Hochschild to launch new strategy

Landin, a company veteran and previous COO, plans to create a solid base for the company ahead of future potential acquisition activity.

"I believe a mining company has to be very efficient on cost and operations. The quality of the assets plays a very important role. There is opportunity, but we have to be very focused," Landin told Mining Journal.

Landin holds up the December 2021 acquisition of Amarillo Gold for its Mara Rosa deposit in Goias, Brazil as a good acquisition.

The company is completing construction of the asset with first production forecast in mid-2023, at an initial run-rate of 100,000ozpa at an all-in sustaining cost (AISC) of US$1000poz. "We try to find projects like that, which give a very good all-in sustaining cost, as we have to be well-positioned on the cost curve to survive when prices go down," said Landin.

With Mara Rosa nearing completion, the company is focusing on the brownfield potential at its Inmaculada mine in Peru, which received its environmental permit approval in August, opening up another 20 years for the asset. Doubts about when (or if) the environmental permit would come through had been an overhang on the company, and saw it downgrade its production guidance for the mine from 204,000-211,000oz of production this year to 192,000-200,000oz.

Overall, the company has guided 2023 production at 289,000-303,000oz at an AISC of $1490-1580.

Hochschild is also looking to breathe new life into its other mine in the central southern highlands of Peru.

Pallancata, some 20-30km north of Inmaculada is the company's highest-cost operation as its veins thin as the deposit nears the end of its life. However, the nearby Royropata discovery is set to give it a new lease of life.

Royropata has thicker veins, averaging 5m in width, higher grade at 848gpt silver equivalent, and already has a 51Moz resource, which the company expect to at least double, allowing for bulk mining methods.

"It is next door to Pallancata. It has fantastic vein widths, double the widths and triple the grades we are mining at Pallancata. We are looking to apply the lessons learned with the Inmaculada permitting and hope that within three years, we can get a permit to be in production in 2027," said Landin.

Band width

While Hochschild sees acquisition opportunities in the low market capitalisations of most junior gold developers, Landin may not be quick to break out the Hochschild chequebook, although this remains an ultimate goal.

Before buying another asset, he wants to ensure the company has a stable base. This means completing the Mara Rosa build receiving cash flow, and advancing on the brownfield programme at Inmaculada.

"It is very difficult to find the right project with the resources, widths, grade and asset quality. We are looking at every opportunity. We are very comfortable in Latin America, in Peru and Brazil. We are comfortable with the level of debt we have at the moment. We have the balance sheet to finish Mara Rosa and once it is in production and cash flowing, we can repay the debt or keep it and use our balance sheet for future opportunities," said Landin.

Landin stressed the company will not bite off more than it can chew in terms of the sticker price of any future development it brings in, illustrated by its decision to divest its Volcan project in Chile's Maricunga gold belt, within an area ripe for consolidation.

In August, the company published a measured and indicated resource of 463.3Mt grading 0.66gpt gold for 9.8Moz at Volcan, with another 1.2Moz in inferred resources. It also published a preliminary economic assessment (PEA) outlining production of 281,000ozpa for 14 years from a 22Mtpa open-pit, heap leach operation. However, it deemed the $900 million initial capital cost as beyond its means.

Rather than overextend itself, the company hired Canaccord to run a strategic process and put Volcan in a newly created company called Tiernan Gold. Potential suitors could include Kinross Gold, which operates the La Coipa mine in the region and PanAmerican Silver, which recently obtained the neighbouring La Pepa project by acquiring Yamana Gold's assets.

Strangely, though, while making Volcan shine to attract interest, in the same news release as the PEA and resource, the company dulled some of that by encumbering the asset with a 1.5% net smelter returns royalty sold to Franco Nevada.

This was not included in the PEA calculations so the project economics were immediately out of date and not as rosy as the PEA stated. Royalties can also turn off larger gold miners from buying assets because they limit their ability to make money.

"At $900 million, Volcan is not a project for us; we don't have that kind of money. The NSR was sold before I was chief executive and I was not involved in that decision. If the strategic process is not successful, with that $15 million, have that cash to continue to derisk the project," said Landin.

Shares in Hochschild Mining are trading at 76.9p, valuing the company at £417 million.