 we also made strong progress at increasing the life-of-mine at our core assets with the new discoveries at San Jose the highlight. It is particularly pleasing that we have already exceeded our IPO target of 8 years and currently stand at 8.7 years.
Hochschild Mining is currently in a very solid financial position with a cash balance of US$540 million, roughly US$480 million of investments and very strong cash generation helped by the silver price at the moment which, despite recent volatility, remains well above last year's average. Overall we are in a very robust position to carry-out out the strategic aims that the management has so clearly delineated.
On behalf of the Board, I would like to thank our entire team for their continued commitment in 2010 and I am confident that such impressive execution will remain the focus as we move through 2011."
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Enquiries:
Hochschild Mining plc
Charles Gordon +44 (0)20 7907 2934
Head of Investor Relations
Finsbury
Faeth Birch +44 (0)20 7251 3801
Public Relations
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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 over forty years' experience in the mining of precious metal epithermal vein deposits and currently operates four underground epithermal vein mines, three located in southern Peru, one in southern Argentina and one open pit mine in northern Mexico. Hochschild also has numerous long-term prospects throughout the Americas.