SUSTAINABLE GROWTH IN THE AMERICAS BMO METALS & MINING CONFERENCE / FEBRUARY 2018

Transcription

1 SUSTAINABLE GROWTH IN THE AMERICAS BMO METALS & MINING CONFERENCE / FEBRUARY 2018

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 HOCHSCHILD AT A GLANCE Peru Argentina Chile Operational Experience A leading Latin American precious metal producer +100yrs of history and +50yrs of mining Volcan Strong portfolio San Jose Key Inmaculada flagship asset Low cost competitive position Arcata Inmaculada Pallancata Southern Peru Cluster Growth potential Brownfield potential at all operations Developing greenfield portfolio Inmaculada 3 Strong portfolio + operational experience + financial stability + growth potential= Shareholder value

4 FULL YEAR RESULTS HIGHLIGHTS Revenue of $722m (2016: $688m) EBITDA of $301m (2016: $329m) EPS of $0.08 (2016: $0.11) AISC of $12.3/oz (2016: $11.2/oz) Cash balance of $257 million (31 Dec 2016: $140m) Net debt of $103 million (31 Dec 2016: $187m) Net debt/ebitda of 0.34x (as at 31 Dec 2017) Bonds repaid - remaining debt refinanced at significantly lower rates Brownfield exploration programme starting to show positive results Recommended final dividend of cents per share ($10m) 4 Final dividend increased by 43%

5 2018 GUIDANCE OPERATION PRODUCTION AISC (operations) SUSTAINING & DEVELOPMENT CAPEX EXPLORATION Inmaculada 160,000oz Au 5.6moz Ag $ /oz Au Eq $40-45m $8m Pallancata 27,000oz Au 7.5moz Ag $ /oz Ag Eq $35m $2m San Jose 51,000oz Au (51%) 3.3moz Ag (51%) $ /oz Ag Eq $43-48m $2m Arcata 10,000oz Au 3.3moz Ag $ /oz Ag Eq $7m $4m TOTAL 514,000oz Au Eq 38.0moz Ag Eq $ /oz Au Eq $ /oz Ag Eq $ m $17m* 5 *In addition there is $10m of budgeted greenfield expenditure for 2018

6 CORE ASSETS: FIVE YEARS OF TRANSFORMATION Attributable production (m oz Ag Eq*) Silver 20.3 Gold e All-in sustaining costs ($/oz Ag Eq) e Delivering 87% production growth and 40% cost reduction 6 * e using gold/silver ratio of 74x to convert gold to silver equivalent. Ratio of 60x used for

7 GROWTH STRATEGY 1 BROWNFIELD PROGRAMME Spare capacity available LOM increases Capacity expansions 2 GREENFIELD Progressing drill-ready projects Staking opportunities Optimising early stage projects 3 JOINT VENTURES Early-stage Earn-in JVs Geological upside ROIC:12-15% Focus on exploration-led growth 7

8 Peru SOUTHERN PERU CLUSTER: COMPETITIVE ADVANTAGE 65KM MINERALISED BELT 8 Hochschild invests in districts

9 EXPLORATION: PROVING INMACULADA S GEOLOGICAL UPSIDE Potential resources Inferred resources First results from surface drilling confirming strong potential at Inmaculada 11 new veins discovered close to existing mine infrastructure Mine development added 10m Ag Eq resources in 2017 Angela vein still open along strike Current campaign to continue throughout 2018 potential & infill drilling/resource conversion 9 Additional resources and strong potential for future expansion and LOM increase

10 INMACULADA: PLANT EXPANSION POTENTIAL Significant production upside Production uplift Lower AISC Low capex estimates for expansion 4,200tpd $10m 5,000tpd $50m Initial modular construction allows relatively simple capacity increases Additional resources will be required to avoid LOM reduction Current Tonnes per day 3,500 3,850 4,200 5,000 Small investment required to materially increase capacity 10

11 EXPLORATION: CHANGING THE PICTURE AT PALLANCATA Palca Zone Pablo & Pablo Pisos discovered in 2015/2016 Drilling for potential resources at Marco-Farallon in 2018 Permits in progress for Cochaloma/Esperanza, East of Pallancata Mapping at Pablo South Geophysics and mapping of Palca completed. Permit in progress for 2019 drilling Potential resources Inferred resources Opening up a new district: reinterpreting & reinvigorating Pallancata 11

12 EXPLORATION: ARCATA 2017/18 Goldspot Discoveries Inc. hired to help identify new targets using machine learning tools 17 different targets being drilled (15,000m) for potential resources during 2018 including Goldspot Looking to add resources from Ruby vein (8,900m drilling) Aiming for exploration-led recovery in ,000 (k oz Ag Eq) 9,000 6,000 Potential resources Inferred resources 3,000 Arcata s historic production has been volatile but brownfield discoveries have often reinvigorated the mine Aiming to improve resource quality and lower long-term cost position 12

13 EXPLORATION: SAN JOSE 2017/2018 Further drilling at Aguas Vivas and other targets carried out in H drilling continuing in H vein structures identified at Aguas Vivas - potential polymetallic sulphide deposit with lead/zinc Next steps: complete potential drilling programme and carry out geometallurgical analysis Incorporation of resources scheduled for 2018 in existing operating areas Aguas Vivas Goldcorp Cerro Negro >7moz Au Eq Acquired 2010 C$3.6bn Potential resources Inferred resources 13 Testing initial results at Aguas Vivas

14 GREENFIELD PROGRAMME Deposit type Targeting skarns, epithermal veins and porphyries Peru Portfolio reshuffled with promising targets generated Five prospects selected: Fresia, Alto Ruri, Corina, Casma, Cueva Blanca Outside Peru Earn-in JVs/options from juniors with: known districts clear evidence of mineralisation straightforward targets Jurisdictions with geological potential, political & regulatory stability, e.g. Chile, US, Canada, Mexico Two deals announced Loro (Chile) 4km of veins similar to nearby El Penon outcrop on discovery Evidence of emerging epithermal vein system Cobalt Silver District (Canada) Alliance established with Cobalt Power Group Historic production of silver/cobalt in Ontario Aiming to drill prospective geology in good geography Peru Alto Ruri Casma Fresia Cueva Blanca Corina Loro (Chile) Cobalt Silver District (Ontario, Canada) Generating and advancing new greenfield opportunities 14

15 VOLCAN LONG-TERM OPTIONALITY Large gold deposit in the Maricunga region in Northern Chile Water rights secured Acquired as future strategic resource 9.5moz of gold resources Mantoverde (Audley Capital, Orion Resource) Chile La Coipa (Kinross) Cerro Maricunga (Atacama Pacific) Stable mining jurisdiction Goldcorp/Barrick/Teck advancing Nueva Union and Norte Abierto JVs Copiapo Candelaria (Lundin Mining, Sumitomo) Maricunga (Kinross) Lobo Marte (Kinross) Volcan Caspiche (Barrick/Goldcorp) Argentina Cerro Casale (Barrick/Goldcorp) Caserones (Pan Pacific Copper, Mitsui) Gold deposit Copper deposit Relincho (Goldcorp/Teck) El Morro (Goldcorp/Teck) 20km A next major gold region in Northern Chile? 15

16 DEBT REDUCTION PROGRAMME ON TRACK Balance sheet progression ($m) Net debt improved from $351m as at 31 Dec 2015 to $103m as at 31 Dec 2017 Net Debt/LTM EBITDA has improved from 5.8x to 0.34x 5.8x x Cash Gross debt Net debt/ebitda % bonds redeemed 23 Jan 2018 ($295m) Financed through cash and new borrowing facilities at lower rates: Principal Bank Term Interest Rate x 0.57x 0.54x x Jun-15 Dec-15 Jun-16 Dec-16 Jun-17 Dec-17 Interest payment reduction* ($m) $100m BBVA/Scotiabank 1yr 1.75% (BBVA) Libor+0.32% (Scotiabank) $100m Citibank/Bank of Nova Scotia 2yr (1yr grace) Libor+0.7% Dec-15 Dec-16 Dec-17 Dec 18e Dec 19e Bond repaid and remaining debt refinanced at significantly lower rates 16 *P&L pre-exceptional interest payments. Dec 2017 interest payment estimate calculated using H annualised. Dec 2018 estimate calculated assuming Jan 2018 repayment and refinancing of $295m senior notes at current available market rates.

17 AN ONGOING VALUE PROPOSITION Production track record Record in 2016 & 2017 Efficient cost structure Ongoing focus on costs and capital efficiency Brownfield growth Encouraging first results from Inmaculada Pablo ramp up Financial strength Growth programme Ramping up to full production in H Debt reduction ahead of schedule $31m of dividends since H Generating and advancing new opportunities Sustainable growth in the Americas 17

18 SUSTAINABLE GROWTH IN THE AMERICAS APPENDIX

19 P&L $m (pre-exceptional) variation Revenue Cost of sales (549.0) (487.7) (61.3) Gross profit (27.0) Administrative exp. (51.3) (48.0) (3.3) Selling exp. (11.0) (14.2) 3.2 Exploration exp. (17.2) (9.2) (8.2) Others net (1.8) 19.0 (20.8) Operating income (56.1) Finance net (20.2) (29.4) 9.2 FX loss (5.3) (1.8) (3.5) PBT (50.3) Tax (12.2) (47.6) 35.4 Net profit (14.8) Attrib. net profit (11.6) EPS (0.03) Adjusted EBITDA (28.2) Revenue increased by 5% due to record production and higher gold price Increased costs in line with guidance Patagonian port benefit elimination in Q explains reduction in other income Falling interest costs reflecting debt reduction FX loss increased due to fall in Argentinian peso in Dec 2017 Recommended final dividend of $10m Sales (k oz) % change Gold Silver 22,295 21,088 6 Avg received price ($/oz) % change Gold 1,270 1,215 5 Silver

20 BALANCE SHEET ANALYSIS EVOLUTION OF 2017 CASH BALANCE $m (2) (19) (50) (22) (14) (13) (31) (2) Dec-16 Inmaculada generation San Jose generation Pallancata generation Arcata generation Brownfield & greenfield exploration Admin Debt Interest Dividends to Share Holders Dividends to McEwen Taxes Working capital & others Dec *Cash generation is calculated as EBITDA less operational capex & exploration capex

21 COSTS Key drivers: Investment in brownfield growth programme Backfill/detox plants at Inmaculada now fully operational Narrow veins/less available stopes at Arcata High countrywide inflation in Argentina vs low currency devaluation Patagonian port benefit cancellation in Q Offset by Better than expected grades/tonnage from Pallancata Lower development costs at Pallancata (delayed to 2018) AISC split ($/oz Ag Eq ) HOC operations ($/oz Au Eq ) ($/oz Ag Eq ) Inmaculada Pallancata ($/oz Ag Eq ) ($/oz Ag Eq ) San Jose Arcata AISC of operations at $12.3/oz - at lower end of $12.2-$12.7 guidance range 21

22 CAPITAL EXPENDITURE & EXPLORATION Sustaining & development capex split (operations) ($m) Exploration split ($m) Brownfield Arcata Pallancata Inmaculada San Jose Total Greenfield Personnel & other Inmaculada Arcata Pallancata San Jose Total TOTAL capex in line with

23 CORE ASSETS: INMACULADA 100% owned Located in Southern Peru Cluster Started in ,000 ha site 4,400m ASL Underground operation Conventional/mechanised (trackless) cut-and-fill Plant capacity: 3,850tpd Product: 70% gold/30% silver dore Peru P&P Reserves (m oz Au Eq) 1.0 M&I Resources (m oz Au Eq) Production (oz) 165,070 Au 5.5m Ag Unit cost ($/t) Inferred Resources (m oz Au Eq) AISC ($/oz Au Eq) Summary Q Q Q Q Q Q Ore production (tonnes treated) 337, , , , , ,247 Average grade gold (g/t) Average grade silver (g/t) Gold produced (koz) Silver produced (koz) 1,363 1,499 1,405 1,239 1,220 1,318 Gold equivalent (koz) Hochschild s flagship low cost operation 23

24 CORE ASSETS: PALLANCATA 100% owned Located in Southern Peru Cluster Started in ,915 ha site 4,600m ASL Underground operation Conventional/mechanised (trackless) cut-and-fill Plant capacity: 3,000tpd Product: 75% silver/25% gold conc Peru P&P Reserves (m oz Ag Eq) 18.4 M&I Resources (m oz Ag Eq) Production (oz) 23,470 Au 6.0m Ag Unit cost ($/t) Inferred Resources (m oz Ag Eq) AISC ($/oz Ag Eq) Summary Q Q Q Q Q Q Ore production (tonnes treated) 125, , ,282 71,662 26,881 82,147 Average grade gold (g/t) Average grade silver (g/t) Gold produced (koz) 1,459 2,058 1, ,030 Silver produced (koz) Silver equivalent (koz) 1,905 2,624 1,912 1, ,365 Pablo vein ramping up during H

25 CORE ASSETS: SAN JOSE 51% owned. McEwen Mining has 49% Located in Santa Cruz, Argentina 50,491 ha site Started in 2007 Underground operation Conventional/mechanised (trackless) cut-and-fill Plant capacity: 1,650tpd Product: 50% silver/50% gold; 50% conc/50% dore Argentina P&P Reserves (m oz Ag Eq) 43.9 M&I Resources (m oz Ag Eq) Production (oz) 100,470 Au 6.4m Ag Unit cost ($/t) Inferred Resources (m oz Ag Eq) AISC ($/oz Ag Eq) Summary Q Q Q Q Q Q Ore production (tonnes treated) 144, , , , , ,366 Average grade gold (g/t) Average grade silver (g/t) Gold produced (koz) 1,877 1,526 1,581 1,463 1,704 1,855 Silver produced (koz) Silver equivalent (koz) 4,071 3,318 3,465 3,029 3,624 3,747 Strong cashflow improvement in

26 CORE ASSETS: ARCATA 100% owned Located in Southern Peru Cluster Started in ,000 ha site 4,600m ASL Underground operation Conventional/mechanised cut-and-fill Plant capacity: 2,000tpd (2017: 1,500tpd) Product: 80% silver/20% gold conc Peru P&P Reserves (m oz Ag Eq) 12.1 M&I Resources (m oz Ag Eq) Production (oz) 15,150 Au 4.4m Ag Unit cost ($/t) Inferred Resources (m oz Ag Eq) AISC ($/oz Ag Eq) Summary Q Q Q Q Q Q Ore production (tonnes treated) 120, , , , , ,784 Average grade gold (g/t) Average grade silver (g/t) Gold produced (koz) 1,085 1,003 1,138 1,165 1,669 1,705 Silver produced (koz) Silver equivalent (koz) 1,350 1,264 1,427 1,471 2,101 2,174 Operating for +50 years and still good geological potential 26

27 ATTRIBUTABLE METAL RESERVES AS AT 31 DECEMBER 2017 Ore reserves and mineral resources estimates Hochschild Mining plc reports its mineral resources and reserves estimates in accordance with the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves 2004 edition ( the JORC Code ). This establishes minimum standards, recommendations and guidelines for the public reporting of exploration results and mineral resources and reserves estimates. In doing so it emphasises the importance of principles of transparency, materiality and confidence. The information on ore reserves and mineral resources were prepared by or under the supervision of Competent Persons (as defined in the JORC Code). Competent Persons are required to have sufficient relevant experience and understanding of the style of mineralisation, types of deposits and mining methods in the area of activity for which they are qualified as a Competent Person under the JORC Code. The Competent Person must sign off their respective estimates of the original mineral resource and ore reserve statements for the various operations and consent to the inclusion of that information in this report, as well as the form and context in which it appears. Hochschild Mining plc employs its own Competent Person who has audited all the estimates set out in this report. Hochschild Mining Group companies are subject to a comprehensive programme of audits which aim to provide assurance in respect of ore reserve and mineral resource estimates. These audits are conducted by Competent Persons provided by independent consultants. The frequency and depth of an audit depends on the risks and/or uncertainties associated with that particular ore reserve and mineral resource, the overall value thereof and the time that has lapsed since the previous independent third-party audit. The JORC Code requires the use of reasonable economic assumptions. These include longterm commodity price forecasts (which, in the Group s case, are prepared by ex-house specialists largely using estimates of future supply and demand and long-term economic outlooks). Ore reserve estimates are dynamic and are influenced by changing economic conditions, technical issues, environmental regulations and any other relevant new information and therefore these can vary from year-to-year. Mineral resource estimates can also change and tend to be influenced mostly by new information pertaining to the understanding of the deposit and secondly the conversion to ore reserves. The estimates of ore reserves and mineral resources are shown as at 31 December 2017, unless otherwise stated. Mineral resources that are reported include those mineral resources that have been modified to produce ore reserves. All tonnage and grade information has been rounded to reflect the relative uncertainty in the estimates; there may therefore be small differences. The prices used for the reserves calculation were: Au Price: US$1,200 per ounce and Ag Price: US$16.5 per ounce. Reserve category 1 Proved and Probable (t) Arcata Proved 318, Probable 539, Total 857, Inmaculada Proved 3,124, Probable 1,564, Total 4,689, Pallancata Proved 934, Probable 368, Total 1,303, San Jose Proved 495, Probable 221, Total 717, Proved 4,872, Probable 2,694, TOTAL 7,567, Ag (g/t) Au (g/t) Ag (moz) Au (koz) Ag Eq (moz) Note: Where reserves are attributable to a joint venture partner, reserve figures reflect the Company s ownership only. Includes discounts for ore loss and dilution. 1 Operations were audited by P&E Consulting. 27

28 ATTRIBUTABLE METAL RESOURCES AS AT 31 DECEMBER 2017 (continued) Resource category Tonnes (t) Ag (g/t) Au (g/t) Ag Eq (g/t) Ag (moz) Au (koz) Ag Eq (moz) Arcata Measured 1,168, Indicated 1,933, Total 3,102, Inferred 4,129, Inmaculada Measured 3,023, Indicated 1,797, Total 4,821, Inferred 2,964, Pallancata Measured 1,331, Indicated 693, Total 2,024, Inferred 3,095, San Jose Measured 805, , Indicated 844, Total 1,649, , Inferred 446,

29 ATTRIBUTABLE METAL RESOURCES AS AT 31 DECEMBER 2017 (continued) Resource category Tonnes (t) Ag (g/t) Au (g/t) Zn (%) Pb (%) Cu (%) Ag Eq (g/t) Ag (moz) Au (koz) Ag Eq (moz) Zn (kt) Pb (kt) Cu (kt) Crespo Measured 5,211, Indicated 17,298, Total 22,509, Inferred 775, Azuca Measured 190, Indicated 6,858, Total 7,049, Inferred 6,946, Volcan Measured 105,918, , Indicated 283,763, , Total 389,681, , Inferred 41,553, Other Projects 1 Measured 1,393, Indicated 1,354, Total 2,747, Inferred 13,445, GRAND TOTAL Measured 119,042, , Indicated 314,542, , Total 433,584, , , Inferred 73,356, , Includes the Jasperoide copper project and the San Felipe zinc/silver project. The silver equivalent grade (147 g/t Ag Eq) has being calculated applying the following ratios, Cu/Ag=96.38 and Au/Ag=60 29

30 Charlie Gordon +44 (0) Cavendish Square, London, W1G 0PH, Tel: +44 (0)