13 March 2024

 

 

Hochschild Mining PLC

 

Preliminary Results

Year ended 31 December 2023

 

RESULTS FOR YEAR ENDED 31 DECEMBER 2023

 

Eduardo Landin, Chief Executive Officer of Hochschild, commented:

"I am pleased to report a robust 2023 performance. We made strong progress at our new Mara Rosa mine in Brazil, which is now in production, on time and on budget. Furthermore, we obtained a crucial permit at Inmaculada in Peru, ensuring an exciting, long-term future for the operation. We remain confident of a strong year ahead as we continue to execute our stated strategy of driving long-term production growth whilst reducing costs."

 

2023 Robust financial performance

§ Revenue of $693.7 million (2022: $735.6 million)^[1]

§ Adjusted EBITDA of $274.4 million (2022: $249.6 million)^[2] 

§ Profit before income tax (pre-exceptional) of $53.5 million (2022: $24.3 million)

§ Loss before income tax (post-exceptional) of $43.5 million (2022: $25.8 million profit)

§ Basic earnings per share (pre-exceptional) of $0.02 (2022: $0.01)

§ Basic loss per share (post-exceptional) of $0.10 (2022: earnings per share of $0.01)

§ Cash and cash equivalent balance of $89.1 million as at 31 December 2023 (2022: $143.8 million)

§ Net debt of $257.9 million as at 31 December 2023 (2022: $175.1 million)

2023 Revised guidance achieved^[3]  

§ All-in sustaining costs (AISC) ² from operations of $1,454 per gold equivalent ounce (2022: $1,448) or $17.5 per silver equivalent ounce (2022: $17.4) lower than revised full year cost guidance of $1,490-$1,580 per gold equivalent ounce ($18.0-$19.0 per silver equivalent ounce)

§ Full year attributable production of 300,749 gold equivalent ounces (25.0 million silver equivalent ounces)

2023 Exploration & Project Highlights

§ Mara Rosa project completed on time and on budget

o  First gold pour achieved on 20 February 2024

o  5.5 million hours completed on the project without any loss time accidents

§ Option recently agreed to acquire the Monte Do Carmo project in neighbouring Tocantins state, Brazil

2023 ESG KPIs

§ Lost Time Injury Frequency Rate of 0.99 (2022: 1.37)[4]

§ Accident Severity Index of 37 (2022: 93)[5]

§ Water consumption of 163lt/person/day (2022: 171lt/person/day)

§ Domestic waste generation of 0.93 kg/person/day (2022: 1.05kg/person/day)

§ ECO score of 5.76 out of 6 (2022: 5.27)[6]

2024 Outlook

§ New Mara Rosa mine set to produce 83,000-93,000 ounces of gold at AISC of $1,090-$1,120 per ounce

§ Overall production target:

o  343,000-360,000 gold equivalent ounces

§ All-in sustaining costs target:

o  $1,510-$1,550 per gold equivalent ounce

§ Total sustaining and development capital expenditure expected to be approximately $171-178 million

 

$000 unless stated	Year ended 31 Dec 2023	Year ended 31 Dec 2022	% change
Attributable silver production (koz)	9,517	11,003	(14)
Attributable gold production (koz)	186	206	(10)
Revenue	693,716	735,643	(6)
Adjusted EBITDA	274,370	249,605	10
Profit from continuing operations (pre-exceptional)	9,505	6,745	41
Profit (loss) from continuing operations (post-exceptional)	(60,033)	4,832	(1,342)
Basic earnings per share (pre-exceptional) $	0.02	0.01	100
Basic earnings (loss) per share (post-exceptional) $	(0.10)	0.01	(1,100)

________________________________________________________________________________________

 

A presentation will be held for analysts and investors at 9.30am (UK time) on Wednesday 13 March 2024 at the offices of Hudson Sandler,

25 Charterhouse Square, London, EC1M 6AE

 

The presentation and a link to the live audio webcast of the presentation can be found at the Hochschild website: 

www.hochschildmining.com

or:

https://brrmedia.news/HOC_FY23

 

To join the event via conference call, please see dial in details below:

UK Toll-Free Number: 0808 109 0700

International Dial in: +44 (0)330 551 0200

US Toll-Free Number: 866 580 3963

Canada Toll Free: 1 866 378 3566

Password: Hochschild Mining

________________________________________________________________________________________

 

Enquiries:

 

Hochschild Mining PLC

Charles Gordon                                                                                                                                                                                                                           +44 (0)20 3709 3264

Head of Investor Relations

 

Hudson Sandler

Charlie Jack                                                                                                                                                                                                                                +44 (0)20 7796 4133

Public Relations

________________________________________________________________________________________

 

Non-IFRS Financial Performance Measures

The Company has included certain non-IFRS measures in this news release. The Company believes that these measures, in addition to conventional measures prepared in accordance with IFRS, provide investors an improved ability to evaluate the underlying performance of the Company. The non-IFRS measures are intended to provide additional information and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS. These measures do not have any standardised meaning prescribed under IFRS, and therefore may not be comparable to other issuers.

 

About Hochschild Mining PLC

Hochschild Mining PLC is a leading precious metals company listed on the London Stock Exchange (HOCM.L / HOC LN) and crosstrades on the OTCQX Best Market in the U.S. (HCHDF), with a primary focus on the exploration, mining, processing and sale of silver and gold. Hochschild has over fifty years' experience in the mining of precious metal epithermal vein deposits and operates two underground epithermal vein mines: Inmaculada, located in southern Peru; and San Jose in southern Argentina, and an open pit gold mine, Mara Rosa, located in the state of Goiás, Brazil.  Hochschild also has numerous long-term projects throughout the Americas.

 

Forward looking statements

This announcement may contain forward looking statements. By their nature, forward looking statements involve risks and uncertainties because they relate to events and depend on circumstances that will or may occur in the future. Actual results, performance or achievements of Hochschild Mining PLC may, for various reasons, be materially different from any future results, performance or achievements expressed or implied by such forward looking statements.

 

The forward-looking statements reflect knowledge and information available at the date of preparation of this announcement. Except as required by the Listing Rules and applicable law, the Board of Hochschild Mining PLC does not undertake any obligation to update or change any forward-looking statements to reflect events occurring after the date of this announcement. Nothing in this announcement should be construed as a profit forecast.

 

Note

The information contained within this announcement is deemed by the Company to constitute inside information as stipulated under the Market Abuse Regulation (Regulation (EU) No.596/2014). Upon the publication of this announcement via a Regulatory Information Service, this inside information is now considered to be in the public domain.

 

LEI: 549300JK10TVQ3CCJQ89

 

 

CHAIR'S STATEMENT

2023 has proved to be a momentous year for Hochschild Mining. We are proud of the significant progress we have made in the execution of our strategy which has included securing Inmaculada's Modified Environmental Impact Assessment ("MEIA") in August and the recent completion of our first mine in Brazil. I am also delighted with the appointment of Eduardo Landin as our new CEO and believe we will be able to count on his experience and leadership qualities. We believe that the Company has reached an inflection point, with strong momentum in the business. Furthermore, this is supported by our ongoing drive to ensure our people feel safe, empowered and respected thereby creating a work environment where everyone can be at their best.

 

On the subject of making people feel safe, I am proud and humbled by the efforts of management and all across the business for achieving our best safety performance in the Company's history.  Our key performance indicators objectively demonstrate that our safety initiatives - all implemented as part of our Safety Culture Transformation Plan, are successfully embedding a safety-first culture.  We cannot use this as a reason to be complacent, and so we will continue to work on maintaining our focus on achieving our strategic goals without compromising the safety of our people.

 

The Company's commitment to managing its environmental impact has also been clearly evident during 2023. I am pleased to report that, during the year, Hochschild became the first mining company in Peru to secure a green loan. This innovative form of financing sees interest costs adjusted according to the Company's environmental performance on three ESG indicators: safety frequency index, fresh water consumption and waste disposal. It is therefore particularly gratifying to note that the Company's overall ECO Score for 2023 was the highest since its implementation in 2015 reflecting, most notably, our highest level of efficiency in terms of water consumption and waste production. The year also saw the setting of our 2030 ambitions in the area of ESG (Environmental, Social and Governance) and which, with respect to our greenhouse gas emissions, will see us on our way to achieving Net Zero by 2050.

 

In acknowledgement of our social licence to operate, our community programmes during the year focused on digital inclusion, health and nutrition, education and the promotion of socio-economic development. Examples of the education programmes organised by Hochschild include the delivery of technical skills' training through the digital centres established as part of the Future Connection initiative. In addition, we have held healthcare campaigns in conjunction with local authorities in remote communities close to the Inmaculada mine, as well as providing healthcare services as part of our "Always Healthy" programme. In seeking to promote socio-economic development, the Company has taken a varied approach, from contracting with local vegetable producers for catering supplies for the Inmaculada mine and providing training on creating digital content for female entrepreneurs in Perito Moreno, the town close to our San Jose operation. Further details on these programmes can be found in our Annual Report.

 

Strategically, Brazil has become an important jurisdiction for us with an attractive mix of economic stability, strong government support for mining, excellent infrastructure and a very experienced local talent pool. We recently achieved first gold pour at our new Mara Rosa mine which has been constructed on schedule and on budget, a rarity in the industry. We are very proud of the entire team in Goias and are confident that the ramp up period will progress smoothly. The mine will produce between 83,000 to 93,000 ounces of low-cost gold this year and we can look forward to increasing production and reducing costs in the next few years.

 

Our entry into Brazil is also yielding further business development opportunities. We recently announced that we have secured an option to acquire 100% of Cerrado Gold's Monte Do Carmo gold project in the state of Tocantins. This low-cost opportunity will build on the template established at Mara Rosa and, if exercised, provide the Company with a further leg of growth at a compelling cost profile in a mining-friendly jurisdiction. We plan to explore its geological potential, confirm the operational assumptions of the project and advance the permitting process. We will invest a limited sum before making a final acquisition decision in the next twelve months.

 

The brownfield team's exploration plans for 2023 were affected by the permitting delays at Inmaculada and consequently started later in the year in Peru. We have already had some encouraging drill results at high grade areas of Inmaculada but there is still work to be done there as well as at San Jose. We will update on the overall results during 2024. At Pallancata, work on the MEIA required for our exciting Royropata discovery was started during the year and has made good progress and we have also applied for the requisite exploration permit to drill for additional resources for the deposit. We expect this area to start yielding new low-cost production in 2027.

 

Our operational team had to respond to a degree of disruption during 2023 including local and national social disturbances in Peru at the start of the year and subsequently the ongoing impact from delays to the Inmaculada MEIA, which impacted exploration and mine development work. However, we are proud of the overall performance of all our teams during the remainder of the year and we were therefore able to meet our revised production and cost targets. In addition, with another year of strong precious metal prices, the business generated strong cashflow and was able to comfortably finance our capital commitments at Mara Rosa whilst maintaining a robust balance sheet position.

 

During the year, we saw changes in the composition of the Board with Eileen Kamerick and Nicolas Hochschild stepping down as Non-Executive Directors at the 2023 AGM and, as part of our Board succession plan, I am pleased that Joanna Pearson joined the Board on 1 October 2023. Given her extensive experience in public company reporting, Joanna will assume the Chair of the Audit Committee at the conclusion of this year's AGM. I would like to thank Jill Gardiner for chairing the Audit Committee so diligently during this interim period.

 

Finally, I would like to take the opportunity to thank Ignacio Bustamante, who stepped down from the Board after having ensured a smooth succession to Eduardo Landin following his appointment in August. Ignacio has been with the Company for over 30 years and 13 years of that as CEO and we are very grateful to him for his strong leadership, and we wish him all the best for the future.

 

Outlook

In 2023, precious metal prices continued to experience volatility albeit within a fairly tight range. Gold fell to almost $1,800 per ounce in the first quarter of the year as unexpectedly strong US economic data propelled both yields and the US dollar higher. However, it then rebounded quickly and although there was another fall in September due to stronger US interest rate expectations, the price ended the year close to record highs of $2,100 per ounce. 2024 has so far continued the price strength, so we remain confident that when combined with the new low-cost ounces set to be delivered from Mara Rosa in the first half onwards, we will continue to generate good cash flow.

 

At this time, our financial targets include the reduction of our existing debt levels in the medium-term and for this reason, we have continued to take advantage of the gold price strength and executed a number of hedges for the next few years at Inmaculada and Mara Rosa. In addition, with that in mind, the Board has decided that it would be inappropriate to restore the final dividend at this stage but will reassess the potential for capital return at the interim results in August.

 

Let me end by thanking the new leadership team and the several thousand Hochschild employees, contractors and partners who delivered for our Company and its stakeholders during the year.

Eduardo Hochschild, Chairman

12 March 2024

 

CHIEF EXECUTIVE OFFICER'S STATEMENT

I was honoured to be appointed as CEO of Hochschild Mining PLC in August 2023 and believe that a relationship with our stakeholders should be based on trust and a thorough appreciation of our key strengths. We are dedicated to transparency and responsible business practices. Our core competencies drive success and our leadership team has recently outlined a renewed strategy based around brownfield exploration, operational efficiency and disciplined capital allocation which we believe will deliver profitable growth from our key Latin American mining jurisdictions. This is supported by a focus on consistent ESG performance and the capacity to continually learn from experience.

 

The first eight months of 2023 were challenging for Hochschild as we reached the final stages of securing Inmaculada's MEIA. The delay in securing the approval unfortunately impacted our operational and exploration strategy in the short-term and will have a knock-on effect for 2024. However, with the approval secured, the Company is now in a strong position to optimise the Inmaculada mine and unlock its impressive geological potential. The approval also reaffirms our commitment to our stakeholders in the Ayacucho region and its communities as well as to Peru overall.

 

We have also recently completed construction at Mara Rosa in Brazil and are now in the ramp-up phase, a testament to our proven development expertise. I am also excited by the potential at the new Royropata deposit which we believe will add significant additional growth to the Company in the next few years.

 

ESG

Our commitment to being a responsible mining company is unqualified, and so I am very proud of the breadth of progress made during the year in the key areas of ESG focus. It gives me great pleasure that we have brought our corporate culture of social responsibility to our new operation in Brazil.  Examples of this include the Knowledge Trail at Mara Rosa which was given the Sustainable Goiás Award by the Goiás State Environment and Sustainable Development Department and our partnership to implement a solar energy project that, in time, will see the Mara Rosa operation supplied entirely by renewable energy.  Finally, I would like to echo the Chair's comments on the Company's robust overall performances in the areas of safety and environmental performance.

 

Operations

Hochschild's output in 2023, although revised by the MEIA delay at Inmaculada, continued our strong track record of meeting annual guidance. Overall attributable production was 300,749 gold equivalent ounces (25.0 million silver equivalent ounces) which was only slightly lower than the original 2023 budgeted figure of between 301,000 and 314,000 gold equivalent ounce range. This was produced at an all-in sustaining cost of $1,454 per gold equivalent ounce ($17.5 per silver equivalent ounce) which was, as expected, slightly higher than 2022 reflecting the lower grades at the declining Pallancata mine and lower production at San Jose in Argentina. Pallancata was placed on temporary care and maintenance during the fourth quarter, and this will remain until we secure the permits to mine the new large, high-quality resources discovered in the Pallancata area at Royropata.

 

Despite a degree of disruption from the local and national protests in late 2022 and early 2023, in addition to the delays to the MEIA approval, the team at Inmaculada had another strong year producing 203,849 gold equivalent ounces (2022: 226,363 ounces) at $1,287 per gold equivalent ounce. At Pallancata, production in 2023 reflected a mining area that was almost depleted with output at 2.4 million silver equivalent ounces (2022: 3.3 million ounces) at a cost of $25.3 per silver equivalent ounce. In Argentina, the San Jose mine was impacted by lower resource grades but nevertheless production was only 6% below the 2022 figure at 11.1 million silver equivalent ounces (2022: 11.8 million ounces) with costs at $18.9 per silver equivalent ounce. These costs are expected to moderate in the next few months following the recent devaluation of the currency in Argentina.

 

Projects

At the Mara Rosa project in the state of Goias in Brazil, we have made excellent progress during the year and are proud to have recently achieved first gold pour at the new operation, having completed construction on time and within budget. We are currently in the ramp-up phase and expect to reach full production in June. The mine remains on track to produce between 83,000 and 93,000 ounces in 2024 at a low all-in sustaining cost of between $1,090 and $1,120 per ounce of gold.

 

I am also excited that our business development team has recently made steps to potentially add, in the medium-term, another low-cost project in Brazil to our pipeline. The option agreement we have executed with Cerrado Gold for their Monte Do Carmo project in Tocantins state delivers an opportunity to build on our emerging Brazilian platform by adding a significant increase in reserves with strong exploration upside in a mining-friendly jurisdiction. The transaction structure limits the upfront consideration to secure an advanced development project.

 

Exploration

As mentioned by our Chair above, the brownfield programme for 2023 was also affected by the MEIA delay and only started towards the end of the year at Inmaculada and San Jose. Plans for 2024 include adding high grade resources close to the mining area at Inmaculada at the Angela North East and nearby vein structures. At San Jose we will continue with our aim to increase the life-of-mine and there will also be directional and infill drilling at Pallancata and additional brownfield work close to Mara Rosa.

 

Financial position

With production remaining robust and a healthy price environment, the Company generated good cashflow with the result that liquidity remains strong. Cash and cash equivalents of $89.1 million at the end of December (2022: $143.8 million) reflect capital expenditure of $121 million at Mara Rosa during 2023. This, along with the draw-down of $60 million from the $200 million medium-term loan facility has led to a net debt position of $257.9 million at 31 December 2023 (31 December 2022: $175.1 million).

 

Financial results

Total Group production was 10% lower than 2022 and, although this was partially offset by a 10% rise in the gold price received and a 1% rise in the silver price, revenue decreased by 6% to $693.7 million (2022: $735.4 million). All-in sustaining costs were in line with revised guidance at $1,454 per gold equivalent ounce or $17.5 per silver equivalent ounce (2022: $1,448 per gold equivalent ounce or $17.4 per silver equivalent ounce). Adjusted EBITDA of $274.4 million (2022: $249.6 million) increased by 10% versus 2022 reflecting the price rises and a recent devaluation of the currency in Argentina. Pre-exceptional earnings per share of $0.02 (2022: $0.01 per share) includes the impact of a decrease in gross profit due to lower gold and silver production, lower exploration expenses mainly due to termination of the option over Snip project and an increase in income tax mainly due to the higher profitability and currency devaluation in Argentina impacting the deferred income tax. Post-exceptional loss per share of $0.10 (2020: $0.01 earnings per share) and includes the impairment losses at the Azuca and Crespo projects of $63.3 million and the San Jose mining unit of $17.4 million; the restructuring charges in Pallancata of $9.0 million resulting from placing the operation in care & maintenance; and the impairment of the investment in Aclara Resources Inc. of $7.2 million. The net after-tax effect of exceptional items is a loss of $69.5 million.

 

Outlook

We expect attributable production in 2024 of between 343,000-360,000 gold equivalent ounces. This will be driven by: 200,000-205,000 gold equivalent ounces from Inmaculada; an attributable contribution of 60,000 - 62,000 gold equivalent ounces from San Jose; and first production from the new Mara Rosa mine of between 83,000 and 93,000 ounces. All-in sustaining costs for operations are expected at between $1,510 and $1,550 per gold equivalent ounce. This forecast reflects $45 million of capital expenditure at Inmaculada which were previously deferred due to the MEIA delay which mostly consists of the expansion of the tailings dam and the construction of a reverse osmosis plant.

 

A project capex budget of $10 million has been assigned to complete the Mara Rosa project in the first few months of the year, whilst the budget for brownfield exploration has recently been set at approximately $33 million.

 

The construction of Mara Rosa and the approval of the Inmaculada MEIA have been key milestones for Hochschild during the year. Having been in the role of CEO for over 6 months, I believe we have a compelling investment case based around the next 20 years of our Inmaculada flagship mine, near-term growth from Brazil and Peru and a focus on capital discipline which includes debt repayment, replenishing our project pipeline and capital return. 2024 has started with a much calmer social situation in Peru and we welcome the government's initiatives to promote mining in Peru worldwide. A consistent execution of our strategy gives me great confidence in our ability to generate long-term value for our shareholders, partners and stakeholders. In my first Full Year reporting as CEO, I want to be clear: I believe Hochschild is a great company, and we will constantly aim to ensure we become a great investment in a responsible manner.

Eduardo Landin, Chief Executive Officer

12 March 2024

 

OPERATING REVIEW

 

OPERATIONS

Note: 2023 and 2022 equivalent figures calculated assume the average gold/silver ratio for 2022 and 2023 of 83x.

 

Production

In 2023, Hochschild delivered attributable production of 300,749 gold equivalent ounces or 25.0 million silver equivalent ounces, in line with the upper end of the Company's revised guidance. Higher production from Inmaculada and Pallancata was partially offset by lower production in San Jose.

The overall attributable production target for 2024 is 343,000-360,000 gold equivalent ounces or 28.5-29.9 million silver equivalent ounces.

 

Total 2023 group production

	Year ended 31 Dec 2023	Year ended 31 Dec 2022
Silver production (koz)	11,683	13,596
Gold production (koz)	225.77	244.63
Total silver equivalent (koz)	30,423	33,900
Total gold equivalent (koz)	366.54	408.43
Silver sold (koz)	11,547	13,536
Gold sold (koz)	221.40	242.89

Total production includes 100% of all production, including production attributable to Hochschild's minority shareholder at San Jose.

 

Attributable 2023 group production

	Year ended 31 Dec 2023	Year ended 31 Dec 2022
Silver production (koz)	9,517	11,003
Gold production (koz)	186.09	206.01
Silver equivalent (koz)	24,962	28,102
Gold equivalent (koz)	300.75	338.57

Attributable production includes 100% of all production from Inmaculada, Pallancata and 51% from San Jose.

 

Attributable 2024 Production forecast split

Operation	Oz Au Eq	Moz Ag Eq
Inmaculada	200,000-205,000	16.6-17.0
Mara Rosa	83,000-93,000	6.9-7.7
San Jose	60,000-62,000	5.0-5.2
Total	343,000-360,000	28.5-29.9

 

Costs

All-in sustaining cost from operations in 2023 was $1,454 per gold equivalent ounce or $17.5 per silver equivalent ounce (2022: $1,448 per gold equivalent ounce or $17.4 per silver equivalent ounce), lower than revised guidance, but as anticipated, slightly higher than 2022 mainly as a result of: lower production in Inmaculada due to lower tonnage resulting from the MEIA delay; higher production costs due to a higher proportion of semi-mechanised mining methods; and higher mine development capex executed once the MEIA was approved in August. These effects were partially offset by lower costs at Pallancata as a result of lower capex and exploration expenses and lower costs in San Jose in line with the devaluation of the Argentinian peso.

The all-in sustaining cost from operations in 2024 is expected to be between $1,510 and $1,550 per gold equivalent ounce (or $18.2 and $18.7 per silver equivalent ounce).

 

2024 AISC forecast split

Operation	$/oz Au Eq	$/oz Ag Eq
Inmaculada	1,610-1,640	19.4-19.8
Mara Rosa	1,090-1,120	13.1-13.5
San Jose	1,670-1,730	20.1-20.8
Total from operations	1,510-1,550	18.2-18.7

 

Inmaculada

The 100% owned Inmaculada gold/silver underground operation is located in the Department of Ayacucho in southern Peru. It commenced operations in June 2015.

 

Inmaculada summary	Year ended 31 Dec 2023	Year ended 31 Dec 2022	% change
Ore production (tonnes)	1,137,109	1,329,177	(14)
Average silver grade (g/t)	177	156	13
Average gold grade (g/t)	4.09	3.81	7
Silver produced (koz)	5,515	5,936	(7)
Gold produced (koz)	137.40	154.85	(11)
Silver equivalent produced (koz)	16,919	18,788	(10)
Gold equivalent produced (koz)	203.85	226.36	(10)
Silver sold (koz)	5,488	5,918	(7)
Gold sold (koz)	136.66	154.93	(12)
Unit cost ($/t)	142.3	118.7	20
Total cash cost ($/oz Au co-product)	803	701	15
All-in sustaining cost ($/oz Au Eq)	1,287	1,109	16

 

Production

The Inmaculada mine delivered gold equivalent production of 203,849 ounces (2022: 226,363 ounces), higher than the revised forecast published in August 2023 and, as expected, lower than that 2022 mainly due to delayed MEIA approval impacting tonnage treated, and due to community road blockages during Q1 2023. These effects were partially offset by higher grades.

 

Costs

All-in sustaining cost was $1,287 per gold equivalent ounce (2022: $1,109 per ounce) with the increase versus 2022 explained by lower tonnage resulting from MEIA approval delay and by higher production costs due to the use of more semi-mechanised mining methods.

 

Pallancata

The 100% owned Pallancata silver/gold property is located in the Department of Ayacucho in southern Peru. Pallancata commenced production in 2007. Ore from Pallancata is transported 22 kilometres to the Selene plant for processing.

 

Pallancata summary	Year ended 31 Dec 2023	Year ended 31 Dec 2022	% change
Ore production (tonnes)	414,044	559,799	(26)
Average silver grade (g/t)	155	151	3
Average gold grade (g/t)	0.64	0.69	(7)
Silver produced (koz)	1,746	2,368	(26)
Gold produced (koz)	7.39	10.98	(33)
Silver equivalent produced (koz)	2,359	3,279	(28)
Gold equivalent produced (koz)	28.43	39.50	(28)
Silver sold (koz)	1,785	2,315	(23)
Gold sold (koz)	7.52	10.76	(30)
Unit cost ($/t)	122.9	131.9	(7)
Total cash cost ($/oz Ag co-product)	24.0	26.6	(10)
All-in sustaining cost ($/oz Ag Eq)	25.3	31.3	(19)

 

Production

In 2023, Pallancata produced 2.4 million silver equivalent ounces (2022: 3.3 million ounces), higher than the revised guidance, and as anticipated, lower than 2022 mainly due to lower tonnage, as a result of being placed on care and maintenance in November 2023.

 

Costs

All-in sustaining cost was $25.3 per silver equivalent ounce, lower than the revised guidance and significantly lower year-on-year (2022: $31.3 per ounce) due to lower exploration expenses, operating capex and lower production costs.

 

San Jose

The San Jose silver/gold mine is located in Argentina, in the province of Santa Cruz, 1,750 kilometres south west of Buenos Aires. San Jose commenced production in 2007. Hochschild holds a controlling interest of 51% and is the mine operator. The remaining 49% is owned by McEwen Mining Inc.

 

San Jose summary	Year ended 31 Dec 2023	Year ended 31 Dec 2022	% change
Ore production (tonnes)	563,013	507,189	11
Average silver grade (g/t)	270	369	(27)
Average gold grade (g/t)	5.03	5.55	(9)
Silver produced (koz)	4,422	5,292	(16)
Gold produced (koz)	80.99	78.80	3
Silver equivalent produced (koz)	11,144	11,833	(6)
Gold equivalent produced (koz)	134.26	142.57	(6)
Silver sold (koz)	4,274	5,303	(19)
Gold sold (koz)	77.23	77.20	-
Unit cost ($/t)	264.0	285.0	(11)
Total cash cost ($/oz Ag co-product)	15.9	14.4	10
All-in sustaining cost ($/oz Ag Eq)	18.9	20.1	(6)

 

Production

San Jose's production in 2023 totalled 11.1 million silver equivalent ounces (2022: 11.8 million ounces) with the decrease versus 2022 reflecting lower grades. This effect was partially offset by higher tonnage.

 

Costs

All-in sustaining costs were at $18.9 per silver equivalent ounce (2022: $20.1 per ounce) with the reduction versus 2022 mainly due to the devaluation of the peso although this was partially offset by lower grades.

 

MARA ROSA

The Mara Rosa project is progressing on schedule and budget with total project progress at 99.8% as of the end of February. On 20 February 2024, the team at the mine achieved the first gold pour with commercial production expected in June.

 

Health and Safety

Proactive corporate safety indicators are being monitored to ensure optimal working conditions for all personnel and the project has completed approximately five million hours without a loss time accident. Frequency and severity indices for 2023 were 0.54 and 2, respectively, both better than corporate goals.

 

Procurement

Main plant reagents and materials, including cyanide, balls for the mills, lime and activated carbon have been purchased and deliveries are on track to be in time for the start of operations.

 

Mine and Pre-Stripping

Total pre-stripping volume was 2,091 kt of which there is approximately 136.5 kt to guarantee availability of mineral for the ramp-up and operation. Waste dumps and ore stockpiles are completed and in operation.

 

Processing plant

The crushing and screening areas were commissioned during Q4 whilst commissioning began of the thickener and ball mill.  Full project commissioning and the beginning of the project's ramp-up is expected during the first quarter.

 

Infrastructure

Construction of the dry stack was completed in December 2023 and the Pequi water reservoir is fully operational and filled to 95% capacity with the water required for 2024 operations.

 

The administrative buildings are fully operational including offices, cafeteria, first aid and nursery areas.

 

Permitting & Sustainability

The project received the Operating License from the environmental agency of Goiás SEMAD in February 2024.

 

The Company organised three festivities to celebrate Children's Day in Mara Rosa and Amaralina with over 3,100 participants and on 2 November, a meeting with the local communities from both towns was held with the objective of updating them on project progress and strengthening local relationships and dialogue.

 

DEVELOPMENT PROJECT: VOLCAN

On 10 August 2023, Hochschild issued an update on the Volcan Gold Project ("Volcan") which detailed a number of key milestones that have been achieved at the 100%-owned project (the "Project") located in the Maricunga Region of Chile: 

§  Created a new Canadian company, Tiernan Gold Corp ("Tiernan"), as a subsidiary of Hochschild Mine Holdings UK

§  Restructured the Project to be owned by Tiernan

§  Completed an updated Mineral Resource Estimate to Canadian NI 43-101 standards, which outlined:

o  463.3 Mt of Measured and Indicated Resources at 0.66 g/t gold for 9.8 million ounces of gold contained

o  75.0 Mt of Inferred Resources at 0.516 g/t gold for an additional 1.2 million ounces of gold contained

§  Completed a positive Preliminary Economic Assessment to Canadian NI 43-101 standards, which highlighted:

o  22mtpa open-pit, heap leach operation with a 14 year mine life

o  Average of 332,000 ounces per year of gold production for first 10 years of operations with 3.8 million ounces produced over the estimated mine life

o  Initial capital cost of $900 million, with life of mine sustaining capital an additional $276 million

o  Cash costs of $921/oz and All-in-Sustaining-Costs of $1,002/oz, life of mine

o  NPV (5%) = $826 million and IRR = 21% at $1,800/oz gold price, after-tax

§  Executed an agreement for a $15 million financing with the sale of a new 1.5% NSR royalty on the Project to Franco-Nevada

§  Engaged Canaccord Genuity to evaluate strategic alternatives for Tiernan

Further details can be found in the separate press release (14 August 2023) on the Company's website at hochschildmining.com

 

BROWNFIELD EXPLORATION

The brownfield programme for 2023 was delayed until the approval of the Inmaculada MEIA in August.

 

Inmaculada

In Q4 2023, the Company performed 900m of potential drilling, intercepting two new structures, Nicolas and Andrea, which will be further investigated in 2024.

 

Vein	Results (potential drilling)
Nicolas	IMS23-207: 1.8m @ 27.0g/t Au & 5,768g/t Ag
Andrea	IMS23-207: 3.3m @ 19.4g/t Au & 79g/t Ag
Saly	IMS23-207: 2.2m @ 3.2g/t Au & 90g/t Ag

 

San Jose

At San Jose, the brownfield team carried out 906m of potential drilling and 4,420m of resource drilling in the Suspiro, Sigmoid Molle, Guadaluoe veins with the key vein expected to be the Suspira quartz sulphide vein which has high silver grades.

 

Vein	Results (potential/resource drilling)
Suspira	SJD-2737: 1.2m @ 17.4g/t Au & 2,477g/t Ag
Tensiona EW	SJM-647: 1.0m @ 7.7g/t Au & 938g/t Ag
RML861V	SJD-2728: 1.1m @ 6.9g/t Au & 615g/t Ag
Sig Molle	SJM-647: 2.8m @ 5.7g/t Au & 656g/t Ag
RML861w	SJD-2731: 1.3m @ 5.5g/t Au & 8g/t Ag

 

The plan for the first quarter of 2024 is to perform 1,500m of potential drilling at San Jose in the Telken North and Cerro Saavedra areas.

 

FINANCIAL REVIEW

The reporting currency of Hochschild Mining PLC is U.S. dollars. In discussions of financial performance, the Group removes the effect of exceptional items, unless otherwise indicated, and in the income statement results are shown both pre and post such exceptional items. Exceptional items are those items, which due to their nature or the expected infrequency of the events giving rise to them, are disclosed separately on the face of the income statement to enable a better understanding of the financial performance of the Group and to facilitate comparison with prior years.

 

Revenue

Gross revenue [7]

Gross revenue decreased by 5% to $710.6 million in 2023 (2022: $751.3 million) due to lower silver and gold production. Output was mainly impacted by the delay in the approval of the MEIA at Inmaculada, scheduled lower production at Inmaculada and Pallancata, and lower grades in San Jose. This was partially offset by higher average realised gold and silver prices.            

 

Gold

Gross revenue from gold in 2023 increased to $437.0 million (2022: $435.1 million) due to the 10% increase in the average realised gold price partially offset by lower gold produced at Inmaculada and Pallancata.

 

Silver

Gross revenue from silver decreased in 2023 to $273.0 million (2022: $315.5 million) mainly due to lower silver produced across all operations; partially offset by the 1% increase in the average realised silver price. 

 

Gross average realised sales prices

The following table provides figures for average realised prices (before the deduction of commercial discounts) and ounces sold for 2023 and 2022:

 

Average realised prices	Year ended 31 Dec 2023	Year ended 31 Dec 2022
Silver ounces sold (koz)	11,547	13,536
Avg. realised silver price ($/oz)	23.6	23.3
Gold ounces sold (koz)	221.40	242.89
Avg. realised gold price ($/oz)	1,974	1,791

 

29,250 gold ounces of 2023 production were hedged at $2,047 per ounce and 3.3 million silver ounces of 2023 production were hedged at $25 per ounce, boosting the realised price. On 12 April 2023, the Company hedged 27,600 ounces of 2024 gold production at $2,100 per ounce, on 19 June 2023 the Company hedged 150,000 ounces of 2025, 2026 and 2027 gold production (50,000 per year) at $2,117, $2,167 and $2,206 per ounce respectively, and on 14 December 2023 the Company hedged 100,000 ounces of 2024 gold production using gold collars with a strike put of $2,000 per ounce and a strike call of $2,252 per ounce.

 

Commercial discounts

Commercial discounts refer to refinery treatment charges, refining fees and payable deductions for processing concentrate, and are deducted from gross revenue on a per tonne basis (treatment charge), per ounce basis (refining fees) or as a percentage of gross revenue (payable deductions). In 2023, the Group recorded commercial discounts of $16.9 million (2022: $15.7 million). The ratio of commercial discounts to gross revenue in 2023 was 2%, in line with 2022.

 

Net revenue

Net revenue was $693.7 million (2022: $735.6 million), comprising net gold revenue of $429.9 million (2022: $429.8 million) and net silver revenue of $263.3 million (2022: $305.2 million). In 2023, gold accounted for 62% and silver 38% of the Company's consolidated net revenue (2022: gold 58% and silver 42%).

 

Reconciliation of gross revenue by mine to Group net revenue

$000	Year ended 31 Dec 2023	Year ended 31 Dec 2022	% change
Silver revenue
Inmaculada	129,456	137,033	(6)
Pallancata	43,380	62,986	(31)
San Jose	100,212	115,477	(13)
Commercial discounts	(9,779)	(10,334)	(5)
Net silver revenue	263,269	305,162	(14)
Gold revenue
Inmaculada	267,188	276,895	(4)
Pallancata	14,985	19,459	(23)
San Jose	154,832	138,782	12
Commercial discounts	(7,123)	(5,335)	34
Net gold revenue	429,882	429,801	-
Other revenue	565	680	(17)
Net revenue	693,716	735,643	(6)

 

Cost of sales

Total cost of sales was $508.2 million in 2023 (2022: $527.6 million). The direct production cost excluding depreciation was lower at $363.0 million (2022: $384.2 million) mainly due to lower production in Inmaculada and Pallancata, partially offset by a scheduled higher proportion of conventional mining methods across all mining units. Depreciation in production cost increased to $144.8 million (2022: $137.7 million) mainly due to higher future capex depreciation in Pallancata (Royropata) and the impact on depreciation of the reversal in impairment loss at Pallancata of $15.5 million as at 31 December 2022, partially offset by lower depreciation in Inmaculada due to lower production. Fixed costs incurred during total or partial production stoppages were $3.0 million in 2023 (2022: $8.0 million).

 

$000	Year ended 31 Dec 2023	Year ended 31 Dec 2022	% change
Direct production cost excluding depreciation	362,980	384,183	(5)
Depreciation in production cost	144,812	137,747	5
Other items and workers profit sharing	1,862	3,321	(44)
Fixed costs during operational stoppages and reduced capacity	3,314	8,023	(59)
Change in inventories	(4,754)	(5,631)	(16)
Cost of sales	508,214	527,643	(4)

 

Fixed costs during operational stoppages and reduced capacity

$000	Year ended 31 Dec 2023	Year ended 31 Dec 2022	% Change
Personnel	3,032	4,498	(33)
Third party services	865	3,090	(72)
Supplies	34	146	(77)
Depreciation and amortisation	-	2	-
Others	(617)	287	(315)
Cost of sales	3,314	8,023	(59)

 

Unit cost per tonne

The Company reported unit cost per tonne at its operations of $171.1 per tonne in 2023, an 8% increase versus 2022 ($158.7 per tonne) resulting from lower treated tonnage in Inmaculada and Pallancata, and a scheduled higher proportion of conventional mining methods across all mining units.

 

Unit cost per tonne by operation (including royalties)[8]:

Operating unit ($/tonne)	Year ended 31 Dec 2023	Year ended 31 Dec 2022	% change
Peru	137.0	122.9	11
Inmaculada	142.3	118.7	20
Pallancata	122.9	131.9	(7)
Argentina
San Jose	264.0	285.0	(7)
Total	171.1	158.7	8

 

Cash costs

Cash costs include cost of sales, commercial deductions and selling expenses before exceptional items, less depreciation included in cost of sales.

 

Cash cost reconciliation[9]

Year ended 31 Dec 2023

$000 unless otherwise indicated	Inmaculada	Pallancata	San Jose	Total
(+) Cost of sales[10]	234,627	72,118	197,399	504,144
(-) Depreciation and amortisation in cost of sales	(75,306)	(18,964)	(48,901)	(143,171)
(+) Selling expenses	533	461	13,868	14,862
(+) Commercial deductions[11]	3,057	4,319	12,923	20,299
Gold	2,079	891	6,440	9,410
Silver	978	3,428	6,483	10,889
Group cash cost	162,911	57,934	175,289	396,134
Gold	267,188	14,094	148,600	429,882
Silver	129,456	39,952	93,861	263,269
Revenue	396,644	54,046	242,461	693,151
Ounces sold
Gold	136.7	7.5	77.2	221.4
Silver	5,488	1,785	4,274	11,547
Group cash cost ($/oz)
Co product Au	803	2,010	1,391	1,110
Co product Ag	9.7	24.0	15.9	13.0
By product Au	238	1,936	970	551
By product Ag	(19.4)	24.1	4.8	(3.7)

 

Year ended 31 Dec 2022

$000 unless otherwise indicated	Inmaculada	Pallancata	San Jose	Total
(+) Cost of sales[12]	239,277	83,926	193,840	517,043
(-) Depreciation and amortisation in cost of sales	(80,633)	(8,671)	(47,123)	(136,427)
(+) Selling expenses	796	622	12,614	14,032
(+) Commercial deductions[13]	2,957	4,879	11,254	19,090
Gold	2,131	969	4,630	7,730
Silver	826	3,910	6,624	11,360
Group cash cost	162,397	80,756	170,585	413,738
Gold	276,895	18,490	134,416	429,801
Silver	137,033	59,076	109,053	305,162
Revenue	413,928	77,566	243,469	734,963
Ounces sold
Gold	154.9	10.8	77.2	242.9
Silver	5,918	2,315	5,303	13,536
Group cash cost ($/oz)
Co product Au	701	1,789	1,220	996
Co product Ag	9.1	26.6	14.4	12.7
By product Au	158	1,652	711	400
By product Ag	(19.7)	26.5	6.0	(1.8)

 

Co-product cash cost per ounce is the cash cost allocated to the primary metal (allocation based on proportion of revenue), divided by the ounces sold of the primary metal. By-product cash cost per ounce is the total cash cost minus revenue and commercial discounts of the by-product divided by the ounces sold of the primary metal.

 

All-in sustaining cost reconciliation[14]

All-in sustaining cash costs per silver equivalent ounce

 

Year ended 31 Dec 2023

$000 unless otherwise indicated	Inmaculada	Pallancata	San Jose	Main operations	Corporate & others	Total
(+) Direct production cost excluding depreciation	162,570	49,940	150,470	362,980	-	362,980
(+) Other items and workers profit sharing in cost of sales	1,373	489	-	1,862	-	1,862
(+) Operating and exploration capex for units[15]	86,031	2,458	40,834	129,323	57	129,380
(+) Brownfield exploration expenses	1,371	1,070	8,233	10,674	3,171	13,845
(+) Administrative expenses (excl depreciation)	3,498	491	5,433	9,422	36,507	45,929
(+) Royalties and special mining tax[16]	3,978	542	-	4,520	2,278	6,798
Sub-total	258,821	54,990	204,970	518,781	42,013	560,794
Au ounces produced	137,399	7,390	80,985	225,774	-	225,774
Ag ounces produced (000s)	5,515	1,746	4,422	11,683	-	11,683
Ounces produced (Ag Eq 000s oz)	16,919	2,359	11,144	30,422	-	30,422
All-in sustaining costs per ounce produced ($/oz Ag Eq)	15.3	23.3	18.4	17.1	1.4	18.4
(+) Commercial deductions (+) Other items[17]	3,057 -	4,319 -	12,923 -21,164	20,299 -21,164	- -	20,299 -21,164
(+) Selling expenses	533	461	13,868	14,862	-	14,862
Sub-total	3,590	4,780	5,627	13,997	-	13,997
Au ounces sold	136,661	7,516	77,227	221,404	-	221,404
Ag ounces sold (000s)	5,488	1,785	4,274	11,547	-	11,547
Ounces sold (Ag Eq 000s oz)	16,831	2,409	10,684	29,924	-	29,924
Sub-total ($/oz Ag Eq)	0.2	2.0	0.5	0.5	-	0.5
All-in sustaining costs per ounce sold ($/oz Ag Eq)	15.5	25.3	18.9	17.5	1.4	18.9
All-in sustaining costs per ounce sold ($/oz Au Eq)	1,287	2,099	1,570	1,454	115	1,569

 

Year ended 31 Dec 2022

$000 unless otherwise indicated	Inmaculada	Pallancata	San Jose	Main Operations	Corporate & others	Total
(+) Direct production cost excluding depreciation	156,551	75,472	152,160	384,183	-	384,183
(+) Other items and workers profit sharing in cost of sales	1,777	1,544	-	3,321	-	3,321
(+) Operating and exploration capex for units[18]	78,176	12,340	47,604	138,120	584	138,704
(+) Brownfield exploration expenses	2,946	6,000	7,700	16,646	2,537	19,183
(+) Administrative expenses (excl depreciation)	3,893	730	6,242	10,865	41,265	52,130
(+) Royalties and special mining tax[19]	4,032	756	-	4,788	2,658	7,446
Sub-total	247,375	96,842	213,706	557,923	47,044	604,967
Au ounces produced	154,846	10,977	78,802	244,625	-	244,625
Ag ounces produced (000s)	5,936	2,368	5,292	13,596		13,596
Ounces produced (Ag Eq 000s oz)	18,788	3,279	11,833	33,900	-	33,900
All-in sustaining costs per ounce produced ($/oz Ag Eq)	13.2	29.5	18.1	16.5	1.4	17.8
(+) Commercial deductions	2,957	4,879	11,254	19,090	-	19,090
(+) Selling expenses	796	622	12,614	14,032	-	14,032
Sub-total	3,753	5,501	23,868	33,122	-	33,122
Au ounces sold	154,930	10,759	77,204	242,893	-	242,893
Ag ounces sold (000s)	5,918	2,315	5,303	13,536	-	13,536
Ounces sold (Ag Eq 000s oz)	18,777	3,208	11,711	33,696	-	33,696
Sub-total ($/oz Ag Eq)	0.2	1.7	2.0	1.0	-	1.0
All-in sustaining costs per ounce sold ($/oz Ag Eq)	13.4	31.1	20.1	17.4	1.4	18.8
All-in sustaining costs per ounce sold ($/oz Au Eq)	1,109	2,594	1,668	1,448	115	1,563

 

Administrative expenses

Administrative expenses were lower at $47.2 million (2022: $54.2 million) mainly due to lower bonus provision and professional fees.

 

Exploration expenses

In 2023, exploration expenses decreased to $21.3 million (2022: $56.8 million) mainly due to lower exploration expenses at the Snip project of $2.2 million due to the termination of the option (2022: $19.6 million), lower exploration expenses at Pallancata of $1.1 million (2022: $6.0 million), lower personnel expenses of $5.5 million (2022: $10.6 million), lower prospects expenditure in USA of $0.1 million (2022: $4.3 million), and lower exploration expenses at Inmaculada of $1.4 million (2022: $2.9 million). 

 

In 2022, the Group capitalised $0.7 million of its brownfield exploration, which mostly relates to costs incurred converting potential resources to the Inferred or Measured and Indicated categories (2023: $nil).

 

Selling expenses

Selling expenses increased slightly to $14.9 million (2022: $14.0 million) mainly due to higher gold prices.

 

Other income/expenses

Other income before exceptional items was higher at $30.3 million (2022: $3.3 million) principally due to: the impact of currency devaluation in Argentina resulting from the Argentinian Government export programme to settle a portion of San Jose exports at the blue chip exchange rate during the last quarter of  2023 of $21.2 million, the collection of a British Columbia tax credit of $3.2 million from the Snip project in 2023, and the insurance reimbursement received in 2023 in connection with damage to Inmaculada's machine belt in 2022 of $2.6 million. 

 

Other expenses before exceptional items were higher at $47.6 million (2022: $39.3 million) mainly due to mine closure provision increases of $28.4 million (2022: $17.8 million).

 

Adjusted EBITDA

Adjusted EBITDA increased by 10% to $274.4 million (2022: $249.6 million) mainly due to the rise in metal prices, and the impact of local currency devaluation of the currency in Argentina. These were partially offset by the impact of lower gold and silver production.

 

Adjusted EBITDA is calculated as profit from continuing operations before exceptional items, net finance costs, foreign exchange losses and income tax plus non-cash items (depreciation and amortisation and changes in mine closure provisions) and exploration expenses other than personnel and other exploration related fixed expenses.

 

$000 unless otherwise indicated	Year ended 31 Dec 2023	Year ended 31 Dec 2022	% change
Profit from continuing operations before exceptional items, net finance income/(cost), foreign exchange loss and income tax	82,128	45,190	82
Depreciation and amortisation in cost of sales	143,171	136,427	5
Depreciation and amortisation in administrative expenses and other expenses	2,075	2,135	(3)
Exploration expenses	21,297	56,826	(63)
Personnel and other exploration related fixed expenses	(5,397)	(10,602)	(49)
Other non-cash income, net [20]	31,096	19,629	58
Adjusted EBITDA	274,370	249,605	10
Adjusted EBITDA margin	39%	34%	15

 

Finance income

Finance income before exceptional items of $7.5 million increased from 2022 ($5.2 million) mainly due to higher interest on deposits of $4.6 million (2022: $2.4 million).

 

Finance costs

Finance costs before exceptional items decreased from $21.8 million in 2022 to $18.2 million in 2023 principally due to: the capitalisation of  interest expenses of $19.4 million that are directly attributable to the construction of Mara Rosa (2022: $4.9 million); lower foreign exchange transaction costs in Argentina of $1.3 million (2022: $5.0 million); a loss on the sale of C3 Metals Inc. shares of $0.3 million in 2023 (2022: recorded a loss on the fair value of C3 Metals Inc. shares of $2.1 million). These effects were partially offset by higher interest expense on loans before capitalisation at $28.9 million (2022: $15.3 million) mainly due to higher interest rates and an additional $60 million medium-term debt facility drawn down in August 2023, and the loss on the unwinding of discount of the mine closure provision of $1.7 million (2022: gain of $1.9 million). 

 

Foreign exchange (losses)/gains

The Group recognised a foreign exchange loss of $15.6 million (2022: $2.6 million) mainly due to the impact of the Argentinian local currency devaluation on monetary assets of $15.5 million.

 

Income tax

The Company's pre-exceptional income tax charge was $44.0 million (2022: $17.6 million). The increase in the charge is mainly explained by higher profitability versus 2022.

 

The effective tax rate (pre-exceptional) for the period was 82.2% (2022: 72.3%), compared to the weighted average statutory income tax rate of 31.8% (2022: 35.6%). The higher effective tax rate in 2023 versus the average statutory rate is mainly explained by: the effect of foreign exchange in Argentina and Brazil increasing the rate by 18.7%, the additions to the mine closure provision increasing the rate by 10.8%, non-deductible expenses increasing the rate by 9.9%, Royalties and the Special Mining Tax which increased the effective rate by 8.9%, and the impact of non-recognised tax losses in non-operating companies increasing the rate by 1.5%.

 

Exceptional items

Exceptional items in 2023 totalled a $69.5 million loss after tax (2022: $1.9 million loss after tax) related to impairment losses at the Azuca and Crespo projects of $63.3 million and the San Jose mining unit of $17.4 million; the restructuring charges in Pallancata of $9.0 million resulting from placing the operation in care & maintenance; and the impairment of the investment in Aclara Resources Inc. of $7.2 million.

 

The tax effect of these exceptional items was a $27.4 million tax gain (2022: $3.3 million tax loss). The net attributable loss of exceptional items was $64.0 million.

 

Cash flow and balance sheet review         

Cash flow:

$000	Year ended 31 Dec 2023	Year ended 31 Dec 2022	Change
Net cash generated from operating activities	178,761	102,918	90,843
Net cash used in investing activities	(245,506)	(337,580)	77,074
Cash flows generated generated/(used in) from financing activities	22,769	(6,588)	29,357
Foreign exchange adjustment	(10,742)	(1,695)	(9,047)
Net increase in cash and cash equivalents during the year	(54,718)	(242,945)	188,227

 

Net cash generated from operating activities increased from $102.9 million in 2022 to $178.8 million in 2023 mainly due to higher Adjusted EBITDA of $274.4 million (2022: $249.6 million), working capital changes, lower exploration expenses and lower taxes paid.

 

Net cash used in investing activities decreased from $337.6 million in 2022 to $245.5 million in 2023 mainly due the consideration paid for the acquisition of Amarillo Gold on 1 April 2022 of $123.4 million, partially offset by higher construction capex in Mara Rosa of $121.1 million (2022: $67.7 million).

 

Cash from financing activities increased to an inflow of $22.8 million from an outflow of $6.6 million in 2022, primarily due the draw-down of $60 million from the $200 million medium-term loan facility (2022: proceeds from Minera Santa Cruz stock market promissory notes of $14.5 million) and no dividends paid in 2023 (2022: $22.0 million); partially offset by the $25 million repayment of the $300 million medium-term loan facility, and the $10.2 million repayment of Minera Santa Cruz stock market promissory notes.

 

Working capital

$000	As at 31 December 2023	As at 31 December 2022
Trade and other receivables	80,456	85,408
Inventories	68,261	61,440
Derivative financial assets/(liabilities)	(344)	2,186
Income tax receivable, net	1,734	7,100
Trade and other payables	(135,839)	(144,102)
Provisions	(26,741)	(24,177)
Working capital	(12,473)	(12,145)

 

The Group's working capital position decreased by $0.4 million from $(12.1) million to $(12.5) million. The key drivers of the decrease were: lower income tax receivable, net of $5.4 million; lower trade and other receivables of $5.0 million; partially offset by lower trade and other payables of $8.3 million.

 

Net (debt)/cash

$000 unless otherwise indicated	As at 31 December 2023	As at 31 December 2022
Cash and cash equivalents	89,126	143,844
Non-current borrowings	(234,999)	(275,000)
Current borrowings [21]	(112,064)	(43,989)
Net cash / (net debt)	(257,937)	(175,145)

 

The Group's reported net debt position was $257.9 million as at 31 December 2023 (31 December 2022: $175.1 million). The increase is mainly explained by: capital expenditure of $121.1 million at Mara Rosa (2022: $67.7 million), partially offset by cash generated by the business. Borrowings increased mainly due to the draw-down of $60 million from the $200 million medium-term loan facility, net of the $25 million repayment of the $300 million medium-term loan facility.

 

Capital Expenditure

$000	Year ended 31 Dec 2023	Year ended 31 Dec 2022
Inmaculada	86,031	78,176
Pallancata	6,428	13,518
San Jose	47,682	50,112
Operations	140,141	141,806
Mara Rosa[22]	145,804	193,218
Aclara	-	-
Other	2,447	4,842
Total	288,392	339,866

 

2023 capital expenditure decreased from $339.9 million in 2022 to $288.4 million in 2023 mainly to the capex acquired in the acquisition of Amarillo Gold on 1 April 2022 of $122.5 million, partially offset by higher construction capex in Mara Rosa of $121.1 million (2022: $67.7 million), and higher capitalised interest expenses that are directly attributable to the construction of Mara Rosa of $18.7 million (2022: $3.0 million).

 

STATEMENT OF DIRECTORS' RESPONSIBILITIES

The Directors confirm that to the best of their knowledge:

o  the financial statements, prepared in accordance with the applicable set of accounting standards, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company and the undertakings included in the consolidation taken as a whole; and

o  the Management report includes a fair review of the development and performance of the business and the position of the Company and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face.

 

 

Consolidated income statement

For the year ended 31 December 2023

 

				Year ended 31 December 2023						Year ended 31 December 2022
		Notes		Before exceptional items US$000		Exceptional items (note 11) US$000		Total US$000		Before exceptional items US$000		Exceptional items (note 11) US$000		Total US$000
Revenue		5		693,716		-		693,716		735,643		-		735,643
Cost of sales		6		(508,214)		-		(508,214)		(527,643)		-		(527,643)
Gross profit				185,502		-		185,502		208,000		-		208,000
Administrative expenses		7		(47,192)		-		(47,192)		(54,158)		-		(54,158)
Exploration expenses		8		(21,297)		-		(21,297)		(56,826)		-		(56,826)
Selling expenses		9		(14,862)		-		(14,862)		(14,032)		-		(14,032)
Other income		12		30,261		-		30,261		3,340		-		3,340
Other expenses		12		(47,553)		(8,960)		(56,513)		(39,302)		-		(39,302)
(Impairment)/reversal of impairment and write-off of non-current assets, net				(2,731)		(80,843)		(83,574)		(1,832)		11,363		9,531
(Loss)/profit before net finance income/(cost), foreign exchange loss and income tax				82,128		(89,803)		(7,675)		45,190		11,363		56,553
Share of loss of an associate		19		(2,277)		(7,183)		(9,460)		(1,677)		(9,923)		(11,600)
Finance income		13		7,473		-		7,473		5,211		-		5,211
Finance costs		13		(18,199)		-		(18,199)		(21,776)		-		(21,776)
Foreign exchange loss, net		13		(15,620)		-		(15,620)		(2,622)		-		(2,622)
(Loss)/profit before income tax				53,505		(96,986)		(43,481)		24,326		1,440		25,766
Income tax (expense)/benefit		14		(44,000)		27,448		(16,552)		(17,581)		(3,353)		(20,934)
(Loss)/profit for the year				9,505		(69,538)		(60,033)		6,745		(1,913)		4,832
Attributable to:
Equity shareholders of the Parent				8,991		(63,997)		(55,006)		4,874		(1,913)		2,961
Non-controlling interests				514		(5,541)		(5,027)		1,871		-		1,871
				9,505		(69,538)		(60,033)		6,745		(1,913)		4,832
Basic (loss)/earnings per ordinary share for the year (expressed in US dollars per share)		15		0.02		(0.12)		(0.10)		0.01		-		0.01
Diluted (loss)/earnings per ordinary share for the year (expressed in US dollars per share)		15		0.02		(0.12)		(0.10)		0.01		-		0.01

 

 

Consolidated statement of comprehensive income

For the year ended 31 December 2023

 

				Year ended 31 December
		Notes		2023 US$000		2022 US$000
(Loss)/profit for the year				(60,033)		4,832
Other comprehensive income that might be reclassified to profit or loss in subsequent periods, net of tax:
Net loss on cash flow hedges		39(a)		(19,704)		(16,929)
Deferred tax benefit on cash flow hedges		39(e)		6,617		4,994
Exchange differences on translating foreign operations				17,722		(12,739)
Share of other comprehensive income of an associate		19		(855)		1,283
				3,780		(23,391)
Other comprehensive income that will not be reclassified to profit or loss in subsequent periods, net of tax:
Net loss on equity instruments at fair value through other comprehensive income ('OCI')		20		(49)		(152)
				(49)		(152)
Other comprehensive income/(loss) for the year, net of tax				3,731		(23,543)
Total comprehensive loss for the year				(56,302)		(18,711)
Total comprehensive loss attributable to:
Equity shareholders of the Parent				(51,275)		(20,582)
Non-controlling interests				(5,027)		1,871
				(56,302)		(18,711)

 

 

Consolidated statement of financial position

As at 31 December 2023

		Notes		As at 31 December 2023 US$000		As at 31 December 2022 US$000
ASSETS
Non-current assets
Property, plant and equipment		16		1,018,853		926,913
Evaluation and exploration assets		17		67,322		123,462
Intangible assets		18		29,983		19,328
Investment in an associate		19		22,927		33,242
Financial assets at fair value through OCI		20		460		509
Financial assets at fair value through profit and loss		21		-		1,015
Trade and other receivables		22		12,438		6,498
Deferred income tax assets		31		763		4,213
				1,152,746		1,115,180
Current assets
Inventories		23		68,261		61,440
Trade and other receivables		22		80,456		85,408
Derivative financial assets		39(a)		846		2,186
Income tax receivable		14		4,713		9,226
Other financial assets		24		2,264		-
Cash and cash equivalents		24		89,126		143,844
Assets held for sale		25		17,398		-
				263,064		302,104
Total assets				1,415,810		1,417,284
EQUITY AND LIABILITIES
Capital and reserves attributable to shareholders of the Parent
Equity share capital		30		9,068		9,061
Share premium		30		-		-
Other reserves				(234,837)		(238,800)
Retained earnings				834,231		886,980
				608,462		657,241
Non-controlling interests				60,122		65,475
Total equity				668,584		722,716
Non-current liabilities
Trade and other payables		26		1,711		1,623
Derivative financial liabilities		39(a)		16,581		-
Borrowings		28		234,999		275,000
Provisions		29		147,372		123,506
Deferred income tax liabilities		31		67,039		80,045
				467,702		480,174
Current liabilities
Trade and other payables		26		135,839		144,102
Derivative financial liabilities		39(aa)		1,190		-
Borrowings		28		112,064		43,989
Provisions		29		26,741		24,177
Income tax payable		14		2,979		2,126
Liabilities directly associated with assets held for sale		25		711		-
				279,524		214,394
Total liabilities				747,226		694,568
Total equity and liabilities				1,415,810		1,417,284

 

These financial statements were approved by the Board of Directors on 12 March 2024 and signed on its behalf by:

Eduardo Landin

Chief Executive Officer

12 March 2024

 

 

Consolidated statement of cash flows

For the year ended 31 December 2023

				Year ended 31 December
		Notes		2023 US$000		2022 US$000
Cash flows from operating activities
Cash generated from operations		35		217,016		144,271
Interest received				5,508		2,409
Interest paid		28		(24,839)		(12,962)
Payment of mine closure costs		29		(13,325)		(10,409)
Income tax, special mining tax and mining royalty paid1				(5,599)		(20,391)
Net cash generated from operating activities				178,761		102,918
Cash flows from investing activities
Purchase of property, plant and equipment				(259,730)		(210,372)
Purchase of evaluation and exploration assets		17		(2,523)		(122,988)
Purchase of intangibles		18		(124)		(353)
Purchase of Argentinian bonds		13		-		(10,204)
Proceeds from sale of Argentinian bonds		13		-		5,248
Proceeds from sale of financial assets at fair value though profit and loss		21		723		-
Proceeds from sale of property, plant and equipment				1,148		1,089
Sale of royalty related to Volcan project				15,000		-
Net cash used in investing activities				(245,506)		(337,580)
Cash flows from financing activities
Proceeds from borrowings		28		137,413		28,911
Repayment of borrowings		28		(111,980)		(11,557)
Payment of lease liabilities		27		(2,338)		(1,639)
Dividends paid to non-controlling interests		32		(326)		(286)
Dividends paid		32		-		(22,017)
Cash flows generated/(used in) from financing activities				22,769		(6,588)
Net decrease in cash and cash equivalents during the year				(43,976)		(241,250)
Exchange difference				(10,742)		(1,695)
Cash and cash equivalents at beginning of year				143,844		386,789
Cash and cash equivalents at end of year		24		89,126		143,844

1  Taxes paid have been offset with value added tax (VAT) credits of US$10,175,000 (2022:US$31,302,000).