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Hochschild’s Q3 output down, working to overcome construction delays at Peru project

23rd October 2014

By: Henry Lazenby

Creamer Media Deputy Editor: North America

  

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TORONTO (miningweekly.com) – Latin America-focused precious metals producer Hochschild Mining on Thursday said attributable output for the three months ended September 30 fell 24% to 4.8-million silver-equivalent ounces, mainly owing to no contribution from the depleted Ares mine, in Peru.

Despite output being lower than the 6.3-million silver-equivalent ounces produced in the same period last year, the epithermal-vein mining specialist said it was on track to deliver on its production forecast of 21-million silver-equivalent ounces this year.

Hochschild noted that it was also keeping its expected precious metals production guidance in place for the Inmaculada development project, in southern Peru, despite plant construction delays.

The project, which was now about 73% complete, was expected to produce between six-million and seven-million silver-equivalent ounces in 2015.

While underground mine development was proceeding ahead of schedule, Hochschild said it was working with its contractor to overcome delays in plant construction.

Inmaculada is a 20 000 ha gold/silver project located in Hochschild’s southern Peru cluster, about 210 km south-west of Cuzco and 530 km south-east of Lima. The project is also 112 km from Hochschild’s Pallancata operation.

The $370-million underground plant would process 3 500 t/d for a total average yearly production of 12-million silver-equivalent ounces from the single Angela vein.

The project was set to be the company’s lowest cost operation and would also require no additional central administration cost.

The company, which had suspended dividend payments and reduced its capital budget as part of a cost-savings drive, reported that total savings this year had exceeded the initial target of saving $200-million by $70-million.

The company pointed out that it had identified further initiatives for 2015 of about $50-million, which again focused on administration, operations and exploration savings.

Hochschild noted that its financial position remained robust with $180-million cash in the bank at the end of the period. Early this month the company had also secured a $100-million medium-term loan facility with Scotiabank Peru, which had not yet been drawn down.

During the quarter, Hochschild sold the final tranche of its holding in Gold Resource Corp of 6.3-million shares for $32.7-million, which was in line with its policy of monetising noncore investments.

Early this month, Hochschild successfully secured a $100-million medium-term loan facility at London Interbank Offered Rate plus 2.6% with Scotiabank Peru. This facility had not yet been drawn down.

The company reported an average realised gold price of $1 226/oz in the period, down from $1 417/oz a year earlier, and an average realised price of $17.13/oz for silver, which was down from $23.24/oz. In August, the company had signed a further agreement to hedge the sale of 38 000 oz of gold at $1 300/oz for 2015.

Hochschild also confirmed that all-in sustaining costs a silver-equivalent ounce were on track to fall by 0% to 5% this year.

Hochschild’s LSE-listed stock had lost 16.64% in value since the start of the year and on Thursday closed 3.17% lower at £1.19 apiece.

Edited by Tracy Hancock
Creamer Media Contributing Editor

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