4.5MOZ SILVER HEDGE PLANNED
Hochschild forecasts 19.1m oz silver production, will pursue underground precious metals projects
With $100 million in cash, Peruvian miner Hochschild plans to pursue acquisition opportunities in the current market, focusing on underground precious metals projects in the Americas.
Author: Dorothy Kosich
Posted: Thursday , 22 Jan 2009
RENO, NV -
Peruvian silver miner Hochschild announced Wednesday that it will increase this year's production to 28 million silver equivalent ounces, a 7.7% increase over the 2008 attributable production of 26.1 million silver equivalent ounces.
The company also plans to hedge 4.5 million ounces of silver on a short-term forward contract with an average price of $11.10/oz.
Fourth-quarter 2008 production increased 28% over the prior quarter to eight million attributable silver equivalent ounces, driven primarily by strong production at Pallancata, Arcata and San José. Production at Pallancata "was particularly strong with silver and gold up 118% and 128% respectively," the company said.
Hochschild's 2009 production target is 19.1 million ounces of silver and 148,200 ounces of gold. The production target is based on estimated forecast grades and updated reserves and resources.
In a news release, Hochschild management said, "Our main focus will continue to be the production of profitable ounces and with the measures we have taken to address volatile market conditions, we are well positioned to face the challenges ahead."
The company stressed it planned to deliver "profitable production and hence Hochschild will reduce production, close, or put into care and maintenance any mines that are considered uneconomic." Although the Selene mine has 1.8 million tonnes of reserves and resources, Hochschild advised that "a high level of capital expenditure would be required to extract these ounces and as a consequence, it is under consideration for closure."
Last November Hochschild announced a range of actions to address current market conditions including the elimination of 150 jobs, a freeze of recruitment, and a reduction of administrative expenses and capital expenditure. "2009 capital expenditure will be largely limited to committed investments and sustaining capex at existing operations."
Hochschild also intends to delay development of the San Felipe project due to the prevailing environment for zinc prices, which fell by 46% in six months. "However, Hochschild remains confident about the long term value of San Felipe and will continue to review the timing of the project," the company said.
With over US$100 million in cash as of December 31, 2008, Hochschild said it is in "sound financial health."
The company suggested it is also "in a solid position to pursue acquisitions opportunities which may arise from current market conditions. Management will maintain a disciplined approach to M&A, focusing on underground precious metals projects in the Americas. The company will also continue to develop its project pipeline which currently contains over 16 long term prospects with significant growth potential."
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