HOCHSCHILD MINING Annual Results March 2014

Transcription

1 HOCHSCHILD MINING Annual Results March 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 MINING: MOVING AHEAD, GAINING MOMENTUM Acquisition of minorities in our lowest cost mine and flagship growth project What have we accomplished in the last year? 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 3

4 ANNUAL RESULTS 2013 Financial highlights Revenue of $622m Adjusted EBITDA of $195m EPS of ($0.15) Final dividend suspended Cashflow optimisation programme Production costs reduced by $48m vs guidance Admin costs reduced by $19m versus 2012 Sustaining capex reduced by $33m vs guidance Exploration costs reduced by $25m vs guidance Financial position Cash balance of $291m* Short term borrowings reduced to $18m* 7 year 7.75% $350m Senior Notes issued 4 Swiftly taken measures already delivered $145m of cost savings *As at 28 Feb Short terms borrowings do not include Hochschild s convertible bond.

5 HOCHSCHILD MINING Ramon Barua, CFO 12 March 2014

6 P&L $m (pre-exceptional) variance Revenue (195.8) Cost of sales (466.8) (420.3) 46.5 Gross profit (242.2) Administrative exp. (54.4) (73.0) (18.6) 2013 vs 2012 net profit reconciliation $m (pre-excep post tax) Selling exp. (28.8) (39.5) (10.7) Exploration exp. (42.9) (64.6) (21.7) Others net (11.6) (0.8) 10.8 Finance net (1.0) (10.9) (9.9) FX loss (19.8) (1.2) 18.6 Tax (45.0) (85.5) (40.5) Net (loss)/profit (42.1) (170.7) Attrib. net profit (50.3) 64.8 (115.1) EPS (0.15) 0.19 (0.34) 2012 Net profit (158.5) (16.1) Volumes Prices Depreciation & Amortization (18.6) (20.3) (42.1) Admin Exploration FX Others 2013 Net profit 6

7 EXCEPTIONAL ITEMS Main positive items ($m) Pre-tax Tax Post-tax Comment Gain on reclassification of GRC shares GRC reclassification from investment to available-for-sale financial asset Reversal of impairment Reversal of San Felipe impairment Main negative items ($m) Pre-tax Tax Post-tax Comment Impairment of investments (124.9) - (124.9) GRC ($105.3m), IMZ (US$12.9m), Other ($6.7m) Asset Impairments (104.1) 33.3 (70.8) Employee redundancy expenses (8.3) 2.0 (6.3) Impairment of San Jose ($40.9m), Azuca ($30.3m), Crespo ($29.1) & Ares ($3.8m) Redundancy benefits paid resulting from cash optimisation programme TOTAL (122.5) 35.9 (86.6) 7

8 ALL-IN SUSTAINING COSTS REDUCED BY 14% AT MAIN OPERATIONS Main operation AISC reconciliation (pre-exceptional) $/oz Ag Eq -14% AISC 2012 Arcata dore Commercial discounts Selling expenses Capex Exploration Admin AISC 2013 Cashflow optimisation programme reducing all-in sustaining costs 8

9 CASHFLOW OPTIMISATION PROGRAMME ON TRACK Approx. $200m of annualised savings targeted e e $52m $30m $54m $50m Ongoing targets Sustaining capex reduced by 18% to $147m in sustaining capex budget of $130m Production costs reduced by $48m in 2013 Main operation AISC forecast to fall by 0-5% in 2014 Exploration costs reduced by $25m to $52m in 2013 Exploration budget reduced to approx. $30m for 2014 Majority to be spent on brownfield exploration Focus on most promising greenfield projects Focus on high value Inmaculada Crespo project delayed - $80m of capex delayed Volcan & Azuca project exploration suspended Admin expenses reduced by $19m in $147m 2014e $130m 2013 $120m 2014e $200m Reduced headcount + Revised compensation schemes Professional & other admin fees minimised Reduction in Board size/directors fees/exec remuneration $145m already delivered 9

10 BALANCE SHEET ANALYSIS Movement in cash balance $m (271) ( 133 ) 359 (71) (20) (19) (18) (14) Dec 2012 Cash balance Equity Bond GRC San Felipe IMZ Project capex Working capital & others FX Transaction fees Dividends Andina 28 Feb 2014 Cash balance Growth strategy financed 10

11 CORPORATE REFINANCING COMPLETED Robust financial position Strong cash position: $291m Minority investments valued at $52.4m Inmaculada project fully funded $115m convertible bond (due Oct 14) fully funded Re-financing process completed $350m 7.75% Senior Notes issued due 2021 Short term debt reduced to $17.8m** Forward sale of 4moz Ag Eq oz for m Ag $22/oz 33,000 Au 1,338/oz 11 * Market value (as at 31 January 2014) of investments accounted for as available for sale financial assets **As at 28 Feb Does not include Hochschild s convertible bond. Growth strategy financed

12 HOCHSCHILD MINING Ignacio Bustamante, CEO 12 March 2014

13 WE MAINTAIN OUR 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 & Azuca Focused exploration budget Early stage Geological potential Highly accretive Control Keeping to our core principles 13

14 CORE ASSETS: STRONG PRODUCTION BASE Current production Resource Life-of-Mine 1 Consistent 2013 production performance at core assets 2013 production target achieved: 20.5moz (Ag Eq) Main operation AISC reduced by 14% in production target set at 21.0moz (Ag Eq) Further reductions in AISC expected in 2014 Strong brownfield results Life-of-Mine increased to 10 yrs - 11% increase at Pallancata Geological potential at main operations still very promising Focus of brownfield programme for 2014 on potential resource drilling improving LOM quality (Yrs) Conservative cut-off and prices maintained (US$/Oz Au 1,200 and US$/Oz Ag 20) 2 1 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. 14

15 INMACULADA/PALLANCATA MINORITIES ACQUISITION COMPLETED Adding more lower cost production 9 C$ IMZ share price 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 AISC Delivers production at no additional admin cost to Hochschild $/oz Ag Eq Transaction announcement Main operation All-in sustaining cost (attributable) Cash optimisation programme Inmaculada 17.1 Strong geological potential in both assets original assumptions (e) Inmaculada full production(e) Strategic acquisition completed with no integration risk 15

16 ADVANCED PROJECT: INMACULADA PROGRESSING WELL 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 begin commissioning 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 16

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

18 18 INMACULADA MINE DEVELOPMENT: OVER 10KM OF TUNNELS ALREADY DEVELOPED

19 19 INMACULADA INFRASTRUCTURE AND ENERGY REQUIREMENTS ON TRACK

20 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 20

21 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 21

22 THE HOCHSCHILD PROPOSITION Current valuation Current mkt cap: $1.2bn Cash and minority investments $0.62bn $350m 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 $850m $1.2bn Current producing assets Upside in current Hochschild valuation 22

23 SUMMARY: POSITIONED FOR GROWTH 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 CASH OPTIMSATION PROGRAMME DELIVERING 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 Corporate refinancing swiftly completed Low risk acquisition and project development expected to bolster cashflow generation and lower average costs Pipeline of opportunities spread across the Americas 23

24 46 Albemarle Street, London, W1S 4JL, United Kingdom Tel: Charlie Gordon charles.gordon@hocplc.com

25 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 2013 LOM: 11.6yrs 2013 All-in sustaining costs: $20.9/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 2013 All-in sustaining costs: $16.7/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 2013 LOM: 11.8yrs 2013 All-in sustaining costs: $19.0/oz Current plant capacity: 1,650 t/day % change Ore production (tonnes) 900, , Average silver grade (g/t) (20) Average gold grade (g/t) (11) Silver produced (koz) 4,984 5,526 (10) Gold produced (koz) (3) Silver equivalent produced (koz) 5,994 6,562 (9) Unit cost ($/t) (6) Total cash cost ($/oz Ag co-product) (12) All-in sustaining cost ($/oz) (13) % change Ore production (tonnes) 1,088,712 1,094,250 (1) Average silver grade (g/t) Average gold grade (g/t) Silver produced (koz) 7,628 7,441 3 Gold produced (koz) Silver equivalent produced (koz) 9,298 9,014 3 Unit cost ($/t) Total cash cost ($/oz Ag co-product) (10) All-in sustaining cost ($/oz) (14) % change Ore production (tonnes) 536, ,851 5 Average silver grade (g/t) Average gold grade (g/t) Silver produced (koz) 6,357 5,953 7 Gold produced (koz) Silver equivalent produced (koz) 12,286 11, Unit cost ($/t) Total cash cost ($/oz Ag co-product) (7) All-in sustaining cost ($/oz) (14) 25