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 (LON: HOC) said on Monday it has completed a reevaluation of its Volcan gold project in Chile, which it added to its portfolio in 2012 with the acquisition of Andina Minerals.
The precious metals miner kicked off the reassessment of the project’s viability and economic potential early last year, after leaving Volcan dormant for a decade.
Hochschild said that in the past 18 months it has allocated time and resources to Volcan, including the creation of a Canadian subsidiary, Tiernan Gold, as the owner of the gold project.
It has also completed a revision of the Mineral Resource Estimate (MRE) for the asset, which confirmed 463.3 million tonnes of Measured and Indicated Resources and 75 million tonnes of Inferred Resources.
“The updated MRE and PEA confirm that Volcan is a large resource capable of generating significant annual gold production with substantial margins at today’s gold prices,” chief executive Ignacio Bustamante, who leaves the company later this month, said in the statement.
Hochschild’s preliminary economic assessment detailed plans for a 22 million tonnes/year open pit, heap leach operation with a 14-year mine life, producing an average of 332,000 ounces of gold annually for the first 10 years.
Overall, the mine would churn out 3.8 million ounces of gold during its estimated productive life, the company said.
Initial capital cost for the project has been pegged at $900 million, with life-of-mine sustaining capital of $276 million.
Hochschild said it had executed an agreement for a $15 million financing with the sale of a 1.5% net smelter return royalty on the project to Franco-Nevada. It noted it had also engaged Canaccord Genuity to evaluate strategic options for Tiernan.
“Tiernan is now fully funded independently to carry out the next phases of project de-risking and, with gold prices remaining strong, we believe there is significant value in this project,” Bustamante said.
The executive said that Hochschild was looking at a number of options to unlock value, but its current focus was on the development of high-grade reserves and resources close to Immaculada mine in Peru, the construction of its Mara Rosa operation in Brazil and the recent Royropata discovery near its Pallancata silver-gold mine in southern Peru.
