Mining’s old guard needs strong medicine
A new report details subpar investor returns in the mining industry over the last decade, particularly big cap diversified companies which have not adapted to new realities.
Hochschild Mining (LSE: HOC) has discovered a new zone to the west of operations at its Pallancata silver-gold mine in southern Peru.
The new area, called Royropata, is not in the current permitted area, but the company believes that the discovery “has the potential to secure the medium-term future of the Pallancata mine.”
Highlights from the discovery include 17.6 metres grading 8.5 grams gold per tonne and 2,520 grams silver per tonne in drill hole DLRY-A10 and 6.5 metres of 6.6 grams gold and 1,994 grams silver in DLRY-A11, both in the Marco West Vein.
Hochschild says it plans to announce a preliminary inferred resource for the new discovery “in the next few weeks and will make a decision on the operation’s short-term future in 2023.”
“The brownfield exploration team expects to continue drilling a number of targets within the existing permitted area during the remainder of 2022,” Hochschild said in its Wednesday news release. “Depending on those results and the level of precious metal prices, Hochschild will make a decision on whether to place the mine on care and maintenance in 2023, while the company secures the necessary permits to bring the new discovery into production.”
In a research note to clients, Ryan Thompson of BMO Capital Markets, noted that on Hochschild’s conference call, “management indicated permitting the new discovery could take ~ three years,” adding that BMO assumes “no production at Pallancata in 2023.”
In the first nine months of this year, Pallancata produced 2.3 million silver-equivalent ounces.
Pallancata, a low-to-intermediate sulphidation epithermal vein deposit, entered production in 2007. Mineralized material from the mine is transported 22 km to the Selene plant for processing.
The company operates three underground epithermal vein mines, two in southern Peru (Pallancata and Inmaculada) and one in southern Argentina (San Jose). It also owns the Mara Rosa project in Brazil.
It reported overall attributable production in the nine months ended Sept. 30 of 261,173 gold-equivalent oz. or 18.8 million silver-equivalent ounces. The company said it remains on track to meet its attributable production target for 2022 of 360,000-375,000 gold-equivalent oz. or 26-27 million silver-equivalent ounces.
It also confirmed that it is reiterating its all-in sustaining cost target for this year of $1,330 to $1,370 per gold-equivalent oz. or $18.5-$19 per silver-equivalent ounce.
As of Sept. 30, Hochschild had about $169 million in total cash and net debt of about $151 million.
