Last checked at 18 Aug 2010 07:00
18 August 2010
Hochschild Mining plc Interim results for the six months ended 30 June 2010
Operational Highlights
·; H1 2010 production of 12.8 million attributable silver equivalent ounces: on track to achieve 2010 production target of 26.3 million attributable silver equivalent ounces
·; $50 million exploration programme1 delivering positive results, $24.4 million invested in H1 2010:
- Significant increase in resource life up 11% to 7.9 years2, expected to further increase by year end
- Scoping study commenced at 100% owned Azuca project
- 100% owned Crespo project progressing towards scoping
- Impressive drilling results at the Company's core assets, Arcata, Pallancata and San Jose
- 'Company maker' pipeline expanded to six projects, active drilling to add further opportunities
Financial Highlights*
·; Record H1 revenue of $306.9 million, up 33% year-on-year
·; EBITDA of $150.1 million, up 51% year-on-year
·; Profit before tax tripled to $87.3 million
·; EPS of $0.11 per share, more than doubled year-on-year
·; Solid financial position with cash balance of $91.0 million
·; Interim dividend of $0.02 per share
·; Continued focus on profitability and cost control - costs remain in line with full year guidance
* On a pre-exceptional basis
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Highlights for the six months ended 30 June 2010
| ($ millions, before exceptional items unless stated) | Six months ended 30 June 2010 | Six months ended 30 June 2009 | % change |
| Attributable silver production (koz) | 8,477 | 9,250 | (8)% |
| Attributable gold production (koz) | 72.5 | 77.6 | (7)% |
| Revenue | 306.9 | 230.6 | 33% |
| EBITDA* | 150.1 | 99.3 | 51% |
| Profit for the period from continuing operations | 56.1 | 19.2 | 192% |
| Attributable profit after tax | 38.9 | 12.9 | 195% |
| Earnings per share | 0.11 | 0.04 | 173% |
| Earnings per share (post exceptional) | 0.08 | 0.05 | 60% |
* EBITDA is calculated as profit from continuing operations before exceptional items, net finance costs and income tax plus depreciation and exploration expenses other than personnel and other expenses.
1 For the full year 2010
2 Resource figures have not been audited by an independent third party. Fully audited figures will be provided in the 2010 Annual Report Commenting on the results, Eduardo Hochschild, Executive Chairman, said:
"I am delighted to report strong financial and operational results for the first half of 2010. We are on track to achieve our full year production target of 26.3 million attributable silver equivalent ounces, we continue to deliver on maximising resource life of mine, now at 7.9 years, and we remain focused on developing our extensive exploration pipeline with Azuca entering scoping stage. Our operational strength, combined with solid fundamentals for precious metals, support our positive outlook for the business."
Ignacio Bustamante, CEO, said:
"I am pleased to report my first set of interim results since becoming CEO of Hochschild Mining. We have achieved record H1 revenues of $306.9 million, tripled profit before tax to $87.3 million and more than doubled EPS to $0.11. Our strong operating cashflow, up 15% to $112.2 million, and healthy cash balance of $91.0 million support the continued delivery of our growth strategy."
A live conference call & audio webcast will be held at 8.30am (London time) on Wednesday 18 August 2010 for analysts and investors. Details as follows:
Conference call:
UK +44 (0)20 7806 1959
Webcast:
http://www.thomson-webcast.net/uk/dispatching/?event_id=8a6eaf0dc32843874765c441b298cbcb&portal_id=b48bca21de6fabf3b2a93c33e33cb205
Replay:
A recording of the conference call will be available for one week following its conclusion, accessible from the following telephone number:
UK +44 (0)20 7111 1244
Access code: 9057274#
Enquiries:
Hochschild Mining plc
Isabel Lutgendorf, Head of Investor Relations +44 (0)20 7907 2934
Finsbury
Faeth Birch +44 (0)20 7251 3801
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.
Forward looking statements
This announcement contains certain forward looking statements, including such statements within the meaning of Section 27A of the US Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. In particular, such forward looking statements may relate to matters such as the business, strategy, investments, production, major projects and their contribution to expected production and other plans of Hochschild Mining plc and its current goals, assumptions and expectations relating to its future financial condition, performance and results.
Forward-looking statements include, without limitation, statements typically containing words such as "intends", "expects", "anticipates", "targets", "plans", "estimates" and words of similar import. 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 be materially different from any future results, performance or achievements expressed or implied by such forward looking statements. Factors that could cause or contribute to differences between the actual results, performance or achievements of Hochschild Mining plc and current expectations include, but are not limited to, legislative, fiscal and regulatory developments, competitive conditions, technological developments, exchange rate fluctuations and general economic conditions. These factors, risks and uncertainties are referred to in the section of this announcement entitled 'Risks' which, in turn, refers to matters disclosed in the Risk Management section of the 2009 Annual Report. Past performance is no guide to future performance and persons needing advice should consult an independent financial adviser.
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 or production forecast.
Chairman's Statement3
I am delighted to report strong operational and financial results for the first half of 2010 with record H1 revenue of $306.9 million up by 33%, underpinned by higherrealised silver and gold prices, which were up 33% and 29% year-on-year respectively.
During the period we produced 12.8 million attributable silver equivalent ounces comprised of 8.5 million ounces of silver and 72.5 thousand ounces of gold and remain firmly on track to achieve our 2010 goal of producing 26.3 million attributable silver equivalent ounces.
As expected, we are seeing inflation relating to labour and supplies, however, I am pleased to say that we are performing well against the industry average with unit cost per tonne in H1 2010 contained at a year-on-year increase of 6%. We are rigorously managing the costs that are within our control and remain confident that unit cost per tonne for the full year will be in line with our guidance of a 10% increase on 2009. Notwithstanding this and higher depreciation in cost of sales, we have reported a strong increase in pre-exceptional gross profit to $154.8 million, up 63% on the equivalent period last year.
Operating profit before exceptional items is up 75% to $97.8 million resulting in a pre-exceptional EPS of $0.11 for the first six months, more than double the equivalent period last year. These impressive half year results drive our confidence in the business going forward and support our declaration of an interim dividend of $0.02 per ordinary share.
We have also reported strong operating cashflow during the period, up 15% to $112.2 million. This, together with our cash balance of $91.0 million as at 30 June 2010, enables us to deliver our growth strategy which focuses on maximising the potential of our current operations, developing our exploration pipeline and securing carefully selected bolt-on acquisitions.
Exploration
Exploration is a vital part of our growth strategy and we have committed to our largest ever exploration budget in 2010 of $50 million, up 75% on 2009. We have spent $24.4 million in the first half and we are already seeing positive results, particularly with regards to our key objective of increasing the resource life of our main operations, up 11% to 7.9 years4.
We take a very conservative approach to resource delineation and are one of the few companies that apply the same cut off grades to reserves and resources. As a result, resources are also economic and the Company has an extremely high rate of conversion from resources to reserves.
We are also focused on bringing new projects into production. Our team of geologists are working in key regions across the Americas to identify 'company maintainers', which are projects that have the potential of delivering 5-10 million silver equivalent ounces of production per year and 'company makers' which have the potential of achieving 20-30 million silver equivalent ounces per year.
We are rapidly progressing our key 'company maintainer' projects, Azuca and Crespo and will be updating on further developments in H2 2010. We have initiated a scoping study at Azuca where resources have increased by 13% to 50 million silver equivalent ounces during H1 2010, and expect to have the results in Q3 2010. If scoping is successful, engineering studies and underground exploration will follow with planned completion by the end of 2011. Scoping at Crespo is expected to be completed by the end of 2010 and the team continues to build on the 44.1 million silver equivalent ounces reported as at 31 December 2009.
For further details, please see the Exploration Review on page 6.
3 All figures are on a pre-exceptional basis unless otherwise stated
4 Resource figures have not been audited by an independent third party. Fully audited figures will be provided in the 2010 Annual Report
Acquisitions & investments
Securing bolt-on acquisitions is also a key part of our long term strategy and we will continue to pursue opportunities which add value to our portfolio of assets. We remain positive on the outlook for our investments in Lake Shore Gold and Gold Resource Corp ("GRC") in which we hold 37%5 and 30% respectively. The companies have a combined market capitalisation of approximately $2 billion, valuing our total investment at over $650 million6.
GRC successfully commenced commercial production on 1 July 2010 and has a target of 70,000 ounces of gold (4.2 million silver equivalent ounces) in the first 12 months of commercial production, with a three year target to triple annual production to 200,000 gold equivalent ounces (12 million silver equivalent ounces).
Earlier this month, Lake Shore Gold announced that it continues to target mine production of 65,000 ounces of gold (3.9 million silver equivalent ounces) in 2010, however, a portion of the ore mined may either be toll milled or held in inventory at year end for processing at the beginning of 2011, reflecting the timing for commissioning of the expansion of the Bell Creek mill. The Company continues to anticipate ending 2010 at a monthly production rate of 10,000 ounces from the Bell Creek mill with commercial production targeted for the fourth quarter. Longer term, the company is working towards building production with the potential to produce over 300,000 ounces of gold annually (18 million silver equivalent ounces) over the coming years.
As a result of the developments above, we have revised the contribution that we expect from our holdings in Lake Shore Gold and GRC to an additional 1-2 million silver equivalent ounces in 2010.
Dividend
The Board has declared an interim dividend of $0.02 per ordinary share (H1 2009: $0.02). We will keep the dividend policy under review in accordance with capital availability and the requirements of the business to ensure that we maximise long term shareholder return.
Summary & outlook
Precious metals prices performed strongly in H1 2010 and management believes that there are strong fundamentals supporting gold and silver over the long term. Ongoing inflationary pressure and weakness in the US dollar continue to drive investment demand for gold and silver as safe haven assets. Furthermore, any improvement in the global economic outlook is likely to have a positive impact on industrial demand for silver.
We are focused on producing profitable ounces and remain on track to deliver our 2010 production target of 26.3 million attributable silver equivalent ounces from our current operations. We are focused on controlling costs and remain confident that we will contain unit cost per tonne inflation within 10% for the full year. We have made excellent progress at our 100% owned advanced projects, Azuca and Crespo, with the results of both scoping studies scheduled for completion by the end of the year.
With our new management team, a solid asset base and extensive project pipeline, we are confident about the long term growth prospects of the Company.
Eduardo Hochschild
Executive Chairman
5 Hochschild's ownership decreased from 38% to 37% following Lake Shore Gold's issuance of share capital during H1 2010
6 As at 16 August 2010 OPERATIONAL REVIEW
A solid production base
During the first six months of 2010 ("H1 2010"), our four underground mines, Arcata, Pallancata, Ares and San Jose, together with Moris, our open pit mine in northern Mexico, produced 8.5 million ounces of silver and 72.5 thousand ounces of gold equating to 12.8 million attributable silver equivalent ounces. Excluding the Selene mine, which closed in H1 2009, this represents a reduction in attributable silver equivalent production of 2% year-on-year due to lower grades at Arcata and Ares.
As a result of solid production in H1 2010, the Company is on track to deliver 26.3 million attributable silver equivalent ounces in 2010, including approximately 17.6 million ounces of silver and 145,000 ounces of gold, with an additional 1-2 million silver equivalent ounces from the Company's stakes in Lake Shore Gold and GRC.
Main operations
Following the closure of the Selene mine in June 2009, Pallancata is using the full capacity of the Selene plant to process ore and, as a result, Pallancata's treated tonnage is up by 38% year-on-year. Pallancata delivered strong results in H1 2010 with year-on-year silver and gold production up by 53% and 45% respectively as a result of the increased tonnage as well as higher extracted grades.
Arcata's silver grades have improved since January when the Company announced that grades were being impacted by narrower veins and changing geotechnical conditions. Average extracted grades increased from 442 g/t in Q4 2009 to 483 g/t in Q2 2010, however, management continues to forecast Arcata's silver grades to be close to Q4 2009 levels over the medium term.
As expected, results at San Jose improved over the first half of 2010 due to the ongoing development of the Kospi vein, as well as improved gold recoveries. Operational challenges remain at San Jose, however, the Company continues to expect an increase in the grade profile of the operation over the next two quarters.
For further information on costs by mine, please see page 46.
Life of mine
Mine site exploration
Hochschild is further increasing its resource base and is committed to maximising the resource life of mine of its core operations. The Company continues to build on the significant progress made in 2009, with resource life of mine increasing 11% from 7.1 years as at 31 December 2009 to 7.9 years7 as at 30 June 2010. This follows a 20% increase from 5.9 years as at 31 December 2008 to 7.1 years as at 31 December 2009.
Arcata: Peru
The Company continues to increase resources through diamond drilling. During H1 2010, the Company completed 33,567 metres of drilling with significant intercepts at the Mariana, Socorro and Sorpresa veins including:
| Vein | Results |
| Socorro | DDH- 728 0.8m at 2.55 g/t Au & 634 g/t Ag |
| Mariana | DDH- 729 2.0m at 1.21 g/t Au & 755 g/t Ag |
| Sorpresa 2 | DDH- 733 2.0m at 98.5 g/t Au & 13,591 g/t Ag |
| Pucara | DDH- 744 0.7m at 2.8 g/t Au & 778 g/t Ag |
| Ramal Julia | DDH- 771 1.0m at 2.3 g/t Au & 1,235 g/t Ag |
| Luz | DDH- 734 0.80m at 0.94 g/t Au & 784 g/t Ag |
7 Resource figures have not been audited by an independent third party. Fully audited figures will be provided in the 2010 Annual Report Pallancata: Peru
Significant resources have been developed at Pallancata during H1 2010. A 16,402 metre diamond drilling programme was executed at the Cimoide, Pallancata-Oeste, Pallancata Este and San Cayetano veins, with results including:
| Vein | Results |
| Pallancata Este vein | DLP-A35 10.6m at 1.5 g/t Au & 473 g/t Ag |
| Pallancata Oeste/ Ramal Oeste | DLPL-A495 1.7m at 3.1 g/t Au & 1,076 g/t Ag and 1.0m at 0.5 g/t Au & 290 g/t Ag |
| Pallancata/Ramal Oeste | DLPL-A501 3.8m at 2.4 g/t Au & 702 g/t Ag and 7.9m at 3.1 g/t Au & 910 g/t Ag |
| San Cayetano | DLSC-A02 1.6m at 2.9 g/t Au & 1,211 g/t Ag |
San Jose: Argentina
During H1 2010, a 27,671 metre diamond drilling programme was completed at the property focusing on the Ayelen, Ramal Frea, Micaela and Antonella veins. Most significant results include:
| Vein | Results |
| Ayelen | SJD 681 4.0m at 6.4 g/t Au & 1,068 g/t Ag |
| SJD 690 2.7m at 6.6 g/t Au & 644 g/t Ag | |
| SJD 692 0.9 m at 21.0 g/t Au & 859 g/t Ag | |
| Ramal Frea/Micaela | SJD 486 16.1m at 14.6 g/t Au & 1,065 g/t Ag and 0.9m at 2.7 g/t Au & 8 g/t Ag |
| Antonella | SJD 753 7.2m at 14.8 g/t Au & 524 g/t Ag and 0.4m at 4.9 g/t Au & 617 g/t Ag |
Other operations
Production at Ares remains relatively stable with 1.5 million silver equivalent ounces produced in H1 2010. Depending on conditions in Q3 2010, production at Ares may continue beyond the scheduled closure in H2 2010, in line with the Company's policy of mining profitable ounces. Moris, the Company's only open pit operation, which produced 0.8 million silver equivalent ounces in H1 2010, is expected to close in the first half of 2011, as previously indicated.
For detailed production tables, see Production Information on page 44.
EXPLORATION REVIEW
Securing future growth
·; Largest ever exploration budget of $50 million for the full year 2010; $24.4 million spent to date
·; Scoping study commenced at Azuca, results expected in Q3 2010
·; Scoping study scheduled to commence at Crespo in Q3 2010, with results expected in Q4 2010
·; Active drilling undertaken at potential company maker projects Victoria in Chile, Mercurio in Mexico and Sabina in Peru
·; Impressive drilling results at Inmaculada
Exploration is a vital part of Hochschild's growth strategy and the Company is committed to increasing the resource life of its main operations as well as to developing its extensive project portfolio. The exploration team targets 'company maintainers', which are projects that have the potential of delivering 5-10 million silver equivalent ounces of production per year and 'company makers' which have the potential of achieving 20-30 million silver equivalent ounces per year.
Company Makers
Victoria: Chile
Victoria is a joint venture with Iron Creek Capital in which the Group can earn in up to a 60% interest. The project is located along the highly prospective Domekyo fault zone in northern Chile. Drilling is ongoing with correlation between holes indicating east-west mineralisation with significant intercepts of higher grade material. During 2010, 8,046 metres of drilling was completed at the project with a high grade mineralised intersect of 8 metres at 10.5 g/t Au and 30 g/t Ag and lower grade intercepts along strike.
Mercurio: Mexico
Mercurio is a 100% owned, 36,388 hectare prospect located between two high grade mines in Mexico, Sombrerete and Fresnillo. During H1 2010, the Company completed 1,514 metres in five diamond drill holes at the site. Drill hole number five discovered 86 metres at 20 g/t Ag, 0.22% Cu, 0.49% Pb and 1.4% Zn which includes 3.5 metres with 300 g/t Ag, 4.36% Cu, 1.18% Pb, 7.49% Zn.
Sabina: Peru
Sabina is a 100% owned project in Peru where the Company has completed field work and commenced drilling in June 2010.
Josnitoro
Drilling is also ongoing at Josnitoro, a 100% owned project acquired as part of the Southwestern Resources acquisition, with visible gold mineralisation starting at surface. The 2010 programme is focused on understanding the geology and preparation of drill targets.
Other
During H1 2010, Hochschild acquired two new early stage projects which have the potential to be 'company makers', Corazon de Tinieblas in Mexico and Apacheta in Peru. The Company is in the process of completing all permits and plans to commence exploration work as soon as the necessary approvals are in place.
Company Maintainers
Hochschild is developing its advanced, 100% owned 'company maintainer' projects, Azuca and Crespo, which have the potential to be the Company's next operating mines.
Azuca: Peru
The Company has initiated a scoping study at Azuca with results expected in Q3 2010 and continues to progress its aggressive resource development drilling programme that will extend to the year end. If scoping is successful, engineering studies and underground exploration will follow with planned completion by the end of 2011. During H1 2010, resources at Azuca increased by 13% to 50 million silver equivalent ounces8 and the Company expects to achieve 60 million silver equivalent ounces by Q3 2010.
Crespo: Peru
The Company continues to build on the 44.1 million silver equivalent ounces reported at Crespo in 2009 and is progressing the project towards scoping, which is expected to be completed by the end of 2010. The 2,864 metre surface drilling programme has been completed and an exploration cross-cut to confirm drill-hole grades and controls of the Au-Ag disseminated mineralisation has advanced 255 metres during the quarter. Underground resource development drilling will follow in H2 2010 when the cross-cut is completed.
8 Resource figures have not been audited by an independent third party. Fully audited figures will be provided in the 2010 Annual Report Inmaculada: Peru
Inmaculada, a gold-silver project owned 49% by Hochschild and 51% by IMZ, Hochschild's partner at the Company's Pallancata operation, has reported high-grade drill results from the Angela Vein, located approximately 25 kilometres from Pallancata. The drill campaign undertaken by IMZ is designed to move inferred resources to the indicated and measured categories, as a requisite to completion of a feasibility study in 2011. Several high-grade intercepts (estimated true widths) were reported in recent drill results, including:
| Drill hole | Results |
| Inma139 | 2.1m at 17.4 g/t gold and 623 g/t silver |
| Inma143 | 4.0m at 24.2 g/t gold and 706 g/t silver |
| Inma149 | 6.0m at 15.5 g/t gold and 617 g/t silver |
| Inma155 | 10.5m at 6.3 g/t gold and 232 g/t silver |
| Inma158 | 10.0m at 7.7 g/t gold and 186 g/t silver |
| Inma132 | 5.0m at 19.9 g/t gold and 285 g/t silver |
| Inma159 | 4.0m at 33.6 g/t gold and 789 g/t silver |
| Inma160 | 8.5m at 8.1 g/t gold and 178 g/t silver |
| Inma161 | 4.0m at 5.1 g/t gold and 375 g/t silver |
| Inma162 | 6.0m at 11.6 g/t gold and 505 g/t silver |
| Inma168 | 3.2m at 19.9 g/t gold and 445 g/t silver |
IMZ can earn an additional 19% interest in the Inmaculada project by financing and completing a feasibility study by September 2013 and by issuing 200,000 common shares to Hochschild over a 5 year period, commencing in February 2011.
Other
In addition, Hochschild is advancing various early stage projects across its pipeline. In Argentina, the Company is making advances at its Mosquito project, where 7 new vein targets have been identified, and also at La Flora where two large vein systems have been identified. Drilling programmes are due to commence at both projects in Q3 2010. During H2 2010 the Company will undertake diamond drilling at the 100% owned Astana Farallón and Cerro Blanco Au-Ag epithermal vein projects in its southern Peru cluster, totaling 3,050 metres and 3,200 metres respectively.
ACQUISITIONS & INVESTMENTS
A selective approach
Lake Shore Gold and GRC are important strategic investments for the Company and provide exposure to significant production potential and long term growth. Lake Shore Gold and GRC are already processing ore from their respective operations, however, revenue is only recognised once commercial production has been achieved. Both GRC and Lake Shore Gold are equity accounted by the Group and will appear under the associates line in the Company's income statement.
Since February 2008, Hochschild has invested $336.9 million in Lake Shore Gold resulting in a current holding of 37%9. Earlier this month, Lake Shore Gold announced that it continues to target mine production of 65,000 ounces of gold (3.9 million silver equivalent ounces) in 2010, however, a portion of the ore mined may either be toll milled or held in inventory at year end for processing at the beginning of 2011, reflecting the timing for commissioning of the expansion of the Bell Creek mill. The Company continues to anticipate ending 2010 at a monthly production rate of 10,000 ounces from the Bell Creek mill with commercial production targeted for the fourth quarter. Longer term, the company is working towards building production with the potential to produce over 300,000 ounces of gold annually (18 million silver equivalent ounces) over the coming years. Lake Shore Gold has a current market capitalisation of approximately $1.2 billion10, valuing the Company's investment at over $460 million.
To date, Hochschild has invested a total of $69.5 million in GRC, a US OTC traded precious metals mining company which successfully commenced commercial production on 1 July 2010. Hochschild now holds 30% of GRC which has a current market capitalisation of approximately $700 million11, valuing the Company's investment at over $200 million. GRC has a number of high grade, low cost development projects in southern Mexico with a production target of 70,000 ounces of gold (4.2 million silver equivalent ounces) in the first 12 months of commercial production and a longer term target to triple annual production to 200,000 gold equivalent ounces (12 million silver equivalent ounces) within three years.
9 Hochschild's ownership decreased from 38% to 37% following Lake Shore Gold's issuance of share capital during H1 2010
10 As at 16 August 2010
11 As at 16 August 2010
FINANCIAL REVIEW
The reporting currency of Hochschild Mining plc is U.S. dollars. In our discussion of financial performance we remove the effect of exceptional items, unless otherwise indicated, and in our income statement we show the results both pre and post such exceptional items. Exceptional items are those significant items, which due to their nature or the expected infrequency of the events giving rise to them, need to be disclosed separately on the face of the income statement to enable a better understanding of the financial performance of the Group and to facilitate comparison with prior years.
Revenue
Revenue from continuing operations, net of commercial discounts was $306.9 million in H1 2010, representing a increase of 33% on H1 2009, driven by higher silver and gold prices which were up 33% and 29% respectively. This was partially offset by a 4% year-on-year decrease in the Group's total silver equivalent production due to the closure of the Selene mine in June 2009 and lower grades at Arcata and Ares.
Silver: Gross revenue from silver increased 28% in the first half of 2010 to $210.6 million (H1 2009: $164.4 million) as a result of higher silver prices. Despite a 3% year-on-year decrease in the Group's total silver production, total amount of silver ounces sold in H1 2010 increased to 11,203 koz (H1 2009: 10,906 koz) as a result of higher inventories.
Gold: Gross revenue from gold increased 25% in the first half of 2010 to $116.6 million (H1 2009: $93.5 million) as a result of higher gold prices, partially offset by a 6% year-on-year decrease in the Group's total gold production. The total amount of gold ounces sold in H1 2010 was 97.0 koz (H1 2009: 98.6 koz).
Commercial discounts: Commercial discounts primarily refer to refinery charges for processing mineral ore and are discounted from revenue on a per tonne or per ounce basis. Commercial discounts of $23.3 million in H1 2010 were flat year-on-year. The ratio of commercial discounts to gross revenue decreased from 9% in H1 2009 to 7% in H1 2010.
Average realised sale prices
|
| Six months to 30 June 2010 | Six months to 31 December 2009 | Six months to 30 June 2009 |
| Silver ($/oz) | 17.3 | 15.8 | 13.0 |
| Gold ($/oz) | 1,160.7 | 1,036.2 | 899.9 |
Costs
Total cost of sales increased 12% to $152.0 million in H1 2010 (H1 2009: $135.4 million) mainly as a result of the expected increase in unit cost per tonne as well as higher depreciation and amortisation.
In line with guidance, unit cost per tonne at the Group's underground operations increased 6% from $73.9 in H1 2009 to $78.6 in H1 2010. Including Moris, the Group's only open pit mine, unit cost per tonne increased 5% from $53.1 to $55.6. The increase is a result of expected inflation relating to labour and supply costs, particularly in Argentina as well as the appreciation of local currencies. The Group is focused on controlling costs and is confident that it will contain unit cost per tonne inflation within 10% for the full year.
Depreciation and amortisation in cost of goods sold increased year-on-year due to the higher capital expenditure and throughput relating to the significant expansions completed by the Group in the previous three years (H1 2010: $43.4 million compared to H1 2009: $40.2 million). The Group's depreciation calculation was revisited in 2009.
For further information on costs by mine, please see page 46.
Cash costs
Co-product cash costs include cost of sales, commercial discounts and selling expenses, less depreciation included in cost of sales. Silver/gold cash costs are total cash costs multiplied by the percentage of revenue from silver/gold, divided by the number of silver/ gold ounces sold in the year.
Co-product cash costs for the period increased from $7.52 to $8.58 per ounce for silver and from $521 to $574 per ounce for gold, mainly explained by the higher production costs detailed above and the expected decline in extracted grades, particularly at Ares.
By-product cash costs include cost of sales, commercial discounts and selling expenses, less depreciation included in cost of sales. Silver/gold cash costs are total cash costs less revenue from gold/silver, divided by the number of silver/gold ounces sold in the year. By-product cash costs for the period were $3.09 per silver ounce and ($630) per gold ounce. (H1 2009: $3.73 per silver ounce and ($276) per gold ounce).
Administrative Expenses
Administrative expenses before exceptional items increased to $29.7 million in H1 2010 (H1 2009: $23.5 million). This was a result of higher personnel expenses and professional fees of which $3.5 million is considered by the Company as non-recurring and refers mainly to the reversal in H1 2009 of a $1.5 million over accrual at 31 December 2008 in respect of professional fees as well as senior management termination benefits of $1.2 million.
Exploration Expenses
Exploration expenses, which primarily relate to greenfield exploration, have more than doubled to $14.3 million in H1 2010 (H1 2009: $6.2 million), following the Group's decision to substantially increase its exploration budget by 75% to $50 million for the full year 2010. In addition, the Group has invested $10.1 million (H1 2009: $2.8 million) in its brownfield exploration programme which is aimed at increasing the resource life of the Group's operations. Brownfield exploration is capitalised.
Selling Expenses
Selling expenses increased by 30% to $11.0 million primarily as a result of higher export duties in Argentina due to higher prices as well as higher transport costs. Export duties in Argentina are levied at 10% of revenue for concentrate and 5% of revenue for doré.
Profit from continuing operations
Profit from continuing operations before exceptional items, net finance costs and income tax increased to $97.8 million (H1 2009: $56.0 million) as a result of the effects detailed above.
EBITDA
EBITDA increased by 51% over the period to $150.1 million (H1 2009: $99.3 million) driven primarily by higher silver and gold prices. EBITDA is calculated as profit from continuing operations before exceptional items, net finance costs and income tax plus depreciation and exploration expenses other than personnel and other expenses.
EBITDA reconciliation
| $ thousands (unless otherwise stated) | Six months ended 30 June 2010 | Six months ended 30 June 2009 | % change |
| Profit from continuing operations before exceptional items, net finance costs and income tax | 97,762 | 56,018 | 75% |
| Operating margin | 32% | 24% |
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|
|
| Depreciation in Cost of Goods Sold | 43,409 | 40,233 | 8% |
| Depreciation in Administrative Expenses | 950 | 385 | 147% |
| Exploration Expenses | 14,340 | 6,217 | 131% |
| Minus: |
|
|
|
| Personnel and other Exploration Expenses | 6,333 | 3,523 | 80% |
| EBITDA | 150,128 | 99,330 | 51% |
| EBITDA margin | 49% | 43% |
|
Impact of the Group's investments in joint ventures and associates
The Group's share of the loss of equity accounted investments in joint ventures and associates resulted in a loss of $1.2 million (2009: $1.3 million) which mainly relates to its investments in Lake Shore Gold and GRC.
Finance income
Finance income decreased to $3.1 million (H1 2009: $3.8 million) as a result of lower interest on the Company's liquidity funds as well as a lower discount rate applied to the VAT receivable by Minera Santa Cruz. This was partly offset by a gain of $0.8 million relating to changes in the fair value of the zero cost collar contracts secured in 2009 for 5.2 million ounces of the Company's 2010 silver production with an average 'floor' at $12.7/oz and an average 'cap' at $19.7/oz. The contracts expire between January and December 2010.
Finance costs
Finance costs totaled $12.1 million in H1 2010 (H1 2009: $27.2 million) mainly comprising an interest expense of $5.8 million relating to the Company's debt facility (H1 2009: $7.7 million) and an interest expense of $4.2 million related to the Company's convertible bond issued in October 2009.
The year-on-year decrease was a result of the one-off $18.0 million expense recorded in H1 2009 relating to the Company's forward sales contracts.
Foreign exchange losses
The Company recognised a foreign exchange loss of $0.2 million (H1 2009: loss of $3.5 million) as a result of transactions in currencies other than the Company's functional currency.
Income tax
The Company's pre-exceptional tax rate was 36% in H1 2010 (H1 2009: 31%). This year-on-year difference is mainly explained by a number of non-recurring items which positively impacted the tax rate in H1 2009 including a positive tax effect of $3.5 million relating to the tax restructuring in Mexican companies and a negative tax effect of $2.6 million due to the foreign exchange effect from converting tax bases and monetary items from local currency to the functional currency. These effects reduced the effective tax rate by 3% in H1 2009.
The Company's post-exceptional effective tax rate was 38% in H1 2010 (H1 2009: 10%). The year-on-year difference is mainly explained by a number of exceptional items which positively impacted the tax rate in H1 2009 including: (i) non-taxable income of $9.8 million arising on the acquisition of Southwestern Group, and (ii) non-taxable income of $6.6 million arising on the acquisition of Gold Resource Corp. In H1 2010, the main exceptional items affecting the tax rate were: (i) non-taxable income of $7.5 million arising on the sale of Zincore shares (ii) non-taxable income of $6.0 million arising on the sale of the El Quevar project and (iii) the non-deductible impairment of the San Felipe project of $14.7million.
Exceptional items Exceptional items totalled $10.1 million after tax (H1 2009: ($2.4 million)). Positive exceptional items mainly include:
(i) Other income of $13.5 million relating to the sale of the Company's investments in Zincore ($7.5 million) and El Quevar ($6.0 million).
Negative exceptional items mainly include:
(i) Bonus of $8.9 million paid to workers at the Peruvian mines as a result of negotiations undertaken in H1 2010
(ii) The Company has impaired the San Felipe property by $14.7 million to $25 million. The impairment was triggered by the conclusion of the marketing process conducted during H1 2010 and reflects the Company's estimate of the fair value less cost to sell.
(iii) Share of post tax losses and negative goodwill of associates and joint ventures accounted under the equity method of $2.0 million, relating to the dilution of Hochschild's holding in Lake Shore Gold from 38% to 37%, following Lake Shore Gold's issuance of share capital during H1 2010.
Cash flow & balance sheet review:
Cash flow
| $ thousands | Six months ended 30 June 2010 | Six months ended 30 June 2009 |
| Net cash generated from operating activities | 112,191 | 97,844 |
| Net cash used in investing activities | (73,866) | (126,473) |
| Cash flows (used)/generated in financing activities | (25,096) | (28,316) |
| Net increase/(decrease) in cash and cash equivalents during the period | 13,209 | (56,945) |
Total cash generated increased from $(57.0) million to $13.2 million. This was primarily as a result of lower cash outflows used in investing activities which decreased from $126.5 million to $73.9 million due to lower capital expenditure and a decline in the Company's investments in associates as well as higher cash flow from operating activities which increased from $97.8 million to $112.2 million
Working capital:
| $ millions | As at 30 June 2010 | As at 31 December 2009 |
| Trade and other receivables | 153.9 | 168.0 |
| Inventories | 47.6 | 45.8 |
| Derivative financial instruments | 0.0 | (1.9) |
| Income tax | 0.4 | (10.8) |
| Trade and other payables | (139.7) | (135.2) |
| Working capital | 62.2 | 66.0 |
The Company's working capital position decreased from $66.0 million at 31 December 2009 to $62.2 million as at 30 June 2010, mainly as a result of lower trade and other receivables, partially offset by lower income tax liabilities.
Net debt:
| $ thousands | As at 30 June 2010 | As at 31 December 2009 |
| Cash and cash equivalents | (90,989) | (77,844) |
| Long term borrowings | 255,883 | 219,681 |
| Short term borrowings less pre-shipment loans | 53,545 | 84,158 |
| Net debt | 218,439 | 225,995 |
|
|
|
|
Net debt decreased 3% to $218.4 million due to mainly due to a higher cash balance of $91.0 million resulting from strong cash generation and lower year-on-year M&A spend.
Capital expenditure1
| $ thousands | Six months ended 30 June 2010 | Six months ended 30 June 2009 |
| Arcata | 12,997 | 10,779 |
| Ares | 721 | 976 |
| Selene | 3,947 | 12,084 |
| Pallancata | 14,641 | 9,977 |
| San Jose | 26,074 | 21,931 |
| Moris | 1,034 | 179 |
| San Felipe | 52 | 199 |
| Other (including capital advances) | 5,632 | 2,492 |
| Total | 65,098 | 58,617 |
1 Includes additions in property, plant and equipment balance sheet account and excludes increases in closure of mine assets.
Total capital expenditure totalled $65.1 million in H1 2010 (H1 2009: $58.6 million) including mine development of $30.5 million, equipment of $24.5 million and exploration of $10.1 million. The year-on-year increase is primarily driven by higher investment at the Company's main operations, Arcata, Pallancata and San Jose.
Dividends:
| Dividend dates | 2010 |
| Ex-dividend date | 01 September |
| Record date | 03 September |
| Deadline for return of currency election forms | 07 September |
| Payment date | 22 September |
Dividends are declared in US dollars. Unless a shareholder elects to receive dividends in US dollars, they will be paid in pounds sterling with the US dollar dividend being converted into pound sterling at exchange rates prevailing at the time of payment.
Risks
The principal risks and uncertainties facing the Group in respect of the year ended 31 December 2009 were set out in detail in the Risk Management section of the 2009 Annual Report and in Note 38 to the 2009 Consolidated Financial Statements. These risks continue to apply to the Group in respect of the remaining six months of the current financial year.
The key risks disclosed in the 2009 Annual Report were categorisedas:
- Financial risks which include commodity price risk and foreign currency risk;
- Operational risks including the risks associated with business interruption, reserve and resource replacement and the retention of key personnel;
- Political, legal and regulatory risks; and
- Corporate Social Responsibility related risks including health and safety, environmental and social.
The 2009 Annual Report is available at www.hochschildmining.com
GOING CONCERN
The Directors confirm that they are satisfied that the Company has sufficient resources to continue in operation for the foreseeable future. Accordingly, adoption of the going concern basis in the preparation of the financial statements contained herein is considered to be appropriate.
RELATED PARTY TRANSACTIONS
Details regarding related party transactions are included in Note 18 on page 41.
Statement of Directors' Responsibilities The Directors confirm that, to the best of their knowledge, the interim condensed consolidated financial statements have been prepared in accordance with IAS 34 "Interim Financial Reporting" as adopted by the European Union and that the interim management report includes a fair review of the information required by Disclosure and Transparency Rules 4.2.7 and 4.2.8. A list of current Directors is maintained on the Company's website which can be found at www.hochschildmining.com. For and on behalf of the Board
Ignacio Bustamante Chief Executive Officer 17 August 2010
INDEPENDENT REVIEW REPORT TO HOCHSCHILD MINING PLC
Introduction
We have been engaged by Hochschild Mining plc (the Company) to review the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2010 which comprises the interim consolidated income statement, the interim consolidated statement of comprehensive income, the interim consolidated statement of financial position, the interim consolidated statement of cash flows, the interim consolidated statement of changes in equity and the related notes 1 to 22. We have read the other information contained in the half yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.
This report is made solely to the company in accordance with guidance contained in International Standard on Review Engagements 2410 (UK and Ireland) "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company, for our work, for this report, or for the conclusions we have formed.
Directors' Responsibilities
The half-yearly financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half-yearly financial report in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority.
As disclosed in note 2, the annual financial statements of the group are prepared in accordance with IFRSs as adopted by the European Union. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with International Accounting Standard 34, "Interim Financial Reporting", as adopted by the European Union.
Our Responsibility
Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.
Scope of Review
We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2010 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority.
Ernst & Young LLP
London
17 August 2010
Interim consolidated income statement
|
|
| Notes |
| Six-months ended 30 June 2010 (Unaudited) |
| Six-months ended 30 June 2009 (Unaudited-Restated) 1 |
| |||||||||
|
|
|
|
| Before exceptional items |
| Exceptional itemsNote 6 |
| Total |
| Before exceptional items |
| Exceptional items Note 6 |
| Total |
| |
|
|
|
|
| US$ (000) | ||||||||||||
| Continuing operations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
| Revenue |
| 5 |
| 306,860 |
| - |
| 306,860 |
| 230,584 |
| - |
| 230,584 |
| |
| Cost of sales |
|
|
| (152,017 | ) | (8,861 | ) | (160,878) | (135,444) | (6,918) | (142,362) | |||||
| Gross profit |
|
|
| 154,843 |
| (8,861 | ) | 145,982 |
| 95,140 |
| (6,918) | 88,222 |
| ||
| Administrative expenses |
|
|
| (29,684 | ) | - |
| (29,684) | (23,533) | - |
| (23,533) | ||||
| Exploration expenses |
|
|
| (14,340 | ) | - |
| (14,340 | ) | (6,217) | (1,049) | (7,266) | ||||
| Selling expenses |
|
|
| (11,016 | ) | - |
| (11,016 | ) | (8,480) | - |
| (8,480) | |||
| Other income |
|
|
| 1,932 |
| 13,543 |
| 15,475 |
| 3,268 |
| 10,367 |
| 13,635 |
| |
| Other expenses |
|
|
| (3,973 | ) | - |
| (3,973 | ) | (4,160) | (825) | (4,985) | ||||
| Impairment and write-off of assets (net)....................................................... |
|
|
| - |
| (14,702) |
| (14,702 | ) | - |
| (12,298 | ) | (12,298) | ||
| Profit/(loss) from continuing operations before net finance income/(cost), foreign exchange gain/(loss) and income tax |
|
|
| 97,762 |
| (10,020 | ) | 87,742 |
| 56,018 |
| (10,723) | 45,295 |
| ||
| Share of post tax losses and negative goodwill of associates and joint ventures accounted under the equity method |
|
|
| (1,168 | ) | (2,021 | ) | (3,189 | ) | (1,331) | 225 |
| (1,106) | |||
| Finance income |
| 7 |
| 3,077 |
| - |
| 3,077 |
| 3,748 |
| 6,632 |
| 10,380 |
| |
| Finance costs |
| 7 |
| (12,143 | ) | (689 | ) | (12,832) | (27,196) | - |
| (27,196) | ||||
| Foreign exchange loss |
|
|
| (180 | ) | - |
| (180) | (3,498) | - |
| (3,498) | ||||
| Profit/(loss) from continuing operations before income tax |
|
|
| 87,348 |
| (12,730 | ) | 74,618 |
| 27,741 |
| (3,866 | ) | 23,875 |
| |
| Income tax expense |
| 8 |
| (31,250 | ) | 2,600 |
| (28,650) | (8,513) | 6,218 |
| (2,295) | ||||
| Profit/(loss) for the period from continuing operations |
|
|
| 56,098 |
| (10,130 | ) | 45,968 |
| 19,228 |
| 2,352 |
| 21,580 |
| |
| Attributable to: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
| Equity shareholders of the Company.... |
|
|
| 38,856 |
| (9,616 | ) | 29,240 |
| 12,932 |
| 2,675 |
| 15,607 |
| |
| Non-controlling interestss |
|
|
| 17,242 |
| (514 | ) | 16,728 |
| 6,296 |
| (323 | ) | 5,973 |
| |
|
|
|
|
| 56,098 |
| (10,130) | 45,968 |
| 19,228 |
| 2,352 |
| 21,580 |
| ||
| Basic earnings per ordinary share from continuing operations and for the period (expressed in U.S. dollars per share) |
| 9 |
| 0.11 |
| (0.03 | ) | 0.08 |
| 0.04 |
| 0.01 |
| 0.05 |
| |
| Diluted earnings per ordinary share from continuing operations and for the period (expressed in U.S. dollars per share) |
| 9 |
| 0.11 |
| (0.03 | ) | 0.08 |
| 0.04 |
| 0.01 |
| 0.05 |
| |
(1) Refer to note 2(b) Interim consolidated statement of comprehensive income
|
|
| Notes |
| Six-months ended 30 June |
| ||
|
|
|
|
| 2010 (Unaudited) |
| 2009 (Unaudited-Restated) 1 |
|
|
|
|
|
| US$ (000) | |||
|
|
|
|
|
|
|
|
|
| Profit for the period |
|
|
| 45,968 |
| 21,580 |
|
| Other comprehensive income |
|
|
|
|
|
|
|
| Exchange differences on translating foreign operations |
|
|
| (4,657 | ) | 854 |
|
| Change in fair value of available-for-sale financial assets |
|
|
| (203 | ) | (162 | ) |
| Change in fair value of cash flow hedges taken to equity |
|
|
| (2,444 | ) | 1,074 |
|
| Income tax relating to components of other comprehensive income |
|
|
| (141 | ) | 218 |
|
| Other comprehensive (loss)/income for the period, net of tax |
|
|
| (7,445 | ) | 1,984 |
|
| Total comprehensive income for the period |
|
|
| 38,523 |
| 23,564 |
|
| Total comprehensive income attributable to: |
|
|
|
|
|
|
|
| Equity shareholders of the Company |
|
|
| 21,795 |
| 17,611 |
|
| Non-controlling interests |
|
|
| 16,728 |
| 5,953 |
|
|
|
|
|
| 38,523 |
| 23,564 |
|
(1) Refer to note 2(b)
Interim consolidated statement of financial position
|
|
| Notes |
| As at 30 June 2010 (Unaudited) |
| As at 31 December 2009
|
|
|
|
|
|
| US$ (000) |
| ||
| ASSETS |
|
|
|
|
|
|
|
| Non-current assets |
|
|
|
|
|
|
|
| Property, plant and equipment |
| 10 |
| 450,834 |
| 438,958 |
|
| Evaluation and exploration assets |
| 11 |
| 52,401 |
| 55,828 |
|
| Intangible assets |
| 12 |
| 21,359 |
| 22,425 |
|
| Investments accounted under equity method |
| 4 |
| 459,759 |
| 450,665 |
|
| Available-for-sale financial assets |
| 13 |
| 24,532 |
| 19,181 |
|
| Trade and other receivables |
|
|
| 3,706 |
| 3,150 |
|
| Income tax receivable |
|
|
| 1,973 |
| 1,302 |
|
| Deferred income tax assets |
|
|
| 6,880 |
| 15,852 |
|
|
|
|
|
| 1,021,444 |
| 1,007,361 |
|
| Current assets |
|
|
|
|
|
|
|
| Inventories |
|
|
| 47,584 |
| 45,813 |
|
| Trade and other receivables |
|
|
| 150,236 |
| 164,864 |
|
| Income tax receivable |
|
|
| 6,165 |
| 9,280 |
|
| Other financial assets |
| 14 |
| 3,789 |
| 695 |
|
| Cash and cash equivalents |
| 15 |
| 90,989 |
| 77,844 |
|
|
|
|
|
| 298,763 |
| 298,496 |
|
| Total assets |
|
|
| 1,320,207 |
| 1,305,857 |
|
|
|
|
|
|
|
|
|
|
| EQUITY AND LIABILITIES |
|
|
|
|
|
|
|
| Capital and reserves attributable to shareholders of the Parent |
|
|
|
|
|
|
|
| Equity share capital |
|
|
| 158,637 |
| 158,637 |
|
| Share premium |
|
|
| 395,928 |
| 395,928 |
|
| Other reserves |
|
|
| (220,366 | ) | (212,921 | ) |
| Retained earnings |
|
|
| 408,179 |
| 385,700 |
|
|
|
|
|
| 742,378 |
| 727,344 |
|
| Non-controlling interests |
|
|
| 76,854 |
| 76,126 |
|
| Total equity |
|
|
| 819,232 |
| 803,470 |
|
| Non-current liabilities |
|
|
|
|
|
|
|
| Trade and other payables |
|
|
| 86 |
| 81 |
|
| Borrowings |
| 16 |
| 255,883 |
| 219,681 |
|
| Provisions |
|
|
| 57,729 |
| 55,176 |
|
| Deferred income tax liabilities |
|
|
| 11,559 |
| 10,662 |
|
|
|
|
|
| 325,257 |
| 285,600 |
|
| Current liabilities |
|
|
|
|
|
|
|
| Trade and other payables |
|
|
| 67,769 |
| 68,501 |
|
| Other financial liabilities |
| 14 |
| 3,820 |
| 2,640 |
|
| Borrowings |
| 16 |
| 82,295 |
| 112,908 |
|
| Provisions |
|
|
| 14,076 |
| 11,405 |
|
| Income tax payable |
|
|
| 7,758 |
| 21,333 |
|
|
|
|
|
| 175,718 |
| 216,787 |
|
| Total liabilities |
|
|
| 500,975 |
| 502,387 |
|
| Total equity and liabilities |
|
|
| 1,320,207 |
| 1,305,857 |
|
Interim consolidated statement of cash flows
|
|
| Notes |
| Six-months ended 30 June |
| ||
|
|
|
|
| 2010 (Unaudited) |
| 2009 (Unaudited-Restated) |
|
|
|
|
|
| US$ (000) | |||
| Cash flows from operating activities |
|
|
|
|
|
|
|
| Cash generated from operations |
| 19 |
| 129,866 |
| 103,187 |
|
| Interest received |
|
|
| 316 |
| 714 |
|
| Interest paid |
|
|
| (3,970 | ) | (7,236 | ) |
| Payments of mine closure costs |
|
|
| (1,311 | ) | (1,309 | ) |
| Income tax (paid)/received |
|
|
| (12,710 | ) | 2,488 |
|
| Net cash generated from operating activities |
|
|
| 112,191 |
| 97,844 |
|
| Cash flows from investing activities |
|
|
|
|
|
|
|
| Purchase of property, plant and equipment |
|
|
| (53,175 | ) | (68,407 | ) |
| Purchase of evaluation and exploration assets |
|
|
| (10,070 | ) | (2,797 | ) |
| Investment in an associate |
|
|
| (20,336 | ) | (35,993 | ) |
| Acquisition of subsidiary |
|
|
| - |
| (19,246 | ) |
| Purchase of available-for-sale financial assets |
|
|
| (568 | ) | - |
|
| Purchase of intangibles |
|
|
| (35 | ) | (41 | ) |
| Proceeds from sale of property, plant and equipment |
|
|
| 664 |
| 11 |
|
| Proceeds from sale of available-for-sale financial assets |
|
|
| 286 |
| - |
|
| Proceeds from sale of investment in associate |
|
|
| 9,348 |
| - |
|
| Net cash used in investing activities |
|
|
| (73,886 | ) | (126,473 | ) |
| Cash flows from financing activities |
|
|
|
|
|
|
|
| Proceeds of borrowings |
| 16 |
| 12,611 |
| 100,023 |
|
| Repayment of borrowings |
| 16 |
| (14,946 | ) | (131,807 | ) |
| Acquisition of non-controlling interests................................................ |
|
|
| - |
| (1,500 | ) |
| Dividends paid |
| 17 |
| (22,761 | ) | (6,147 | ) |
| Capital contribution from minority shareholders |
|
|
| - |
| 11,115 |
|
| Cash flows used in financing activities |
|
|
| (25,096 | ) | (28,316 | ) |
| Net increase/(decrease) in cash and cash equivalents during the period |
|
|
| 13,209 |
| (56,945 | ) |
| Exchange difference |
|
|
| (64 | ) | (279 | ) |
| Cash and cash equivalents at beginning of period |
|
|
| 77,844 |
| 116,147 |
|
| Cash and cash equivalents at end of period |
| 15 |
| 90,989 |
| 58,923 |
|
Interim consolidated statement of changes in equity
|
|
|
|
|
|
|
|
| Other reserves |
|
|
|
|
|
|
|
|
| |||||||||||
|
|
| Notes |
| Equity share capital |
| Share premium |
| Unrealised (loss)/gain on available-for-sale financial assets |
| Initial valuation of cash flow hedges |
| Bond equity component |
| Cumulative translation adjustment |
| Merger reserve |
| Total other reserves |
| Retained earnings |
| Capital and reserves attributable to shareholders of the Parent |
| Non-controlling interests |
| Total Equity |
| |
|
|
| US$(000) |
| |||||||||||||||||||||||||
| Balance at 31 December 2009 |
|
|
| 158,637 |
| 395,928 |
| 3,339 |
| (13) |
| 8,432 |
| (14,633) |
| (210,046) |
| (212,921) |
| 385,700 |
| 727,344 |
| 76,126 |
| 803,470 |
| |
| Other comprehensive (loss)/income |
|
|
| - |
| - |
| (344) |
| (2,444) |
| - |
| (4,657) |
| - |
| (7,445) |
| - |
| (7,445) |
| - |
| (7,445) |
| |
| Profit for the period |
|
|
| - |
| - |
| - |
| - |
| - |
| - |
| - |
| - |
| 29,240 |
| 29,240 |
| 16,728 |
| 45,968 |
| |
| Total comprehensive (loss)/income for the period |
|
|
| - |
| - |
| (344) |
| (2,444) |
| - |
| (4,657) |
| - |
| (7,445) |
| 29,240 |
| 21,795 |
| 16,728 |
| 38,523 |
| |
| Dividends paid to non-controlling interests |
| 17 |
| - |
| - |
| - |
| - |
| - |
| - |
| - |
| - |
| - |
| - |
| (16,000) |
| (16,000) |
| |
| Dividends |
| 17 |
| - |
| - |
| - |
| - |
| - |
| - |
| - |
| - |
| (6,761) |
| (6,761) |
| - |
| (6,761) |
| |
| Balance at 30 June 2010 |
|
|
| 158,637 |
| 395,928 |
| 2,995 |
| (2,457) |
| 8,432 |
| (19,290) |
| (210,046) |
| (220,366) |
| 408,179 |
| 742,378 |
| 76,854 |
| 819,232 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
| Balance at 31 December 2008 (restated) |
|
|
| 146,466 |
| 395,928 |
| (410) |
| - |
| - |
| (40,375) |
| (210,046) |
| (250,831) |
| 167,767 |
| 459,330 |
| 66,293 |
| 525,623 |
| |
| Other comprehensive income/(loss) |
|
|
| - |
| - |
| 50 |
| 1,074 |
| - |
| 880 |
| - |
| 2,004 |
| - |
| 2,004 |
| (20) |
| 1,984 |
| |
| Profit for the period (restated) |
|
|
| - |
| - |
| - |
| - |
| - |
| - |
| - |
| - |
| 15,607 |
| 15,607 |
| 5,973 |
| 21,580 |
| |
| Total comprehensive income for the period.. |
|
|
| - |
| - |
| 50 |
| 1,074 |
| - |
| 880 |
| - |
| 2,004 |
| 15,607 |
| 17,611 |
| 5,953 |
| 23,564 |
| |
| Purchase of shares from non-controlling interests (restated) |
|
|
| - |
| - |
| - |
| - |
| - |
| - |
| - |
| - |
| 4,150 |
| 4,150 |
| (5,650) |
| (1,500) |
| |
| Dividends |
| 17 |
| - |
| - |
| - |
| - |
| - |
| - |
| - |
| - |
| (6,147) |
| (6,147) |
| - |
| (6,147) |
| |
| Balance at 30 June 2009 (restated)1 |
|
|
| 146,466 |
| 395,928 |
| (360) |
| 1,074 |
| - |
| (39,495) |
| (210,046) |
| (248,827) |
| 181,377 |
| 474,944 |
| 66,596 |
| 541,540 |
| |
(1) Refer to note 2(b)
Notes to the interim consolidated financial statements
1 Corporate Information
Hochschild Mining plc (hereinafter the "Company") is a public limited company incorporated on 11 April 2006 under the Companies Act 1985 as a limited company and registered in England and Wales with registered number 05777693. The Company's registered office is located at 46 Albemarle Street, London W1S 4JL, United Kingdom. Its ordinary shares are traded on the London Stock Exchange.
The Group's principal business is the mining, processing and sale of silver and gold. The Group has three operating mines (Ares, Arcata, Pallancata) and a plant (Selene, which treats ore from the Pallancata mine), located in Southern Peru, one operating mine (San José) located in Argentina and one operating mine (Moris) located in Mexico. The Group also has a portfolio of projects located across Peru, Mexico, Chile, Argentina and Canada at various stages of development.
These interim consolidated financial statements were approved for issue on behalf of the Board of Directors on 17 August 2010.
2 Significant Accounting Policies
(a) Basis of preparation
These consolidated financial statements set out the Group's financial position as at 30 June 2010 and 31 December 2009 and its financial performance and cash flows for the periods ended 30 June 2010 and 30 June 2009.
These interim condensed consolidated financial statements of the Group for the six months ended 30 June 2010 have been prepared in accordance with IAS 34 Interim Financial Reporting in accordance with International Financial Reporting Standards ('IFRS') as adopted by the European Union. Accordingly, the interim consolidated financial statements do not include all the information required for full annual financial statements and therefore, should be read in conjunction with the Group's 2009 annual consolidated financial statements as published in the 2009 Annual Report.
The interim consolidated financial statements do not constitute statutory accounts as defined in the Companies Act 2006. The financial information for the full year is based on the statutory accounts for the financial year ended 31 December 2009. A copy of the statutory accounts for that year, which were prepared in accordance with International Financial Reporting Standards ('IFRS') as adopted by the European Union has been delivered to the Registrar of Companies. The auditors' report under section 495 of the Companies Act 2006 in relation to those accounts was unqualified and did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying the report and did not contain a statement under s498(2) or s498(3) of the Companies Act 2006.
The impact of the seasonality or cyclicality of operations is not regarded as significant on the interim consolidated financial statements.
The interim consolidated financial statements have been prepared on a historical cost basis, except for certain classes of property, plant and equipment which have been revalued at 1 January 2003 to determine deemed cost and derivatives and available-for-sale financial instruments which have been measured at fair value. The financial statements are presented in US dollars ($) and all monetary amounts are rounded to the nearest thousand ($000) except when otherwise indicated.
(b) Restatement of June 2009 comparative information
- Restrospective restatement for change to depreciation calculation
The Group applies the unit of production depreciation methodology in the calculation of depreciation of its mining assets. When this approach was adopted in connection with the Group's listing during 2006, the future capital expenditure associated with developing the undeveloped reserves and resources was not significant to the calculation and therefore these depreciation calculations included only the future costs of converting resources to reserves. Since its listing, the Group has extended both the life, and throughput, of certain mines, and has opened, and subsequently expanded, two new mines. These actions, which were completed in 2009, have led to an increase in the amount of undeveloped resources, and a disproportionate increase to the associated future capital expenditure required to develop and access these reserves and resources.
As a result of these changed circumstances, during the year 2009 management identified that the existing depreciation calculations were no longer effectively matching costs to production in the manner in which the unit of production approach is designed. Consequently the depreciation calculations were revised to include all the future capital expenditure associated with developing these reserves and resources. Management believes that this revision will enable improved matching of costs to production in the relevant period, and thereby will better reflect the Group's economic performance.
As required by IAS 8 'Accounting Policies, Changes in Accounting Estimates and Errors', the Group retrospectively applied this revised depreciation methodology in the 2009 Annual Report and has adjusted the comparative financial information contained in these financial statements.
- Acquisition of non-controlling interests
In compliance with the Group´s accounting policy, the difference between the consideration paid and the carrying value of the non-controlling interests at the time of the acquisition is recognised in retained earnings in equity. At 30 June 2009 $4,150,000 had been recognised in the Income Statement in "Other Income" rather than in equity in accordance with the Group's accounting policy. The Group has restated the comparative financial statements for June 2009 to be consistent with the Group's policy.
The effect of both of these restatements is as follows:
| Consolidated income statement |
| (Reported) Period ended 30 June 2009 US$000 |
| (Restated) Period ended 30 June 2009 US$000 |
| Effect of restatement US$000 |
| Continuing operations |
|
|
|
|
|
|
| Cost of sales |
| (131,531) |
| (142,362) |
| (10,831) |
| Gross profit |
| 99,053 |
| 88,222 |
| (10,831) |
| Other income1 |
| 17,785 |
| 13,635 |
| (4,150) |
| Impairment of property, plant and equipment |
| (13,488) |
| (12,298) |
| 1,190 |
| Profit from continuing operations before net finance income/(cost), foreign exchange (loss)/gain and income tax |
| 59,086 |
| 45,295 |
| (13,791) |
| Profit from continuing operations before income tax |
| 37,666 |
| 23,875 |
| (13,791) |
| Income tax expense |
| (5,303) |
| (2,295) |
| 3,008 |
| Profit for the period from continuing operations |
| 32,363 |
| 21,580 |
| (10,783) |
| Attributable to: |
|
|
|
|
|
|
| Equity shareholders of the Company |
| 24,733 |
| 15,607 |
| (9,126) |
| Minority shareholders |
| 7,630 |
| 5,973 |
| (1,657) |
| Basic and diluted earnings per ordinary share from continuing operations and for the period (expressed in US dollars per share) |
| 0.08 |
| 0.05 |
| (0.03) |
(1) Includes acquisition of non-controlling interests of US$4,150,000.
These restatements had no impact on the statement of comprehensive income and the statement of cash flows other than the change in profit for the period.
(c) Changes in accounting policies and disclosures
The accounting policies adopted in the preparation of the interim consolidated financial statements are consistent with those applied in the preparation of the consolidated financial statement for the year ended 31 December 2009, except for the adoption of the following standards and interpretations:
·; IFRS 3 'Business Combinations (Revised)' applicable for annual periods beginning on or after 1 July 2009.
The revised standard will have an impact on the profit or loss reported in the period of an acquisition, the amount of goodwill recognised in a business combination and the profit or loss reported in future periods. IFRS 3 applies prospectively to business combinations occurring after 1 July 2009 and had no impact on the interim financial statements.
·; IAS 27 'Consolidated and Separate Financial Statements (Amendment)', applicable for annual periods beginning on or after 1 July 2009.
IAS 27 requires that a change in the ownership interest of a subsidiary (without loss of control) is accounted for as a transaction with owners in their capacity as owners. The Group has changed the reference 'minority interest' to 'non-controlling interest', in accordance with the standard.
·; IAS 39 'Financial Instruments: Recognition and Measurement - Eligible hedged items (Amendment)', applicable for annual periods beginning on or after 1 July 2009.
The amendment addresses the designation of a one-sided risk in a hedged item, and the designation of inflation as a hedged risk or portion in particular situations. The amendment had no effect on the financial position or performance of the Group.
·; IFRIC 17 'Distributions of Non-cash Assets to Owners', applicable for annual periods beginning on or after 1 July 2009.
This interpretation provides guidance on accounting for arrangements whereby an entity distributes non-cash assets to shareholders either as a distribution of reserves or as dividends. The interpretation had no effect on the financial position nor performance of the Group.
·; IFRS 2 'Group Cash-settled Share-based Payment Arrangements', applicable for annual periods beginning on or after 1 January 2010.
The standard has been amended to clarify the accounting for group cash-settled share-based payment transactions, where a subsidiary receives goods or services from employees or suppliers but the parent or another entity in the group pays for those goods or services. IFRIC 8 and IFRIC 11 have been withdrawn. This amendment had no effect on the financial position nor performance of the Group.
·; Improvements to International Financial Reporting Standards (issued 2009)
Includes 15 amendments to 12 standards.
Applicable for annual periods beginning on or after 1 July 2009: IFRS 2 Share-based Payment, IAS 38 Intangible Assets, IFRIC 9 Reassessment of Embedded Derivatives, IFRIC 16 Hedges of a net Investment in a Foreign Operation.
Effective immediately on issue date in April 2009: IAS 18 Revenue.
Applicable for annual periods beginning on or after 1 January 2010: IFRS 5 Non-current Assets Held for Sale and Discontinued Operations, IFRS 8 Operating Segments, IAS 1 Presentation of Financial Statements, IAS 7 Statement of Cash Flows, IAS 17 Leases, IAS 36 Impairment of Assets, IAS 39 Financial Instruments: Recognition and Measurement. These improvements had no impact on the financial position or performance of the Group.
(d) Comparatives
Where applicable, comparatives have been reclassified on the same basis as current period figures.
3 Segment Reporting
The Group's activities are principally related to mining operations which involve the exploration, production and sale of gold and silver. Products are subject to the same risks and returns and are sold through the same distribution channels. The Group undertakes a number of activities solely to support mining operations including power generation and services. Transfer prices between segments are set on an arm´s length basis in a manner similar to that used for third parties. Segment revenue, segment expense and segment results include transfers between segments. Those transfers are eliminated on consolidation.
For internal reporting purposes, management takes decisions and assesses the performance of the Group through consideration of the following reporting segments:
• Operating unit - Ares, which generates revenue from the sale of gold and silver.
• Operating unit - Arcata, which generates revenue from the sale of gold, silver and concentrate.
• Operating unit - Selene, which until June 2009 generated revenue from the sale of gold, silver and concentrate. The operating unit is no longer considered a reporting segment.
• Operating unit - Pallancata, which generates revenue from the sale of concentrate.
• Operating unit - San José, which generates revenue from the sale of gold, silver and concentrate.
• Operating unit - Moris, which generates revenue from the sale of gold and silver.
• Exploration, which explores and evaluates areas of interest in brownfield and greenfield sites with the purpose of extending the life of mine of existing operations and to assess the feasibility of new mines. The exploration segment includes expenses reflected through profit and loss and capitalised as assets.
• Other - for the six months ended 30 June 2010 the amount disclosed includes the profit or loss generated by Empresa de Trasmision Callalli S.A.C (a power generation company), Servicios Corporativos Hochschild Mining Mexico S.A de C.V (a service company in Mexico), and the Selene mine that closed in 2009 which, as a consequence, was not considered to be a reportable segment. For the six months ended 30 June 2009 the amount disclosed includes the profit or loss generated by Empresa de Trasmision Callalli S.A.C., Servicios Corporativos Hochschild Mining Mexico S.A de C.V. and Compañia Minera Arcata S.A.
The Group's administration, financing, other activities (including other income and expense), and income taxes are managed at a corporate level and are not allocated to operating segments.
Segment information is consistent with the accounting policies adopted by the Group. Management evaluates the financial information based on International Financial Reporting Standards (IFRS) as adopted for use in the European Union.
The Group measures the performance of its operating units by the segment profit or loss that comprises gross profit, selling and exploration expenses.
Segment assets include the items that could be allocated directly to the segment.
(a) Reportable segment information
| Six-months ended 30 June 2010 |
| Ares |
| Arcata |
| Pallancata |
| San José |
| Moris |
| Exploration |
| Other(1) |
| Adjustments and eliminations |
| Total |
| Revenue from external customers |
| 27,035 |
| 77,473 |
| 107,441 |
| 77,225 |
| 17,643 |
| - |
| 43 |
| - |
| 306,860 |
| Inter segment revenue |
| - |
| - |
| - |
| - |
| - |
| - |
| 3,384 |
| (3,384) |
| - |
| Total revenue |
| 27,035 |
| 77,473 |
| 107,441 |
| 77,225 |
| 17,643 |
| - |
| 3,427 |
| (3,384) |
| 306,860 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Segment profit/(loss)(2) |
| 7,638 |
| 41,014 |
| 57,875 |
| 22,357 |
| 4,698 |
| (16,152) |
| 1,981 |
| 1,215 |
| 120,626 |
| Others(3) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (46,008) |
| Profit/(loss) from continuing operations before income tax |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 74,618 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Other segment information |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Depreciation |
| (2,349) |
| (8,041) |
| (14,374) |
| (15,743) |
| (2,754) |
| - |
| (921) |
| - |
| (44,182) |
| Amortisation |
| - |
| - |
| - |
| (941) |
| - |
| - |
| (159) |
| - |
| (1,100) |
| Non-cash expenses |
| - |
| - |
| - |
| - |
| - |
| (14,702) |
| - |
| - |
| (14,702) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Current assets |
| 5,955 |
| 20,875 |
| 41,857 |
| 34,589 |
| 7,774 |
| - |
| 1,051 |
| - |
| 112,101 |
| Capital expenditure |
| 721 |
| 12,997 |
| 18,588 |
| 26,074 |
| 1,034 |
| 2,979 |
| 2,705 |
| - |
| 65,098 |
| Other non-current assets |
| 4,871 |
| 65,919 |
| 102,959 |
| 183,405 |
| 6,635 |
| 83,142 |
| 12,348 |
| - |
| 459,279 |
| Total segment assets |
| 11,547 |
| 99,791 |
| 163,404 |
| 244,068 |
| 15,443 |
| 86,121 |
| 16,104 |
| - |
| 636,478 |
| Not reportable assets |
| - |
| - |
| - |
| - |
| - |
| - |
| 683,729 |
| - |
| 683,729 |
| Total assets |
| 11,547 |
| 99,791 |
| 163,404 |
| 244,068 |
| 15,443 |
| 86,121 |
| 699,833 |
| - |
| 1,320,207 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) "Other" revenue primarily relates to revenues earned by Servicios Corporativos Hochschild Mining Mexico S.A de C.V for services provided to the Moris mine, and the Mexican exploration activities.
(2) Segment profit for the operating segments Ares, Arcata, Selene and Pallancata includes an exceptional item in cost of sales of US$8,861,000 (refer to note 6).
(3) Others is comprised of administrative expenses of US$29,684,000, other income of US$15,475,000, other expenses of US$3,973,000, impairment of assets of US$14,702,000, share of losses of associates and joint ventures of US$3,189,000, finance income of US$3,077,000, finance cost of US$12,832,000, and foreign exchange loss of US$180,000.
| US$(000) | ||||||||||||||||||||
| Six-months ended 30 June 2009 (Restated) |
| Ares |
| Arcata |
| Selene |
| Pallancata |
| San José |
| Moris |
| Exploration |
| Other(1) |
| Adjustments and eliminations |
| Total |
| Revenue from external customers |
| 26,792 |
| 59,447 |
| 9,311 |
| 57,824 |
| 62,086 |
| 15,047 |
| - |
| 77 |
| - |
| 230,584 |
| Inter segment revenue |
| - |
| - |
| - |
| - |
| - |
| - |
| - |
| 1,685 |
| (1,685) |
| - |
| Total revenue |
| 26,792 |
| 59,447 |
| 9,311 |
| 57,824 |
| 62,086 |
| 15,047 |
| - |
| 1,762 |
| (1,685) |
| 230,584 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Segment profit/(loss)(2) |
| 7,843 |
| 26,264 |
| (3,585) |
| 23,665 |
| 15,948 |
| 4,947 |
| (7,368) |
| 1,212 |
| 3,450 |
| 72,376 |
| Others(3) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (48,501) |
| Profit/(loss) from continuing operations before income tax |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 23,875 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Other segment information (Restated) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Depreciation)(4) |
| (2,668) |
| (10,640) |
| (4,660) |
| (6,524) |
| (11,158) |
| (2,187) |
| (6) |
| (1,280) |
| - |
| (39,123) |
| Amortisation |
| - |
| - |
| - |
| - |
| - |
| - |
| - |
| (153) |
| - |
| (153) |
| Non-cash expenses |
| - |
| - |
| (2,207) |
| - |
| - |
| - |
| (10,091) |
| - |
| - |
| (12,298) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Year-ended 31 December 2009 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Current assets |
| 5,239 |
| 21,004 |
| 2,708 |
| 51,228 |
| 33,190 |
| 8,307 |
| - |
| 1,118 |
| - |
| 122,794 |
| Capital expenditure |
| 3,484 |
| 29,688 |
| 16,579 |
| 24,117 |
| 26,113 |
| 480 |
| 5,778 |
| 2,296 |
| - |
| 108,535 |
| Other non-current assets |
| 3,630 |
| 43,291 |
| 43,995 |
| 31,765 |
| 174,057 |
| 9,009 |
| 91,322 |
| 11,265 |
| - |
| 408,334 |
| Total segment assets |
| 12,353 |
| 93,983 |
| 63,282 |
| 107,110 |
| 233,360 |
| 17,796 |
| 97,100 |
| 14,679 |
| - |
| 639,663 |
| Not reportable assets |
| - |
| - |
| - |
| - |
| - |
| - |
| - |
| 666,194 |
| - |
| 666,194 |
| Total assets |
| 12,353 |
| 93,983 |
| 63,282 |
| 107,110 |
| 233,360 |
| 17,796 |
| 97,100 |
| 680,873 |
| - |
| 1,305,857 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) "Other" revenue primarily relates to revenues earned by Servicios Corporativos Hochschild Mining Mexico S.A de C.V for services provided to the Moris mine, and the Mexican exploration activities.
(2) Segment profit for the operating segments Ares, Arcata, Selene and Pallancata includes an exceptional item in cost of sales of US$6,918,000 (refer to note 6).
(3) Others is comprised of administrative expenses of US$23,533,000, other income of US$13,635,000, other expenses of US$4,985,000, impairment of property, plant and equipment of US$12,298,000, share of losses of associates and joint ventures of US$1,106,000, finance income of US$10,380,000, finance cost of US$27,196,000 and foreign exchange loss of US$3,498,000.
(4) Includes US$6,000 of depreciation capitalised in Minera Hochschild Mexico S.A. de C.V. due to the San Felipe project.
(b) Geographical information
The revenue for the period based on the country in which the customer is located is as follows:
|
|
| Six-months ended 30 June (Unaudited) |
| ||
|
|
| 2010 |
| 2009 |
|
|
|
| US$(000) |
| ||
| External customer |
|
|
|
|
|
| USA.......................................................................................................................... |
| 57,585 |
| 63,644 |
|
| Peru.......................................................................................................................... |
| 69,353 |
| 64,731 |
|
| United Kingdom........................................................................................................ |
| 18,554 |
| - |
|
| Canada..................................................................................................................... |
| 54,864 |
| 39,447 |
|
| Germany.................................................................................................................. |
| 57,740 |
| 31,358 |
|
| Switzerland.............................................................................................................. |
| 36,625 |
| 28,548 |
|
| Korea....................................................................................................................... |
| 12,139 |
| 2,856 |
|
|
|
| 306,860 |
| 230,584 |
|
| Inter-segment |
|
|
|
|
|
| Peru................................................................................................................... |
| 497 |
| 623 |
|
| Mexico............................................................................................................... |
| 2,887 |
| 1,062 |
|
|
|
| 310,244 |
| 232,269 |
|
In the periods set out below, certain customers accounted for greater than 10% of the Group´s total revenues as detailed in the following table:
|
|
| Six-months ended 30 June 2010 (Unaudited) |
| Six-months ended 30 June 2009 (Unaudited) |
| ||||||||
|
|
| US$(000) |
| % Revenue |
| Segment |
| US$(000) |
| % Revenue |
| Segment |
|
| Consorcio Minero S.A..................... |
| 69,353 |
| 22.6% |
| Arcata, San José |
| 58,481 |
| 25.4% |
| Arcata, San José, Pallancata |
|
| Aurubis AG (formerly Nordeutsche Affinerie AG)................................... |
| 57,740 |
| 18.8% |
| Selene, Pallancata, San José |
| 31,358 |
| 13.6% |
| Selene, San José, Pallancata |
|
| Teck Metals Ltd. (formerly Teck Cominco Metals Ltd)........................ |
| 54,864 |
| 17.9% |
| Arcata, Pallancata |
| 39,447 |
| 17.1% |
| Selene, Pallancata |
|
| International Commodities Inc.......... |
| 22,599 |
| 7.4% |
| Ares, Arcata, Moris |
| 38,996 |
| 16.9% |
| Ares, Arcata, Selene, Moris |
|
| Argor Heraus.................................. |
| 18,535 |
| 6.0% |
| San José |
| 28,548 |
| 12.4% |
| San José |
|
The non-current assets, excluding financial instruments and income tax assets, were allocated based on the geographical area where the assets are located as follows:
|
|
| As at 30 June 2010 (Unaudited) |
| As at 31 December 2009 |
|
|
|
| US$(000) |
| ||
| Peru..................................................................................................................... |
| 280,524 |
| 242,170 |
|
| Argentina............................................................................................................. |
| 209,691 |
| 200,384 |
|
| Mexico................................................................................................................. |
| 33,994 |
| 49,328 |
|
| Chile..................................................................................................................... |
| 69 |
| 54 |
|
| Canada................................................................................................................ |
| - |
| 24,902 |
|
| United Kingdom(1)................................................................................................. |
| 460,075 |
| 451,038 |
|
| Total non-current segment assets...................................................................... |
| 984,353 |
| 967,876 |
|
| Available-for-sale financial assets...................................................................... |
| 24,532 |
| 19,181 |
|
| Trade and other receivables............................................................................... |
| 3,706 |
| 3,150 |
|
| Deferred income tax assets................................................................................ |
| 6,880 |
| 15,852 |
|
| Income tax receivable.......................................................................................... |
| 1,973 |
| 1,302 |
|
| Total non-current assets..................................................................................... |
| 1,021,444 |
| 1,007,361 |
|
(1) Primarily relates to the Group's interests in Lake Shore Gold Corporation and Gold Resource Corporation, which are held in the United Kingdom.
4 Investments accounted under the equity method
Gold Resource Corporation
Between 26 January 2010 and 5 February 2010 the Group acquired 440,500 further common shares of Gold Resource Corporation in the open market for a cash consideration of US$4,351,000. In addition, on 8 March 2010, the Company signed a subscription agreement with Gold Resource Corporation under which the Group acquired 600,000 common shares for a total consideration of US$5,172,000. The Group made an additional purchase of 631,579 common shares on 26 May 2010 for US$6,000,000. After completion of these transactions, the Group´s ownership in Gold Resource Corporation increased to 29.6% (27.6% on a fully diluted basis).
Lake Shore Gold Corporation
On 16 February 2010 the Group acquired a further 1,273,036 shares in Lake Shore Gold Corporation ("Lake Shore Gold") for CAD$5,130,000 (US$4,813,000). After completion of this transaction, the Group's ownership in Lake Shore Gold increased to 37.3% (35.7% on a fully diluted basis).
Zincore Metals Inc.
On 21 May 2009 the Group acquired 100% of Southwestern Resources Corporation. Within the assets of the group were 38,100,000 shares of Zincore Metals Inc.
On 5 March 2010, Executive Chairman, Eduardo Hochschild, purchased the Group´s investment in Zincore Metals Inc. at a price of C$0.27 per share representing a 11.6% premium over the 20 day average closing price. The shares were purchased through Inversiones Pacasmayo SA. for a total cash consideration of C$10,287,000. As a result of the transaction, the Group has no further interest in Zincore Metals Inc. (refer to note 18).
5 Revenue
|
|
| Six-months ended 30 June |
| ||
|
|
| 2010 (Unaudited) |
| 2009 (Unaudited) |
|
|
|
| US$(000) |
| ||
| Gold (from doré bars) |
| 58,419 |
| 56,827 |
|
| Silver (from doré bars) |
| 36,226 |
| 35,309 |
|
| Concentrate |
| 212,186 |
| 138,371 |
|
| Services |
| 29 |
| 77 |
|
|
|
| 306,860 |
| 230,584 |
|
The revenue from concentrate sold is split between the contained commodities on the following basis:
|
|
| Six-months ended 30 June |
| ||
|
|
| 2010 (Unaudited) |
| 2009 (Unaudited) |
|
|
|
| US$(000) |
| ||
| Gold |
| 54,216 |
| 31,916 |
|
| Silver |
| 157,970 |
| 106,361 |
|
| Other minerals |
| - |
| 94 |
|
| Total concentrate |
| 212,186 |
| 138,371 |
|
The total volume of gold and silver sold are as follows:
|
|
| Six-months ended 30 June |
| ||
|
|
| 2010 (Unaudited) |
| 2009 (Unaudited) |
|
|
|
| (in thousands of ounces) |
| ||
| Gold |
| 97 |
| 99 |
|
| Silver |
| 11,203 |
| 10,906 |
|
6 Pre-tax exceptional items1
The Group recognised the following pre-tax exceptional items:
|
|
| Six-months ended 30 June |
| ||
|
|
| 2010 (Unaudited) |
| 2009 (Unaudited-Restated) |
|
|
|
| US$(000) |
| ||
| Cost of sales |
|
|
|
|
|
| Exceptional bonus to mining workers2.............................................................. |
| (8,861 | ) | (6,918 | ) |
|
|
| (8,861 | ) | (6,918 | ) |
| Exploration expenses: |
|
|
|
|
|
| Termination benefits3......................................................................................... |
| - |
| (1,049 | ) |
|
|
| - |
| (1,049 | ) |
| Other income: |
|
|
|
|
|
| Negative goodwill on acquisition of subsidiary4................................................ |
| - |
| 9,807 |
|
| Gain on sale of investment in El Quevar5.......................................................... |
| 6,010 |
| - |
|
| Gain on sale of investment in Zincore Metals Inc.6........................................... |
| 7,533 |
| - |
|
| Recovery of impairment of deposits in Kaupthing, Singer and Friedlander Bank.................................................................................................................. .......................................................................................................................... |
| - |
| 560 |
|
|
|
| 13,543 |
| 10,367 |
|
| Other expenses: |
|
|
|
|
|
| Termination benefits of Selene mine7................................................................ |
| - |
| (414 | ) |
| Electroperu contingency................................................................................... |
| - |
| (32 | ) |
| Write off of inventory8....................................................................................... |
| - |
| (178 | ) |
| Obsolescence of supplies9............................................................................... |
| - |
| (181 | ) |
| Others............................................................................................................... |
|
|
| (20 | ) |
|
|
| - |
| (825 | ) |
| Impairment and write-off of assets (net): |
|
|
|
|
|
| Impairment of San Felipe property (refer to note 11)....................................... |
| (14,702 | ) | - |
|
| Impairment of Liam property ............................................................................. |
| - |
| (10,091 | ) |
| Impairment of assets in Selene unit .................................................................. |
| - |
| (2,207 | ) |
|
|
| (14,702 | ) | (12,298 | ) |
|
|
|
|
|
|
|
| Share of post tax losses and negative goodwill of associates and joint ventures accounted under equity method: |
|
|
|
|
|
| Negative goodwill on acquisition of Gold Resource Corp. (refer to note 4)..... |
| - |
| 225 |
|
| Loss from dilution of the Group´s interest in Lake Shore Gold Corp. (refer to note 4)............................................................................................................... |
| (2,021) |
|
|
|
|
|
| (2,021) |
| 225 |
|
| Finance income: |
|
|
|
|
|
| Gain from changes in the fair value of financial instruments10......................... |
| - |
| 6,632 |
|
|
|
| - |
| 6,632 |
|
|
|
|
|
|
|
|
| Finance cost: |
|
|
|
|
|
| Loss from changes in the fair value of financial instruments11........................ |
| (689 | ) | - |
|
|
|
| (689 | ) | - |
|
1 Exceptional items are those significant items which due to their nature or the expected infrequency of the events giving rise to them, need to be disclosed separately on the face of the income statement to enable a better understanding of the financial performance of the Group and facilitate comparison with prior periods. Exceptional items mainly include the following, where significant:
·; Impairments of assets, including goodwill, assets held for sale, and property, plant and equipment;
·; Gains or losses arising on the disposal of subsidiaries, investments or property, plant and equipment;
·; Fair value gains or losses arising on financial instruments not held in the normal course of trading;
·; Any gain or loss resulting from any restructuring within the Group, and
·; The related tax impacts of these items.
2 Corresponds to the bonus paid in March 2010 to the workers at the Peruvian mines as a result of negotiations with the unions in relation to the 2009 financial year. In the prior year, the equivalent bonus was paid in April 2009 in relation to the 2008 financial year. The Group now believes that a constructive obligation has been created for these bonuses, and future bonuses will be accrued each year and recorded as a pre-exceptional item.
3 Corresponds to the termination benefits paid to the workers of the companies forming part of the Southwestern Gold Resources Group.
4 Corresponds to the negative goodwill generated from the acquisition of the Southwestern Gold Resources Group.
5 Corresponds to the gain generated due to the sale of the Group´s interest in the El Quevar project in Argentina in exchange for 400,000 common shares and a warrant to purchase 300,000 common shares of Golden Minerals Co at a price per share of US$15.
6 Corresponds to the gain generated by the sale of the Group´s interest in Zincore Metals Inc. to Inversiones Pacasmayo S.A., a related party of the Group (refer to note 18).
7 Represents the termination benefits paid to the employees due to the closing of the Selene mine.
8 Corresponds to the write-off of supplies at the Sipán mine that could not be sold or used in the Group's other mine units in Peru.
9 Corresponds to the obsolescence of supplies at the Selene mine due to the closure of the mine.
10 Mainly results from (i) the gain realised upon exercise of the option shares in Gold Resource Corporation on 25 February 2009 of US$5,493,000; (ii) the change in the fair value of the forward contract to buy 3,750,000 shares of Gold Resource Corporation of US$675,000 and (iii) the change in the fair value of 2,475,355 warrants over the same number of shares in Fortuna Silver Mine Inc. of US$464,000. The expiry date of the warrants is 27 June 2010 and 17 November 2010 (in respect of 862,117 and 1,613,238 warrants respectively).
11 Mainly results from a loss arising from the fair value adjustment of the Golden Minerals Co warrants.
7 Finance income and finance cost before exceptional items
The Group recognised the following finance income and finance cost before exceptional items:
|
|
| Six-months ended 30 June |
| ||
|
|
| 2010 (Unaudited) |
| 2009 (Unaudited) |
|
|
|
| US$(000) |
| ||
| Finance income: |
|
|
|
|
|
| Interests on time deposits 1............................................................................... |
| 88 |
| 530 |
|
| Gain from changes in the fair value of derivative instruments2........................ |
| 826 |
| - |
|
| Interest on loans to minority shareholders........................................................ |
| 1,297 |
| 1,297 |
|
| Change in discount rate3................................................................................... .......................................................................................................................... |
| 440 |
| 1,852 |
|
| Gain on exchange of available-for-sale financial assets4................................ |
| 211 |
| - |
|
| Others............................................................................................................... |
| 215 |
| 69 |
|
|
|
| 3,077 |
| 3,748 |
|
| Finance cost: |
|
|
|
|
|
| Interest on bank loans and long-term debt........................................................ |
| (5,760 | ) | (7,693 | ) |
| Interest on convertible bond.............................................................................. |
| (4,235 | ) | - |
|
| Unwind of discount rate.................................................................................... |
| (354 | ) | (47 | ) |
| Loss from changes in the fair value of forward contracts5............................. |
| - |
| (18,031 | ) |
| Loss from changes in the fair value of derivative instruments6....................... |
| (1,133 | ) | (554 | ) |
| Others............................................................................................................... |
| (661 | ) | (871 | ) |
|
|
| (12,143 | ) | (27,196 | ) |
1 Mainly corresponds to interest on liquidity funds.
2 Corresponds to the gain arising from changes in the time value of the zero cost collar contracts signed by Cia. Minera Ares S.A.C. during 2009. These contracts are in respect of 5,200,000 ounces of silver, with a cap of US$17/oz in respect of 1,400,000 ounces, US$19.5/oz in respect of 400,000 ounces and US$19.95/oz in respect of 400,000 ounces, and a floor of US$11.00/oz., and contracts with a cap of US$20.92/oz and a floor of US$13.80/oz in respect of 1,500,000 ounces, and a cap of US$21/oz and a floor of US$14/oz in respect of 1,500,000 ounces. These contracts expire in December 2010.
3 Corresponds to the gain arising on the reduction in the discount rate used to discount the VAT of Minera Santa Cruz S.A.
4 Includes the gain arising from the receipt of shares in International Minerals Corporation following its merger with Ventura Gold Corp.
5 Corresponds to the loss arising from changes in the fair value of derivative instruments under the terms of contracts signed with Citibank, JP Morgan and INTL Commodities Inc. intended to mitigate the risk of fluctuations in metal prices. Of the total loss, US$5,926,000 corresponds to forward contracts settled during the first half of 2009. At 30 June 2009, the Group held forward contracts with Citibank and JP Morgan in respect of a total of 4,634,394 ounces of silver at an average price of US$12/oz and in respect of 18,000 ounces of gold at a price of US$972/oz, settled between July and December 2009.
6 Mainly results from a loss of US$1,133,000 arising from the swap contract signed with BBVA and Citibank to fix the interest rate of the JP Morgan led syndicated loan at 1.75% that is accounted for as a fair value hedge. The amount disclosed in respect of 2009 corresponds to the loss arising from changes in the time value of the zero cost collar contracts signed by Cia. Minera Ares S.A.C. during the period. These contracts are in respect of 2,200,000 ounces of silver, with a cap of US$17/oz in respect of 1,400,000 ounces, US$19.5/oz in respect of 400,000 ounces and US$19.95/oz in respect of 400,000 ounces, and a floor of US$11.00/oz. These contracts expire in December 2010.
8 Income tax expense
|
|
| Six-months ended 30 June |
| ||
|
|
| 2010 (Unaudited) |
| 2009 (Unaudited) |
|
|
|
| US$(000) |
| ||
|
|
|
|
|
|
|
| Current tax from continuing operations............................................................. |
| 18,286 |
| 11,167 |
|
| Deferred income tax relating to origination and reversal of temporary differences from continuing operations............................................................ |
| 10,091 |
| (9,313 | ) |
| Withholding taxes.............................................................................................. |
| 273 |
| 441 |
|
| Total taxation charge in the income statement...................................... |
| 28,650 |
| 2,295 |
|
Amounts relating to items classified as exceptional items for the six-months ended 30 June 2010 and 30 June 2009 comprised of tax credits of US$2,600,000 and US$6,218,000 respectively.
9 Basic and diluted earnings per share
Earnings per share ("EPS") is calculated by dividing profit for the period attributable to equity shareholders of the Company by the weighted average number of ordinary shares in issue during the period.
The Company has potentially dilutive ordinary shares.
As at 30 June 2010 and 30 June 2009, earnings per share has been calculated as follows:
|
|
| Six-months ended 30 June |
| ||
|
|
| 2010 (Unaudited) |
| 2009 (Unaudited-Restated) |
|
| Profit from continuing operations attributable to equity holders of the Company (US$000) .......................................................................................... |
| 29,240 |
| 15,607 |
|
| Weighted average number of ordinary shares in issue ('000)......................... |
| 338,085 |
| 307,350 |
|
| Weighted average number of ordinary shares in issue and potentially dilutive ordinary shares ('000)...................................................................................... |
| 356,246 |
| 307,350 |
|
| Basic earnings per share: |
|
|
|
|
|
| Before exceptional items (US$)........................................................................ |
| 0.11 |
| 0.04 |
|
| Exceptional items (US$).................................................................................... |
| (0.03 | ) | 0.01 |
|
| Total for the period and from continuing operations (US$)............................... |
| 0.08 |
| 0.05 |
|
| Diluted earnings per share: |
|
|
|
|
|
| Before exceptional items (US$)........................................................................ |
| 0.11 |
| 0.04 |
|
| Exceptional items (US$).................................................................................... |
| (0.03 | ) | 0.01 |
|
| Total for the period and from continuing operations (US$)............................... |
| 0.08 |
| 0.05 |
|
10 Property, plant and equipment
|
|
| Mining properties and development costs |
| Land and buildings |
| Plant and equipment(a) |
| Vehicles |
| Mine closure asset |
| Construction in progress and capital advances |
| Total |
| |
|
|
| US$(000) |
| |||||||||||||
| Year ended 31 December 2009 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
| Cost |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
| At 1 January 2009............................... |
| 237,818 |
| 100,393 |
| 183,245 |
| 3,420 |
| 41,681 |
| 65,933 |
| 632,490 |
| |
| Additions............................................ |
| 50,969 |
| 381 |
| 16,032 |
| 160 |
| _ |
| 32,357 |
| 99,899 |
| |
| Acquisition of subsidiary....................... |
| 23,800 |
| _ |
| 347 |
| 119 |
| _ |
| _ |
| 24,266 |
| |
| Change in discount rate........................ |
| _ |
| _ |
| _ |
| _ |
| (1,770 | ) | _ |
| (1,770 | ) | |
| Disposals........................................... |
| (1,148 | ) | _ |
| (1,639 | ) | (96 | ) | _ |
| (169 | ) | (3,052 | ) | |
| Write-off............................................ |
| (27,718 | ) | (1,894 | ) | (5,496 | ) | (162 | ) | _ |
| 62 |
| (35,208 | ) | |
| Change in mine closure estimate........... |
| _ |
| _ |
| _ |
| _ |
| 15,220 |
| _ |
| 15,220 |
| |
| Reclassification to intangibles............... |
| _ |
| _ |
| (5,891 | ) | _ |
| _ |
| _ |
| (5,891 | ) | |
| Transfers and other movements............ |
| _ |
| 10,244 |
| 28,433 |
| 255 |
| _ |
| (38,932 | ) | _ |
| |
| Transfer to Evaluation and exploration assets |
| (1,921 | ) | _ |
| _ |
| _ |
| _ |
| _ |
| (1,921 | ) | |
| Foreign exchange................................ |
| 2,087 |
| 3 |
| 546 |
| 12 |
| _ |
| 33 |
| 2,681 |
| |
| At 31 December 2009........................... |
| 283,887 |
| 109,127 |
| 215,577 |
| 3,708 |
| 55,131 |
| 59,284 |
| 726,714 |
| |
| Accumulated depreciation and impairment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
| At 1 January 2009............................... |
| 107,516 |
| 21,311 |
| 51,628 |
| 1,306 |
| 33,376 |
| 788 |
| 215,925 |
| |
| Depreciation for the year...................... |
| 45,229 |
| 13,719 |
| 23,345 |
| 375 |
| 1,254 |
| _ |
| 83,922 |
| |
| Write-off............................................ |
| (26,666 | ) | (1,147 | ) | (2,924 | ) | (80 | ) | 130 |
| _ |
| (30,687 | ) | |
| Impairment(b)...................................... |
| 9,671 |
| 4,390 |
| 5,093 |
| 50 |
| 2,172 |
| 310 |
| 21,686 |
| |
| Disposals........................................... |
| _ |
| _ |
| (956 | ) | (110 | ) | _ |
| _ |
| (1,066 | ) | |
| Reclassification to intangibles............... |
| _ |
| (606 | ) | (1,559 | ) | _ |
| _ |
| _ |
| (2,165 | ) | |
| Foreign exchange................................ |
| _ |
| _ |
| 141 |
| _ |
| _ |
| _ |
| 141 |
| |
| At 31 December 2009........................... |
| 135,750 |
| 37,667 |
| 74,768 |
| 1,541 |
| 36,932 |
| 1,098 |
| 287,756 |
| |
| Net book amount at 31 December 2009 |
| 148,137 |
| 71,460 |
| 140,809 |
| 2,167 |
| 18,199 |
| 58,186 |
| 438,958 |
| |
| Period ended 30 June 2010 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
| Cost |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
| At 1 January 2010............................... |
| 283,887 |
| 109,127 |
| 215,577 |
| 3,708 |
| 55,131 |
| 59,284 |
| 726,714 |
| |
| Additions(c)......................................... |
| 30,273 |
| 130 |
| 7,266 |
| 15 |
| _ |
| 17,342 |
| 55,026 |
| |
| Change in discount rate |
| _ |
| _ |
| _ |
| _ |
| 1,836 |
| _ |
| 1,836 |
| |
| Disposals........................................... |
| _ |
| _ |
| (754 | ) | (751 | ) | _ |
| _ |
| (1,505 | ) | |
| Transfers and other movements............ |
| 274 |
| 934 |
| 1,946 |
| 206 |
| _ |
| (3,360 | ) | _ |
| |
| Foreign exchange................................ |
| 42 |
| 4 |
| (137 | ) | 6 |
| _ |
| 3 |
| (82 | ) | |
| At 30 June 2010.................................. |
| 314,476 |
| 110,195 |
| 223,898 |
| 3,184 |
| 56,967 |
| 73,269 |
| 781,989 |
| |
| Accumulated depreciation and impairment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
| At 1 January 2010............................... |
| 135,750 |
| 37,667 |
| 74,768 |
| 1,541 |
| 36,932 |
| 1,098 |
| 287,756 |
| |
| Depreciation for the period.................... |
| 24,111 |
| 7,357 |
| 10,839 |
| 167 |
| 1,708 |
| _ |
| 44,182 |
| |
| Disposals........................................... |
| _ |
| _ |
| (71 | ) | (720 | ) | _ |
| _ |
| (791 | ) | |
| Foreign exchange................................ |
| _ |
| 1 |
| (6 | ) | 13 |
| _ |
| _ |
| 8 |
| |
| At 30 June 2010.................................. |
| 159,861 |
| 45,025 |
| 85,530 |
| 1,001 |
| 38,640 |
| 1,098 |
| 331,155 |
| |
| Net book amount at 30 June 2010 |
| 154,615 |
| 65,170 |
| 138,368 |
| 2,183 |
| 18,327 |
| 72,171 |
| 450,834 |
| |
a) The carrying value of plant and equipment held under finance leases at 30 June 2010 was US$11,783,178 (31 December 2009: US$11,177,000). Additions during the period include US$1,239,000 (31 December 2009: US$6,058,000) of plant and equipment under finance leases. Leased assets are pledged as security for the related finance lease.
b) There was no impairment loss recognised in profit and loss during the six months ended 30 June 2010.
The methodology adopted for impairment testing is consistent with that applied as at 31 December 2009 as more fully described in Note 16 to the 2009 consolidated financial statements. During the year ended 31 December 2009, the Group recognised impairments totalling US$21,686,000, which included (i) a charge of US$15,041,000 in respect of the Ares mine unit; (ii) a charge of US$10,091,000 in respect of the Liam property; and (iii) a reversal of the impairment loss in respect of the Moris unit of US$3,446,000. The trigger for the impairment of Ares was the proximity of the closing and the resulting revision to its remaining recoverable reserves and resources. In addition, the Group reassessed the fair value of the Liam properties following the acquisition of Southwestern Resources (please refer to note 5 to the 2009 consolidated financial statements).
c) Mainly corresponds to: (i) additions of leasing equipments in Ares of US$1,239,000,(ii) additions related to a tailing dam of US$1,250,225 and a paste fill plant of US$1,086,380 in Pallancata, (iii) improvements in San Jose mine of US$1,500,000, and (iv) development costs of US$30,273,000.
There were no borrowing costs capitalised in property, plant and equipment as no significant qualifying assets were constructed during the period.
11 Evaluation and exploration assets
|
|
| Period ended 30 June 2010 (Unaudited) |
| Year ended 31 December 2009 |
|
|
| US$(000) | ||
| Beginning balance |
| 55,828 |
| 44,726 |
| Additions1 |
| 10,070 |
| 8,636 |
| Impairment and write-off2 |
| (14,702) |
| (506) |
| Transfers and other movements |
| - |
| 1,921 |
| Foreign exchange |
| 1,205 |
| 1,051 |
| Ending balance |
| 52,401 |
| 55,828 |
1 There were no borrowing costs capitalised in evaluation and exploration assets.
2 The Group has impaired the San Felipe property by US$14,702,000 to US$25,000,000. The impairment was triggered by the conclusion of the marketing process conducted during the period and reflects the Company's estimate of the fair value less cost to sell.
12 Intangible assets
|
|
| Goodwill |
| Transmission line |
| Software licences |
| Total |
|
|
| US$(000) | ||||||
| Cost |
|
|
|
|
|
|
|
|
| Balance at 1 January 2009 |
| 2,091 |
| - |
| 913 |
| 3,004 |
| Additions |
| - |
| 16,266 |
| 76 |
| 16,342 |
| Reclassification |
| - |
| 5,891 |
| - |
| 5,891 |
| Balance at 31 December 2009 |
| 2,091 |
| 22,157 |
| 989 |
| 25,237 |
| Additions |
| - |
| - |
| 35 |
| 35 |
| Balance at 30 June 2010 |
| 2,091 |
| 22,157 |
| 1,024 |
| 25,272 |
| Accumulated amortisation |
|
|
|
|
|
|
|
|
| Balance at 1 January 2009 |
| - |
| - |
| 336 |
| 336 |
| Amortisation for the year |
| - |
| 2,078 |
| 311 |
| 2,389 |
| Reclassification |
| - |
| 87 |
| - |
| 87 |
| Balance at 31 December 2009 |
| - |
| 2,165 |
| 647 |
| 2,812 |
| Amortisation for the period |
| - |
| 941 |
| 159 |
| 1,100 |
| Foreign exchange difference |
| - |
| - |
| 1 |
| 1 |
| Balance at 30 June 2010 |
| - |
| 3,106 |
| 807 |
| 3,913 |
| Net book value as at 31 December 2009 |
| 2,091 |
| 19,992 |
| 342 |
| 22,425 |
| Net book value as at 30 June 2010 |
| 2,091 |
| 19,051 |
| 217 |
| 21,359 |
13 Available-for-sale financial assets
|
|
| Period ended 30 June 2010 |
| Year ended 31 December 2009 |
|
|
| US$(000) | ||
| Beginning balance |
| 19,181 |
| 17,794 |
| Additions1 |
| 5,635 |
| 70,022 |
| Increase in value of available-for-sale financial assets due to merger of companies |
| 6 |
| 357 |
| Fair value change recorded in equity |
| 437 |
| 22,592 |
| Foreign exchange |
| (433) |
| 427 |
| Disposals2 |
| (294) |
| (4,749) |
| Reclassification to investments accounted under equity method |
| - |
| (87,262) |
| Ending balance |
| 24,532 |
| 19,181 |
The breakdown of the investments in equity securities held is as follows (number of shares):
|
|
| Number of shares at 31 December 2009 |
| Additions |
| Transfers |
| Disposals |
| Number of shares at 30 June 2010 | |
| Fortuna River2 |
| 663,600 |
| - |
| - |
| (663,600) |
| - | |
| Mirasol Resources Ltd. |
| 500,000 |
| - |
| - |
| - |
| 500,000 | |
| Pembrook Mining Corp. |
| 6,825,397 |
| - |
| - |
| - |
| 6,825,397 | |
| Electrum Capital Inc. |
| 4,205,462 |
| - |
| - |
| - |
| 4,205,462 | |
| Iron Creek Capital Corp.1 |
| 2,000,000 |
| 280,000 |
| - |
| - |
| 2,280,000 | |
| Mariana Resources Ltd. |
| 11,002,948 |
| - |
| - |
| - |
| 11,002,948 | |
| Ventura Gold Corp.3 |
| 1,000,000 |
| - |
| (1,000,000) |
| - |
| - | |
| International Minerals Corporation3 |
| - |
| - |
| 100,000 |
| - |
| 100,000 | |
| Northern Superior Resources Inc. |
| 10,053,007 |
| - |
| - |
| - |
| 10,053,007 | |
| Empire Petroleum Corp. |
| 1,333,333 |
| - |
| - |
| - |
| 1,333,333 | |
| Dia Bras Exploration Inc |
| 3,751,047 |
| - |
| - |
| - |
| 3,751,047 | |
| Lara Exploration Ltd. 2 |
| 495,200 |
| - |
| - |
| (325,500) |
| 169,700 | |
| Brionor Resources Inc1 |
| - |
| 2,730,000 |
| - |
| - |
| 2,730,000 | |
| Golden Minerals Company1 |
| - |
| 400,000 |
| - |
| - |
| 400,000 | |
1 The amount represents the fair value of shares at the date of acquisition and mainly includes the purchase of shares of Iron Creek Capital Corp of US$67,000, Brionor Resources of US$568,000 and Golden Minerals of US$5,000,000.
2 Mainly corresponds to the sale of 663,600 shares in Fortuna River of US$55,000 and 325,500 shares in Lara Exploration Ltd. of US$231,000.
3 In 2010 the Group received shares in International Minerals Corporation in exchange for its holding of Ventura Gold Corp. shares, following the merger of these companies.
14 Other financial assets and liabilities
|
|
| As at 30 June 2010 (Unaudited) |
| As at 31 December 2009
|
|
|
|
| US$ (000) |
| ||
| Other financial assets |
|
|
|
|
|
| Embedded derivatives |
| 3,468 |
| 695 |
|
| Warrants in Golden Minerals Company |
| 307 |
| - |
|
| Warrants on Iron Creek Capital Corp |
| 14 |
| - |
|
| Total financial assets at fair value through profit or loss |
| 3,789 |
| 695 |
|
| Other financial liabilities |
|
|
|
|
|
| Embedded derivatives |
| - |
| 175 |
|
| Total financial liabilities at fair value through profit or loss |
| - |
| 175 |
|
| Zero cost collar contracts |
| 2,076 |
| 2,452 |
|
| Swap contracts |
| 1,744 |
| 13 |
|
| Total derivatives designated as hedge instruments |
| 3,820 |
| 2,465 |
|
| Total financial liabilities |
| 3,820 |
| 2,640 |
|
15 Cash and cash equivalents
|
|
| As at 30 June 2010 (Unaudited) |
| As at 31 December 2009
|
|
|
|
| US$ (000) |
| ||
|
|
|
|
|
|
|
| Cash at bank |
| 272 |
| 1,430 |
|
| Liquidity funds1 |
| 53,033 |
| 28,294 |
|
| Current demand deposit accounts2 |
| 29,537 |
| 40,447 |
|
| Time deposits3 |
| 8,147 |
| 7,673 |
|
| Cash and cash equivalents |
| 90,989 |
| 77,844 |
|
1 The liquidity funds are mainly invested in certificate of deposits, commercial papers and floating rate notes with a weighted average annual effective interest rate of 0.23% and a weighted average maturity between 33 to 55 days as at 30 June 2010 (0.71% and 30 to 55 days as at 31 December 2009).
2 Relates to bank accounts which are readily accessible to the Group and do not bear interest.
3 The effective interest rates as at 30 June 2010 were 1.71% (As at 31 December 2009: 3.00%). These deposits have an average maturity of 1 to 30 days (as at 31 December 2009: 1 to 30 days).
The fair value of cash and cash equivalents approximates its book value.
16 Borrowings
|
|
| As at 30 June 2010 (Unaudited) |
| As at 31 December 2009
|
| ||||
|
|
| Non-current |
| Current |
| Non-current |
| Current |
|
|
|
| US$(000) | |||||||
| Secured bank loans1 |
| 114,476 |
| 35,446 |
| 115,854 |
| 34,773 |
|
| Amounts due to minority shareholders2 |
| 37,580 |
| 41,859 |
| - |
| 75,570 |
|
| Convertible bond payable3 |
| 103,827 |
| 4,098 |
| 103,827 |
| 1,663 |
|
| Amounts due to related parties |
| - |
| 892 |
| - |
| 902 |
|
|
|
| 255,883 |
| 82,295 |
| 219,681 |
| 112,908 |
|
1 Secured bank loans
The balance corresponds to:
- Pre shipment loans for a total amount of US$8,750,000 in Compañía Minera Ares S.A.C. and US$20,000,000 in Minera Santa Cruz S.A. (at 31 December 2009: US$8,750,000 and US$20,000,000 respectively). These obligations accrue an effective annual interest rate ranging from 1.38% to 3.9% and are guaranteed by the inventories and the trade receivables of the Company (at 31 December 2009: 1.05% to 4.75%). Pre-shipments are credit lines given by the Banks to meet payment obligations related to the exports of the Group.
- Leasing agreement with Banco de Credito for an amount of US$5,594,000 in Compañía Minera Ares S.A.C. (2009: US$5,693,000). This obligation accrues an effective annual interest rate of 3.25% (2009: 6.80% to 7.60%)
- Leasing agreement with BIF for an amount of US$2,108,000 in Compañía Minera Ares S.A.C. (2009: US$3,016,000). This obligation accrues an effective annual interest rate ranging from 7.45% to 8.25% (2009: 7.15% to 8.25%).
- Leasing agreement with Interbank for an amount of US$217,000 in Compañía Minera Ares S.A.C. (2009: US$296,000). This obligation accrues an effective annual interest rate of 9.01% (2009: 9.01%).
- Loan facility with a syndicate of lenders with JP Morgan Chase Bank N.A. acting as the administrative agent. The balance as at 30 June 2010 is comprised of the secured term loan facility of US$114,320,000 (2009: US$ 114,320,000) plus accrued interest of US$2,168,000 (2009: US$1,787,000) and net of transaction costs of US$3,235,000 (2009: US$3,235,000). This obligation accrues an effective interest rate of LIBOR + 1% and is guaranteed by all the equity share capital, free and clear of any liens, of Compañia Minera Ares S.A.C. During 2009 the Group signed a swap contract with BBVA and Citibank to fix the interest rate at 1.75%.
2 Amounts due to minority shareholders
The balance as at 30 June 2010 mainly corresponds to loans from Minera Andes Inc. to Minera Santa Cruz S.A. for an amount of US$70,724,000 (2009: US$67,124,000) which bear interest between 7.86% and 12% (2009: 7.86% and 12%). In addition, there is also a loan of US$8,715,000 advanced to Minera Santa Cruz S.A. by Minera Andes S.A. (2009: US$8,446,000) which bears interest at a rate of 12%.
3 Convertible bond payable
Placement of US$115,000,000 of senior unsecured convertible bonds, due 2014, which are convertible into ordinary shares of the Company. The bonds have a coupon of 5.75% per annum payable semi-annually on 28 January and 28 July of each year. The Company has the option to redeem the bonds on or after 20 October 2012 but before maturity in the event the trading price of the Company's ordinary shares exceeds 130% of the conversion price over a prescribed period. In addition, the Group has the right to redeem the bonds if at any time the aggregate principal amount of the bonds outstanding is equal to 15% or less of the aggregate principal amount of the bonds initially issued.
The following information has to be considered for the conversion into ordinary shares:
- Conversion premium: 35% above the Reference Share Price
- Reference Share Price: GBP 2.95
- Initial Conversion Price: GBP 3.9825
- Fixed Exchange Rate: US$ 1.59 / GBP 1.00
The balance as at 30 June 2010 is comprised of the principal of US$115,000,000 (at 31 December 2009: US$115,000,000) plus accrued interest of $4,098,000 (at 31 December 2009: US$1,663,000) and net of transaction costs of US$2,741,000 (at 31 December 2009: US$2,741,000) and the bond equity component of US$8,432,000 (at 31 December 2009: US$8,432,000).
The movement of borrowings during the period is as follows (refer to interim consolidated cash flow statement):
|
| As at 1 January 2010 |
| Additions |
| Payments |
| Reclassification |
| As at 30 June 2010 |
|
| US$ (000) | ||||||||
| Non-current | 219,681 |
| - |
| (170) |
| 36,372 |
| 255,883 |
| Current | 112,908 |
| 23,153 |
| (17,394) |
| (36,372) |
| 82,295 |
|
| 332,589 |
| 23,153 |
| (17,564) |
| - |
| 338,178 |
|
|
|
|
|
|
|
|
|
|
|
| Accrued Interest: |
|
|
|
|
|
|
|
|
|
| Non-current and current | 22,957 |
| 9,303 |
| (2,618) |
| - |
| 29,642 |
| Net of accrued interest | 309,632 |
| 13,850(a) |
| (14,946) |
| - |
| 308,536 |
(a) US$1,239,000 corresponds to the addition of leases that do not affect cash.
17 Dividends Paid and Declared
|
| Amount |
|
| US$(000) |
| Period ended 30 June 2009 |
|
| Total dividends paid during the period1 | 6,147 |
| Total dividends declared after period-end and not provided for2 | 6,147 |
|
|
|
| Six months ended 30 June 2010 |
|
| Total dividends paid during the period3 | 22,761 |
| Total dividends declared after period-end and not provided for | 6,762 |
1 Corresponds to dividends paid and provided for during 2009 of US$6,147,005.
2 Corresponds to dividends declared after 31 December 2008 to Pelham Investment Corporation, Navajo Overseas Corporation and public shareholders of US$6,147,005.
3 Corresponds to dividends paid and provided during 2010 of US$6,761,704, and dividends paid to minority shareholders of Minera Suyamarca of US$16,000,000.
Dividends per share
A dividend in respect of the year ended 31 December 2009 of US$0.020 per share, amounting to a total dividend of US$6,761,704, was approved by shareholders at the Annual General Meeting held on 26 May 2010. An interim dividend of US$0.020 per share in respect of the year ending 31 December 2010 has been declared by the Directors of the Company which will be paid to shareholders on 22 September 2010 to those shareholders appearing on the register on 3 September 2010. These financial statements do not reflect this dividend payable.
18 Related party transactions
During the period, in addition to the normal arrangements the Group has with its related parties, the Group sold its investment in Zincore Metals Inc. to Inversiones Pacasmayo S.A, a company under common control to that of the Group, for C$10,287,000 representing an arm's length selling price.
The disposal was approved on behalf of the Hochschild board by a committee comprising solely independent Non-Executive Directors ("the Independent Committee"). The Independent Committee was advised by Canaccord Adams Limited, an independent financial adviser, that the terms of the disposal are fair and reasonable as far as shareholders are concerned.
19 Notes to the cash flow statement
|
|
| Six-months ended 30 June |
| ||
|
|
| 2010 (Unaudited) |
| 2009 (Unaudited) |
|
|
|
| US$(000) |
| ||
| Reconciliation of profit for the period to net cash generated from operating activities: |
|
|
|
|
|
| Profit for the period |
| 45,968 |
| 21,580 |
|
| Adjustments to reconcile group profit for the period to net cash inflows from operating activities: |
|
|
|
|
|
| Depreciation |
| 44,182 |
| 39,117 |
|
| Amortisation of intangibles |
| 1,100 |
| 153 |
|
| Impairment of property, plant and equipment |
| 14,702 |
| 10,091 |
|
| Negative goodwill generated on acquisitions of subsidiaries |
| - |
| (9,807) |
|
| Write off of property, plant and equipment |
| - |
| 2,207 |
|
| Gain on sale of investment in Zincore Metals Inc |
| (7,533 | ) | - |
|
| Gain on sale of investment in El Quevar. |
| (6,010 | ) | - |
|
| Share of post tax losses and negative goodwill of associates and joint ventures accounted under equity method |
| 3,189 |
| 1,106 |
|
| Increase in provision for mine closure |
| 370 |
| 1,116 |
|
| Finance income |
| (3,077 | ) | (10,380) |
|
| Finance costs (excluding impairment of available-for-sale financial assets)... |
| 12,832 |
| 27,196 |
|
| Income tax expense |
| 28,650 |
| 2,295 |
|
| Other |
| 365 |
| 4,636 |
|
| Increase/(decrease) of cash flows from operations due to changes in assets and liabilities: |
|
|
|
|
|
| Trade and other receivables |
| (1,114 | ) | 14,720 |
|
| Derivative financial instruments |
| (4,344 | ) | 748 |
|
| Inventories |
| (1,771 | ) | 3,989 |
|
| Trade and other payables |
| (1,617 | ) | (5,241) |
|
| Provisions |
| 3,974 |
| (339) |
|
| Cash generated from operations |
| 129,866 |
| 103,187 |
|
20 Commitments
a) Mining rights purchase options
During the ordinary course of business, the Group enters into agreements to carry out exploration under concessions held by third parties. Generally, under the terms of these agreements, the Group has the option to acquire the concession or invest in the entity holding the concession. In order to exercise the option the Group must satisfy certain financial and other obligations over the agreement term. The options lapse in the event that the Group does not meet the financial requirements. At any point in time, the Group may cancel the agreements without penalty, except in certain specific circumstances.
The Group continually reviews its requirements under the agreements and determines on an annual basis whether to proceed with the financial commitment. Based on management's current intention regarding these projects, the commitments at the balance sheet date are as follows:
|
| As at 30 June 2010 |
| As at 31 December 2009 |
|
| US$ (000) | ||
| Commitment for the subsequent twelve months | 740 |
| 560 |
| Later than one year | 13,301 |
| 10,436 |
b) Capital commitments
The future capital commitments of the Group are as follows:
|
| As at 30 June 2010 |
| As at 31 December 2009 |
|
| US$ (000) | ||
| Peru | 31,038 |
| 34,089 |
| Argentina | 14,950 |
| 14,900 |
| Mexico | 229 |
| 247 |
|
| 46,217 |
| 49,236 |
21 Litigation update
The 2009 Annual Report referred to the fact that the Group had commenced legal proceedings against its joint venture partner at the San Jose project, Minera Andes SA ("MASA") and its parent company, Minera Andes Inc. ("MAI"), requiring the execution of formal loan agreement documents in respect of the US$65 million project finance loan, which was provided to Minera Santa Cruz S.A. in 2006. The case is ongoing, and the directors remain confident of the Group's legal position.
22 Subsequent events
At the date of this report there are no significant subsequent events to report.
TOTAL GROUP PRODUCTION (100% of all operations)
|
| H1 2010 | H1 20091 | % change |
| Silver production (koz) | 11,423 | 11,792 | -3% |
| Gold production (koz) | 97.25 | 103.73 | -6% |
| Total silver equivalent (koz) | 17,258 | 18,016 | -4% |
| Total gold equivalent (koz) | 287.64 | 300.27 | -4% |
| Silver sold (koz) | 11,2022 | 10,906 | 3% |
| Gold sold (koz) | 97.04 | 98.62 | -2% |
1 Includes 0.5 million silver equivalent ounces from the Selene mine which closed in May 2009
2 Includes 1,055 ounces of silver from Selene
ATTRIBUTABLE GROUP PRODUCTION (Production attributable to Hochschild1)
|
| H1 2010 | H1 20092 | % change |
| Silver production (koz) | 8,477 | 9,250 | -8% |
| Gold production (koz) | 72.53 | 77.60 | -7% |
| Attrib. silver equivalent (koz) | 12,829 | 13,906 | -8% |
| Attrib. gold equivalent (koz) | 213.81 | 231.77 | -8% |
1 Attributable production includes 100% of all production from Arcata, Ares and Moris, 60% from Pallancata and 51% from San Jose.
2 Includes 0.5 million silver equivalent ounces from the Selene mine which closed in May 2009
QUARTERLY PRODUCTION BY MINE
ARCATA (100% owned)
| Product | H1 2010 | H1 2009 | % change |
| Ore production (tonnes processed) | 295,434 | 311,506 | -5% |
| Average head grade silver (g/t) | 471 | 541 | -13% |
| Average head grade gold (g/t) | 1.59 | 1.61 | -1% |
| Concentrate produced (tonnes) | 9,984 | 11,388 | -12% |
| Silver grade in concentrate (kg/t) | 12.65 | 13.64 | -7% |
| Gold grade in concentrate (kg/t) | 0.04 | 0.04 | 0% |
| Silver produced (koz) | 4,024 | 4,970 | -19% |
| Gold produced (koz) | 13.36 | 14.08 | -5% |
| Silver equivalent produced (koz) | 4,826 | 5,815 | -17% |
| Silver sold (koz) | 3,880 | 4,174 | -7% |
| Gold sold (koz) | 12.50 | 11.98 | 4% |
ARES (100% owned)
| Product | H1 2010 | H1 2009 | % change |
| Ore production (tonnes processed) | 156,606 | 161,964 | -3% |
| Average head grade silver (g/t) | 102 | 89 | 14% |
| Average head grade gold (g/t) | 3.78 | 4.92 | -23% |
| Doré total (koz) | 466 | 425 | 10% |
| Silver produced (koz) | 446 | 399 | 12% |
| Gold produced (koz) | 17.90 | 24.16 | -26% |
| Silver equivalent produced (koz) | 1,520 | 1,848 | -18% |
| Silver sold (koz) | 425 | 395 | 8% |
| Gold sold (koz) | 16.85 | 23.65 | -29% |
PALLANCATA (60% owned)
| Product | H1 2010 | H1 2009 | % change |
| Ore production (tonnes processed) | 517,343 | 375,840 | 38% |
| Average head grade silver (g/t) | 340 | 303 | 12% |
| Average head grade gold (g/t) | 1.39 | 1.34 | 4% |
| Concentrate produced (tonnes) | 4,898 | 3,004 | 63% |
| Silver grade in concentrate (kg/t) | 30.89 | 32.95 | -6% |
| Gold grade in concentrate (kg/t) | 0.11 | 0.13 | -11% |
| Silver produced (koz) | 4,862 | 3,182 | 53% |
| Gold produced (koz) | 17.54 | 12.11 | 45% |
| Silver equivalent produced (koz) | 5,914 | 3,909 | 51% |
| Silver sold (koz) | 4,805 | 3,190 | 51% |
| Gold sold (koz) | 16.95 | 11.44 | 48% |
SAN JOSE (51% owned)
| Product | H1 2010 | H1 2009 | % change |
| Ore production (tonnes processed) | 212,743 | 238,170 | -11% |
| Average head grade silver (g/t) | 334 | 414 | -19% |
| Average head grade gold (g/t) | 5.86 | 5.47 | 7% |
| Silver produced (koz) | 2,044 | 2,564 | -20% |
| Gold produced (koz) | 36.14 | 34.64 | 4% |
| Silver equivalent produced (koz) | 4,212 | 4,642 | -9% |
| Silver sold (koz) | 2,034 | 2,547 | -20% |
| Gold sold (koz) | 36.49 | 33.31 | 10% |
MORIS (100% owned)
| Product | H1 2010 | H1 2009 | % change |
| Ore production (tonnes processed) | 648,416 | 632,497 | 3% |
| Average head grade silver (g/t) | 4.41 | 5.01 | -12% |
| Average head grade gold (g/t) | 1.25 | 1.37 | -9% |
| Silver produced (koz) | 48 | 50 | -3% |
| Gold produced (koz) | 12.31 | 15.73 | -22% |
| Silver equivalent produced (koz) | 787 | 993 | -21% |
| Silver sold (koz) | 57 | 50 | 14% |
| Gold sold (koz) | 14.24 | 15.69 | -9% |
PROFIT BY OPERATION1 (segment report reconciliation) as at June 2010
| Company (US$m)
| Ares
| Arcata
| Pallancata
| San José
| Moris
| Consolidation adjustment | Total/HOC
|
| Revenue | 27.0 | 77.5 | 107.4 | 77.2 | 17.6 | - | 306.9 |
| Cost of sales (Pre consolidation) | -19.4 | -35.2 | -47.9 | -46.7 | -12.9 | 1.3 | -160.9 |
| Consolidation adjustment | - | - | -2.0 | -0.2 | - | 1.3 | -1.0 |
| Cost of sales (Post consolidation) | -19.3 | -35.2 | -45.9 | -46.5 | -12.9 | - | -159.9 |
| Production cost w/o depreciation | -16.1 | -20.5 | -25.8 | -30.3 | -9.8 | - | -102.4 |
| Depreciation in production cost | -1.8 | -8.5 | -14.4 | -15.7 | -2.8 | - | -43.2 |
| Other items | -3.2 | -5.8 | -5.3 | -0.4 | - | - | -14.7 |
| Change in inventories | 1.8 | -0.4 | -0.4 | -0.1 | -0.4 | - | 0.4 |
| Gross profit | 7.7 | 42.2 | 59.5 | 30.5 | 4.7 | 1.4 | 146.0 |
| Administrative expenses | - | - | - | - | - | -29.7 | -29.7 |
| Exploration expenses | - | - | - | - | - | -14.3 | -14.3 |
| Selling expenses | - | -1.2 | -1.6 | -8.2 | - | - | -11.0 |
| Other income/ expenses | - | - | - | - | - | 11.5 | 11.5 |
| Operating profit before impairment | 7.7 | 41.0 | 57.9 | 22.3 | 4.7 | -31.1 | 102.5 |
| Impairment of assets | - | - | - | - | - | -14.7 | -14.7 |
| Investments under equity method | - | - | - | - | - | -3.2 | -3.2 |
| Finance income | - | - | - | - | - | 3.0 | 3.0 |
| Finance costs | - | - | - | - | - | -12.8 | -12.8 |
| FX gain/(loss) | - | - | - | - | - | -0.2 | -0.2 |
| Profit/(loss) from continuing operations before income tax2 | 7.7 | 41.0 | 57.9 | 22.3 | 4.7 | -59.0 | 74.6 |
| Income Tax | - | - | - | - | - | -28.7 | -28.7 |
| Profit/(loss) for the year from continuing operations | 7.7 | 41.0 | 57.9 | 22.3 | 4.7 | -87.7 | 45.9 |
1 On a post exceptional basis
2 Hochschild profit before income tax reflected in 2010 interim report
Shareholder Information
1. Company website
Hochschild Mining plc Interim and Annual Reports and results announcements are available via the internet on our website at www.hochschildmining.com. Shareholders can also access the latest information about the Company and press announcements as they are released, together with details of future events and how to obtain further information.
2. Registrars
Enquiries concerning shareholdings, dividends and changes in personal details should be referred to the Company's registrars, Capita as detailed below.
By post:
Shareholder Services Department, Capita Registrars, Northern House, Woodsome Park, Fenay Bridge, Huddersfield HD8 0GA
By telephone:
- If calling from the UK: 0871 664 0300 (Calls cost 10p per minute plus network extras, lines are open 8.30am - 5.30pm Mon-Fri)
- If calling from overseas: +44 20 8639 3399
By fax: +44 (0) 1484 600 911
3. Currency option and dividend mandate
Shareholders wishing to receive their dividend in US dollars should contact the Company's registrars to request a currency election form. This form should be completed and returned to the registrars by 7 September 2010 in respect of the 2010 interim dividend.
The Company's registrars can also arrange for the dividend to be paid directly into a shareholder's UK bank account. To take advantage of this facility in respect of the 2010 interim dividend, a dividend mandate form, also available from the Company's registrars, should be completed and returned to the registrars by 7 September 2010. This arrangement is only available in respect of dividends paid in UK pounds sterling. Shareholders who have already completed one or both of these forms need take no further action.
4. Investor Relations
For investor enquiries please contact Jane Flynn, Investor Relations Associate, by writing to the registered office address (given below) or by telephone on 020 7907 2933 or by email at jane.flynn@hocplc.com.
5. Financial Calendar
| Dividend dates | 2010 |
| Ex-dividend date | 01 September |
| Record date | 03 September |
| Deadline for return of currency election forms | 07 September |
| Payment date | 22 September |