Hochschild foresees rise in output, fall in costs

Hochschild Mining expects its production to increase in the next three years while all-in sustaining costs will go down, it told analysts and investors at a presentation of Hochschild's new strategy on November 22.

The previous metals miner will focus on its precious metals business with a simplified portfolio and prioritising core assets in Latin America, such as its Inmaculada mine in Peru, the Mara Rosa project in Brazil, the Royropata deposit in Peru, and the San Jose mine in Argentina,

"We are going to focus on the core business to increase production and lower costs," Hochschild's new chief executive Eduardo Landin told Mining Journal.

In the next three years, Hochschild expects around 20% increase in production and approximately 24% reduction in costs. For 2024, production guidance is at 343,000-360,000oz of gold equivalent and costs $1,510-1,550/oz. The capital expenditure budget for 2024 is around $171-178 million, with the remaining expenditure for Mara Rosa at $10 million.

Inmaculada and Mara Rosa

The main drives of the increased production and lower costs are higher grades at Inmaculada and the start of production at Mara Rosa, as well as other projects that continue lowering costs.

"We want to implement a lean philosophy across the company," Landin said. "We want to optimise processes, bring in consultants, and, of course, finish all projects - including the capital projects at the sites - on time and on budget."

Hochschild said the Inmaculada is de-risked after it received the MEIA approval in August this year, which paves the way for expanding the mine life by 20 years. Inmaculada is projected to produce a minimum of 200,000oz annually and has a decrease in costs in 2025.

"[The approval] opened the possibility to start exploration activities and bring high-grade resources in the future," Landin said.

The Mara Rosa gold project in Brazil is time and budget, with 99% complete at the end of the September quarter. The first gold pour is expected in the March quarter of 2024, with first commercial production in the June quarter.

Latin America

In its strategy presentation, Hochschild said, "Peru is back in business", with the government prioritising mining by actively promoting investments and aiming to streamline permitting.

In the next few years, the miner is working to develop the Royropata deposit west of current operations at Pallancata in the Ayacucho region. Hochschild expects Royropata to deliver an additional minimum of 100,000oz annually from 2027. Landin said the permit still needs to be acquired, which could prove a challenge, but work on permitting has started.

"We have a dedicated team to work on the permit," Landin explained. "The complexity between this permit and the permit for Inmaculada is completely different. The [current] government has a different attitude, and we don't have [to deal with] COVID-19. The scope of the work is much less, so we consider that … it will be easier."

"On top of that, we have implemented all the lessons learned from Inmaculada into this permit," he added. "Therefore, we expect to have a state-of-the-art document that we can present to the government very soon and that the permit will be issued for 2027."

In Brazil, the new Lula government offers continued stability, Hochschild said.

"With the Lula administration, we feel that mining is still a priority for the central government," Landin said. "Additionally, we have a close relationship with the local and state government."

The state of Goias, where the Mara Rosa project is located, is a mining-friendly jurisdiction, according to Landin.

"We were very surprised by the level of infrastructure in the state of Goias, in terms of growth and the connection to the national grid. In terms of people, we were amazed by the level of senior professional management. We have a very highly qualified workforce. We have regional contractors that have a lot of experience. And I will say that communities are extremely friendly because they appreciate that we are going to open a new business and create jobs."

A new government has just been elected in Argentina, where the San Jose mine is located. Political outsider and self-proclaimed "radical libertarian" Javier Milei was chosen as the country's next president on November 20. Melei's monetary plans could reduce costs "further than projected", thinks Landin.

In an update, American finance multinational JP Morgan said that Hochschild's new strategy "represents a positive update" and "should help re-establish investor confidence after several years of uncertainty stemming from the Inmaculada MEIA delay".

On Wednesday afternoon, Hochschild shares were trading at £108.5p/share, up 0.7% on the day's trade and raised over 45% year-to-date.