HOCHSCHILD MINING BMO Metals & Mining Conference February 2014

Transcription

1 HOCHSCHILD MINING BMO Metals & Mining Conference February 2014

2 DISCLAIMER Some statements contained in this presentation or in documents referred to in it are or may be forward-looking statements. Actual results may differ from those expressed in such statements, depending on a variety of factors. Past performance of the Company or its shares cannot be relied on as a guide to future performance. 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, and accordingly, actual results may vary. This presentation 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 shares in Hochschild Mining plc 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. No reliance may be placed for any purpose whatsoever on the information or opinions contained in this document or on its 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. Nothing in this presentation is to be construed as a profit forecast. 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 HOCHSCHILD AT A GLANCE Location Key Highlights MEXICO Operation Project Top 5 primary silver producer 50 years operating experience in the Americas 3 core underground assets in Peru & Argentina Acquisition of IMZ completed Pallancata Selene 100% Inmaculada 100% Arcata 100% PERU Crespo Ares Volcan CHILE Crespo Arcata Ares ARGENTINA San Jose Inmaculada Advanced Project on track for completion Set to commence 4 years of production growth Project pipeline spread across Peru, Chile, Argentina & Mexico Cashflow optimisation programme swiftly executed 51% Clean portfolio, operational experience, financial discipline, exciting growth 3

4 RECENT EVENTS: MOVING AHEAD, GAINING MOMENTUM What have we accomplished in the last year? Acquisition of minorities in our lowest cost mine and flagship growth project Rapidly initiated major cashflow optimisation programme Corporate refinancing swiftly completed Focus for 2014 Delivery of high value 100% owned Inmaculada project Target further savings + in administration, operations & + exploration Manage conservative balance sheet + Target further brownfield exploration upside 4

5 CONSISTENT STRATEGY THROUGH THE CYCLE Long-term strategy model Arcata, Pallancata, San Jose 2014 target: 21.0moz (Ag Eq) Productivity/Resource quality strategy OPERATING RESPONSIBLY CORE ASSETS EXPLORATION ACQUISITIONS Advanced Project: Inmaculada Growth project: Crespo Growth project: Volcan Focused exploration budget Early stage Geological potential Highly accretive Control Keeping to our core principles 5

6 INMACULADA/PALLANCATA MINORITIES ACQUISITION COMPLETED Low risk, high potential return Transaction monitored since 2010 Consolidation of assets already controlled and operated by Hochschild 100% ownership of largest cashflow generator & flagship project Set to lower Hochschild s average cash cost Delivers production at no additional admin cost to Hochschild Strong geological potential in both assets C$ IMZ share price $/oz Ag Eq Transaction announcement Main operation All-in sustaining cost (attributable) original assumptions (e) 2014 (e) Inmaculada full production(e) Strategic acquisition completed with no integration risk 6

7 ADVANCED PROJECT: INMACULADA Overview Many more years of production potential Gold-silver project located in Southern Peru Cluster 112 km from Pallancata Expected avg annual production: 64% Gold/36% Silver On track to start operations in Q Environmental Impact Statement (EIS) and construction permit already approved Feasibility Study Jan 2012: Operating Summary Production Data Initial reserve Life of-mine Initial resource Life-of-Mine Average Annual Gold/Silver Eq Production Operating Costs and Capex Direct Production Cost per Tonne Cash Cost (Au, co-product) Cash Cost (Ag, co-product) Total 6.3 yrs 11.3 yrs 194k oz/11.6m oz $74/t $527/oz $8.3/oz Pre-Production Capex $373m Quellopata system Angela vein Selected key intercepts 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 Upside outside current Angela resource base 7

8 INMACULADA ADVANCED PROJECT Overall project progress Plant progress: Main Equipment Infrastructure & Access Electricity transmission line Mine Development (tunnels) Engineering Permitting (water, land, licenses) EIS approval Contracts & Procurement Construction (Plant, Dumps & Tailings) Overall progress Capex to date: $170m 51% 75% 87% 80% 88% 89% 100% 100% 98% Remaining capex: $200m 49% 25% 13% 20% 12% 11% Wet Vibrating Screen: Delivered May 2013 Oxygen Plant: Delivered July 2013 Slurry Samplers: Delivered Oct 2013 Primary Crusher: Delivered Oct 2013 Cyclone Cluster: Delivered Nov 2013 Agitators: Delivered Nov 2013 Flocculant Mixing System: Delivered Nov 2013 Clarifier & Thickeners: Delivered Nov 2013 Merrill Crowe Plant: Delivered Dec 2013 SAG Mill: Delivered Jan 2014 Ball Mill: Delivered Jan 2014 Lime Slaker System: Due March 2014 Completed Remaining Commissioning on track for Q

9 9 INMACULADA MINE DEVELOPMENT: OVER 10KM OF TUNNELS ALREADY DEVELOPED

10 10 INMACULADA INFRASTRUCTURE AND ENERGY REQUIREMENTS ON TRACK

11 PRODUCTION IMPACT Production uplift M Ag eq oz 40 Expected attributable production capacity Core operations Ageing operations Inmaculada Crespo *2017 production forecast includes an indicative contribution from the delayed Crespo growth project Commencing 4 years of growth 11

12 CASHFLOW OPTIMISATION PROGRAMME ON TRACK Approximately $200m of annualised savings Ongoing targets Contractor/equipment/material suppliers renegotiations Targeting mine dilution improvements Increased mine mechanisation Energy optimisation EXPLORATION OPERATIONS ADMINISTRATION ADVANCED PROJECTS Exploration budget reduced to approx. $30m for 2014 Approximately 60% to be spent on brownfield exploration Focus on most promising greenfield projects Focus on high value Inmaculada Crespo project delayed Azuca project exploration suspended Reduced headcount + Revised compensation schemes Professional & other admin fees minimised Reduction in Board size/directors fees/exec remuneration Dividend suspended Savings include costs, capex and expenses 12

13 CORE ASSETS: STRONG PRODUCTION BASE Current production Total Resources Evolution Resource Life-of-Mine 1 Consistent production performance at core assets 2013 target achieved: 20.5m ounces (Ag Eq) Contained Metal in Moz Ag Eq CAGR: 31.6% (Yrs) 2014 target set at 21.0m ounces (Ag Eq) All-in sustaining cost expected to have fallen by 12-16% in 2013 Further fall expected in 2014 Geological potential at main operations still very promising , Significant high grade discoveries in 2012/ Focus of brownfield programme shifted to improving resource base quality High reserve to resource conversion rates Conservative cut-off and prices (US$/Oz Au 1,200 and US$/Oz Ag 20) Main operations were audited by P&E Consulting. 2 Inmaculada reserves as published in the Feasibility Study released on 11 January Prices used for reserves calculation: Au: $1,100/oz and Ag: $18/oz. 13

14 GROWTH PROJECTS PIPELINE Volcan (100% owned) Strong portfolio of projects across the Americas Acquired as future strategic resource Large Chilean gold deposit Water rights purchased by Andina 9.6m oz of gold resources PERU CHILE Crespo (100% owned) Open pit project in S.Peru Cluster Expected 2.7m Ag Eq p.a. EIS already approved Remaining capex of $80m MEXICO ARGENTINA Azuca (100% owned) Several veins delineated Over 100m oz of silver Eq resources Geological potential in district Large overall land package Long term growth optionality 14

15 PERU: ATTRACTIVE MINING JURISDICTION Peru is a Global Mining Powerhouse Mining Industry of Critical Importance to Peru Peru s Global Mining Production Ranking (2012) 1 Mineral Global Latin America Silver 3 2 Gold 5 1 Zinc 3 1 Copper 3 2 Tin 3 1 Exports by Industry Other 31% Oil & Gas 11% Mining Non- Metals 2% Mining 56% Income Tax by Sector Other 6% Primary Manufact 12% Commerce 14% Other Services 32% Mining 35% Strong Peruvian Government Support for Mining Industry We are committed to maintain our economic and legal stability to continue attracting investment in the mining sector, so that investors who come to the country have the tranquillity and assurance that the rules are respected here. President Ollanta Humala (Perumin Mining Convention, Sept 2013) 1 Source: US Geological Survey 2 Source Peruvian Ministry of Energy and Mining, Boletín Estadístico de Minería, Source:Superintendencia Nacional de Aduanas de Administracion Tributaria (SUNAT) 15

16 ARGENTINA: ROAD TO IMPROVEMENT More positive environment Peso devaluation catching up with ongoing inflation Positive effect on mine operating costs Approximately $5 million in dividends remitted offshore since Nov 2013 Strong long term potential at high grade San Jose deposit Argentine Peso beginning to adjust to reality % -20% ytd 5-8% -14%

17 FINANCING Strong cash position: $347m Re-financing process completed Inmaculada project fully funded $115m convertible bond (due Oct 14) fully funded Short term debt reduced Long term debt: $350m 7.75% Senior Notes issued due Broad corporate refinancing initiative completed

18 THE HOCHSCHILD PROPOSITION Current valuation Current mkt cap: $1.2bn Cash and minority investments $0.62bn $400m Near-term upside 70% production growth Inmaculada Total Resources: 150m oz Ag Eq Crespo Total Resources: 50m oz Ag Eq Long-term upside Peru & N.Chile Azuca Total Resources: 103m oz Ag Eq Volcan Total Resources: 9.5m oz Au Exploration optionality Extensive project pipeline Investment in Latin American exploration potential $800m $1.2bn Current producing assets Upside in current Hochschild valuation 18

19 SUMMARY COMPANY HISTORY LOCAL ADVANTAGE Leading Peruvian mining house with +100 years of mining experience & 50 years of successful mining operations Cluster in rich, mining friendly southern Peru region COST COMPETITIVENESS Strong operational flexibility to adapt to diverse market conditions SOLID RESOURCE BASE Proven ability to replace resources through brownfield exploration CONSERVATIVE FINANCIAL POLICIES STRONG GROWTH POTENTIAL EXPLORATION OPTIONALITY Demonstrated access to capital markets Low risk acquisition and project development expected to bolster cashflow generation Pipeline of opportunities spread across the Americas 19

20 CORE ASSETS Arcata 100% owned Pallancata 100% owned San Jose 51% owned Located in Southern Peru Cluster - 4,600 MASL Underground operation - commenced in 1964 Conventional and mechanised (trackless) cut-and-fill mining Current LOM: 11.7yrs 2012 co-product cash cost: $14.5/oz Current plant capacity: 2,500 t/day Located in Southern Peru Cluster Underground operation commenced in 2007 Mined using cut and fill Current LOM: 7.4yrs 2012 co-product cash cost: $11.4/oz Current plant capacity: 3,000 t/day Located in Argentina, in Santa Cruz province Underground operation commenced in 2007 Low sulphidation type with quartz sulphide veins with economic silver and gold values Current LOM: 12.2yrs 2012 co-product cash cost: $14.4/oz Current plant capacity: 1,650 t/day Ore production (t) 645, , , ,861 Silver produced (koz) 8,099 6,081 5,526 4,984 Gold produced (koz) Ag Eq produced (koz) 9,649 7,124 6,562 5,994 Resource LOM (yrs) n/a Ore production (t) 1.07m 1.07m 1.09m 1.09m Silver produced (koz) 10,135 8,767 7,441 7,628 Gold produced (koz) Ag Eq produced (koz) 12,286 10,800 9,014 9,298 Resource LOM (yrs) n/a Ore production (t) 461, , , ,937 Silver produced (koz) 5,324 5,870 5,953 6,357 Gold produced (koz) Ag Eq produced (koz) 10,382 10,727 11,099 12,286 Resource LOM (yrs) n/a 20