HOCHSCHILD MINING Denver Gold Forum September 2014

Transcription

1 HOCHSCHILD MINING Denver Gold Forum September 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 Pallancata Selene 100% Inmaculada 100% PERU Crespo Ares Volcan CHILE Crespo Arcata Ares ARGENTINA 3 core underground assets in Peru & Argentina Inmaculada growth project close to completion Project pipeline spread across Peru, Chile, Argentina & Mexico Arcata San Jose 100% 51% Solid financial position Strong portfolio, operational experience, financial discipline, exciting growth 3

4 HOCHSCHILD MINING: CURRENT PRIORITIES + + TARGET FURTHER COST SAVINGS COMPLETE INMACULADA DEVELOP FURTHER GROWTH OPTIONS $270m already delivered Ongoing targeting of further opportunities Strong AISC performance in H Start of commissioning & ramp up at end 2014/early 2015 Project 68% complete Set to be lowest cost operation Crespo, Volcan & Azuca Advanced Projects Exploration pipeline spread across Peru, Chile, Argentina & Mexico Disciplined approach to M&A 4

5 CORE ASSETS: CONSISTENT PERFORMANCE Current production Main operation all-in sustaining cost Consistent production performance On track to meet 2014 production target of 21m oz (Ag Eq) 30 $/oz Ag Eq Cash optimisation programme Disciplined policy of mining close to average reserve grade no high grading Cash optimisation programme has reduced operating costs by almost $100m Main operation AISC fell by 16% in H Inmaculada Conservative cut-off and prices maintained (US$/oz Au 1,200 and US$/oz Ag 20) original assumptions (e) Inmaculada full production(e) 1 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. 2 Reserve grades taken from previous full year Proved & Probable reserve grades. 5

6 CASHFLOW OPTIMISATION PROGRAMME HAS EXCEEDED EXPECTATIONS Approx. $270m of annualised savings delivered Production costs/sustaining capex reduced by $161m versus initial 2013 guidance Exploration Operations Administration Advanced Projects Exploration costs reduced by $53 million versus initial 2013 guidance Prioritised high value Inmaculada project Admin expenses reduced by $34m versus 2012 $270m already delivered; further initiatives expected 6

7 INMACULADA Overview World class gold/silver project close to completion Located in Hochschild s Southern Peru Cluster On track to begin plant commissioning at end of Q4 Strong growth potential Feasibility Study Jan 2012: Operating Summary Production Data Initial reserve Life-of-Mine 6.3 yrs Initial resource Life-of-Mine 11.3 yrs Average Annual Gold/Silver Eq Production 194k oz/11.6m oz Operating Costs and Capex Direct Production Cost per Tonne $74/t Cash Cost (Au, co-product) $527/oz Cash Cost (Ag, co-product) $8.3/oz Pre-Production Capex $373m 7 7 Commissioning on track for Q4 2014

8 INMACULADA UPSIDE Upside outside current Angela resource base Quellopata system Inmaculada area Hochschild district land packages Selene 44moz Ag eq Pallancata 110moz Ag eq 15,915 has Inmaculada 150moz Ag eq 58,111 has Strong potential upside in a major mining district 8

9 INMACULADA PROGRESS Overall project progress Overall project 70% complete Infrastructure & Access Electricity transmission line Mine development 80% 100% 97% 20% 3% Contractor commenced plant construction in April Small delays due to poor weather in March & slow on-site recruitment Expected to catch-up in H2 Engineering 98% 2% Plant 41% complete Permitting 100% All main equipment procured and on-site EIS approval Contracts & Procurement Plant construction Overall progress 41% 70% 100% 100% 59% 30% Transmission line completed and connected to national grid Mine development now reached 15km Paste Backfill Plant: basic and detailed engineering completed and construction contract awarded Completed Remaining Commissioning on track for Q

10 PRODUCTION IMPACT Production uplift M Ag eq oz 40 Expected attributable production Core operations Ageing operations Inmaculada Crespo *2017 production forecast includes an indicative contribution from the delayed Crespo growth project Commencing 4 years of growth 10

11 MEDIUM TO LONG TERM GROWTH POTENTIAL Strong portfolio optionality Brownfield potential at all current operations Medium term expansion potential at Inmaculada Portfolio of growth options spread across the Americas 2014 greenfield activity focused on most promising options including: Riverside JV in Mexico Corina & Ibel projects in Peru Volcan (100% owned) Acquired as future strategic resource Large Chilean gold deposit Water rights purchased by Andina 9.6m oz of gold resources Crespo (100% owned) Open pit project in S.Peru Cluster Expected 2.7m Ag Eq p.a. Construction permit approved Remaining capex of $80m 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 11

12 FINANCING Secure financial position Sources and uses of cash Cash position: $226m Minority investments valued at $40m* $m Low cost Inmaculada project fully funded Remaining capex: $125m Short term lines $115m convertible bond (due Oct 14) fully funded $350m 7.75% Senior Notes issued due 2021 Undrawn medium term credit facility Securities* Term sheet signed for $100m medium term credit facility Cash Remaining Inmaculada capex Forward sale of 6moz Ag Eq oz for m Ag 2m Ag 33,000 Au 1,338/oz Liquidity 115 H expenditure Convertible bond New mine and convertible bond repayment financed 12 Does not include sales made of securities since 30 June 2014.

13 LONG EXPERIENCE IN KEY MINING JURISDICTIONS IN THE AMERICAS Peru is a Global Mining Powerhouse Mineral Global Latin America Silver 3 2 Gold 5 1 Zinc 3 1 Copper 3 2 Tin 3 1 Other 31% Peru s Global Mining Production Ranking (2012) 1 Mining Industry of Critical Importance to Peru Exports by Industry 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 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) More positive Argentinian environment Peso devaluation catching up with ongoing inflation Positive effect on mine operating costs Approximately $10m dividends remitted offshore since Nov 2013 Strong long term potential at high grade San Jose deposit Argentine Peso/US$ % ytd 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) 13

14 SUMMARY: KEY MESSAGES CASH OPTIMISATION PROGRAMME $270m delivery exceeds expectations with further savings targeted Steady production, disciplined cost control leading to encouraging financials INMACULADA Completion nearing of Hochschild s key low cost growth driver Production set to increase by over 50% FURTHER GROWTH Pipeline of opportunities spread across the Americas 14

15 23 Hanover Square, London, W1S 1JB, Tel: +44 (0) Charlie Gordon +44 (0)

16 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 & mechanised cut-and-fill mining 2013 LOM: 11.6yrs H All-in sustaining costs: $17.9/oz Current plant capacity: 2,500 t/day Located in Southern Peru Cluster Underground operation commenced in 2007 Mined using cut and fill 2013 LOM: 8.2yrs H All-in sustaining costs: $15.3/oz Current plant capacity: 3,000 t/day Located in Argentina, in Santa Cruz province Underground operation commenced in 2007 Low sulphidation with quartz sulphide veins 2013 LOM: 11.8yrs H All-in sustaining costs: $17.3/oz Current plant capacity: 1,650 t/day H Ore production (tonnes) 365, ,861 Average silver grade (g/t) Average gold grade (g/t) Silver produced (koz) 2,895 4,984 Gold produced (koz) Silver equivalent produced (koz) 3,420 5,994 Unit cost ($/t) Total cash cost ($/oz Ag co-product) All-in sustaining cost ($/oz) H Ore production (tonnes) 523,695 1,088,712 Average silver grade (g/t) Average gold grade (g/t) Silver produced (koz) 3,588 7,628 Gold produced (koz) Silver equivalent produced (koz) 4,358 9,298 Unit cost ($/t) Total cash cost ($/oz Ag co-product) All-in sustaining cost ($/oz) H Ore production (tonnes) 276, ,937 Average silver grade (g/t) Average gold grade (g/t) Silver produced (koz) 2,975 6,357 Gold produced (koz) Silver equivalent produced (koz) 5,610 12,286 Unit cost ($/t) Total cash cost ($/oz Ag co-product) All-in sustaining cost ($/oz)

17 THE SILVER MARKET A versatile metal High correlation to gold price Store of value Physical silver demand (2013: +13%) has risen significantly due to strong investor interest Supply constraints Total refined silver supply fell 2.4% to 971m oz in 2013 Mine production struggling to rise (2013:+4%); grades falling Several projects significantly delayed Small market Annual total supply approx 15% of gold availability by value Majority of supply is consumed in traditional demand sources e.g. industrial, medical, jewellery Varied industrial applications taking large amount of supply One of the best conductors of heat/electricity 2nd best reflector of light Used in majority of consumer electronics e.g. mobiles Widespread use in medical applications silver is a biocide Silver m oz Awaiting finance Bol Koni Mansur Pascua Lama Source: BMO, Company Reports Secondary supply* 25% Largest silver development projects Navidad La Pitarrilla 2013 Silver Supply Source: CPM Group, Silver Institute Delayed Under Delayed evaluation Mine production 75% Deep Glogow Resources Reserves Resource Conceptual stage stage Oroyek Metates Toromocho Cordero Mehdiabad Cumo Corani 2013 Silver Demand Coins & Bars 22% Jewellery & silverware 23% Photography 5% Conceptual Prefeasibility stage Prefeasibility Other industrial uses 47% Awaiting finance 17