Hochschild Mining Unearths Golden Profits in 2011, Expects Continued Production Growth in 2012

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Researched by Industrial Info Resources (Sugar Land, Texas)--Hochschild Mining plc (PINK:HCHDF) (London, England), a leading precious metals company focused on the mining and processing of gold and silver in Argentina, Mexico and Peru, benefited from a strong, albeit volatile, precious metals market in 2011, despite high inflation rates that drove up costs. Total profits were reported to be $272.34 million, a 25.7% increase from 2010.

Hochschild officials stressed that results were different when using the "adjusted EBITDA" measurement, which in this case is calculated as profit from continuing operations before net finance income and costs; foreign exchange losses; income taxes; depreciation; and non-fixed exploration costs. Using this method, profits stood at $563.4 million, a 41.65% increase from 2010.

Total revenues were reported to be $987.66 million, a 31.28% increase. The company met its full-year production target of more than 22 million silver equivalent ounces and saw the resource life of its main operations improve to just less than 10 years. Among the most beneficial transactions during the year were the selling of the silver and gold concentrate from the Pallancata mine in Peru and the San Jose mine in Argentina to Aurubis AG (Hamburg, Germany), LS-Nikko Copper Incorporated (Seoul, South Korea) and Teck Metals Limited (Vancouver, British Columbia). These three companies accounted for 19%, 18% and 15% of Hochschild's total revenues in 2011, respectively. Hochschild reported $71 million in exploration investments for the year.

"We are already at 9.7 [years], which represents a 67% increase in our life-of-mine in three years, which is a very clear indication of the very strong potential that all our core assets have, and the sustainability that they have over the long run," said Ignacio Bustamante, the chief executive officer of Hochschild, in a conference call.

Industrial Info is tracking $736 million in planned projects involving Hochschild, including the $315 million construction of the Inmaculada underground silver and gold mine and processing plant near Oyolo, Peru. Plans include a 3,500-ton-per-day processing plant that will produce 4.24 million ounces per year of silver and 124,000 ounces per year of gold, over a initial mine life of more than six years. The project is expected to kick off in May of this year and be completed in December 2013.

Industrial Info also is tracking the planned $111 million construction of the Cresco open pit, aboveground silver and gold mine near Santa Tomas, Peru. The project involves building a 6,850-ton-per-day heap leach mine to produce an average of 280,000 ounces per year of gold and 1 million ounces per year of silver, over an initial mine life of eight and a half years. The project is expected to kick off in September of this year and be completed in December 2013.

Both gold and silver revenues strengthened during the year, despite 7% declines in ounces sold:

• Revenues attributed to gold from dore bars were reported to be $144.81 million, a 15.28% increase from 2010.
• Revenues attributed to silver from dore bars were reported to be $155.12 million, a 57.59% increase from 2010.
• Revenues attributed to gold from concentrate were reported to be $134.44 million, a 13.62% increase from 2010.
• Revenues attributed to silver from concentrate were reported to be $553.21 million, a 34.98% increase from 2010.
• Revenues attributed to other operations were reported to be $84,000, a 20% decrease from 2010.

Hochschild executives are projecting a 2012 exploration budget of $90 million, which is a record for the company, and a production target of 20 million silver equivalent ounces. They also expect Hochschild to begin construction on its Inmaculada and Crespo mines, which they say will boost silver equivalent production substantially.

"In 2014, we start hitting production with our projects at Inmaculada and Crespo," Bustamante said in the conference call. "Those two projects combined give us an additional 10 million ounces, which represents an increase of 50% compared to our 2012 guidance."

For more information, visit Industrial Info's International Metals and Minerals Project Database.

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