TIDMHOC
RNS Number : 4808L
Hochschild Mining PLC
06 September 2023
6 September 2023
Hochschild Mining PLC
Interim Results
Six months ended 30 June 2023
Hochschild Mining PLC ("Hochschild" or the "Company") (LSE: HOC)
(OTCQX: HCHDF) is pleased to announce Interim Results for the six
months ended 30 June 2023.
Financial Highlights
-- Revenue of $314.0 million (H1 2022: $347.8 million) ([1])
-- Adjusted EBITDA of $99.5 million (H1 2022: $130.5 million)
([2])
-- Profit before income tax (pre-exceptional) of $0.8 million
(H1 2022: $15.3 million)
-- Loss before income tax (post-exceptional) of $66.1 million
(H1 2022: profit of $5.4 million)
-- Basic loss per share (pre-exceptional) of $0.004 (H1 2022:
earning per share of $0.01)
-- Basic loss per share (post-exceptional) of $0.09 (H1 2022:
$0.01)
-- Cash and cash equivalent balance of $93.6 million as at 30
June 2023 (31 December 2022: $143.8 million)
-- Net debt of $227.1 million as at 30 June 2023 (31 December
2022: $175.1 million)
Operational Highlights [3]
-- Inmaculada's Modified Environmental Impact Assessment
approved on 1 August 2023 for an additional 20 years
-- All-in sustaining costs (AISC) from operations of $1,572 per
gold equivalent ounce (H1 2022: $1,466) or $18.9 per silver
equivalent ounce (H1 2022: $17.7) [4]
-- H1 2023 attributable production of 136,878 gold equivalent
ounces or 11.4 million silver equivalent ounces (H1 2022: 157,380
gold equivalent ounces or 13.1 million silver equivalent
ounces)
Project & Exploration Highlights
-- Mara Rosa project in Brazil advancing on schedule and on
budget - total project progress at 92% with first production on
track for H1 2024
-- Brownfield programme commenced in the surrounding areas of
all three mines
ESG highlights
-- Continued improvement across all key metrics
-- Lost Time Injury Frequency Rate of 0.84 (FY 2022: 1.37)
([5])
-- Accident Severity Index of 32 (FY 2022: 93) ([6])
-- Water Consumption of 168lt/person/day (FY 2022:
171lt/person/day)
-- Domestic waste generation of 0.95 kg/person/day (FY 2022:
1.05kg/person/day)
-- ECO score of 5.89 out of 6 (FY 2022: 5.27) ([7])
2023 Full year outlook
-- Revised guidance mainly reflects the impact of MEIA delays on
Inmaculada and accelerated mine development costs at San Jose
-- Revised production target:
o 289,000-303,0000 gold equivalent ounces (24.0-25.0 million
silver equivalent ounces)
-- Revised All-in sustaining costs target:
o $1,490-$1,580 per gold equivalent ounce ($18.0-$19.0 per
silver equivalent ounce)
-- Total sustaining and development capital expenditure expected
to be approximately $130-140 million
-- Additional $60 million drawn down in early August 2023 from
$200 million debt facility signed in December 2022
Capital Markets Event
-- Capital Markets Event to be held on 22 November 2023 in
London where the Company will set out its long-term strategy
$000 unless stated Six months to Six months to % change
30 June 2023 30 June 2022
-------------- --------------
Attributable silver production (koz) 4,442 5,065 (12)
Attributable gold production (koz) 83 96 (14)
Revenue 314,023 347,781 (10)
Adjusted EBITDA 99,497 130,525 (24)
Profit/(loss) from continuing operations (pre-exceptional) (4,357) 9,503 (146)
Profit/(loss) from continuing operations (post-exceptional) (52,685) (420) 12,444
Basic earnings/(loss) per share (pre-exceptional) $ (0.004) 0.01 (140)
Basic earnings/(loss) per share (post-exceptional) $ (0.09) (0.01) 800
------------------------------------------------------------- -------------- -------------- ---------
_______________________________________________________________________________________
A live conference call and audio webcast will be held at 9.30am
(London time) on Wednesday 6 September 2023 for analysts and
investors.
For a live webcast of the presentation please click on the link
below:
https://brrmedia.news/HOC_IR23
Conference call dial in details:
UK: +44 (0)330 551 0200
UK Toll Free: 0808 109 0700
US/Canada Toll Free: 866 580 3963
Pin: Hochschild - Interim Results
_______________________________________________________________________________________
Enquiries:
Hochschild Mining PLC
Charles Gordon
+44 (0)20 3709 3264
Head of Investor Relations
Hudson Sandler
Charlie Jack
+44 (0)207 796 4133
Public Relations
_______________________________________________________________________________________
Non-IFRS Financial Performance Measures
The Company has included certain non-IFRS measures in this news
release. The Company believes that these measures, in addition to
conventional measures prepared in accordance with IFRS, provide
investors an improved ability to evaluate the underlying
performance of the Company. The non-IFRS measures are intended to
provide additional information and should not be considered in
isolation or as a substitute for measures of performance prepared
in accordance with IFRS. These measures do not have any
standardised meaning prescribed under IFRS, and therefore may not
be comparable to other issuers.
About Hochschild Mining PLC:
Hochschild Mining PLC is a leading precious metals company
listed on the London Stock Exchange (HOCM.L / HOC LN) and
crosstrades on the OTCQX Best Market in the U.S. (HCHDF), with a
primary focus on the exploration, mining, processing and sale of
silver and gold. Hochschild has over fifty years' experience in the
mining of precious metal epithermal vein deposits and currently
operates three underground epithermal vein mines, two located in
southern Peru and one in southern Argentina. Hochschild also owns
the Mara Rosa Advanced Project in Brazil as well as numerous
long-term projects throughout the Americas
EDUARDO LANDIN, CHIEF EXECUTIVE OFFICER SAID:
I am honoured to lead Hochschild Mining PLC and believe in a
relationship with shareholders based on trust and a thorough
appreciation of our key strengths.
We are dedicated to transparency and responsible business
practices. Our core competencies drive success, with a proven track
record of finding new resources, looking for new value accretive
opportunities, delivering projects on time and on budget and
operating efficiently. These are underpinned by a focus on
consistent ESG performance and the capacity to continually learn
from experience.
I look forward to working with colleagues across the business to
ensure that we continue improving our strong safety, environmental,
operational and financial record, while progressing our growth
strategy. Together with the executive team, we are fully committed
to unleashing Hochschild's full potential. We believe that safe,
efficient operations, a clear strategic direction, great people and
capital discipline will enable our Company to generate superior
returns for shareholders and make a broader positive contribution
to society.
The first half of the year was challenging for the Company as we
reached the final stages of the process in securing Inmaculada's
Modified Environmental Impact Assessment ("MEIA") which,
regrettably, impacted in the short-term our operational and
exploration strategy. However, following the recent welcome
approval of the MEIA by the Peruvian government, the Company is now
in an excellent position to optimise the Inmaculada mine and unlock
its impressive geological potential, complete construction of our
new Mara Rosa operation in Brazil and advance the new Royropata
discovery at Pallancata.
I would like to thank the teams involved in four years of hard
work on the permitting project and am delighted that Inmaculada
will remain a key part of Hochschild's portfolio for many years to
come. The extension reaffirms our commitment to our stakeholders in
the Ayacucho region and its communities as well as to Peru
overall.
ESG
We continued with our focus on safety and are proud that, in H1
2023, our key performance indicators highlighted our strongest
performance to date in this area with both the accident frequency
rate and accident severity indices at unprecedented low levels of
0.84 and 32, respectively. We are particularly pleased to report
that during the construction phase at Mara Rosa, we performed over
three million hours without any lost time accidents and that at
both our Pallancata and San Jose operations we have surpassed two
million hours without lost time accidents.
Our safety performance is matched by our environmental
management during this first half with our ECO Score ending the
period at 5.89 (out of 6), its most robust level since the
implementation of this internally-designed KPI. This demonstrates
not only proactivity and sound operational credentials but also a
positive outcome of internal audits and regulatory inspections.
We are always looking for ways to improve our engagement with
our local communities and so, to achieve this, during the first
half we have reviewed, and are in the process of implementing, a
reorganised social relations team with a continued focus on support
and collaboration. In addition, in the first half, we held training
sessions as part of our focus on promoting economic development
through the Impulso Productivo ('Boosting Productivity') and
"Orgullo Pecuario ('Pride in our Livestock') programmes for local
farmers and livestock keepers. Additionally, we have been
supporting local farmers in their sales by partnering with
Sodexo.
Finally, in the area of education, we launched courses in our
five Digital Centres in Peru in conjunction with local educational
institutions under the Conexion Futuro programme ('Future
Connection'). Workshops and motivational talks were also conducted
for secondary school students in our communities, thanks to the
Aprender para Triunfar programme ('Learn to Succeed').
Operations
Hochschild's production in the first half was, as expected,
impacted by the delay in securing the approval of the MEIA, which
had a knock-on effect on development at the mine. Overall
attributable production was 136,878 gold equivalent ounces (11.4
million silver equivalent ounces), which was lower than the first
half of 2022 due to the permit delay, as well as the expected lower
production at Pallancata. Production in the period was at an all-in
sustaining cost ("AISC") of $1,572 per gold equivalent ounce ($18.9
per silver equivalent ounce). Inmaculada otherwise had a solid half
with production of 92,856 gold equivalent ounces (H1 2022: 106,584
ounces) and AISC at $1,272 per gold equivalent ounce (H1 2022:
$1,074 per ounce).
Pallancata's current mining area is almost depleted, and grades
and tonnage, as expected, continued to decline in the first half of
the year. Output was 1.2 million silver equivalent ounces (H1 2022:
1.6 million ounces) with the mine's AISC unsurprisingly high at
$31.7 per silver equivalent ounce (H1 2022: $32.3 per ounce). The
Company's plan is to place Pallancata on care and maintenance in Q4
2023.
In Argentina, mine sequencing and the annual holidays impacted
the first quarter but the second quarter was much stronger, leading
to production of 4.9 million silver equivalent ounces in the first
half (H1 2022: 5.1 million ounces). AISC was $21.5 per silver
equivalent ounce (H1 2022: $21.2 per ounce).
Overall, I am proud of our team's fantastic work, which has
delivered operational efficiencies and cost savings to mitigate the
impact of the MEIA delay.
Projects
At the Mara Rosa project in the state of Goias in Brazil, we
have made excellent progress in the first half of the year and are
now at 92% total completion with all key equipment in place and all
civil works complete and mechanical assembly advanced to 70%
completion. We have also made good progress with pre-stripping and
preparations for the operational permit. I am pleased to say that
we remain on track for first production in the first half of next
year and will provide regular progress updates over the final few
months of construction.
Exploration
Our brownfield exploration programme for 2023 was also affected
by the MEIA delay and has only recently re-started in Peru. Plans
are underway to drill 10,000 metres at Inmaculada to identify
additional high-grade resources in the Eduardo and San Salvador
belts. With respect to our exciting Royropata discovery in
Pallancata, where over 50 million ounces of high-grade silver were
discovered in 2022 in veins with average widths of 5 metres, we
have applied for the requisite permit to drill for additional
resources. In Argentina, the team is targeting further potential
resource drilling in the area surrounding our operations.
Financial results
Financial results reflect the difficult operating environment
experienced in H1 2023, which we expect to improve in H2. Both
silver and gold production were lower, as guided, versus H1 2022
and therefore, despite a 4% rise in the average gold price
achieved, revenue decreased by 10% to $314.0 million (H1 2022:
$347.8 million). AISC was $1,572 per gold equivalent ounce (H2
2022: $1,466 per ounce) with the rise reflecting the impact of the
MEIA delay at Inmaculada, expected lower production at Pallancata
and lower grades at San Jose. Adjusted EBITDA of $99.5 million (H1
2022: $130.5 million) mostly reflects the decreased production
levels and increased costs whilst pre-exceptional loss per share
was $0.004 (H1 2022: $0.01 earnings per share). Post-exceptional
loss per share was $0.09 (H1 2022: $0.01).
Financial position
Following receipt of the MEIA, the Company is in a good position
to fund the remaining capital expenditure at Mara Rosa which we
expect to amount to $54 million in H2. Cash and cash equivalents
was $93.6 million at the end of June (31 December 2022: $143.8
million) and net debt was $227.1 million (31 December 2022: $175.1
million). In December 2022, Hochschild closed a $200 million
committed medium-term loan facility, which will provide funding to
complete the construction of Mara Rosa and amortise our existing
debt facilities, as well as for other corporate uses. We have also
taken additional steps to ensure future cashflow certainty from the
low-cost Mara Rosa project and have hedged additional ounces in
Brazil for the next few years at highly competitive gold prices.
This gives us financial flexibility to repay debt and continue to
invest in our growth strategy.
Outlook
The MEIA delay has, as expected, impacted several of our 2023
operational and investment plans. We have therefore modified our
production and cost guidance for the year at Inmaculada and at San
Jose, where we have taken the decision to accelerate some 2024 mine
development plans. The second half will also feature the final
stages of investment in Mara Rosa as well as the restarting of our
brownfield exploration programme in Peru, which will continue into
2024.
As we enter this new exciting phase for the Company, we look
forward to presenting our long-term strategic plans and showcasing
our future exploration opportunities at a Capital Markets Event on
22 November 2023.
I would like to express my gratitude to all stakeholders for
their ongoing support in what has been a prolonged period of
uncertainty for the Company. We are, however, entering a new phase
with renewed impetus, and we are looking forward to a busy second
half of construction and exploration while maintaining the very
highest levels of safety, ethics and community support as we work
to deliver on our commitments to all stakeholders.
OPERATING REVIEW
OPERATIONS
Note: All 2023 and 2022 silver/gold equivalent production
figures assume a gold/silver ratio of 83:1.
Production
In H1 2023, Hochschild delivered attributable production of
136,878 gold equivalent ounces or 11.4 million silver equivalent
ounces (on an attributable basis), with the decrease versus the
same period of 2022 resulting from mine development of Inmaculada
being temporarily impacted by the delay in the approval of the
MEIA, as well as expected planned lower production at Inmaculada
and Pallancata.
Total group production
Six months to Six months to 30 June
30 June 2023 2022
--------------
Silver production
(koz) 5,393 6,105
Gold production (koz) 100.55 113.94
Total silver equivalent
(koz) 13,739 15,562
Total gold equivalent
(koz) 165.53 187.50
Silver sold (koz) 5,425 6,045
Gold sold (koz) 99.79 112.70
------------------------- -------------- ----------------------
Total production includes 100% of all production, including
production attributable to Hochschild's minority shareholder at San
Jose.
Attributable group production
Six months to Six months to 30 June
30 June 2023 2022
--------------
Silver production
(koz) 4,442 5,065
Gold production (koz) 83.36 96.36
Silver equivalent
(koz) 11,361 13,063
Gold equivalent (koz) 136.88 157.38
----------------------- -------------- ----------------------
Attributable production includes 100% of all production from
Inmaculada and Pallancata and 51% from San Jose.
The delay in the approval of the Inmaculada MEIA has, as
expected, temporarily impacted the mine plan for 2023 at the
operation and resulted in a modification to the production and cost
forecasts for 2023. In addition, the Company has taken the decision
to accelerate some 2024 mine development plans at San Jose into the
second half of 2023 and therefore this has temporarily increased
capital expenditure at the operation. The revised guidance for 2023
is as follows:
Revised attributable 2023 Production forecast split
Operation Oz Au Eq Moz Ag Eq
----------------
Inmaculada 192,000-200,000 16.0-16.5
Pallancata 24,000-27,000 2.0-2.2
San Jose 73,000-76,000 6.0-6.3
----------- ---------------- ----------
Total 289,000-303,000 24.0-25.0
----------- ---------------- ----------
Costs
AISC from operations in H1 2023 was $1,572 per gold equivalent
ounce or $18.9 per silver equivalent ounce (H1 2022: $1,466 per
gold equivalent ounce or $17.7 per silver equivalent ounce), higher
than H1 2022 mainly due to lower tonnage at Inmaculada and lower
grades at San Jose, partially offset by higher grades at
Inmaculada.
The all-in sustaining cost from operations for 2023 is revised
to between $1,490 and $1,580 per gold equivalent ounce (or $18.0
and $19.0 per silver equivalent ounce). This incorporates an
additional provision of $4.1 million for brownfield exploration at
Inmaculada and San Jose.
Revised 2023 AISC forecast split
Operation $/oz Au Eq $/oz Ag Eq
------------
Inmaculada 1,330-1,380 16.0-16.6
Pallancata 2,175-2,390 26.2-28.8
San Jose 1,610-1,690 19.4-20.4
---------------------- ------------ -----------
Total from operations 1,490-1,580 18.0-19.0
---------------------- ------------ -----------
Inmaculada
The 100% owned Inmaculada gold/silver underground operation is
located in the Region of Ayacucho in southern Peru. It commenced
operations in 2015.
Inmaculada summary Six months to Six months % change
30 June 2023 to
30 June 2022
--------------- --------------
Ore production (tonnes) 535,905 657,202 (18)
Average silver grade (g/t) 178 145 23
Average gold grade (g/t) 3.85 3.61 7
Silver produced (koz) 2,573 2,815 (9)
Gold produced (koz) 61.85 72.67 (15)
Silver equivalent produced
(koz) 7,707 8,846 (13)
Gold equivalent produced
(koz) 92.86 106.58 (13)
Silver sold (koz) 2,561 2,805 (9)
Gold sold (koz) 61.39 72.72 (16)
Unit cost ($/t) 140.5 111.8 26
Total cash cost ($/oz Au
co-product) 808 679 19
All-in sustaining cost ($/oz
Au Eq) 1,272 1,074 18
------------------------------ --------------- -------------- ---------
Production
Inmaculada's first half production was 61,852 ounces of gold and
2.6 million ounces of silver, which amounts to a gold equivalent
output of 92,856 ounces (H1 2022: 106,584 ounces),with the
reduction versus H1 2022, as expected, due to the ongoing delays in
the decision on the MEIA impacting mine development although this
was partially offset by higher grades.
Costs
AISC was $1,272 per gold equivalent ounce (H1 2022: $1,074 per
ounce). The increase versus the same period of 2022 is mainly due
to deferred mine development resulting from the MEIA delay, which
caused decreased tonnage although this was partially offset by
higher grades. The result was better than originally budgeted for
the period due to temporary lower capex.
Pallancata
The 100% owned Pallancata silver/gold property is located in the
Region of Ayacucho in southern Peru. Pallancata commenced
production in 2007. Ore from Pallancata is transported 22km to the
Selene plant for processing.
Pallancata summary Six months Six months % change
to to
30 June 2023 30 June 2022
--------------- --------------
Ore production (tonnes) 239,624 259,058 (8)
Average silver grade (g/t) 137 159 (14)
Average gold grade (g/t) 0.55 0.72 (24)
Silver produced (koz) 879 1,167 (25)
Gold produced (koz) 3.61 5.39 (33)
Silver equivalent produced
(koz) 1,179 1,615 (27)
Gold equivalent produced
(koz) 14.20 19.46 (27)
Silver sold (koz) 923 1,161 (20)
Gold sold (koz) 3.75 5.36 (30)
Unit cost ($/t) 133.8 137.4 (3)
Total cash cost ($/oz Ag
co-product) 28.9 24.0 20
All-in sustaining cost ($/oz
Ag Eq) 31.7 32.3 (2)
------------------------------ --------------- -------------- ---------
Production
In H1 2023, Pallancata's output was 1.2 million silver
equivalent ounces (H1 2022: 1.6 million ounces) with reduced
tonnage and grades versus H1 2022 in line with the current
declining production profile.
Costs
AISC was $31.7 per silver equivalent ounce (H1 2022: $32.3 per
ounce). Costs were slightly lower than H1 2022 as lower tonnage and
lower grades were offset by substantially lower exploration capex
versus the same period of last year.
San Jose
The San Jose silver/gold mine is located in Argentina, in the
province of Santa Cruz, 1,750km southwest of Buenos Aires. San Jose
commenced production in 2007. Hochschild holds a controlling
interest of 51% in the mine and is the mine operator. The remaining
49% interest is owned by McEwen Mining Inc.
San Jose summary Six months Six months % change
to 30 June to 30 June
2023 2022
------------- ------------
Ore production (tonnes) 272,063 205,359 32
Average silver grade (g/t) 254 365 (30)
Average gold grade (g/t) 4.68 6.19 (24)
Silver produced (koz) 1,941 2,123 (9)
Gold produced (koz) 35.09 35.88 (2)
Silver equivalent produced
(koz) 4,854 5,101 (5)
Gold equivalent produced
(koz) 58.48 61.46 (5)
Silver sold (koz) 1,941 2,080 (7)
Gold sold (koz) 34.66 34.62 -
Unit cost ($/t) 270.1 309.6 (13)
Total cash cost ($/oz Ag
co-product) 15.9 13.7 16
All-in sustaining cost ($/oz
Au Eq) 21.5 21.2 1
------------------------------ ------------- ------------ ---------
Production
The first half at San Jose in Argentina is traditionally a
shorter operational period due to the scheduled hourly workers'
holiday, which occurs in the first quarter. Mine sequencing also
affected production earlier on in the year but the operation
delivered a stronger second quarter with improved grades resulting
in the H1 total of 4.9 million silver equivalent ounces (H1 2022:
5.1 million ounces).
Costs
AISC was $21.5 per silver equivalent ounce (H1 2022: $21.2 per
ounce), in line with the same period of 2022. The effect of lower
grades was offset by higher tonnage, lower capex and local currency
devaluation.
ADVANCED PROJECT: MARA ROSA
The Mara Rosa project is progressing according to schedule and
budget with total project progress now standing at 92% and with the
Company continuing to expect first production in H1 2024.
Procurement
Currently purchase orders have been issued for 99% of the
project. Deliveries are on schedule with key equipment received
including the crusher, belt conveyors, the secondary substation,
electrocentres, filters, HDPE piping, aluminium cables for the
transmission lines, hydrocyclones, agitators, wastewater treatment
station, thickeners and the ball mills. In addition, the drilling
service contract was signed during the period and the contractor is
already mobilised.
Mine and Pre-Stripping:
The pre-stripping contractor has begun blasting work and 365kt
of ore has already moved according to schedule. The target is to
guarantee a stockpile for use during the plant ramp-up period.
Construction of the waste dumps and ore stockpiles is also
underway.
Civil works
Civil works in the processing plant area is completed. Assembly
work is advancing on schedule; total advance is 70%.
Infrastructure assembly
The Electromechanical assembly contractor has been mobilised,
and the work is advancing in line with schedule at 70% progress.
The commissioning of the dry circuit, including crushing, screening
and belt conveyor areas is expected towards the end of Q3. Power
supply for the mine is being provided by the building of a 67km,
138kv transmission line from the Porangatu substation with work
currently 99% advanced and expected to be completed very
shortly.
Earthworks
The water reservoir is fully operational and already at 95% of
storage capacity with water from the pit area whilst dry stacking
construction started during the quarter and is expected to finish
in the fourth quarter.
Permitting
Operations licences for the 138kv powerline, main substation,
and dry and wet circuits were submmited to local authorities. The
company received the operation permit for the Powerline and expects
to receive the operaitons license of the dry circuit in the third
quarter.
Sustainability
Environmental controls to monitor construction work have been
implemented to ensure compliance with applicable permits. ESG
programmes are advancing as expected with almost 900 people having
visited the "knowledge trail" as of June 2023. On 5 June, the trail
received the "Goiás Sustainability Award" in the Innovation,
Science and Education category.
During May, the project hosted over 70 stakeholders including
local mayors, politicians and community members, who inspected the
site progress and gave some very positive feedback. Also in May,
the team helped to promote "Traffic Week" involving 2,600 people
from schools in Mara Rosa as well as on the main street in Mara
Rosa itself. Monthly newsletters covering project progress and
sustainability initiatives are continuing to be distributed to
local communities.
Health and Safety
Hochschild's health and safety corporate standards have been
implemented at the project, including the introduction of the
Company's Seguscore safety indicator. The project has recently
surpassed three million injury-free working hours and year-to-date
Frequency and Severity Indexes are currently at zero.
DEVELOPMENT PROJECT: VOLCAN
On 10 August, Hochschild issued an update on the Volcan Gold
Project ("Volcan") which detailed a number of key milestones that
have been achieved at the 100%-owned project (the "Project")
located in the Maricunga Region of Chile:
-- Created a new Canadian Company, Tiernan Gold Corp
("Tiernan"), as a subsidiary of Hochschild Mine Holdings UK
-- Restructured the Project to be owned by Tiernan
-- Completed an updated Mineral Resource Estimate to Canadian NI
43-101 standards, which outlined:
o 463.3 Mt of Measured and Indicated Resources at 0.66 g/t gold
for 9.8 million ounces of gold contained
o 75.0 Mt of Inferred Resources at 0.516 g/t gold for and
additional 1.2 million ounces of gold contained
-- Completed a positive Preliminary Economic Assessment to
Canadian NI 43-101 standards, which highlighted:
o 22mtpa open-pit, heap leach operation with a 14 year mine
life
o Average of 332,000 ounces per year of gold production for
first 10 years of operations with 3.8 million ounces produced over
the estimated mine life
o Initial capital cost of $900 million, with life of mine
sustaining capital an additional $276 million
o Cash costs of $921/oz and All-in-Sustaining- Costs of
$1,002/oz, life of mine
o NPV (5%) = $826 million and IRR = 21% at $1,800/oz gold price,
after-tax
-- Executed an agreement for a $15 million financing with the
sale of a new 1.5% NSR royalty on the Project to Franco-Nevada
-- Engaged Canaccord Genuity to evaluate strategic alternatives
for Tiernan
Further details can be found in the separate press release on
the Company's website at hochschildmining.com
BROWNFIELD EXPLORATION
Following the approval of the Inmaculada's MEIA, the brownfield
team is planning to drill 10,000m at the deposit to target
high-grade structures in the Eduardo and San Salvador belts.
Resources are expected to be added by the end of the first quarter
of 2024.
At Pallancata, geological mapping is being completed on the
western side west of the new Royropata belt with the team also
close to completing a geological model for the Bolsa target in the
same area. Permitting for the next drilling campaign is expected in
the second quarter of 2024.
Finally, 5,000m of drilling is planned close to operations at
San Jose with completion again expected towards the end of the
first quarter of 2024.
FINANCIAL REVIEW
The reporting currency of Hochschild Mining PLC is U.S. dollars.
In discussions of financial performance, the Group removes the
effect of exceptional items, unless otherwise indicated, and in the
income statement results are shown both pre and post such
exceptional items. Exceptional items are those 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
periods.
Revenue
Gross revenue [8]
Gross revenue from continuing operations decreased by 9% to
$321.9 million in H1 2023 (H1 2022: $355.0 million) due to lower
silver and gold production. Output was mainly impacted by the delay
in the approval of the MEIA at Inmaculada and scheduled lower
production at Inmaculada and Pallancata . This was partially offset
by higher average realised gold prices.
On 10 November 2021, the Group hedged 3.3 million ounces of 2023
silver production at US$25 per ounce, and on 20 April 2023 the
Group hedged 29,250 ounces of 2023 gold production at US$2,047 per
ounce. As of June 2023, 1.65 million silver ounces (H1 2022: 2.0
million) were priced at US$25 per ounce (H1 2022: US$27), and 9,750
gold ounces (H1 2022: nil) were priced at US$2,047 per ounce,
boosting the realised price.
On 12 April 2023, the Group hedged 27,600 ounces of 2024 gold
production at US$2,100 per ounce and on 19 June 2023, the Group
hedged 150,000 ounces of 2025, 2026 and 2027 gold production at
US$2,117, US$2,167 and US$2,206 per ounce, respectively.
Gold
Gross revenue from gold in H1 2023 decreased to $195.3 million
(H1 2022: $211.3 million) due to lower gold produced across all
operations. This was partially offset by a 4% increase in the
average realised gold price.
Silver
Gross revenue decreased in H1 2023 to $126.3 million (H1 2022:
$143.4 million) due to lower silver produced across all operations
and a 2% decrease in the average realised silver price.
Gross average realised sales prices
The following table provides figures for average realised prices
( before the deduction of commercial discounts) and ounces sold for
H1 2023 and H1 2022:
Average realised prices Six months to Six months
30 June 2023 to
30 June 2022
-------------- --------------
Gold ounces sold (koz) 99.79 112.70
Avg. realized gold price ($/oz) 1,957 1,875
Silver ounces sold (koz) 5,425 6,045
Avg. realized silver price ($/oz) 23.3 23.7
----------------------------------- -------------- --------------
Commercial discounts
Commercial discounts refer to refinery treatment charges,
refining fees and payable deductions for processing concentrate,
and are deducted from gross revenue on a per tonne basis (treatment
charge), per ounce basis (refining fees) or as a percentage of
gross revenue (payable deductions ). In H1 2023, the Group recorded
commercial discounts of $7.8 million (H1 2022: $7.2 million). The
ratio of commercial discounts to gross revenue in H1 2023 was 2.4%
(H1 2022: 2.0%).
Net revenue
Net revenue was $314.0 million (H1 2022: $347.8 million),
comprising net gold revenue of $192.1 million (H1 2022: $208.7
million) and net silver revenue of $121.6 million (H1 2022: $138.8
million ). In H1 2023, gold accounted for 61% and silver for 39% of
the Company's consolidated net revenue (H1 2022: gold 60% and
silver 40%).
Reconciliation of gross revenue by mine to Group net revenue
$000 Six months to Six months to % change
30 June 2023 30 June 2022
-------------- --------------
Gold revenue
Inmaculada 118,764 135,893 (13)
Pallancata 7,488 10,084 (26)
San Jose 69,031 65,343 6
Commercial discounts from concentrates (3,159) (2,655) 19
Net gold revenue 192,124 208,665 (8)
-------------- --------------
Silver revenue
Inmaculada 60,047 68,303 (12)
Pallancata 21,650 28,920 (25)
San Jose 44,621 46,154 (3)
Commercial discounts from concentrates (4,684) (4,561) 3
---------------------------------------- -------------- -------------- ---------
Net silver revenue 121,634 138,816 (12)
---------------------------------------- -------------- -------------- ---------
Other revenue 265 300 12
---------------------------------------- -------------- -------------- ---------
Net revenue 314,023 347,781 (10)
---------------------------------------- -------------- -------------- ---------
Costs
Total cost of sales before exceptional items was $250.9 million
in H1 2023 ( H1 2022: $240.5 million). The direct production cost
excluding depreciation was lower at $170.1 million (H1 2022: $174.0
million) mainly due to lower production in Inmaculada and
Pallancata, partially offset by a scheduled higher proportion of
conventional mining methods across all mining units, and inflation
. D epreciation in production cost increased to $71.9 million (H1
2022: $68.8 million) mainly due to the impact of the reversal in
impairment loss at Pallancata of $15.5 million as at 31 December
2022, partially offset by lower depreciation in Inmaculada due to
lower production. Fixed costs incurred during total or partial
production stoppages were $3.0 million in H1 2023 (H1 2022: $3.9
million). Decrease in inventories was $4.7 million in H1 2023 (H1
2022: increase in inventories of $8.2 million) due to higher
consumption of products in process across all operations.
$000 Six months Six months % change
to to
30 June 30 June 2022
2023
----------- --------------
Direct production cost excluding
depreciation 170,072 174,001 (2)
Depreciation in production cost 71,904 68,801 5
Other items and workers profit
sharing 1,173 2,046 (43)
Fixed costs during operational
stoppages and reduced capacity 3,005 3,870 (22)
Change in inventories 4,716 (8,202) (157)
---------------------------------- ----------- -------------- ---------
Cost of sales 250,870 240,516 4
---------------------------------- ----------- -------------- ---------
Fixed costs during operational stoppages and reduced
capacity:
$000 Six months Six months % change
to to
30 June 30 June 2022
2023
----------- --------------
Personnel 2,410 2,292 5
Third party services 1,030 1,495 (31)
Supplies 34 5 580
Depreciation and amortisation - 2 -
Others (469) 76 (717)
------------------------------- ----------- -------------- ---------
Cost of sales 3,005 3,870 (22)
------------------------------- ----------- -------------- ---------
Unit cost per tonne
The Company reported unit cost per tonne at its operations of
$170.6 per tonne in H1 2023, a 9% increase versus H1 2022 ($156.6
per tonne). This was due to the effect of: higher costs resulting
from lower treated tonnage in Inmaculada and Pallancata, a
scheduled higher proportion of conventional mining methods across
all mining units, and inflation.
Unit cost per tonne by operation (including royalties) [9] :
Operating unit ($/tonne) Six months Six months % change
to to
30 June 30 June 2022
2023
----------- --------------
Peru 138.3 119.4 16
Inmaculada 140.5 111.8 26
Pallancata 133.8 137.4 (3)
-------------------------- ----------- -------------- ---------
Argentina
San Jose 270.1 309.6 (13)
-------------------------- ----------- -------------- ---------
Total 170.6 156.6 9
-------------------------- ----------- -------------- ---------
Cash costs
Cash costs include cost of sales, commercial deductions and
selling expenses before exceptional items, less depreciation
included in cost of sales.
Cash cost reconciliation [10]
Six months to 30 June 2023
$000 unless otherwise indicated Inmaculada Pallancata San Total
Jose
----------- ----------- ---------
Group cash cost 74,717 36,160 79,893 190,770
-------------------------------------- ----------- ----------- --------- ---------
(+) Cost of sales [11] 110,688 45,374 91,047 247,109
(-) Depreciation and amortisation in
cost of sales (37,677) (11,588) (23,440) (72,705)
(+) Selling expenses 230 249 6,415 6,894
(+) Commercial deductions [12] 1,476 2,125 5,871 9,472
Gold 994 406 2,846 4,246
Silver 482 1,719 3,025 5,226
-------------------------------------- ----------- ----------- --------- ---------
Revenue 178,811 27,013 107,934 313,758
-------------------------------------- ----------- ----------- --------- ---------
Gold 118,764 7,082 66,278 192,124
Silver 60,047 19,931 41,656 121,634
Ounces sold
----------- ----------- ---------
Gold 61.4 3.7 34.7 99.8
Silver 2,561.1 923.2 1,940.7 5,425.0
-------------------------------------- ----------- ----------- --------- ---------
Group cash cost ($/oz)
-------------------------------------- ----------- ----------- --------- ---------
Co product Au 808 2,531 1,416 1,171
Co product Ag 9.8 28.9 15.89 13.63
By product Au 231 3,874 1,016 640
By product Ag (17.59) 31.06 5.55 (1.03)
-------------------------------------- ----------- ----------- --------- ---------
Six months to 30 June 2022
$000 unless otherwise indicated Inmaculada Pallancata San Total
Jose
----------- ----------- ---------
Group cash cost 74,152 37,802 70,021 181,975
-------------------------------------- ----------- ----------- --------- ---------
(+) Cost of sales [13] 112,680 43,848 77,710 234,238
(-) Depreciation and amortisation in
cost of sales (40,193) (8,754) (18,786) (67,733)
(+) Selling expenses 322 242 6,163 6,727
(+) Commercial deductions [14] 1,343 2,466 4,934 8,743
Gold 1,007 490 2,272 3,769
Silver 336 1,976 2,662 4,974
-------------------------------------- ----------- ----------- --------- ---------
Revenue 204,196 36,538 106,747 347,781
-------------------------------------- ----------- ----------- --------- ---------
Gold 135,893 9,594 63,178 208,665
Silver 68,303 26,944 43,569 138,816
Others - - - 300
-------------------------------------- ----------- ----------- --------- ---------
Ounces sold
-------------------------------------- ----------- ----------- --------- ---------
Gold 72.7 5.4 34.6 112.7
Silver 2,805 1,160 2,080 6,045
-------------------------------------- ----------- ----------- --------- ---------
Group cash cost ($/oz)
-------------------------------------- ----------- ----------- --------- ---------
Co product Au 679 1,853 1,197 970
Co product Ag 8.8 24.0 13.7 12.0
By product Au 76 1,658 687 395
By product Ag (22.4) 23.9 2.2 (5)
-------------------------------------- ----------- ----------- --------- ---------
Co-product cash cost per ounce is the cash cost allocated to the
primary metal (allocation based on proportion of revenue), divided
by the ounces sold of the primary metal. By-product cash cost per
ounce is the total cash cost minus revenue and commercial discounts
of the by-product divided by the ounces sold of the primary
metal.
All-in sustaining cost reconciliation [15]
All-in sustaining cash costs per silver equivalent ounce
Six months to 30 June 2023
$000 unless otherwise Inmaculada Pallancata San Main Corporate Total
indicated Jose operations & others
----------- ----------- -------- ------------ ----------
(+) Direct production cost
excluding depreciation 73,869 31,163 65,040 170,072 - 170,072
(+) Other items and workers
profit sharing in cost
of sales 732 441 - 1,173 - 1,173
(+) Operating and exploration
capex for units 37,642 2,384 20,197 60,223 61 60,284
(+) Brownfield exploration
expenses 368 591 4,213 5,172 1,446 6,618
(+) Administrative expenses
(excl. depreciation) 1,950 291 2,744 4,985 14,981 19,966
(+) Royalties and special
mining tax [16] 1,850 280 - 2,130 618 2,748
-------------------------------- ----------- ----------- -------- ------------ ---------- ---------
Sub-total 116,411 35,150 92,194 243,755 17,106 260,861
-------------------------------- ----------- ----------- -------- ------------ ---------- ---------
Au ounces produced 61,852 3,607 35,095 100,554 - 100,554
Ag ounces produced (000s) 2,573 879 1,941 5,393 - 5,393
Ounces produced (Ag Eq
000s oz) 7,707 1,179 4,854 13,740 - 13,740
-------------------------------- ----------- ----------- -------- ------------ ---------- ---------
Sub-total ($/oz Ag Eq) 15.1 29.8 19.0 17.7 1.2 18.9
-------------------------------- ----------- ----------- -------- ------------ ---------- ---------
(+) Commercial deductions 1,476 2,125 5,871 9,472 - 9,472
(+) Selling expenses 230 249 6,415 6,894 - 6,894
-------------------------------- ----------- ----------- -------- ------------ ---------- ---------
Sub-total 1,706 2,374 12,286 16,366 - 16,366
-------------------------------- ----------- ----------- -------- ------------ ---------- ---------
Au ounces sold 61,389 3,746 34,656 99,791 - 99,791
Ag ounces sold (000s) 2,561 923 1,941 5,425 - 5,425
Ounces sold (Ag Eq 000s
oz) 7,656 1,234 4,817 13,707 - 13,707
-------------------------------- ----------- ----------- -------- ------------ ---------- ---------
Sub-total ($/oz Ag Eq) 0.2 1.9 2.5 1.2 - 1.2
-------------------------------- ----------- ----------- -------- ------------ ---------- ---------
All-in sustaining costs
($/oz Ag Eq) 15.3 31.7 21.5 18.9 1.2 20.1
-------------------------------- ----------- ----------- -------- ------------ ---------- ---------
All-in sustaining costs
($/oz Au Eq) [17] 1,272 2,635 1,788 1,572 103 1,675
-------------------------------- ----------- ----------- -------- ------------ ---------- ---------
Six months to 30 June 2022
$000 unless otherwise Inmaculada Pallancata San Main Corporate Total
indicated Jose operations & others
----------- ----------- ------- ------------ ----------
(+) Direct production cost
excluding depreciation
[18] 71,851 35,846 66,304 174,001 - 174,001
(+) Other items and workers
profit sharing in cost
of sales 1,095 951 - 2,046 - 2,046
(+) Operating and exploration
capex for units 34,013 8,236 23,324 65,573 356 65,929
(+) Brownfield exploration
expenses 1,618 3,714 4,324 9,656 1,794 11,450
(+) Administrative expenses
(excl. depreciation) 2,151 385 3,012 5,548 18,501 24,049
(+) Royalties and special
mining tax [19] 2,099 376 - 2,475 1,532 4,007
-------------------------------- ----------- ----------- ------- ------------ ---------- --------
Sub-total 112,827 49,508 96,964 259,299 22,183 281,482
-------------------------------- ----------- ----------- ------- ------------ ---------- --------
Au ounces produced 72,666 5,394 35,883 113,943 - 113,943
Ag ounces produced (000s) 2,815 1,167 2,123 6,105 - 6,105
Ounces produced (Ag Eq
000s oz) 8,846 1,615 5,101 15,562 - 15,562
-------------------------------- ----------- ----------- ------- ------------ ---------- --------
Sub-total ($/oz Ag Eq) 12.8 30.7 19.0 16.7 1.4 18.1
-------------------------------- ----------- ----------- ------- ------------ ---------- --------
(+) Commercial deductions 1,343 2,466 4,934 8,743 - 8,743
(+) Selling expenses 322 242 6,163 6,727 - 6,727
-------------------------------- ----------- ----------- ------- ------------ ---------- --------
Sub-total 1,665 2,708 11,097 15,470 - 15,470
-------------------------------- ----------- ----------- ------- ------------ ---------- --------
Au ounces sold 72,718 5,357 34,622 112,696 - 112,696
Ag ounces sold (000s) 2,805 1,161 2,080 6,046 - 6,046
Ounces sold (Ag Eq 000s
oz) 8,840 1,605 4,953 15,398 - 15,398
-------------------------------- ----------- ----------- ------- ------------ ---------- --------
Sub-total ($/oz Ag Eq) 0.1 1.6 2.2 1.0 - 1.0
-------------------------------- ----------- ----------- ------- ------------ ---------- --------
All-in sustaining costs
($/oz Ag Eq) 12.9 32.3 21.2 17.7 1.4 19.1
-------------------------------- ----------- ----------- ------- ------------ ---------- --------
All-in sustaining costs
($/oz Au Eq) [20] 1,074 2,685 1,764 1,466 119 1,585
-------------------------------- ----------- ----------- ------- ------------ ---------- --------
Administrative expenses
Administrative expenses were down by 16% to $20.9 million (H1
2022: $24.9 million) mainly due to lower bonus provision and
professional fees.
Exploration expenses
In H1 2023, exploration expenses decreased to $11.5 million (H1
2022: $23.8 million) mainly due lower exploration expenses at the
Snip project of $2.3 million (H1 2022: $6.9 million), lower
exploration expenses at Pallancata of $0.6 million (H1 2022: $3.7
million), lower personnel expenses of $2.5 million (H1 2022: $3.7
million), and lower exploration expenses at Inmaculada of $0.4
million (H1 2022: $1.6 million).
In addition, the Group capitalises part of its brownfield
exploration, which mostly relates to costs incurred converting
potential resources to the Inferred or Measured and Indicated
categories. In H1 2023, the Company capitalized $0.4 million
relating to brownfield exploration (H1 2022: $0.2 million),
bringing the total investment in exploration for H1 2022 to $11.9
million (H1 2022: $24.0 million).
Selling expenses
Selling expenses slightly increased to $6.9 million (H1 2022:
$6.7 million) mainly due to higher gold prices.
Other income/expenses
Other income was $4.9 million (H1 2022: $2.6 million) with the
increase mainly due to an insurance reimbursement received in H1
2023 in connection with damage to Inmaculada's machine belt in
2022.
Other expenses before exceptional items were $12.8 million (H1
2022: $22.9 million) with the decrease mainly due to: lower
additions to the provision for mine closure of $1.3 million (H1
2022: $10.8 million), a decrease in care and maintenance costs of
$3.2 million (H1 2022: $4.2 million), expenses from a voluntary
redundancy programme in Argentina incurred in H1 2022 of $0.9
million, and lower labour contingencies in Argentina of $1.0
million (2022: $1.7 million). These were partially offset by a
provision for obsolescence of supplies of $1.7 million (H1 2022:
$nil).
Adjusted EBITDA
Adjusted EBITDA decreased by 24% to $99.5 million (H1 2022:
$130.5 million) mainly due to the fall in revenue resulting from
lower silver and gold production.
Adjusted EBITDA is calculated as profit from continuing
operations before exceptional items, net finance costs, foreign
exchange losses and income tax plus non-cash items (depreciation
and amortisation and changes in mine closure provisions) and
exploration expenses other than personnel and other exploration
related fixed expenses.
$000 unless otherwise indicated Six months to Six months to % change
30 June 2023 30 June 2022
-------------- --------------
Profit from continuing operations before exceptional items, net finance
income/(cost), foreign
exchange loss and income tax 14,222 29,413 (52)
Depreciation and amortisation in cost of sales 72,705 67,735 7
Depreciation and amortisation in administrative and other expenses 978 915 7
Exploration expenses 11,515 23,826 (52)
Personnel and other exploration related fixed expenses (2,922) (4,227) (31)
Other non-cash income, net [21] 2,999 12,863 (77)
--------------------------------------------------------------------------- -------------- -------------- ---------
Adjusted EBITDA 99,497 130,525 (24)
--------------------------------------------------------------------------- -------------- -------------- ---------
Adjusted EBITDA margin 32% 38% (16)
--------------------------------------------------------------------------- -------------- -------------- ---------
Finance income
Finance income was $2.6 million (H1 2022: $2.2 million), mainly
due to higher interest on deposits of $2.3 million (H1 2022: $0.6
million) resulting from the rise in interest rates, partially
offset by the gain on the unwinding of discount of the mine closure
provision of $1.1 million in H1 2022.
Finance costs
Finance costs decreased from $13.1 million in H1 2022 to $11.0
million in H1 2023, principally due to foreign exchange transaction
costs to acquire dollars in Argentina in H1 2022 of $2.8 million, a
loss on the sale of C3 Metals Inc. shares of $0.3 million in H1
2023 (H1 2022: recorded a loss on the fair value of C3 Metals Inc.
shares of $2.3 million), partially offset by higher interest
expenses, which totalled $8.6 million in H1 2023 (H1 2022: $6.3
million), mainly explained by higher interest rates,
Foreign exchange losses
The Group recognized a foreign exchange loss of $4.3 million (H1
2022: $2.6 million) as a result of exposures in currencies other
than the functional currency, mainly in Argentina of $3.8 million
(H1 2022: $0.1 million), and Peru of $0.5 million (H1 2022: $3.0
million).
Income tax
The Company's pre-exceptional income tax charge was $5.1 million
(H1 2022: $5.8 million) and includes royalties and special mining
tax of $2.7 million (H1 2022: $4.0 million), and the foreign
exchange effect on deferred income tax of $1.9 million (H1 2022:
credit of $5.6 million).
Exceptional items
Exceptional items in H1 2023 totalled a $48.3 million loss after
tax (H1 2022: $9.9 million loss after tax) related to impairment
losses at: the Azuca and Crespo projects of $42.3 million; the San
Jose mining unit of $17.4 million; and the investment in Aclara
Resources Inc. of $7.2 million.
The tax effect of the exceptional items was a tax gain of $18.6
million (H1 2022: $nil). The total effective tax rate was 20.3%
(2022: 107.8%).
Cash flow and balance sheet review
Cash flow
$000 Six months Six months Change
to to
30 June 30 June
2023 2022
----------- -----------
Net cash generated from operating
activities 86,374 18,658 363
Net cash used in investing activities (134,448) (199,172) (32)
Cash flows generated (used in)/from
financing activities (178) 306 (158)
Foreign exchange adjustment (2,014) (2,257) (11)
--------------------------------------- ----------- ----------- -------
Net increase/(decrease) in cash
and cash equivalents during the
period (50,266) (182,465) (72)
--------------------------------------- ----------- ----------- -------
Net cash generated from operating activities increased from
$18.7 million in H1 2022 to $86.4 million in H1 2023 mainly due to
higher cash inflows from working capital changes and lower taxes
paid; partially offset by lower Adjusted EBITDA.
Net cash used in investing activities decreased to $134.4
million in H1 2023 from $199.2 million in H1 2022 mainly due to the
consideration paid for the acquisition of Amarillo Gold on 1 April
2022 of $123.4 million, partially offset by higher construction
capex in Mara Rosa of $64.6 million (H1 2022: $10.1 million) .
Cash generated (used in)/from financing activities changed to an
outflow of $0.2 million from an inflow of $0.3 million in H1 2022
mainly due to the net effect of: (i) repayment of pre-shipment
loans of $11.7 million (H1 2022: $nil), (ii) pre-shipment loans
raised of $12.6 million (H1 2022: $13.4 million), and (iii) payment
of $12.0 million in dividends to shareholders in H1 2022.
Working capital
$000 As at As at
30 June 2023 31 December 2022
--------------
Trade and other receivables 79,583 85,408
Inventories 51,000 61,440
Derivative financial assets/(liabilities) 5,679 2,186
Income tax payable, net 4,410 7,100
Trade and other payables (136,407) (144,102)
Provisions (20,098) (24,177)
------------------------------------------- -------------- ------------------
Working capital (15,833) (12,145)
------------------------------------------- -------------- ------------------
The Group's working capital position in H1 2023 decreased by
$3.7 million from $(12.1) million to $(15.8) million. The key
drivers of the decrease were lower inventories of $10.4 million
partially offset by lower trade and other payables of $7.7
million.
Net cash/ (debt)
$000 unless otherwise indicated As at As at
30 June 2023 31 December 2022
--------------
Cash and cash equivalents 93,578 143,844
Non-current borrowings (224,999) (275,000)
Current borrowings [22] (95,633) (43,989)
--------------------------------- -------------- ------------------
Net cash/(debt) (227,054) (175,145)
--------------------------------- -------------- ------------------
The Group's reported net debt position was $227.1 million as at
30 June 2023 (31 December 2022: net debt position of $175.1
million). The decrease in cash and cash equivalents in H1 2023 is
mainly explained by capital expenditure at Mara Rosa of $64.6
million.
Capital expenditure ([23])
$000 Six months Six months to
to# 30 June 2022
30 June 2023
--------------
Inmaculada 37,642 34,013
Pallancata 3,108 8,236
San Jose 21,487 24,551
Operations 62,237 66,800
--------------
Mara Rosa 64,591 133,516
Aclara - -
Other 1,646 2,134
------------ -------------- --------------
Total 128,474 202,450
------------ -------------- --------------
H1 2023 capital expenditure decreased from $202.5 million in H1
2022 to $128.5 million in H1 2023 mainly to the consideration paid
for the acquisition of Amarillo Gold on 1 April 2022 of $123.4
million, partially offset by higher construction capex in Mara Rosa
of $64.6 million (H1 2022: $10.1 million) .
Non-IFRS Financial Performance Measures
The Company has included certain non-IFRS measures in this news
release. The Company believes that these measures, in addition to
conventional measures prepared in accordance with IFRS, provide
investors an improved ability to evaluate the underlying
performance of the Company. The non-IFRS measures are intended to
provide additional information and should not be considered in
isolation or as a substitute for measures of performance prepared
in accordance with IFRS. These measures do not have any
standardised meaning prescribed under IFRS, and therefore may not
be comparable to other issuers.
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. The Company cautions
against undue reliance on any forward looking statement or
guidance, particularly in light of the current economic climate and
the significant volatility, uncertainty and disruption caused by
Covid-19. 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, Hochschild
Mining PLC does not undertake any obligation to update or change
any forward looking statements to reflect events occurring after
the date of this announcement. Nothing in this announcement should
be construed as a profit forecast.
RISKS
The principal risks and uncertainties facing the Company in
respect of the year ended 31 December 2022 are set out in detail in
the Risk Management section of the 2022 Annual Report and in Note
38 to the 2022 Consolidated Financial Statements.
The key risks disclosed in the 2022 Annual Report (available at
www.hochschildmining.com ) are categorised as:
-- Financial risks comprising commodity price risk, commercial
counterparty risk and liquidity risk;
-- Operational risks including the risks associated with
operational performance, business interruption/supply chain,
information security and cybersecurity, exploration & reserve
and resource replacement, personnel and project development;
-- Macro-economic risks which include political, legal and
regulatory risks; and
-- Sustainability risks including risks associated with health
and safety, environmental, climate change and community
relations.
With the exception of liquidity risk, which has been mitigated
by the approval of the Inmaculada MEIA, the risks referred to above
continue to apply to the Company in respect of the remaining six
months of the financial year.
RELATED PARTY TRANSACTIONS
Related party transactions are disclosed in Note 23 to the
interim condensed consolidated financial statements.
GOING CONCERN
After making enquiries, the Directors have a reasonable
expectation that the Group has adequate resources to continue in
operational existence for the duration of the Going Concern Period
until 30 September 2024. Accordingly, they continue to adopt the
going concern basis in preparing the interim condensed set of
financial statements. For further detail, refer to the Going
concern disclosure in Note 2 "Significant Accounting Policies" of
the interim condensed consolidated financial statements.
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 UK adopted International Accounting
Standard 34 "Interim Financial Reporting" and that the interim
management report includes a fair review of the information
required by Disclosure Guidance and Transparency Rules 4.2.7R and
4.2.8R.
A list of current Directors and their functions is maintained on
the Company's website.
For and on behalf of the Board
Eduardo Landin
Chief Executive Officer
5 September 2023
INDEPENT REVIEW REPORT TO HOCHSCHILD MINING PLC
Conclusion
We have been engaged by the Company to review the condensed set
of financial statements in the half-yearly financial report for the
six months ended 30 June 2023, which comprises the interim
condensed consolidated income statement, the interim condensed
consolidated statement of comprehensive income, the interim
condensed consolidated statement of financial position, the interim
condensed consolidated statement of cash flows, the interim
condensed consolidated statement of changes in equity and the
related notes 1 to 25. 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.
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 2023 is not prepared, in all material respects, in accordance
with UK adopted International Accounting Standard 34 and the
Disclosure Guidance and Transparency Rules of the United Kingdom's
Financial Conduct Authority.
Basis for Conclusion
We conducted our review in accordance with International
Standard on Review Engagements 2410 (UK) "Review of Interim
Financial Information Performed by the Independent Auditor of the
Entity" (ISRE) issued by the Financial Reporting Council. 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
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.
As disclosed in note 2, the annual financial statements of the
Group are prepared in accordance with UK adopted international
accounting standards. The condensed set of financial statements
included in this half-yearly financial report has been prepared in
accordance with UK adopted International Accounting Standard 34,
"Interim Financial Reporting".
Conclusions Relating to Going Concern
Based on our review procedures, which are less extensive than
those performed in an audit as described in the Basis of Conclusion
section of this report, nothing has come to our attention to
suggest that management have inappropriately adopted the going
concern basis of accounting or that management have identified
material uncertainties relating to going concern that are not
appropriately disclosed.
This conclusion is based on the review procedures performed in
accordance with this ISRE, however future events or conditions may
cause the entity to cease to continue as a going concern.
Responsibilities of the directors
The directors are responsible for preparing the half-yearly
financial report in accordance with the Disclosure Guidance and
Transparency Rules of the United Kingdom's Financial Conduct
Authority.
In preparing the half-yearly financial report, the directors are
responsible for assessing the company's ability to continue as a
going concern, disclosing, as applicable, matters related to going
concern and using the going concern basis of accounting unless the
directors either intend to liquidate the company or to cease
operations, or have no realistic alternative but to do so.
Auditor's Responsibilities for the review of the financial
information
In reviewing the half-yearly report, we are responsible for
expressing to the Company a conclusion on the condensed set of
financial statements in the half-yearly financial report. Our
conclusion, including our Conclusions Relating to Going Concern,
are based on procedures that are less extensive than audit
procedures, as described in the Basis for Conclusion paragraph of
this report.
Use of our report
This report is made solely to the company in accordance with
guidance contained in International Standard on Review Engagements
2410 (UK) "Review of Interim Financial Information Performed by the
Independent Auditor of the Entity" issued by the Financial
Reporting Council. 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.
Ernst & Young LLP
London
5 September 2023
Interim condensed consolidated income statement
Six months ended Six months ended
30 June 2023 (Unaudited) 30 June 2022 (Unaudited)
------------------------- -------------------------
Exceptional Exceptional
Before items Before items
exceptional (Note exceptional (Note
items 10) Total items 10) Total
Notes US$000 US$000 US$000 US$000 US$000 US$000
------------------ ----- ----------- ----------- --------- ----------- ----------- ---------
Continuing
operations
Revenue 5 314,023 - 314,023 347,781 - 347,781
Cost of sales 6 (250,870) - (250,870) (240,516) - (240,516)
------------------- ----- ----------- ----------- --------- ----------- ----------- ---------
Gross profit 63,153 - 63,153 107,265 - 107,265
------------------- ----- ----------- ----------- --------- ----------- ----------- ---------
Administrative
expenses (20,884) - (20,884) (24,913) - (24,913)
Exploration
expenses 7 (11,515) - (11,515) (23,826) - (23,826)
Selling expenses 8 (6,894) - (6,894) (6,727) - (6,727)
Other income 9 4,863 - 4,863 2,580 - 2,580
Other expenses 9 (12,817) - (12,817) (22,902) - (22,902)
Impairment and
write-off
of non-financial
assets 13 (1,684) (59,719) (61,403) (2,064) - (2,064)
------------------- ----- ----------- ----------- --------- ----------- ----------- ---------
(Loss)/profit from
continuing
operations
before net finance
cost, foreign
exchange
loss and income
tax 14,222 (59,719) (45,497) 29,413 - 29,413
------------------- ----- ----------- ----------- --------- ----------- ----------- ---------
Share of loss of an
associate 15 (785) (7,183) (7,968) (551) (9,923) (10,474)
Finance income 11 2,628 - 2,628 2,163 - 2,163
Finance costs 11 (11,010) - (11,010) (13,083) - (13,083)
Foreign exchange
loss (4,268) - (4,268) (2,649) - (2,649)
------------------- ----- ----------- ----------- --------- ----------- ----------- ---------
(Loss)/profit from
continuing
operations
before income tax 787 (66,902) (66,115) 15,293 (9,923) 5,370
------------------- ----- ----------- ----------- --------- ----------- ----------- ---------
Income tax
(expense)/benefit 12 (5,144) 18,574 13,430 (5,790) - (5,790)
------------------- ----- ----------- ----------- --------- ----------- ----------- ---------
(Loss)/profit for
the period from
continuing
operations (4,357) (48,328) (52,685) 9,503 (9,923) (420)
------------------- ----- ----------- ----------- --------- ----------- ----------- ---------
Attributable to:
Equity shareholders
of the parent (1,927) (42,787) (44,714 ) 7,156 (9,923) (2,767
Non-controlling
interests (2,430) (5,541) (7,971) 2,347 - 2,347
------------------- ----- ----------- ----------- --------- ----------- ----------- ---------
(4,357) (48,328) (52,685) 9,503 (9,923) (420)
----- ----------- ----------- --------- ----------- ----------- ---------
Basic
(loss)/earnings
per ordinary share
from continuing
operations
for the period
(expressed
in U.S. dollars
per
share) (0.004) (0.083) (0.087) 0.01 (0.02) (0.01)
------------------- ----- ----------- ----------- --------- ----------- ----------- ---------
Diluted
(loss)/earnings
per ordinary share
from continuing
operations
for the period
(expressed
in U.S. dollars
per
share) (0.004) (0.081) (0.085) 0.01 (0.02) (0.01)
------------------- ----- ----------- ----------- --------- ----------- ----------- ---------
Interim condensed consolidated statement of comprehensive
income
Six months ended
30 June
----------------------------------
2023 (Unaudited) 2022 (Unaudited)
Notes US$000 US$000
----- ---------------- ----------------
Loss for the period (52,685) (420)
--------------------------------------------- ----- ---------------- ----------------
Other comprehensive income that might
be reclassified to profit or loss in
subsequent periods; net of tax:
Net gain on cash flow hedges 16 4,113 6,734
Deferred tax charge on cash flow hedges (1,269) (1,987)
Exchange differences on translating foreign
operations (1) 22,554 (18,883)
Share of other comprehensive gain/(loss)
of an associate 15 1,058 (1,541)
--------------------------------------------- ----- ---------------- ----------------
26,456 (15,677)
----- ---------------- ----------------
Other comprehensive income that will
not be reclassified to profit or loss
in subsequent periods; net of tax:
Net loss on equity instruments at fair
value through other comprehensive income
("OCI") (106) (159)
--------------------------------------------- ----- ---------------- ----------------
(106) (159)
-----
Other comprehensive income/(loss) for
the period, net of tax 26,350 (15,836)
--------------------------------------------- ----- ---------------- ----------------
Total comprehensive loss for the period (26,335) (16,256)
--------------------------------------------- ----- ---------------- ----------------
Total comprehensive loss attributable
to:
Equity shareholders of the parent (18,364) (18,603)
Non-controlling interests (7,971) 2,347
--------------------------------------------- ----- ---------------- ----------------
(26,335) (16,256)
----- ---------------- ----------------
1 Foreign exchange effect generated in the Group's companies
when the functional currency is the local currency, mainly
generated by the decrease of the US$ exchange rate in Brazil.
Interim condensed consolidated statement of financial
position
As at
30 As at 31
June December
2023 2022
(Unaudited)
Notes US$000 US$000
--------------------------------------- ----- ------------- ----------
ASSETS
--------------------------------------- ----- ------------- ----------
Non-current assets
Property, plant and equipment 13 965,708 926,913
Evaluation and exploration assets 14 101,654 123,462
Intangible assets 19,540 19,328
Investment in an associate 15 26,332 33,242
Financial assets at fair value through
OCI 16 403 509
Financial assets at fair value through
profit and loss 16 - 1,015
Trade and other receivables 13,147 6,498
Derivative financial assets 16 1,574 -
Deferred income tax assets 17 1,029 4,213
-------------------------------------------- -----
1,129,387 1,115,180
----- ------------- ----------
Current assets
Inventories 51,000 61,440
Trade and other receivables 79,583 85,408
Derivative financial assets 16 5,679 2,186
Income tax receivable 5,856 9,226
Cash and cash equivalents 18 93,578 143,844
-------------------------------------------- -----
235,696 302,104
----- ------------- ----------
Total assets 1,365,083 1,417,284
-------------------------------------------- ----- ------------- ----------
EQUITY AND LIABILITIES
--------------------------------------- ----- ------------- ----------
Capital and reserves attributable
to shareholders of the Parent
Equity share capital 21 9,068 9,061
Other reserves (213,400) (238,800)
Retained earnings 844,523 886,980
-------------------------------------------- ----- ------------- ----------
640,191 657,241
----- ------------- ----------
Non-controlling interests 57,178 65,475
-------------------------------------------- -----
Total equity 697,369 722,716
-------------------------------------------- ----- ------------- ----------
Non-current liabilities
Trade and other payables 2,849 1,623
Derivative financial liabilities 16 954 -
Borrowings 19 224,999 275,000
Provisions 20 131,420 123,506
Deferred income tax liabilities 17 53,908 80,045
-------------------------------------------- ----- ------------- ----------
414,130 480,174
----- ------------- ----------
Current liabilities
Trade and other payables 136,407 144,102
Borrowings 19 95,633 43,989
Provisions 20 20,098 24,177
Income tax payable 1,446 2,126
-------------------------------------------- -----
253,584 214,394
----- ------------- ----------
Total liabilities 667,714 694,568
-------------------------------------------- ----- ------------- ----------
Total equity and liabilities 1,365,083 1,417,284
-------------------------------------------- ----- ------------- ----------
Interim condensed consolidated statement of cash flows
Six months ended
30 June
----------------------------------
2023 (Unaudited) 2022 (Unaudited)
Notes US$000 US$000
------------------------------------------ ----- ---------------- ----------------
Cash flows from operating activities
Cash generated from operations 24 99,810 41,208
Interest received 2,333 1,069
Interest paid 19 (11,139) (3,814)
Payment of mine closure costs (3,046) (3,789)
Income tax paid (1,584) (16,016)
------------------------------------------- ----- ---------------- ----------------
Net cash generated from operating
activities 86,374 18,658
------------------------------------------- ----- ---------------- ----------------
Cash flows from investing activities
Purchase of property, plant and equipment (133,817) (82,590)
Purchase of evaluation and exploration
assets (1,828) (113,625)
Purchase of intangibles (123) (354)
Purchase of Argentinian bonds 11(2) - (6,091)
Proceeds from sale of Argentinian
bonds 11(2) - 3,289
Proceeds from sale of financial assets
at fair value though profit and loss 723 -
Proceeds from sale of property, plant
and equipment 13 597 199
------------------------------------------- -----
Net cash used in investing activities (134,448) (199,172)
------------------------------------------- ----- ---------------- ----------------
Cash flows from financing activities
Proceeds from borrowings 19 12,560 13,411
Repayment of borrowings 19 (11,682) -
Payment of lease liabilities (730) (821)
Dividends paid to shareholders 22 - (11,998)
Dividends paid to non-controlling
interests 22 (326) (286)
------------------------------------------- -----
Cash flows (used in)/generated from
financing activities (178) 306
------------------------------------------- ----- ---------------- ----------------
Net decrease in cash and cash equivalents
during the period (48,252) (180,208)
Impact of foreign exchange (2,014) (2,257)
Cash and cash equivalents at beginning
of period 18 143,844 386,789
------------------------------------------- ----- ---------------- ----------------
Cash and cash equivalents at end
of period 18 93,578 204,324
------------------------------------------- ----- ---------------- ----------------
Interim condensed consolidated statement of changes in
equity
Other reserves
---------------------------------------------
Fair
value Capital
Share reserve and
Unrealised of of reserves
gain/ other financial attributable
(loss) compre- assets to
on hedges hensive at fair shareholders
Equity US$000 loss value Cumulative Share-based Total of
share Share Dividends of an through translation Merger payment other Retained the Non-controlling Total
capital premium expired associate OCI adjustment reserve reserve reserves earnings Parent interests equity
Notes US$000 US$000 US$000 US$000 US$000 US$000 US$000 US$000 US$000 US$000 US$000 US$000 US$000
Balance at 1
January
2023 9061 - 99 1,541 1,274 (78) (37,902) (210,046) 6,312 (238,800) 886,980 657,241 65,475 722,716
----------------- ----- --------- --------- --------- ----------- ---------- --------- ----------- --------- ----------- --------- --------- ------------ ---------------- --------
Other
comprehensive
income/(loss) - - - 2,844 1,058 (106) 22,554 - - 26,350 - 26,350 - 26,350
Loss for the
period - - - - - - - - - - (44,714) (44,714) (7,971) (52,685)
----------------- ----- --------- --------- --------- ----------- ---------- --------- ----------- --------- ----------- --------- --------- ------------ ---------------- --------
Total
comprehensive
income/(loss)
for
the period - - - 2,844 1,058 (106) 22,554 - - 26,350 (44,714) (18,364) (7,971) (26,335)
----------------- ----- --------- --------- --------- ----------- ---------- --------- ----------- --------- ----------- --------- --------- ------------ ---------------- --------
Dividends paid to
non-controlling
interest 22 - - - - - - - - - - - - (326) (326)
Cancellation of
dividends
expired - - (99) - - - - - - (99) 152 53 - 53
Exercise of share
based payments 7 - - - - - - - (584) (584) 577 - - -
Accrual of
share-based
payments - - - - - - - - 1,261 1,261 - 1,261 - 1,261
Forfeiture of
share
options - - - - - - - - (1,528) (1,528) 1,528 - - -
----------------- ----- --------- --------- --------- ----------- ---------- --------- ----------- --------- ----------- --------- --------- ------------ ---------------- --------
Balance at 30
June
2023 (unaudited) 9,068 - - 4,385 2,332 (184) (15,348) (210,046) 5,461 (213,400) 844,523 640,191 57,178 697,369
----------------- ----- --------- --------- --------- ----------- ---------- --------- ----------- --------- ----------- --------- --------- ------------ ---------------- --------
Balance at 1
January
2022 226,506 438,041 99 13,476 (9) 74 (25,163) (210,046) 3,912 (217,657) 248,664 695,554 63,890 759,444
----------------- ----- --------- --------- --------- ----------- ---------- --------- ----------- --------- ----------- --------- --------- ------------ ---------------- --------
Other
comprehensive
income/(loss) - - - 4,747 (1,541) (159) (18,883) - - (15,836) - (15,836) - (15,836)
Loss for the
period - - - - - - - - - - (2,767) (2,767) 2,347 (420)
----------------- ----- --------- --------- --------- ----------- ---------- --------- ----------- --------- ----------- --------- --------- ------------ ---------------- --------
Total
comprehensive
income/(loss)
for
the period - - - 4,747 (1,541) (159) (18,883) - - (15,836) (2,767) (18,603) 2,347 (16,256)
----------------- ----- --------- --------- --------- ----------- ---------- --------- ----------- --------- ----------- --------- --------- ------------ ---------------- --------
Dividends 22 - - - - - - - - - - (11,998) (11,998) - (11,998)
Dividends paid to
non-controlling
interest 22 - - - - - - - - - - - - (286) (286)
Issuance of
deferred
bonus shares 21 303,268 - - - - - - - - - (303,268) - - -
Cancelation of
deferred
bonus shares 21 (303,268) - - - - - - - - - 303,268 - - -
Cancelation of
share
premium account 21 - (438,041) - - - - - - - - 438,041 - - -
Nominal value
reduction 21 (217,445) - - - - - - - - - 217,445 - - -
Accrual of
share-based
payments - - - - - - - - 1,187 1,187 - 1,187 - 1,187
Forfeiture of
share
options - - - - - - - - (1,886) (1,886) 1,886 - - -
----------------- ----- --------- --------- --------- ----------- ---------- --------- ----------- --------- ----------- --------- --------- ------------ ---------------- --------
Balance at 30
June
2022 (unaudited) 9,061 - 99 18,223 (1,550) (85) (44,046) (210,046) 3,213 (234,192) 891,271 666,140 65,951 732,091
----------------- ----- --------- --------- --------- ----------- ---------- --------- ----------- --------- ----------- --------- --------- ------------ ---------------- --------
Notes to the interim condensed consolidated financial
statements
1 Corporate Information
Hochschild Mining PLC (hereinafter the "Company" and together
with its subsidiaries, the "Group") 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 17
Cavendish Square, London W1G 0PH, United Kingdom. Its ordinary
shares are traded on the London Stock Exchange.
The Group's principal business is the mining, processing and
sale of gold and silver. The Group has two operating mines
(Pallancata and Inmaculada) located in southern Peru, and one
operating mine (San Jose) located in Argentina. The Group also has
a portfolio of projects located across Peru, Argentina, Mexico,
Brazil and Chile at various stages of development.
These interim condensed consolidated financial statements were
approved for issue on behalf of the Board of Directors on 5
September 2023.
2 Significant Accounting Policies
Basis of preparation
These interim condensed consolidated financial statements set
out the Group's financial position as at 30 June 2023 and 31
December 2022 and its financial performance and cash flows for the
six months ended 30 June 2023 and 30 June 2022.
They have been prepared in accordance with the Disclosure and
Transparency Rules of the Financial Conduct Authority and UK
adopted International Accounting Standard 34, "Interim Financial
Reporting". Accordingly, the interim condensed 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 2022 annual consolidated financial
statements as published in the 2022 Annual Report. The annual
financial statements of the Group will be prepared in accordance
with UK adopted IFRS.
The interim condensed 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 2022. A
copy of the statutory accounts for that year, which were prepared
in accordance with UK adopted International Accounting Standards
has been delivered to the Registrar of Companies. The auditor's
report under section 495 of the Companies Act 2006 in relation to
those accounts was unmodified and did not include a reference to
any matters to which the auditor 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 condensed consolidated
financial statements.
The interim condensed consolidated financial statements are
presented in US dollars ($) and all monetary amounts are rounded to
the nearest thousand ($000) except when otherwise indicated.
Critical accounting estimates and judgements
Many of the amounts included in the financial statements involve
the use of judgement and/or estimation. These judgements and
estimates are based on management's best knowledge of the relevant
facts and circumstances, having regard to prior experience, but
actual results may differ from the amounts included in the
financial statements. Information about such judgements and
estimates is contained in the accounting policies and/or the notes
to the financial statements.
The significant accounting judgements, estimates and assumptions
remain consistent with those disclosed in the consolidated
financial statements for the year ended 31 December 2022. The most
significant are:
Critical judgements:
-- Assessment of impairment indicators for the Group's GCUs - note 13
-- Acquiring a subsidiary or a group of assets - note 4.
In identifying a business combination or acquisition of assets
the Group considers the underlying inputs, processes and outputs
acquired as a part of the transaction. For an acquired set of
activities and assets to be considered a business there must be at
least some inputs and processes that have the capability to achieve
the purposes of the Group. Where significant inputs and processes
have not been acquired, a transaction is considered to be the
purchase of assets. For the assets and assumed liabilities acquired
the Group allocates the total consideration paid (including
directly attributable transaction costs) based on the relative fair
values of the underlying items. On 1 April 2022 the Group acquired
the control of Amarillo Gold Group (note 4). The transaction was
accounted as a purchase of assets as no significant systems,
processes or outputs were acquired, with the main asset acquired
being the Posse gold project.
As at 30 June 2023, the valuation of certain of the Group's
assets and liabilities reflect the changes to certain assumptions
used in the determination of their value, such as future gold and
silver prices, discount rates, exchange rates, and interest rates
(note 16).
Significant estimates:
-- Mine closure estimates - note 20
-- Recoverable values of mining assets - note 13
The values of the Group's mining assets are sensitive to a range
of characteristics unique to each mine unit. Key sources of
estimation for all assets include uncertainty around ore reserve
estimates and cash flow projections. In performing impairment
reviews, the Group assesses the recoverable amount of its operating
assets principally with reference to fair value less costs of
disposal, assessed using discounted cash flow models. The Group
uses two approaches to estimate the fair value less costs of
disposal, depending on the circumstances: (i) the traditional
approach, which uses a single cash flow projection, and (ii) the
expected cash flow approach, which uses multiple,
probability-weighted cash flow projections. As at 31 December 2022,
the impairment reviews for the Group's operating assets were
performed using a traditional approach, with the exception of
Inmaculada where the Group used an expected cash flow approach. To
determine the fair value less costs of disposal of exploration
assets the Group uses the value-in-situ methodology. This
methodology applies a realisable 'enterprise value' to unprocessed
mineral resources per ounce of resources.
There is judgement involved in determining the assumptions that
are considered to be reasonable and consistent with those that
would be applied by market participants. Significant estimates used
include future gold and silver prices, future capital requirements,
reserves and resources volumes, production costs and the
application of discount rates which reflect the macro-economic risk
in Peru and Argentina, as applicable. Judgement is also required in
determining the risk factor that will be applied by market
participants to take into account the water restrictions imposed by
the Chilean government over the Volcan cash-generating unit.
Changes in these assumptions will affect the recoverable amount of
the property, plant and equipment, evaluation and exploration
assets, and intangibles.
Changes in accounting policies and disclosures
The accounting policies adopted in the preparation of the
interim condensed consolidated financial statements are consistent
with those followed in the preparation of the Group's annual
consolidated financial statements for the year ended 31 December
2022, except for the adoption of new standards effective as of 1
January 2023. The Group has not early adopted any standard,
interpretation or amendment that has been issued but is not yet
effective. Several amendments apply for the first time in 2023, but
do not have an impact on the interim condensed consolidated
financial statements of the Group.
Definition of Accounting Estimates - Amendments to IAS 8
The amendments to IAS 8 clarify the distinction between changes
in accounting estimates, and changes in accounting policies and the
correction of errors. They also clarify how entities use
measurement techniques and inputs to develop accounting estimates.
The amendments had no impact on the Group's interim condensed
consolidated financial statements.
Deferred Tax related to Assets and Liabilities arising from a
Single Transaction - Amendments to IAS 12
The amendments to IAS 12 Income Tax narrow the scope of the
initial recognition exception, so that it no longer applies to
transactions that give rise to equal taxable and deductible
temporary differences such as leases and decommissioning
liabilities. The amendments had no impact on the Group's interim
condensed consolidated financial statements.
Going concern
The Directors have reviewed Group liquidity and covenant
forecasts to assess whether the Group is able to continue in
operation for the period to 30 September 2024 (the "Going Concern
Period") which is at least 12 months from the date of these
financial statements. The Directors also considered the impact of a
reasonable downside scenario on the Group's future cash flows and
liquidity position as well as debt covenant compliance.
Having secured government approval of the Inmaculada MEIA in
early August 2023, the material uncertainties disclosed in the 2022
Annual Report with respect to the Group's ability to continue as a
going concern no longer exist.
For purposes of the review, the base case scenario assumed
forecast production for 2023, life-of-mine plans for Inmaculada,
Pallancata, San Jose and Mara Rosa, and precious metal prices of
$1,876.6/oz for gold and $24.2/oz for silver (the "Assumed
Prices"), based on analysts' consensus prices as of June 2023. The
Directors also considered a reasonable downside scenario, taking
into account, a four-week suspension of all operations, community
relations-related cost increases, and precious metal prices which
are 10% lower than the Assumed Prices. In both of these scenarios,
it has been assumed that the US$200 million medium-term loan is
fully drawn down.
Under both scenarios, the cash balance remained more than
adequate for the Group's forecast expenditure with sufficient
headroom maintained to comply with debt covenants.
The results of reverse stress tests were also considered.
After their thorough review, the Directors have a reasonable
expectation that the Group has adequate resources to continue in
operational existence during the Going Concern Period. Accordingly,
they continue to adopt the going concern basis in preparing the
condensed set of financial statements.
3 Segment reporting
The following tables present revenue and profit/(loss)
information for the Group's operating segments for the six months
ended 30 June 2023 and 30 June 2022 and asset information as at 30
June 2023 and 31 December 2022, respectively:
Six months ended
30 June 2023 Pallancata Other Total
San Adjustments
Jose Inmaculada Exploration and eliminations
(Unaudited) US$000 US$000 US$000 US$000 US$000 US$000 US$000
------------------ ----------- ------- ----------- ------------ -------- ---------------- ---------
Revenue from external
customers 27,223 107,964 178,772 - 265 - 314,224
Inter segment revenue - - - - 4,669 (4,669) -
----------------------- ----------- ------- ----------- ------------ -------- ---------------- ---------
Total revenue from
customers 27,223 107,964 178,772 - 4,934 (4,669) 314,224
----------------------- ----------- ------- ----------- ------------ -------- ---------------- ---------
Provisional pricing
adjustments (210) (30) 39 - - - (201)
-----------------------
Total revenue 27,013 107,934 178,811 - 4,934 (4,669) 314,023
----------------------- ----------- ------- ----------- ------------ -------- ---------------- ---------
Segment profit/(loss) (19,501) 9,297 62,447 (11,593) 4,016 78 44,744
----------------------- ----------- ------- ----------- ------------ -------- ---------------- ---------
Others(1) (110,859)
----------------------- ----------- ------- ----------- ------------ -------- ---------------- ---------
Profit from continuing
operations before
income tax (66,115)
----------------------- ----------- ------- ----------- ------------ -------- ---------------- ---------
As at 30 June 2023
(Unaudited)
Assets
------------------ ----------- ------- ----------- ------------ -------- ---------------- ---------
Capital expenditure 3,108 21,487 37,642 66,159 78 - 128,474
----------------------- ----------- ------- ----------- ------------ -------- ---------------- ---------
Current assets 6,350 49,686 17,698 2 4,422 - 78,158
Other non-current
assets 12,289 140,652 508,960 386,424 38,577 - 1,086,902
----------------------- ----------- ------- ----------- ------------ -------- ---------------- ---------
Total segment assets 18,639 190,338 526,658 386,426 42,999 - 1,165,060
----------------------- ----------- ------- ----------- ------------ -------- ---------------- ---------
Not reportable
assets(2) - - - - 200,023 - 200,023
----------------------- ----------- ------- ----------- ------------ -------- ---------------- ---------
Total assets 18,639 190,338 526,658 386,426 243,022 - 1,365,083
----------------------- ----------- ------- ----------- ------------ -------- ---------------- ---------
1 Comprised of administrative expenses of US$20,884,000, other
income of US$4,863,000, other expenses of US$12,817,000, impairment
and write off of non-financial assets of US$61,403,000, share of
losses of an associate of US$7,968,000, finance income of
US$2,628,000, finance costs of US$11,010,000 and foreign exchange
loss of US$4,268,000.
2 Not reportable assets are comprised of financial assets at
fair value through OCI of US$403,000, financial assets at fair
value through profit and loss of US$nil, other receivables of
US$65,572,000, income tax receivable of US$5,856,000, deferred
income tax asset of US$1,029,000, investment in associates
US$26,332,000, derivative financial assets of US$7,253,000 and cash
and cash equivalents of US$93,578,000.
Adjustments
Six months ended San and
30 June 2022 Pallancata Jose Inmaculada Exploration Other eliminations Total
(Unaudited) US$000 US$000 US$000 US$000 US$000 US$000 US$000
---------------- ---------- ------- ---------- ----------- ------- ------------ ---------
Revenue from
external
customers 39,084 110,804 204,262 - 300 - 354,450
Inter segment
revenue - - - - 4,834 (4,834) -
---------------- ---------- ------- ---------- ----------- ------- ------------ ---------
Total revenue
from
customers 39,084 110,804 204,262 - 5,134 (4,834) 354,450
---------------- ---------- ------- ---------- ----------- ------- ------------ ---------
Provisional
pricing
adjustments (2,546) (4,057) (66) - - - (6,669)
----------------
Total revenue 36,538 106,747 204,196 - 5,134 (4,834) 347,781
---------------- ---------- ------- ---------- ----------- ------- ------------ ---------
Segment
profit/(loss) (8,614) 18,436 86,617 (24,286) 4,098 461 76,712
---------------- ---------- ------- ---------- ----------- ------- ------------ ---------
Others(1) (71,342)
---------------- ---------- ------- ---------- ----------- ------- ------------ ---------
Profit from
continuing
operations
before
income tax 5,370
---------------- ---------- ------- ---------- ----------- ------- ------------ ---------
As at 31
December
2022
Assets
---------------- ---------- ------- ---------- ----------- ------- ------------ ---------
Capital
expenditure 13,518 50,112 78,176 196,792 1,268 - 339,866
---------------- ---------- ------- ---------- ----------- ------- ------------ ---------
Current assets 16,965 62,796 19,872 - 4,171 - 103,804
Other
non-current
assets 21,345 159,617 508,768 337,654 42,319 - 1,069,703
---------------- ---------- ------- ---------- ----------- ------- ------------ ---------
Total segment
assets 38,310 222,413 528,640 337,654 46,490 - 1,173,507
---------------- ---------- ------- ---------- ----------- ------- ------------ ---------
Not reportable
assets(2) - - - - 243,777 - 243,777
---------------- ---------- ------- ---------- ----------- ------- ------------ ---------
Total assets 38,310 222,413 528,640 337,654 290,267 - 1,417,284
---------------- ---------- ------- ---------- ----------- ------- ------------ ---------
1 Comprised of administrative expenses of US$24,913,000, other
income of US$2,580,000, other expenses of US$22,902,000, impairment
and write off of non-financial assets of US$2,064,000, share of
losses of an associate of US$10,474,000, finance income of
US$2,163,000, finance costs of US$13,083,000 and foreign exchange
loss of US$2,649,000.
2 Not reportable assets are comprised of financial assets at
fair value through OCI of US$509,000, financial assets at fair
value through profit and loss of US$1,015,000, other receivables of
US$49,542,000, income tax receivable of US$9,226,000, deferred
income tax asset of US$4,213,000, investment in associates
US$33,242,000, derivative financial assets of US$2,186,000 and cash
and cash equivalents of US$143,844,000.
4 Acquisition of assets
Amarillo Gold Group ("Amarillo")
On 1 April 2022, the Group acquired a 100% interest in Amarillo
Gold Corporation (Amarillo) flagship Mara Rosa ("Mara Rosa")
project located in Goiás State, Brazil, which included the
construction stage Posse gold project as well as certain
early-stage exploration targets.
The Group applied its judgement to weigh the characteristics of
Amarillo's acquisition and concluded whether it constituted the
acquisition of a business or a set of assets and activities. Since
there were no outputs acquired, the Group based its conclusion on
the fact that the processes acquired were not critical to the
ability to develop or convert the actual inputs into outputs. In
this context, and in application of IFRS 3, the Group concluded
that the acquisition of Amarillo did not constitute the acquisition
of a business but the acquisition of a set of assets.
The consideration paid for the transaction amounted to
CAD$154,429,478 (US$123,420,039), and transaction costs amounted to
US$4,830,000. In addition, a 2 per cent net smelter revenue royalty
on certain exploration properties owned by Amarillo that were
separate from Posse was granted.
Amarillo consolidated its financial information with the Group
from 1 April 2022, being the date on which the Group obtained
control.
The fair value of assets acquired and liabilities assumed as at
1 April 2022 comprised the following:
US$000
---------------------------------------------------------- -------
Cash and cash equivalents 4,246
Other receivables 968
Intangibles 21
Evaluation and exploration assets 107,362
Property, plant and equipment 15,078
Deferred income tax asset 3,775
Income tax receivable 36
----------------------------------------------------------- -------
Total assets 131,486
----------------------------------------------------------- -------
Accounts payable and other liabilities (3,236)
----------------------------------------------------------- -------
Total liabilities (3,236)
----------------------------------------------------------- -------
Net assets acquired 128,250
----------------------------------------------------------- -------
Consideration for the acquisition of Amarillo Gold Canada
shares 123,420
Transaction costs 4,830
----------------------------------------------------------- -------
Total consideration 128,250
----------------------------------------------------------- -------
Cash paid 128,250
----------------------------------------------------------- -------
Less cash acquired with the subsidiary (4,246)
----------------------------------------------------------- -------
Net cash flow on acquisition 124,004
----------------------------------------------------------- -------
The Group recognised individual identifiable assets (and
liabilities) by allocating the cost of acquisition on the basis of
the relative fair values at the date of purchase:
Step 1: Identify assets and liabilities acquired, adjusting them
to the Group's accounting policies and presentation;
Step 2: Determine the purchase consideration; and
Step 3: Purchase Price Allocation: The consideration paid is
allocated to the fair value of the identifiable assets and
liabilities assumed with the remainder allocated to the mineral
property acquired.
The fair value at the time of acquisition is the amount for
which an asset could be exchanged, or a liability settled, between
knowledgeable, willing parties in an arm's-length transaction.
5 Revenue
Period ended 30 June 2023 Period ended 30 June 2022
(unaudited) (unaudited)
------------------------------------------------------ -------------------------------------------------------
Revenue from Revenue from
customers customers
------------------------------ ------------ -------- ------------------------------ ------------ ---------
Goods/ Goods/
services Shipping Provisional services Shipping Provisional
sold services Total pricing Total sold services Total pricing Total
US$000 US$000 US$000 US$000 US$000 US$000 US$000 US$000 US$000 US$000
-------------- --------- -------- -------- --------- -------- ------------
Gold (from
dore bars) 142,854 321 143,175 21 143,196 164,011 458 164,469 (34) 164,435
Silver (from
dore bars) 77,055 226 77,281 (3) 77,278 87,531 312 87,843 (74) 87,769
Gold (from
concentrate) 46,796 1,871 48,667 261 48,928 44,215 1,277 45,492 (1,262) 44,230
Silver (from
concentrate) 43,293 1,543 44,836 (480) 44,356 54,822 1,524 56,346 (5,299) 51,047
Services 265 - 265 - 265 300 - 300 - 300
-------------- --------- --------- -------- ------------ -------- --------- --------- -------- ------------ ---------
Total 310,263 3,961 314,224 (201) 314,023 350,879 3,571 354,450 (6,669) 347,781
-------------- --------- --------- -------- ------------ -------- --------- --------- -------- ------------ ---------
6 Cost of sales before exceptional items
Included in cost of sales are:
Six months ended
30 June
----------------------------------
2023 (Unaudited) 2022 (Unaudited)
US$000 US$000
---------------------------------------------------- ---------------- ----------------
Depreciation and amortisation in cost of sales
1 72,705 67,733
Personnel expenses 2 58,905 58,052
Mining royalty 2,844 3,020
Change in products in process and finished goods(3) 4,716 (8,202)
Fixed costs at the operations during stoppages,
reduced capacity and excess absenteeism(4) 3,005 3,870
----------------------------------------------------- ---------------- ----------------
1 The depreciation and amortisation in production cost is US$71,903,000 (2022: US$68,801,000).
2 Includes workers' profit sharing of US$1,174,000 (2022: US$2,046,000).
3 Corresponds to the difference between the beginning and ending
balance of the finished products and products in process included
in the production cost during the period.
4 Corresponds to the fixed cost at the operations during
stoppages of US$905,000, net of the income for the insurance of
US$486,000, and the incremental idle capacity costs of US$2,586,000
(2022: Corresponds to the unallocated fixed costs accumulated
during operation below planned operating capacity and excess
absenteeism due to Covid-19 pandemic of US$2,081,000, and the
unallocated fixed cost accumulated during operations below planning
operating capacity due to the fire in San Jose of
US$1,789,000).
7 Exploration expenses
Six months ended 30
June
-----------------------------
2023 2022
(Unaudited) (Unaudited)
US$000 US$000
-------------------------- ------------- -------------
Mine site exploration1
Arcata 40 43
Ares 13 159
Inmaculada 368 1,618
Pallancata 591 3,714
San Jose 4,213 4,324
------------------------------ ------------- -------------
5,225 9,858
------------- -------------
Prospects2
Canada 2,308 6,903
Peru 114 204
USA - 1,353
Chile (24) (20)
------------------------------ ------------- -------------
2,398 8,440
------------- -------------
Generative3
Peru (206) 928
Mexico 7 270
USA 1 -
Brasil 1,120 -
922 1,198
------------- -------------
Personnel 2,502 3,682
Depreciation right-of-use 48 102
Others 420 546
------------------------------ ------------- -------------
Total 11,515 23,826
------------------------------ ------------- -------------
1 Mine-site exploration is performed with the purpose of
identifying potential minerals within an existing mine-site, with
the goal of maintaining or extending the mine's life.
2 Prospects expenditure relates to detailed geological
evaluations in order to determine zones which have mineralisation
potential that is economically viable for exploration. Exploration
expenses are generally incurred in the following areas: mapping,
sampling, geophysics, identification of local targets and
reconnaissance drilling.
3 Generative expenditure is early stage exploration expenditure
related to the basic evaluation of the region to identify prospects
areas that have the geological conditions necessary to contain
mineral deposits. Related activities include regional and field
reconnaissance, satellite images, compilation of public information
and identification of exploration targets.
8 Selling expenses
Six months ended 30
June
----------------------------------
2023 (Unaudited) 2022 (Unaudited)
US$000 US$000
------------------- ---------------- ----------------
Personnel expenses 78 159
Warehouse services 743 511
Taxes 1 5,143 5,219
Other 930 838
-------------------- ---------------- ----------------
Total 6,894 6,727
-------------------- ---------------- ----------------
1 Corresponds to the export duties in Argentina calculated as a
fixed amount in pesos per US$ of export.
9 Other income and expenses before exceptional Six months ended 30
items June
----------------------------------
2023 (Unaudited) 2022 (Unaudited)
US$000 US$000
----------------------------------------------- ---------------- ----------------
Other income
Logistic services 712 -
Gain on recovery of expenses 1 2,414 213
Recovery of previously written off account
receivable - 543
Others 2 1,737 1,824
------------------------------------------------ ---------------- ----------------
Total 4,863 2,580
------------------------------------------------ ---------------- ----------------
Other expenses
Increase in provision for mine closure (1,315) (10,799)
Depreciation right-of-use assets (54) (52)
Corporate social responsibility contribution
in Argentina (1,696) (1,615)
Care and maintenance expenses of Ares mine
unit (1,355) (1,921)
Care and maintenance expenses of Arcata mine
unit (1,808) (2,271)
Voluntary retirement program in Argentina
3 - (938)
Damage Inmaculada machine belt - (1,831)
Provision of obsolescence of supplies 4 (1,730) -
Others(5) (4,859) (3,475)
------------------------------------------------ ---------------- ----------------
Total (12,817) (22,902)
------------------------------------------------ ---------------- ----------------
1 This is primarily the insurance collected in 2023 due to the
damage of the Inmaculada machine belt in 2022 of US$2,620,000, net
of the loss on recovery of expenses of US$206,000.
2 This mainly includes the sale of mine concessions in Chile of
US$1,150,000 (2022: US$nil), export credits in Argentina of US$nil
(2022: US$345,000), gain on sale of property, plant and equipment
of US$nil (2022: US$199,000), gain on sale of supplies US$204,000
(2022: US$281,000) and the recovery of a receivable in Canada of
US$nil (2022: US$543,000).
3 This represents the voluntary retirement programme implemented
at Minera Santa Cruz as a result of the need to comply with the
Provincial Employment Law that requires at least 70% of the
workforce to have resided in the province of Santa Cruz for three
years.
4 Mainly includes the provision for obsolescence of supplies
related to the ore sorting project amounting to US$1,713,000.
5 This is primarily the tax penalties of US$2,069,000 (2022:
US$657,000), loss on sale of property, plant and equipment of
US$409,000 (2022: US$nil), the contingencies of US$956,000 mainly
explained by labor claims in Argentina (2022: US$1,670,000), the
remuneration of the employees included in the voluntary retirement
program of US$nil (June 2022 US$463,000), since Minera Santa Cruz
has to pay them until the employment relationship is terminated
even though they are prevented from attending the mining unit, and
the termination benefits of the Pallancata mine unit of US$400,000
(2022: US$nil).
10 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 facilitate comparison with prior
years. Unless stated, exceptional items do not correspond to a
reporting segment of the Group.
Six months ended 30
June
----------------------------------
2023 (Unaudited) 2022 (Unaudited)
US$000 US$000
------------------------------------------- ---------------- ----------------
Share of loss on an associate
Impairment of Aclara Resources Inc. (1 and
refer note 15) (7,183) (9,923)
-------------------------------------------- ---------------- ----------------
Total (7,183) (9,923)
-------------------------------------------- ---------------- ----------------
Impairment and write-off of non-financial
assets
-------------------------------------------- ---------------- ----------------
Impairment of non-current assets (2) (59,719) -
-------------------------------------------- ---------------- ----------------
Total (59,719) -
-------------------------------------------- ---------------- ----------------
Income tax expense
Income tax credit 18,574 -
-------------------------------------------- ---------------- ----------------
Total 18,574 -
-------------------------------------------- ---------------- ----------------
The exceptional items for the period ended 30 June 2023 and 2022
correspond to:
1 Corresponds to the impairment charge of US$7,183,000 (2022:
US$9,923,000) based on the updated valuation of the investment in
Aclara Resources Inc. as at 30 June 2023.
2 Corresponds to the impairment charge related to San Jose
(US$17,398,000) and Azuca and Crespo (US$42,321,000) projects.
11 Finance income and finance cost before exceptional items
The Group recognised the following finance income and finance
costs before exceptional items:
Six months ended 30
June
----------------------------------
2023 (Unaudited) 2022 (Unaudited)
US$000 US$000
------------------------------------------------- ---------------- ------------------
Finance income:
Interest on deposits and liquidity funds 2,313 562
Interest on loans 126 104
Unwind of discount on mine rehabilitation - 1,098
Others 189 399
-------------------------------------------------- ---------------- ----------------
Total finance income 2,628 2,163
-------------------------------------------------- ---------------- ----------------
Finance cost:
Interest on bank loans (5,468) (5,303)
Other interest (3,125) (1,045)
-------------------------------------------------- ---------------- ----------------
Total interest expense (8,593) (6,348)
-------------------------------------------------- ---------------- ----------------
Loss on discount of other receivables (1) (349) (957)
Loss from changes in the fair value of financial
instruments (2) - (2,802)
Loss from changes in the fair value of financial
assets at fair value through profit and loss - (2,282)
Loss on sale of financial assets at fair value
through profit and loss (292) -
Unwind of discount on mine rehabilitation (791) -
Others (985) (694)
-------------------------------------------------- ---------------- ----------------
Total finance costs (11,010) (13,083)
-------------------------------------------------- ---------------- ----------------
1 Mainly corresponds to the gain/(loss) on discount of tax credits in Argentina.
2 Represents the foreign exchange transaction costs to acquire
US$3,289,000 dollars through the sale of bonds in Argentina.
12 Income tax expense
Six months ended 30
June
----------------------------------
2023 (Unaudited) 2022 (Unaudited)
US$000 US$000
-------------------------------------------------- ---------------- ----------------
Current tax
Current income tax expense 7,405 9,386
Withholding tax 297 -
Current mining royalty charge 2,130 2,475
Current special mining tax charge 618 1,533
---------------------------------------------------
Total 10,450 13,394
--------------------------------------------------- ---------------- ----------------
Deferred tax
Origination and reversal of temporary differences (23,880) (7,604)
--------------------------------------------------- ---------------- ----------------
Total (13,430) (7,604)
--------------------------------------------------- ---------------- ----------------
Total taxation (credit)/charge in the income
statement (13,430) 5,790
--------------------------------------------------- ---------------- ----------------
The pre-exceptional tax charge for the period was US$5,144,000
(2022: US$5,790,000).
The weighted average statutory income tax rate was 31.5% for
2023 and 35.0% for 2022. This is calculated as the average of the
statutory tax rates applicable in the countries in which the Group
operates, weighted by the profit or loss before tax of the Group
companies in their respective countries as included in the
consolidated financial statements. The interim income tax rate
calculation is based on the estimate average annual effective tax
rate of the Group.
The change in the weighted average statutory income tax rate is
due to a change in the weighting of profit or loss before tax in
the various jurisdictions in which the Group operates.
The profit before income tax (pre-exceptional) excluding the
exchange difference of US$ 4,268,000 was US$ 5,055,000. The
weighted average effective annual income tax rate expected for the
full financial year was 47.5% generating an income tax expense of
US$ 2,401,000. The higher tax in H1 2023 versus US$ 2,401,000 is
due to the one-time effect occurred in the half year related to the
local currency revaluation of US$ 1,906,000 and the non-deductible
loss on the sale of C3 Metals Inc. shares of US$ 837,000.
The UK Government increased the rate of Corporation Tax to 25%
on profits over GBP250,000, approximately US$318,000, from April
2023. There is no impact on the deferred tax calculation of the
Group.
13 Property, plant and equipment
During the six months ended 30 June 2023, the Group acquired and
developed assets with a cost of US$126,523,000 (2022:
US$88,471,000). The additions for the six months ended 30 June 2023
relate to:
Mining Other property Total additions
properties plant and of property
and development equipment plant and
(Unaudited) (Unaudited) equipment
US$000 US$000 (Unaudited)
US$000
----------- ---------------- --------------- ---------------
San Jose 16,086 5,401 21,487
Pallancata 3,065 43 3,108
Inmaculada 34,748 2,894 37,642
Mara Rosa 16,423 47,593 64,016
Others 192 78 270
------------ ---------------- --------------- ---------------
Total 70,514 56,009 126,523
------------ ---------------- --------------- ---------------
Assets with a net book value of US$1,006,000 were disposed of by
the Group during the six month period ended 30 June 2023 (30 June
2022: US$nil) resulting in a net loss on disposal of US$409,000 (30
June 2022: gain of US$199,000).
For the six months ended 30 June 2023, the depreciation charge
on property, plant and equipment was US$74,429,000 (2022:
US$70,020,000).
There were borrowing costs capitalised in property, plant and
equipment amounting to US$6,807,000 (31 December 2022:
US$1,974,000).
30 June 2023
In 2023, management determined that there was a trigger of
impairment in the San Jose mine unit due to the increase in the
discount rate from 19.8% to 21.7% mainly explained by the rise in
country risk premium in Argentina, and higher costs than expected
due to local inflation. The impairment test performed over the San
Jose CGU resulted in an impairment recognised as at 30 June 2023 of
US$17,398,000 (US$16,588,000 in property, plant and equipment,
US$376,000 in evaluation and exploration assets and US$434,000 in
intangibles).
The Group is conducting a sales process for its Azuca and Crespo
projects. This decision to evaluate the sale of these assets is
part of the Group's strategy to focus its capital on larger-scale
projects. Management is currently negotiating with interested
parties and has not entered into a definitive agreement for the
sale of these assets. As at 30 June 2023, Azuca and Crespo do not
meet the conditions to be classified as an asset held-for sale
under IFRS 5 "Non-current Assets Held for Sale and Discontinued
Operations".
Based on preliminary discussions with interested parties on the
investment and costs required for these projects, given their
operational capabilities, management determined that there were
triggers of impairment in both the Azuca and Crespo projects. An
impairment test was carried out, adjusting the key inputs used to
determine the projects recoverable value, resulting in an
impairment charge of US$42,321,000 (US$15,898,000 in property,
plant and equipment, US$26,420,000 in evaluation and exploration
assets and US$3,000 in intangibles) for Azuca, and Crespo.
No indicators of impairment or reversal of impairment were
identified in the other CGUs, which includes other exploration
projects.
The recoverable value of the San Jose, CGU, and the Crespo and
Azuca assets was determined using a fair value less costs of
disposal (FVLCD) methodology.
The key assumptions on which management has based its
determination of FVLCD and the associated recoverable values
calculated for the San Jose CGU and Crespo assets are gold and
silver prices, future capital requirements, production costs,
reserves and resources volumes (reflected in the production
volume), and the discount rate.
Real prices US$ per oz. 2024 2025 2026 2027 Long-term
========================= ====== ====== ====== ====== ==========
Gold 1,850 1,735 1,582 1,557 1,600
------------------------- ------ ------ ------ ------ ----------
Silver 24.3 22.6 21.4 21.8 22.0
------------------------- ------ ------ ------ ------ ----------
San Crespo
Jose
============ ============================================================================================ ==============================================================================================
Discount
rate
(post-tax) 21.7% 6.0%
------------- -------------------------------------------------------------------------------------------- ----------------------------------------------------------------------------------------------
The period of 7 years and 9 years was used to prepare the cash
flow projections of San Jose mine unit and Crespo, respectively,
which were in line with their life of mine.
With respect to Azuca, given its early stage, the Group applied
a value-in-situ methodology, which applies a realisable 'enterprise
value' to unprocessed mineral resources. The methodology is used to
determine the fair value less costs of disposal of the Azuca
assets. The enterprise value used in the calculation performed as
at 30 June 2023 was $0.095 per silver equivalent ounce of
resources. The enterprise value figure is based on observable
external market information.
The estimated recoverable values of the Group's CGUs are equal
to, or not materially different than, their carrying values.
Sensitivity analysis
Other than as disclosed below, management believes that no
reasonably possible change in any of the key assumptions above
would cause the carrying value of any of its cash generating units
to exceed its recoverable amount.
A change in any of the key assumptions would have the following
impact:
US$000
San Jose Crespo
-------------------------------------------- --------- ---------
Gold and silver prices (decrease by 10%) (45,400) (25,800)
--------------------------------------------- --------- ---------
Gold and silver prices (increase by 10%) 45,600 25,000
--------------------------------------------- --------- ---------
Production costs (increase by 10%) (31,100) (11,300)
--------------------------------------------- --------- ---------
Production costs (decrease by 10%) 30,300 11,100
--------------------------------------------- --------- ---------
Production volume (decrease by 10%) (28,600) (13,800)
--------------------------------------------- --------- ---------
Production volume (increase by 10%) 28,600 13,600
--------------------------------------------- --------- ---------
Post tax discount rate (increase by 3%)(1) (6,100) (17,800)
--------------------------------------------- --------- ---------
Post tax discount rate (decrease by 3%)(1) 6,900 22,400
--------------------------------------------- --------- ---------
Capital expenditure (increase by 10%) (8,900) (10,700)
--------------------------------------------- --------- ---------
Capital expenditure (decrease by 10%) 8,900 10,600
--------------------------------------------- --------- ---------
1 Management believed that a 3% change was a reasonably possible
change in the post-tax discount rate in Argentina. However, changes
in the perception of Argentina arising from political, social and
financial disruption may give rise to significant movement in the
discount rate used in the assessment of the San Jose CGU.
2022
The delay on the government decision on Inmaculada MEIA
constituted a trigger for impairment as at 31 December 2022. The
MEIA was approved on 1 August 2023.
The company used an expected cash flow approach, assigning
probabilities to the following possible scenarios regarding the
government decision on Inmaculada's MEIA: (i) MEIA was approved,
(ii) MEIA was denied, reapplication was needed and consequently
Inmaculada was placed in care and maintenance by end of 2023,
resuming operations in H2 2026. Management considered scenario (i)
as the most likely one, and scenario (ii) to have a probability of
less than 25% of occurrence. The valuation test performed over
Inmaculada CGU, using a probability-weighted approach, resulted in
no impairment. If the probability of occurrence of scenario (ii)
was higher than 25%, an impairment charge would be required for
Inmaculada.
The recoverable value of the Inmaculada CGU was determined using
a fair value less costs of disposal (FVLCD) methodology. FVLCD was
determined using a combination of level 2 and level 3 inputs, which
result in fair value measurements categorised in its entirety as
level 3 in the fair value hierarchy, to construct a discounted cash
flow model to estimate the amount that would be paid by a willing
third party in an arm's length transaction.
Real prices US$ per oz. 2023 2024 2025 2026 2027 2028-2038
========================= ====== ====== ====== ====== ====== ==========
Gold 1,716 1,711 1,603 1,545 1,466 1,561
------------------------- ------ ------ ------ ------ ------ ----------
Silver 20.3 20.7 19.6 20.6 23.3 20.8
------------------------- ------ ------ ------ ------ ------ ----------
Inmaculada
========================== ===========
Discount rate (post-tax) 5.2%
--------------------------- -----------
31 December 2022 (US$000) Inmaculada
================================================ ===========
Current carrying value of CGU, net of deferred
tax 443,447
------------------------------------------------- -----------
Sensitivity analysis
Other than as disclosed below, management believes that no
reasonably possible change in any of the key assumptions above
would cause the carrying value of any of its cash generating units
to exceed its recoverable amount.
A change in any of the key assumptions would have the following
impact:
Inmaculada San
Jose
========================================== ===========
Gold and silver prices (decrease by 10%) (175,100) (53,800)
Gold and silver prices (increase by 10%) 171,800 54,600
Production costs (increase by 10%) (96,700) (49,800)
Production costs (decrease by 10%) 94,700 49,800
Production volume (decrease by 10%) (73,300) (78,900)
Production volume (increase by 10%) 73,100 78,900
Post tax discount rate (increase by 3%) (69,000) (7,800)
Post tax discount rate (decrease by 3%) 91,700 8,800
Capital expenditure (increase by 10%) (35,600) (11,600)
Capital expenditure (decrease by 10%) 35,600 11,600
=========================================== =========== ---------
As at 31 December 2022, management determined that the newly
discovered area Royropata, west of current operations at
Pallancata, was a trigger for reversal of impairment. The new area
is estimated to contain 51.2 million silver equivalent ("Ag Eq")
ounces. These new resources constitute a significant change in the
estimates used to determine the asset's recoverable amount since
the last impairment loss was recognised as at 31 December 2021.
The valuation test performed over the Pallancata CGU resulted in
a reversal of impairment recognised as at December 31, 2022 of
US$15,145,000 in property, plant and equipment, and US$417,000 in
evaluation and exploration assets).
The recoverable value of the Pallancata CGU was determined using
a fair value less costs of disposal (FVLCD) methodology. FVLCD was
determined using a combination of level 2 and level 3 inputs, which
result in fair value measurements categorised in its entirety as
level 3 in the fair value hierarchy, to construct a discounted cash
flow model to estimate the amount that would be paid by a willing
third party in an arm's length transaction.
Real prices US$ per oz. 2026 2027 2028
========================= ====== ====== ======
Gold 1,545 1,466 1,561
-------------------------- ------ ------ ------
Silver 20.6 23.3 20.8
-------------------------- ------ ------ ------
Pallancata
=============== ==================================================================================================
Discount rate
(post-tax) 5.1%
---------------- --------------------------------------------------------------------------------------------------
31 December 2022 (US$000) Pallancata
================================================ ===========
Current carrying value of CGU, net of deferred
tax 21,345
------------------------------------------------- -----------
Sensitivity analysis
Given that Pallancata's recoverable value is significantly
higher than the reversal of impairment amount recognised, there is
no reasonably possible change in any of the key assumptions that
would decrease the reversal of impairment amount recognised.
14 Evaluation and exploration assets
During the six months ended 30 June 2023, the Group capitalised
evaluation and exploration costs of US$1,828,000 (2022:
US$113,625,000). The additions correspond to the following mine
units:
Unaudited
US$000
---------- ---------
Mara Rosa 452
Azuca 367
Crespo 314
Volcan 695
Total 1,828
------------ ---------
There were no transfers from evaluation and exploration assets
to property, plant and equipment during the period (30 June 2022:
US$nil, 31 December 2022: US$102,119,000).
At 30 June 2023, the Group recorded an impairment with respect
to evaluation and exploration assets of the San Jose mine unit of
US$376,000, and the Azuca and Crespo projects of US$26,420,000. The
calculation of the recoverable values is detailed in note 13.
At 31 December 2022, the Group recorded a reversal of impairment
with respect to evaluation and exploration assets of the Pallancata
mine unit of US$417,000 and an impairment of the Azuca project of
US$4,199,000. The calculation of the recoverable values of the
Pallancata mine unit is detailed in note 13.
There were borrowing costs capitalised in evaluation and
exploration assets of US$38,000 (31 December 2022:
US$1,087,000).
15 Investment in an associate
The Group retains a 20.0% interest in Aclara Resources Inc.
("Aclara"), a listed company involved in the exploration of,
rare-earth metals in Chile. The company was incorporated under the
laws of British Columbia, Canada, where the principal executive
offices are located. The operations are conducted through one
wholly owned subsidiary named REE UNO SpA, located in Chile.
Upon Aclara's Initial Public Offering ('IPO') on 10 December
2021, HM Holdings retained 20% of Aclara shares. The investment was
recorded at initial recognition at fair value, based on the IPO'
offering price, and is accounted for using the equity method in the
consolidated financial statements.
The following table summarises the financial information of the
Group's investment in Aclara Resources Inc:
As at 30
June As at 31
2023 December
(Unaudited) 2022
US$000 US$000
---------------------------------------------------- ------------- ----------
Current assets 52,658 67,291
Non-current assets 105,236 90,271
Current liabilities (2,328) (3,674)
Non-current liabilities - (1)
Equity 155,566 153,887
Group's share in equity (20%) 31,113 30,777
Fair value adjustment allocated to the evaluation
and exploration assets on initial recognition(1) 12,325 12,388
Impairment of non-current assets(2) (17,106) (9,923)
---------------------------------------------------------
Group's carrying amount of the investment
20% 26,332 33,242
--------------------------------------------------------- ------------- ----------
Summarised consolidated statement of profit
and loss
Revenue - -
Administrative expenses (2,914) (5,261)
Exploration expenses (2,580) (3,642)
Other income 33 -
Finance income 1,460 648
Finance cost (13) (18)
Foreign exchange gain/(loss) 87 (111)
Loss from continuing operations for the period (3,927) (8,384)
--------------------------------------------------------- ------------- ----------
Loss from continuing operation for the period (3,927) (8,384)
--------------------------------------------------------- ------------- ----------
Group's share of loss for the period (785) (1,677)
--------------------------------------------------------- ------------- ----------
Other comprehensive profit that may be reclassified
to profit or loss in subsequent periods, net
of tax
Exchange differences on translating foreign
operations 5,292 6,417
Total comprehensive profit for the period 5,292 6,417
Total comprehensive profit 5,292 6,417
--------------------------------------------------------- ------------- ----------
Group's share of comprehensive profit/(loss)
for the period 1,058 1,283
--------------------------------------------------------- ------------- ----------
1. This represents the 20% of the fair value adjustment,
estimated by the Group, to Aclara's exploration and evaluation
assets on initial recognition, representing US$12,010,000
(2022:US$61,940,000).
2. This represents the 20% share in the total impairment,
estimated by the Group, of Aclara's exploration and evaluation
assets of US$85,530,000 (2022: US$49,615,000)
The movement of investment in associate is as follows:
Period ended
31 December
====================
30 June 31 December
2023 2022
US$000 US$000
============================================= ======= ===========
Beginning balance 33,242 43,559
---------------------------------------------- ------- -----------
Initial recognition - -
--------------------------------------------- ------- -----------
Impairment of non-current assets (7,183) (9,923)
---------------------------------------------- ------- -----------
Share of loss for the period (785) (1,677)
---------------------------------------------- ------- -----------
Share of comprehensive profit for the period 1,058 1,283
---------------------------------------------- ------- -----------
Ending balance 26,332 33,242
---------------------------------------------- ------- -----------
At the moment of the acquisition of the associate the loss of
the period was US$483,000 and the comprehensive loss for the period
was US$4,480,000.
On July 4th, 2023, Aclara announced the receipt of a notice from
the Environmental Service Assessment in Chile of its decision to
terminate the review of Aclara's application for an environmental
impact assessment of the Penco Module due to the finding of trees
considered as 'vulnerable species' in the area of the project.
Aclara is currently working to refile a revised application.
Aclara's recent announcement and the impact that it could have
in the first production date of Penco project, were considered as
indicators of impairment. Therefore, in compliance with IAS 36, the
Group has performed a valuation on Aclara, and determined an
impairment charge of US$7,183,000.
The recoverable value of Aclara was determined using a
value-in-use methodology. The key assumptions on which management
has based its valuation of Aclara's shares are the independent
technical report of Penco module issued in September 2021, adjusted
by: a 3-year delay in the first production date, local inflation
and additional risk impacting costs; latest forecast prices; and a
discount rate of 9.6%.
Sensitivity analysis
An increase of 1% in the discount rate and a delay of one
additional year in the first production date would have the
following impact in the Group's investment in Aclara:
US$000
---------------------------------------------------- --------
Discount rate (increase by 1%) (3,578)
Delay in first production date (1 additional year) (2,551)
---------------------------------------------------- --------
T he carrying amount of the investment recognised the changes in
the Group's share of net assets of the associate since the
acquisition date. The balance as at 30 June 2023, after recognising
the changes in the Group's share of net assets of the associate and
the impairment charge is US$26,332,000 (31 December 2022:
US$33,242,559,000).
Aclara's fair value based on share price as of 30 June 2023 was
US$14,810,000 (31 December 2022: US$7,679,000 ).
No dividends were received from the associate during 2023 and
2022.
The associate had no contingent liabilities or capital
commitments as at 30 June 2023 and 31 December 2022.
16 Financial instruments
Fair value hierarchy
The Group uses the following hierarchy for determining and
disclosing the fair value of financial instruments by valuation
technique:
Level 1: quoted (unadjusted) prices in active markets for
identical assets or liabilities.
Level 2: other techniques for which all inputs which have a
significant effect on the recorded fair value are observable,
either directly or indirectly.
Level 3: techniques which use inputs which have a significant
effect on the recorded fair value that are not based on observable
market data.
At 30 June 2023 and 31 December 2022, the Group held the
following financial instruments measured at fair value:
As at
30 June Level Level
2023 (Unaudited) 1 2 Level 3
US$000 US$000 US$000 US$000
------------------------------------- ------------------ -------- -------- --------
Assets measured at fair
value
Equity shares(1) 403 403 - -
Derivative financial assets(2) 7,253 - 7,253 -
Trade receivables 27,158 - - 27,158
Liabilities measured at
fair value
Derivative financial liabilities(3) (954) (954)
-------------------------------------
33,860 403 6,299 27,158
------------------------------------- ------------------ -------- -------- --------
1 These investments were classified as financial assets at fair
value through OCI. The C3 Metals Inc. shares, classified as
financial assets at fair value through profit and loss, were sold
during 2023.
2 Derivative financial assets - Silver forward and Gold forward.
3 Derivative financial liabilities - Gold forward.
On 8 February 2021, the Group signed agreements with JP Morgan
to hedge the sale of 4,000,000 ounces of silver at US$27.10 per
ounce for 2021 and a further 4,000,000 ounces of silver at US$26.86
per ounce for 2022.
On 10 November 2021, the Group signed agreements with JP Morgan
to hedge the sale of 3,300,000 ounces of silver at US$25.0 per
ounce for 2023.
On 12 April 2023, the Group signed agreements with Citibank to
hedge the sale of 27,600 ounces of gold at US$2,100 per ounce for
2024.
On 20 April 2023, the Group signed agreements with JP Morgan to
hedge the sale of 29,250 ounces of gold at US$2,047 per ounce for
2023.
On 19 June 2023, the Group signed agreements with Citibank to
hedge the sale of 150,000 ounces of gold at US$2,117.05,
US$2,166.65 and US$2,205.50 per ounce in 2025, 2026 and 2027
respectively.
The gold and silver forwards are being used to hedge exposure to
changes in cash flows from gold and silver commodity prices. There
is an economic relationship between the hedged item and the hedging
instruments due to a common underlying. In accordance with IFRS 9,
the derivative instruments are categorised as cash flow hedges at
the inception of the hedging relationship and, on an ongoing basis,
the Group assesses whether a hedging relationship meets the hedge
effectiveness requirements. The Group has established a hedge ratio
of 1:1 for the hedging relationships as the underlying risk of the
silver and gold forwards is identical to the hedged risk
components. To test the hedge effectiveness, the Group uses the
hypothetical derivative method and compares the changes in the fair
value of the gold and silver forwards against the changes in fair
value of the hedged item attributable to the hedged risk. That
said, it is observed that the effectiveness tests comply with the
requirements of IFRS 9 and that the hedging strategy is highly
effective.
The fair values of the gold and silver forwards were calculated
using a discounted cash flow model applying a combination of level
1 (USD quoted market commodity prices) and level 2 inputs. The
models used to value the commodity forward contracts are standard
models that calculate the present value of the fixed-legs (the
fixed gold and silver leg) and compare them with the present value
of the expected cash flows of the flowing legs (the London metal
exchange "LME" gold and silver fixing). In the case of the
commodity forward contracts, the models use the LME AU and AG
forward curve and the US LIBOR swap curve for discounting.
This approach results in the fair value measurement categorised
in its entirety as level 2 in the fair value hierarchy. The fair
values of the gold and silver forwards as at 30 June 2023 are as
follows:
US$000
------------------------- -------
Current assets 5,679
Non-current assets 1,574
------------------------- -------
Non-current liabilities (954)
------------------------- -------
6,299
The effect recorded is as follows:
US$000
------------------------------------ -------
Income statement - revenue 3,362
Equity - Unrealised gain on hedges 4,113
------------------------------------ -------
The sensitivity to a reasonable movement in the commodity
prices, with all other variables held constant, determined as a
+/-10% change in prices -US$31,778,000 / US$42,288,000 effect on
OCI.
As at
December Level Level
2022 (Unaudited) 1 2 Level 3
US$000 US$000 US$000 US$000
----------------------------- ------------------ -------- -------- --------
Assets measured at fair
value
Equity shares(1) 1,524 1,524 - -
Derivative financial assets 2,186 2,186 -
Trade receivables 42,364 42,364
-----------------------------
46,074 1,524 2,186 42,364
----------------------------- ------------------ -------- -------- --------
1 These investments were classified as financial assets at fair
value through OCI (US$509,000) and financial assets at fair value
through profit and loss (US$ 1,015,000).
During the six months ended 30 June 2023 and the year, ended 31
December 2022 there were no transfers between these levels.
The reconciliation of the financial instruments categorised as
Level 3 is as follows:
Trade receivables
subject to
price adjustments
US$000
------------------------------------------------ ------------------
Balance at 1 January 2022 27,773
Net change in trade receivables from goods sold 8,063
Changes in fair value of price adjustments (1,323)
Realised price adjustments during the year 7,851
Balance at 31 December 2022 42,364
-------------------------------------------------- ------------------
Net change in trade receivables from goods sold (6,704)
Changes in fair value of price adjustments (201)
Realised price adjustments during the period (8,301)
-------------------------------------------------- ------------------
Balance at 30 June 2023 (Unaudited) 27,158
-------------------------------------------------- ------------------
The Group has price adjustments arising from the sale of
concentrate and dore which were provisionally priced at the time
the sale was recorded. The sensitivity of the fair value to an
immediate 10% favourable or adverse change in the price of gold and
silver (assuming all other variables remain constant), is as
follows:
Increase/ Effect on
decrease in profit before
price of tax
Period ounces of: US$000
----------------- -------------- --------------
Gold +/-10% +/-28
30 June 2023 Silver+/-10% +/-51
------------------ --------------- --------------
Gold +/-10% +/-165
31 December 2022 Silver+/-10% +/-138
------------------ --------------- --------------
17 Deferred income tax assets and liabilities
The changes in the net deferred income tax assets/(liabilities)
are as follows:
As at 30 June As at 31 December
2023 2022
(Unaudited) US$000
US$000
------------------------------------ -------------- ------------------
Beginning of the period (75,832) (86,744)
Income statement credit 23,880 2,687
Equity (charge)/credit (927) 8,167
Deferred tax recognised for payment - 58
---------------------------------------- -------------- ------------------
End of the period (52,879) (75,832)
---------------------------------------- -------------- ------------------
Deferred income tax assets and liabilities are offset when there
is a legally enforceable right to offset current tax assets against
current tax liabilities and when the deferred income tax assets and
liabilities relate to the same fiscal authority.
The amounts after offset, as presented on the face of the
Consolidated statement of financial position, are as follows:
As at As at
30 June 31 December
2023 2022
(Unaudited)
US$000 US$000
------------------------------------ ------------- -------------
Deferred income tax assets(1) 1,029 4,213
Deferred income tax liabilities (53,908) (80,045)
---------------------------------------- ------------- -------------
Net deferred income tax liabilities (52,879) (75,832)
---------------------------------------- ------------- -------------
1 The decrease is driven principally by the recognition of the impairment charge of the period (US$18,574,000).
18 Cash and cash equivalents
As at
As at 30 31 December
June 2023 2022
(Unaudited)
US$000 US$000
----------------------------------- ------------- -------------
Cash in hand 986 922
Current demand deposit accounts(1) 64,960 53,697
Time deposits(2) 27,632 89,225
--------------------------------------- ------------- -------------
Cash and cash equivalents 93,578 143,844
--------------------------------------- ------------- -------------
1 Relates to bank accounts, which are readily accessible to the Group and bear interest.
2 These deposits have an average maturity of 9 days (as at 31 December 2022: 18 days).
Cash and cash equivalents comprise cash on hand and deposits
held with banks that are readily convertible into known amounts of
cash and which are subject to insignificant risk of changes in
value.
The fair value of cash and cash equivalents approximates their
book value.
19 Borrowings
As at 30 June 2023 As at 31 December
(Unaudited) 2022
------------------------------- ------------------------------------
Effective Effective
interest Non-current Current interest Non-current Current
rate US$000 US$000 rate US$000 US$000
--------------------------------------------------------- --------- ----------- ------- --------- ----------- ------------
Secured bank loans
47.25%
* Pre-shipment and short-term loans in Minera Santa 13.00% and
Cruz to 95.00% - 5,407 48.00% - 2,161
* Mid-term loans in Minera Ares 8.74% 224,999 78,726 7.74% 275,000 27,328
* Stock market promissory notes in Minera Santa Cruz - - 11,500 - - 14,500
---------------------------------------------------------- --------- ----------- ------- --------- ----------- ------------
Total 224,999 95,633 275,000 43,989
---------------------------------------------------------- --------- ----------- ------- --------- ----------- ------------
The movement in borrowings during the six-month period to 30
June 2023 is as follows:
As at Additions Repayments As at
31 US$000 US$000 30
December Reclassifications June 2023
2022 US$000 US$000 (Unaudited)
US$000
------------------------- ------------- ---------- ----------- -------------------- -------------
Current
Bank loans(1) 26,693 8,653 (4,775) 49,464 80,035
Stock market promissory
notes(2) 14,500 3,907 (6,907) - 11,500
Accrued interest 2,796 5,468 (11,139) 6,973 4,098
-------------------------- --------------------
43,989 18,028 (22,821) 56,437 95,633
--------------------
Non-current
Bank loans(1) 275,000 - - (50,001) 224,999
-------------------------- --------------------
275,000 - - (50,001) 224,999
------------- ---------- ----------- -------------------- -------------
1 Relates to pre-shipment loans for a total amount of
US$2,589,000 (31 December 2022: US$2,161,000) which are credit
lines given by banks to meet payment obligations arising from the
exports of the Group and other short-term loans of US$2,818,000. In
addition, the balance at 30 June 2023 and 31 December 2022 includes
a five-year credit agreement signed between Minera Ares and
Scotiabank Peru S.A.A., The Bank of Nova Scotia and BBVA Securities
Inc., with Hochschild Mining PLC as guarantor. The US$200,000,000
medium term loan was payable on equal quarterly instalments from
the second anniversary of the loan with an interest rate of Libor
three months plus 1.15% payable quarterly until maturity on 13
December 2024. In September 2021, the Group negotiated with the
same counterpart a US $ 200,000,000 loan to replace the original
loan, plus an additional US $ 100,000,000 optional loan. US $
200,000,000 was withdrawn on 21 September 2021, and the optional US
$ 100,000,000 loan was withdrawn on 1 December 2021. The maturity
was extended until September 2026, and the interest rate increased
to 3-month USD Libor plus a spread of 1.65%. The carrying value
including accrued interests at 30 June 2023 is US$303,725,000 (31
December 2022: US$302,328,000).
2 Corresponds to 11 Stock market promissory notes signed from
August 2022 to June 2023 by Minera Santa Cruz with Max Capital, a
finance advisory company located in Argentina, amounting to
US$11,500,000. The expiration date of the notes is from July 2023
to August 2024. During the period 2023 the Group repaid
US$6,907,000. The balance as at 30 June 2023 is US$11,500,000 (31
December 2022: US$14,500,000).
As at 30 June 2023, the Group has US$200,000,000 of undrawn
medium-term debt facility that is available due to the receipt of
the Inmaculada MEIA approval.
The carrying amount of the pre-shipment and short-term loans
approximates their fair value. The carrying amount and fair value
of the mid-term loan are as follows:
Carrying amount Fair value
-------------------------- --------------------------
As at 30 As at 31 As at 30 As at 31
June 2023 December June 2023 December
(Unaudited) 2022 US$000 (Unaudited) 2022 US$000
US$000 US$000
----------- ------------ ------------ ------------ ------------
Bank loans 303,725 302,328 291,766 283,677
Total 303,725 302,328 291,766 283,677
------------ ------------ ------------ ------------ ------------
20 Provisions
As at 30 June As at 31 December
2023 (Unaudited) 2022
-------------------- --------------------
Non-current Current Non-current Current
US$000 US$000 US$000 US$000
------------------------------- ----------- ------- ----------- -------
Provision for mine closure1 124,618 14,711 119,332 17,668
Workers' profit sharing2 - 1,989 - 4,947
Provision for contingencies(3) 6,802 3,398 4,174 1,562
Total 131,420 20,098 123,506 24,177
-------------------------------- ----------- ------- ----------- -------
1 The provision represents the discounted values of the
estimated cost to decommission and rehabilitate the mines at the
expected date of closure of each of the mines. The present value of
the provision has been calculated using a real pre-tax annual
discount rate, based on a US Treasury bond of an appropriate tenure
adjusted for the impact of inflation as at 30 June 2023 and 31
December 2022 respectively, and the cash flows have been adjusted
to reflect the risk attached to these cash flows. Uncertainties on
the timing for use of this provision include changes in the future
that could impact the time of closing the mines, as new resources
and reserves are discovered. The pre-tax real discount rate used
was 1.25% (2022: 0.95%). Movement in the provision relates to an
increase due to change in estimate of US$5,939,000 (mainly in the
mine unit Mara Rosa US$4,173,000), net of payments of US$4,787,000,
and the increase related to change in discount rate of US$386,000
and related unwind of discount on mine rehabilitation of
US$791,000.
A change in any of the following key assumptions used to
determine the provision would have the following impact:
US$000
--------------------------------------------------------- -------
Closure costs (increase by 10%) increase of provision 13,933
Discount rate (increase by 0.5%) (decrease of provision) (8,082)
--------------------------------------------------------- -------
2 Corresponds to worker's profit sharing in Compania Minera Ares.
3 Mainly corresponds to the increase due to an income tax
contingency in Compañía Minera Ares of US$2,213,000.
21 Equity
Share capital and share premium
The movement in share capital of the Company from 31 December
2022 to 30 June 2023 is as follows:
Number Share
of ordinary capital Share premium
shares US$000 US$000
---------------------------------------- ------------- --------- -------------
Shares issued as at 31 December 2021 513,875,563 226,506 438,041
----------------------------------------- ------------- --------- -------------
Deferred bonus shares issued on 20 June
2022 513,875,563 303,268 -
Cancelation of deferred bonus shares
on 22 June 2022 (513,875,563) (303,268) -
Cancelation of share premium account
on 24 June 2022 - - (438,041)
Reduction of nominal value to 1 pence
on 24 June 2022 - (217,445) -
----------------------------------------- ------------- --------- -------------
Shares issued as at 31 December 2022 513,875,563 9,061 -
----------------------------------------- ------------- --------- -------------
Issuance of shares for bonus payment
on 12 May 2023 582,869 7 -
----------------------------------------- ------------- --------- -------------
Shares issued as at 30 June 2023 514,458,432 9,068 -
----------------------------------------- ------------- --------- -------------
Following the passing of certain special resolutions at an
Extraordinary General Meeting of shareholders held on 26th May
2022, the Company capitalised the Company's merger reserve by
applying its balance to the issuance of
513,875,563 bonus shares with a nominal value of US$0.59 each (the "Bonus Shares").
Subsequently, the Company obtained, on 21 June 2022, the
approval of the High Courts of Justice of England and Wales (the
Companies Court (Ch D) of the Business and Property Courts) to:
i. the cancellation of the Bonus Shares with the sum arising on
the cancellation being credited to the Company's retained earnings
reserve;
ii. the reduction of the Company's share premium account to nil
and crediting the corresponding amount to the Company's retained
earnings reserve; and
iii. the reduction in the nominal value of the Ordinary Shares
from 25 pence per Ordinary Share to 1 pence per Ordinary Share,
(both (ii) and (iii) above collectively referred to as "the
Reductions").
The Reductions were effective on registration of the relevant
court order by the Registrar of Companies, which
took place on 24th June 2022.
22 Dividends paid and declared
Dividends declared and paid to non-controlling interests in the
six months ended 30 June 2023 were US$326,000 (2022:
US$286,000).
There was no final dividend in respect of the year 2022 (final
dividend for 2021: US$11,998,000). An interim dividend in respect
of the six months ended 30 June 2023 amounting to US$nil (2022:
US$10,019,000) has been declared by the Directors. Dividends paid
to shareholders of the parent in the six months ended 30 June 2023
were US$nil (2022: US$11,998,000).
23 Related party transactions
There were no significant transactions with related parties
during the six months period ended 30 June 2023.
24 Notes to the statement of cash flows
Six months ended 30
June
-----------------------------
2023 2022
(Unaudited) (Unaudited)
US$000 US$000
-------------------------------------------------- ------------- -------------
Reconciliation of profit for the period to
net cash generated from operating activities
Loss for the period (52,685) (420)
Adjustments to reconcile Group profit to net
cash inflows from operating activities
Depreciation 72,513 69,444
Amortisation of intangibles 416 384
Impairment of non-financial assets 59,719 1,741
Write-off of non-financial assets, net 1,684 323
Impairment of an associate 7,183 9,923
Share of loss of an associate 785 551
Loss/(gain) on sale of property, plant and
equipment 409 (199)
Increase of provision for mine closure 1,315 10,799
Loss from changes in the fair value of financial
assets at fair value through profit and loss 292 2,282
Finance income (2,628) (2,163)
Finance costs 11,010 13,083
Income tax expense (13,430) 5,790
Other 12,924 3,639
Increase/(decrease) of cash flows from operations
due to changes in assets and liabilities
Trade and other receivables (4,177) (39,469)
Income tax receivable (1,174) (2,725)
Other financial assets and liabilities - 2,802
Inventories 7,347 (9,240)
Trade and other payables (1,457) (19,345)
Provisions (236) (5,992)
------------------------------------------------------ ------------- -------------
Cash generated from operations 99,810 41,208
------------------------------------------------------ ------------- -------------
25 Subsequent events
(a) Volcan
On 6 July 2023, the Group signed a royalty agreement with Minera
Global Copper Chile S.A. Pursuant to the contract, the Group
undertakes to pay a royalty of 1.5% of the net smelter returns of
the ore from the Volcan project located in Chile, for a
consideration of US$15,000,000 which to date is pending
payment.
(b) Loan facility
- On 28 June 2023 the Group signed a short-term credit facility
agreement up to US$80,000,000 with the Banco Santander S.A. Based
on the agreement, the Group drew down US$60,000,000 on 3 July 2023.
This was repaid on 11 August 2023 amounting to US$60,525,541
including interests and commissions.
- On 9 August 2023 the Group drew down US$60,000,000 from the
US$200,000,000 medium-term debt facility signed in 2022 with the
Bank of Nova Scotia and BBVA Securities Inc. These funds were used
to repay other outstanding debts.
(c) Inmaculada
On 1 August 2023 the Group received the approval of the
Inmaculada MEIA "Modification of the Environmental Impact Study",
extending the permit for an additional 20 years.
Profit by operation (1)
(Segment report reconciliation) as at 30 June 2023:
Consolidation
adjustment
Group (US$000) Pallancata San Jose Inmaculada and others Total/HOC
========================================= ========== ======== ========== ============= =========
Revenue 27,013 107,934 178,811 265 314,023
========================================== ========== ======== ========== ============= =========
Cost of sales (pre consolidation) (46,265) (92,222) (116,134) 3,751 (250,870)
========================================== ========== ======== ========== ============= =========
Consolidation adjustment 224 - 3,527 (3,751) -
Cost of sales (post consolidation) (46,041) (92,222) (112,607) - (250,870)
Production cost excluding depreciation (31,163) (65,040) (73,869) - (170,072)
Depreciation in production
cost (12,714) (22,435) (36,754) - (71,903)
Workers profit sharing (441) - (733) - (1,174)
Other items (667) (419) (1,919) - (3,005)
Change in inventories (1,056) (4,328) 668 - (4,716)
========================================== ========== ======== ========== ============= =========
Gross profit (19,252) 15,712 62,677 4,016 63,153
========================================== ========== ======== ========== ============= =========
Administrative expenses - - - (20,884) (20,884)
Exploration expenses - - - (11,515) (11,515)
Selling expenses (249) (6,415) (230) - (6,894)
Other expenses, net - - - (7,954) (7,954)
========================================== ========== ======== ========== ============= =========
Operating profit/(loss) before
impairment (19,501) 9,297 62,447 (36,337) 15,906
========================================== ========== ======== ========== ============= =========
Impairment and write-off of
non-financial assets, net - - - (61,403) (61,403)
Share of post-tax losses from
associate - - - (7,968) (7,968)
Finance income - 2,628 2,628
Finance costs - - - (11,010) (11,010)
Foreign exchange loss - - - (4,268) (4,268)
========================================== ========== ======== ========== ============= =========
Profit/(loss) from continuing
operations before
income tax (19,501) 9,297 62,447 (118,358) (66,115)
========================================== ========== ======== ========== ============= =========
Income tax - - - 13,430 13,430
========================================== ========== ======== ========== ============= =========
Profit/(loss) for the period
from continuing operations (19,501) 9,297 62,447 (104,928) (52,685)
========================================== ========== ======== ========== ============= =========
1 On a post-exceptional basis.
SHAREHOLDER INFORMATION
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.
Registrars
The Registrars can be contacted as follows for information about
the AGM, shareholdings, dividends and to report changes in personal
details:
BY EMAIL
shareholderenquiries@linkgroup.co.uk
POST
Link Group, 10(th) Floor, Central Square, 29 Wellington Street,
Leeds LS1 4DL
BY TELEPHONE
(+44 (0)) 371 664 0300 ( Calls are charged at the standard
geographic rate and will vary by provider. Calls outside the United
Kingdom will be charged at the applicable international rate. Lines
are open between 9am - 5:30pm, Monday to Friday excluding public
holidays in England and Wales)
17 Cavendish Square
London
W1G 0PH
Registered in England and Wales with Company Number 5777693
[1] Revenue presented in the financial statements is disclosed
as net revenue and is calculated as gross revenue less commercial
discounts plus services revenue
(2) Please see the Financial Review on page 14 for a definition
of Adjusted EBITDA
[3] All equivalent figures calculated using the Company's 2022
average gold/silver ratio of 83:1.
4 All-in sustaining cost per (AISC) silver equivalent ounce:
Calculated before exceptional items and includes production cost
excluding depreciation, other items and workers profit sharing in
cost of sales, administrative expenses (excl. depreciation),
brownfield exploration, operating and exploration capex and
royalties and special mining tax (presented with income tax)
divided by silver or gold equivalent ounces produced, plus
commercial deductions and selling expenses divided by silver or
gold equivalent ounces sold using a gold/silver ratio of 83:1. H1
2022 Excludes non-recurrent COVID-19 expenses of $2.4 million..
[5] Calculated as total number of accidents per million labour
hours
([6]) Calculated as total number of days lost per million labour
hours.
[7] The ECO Score is an internally designed Key Performance
Indicator measuring environmental performance in one number and
encompassing numerous fronts including management of waste water,
outcome of regulatory inspections and sound environmental practices
relating to water consumption and the recycling of materials.
[8] Includes revenue from services
[9] Unit cost per tonne is calculated by dividing mine and
treatment production costs (excluding depreciation) by extracted
and treated tonnage respectively
[10] Cash costs are calculated to include cost of sales,
commercial discounts and selling expenses items less depreciation
included in cost of sales
([11]) Does not include unallocated fixed costs accumulated
during operation below planned operating capacity
[12] Includes commercial discounts from the sales of concentrate
and commercial discounts from the sale of dore
([13]) Does not include non-recurrent COVID-19 expenses of $2.4
million, unallocated fixed costs accumulated during operation below
planned operating capacity and excess absenteeism in Argentina due
to the Covid-19 pandemic of $2.0 million, and unallocated fixed
cost accumulated during operations below planning operating
capacity due to the fire in San Jose of $1.7 million
[14] Includes commercial discounts (from the sales of
concentrate) and commercial discounts from the sale of dore
[15] Calculated using a gold /silver ratio of 83:1.
[16] Royalties arising from revised royalty tax schemes
introduced in 2011 and included in income tax line
[17] Calculated using a gold silver ratio of 83:1
[18] Excludes non-recurrent COVID expenses of $2.4 million
[19] Royalties arising from revised royalty tax schemes
introduced in 2011 and included in income tax line
[20] Calculated using a gold silver ratio of 83:1
[21] Adjusted EBITDA has been presented before the effect of
significant non-cash (income)/expenses related to changes in mine
closure provisions and the write-off of property, plant and
equipment
[22] Includes pre-shipment loans and short term interest
payables
[23] Includes additions in property, plant and equipment and
evaluation and exploration assets (confirmation of resources) and
excludes increases in the expected closure costs of mine asset
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END
IR VELFBXKLLBBZ
(END) Dow Jones Newswires
September 06, 2023 02:00 ET (06:00 GMT)
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