Hochschild Regulatory News (HOC)

8 Jan 2008 07:00

Hochschild Mining PLC08 January 2008 ________________________________________________________________________ 8 January 2008 Hochschild Mining plc 2007 production report and outlook for 2008 2007 Highlights: * 2007 full year attributable production of 25.667 million silver equivalent ounces, in-line with original guidance of 26 million silver equivalent ounces and a 10% increase year-on-year * 2007 full year attributable silver production of 13.587 million ounces; a 17% increase year-on-year * 2007 full year attributable gold production of 201 thousand ounces; a 3% increase year-on-year * New operations, San Jose, Pallancata and Moris in commercial production and operating at full capacity * Expansions of Arcata, Ares and Selene completed on time * Average cash cost per tonne (excluding the mines opened in 2007) expected to increase by only 5% despite industry inflationary pressures and appreciation of local currencies * Gross margin in-line with expectations due to higher commodity prices * Average reserve life of mine increased to an expected 4.1 years from 2.8 years at IPO, while resource life increased from 1.7 to 1.9 years over the same period Outlook for 2008: * Further expansions of Arcata, Selene and San Jose plants will increase throughput by 27%, providing a strong platform for future growth * 2008 attributable production target to exceed 26 million silver equivalent ounces, comprising 16.9 million silver ounces and 153 thousand gold ounces * At current consensus prices, higher depreciation and lower grades at Ares and Selene will materially impact gross margin and attributable profit relative to market expectations * Attributable profit will also be affected as we shift production to projects where we have minority partners * EBITDA growth trend expected to remain positive * San Felipe on track to complete feasibility study in Q3 2008 and begin construction immediately thereafter * Remain confident in reaching 50 million silver equivalent ounces by 2011 through additional growth in 2009 and a major production increase in 2010 from San Felipe Eduardo Hochschild, Executive Chairman of Hochschild Mining plc, commented; "We are very pleased with a strong set of production results for 2007,substantially increased reserves and our overall performance for the year. Our2007 full year production of 25.667 million silver equivalent ounces is in-linewith original guidance and represents a 10% increase over 2006. In our firstyear since IPO, we have grown from three mines in one country to six mines inthree countries, while also expanding the capacity at Ares, Arcata and Selene.In 2008, we plan to further increase the plant capacity of Arcata, Selene andSan Jose to create a strong platform for future growth. We thus remain confidentof meeting our 2011 target of 50 million silver equivalent ounces, whilepreserving the long term value proposition of the company." Overview of 2007: Our 2007 full year attributable production of 25.667 million silver equivalentounces is in-line with our target and represents a 10% increase over 2006.Production volumes for the three months to 31 December 2007 were significantlyhigher compared with the prior period. The increase in production was primarilya result of increased capacity at Arcata where we have already begun a furtherexpansion. In addition, relatively high grades at Ares and the productioncontribution from the new projects, San Jose, Pallancata and Moris alsocontributed favourably to production in Q4. This increase was offset by lowerproduction at Selene as a result of lower grades mined and a reduction inthroughput with the ramp up of Pallancata. Outlook for 2008: Our 2008 attributable production target aims to exceed 26 million silverequivalent ounces (at a conversion ratio of 60:1), which would be comprised ofapproximately 16.9 million ounces of silver and 153 thousand ounces of gold.Attributable silver production is expected to increase despite lower grades atAres (from 279.3 g/t to 165.2 g/t) and Selene (from 295.8 g/t to 230 g/t). Thisdecrease will be fully offset by higher production from Arcata, Pallancata andSan Jose. Attributable gold production for 2008 is projected to decrease from2007 levels as we mine anticipated lower grades at Ares (from 14.6 g/t to 6.4 g/t) and Selene (from 2.0 g/t to 1.6 g/t). This decrease will be partially offsetby higher production at Pallancata, San Jose and Moris.The projected production considers a further expansion of plant capacity at SanJose from 265 ktpa to 530 ktpa by Q3 2008, at Arcata from 420 ktpa to 618 ktpaby Q4 2008, and Selene from 706 ktpa to 1,059 ktpa by Q3 2008 to accommodate theore from Pallancata. While we expect industry cost inflation to continue in general and foreignexchange to be a potentially negative factor in a weak U.S. dollar environment,we anticipate that our average cash cost per tonne in 2008 for our sixoperations will be at or below 2007 levels. This is primarily a result of anincrease in tonnage treated at Arcata, San Jose and Pallancata and costreduction efforts. At current consensus for commodity prices, due to lower grades at Ares andSelene and significantly higher depreciation, gross margins for 2008 will beimpacted and as a result will be materially lower than current marketexpectations. The increase in depreciation will primarily result from CAPEXrelated to plant expansions in 2007 and 2008 and continued investment toincrease average life of mine. Additionally, as we shift production towards ournewer mines (Pallancata and San Jose) and scale back both Ares and Selene,incremental profit will come from mines where we have minority partners(International Minerals Corporation and Minera Andes Incorporated), in turnfurther affecting attributable profit. Notwithstanding these factors, we remaincommitted to developing our resource base in a manner consistent with ourstrategy of enhancing the long term value of the business. We remain positive on the fundamentals for silver and gold given continued U.S.dollar weakness, heightened geopolitical tensions, depleted above ground stocksand increasing investment demand. In addition to macroeconomic drivers, webelieve strong industrial demand for silver will continue in 2008 and willreflect positively on its price. Finally, we remain confident in reaching 50 million silver equivalent ounces by2011 through additional growth in 2009 and a major production increase in 2010from San Felipe. Management continues to focus on operational efficiency, whichis fundamental to our overall profitability, and to preserving the long-termvalue proposition of the company. TOTAL PRODUCTION(1)----------------------------------------------------------------------------------- Q4 Q3 Q4 Full year Full year 2007 2007 2006 2007 2006 -----------------------------------------------------------------------------------Silver production (Koz) 5,155 3,555 3,430 14,343 11,604Gold production (Koz) 70.09 50.66 54.25 211.46 195.73Total silver equivalent (Koz) 9,360 6,595 6,685 27,031 23,348Total gold equivalent (Koz) 156.00 109.91 111.42 450.51 389.13Silver sold (Koz) 5,549 2,544 2,146 13,794 10,650Gold sold (Koz) 61.51 46.87 45.06 203.24 200.26----------------------------------------------------------------------------------- ARCATA------------------------------------------------------------------------------------ Q4 Q3 Q4 Full year Full yearProduct 2007 2007 2006 2007 2006 ------------------------------------------------------------------------------------Ore production (tonnes) 132,231 106,656 91,190 415,400 313,688Average head grade silver (g/t) 581.06 578.97 548.28 560.04 536.62Average head grade gold (g/t) 1.48 1.48 1.46 1.43 1.39Concentrate produced (tonnes) 4,761 4,457 3,857 16,665 12,407Silver grade in concentrate (kg/t) 14.04 11.94 11.34 12.12 11.90Gold grade in concentrate (kg/t) 0.03 0.03 0.03 0.03 0.03Silver produced (Koz) 2,211 1,711 1,406 6,553 4,754Gold produced (Koz) 5.50 4.23 3.73 16.47 11.89Silver sold (Koz) 3,211 896 783 6,594 4,094Gold sold (Koz) 7.23 2.24 2.12 15.66 9.90------------------------------------------------------------------------------------ ARES------------------------------------------------------------------------------------ Q4 Q3 Q4 Full year Full yearProduct 2007 2007 2006 2007 2006 ------------------------------------------------------------------------------------Ore production (tonnes) 92,401 84,995 75,688 333,800 289,138Average head grade silver (g/t) 337.29 255.93 335.42 279.25 310.61Average head grade gold (g/t) 14.67 13.98 18.24 14.57 17.37Dore total (Koz) 674.19 664.57 799.88 2,593 2,850Silver produced (Koz) 889 633 755 2,701 2,688Gold produced (Koz) 41.81 36.57 42.79 149.98 155.50Silver sold (Koz) 883 646 681 2,847 2,836Gold sold (Koz) 42.09 38.56 36.66 157.66 163.32------------------------------------------------------------------------------------ SELENE------------------------------------------------------------------------------------ Q4 Q3 Q4 Full year Full yearProduct 2007 2007 2006 2007 2006 ------------------------------------------------------------------------------------Ore production (tonnes) 97,590 125,451 93,915 413,622 359,686Average head grade silver (g/t) 238.95 275.31 465.10 295.78 397.76Average head grade gold (g/t) 1.41 1.84 2.98 2.01 2.85Concentrate produced (tonnes) 1,112 1,090 969 4,010 3,842Silver grade in concentrate (kg/t) 18.96 26.69 40.75 26.83 33.70Gold grade in concentrate (kg/t) 0.10 0.16 0.25 0.17 0.23Silver produced (Koz) 669 923 1,269 3,414 4,162Gold produced (Koz) 3.61 5.66 7.74 21.62 28.34Silver sold (Koz) 786 1,002 682 3,685 3,721Gold sold (Koz) 4.53 6.07 6.28 22.26 27.04------------------------------------------------------------------------------------ PALLANCATA(2)------------------------------------------------------------------------------Product Q4 Q3 Full year 2007 2007 2007------------------------------------------------------------------------------Ore production (tonnes) 63,612 14,723 78,335Average head grade silver (g/t) 322.64 255.45 310.02Average head grade gold (g/t) 1.54 1.29 1.50Concentrate produced (tonnes) 560 79 638Silver grade in concentrate (kg/t) 33.25 41.60 34.28Gold grade in concentrate (kg/t) 0.13 0.17 0.13Silver produced (Koz) 599 105 704Gold produced (Koz) 2.33 0.43 2.76Silver sold (Koz) 561 0 561Gold sold (Koz) 2.08 0.00 2.08------------------------------------------------------------------------------ SAN JOSE(3)-------------------------------------------------------------------------------Product Q4 Q3 Full year 2007 2007 2007-------------------------------------------------------------------------------Ore produciton (tonnes) 65,480 27,494 92,974Average head grade silver (g/t) 536.12 543.80 538.39Average head grade gold (g/t) 7.03 7.20 7.08Silver produced (Koz) 776 182 958Gold produced (Koz) 11.66 3.29 14.95Silver sold (Koz) 100 0 100Gold sold (Koz) 1.66 0.00 1.66------------------------------------------------------------------------------- MORIS(4)------------------------------------------------------------------------------Product Q4 Q3 Full year 2007 2007 2007------------------------------------------------------------------------------Ore produciton (tonnes) 253,766 84,538 338,304Average head grade silver (g/t) 4.62 4.90 4.70Average head grade gold (g/t) 1.62 1.80 1.65Silver produced (Koz) 11 1 13Gold produced (Koz) 5.18 0.50 5.68Silver sold (Koz) 8 0 8Gold sold (Koz) 3.92 0.00 3.92------------------------------------------------------------------------------(1) Total production includes 100% of all production, including production attributable to joint venture partners at Moris, San Jose and Pallancata.(2) The Company has a 60% interest in Pallancata.(3) The Company has a 51% interest in San Jose.(4) The Company has a 70% interest in Moris. Hochschild Mining's Preliminary results will be announced on 12 March 2008. Enquiries: Hochschild Mining plcWray Barber +44 (0)20 7152 6014Head of Investor Relations FinsburyRobin Walker +44 (0)20 7251 3801Public Relations Certain statements in this presentation are or may be forward looking statementsregarding Hochschild Mining plc's financial position and results, businessstrategy, plans and objectives. By their nature, all forward-looking statementsinvolve risk and uncertainty because they relate to future events andcircumstances which are beyond the Group's control. As a result, the Group'sactual future financial condition, performance and results may differ materiallyfrom the plans, goals and expectations set forth in the Group's forward-lookingstatements. The Group undertakes no obligation to update the forward-lookingstatements contained in this presentation or any other forward-looking statementit may make. This presentation does not constitute or form part of any offer, invitation tounderwrite, subscribe for or otherwise acquire or dispose of any HochschildMining plc shares. Past performance of the Company or its shares cannot be relied upon as a guideto future performance and persons needing advice should consult an independentfinancial adviser. - ends --------------------------- This information is provided by RNS The company news service from the London Stock Exchange