Achieving Transformational Growth

Transcription

1 HOCHSCHILD MINING Achieving Transformational Growth Annual Results March 2016

2 DISCLAIMER Some statements contained in this presentation or in documents referred to in it are or may be forward-looking statements. Any forward-looking information contained in this presentation has been prepared on the basis of a number of assumptions which may prove to be incorrect. Accordingly, actual results may vary or differ from those expressed in such statements, depending on a variety of factors. Forward-looking statements speak only as of the date on which they are made. Hochschild Mining plc undertakes no obligation to update or revise any forward-looking statement, whether as a result of new information, future events or otherwise. Past performance of the Company or its shares cannot be relied on as a guide to future performance. Nothing in this presentation is to be construed as a profit forecast. This presentation has been prepared solely for informational purposes and does not constitute, or form part of or contain any invitation or offer to any person to underwrite, subscribe for, otherwise acquire, or dispose of any securities issued by Hochschild Mining plc (or any subsidiary thereof) or advise persons to do so in any jurisdiction, nor shall it, or any part of it, form the basis of or be relied on in any connection with or act as an inducement to enter into any contract or commitment therefore. The information herein is only a summary, does not purport to be complete and has not been independently verified. No representation or warranty, either express or implied, is made as to, and no reliance may be placed for any purpose whatsoever on the information or opinions contained in this document or on its accuracy or completeness and no liability whatsoever is accepted for any loss howsoever arising from any use of this document or its contents otherwise in connection therewith. This presentation has been prepared in compliance with English law and English courts will have exclusive jurisdiction over any disputes arising from or connected with this presentation. 2

3 HIGHLIGHTS 2015 MILESTONES 2016 TARGETS Completed & ramped-up low cost Inmaculada mine Inmaculada set to produce 14m oz Ag Eq Production of 27.0m oz: exceeding target Company target of 32m oz Ag Eq Reduced AISC by 26% to $12.9/oz Ag Eq Further reduction in AISC to $ /oz Ag Eq Discovered new Pablo vein at Pallancata Production at Pablo by year end Reduced net debt to $351m Targeting Net debt/ebitda of 1-2x by year end 3

4 BALANCE SHEET ANALYSIS Evolution of 2015 cash balance $m Positive cash generation: $65m* (42) (132) (105) (35) 5 84 Dec 14 Cash Balance Inmaculada Arcata Generation Pallancata Generation San José Generation Hedge Corporate & Greenfield Cash Balance before Debt, Projects & Others Debt issued Project & Preop capex Rights issue Debt repaid Interest Other Dec 15 Cash balance Operations delivering positive cash generation 4 *Cash generation is calculated as EBITDA less operational capex & exploration capex

5 P&L $m (pre-exceptional) variation Revenue (23.9) Cost of sales (403.7) (404.6) 0.9 Depreciation (135.6) (128.5) (7.1) Gross profit (22.8) Gross profit margin 14.0% 17.9% (3.9) Administrative exp. (38.1) (43.3) 5.2 Selling exp. (21.7) (28.7) 7.0 Exploration exp. (9.3) (17.3) 8.0 Others net (7.2) (13.4) 6.2 Operating income (10.9) (14.4) 3.5 Finance net (29.5) (30.9) 1.4 FX loss (5.6) (5.0) (0.6) PBT (46.0) (50.2) 4.2 Tax (20.4) (6.5) (13.9) Net (loss)/profit (66.4) (56.7) (9.7) Attrib. net profit (61.9) (55.0) (6.9) EPS (0.14) (0.13) - Adjusted EBITDA $/oz Avg: $19.0/oz Sales 29.5moz Ag Eq Average mkt silver price Sustaining/development capex Sales 31.1moz Ag Eq 2015 Avg: $15.7/oz Depreciation e 5

6 IMPAIRMENTS Asset ($m) Arcata (72.4) Pallancata (39.0) Volcan (57.1 ) Crespo (14.4 ) Azuca (12.8 ) San Felipe (10.9 ) Others (0.6 ) Total (207.1) Tax (36.5) Post tax (170.6) 6

7 ALL-IN SUSTAINING COSTS Main operation AISC (pre-exceptional)* $/oz Ag Eq AISC reduced by 26% versus 2014 Key factors: % st contribution from low cost Inmaculada mine ($1.6/oz) Positive impact of processing already mined Inmaculada stockpile Rising grades and operational efficiencies at other operations ($1.2/oz) Lower mine development capex as per revised 2015 mine plans ($0.8/oz) Local currency devaluation ($0.5/oz) Supplier renegotiation, headcount savings & others ($0.4/oz) e Over 40% cost reductions in 3 years 7 *Assuming average gold/silver ratio for 2015 of 74x. 2013/2014 assumes previous 60:1 ratio.

8 FINANCIAL POSITION: SIGNIFICANT PROGRESS MADE Liquidity position Debt ($m) Size Maturity Rate (pre tax) Rate (post tax) Bond % 5.58% Medium term loan Libor +2.6% 1.87% Short term debt Peru 75 July-Dec % 0.66% GyM / % 3.60% Debt already substantially reduced $105m paid down by end Dec 2015 Cash balance at $84m as at 31 Dec 2015 Net debt of $351m as at 31 Dec 2015 Debt amortisation profile $m Short Term Debt Peru GyM Bond Medium term loan Net debt/ebitda progression ** 5.8x 2.5x 1-2x 8 *Does not include approximately $9m of short term debt in Argentina **Assumes analyst consensus EBITDA estimates for Dec 2015/2016 Jun-15 Dec-15 Dec 2016e Targeting Net debt/ebitda of 1-2x by end 2016

9 NEAR TERM CASH FLOW PRESERVATION Hedge strategy Hedging strategy approved by Board and reviewed regularly 55% of 2016 production hedged in order to: Improve cash flow certainty Allow ongoing debt reduction Preserve capital from gold and silver price risks Hedge position $/oz 2016 oz Silver m 3.0m Gold 1,244 1,154 1,145 15k 71k 29k 9 *Assuming current gold/silver ratio

10 STRATEGIC RESPONSE TO DOWNTURN Driving Cost Reduction AISC reduced by 40%+ since 2012 $300m+ of cash savings achieved since 2013 Inmaculada, Pablo, Argentina changing cost profile Strengthening Financial Position Debt reduction driven by improving cashflow & $100m rights issue Targeting 1-2x Net debt/ebitda by year end 2016 Hedging programme providing further underpin Delivering Brownfield Potential High value, low risk Pablo development showing success of strategy Strong geological potential at all operations Future growth potential throughout Hochschild s Southern Peru cluster Achieving Transformational Growth 10

11 PRODUCTION AND COST PROFILE Moz (Ag Eq) Att production* $/Ag Eq oz (Main operation) AISC e 2016e 2017e 10.0 Silver/gold production AISC Targeting 5 consecutive years of increasing production & lowering costs 11 * e using average gold/silver ratio for 2015 of 74x to covert gold to silver equivalent. Historic ratio of 60x used for

12 2016 SPLIT BY OPERATION Production forecast* Pallancata m AISC forecast by mine 20 Arcata m San Jose (51%) 7.0m Inmaculada 14.0m Production profile 12 Q1 20% Q2 32 Moz Ag Eq Attrib Q3 *Using average gold/silver ratio for 2015 of 74x to covert gold to silver equivalent Q4 25% 25% 30% Sustaining & Spot silver 9-10 Inmaculada Post Argentina changes San Jose Arcata Cashflow underpinned by rapidly improving cost/production dynamics 10.6 Pablo Pallancata develop capex $35m $30m $30m $10m

13 2015E AISC (US$/oz) INMACULADA: FIRST QUARTILE COSTS $1,800 $1,600 $1,400 $1,200 $1,000 $ e Global gold AISC cost curve ($/oz Au) Spot gold Underground mine in Southern Peru cluster 70% Gold: 30% Silver 8.3m oz Ag Eq oz produced in m oz target for AISC of $7.3/oz Ag Eq 2016: AISC target of $9-10/oz Ag Eq Strong growth potential: LOM or expansion $600 $400 $200 $0 Inmaculada -$200 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Cumulative Production Source: RBC Capital Market estimates, GFMS 13 AISC of $9-10/oz in 2016

14 INMACULADA UPSIDE 6m average vein width Quellopata system Inmaculada area 7.12g/t Au & 369g/t Ag 6.34g/t Au & 180g/t Ag 31.55g/t Au & 199g/t Ag g/t Au & 81 g/t Ag g/t Au & 81 g/t Ag g/t Au & 153 g/t Ag g/t Au & 1,851 g/t Ag g/t Au & 531 g/t Ag g/t Au & 188 g/t Ag g/t Au & 214 g/t Ag Selected key intercepts Potential upside outside current Angela resource base 14

15 SAN JOSE High grade deposit in a rapidly improving economic environment 2015: Record 13.9m oz production (Ag Eq) Original AISC forecast of $13.0/oz for 2016; now expected to fall further to $11.5/oz Significant exploration potential in high grade district Increased number of known structures open to SW 2016: Drilling 3,000 metres to increase potential resources 15 Significant cashflow improvement expected in 2016

16 PALLANCATA Significant discovery of Pablo vein Wide, high grade vein discovered at 100% owned mine Impressive width of 12.6m - low cost production Sufficient plant capacity available Pablo increases throughput to 2,000-2,200 tpd Low capex requirements: <1km from existing developments Adjusted mine plan to transition to Pablo later in 2016 $40m NAV at spot prices 2016: 5,500m drilling programme on Pablo/Yurika veins 16 Pablo key metrics Inferred resources (kt) (unaudited) 1,251 Ag grade (g/t) 344 Au grade (g/t) 1.3 LOM production (M oz Ag Eq) 12.6 LOM AISC ($/oz Ag Eq) 10.6 (spot metal prices)* 40.5 *Spot prices: $15.5/oz Ag; $1,230/oz Au Brownfield programme delivering high value additions

17 ARCATA Historic flagship mine renewed through successful exploration 2015: 6.8m oz (Ag Eq) produced despite capacity reductions AISC reduced by 19% to $14.3/oz Discovering new vein structures Higher production grades underpinned with newly discovered higher grade resources Significant geological potential to continue mine plans in the medium term Reserves Grade (Ag Eq g/t) Tonnage (mt) Resources Grade (Ag Eq g/t) Tonnage (mt) Mined production Grade (Ag Eq g/t) Mined tonnage (mt) Strong brownfield results improving margins 17

18 REGIONAL UPSIDE: HOCHSCHILD S CLUSTER ADVANTAGE Substantial land package in Hochschild s Southern Peru cluster 65km mineralised belt with new veins being discovered Mining concession & superficial rights secured Targets within 20km of existing permitted plants Drill targets identified in : budget assigned for drilling programme Pablo discovery evidence of low cost, low risk, high value strategy Strong potential to: Increase resource base at Inmaculada & Pallancata Discover a new mine 65km mineralised belt Low cost, low risk, high reward 18

19 MEDIUM TO LONG TERM GROWTH POTENTIAL Chile: Volcan (100% owned) Acquired as future strategic resource Large Chilean gold deposit Water rights secured 9.6m oz of gold resources Peru: Crespo (100% owned) Open pit project in S.Peru Cluster Expected 2.7m Ag Eq p.a. Construction permit approved Remaining capex of $80m Peru: Azuca (100% owned) Several veins delineated Over 100m oz of silver Eq resources Geological potential in district Large overall land package Pipeline of projects spread across the Americas 19

20 LONG EXPERIENCE IN KEY MINING JURISDICTIONS IN THE AMERICAS Argentina: transforming cashflow potential Peso devaluation Approximately 40% in Dec % of operating costs incurred in pesos Material impact on cost position Port rebate Rebate from exports thru Patagonian ports restored Nov % FOB value of exports: $15 million p.a. for HOC Tax Elimination 10% export taxes on conc sales eliminated as of 12 Feb $8-10m p.a. benefit (50% production) 5% export taxes on dore sales also eliminated $4-5m p.a. Regional 1% tax on reserves eliminated Positive Peruvian environment One of the key mining jurisdictions in Americas Positive effects from ongoing Sol devaluation on operating costs Strong Peruvian government support for mining National elections in April all candidates expected to be pro-business 15 Peso 3.6 Sol Jan 15 Mar 15 May 15 Jul 15 Sep 15 Nov 15 Jan Jan 15 Mar 15 May 15 Jul 15 Sep 15 Nov 15 Jan 16 Significant cashflow improvement expected in

21 Key Catalysts ACHIEVING TRANSFORMATIONAL GROWTH Inmaculada Potential low cost capacity increases Excess plant capacity Arcata, Selene, Ares ready to generate swift value uplift Brownfield progamme Strong potential to deliver further grade/tonnage increases Argentina changes San Jose set to deliver material cashflow increase Debt reduction Spot prices will deliver 1-2x Net Debt/EBITDA by end 2016 Medium term growth Portfolio provides opportunities throughout Americas 21

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