1B_BMO Conference_FINAL.pdf

8/15/2019 1B_BMO Conference_FINAL.pdf

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HOCHSCHILD MININGBMO Metals & Mining Conference 2015

22-25 February 2015


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DISCLAIMER

2

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 theinformation 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.


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Arcata

HOCHSCHILD AT A GLANCE

Location

3

Crespo

Arcata

Ares

Volcan

MEXICO

Ares

Crespo

OperationProject

Pallancata

Selene

CHILE

ARGENTINA

PERU

Inmaculada

San Jose

Strong portfolio, operational experience, financial flexibility, exciting growth

100%

100%

100% 51%

Top 5 primary silver producer

50+ years operating experience in the Americas

3 core underground assets in Peru & Argentina

Inmaculada growth project close to completion

Project pipeline spread across the Americas

Solid liquidity position

Who are we?


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HOCHSCHILD : WHERE WE ARE NOW

Key Highlights

4

Delivering profitable growth

Full year production of 22.2moz (Ag Eq attrib) (6% above guidance) 2015 production target of 24.0m (Ag Eq attrib)

AISC reduced by up to 5% in 2014 2015 AISC expected to be $15-16/oz (Ag Eq)

Inmaculada project now 86% complete Q2 2015 processing plant commissioning

Current operation mine plans optimised Set to deliver only profitable ounces in 2015


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21.7

18.6

17.7

15-16

2012 2013 2014 (e) 2015 (e)

$/oz Ag Eq

PRESERVING CAPITAL & OPTIMISING CASHFLOW

2015

• Production target of 24.0m oz (Ag Eq)

• Sustaining capex reduced to $45m

• AISC expected at $15-16/oz (Ag Eq)

5

Main operations all-in sustaining cost Cashflow optimisation programme

• Production costs reduced by $94m vs initial 2013 guidance

• Administration costs reduced by $34m vs 2012

• Sustaining capex reduced by $67m vs initial 2013 guidance

• Exploration costs reduced by $53m vs initial 2013 guidance

• Operational efficiencies in:― Dilution control

― Supply chain management

―

Commercial negotiations― Working capital improvements

• Significant headcount reduction

• Board level rationalisation

Approx 30% expected cost reduction in 3 years


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HOCHSCHILD MINING: INMACULADA

6

Located in Hochschild’s Southern Peru ClusterWorld class gold/silverproject close to completion Strong geological upsidpotential

Hochschild’s new mine set to deliver 11-12m oz in 2016


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7

Plant commissioning set for Q2 2015

Project overview

INMACULADA: AISC OF $711/OZ

Initial reserve Life-of-Mine 6.1 yrsInitial resource Life-of-Mine 11.3 yrs

Average annual production (Au Eq) 189k oz

Average annual production (Ag Eq) 11.3m oz

Operating Costs and Capex

Production Data

Pre production capex $420m

Direct production cost per tonne $88/t

Cash cost (Au, co-product) $610/oz

Cash cost (Ag, co-product)

$9.3/ozAISC (Au Eq) 711/oz

AISC (Ag Eq) 11.8/oz

Updated Operating Summary

• Set to be Hochschild’s lowest cost operation

• Single, wide vein allows for low mining cost

• Fraction of the known resources used in current

LOM assumptions

• Already identified inferred resources within main

Angela vein almost doubles LOM

• Significant geological potential, presence of several

other veins already identified

• Inclusion of further 50% additional potential

resources - LOM would increase to 17.0yrs

GFMS/UBS Global gold AISC curve (Jan 2015)*

*Source: GFMS/UBS Global I/O®: Miner’s Price Review

(15 Jan 2015)

Inmaculada (e)


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88%

17%

87%

100%

100%

100%

100%

100%

100%

93%

12%

83%

13%

7%

Overall progress

Paste backfill, workshops, warehouses

Plant construction

Contracts & Procurement

EIS approval

Permitting

Engineering

Mine development

Electricity transmission line

Infrastructure & Access

Completed Remaining

8

8

Majority of key deliverables completed

Overall project progress

INMACULADA PROGRESS

• All engineering, permitting procurement targets complete

• Underground mine development complete

• Infrastructure targets almost complete

• Processing plant 87% complete

• 169kt of mineral already stockpiled (see below)

• Paste backfill plant construction progressing well

• Overall project 88% complete

On track to produce 6-7m oz in 2015


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INMACULADA UPSIDE

9

Quellopata system

Upside outside current Angela resource base

Inmaculada area

Further potential along

Angela vein

Selected key intercepts

[email protected] g/t Au & 1,851 g/t Ag

[email protected] g/t Au & 531 g/t Ag




3.50m@ 7.12g/t Au & 369g/t Ag

1.50m@ 6.34g/t Au & 180g/t Ag

3.12m@ 31.55g/t Au & 199g/t Ag




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INMACULADA UPSIDE

10

Consolidating a major mining district

• 60km mineralised belt with new veins discovered

• Geochemical results show Au/Ag presence atsurface

• Veins belong to same Pallancata/Inmaculada

geological system

• Only 40% of the area has been examined

• Mapping over the whole district to be completed

in 2015

• Corina: 100% earn-in with Lara Exploration Ltd.

― 4 km vein with Au values at surface - 20 km from Selene

• Strong medium term potential to increase

Inmaculada resource base and plant capacity

• Mining concession & superficial rights secured

Substantial land package in Hochschild’s Southern Peru cluster

•

Mapped: 1km x 1-10m• Inferred: 2Km

• Au: 4.7g/t

• Ag: 5 -20 g/t

Corina

NS• Veins: 1.1km x 0.6-3m

• Au: 0.4-1.7ppm

• Ag: 5-34ppm

NE• Veins: 0.7km x 0.35-1.5m

• Au: 1.34-3.34 ppm

• Ag: 4-151 ppm

NW• Veins: 0.5km x 0.8-3m

• Au: 5.7-22.62ppm

• Ag: 228-359ppm

Cochaloma veins

PROMETIDA PR• Total sample: 377

• Veins: 1.3km x 0.6– 6.2m

• Au: 4.57g/t

• Ag: 6.8-113g/t

Palca zone veins

Puquiopata Zone

Puquiopata

Zone

• Multiple veins, permit

application in progress

• Drilling expected during

2015


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PRODUCTION IMPACT

Production uplift

11

*2017 production forecast includes an indicative

contribution from the delayed Crespo growth project 3 years of growth

0

10

20

30

40

2013 2014 2015 2016

20.522.2

M Ag eq oz

24.0

29.0

InmaculadaAgeing operationsCore operations

Expected attributable production


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MEDIUM TO LONG TERM GROWTH POTENTIAL

12

Pipeline of projects spread across the Americas

Strong portfolio optionality

•Brownfield potential at all currentoperations

• Portfolio of growth options spread across

the Americas

• 2015 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

• Open pit project in S.Peru Cluster

• Expected 2.7m Ag Eq p.a.

• Construction permit approved

• Remaining capex of $80m

Crespo (100% owned)

• Several veins delineated

• Over 100m oz of silver Eq resources

• Geological potential in district• Large overall land package

Azuca (100% owned)


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Secure financial position

13

New mine financed

FINANCING

• Flexible balance sheet

• Cash position: $115m*

• Low cost Inmaculada project fully funded

―Remaining construction capex: $72m

• $350m 7.75% Senior Notes issued due 2021

• $100m medium term credit facility drawn down

• Forward sale of 6moz Ag @$17.75/oz for 2015

• Forward sale of 38,000oz Au @$1,300/oz for 2015

115

72

50

25

Cash Short term lines Remaining

project

expenditure

Inmacualda opex

& net working

capital

•As at 31 Dec 2014.

$m

Sources and uses of cash

Protecting cashflows during Inmaculada construction


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HOCHSCHILD MINING: SUMMARY

14

Project Execution• Close to completion of low cost growth driver

(AISC: $11.8/oz)

• Production set to increase by over 50%

Cost Competitiveness• Core operations optimised

• Company savings targets exceeded

Financial Efficiency• Flexible balance sheet

strategy

Delivering profitable growth

2015 AISC: $15-16/oz Key value catalyst Growth fully financed

Hochschild is entering an exciting new phase of low cost growth.....

l l d


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23 Hanover Square, London, W1S 1JB,

Tel: +44 (0) 20 3714 9040

www.hochschildmining.com

Charlie Gordon+44 (0)20 3714 9042

[email protected]

Angela vein at Inmaculada

mailto:[email protected]:[email protected]


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CORE ASSETS

• Located in Southern Peru Cluster - 4,600 MASL

•Underground operation - commenced in 1964

•Conventional & mechanised cut-and-fill mining

• 2013 LOM: 11.6yrs

•H1 2014 All-in sustaining costs: $17.9/oz

•Current plant capacity: 1,500 t/day

Arcata

16

100% owned Pallancata 100% owned

• Located in Southern Peru Cluster

•Underground operation

–

commenced in 2007•Mined using cut and fill

• 2013 LOM: 8.2yrs


•Current plant capacity:1,800 t/day

San Jose 51% owned

• Located in Argentina, in Santa Cruz province

•Underground operation

–

commenced in 2007• Low sulphidation with quartz sulphide veins

• 2013 LOM: 11.8yrs


•Current plant capacity: 1,650 t/day

2014 2013

Ore production (tonnes) 701,947 900,861

Average silver grade (g/t) 286 217

Average gold grade (g/t) 0.85 0.74

Silver produced (koz) 5,827 4,984

Gold produced (koz) 16.89 16.83

Silver equivalent produced (koz) 6,841 5,994Unit cost ($/t) n/a 81.3

Total cash cost ($/oz Ag co-product) n/a 12.7

All-in sustaining cost ($/oz) n/a 20.9

2014 2013

Ore production (tonnes) 1,051,068 1,088,712








2014 2013

Ore production (tonnes) 571,017 536,937









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17

0

400

800

1200

1600

2000

Bol Koni

Mansur

Pascua

Lama

Navidad La Pitarrilla Deep

Glogow

Oroyek Metates Toromocho Cordero Mehdiabad Cumo Corani

Resources Reserves

Largest silver development projects

Source: BMO, Company Reports

Silver m oz• 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 sourcese.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 – silveris a biocide

Mine

production75%

Secondary

supply*

25%

2013 Silver Supply

Other

industrial

uses

47%Jewellery &

silverware23%

Coins & Bars

22%

Photography

5%

2013 Silver Demand

A versatile metal

THE SILVER MARKET

Source: CPM Group, Silver Institute

Awaiting finance

DelayedDelayed

Under

evaluation Conceptual

stage

Pre-

feasibility Resource

stage

Conceptual

stagePre-

feasibility

Awaiting

finance

Documents

1B_BMO Conference_FINAL.pdf