Hochschild Mining plc. RBC conference December 2010

Transcription

1 Hochschild Mining plc RBC conference December 2010

2 Disclaimer Some statements contained in this presentation or in documents referred to in it are or may be forwardlooking 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. 1

3 Hochschild Mining Focus on profitable growth Mercurio Gold Resource Corp (28%) Moris (100%) Astana Farallon Josnitoro Crespo Ares (100%) Azuca Inmaculada (60%) Arcata (100%) Cerro Blanco Pallancata (60%) Sabina Current operations Victoria (60%) Advanced projects Strategic investments Valeriano Exploration projects Offices Mosquito San José (51%) Los Pinos Leading precious metals producer Control of 3 of the 12 largest primary silver mines in the world Specialising in high margin, precious metal assets in the Americas Production: 66% Ag, 34% Au Operations in Peru, Argentina and Mexico Two projects under feasibility stage Mine operators for over 40 years Flagship mine Arcata in production since production target: 26.3 moz Ag Eq Mine life of approx. 8.5 years and growing* FTSE 250 with market cap over $3.3bn Financial debt of approx $255 million as at November 2010 Cash of approx $480 million as at November 2010 Project pipeline $50 million exploration budget in 2010 Actively drilling projects in Peru, Mexico, Chile and Argentina 2 * Unaudited figures as at October 2010.

4 Strategy pillars for growth 1 Core Assets Optimise life of mine at main operations Improve productivity Arcata San Jose Pallancata 2 Exploration Land package People Incentives Budget Company makers Company maintainers 3 Corporate Development Early stage projects Significant geological potential Highly accretive Control Strategic Investments 3

5 1 Current operations ARCATA, Peru PALLANCATA, Peru SAN JOSE, Argentina Core assets 100% owned HOC 60%, IMZ 40% HOC 51%, MAI 49% ARES, Peru MORIS, Mexico Smaller, ageing mines 100% owned 100% owned 4

6 1 We are committed to maximising LOM Arcata LOM FY08 FY09 Pallancata LOM FY08 FY09 San Jose LOM 8.3 H H110 Main Operations LOM 44% FY08 FY H110 Resource life of mine at main operations is now approx 8.5 years (core assets) Reserve cut off grades applied to resources High conversion rate from resources to reserves POTENTIAL TO FURTHER INCREASE RESOURCES AT CORE ASSETS FY08 FY09 Oct 10 5

7 1 Maximising LOM at San Jose Total (Mtonnes) Ag (g/t) Au (g/t) Ag Eq (g/t) Ag Eq (moz) LOM (years) Frod Ayelen Odin Resources at 31 December Frea Kospi Ramal Kospi Micaela Antonella Sofia Total resources (Mtonnes) Ag (g/t) Au (g/t) Ag Eq (g/t) Ag Eq (moz) LOM ** (years) Existing veins Huevos Verdes Norte Huevos Verdes Centro New veins and extensions Total additions New veins Known veins Huevos Verdes Sur 0 1km 6

8 1 San Jose Cerro Negro district: More value through exploration 100% HOC 100% HOC San Jose* 3.1 moz Au eq at 12.8 g/t Au eq Approx 10k Cerro Negro (Andean) 3.5 moz Au eq at 5.8 g/t Au eq Acquired by Goldcorp in 2010: US$3.6bn 7 * Total endowment

9 2 Exploration: high quality project pipeline CURRENT OPERATIONS Arcata Pallancata San José Ares Moris Peru Argentina Mexico Chile COMPANY MAKERS COMPANY MAINTAINERS Mine Development Inmaculada Azuca Resource Development Crespo Victoria Valeriano Mercurio Sabina Drill Targets Encrucijada Mosquito La Flora Cerro Blanco Josnitoro Apacheta Corazon de Tiniebla Prospects Los Pinos Argenta Astana Farallon Ibel Careli Carmen Huacullo San Martin Generative 340,835ha Projects 498,768ha Mines 152,919ha HIGHLY PROSPECTIVE LAND PACKAGE 8

10 2 Company maintainers AZUCA, Peru Underground INMACULADA, Peru (HOC 60%, IMZ 40%) Underground Mine development 7 rigs CRESPO, Peru Open pit 1 rig Scoping stage 2 rigs CERRO BLANCO, Peru LA FLORA, Argentina MOSQUITO, Argentina Underground Underground Underground Drilling underway in rigs 1 rig 1 rig LOS PINOS, Argentina ASTANA FARALLON, Peru HUACULLO, Peru Underground Underground Underground Target preparation 9

11 2 Advanced projects: Azuca (Peru) Indicative Azuca timetable IIIQ IVQ IQ IIQ IIIQ IVQ IQ IIQ IIIQ IVQ IQ IIQ IIQ IIIQ Scoping (+/- 30%) Pre-feasibility (evaluation of activity) Feasibility (+/- 10%) EPCM Start up 100% owned project Pre feasibility study underway Significant geological potential Located in Southern Peru Cluster 10

12 2 Azuca Scoping study results Base case scenario as per scoping study Au: $1,000/oz Ag: $17/oz Au: $1,400/oz Ag: $24/oz Plant capacity: 750tpd Initial CAPEX: $75 million Avg annual Ag Eq production of 3.5 moz, approx 13% of Hochschild s anticipated 2010 production Pre Tax NPV Non discounted $m At 5% $m At 10% $m IRR % 21% 56% Significant geological potential provides opportunity to increase the size of the project Production cost: $71/tonne 11

13 2 Azuca: growing resources Yanamayo Resource development New veins Neighbouring areas: 30% HOC 70% Yamana During this year three new veins have been discovered which provides significant resource upside Total inferred resources to August 2010 of 60.8 moz Ag equivalent (5.5mt at 1.3g/t Au, 343g/t Ag) 0 2km Azuca 12

14 2 Inmaculada the transaction VALUE ACCRETIVE TRANSACTION SATISFIES KEY ACQUISITION CRITERIA EARLY STAGE PROJECTS SIGNIFICANT GEOLOGIC POTENTIAL HIGHLY ACCRETIVE CONTROL LOW ACQUISITION COST: $84 PER AU EQ OUNCE 13

15 2 Pallancata: world s #7 primary silver producer Pallancata 2009 Inmaculada estimated Pallancata's resources AVG. GRADE Ag (g/t) Au (g/t) UNIT COST PER TONNE $50 $52* CAPEX PER TONNE * total moz Ag eq ANNUAL PRODUCTION (Ag Eq oz) AVG. VEIN WIDTH 11 metres 6 metres DILUTION 13% 20% CAPACITY (tpd) 3,000 3,000 * Average figures based on estimated life of mine Inmaculada has total resources of 115 moz compared to 49 moz at Pallancata in 2006 Au: $1,000/oz Ag: $17/oz Au: $1,400/oz Ag: $24/oz Pre Tax NPV Non discounted $m 660 1,148 At 5% $m At 10% $m IRR % 41% 63% 14 14

16 2 Work has focused on one vein out of many 5km Drilled Angela Vein SIGNIFICANT GROWTH POTENTIAL m

17 2 Company makers VICTORIA, Chile Open pit MERCURIO, Mexico Open pit VALERIANO, Chile Open pit Drilling in progress 1 rig SABINA, Peru Open pit 1 rig JOSNITORO, Peru Open pit 1 rig CORAZON DE TINIEBLAS, Mexico Open pit APACHETA, Peru Open pit Drill target definition Permits and approvals underway 16

18 2 Company makers: Victoria, Chile Ownership: 60% Hochschild/40% Iron Creek Proyecto Victoria Vaquillas Target Ore geometry definition core drilling underway (1,420m of 4,600m programme) Three twin holes to prove the consistency of the difference between core and reverse circulation drilling assay results Vida Target New discovery 10.5 g/t Au & 29 g/t Ag) 4,100m of RC drilling to test new targets throughdecember 17

19 2 Company makers: Mercurio, Mexico Sombrerete Mercurio Mercurio Project Mercurio is a 100% owned, 36,388 hectare prospect located between two high grade mines in Mexico; Sombrerete and Fresnillo. Fresnillo: From 1553 to 2004 produced 1.1 boz Ag (700 g/t Ag y 0.6 g/t Au) Sombrerete: From 1545 to 2000 produced 210 moz Ag (700 g/t Ag y 1.5 g/t Au) Fresnillo 18 18

20 2 Company makers: Valeriano, Chile Option agreement signed in November 2010 Ownership: Right to increase stake to 100% Intensive drilling programme to commence in 2011 Valeriano Project Pascua-Lama (100% Barrick) +20Moz Au; +700Moz Ag POTENTIAL TO BE COMPANY MAKER El Morro (Goldcorp-NewGold) +5Moz Au; +4Blbs Cu Historical drilling results (pre 1997): 100m at 1.37 g/t Au in typical shallow high sulphidation style mineralisation starting at 19m depth 41m at 0.61 g/t Au, 12 g/t Ag and 0.30% Cu, porphyry type mineralisation starting at 70m depth 19

21 2 Other potential Company Maker targets Corazón de Tinieblas, Mexico (100% option) Guerrero Gold Belt: +10moz Au endowment Project has similar geological characteristics Field work commenced in H210 Apacheta, Peru (100% owned) Footprint >12 x 6 km silicification & advanced argillic alteration Early stage, only 1,000 surface samples & partial geological mapping 20

22 2 Copper projects Alpacocha: 100% Hochschild, 18,800 ha, four porphyry Cu/skarn targets, one target with 6 diamond drill holes (DDH), permitting approved. Drilling intercepted porphyry copper system Jasperoide: 100% Hochschild, 1,200 Ha, copper gold project, 27 DDHs from mid 90s high grade intervals, permitting advancing Antay: 100% Hochschild, 31,000 ha, Sayta porphyry copper discovery with 9 DDHs 21

23 3 Realising value LAKE SHORE GOLD Disposal of 35% stake in LSG undertaken in Q4 10 Net proceeds of approximately $454m Average selling price of C$3.62 per common 34% gain on average purchase price of C$2.70 per share Supports ongoing strategy of delivering organic growth through exploration Proceeds will be invested in expanding exploration pipeline and funding Azuca & Inmaculada to production GOLD RESOURCE CORPORATION Located in southern Mexico, 28% ownership Commercial production commenced in H110. Production reached 7,351 Au oz as at Q310 Production target of 70 koz of gold in first 12 months commercial production. Target of 15k 20k Au oz for 2010 Longer term target to triple annual production to 200 koz Au equivalent within 3 years Investment Proceeds Investment Dec 09th,

24 H110: Solid financial performance Impressive results vs H109: Record H1 revenue of $306.9m, up 33% Costs remain in line with expectations EBITDA of $150.1m, up 51% Profit before tax trebled to $87.3m Interim dividend of $0.02 per share Solid financial position cash balance of $480.9m as of November 2010 EPS MORE THAN DOUBLED TO $0.11 PER SHARE 23

25 Solid asset base + growth from 2 new operations Attributable moz New operations Current operations SOLID ASSET BASE: ~20 23 MOZ AG EQ PER YEAR FROM CURRENT OPERATIONS* 2011E 2012E 2013E 2014E 2015E NEW OPERATIONS EXPECTED TO DELIVER + 10 MOZ AG EQ FROM

26 High potential for value creation LOM increased by 44% since 2008* Azuca at pre feasibility stage Inmaculada at feasibility stage Robust project pipeline in premium mining locations Strategic investments delivering shareholder value Impressive financial results and solid balance sheet Strong precious metals prices 25 * Unaudited figures as at October Does not consider production for H210

27 Appendix CONTACT US Jane Flynn