Last checked at 14 May 2013 07:00
14 May 2013
Hochschild CEO Comments On Cashflow Optimisation Action Plan
At the Bank of America Merrill Lynch Global Metals, Mining & Steel Conference in Barcelona today, Ignacio Bustamante, CEO, will give an update on Hochschild Mining's progress in 2013 and, in particular, detail on several of the measures taken as part of the Company's previously announced cashflow optimisation action plan, implemented as a prudent response to recent volatility in precious metal prices.
Highlights
§ 2013 exploration budget revised by 29% to $55m
§ Greenfield exploration initiatives focused on most promising prospects
§ Positive impact from cashflow optimisation initiatives:
o 2013 production target maintained at 20.0 million attributable silver equivalent ounces
o Unit cost increases in Peru now expected at 10-15% for 2013 (previously 15-20% increase)
o Unit cost increase in Argentina maintained at 10-15% for 2013
o Sustaining capital expenditure at main operations now expected to be approximately $160m
Exploration
Following a detailed review of discretionary elements of the Company's exploration budget, Hochschild has reduced the expected 2013 figure by 29% to $55m with the key temporary reductions in the greenfield programme which will now represent 53% of the overall reduced figure and will concentrate on the Company's most promising prospects. In addition, brownfield exploration programmes at the Company's main operations are expected to focus on the development of potential resources as opposed to further resource life-of-mine increases, reflecting the Company's confidence in their long term sustainability.
Operating cost optimisation
Hochschild has also made progress with regards to its operating cost base and has identified key savings following ongoing negotiations with equipment and material suppliers as well as changes to the mine development budget which is expected to materially impact both the unit cost per tonne at the main operations as well as the forecast level of sustaining capital expenditure. The 2013 production target of 20.0 million attributable silver equivalent ounces is unchanged.
The Company now expects the increase in overall 2013 unit cost per tonne in Peru to be approximately 10-15% (excluding royalties and the increased refining cost due to the effects of the dore project at Arcata) versus previous guidance of 15-20% as disclosed in the 2012 Full Year Production Report on 23 January 2013. In Argentina, the expected unit cost per tonne increase has been maintained at 10-15%. In addition, sustaining capital expenditure for the main operations has been revised down from $180m to approximately $160m.
Administrative cost optimisation
The Company has also recently reduced its Administrative budget with key savings identified in administrative expenses, professional fees and other items of corporate and support capex. In addition, a significant headcount reduction of 86 employees has already been carried out at the corporate centre.
Ignacio Bustamante, Chief Executive Officer commented:
"We have highlighted in our first quarter interim management statement that Hochschild has initiated an action plan to conserve capital and optimise cashflow and I am pleased that we are today able to give an update on our progress. The Company has moved swiftly to implement plans that were put in place as part of our ongoing review of market conditions and has already begun to deliver significant savings without impacting our overall long term exploration-led strategy. I am confident that we will be able to report back with further important progress at our Interim Results in August."
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Enquiries:
Hochschild Mining plc
Charles Gordon +44 (0)20 7907 2934
Head of Investor Relations
RLM Finsbury
Charles Chichester +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 almost fifty years' experience in the mining of precious metal epithermal vein deposits and currently operates four underground epithermal vein mines, three located in southern Peru and one in southern Argentina. Hochschild also has numerous long-term projects throughout the Americas.
Forward looking statements
This announcement may contain forward looking statements. By their nature, forward looking statements involve risks and uncertainties because they relate to events and depend on circumstances that will or may occur in the future. Actual results, performance or achievements of Hochschild Mining plc may, for various reasons, be materially different from any future results, performance or achievements expressed or implied by such forward looking statements.
The forward looking statements reflect knowledge and information available at the date of preparation of this announcement. Except as required by the Listing Rules and applicable law, the Board of Hochschild Mining plc does not undertake any obligation to update or change any forward looking statements to reflect events occurring after the date of this announcement. Nothing in this announcement should be construed as a profit forecast.
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