Chile , Argentina , Mexico and Peru

Hochschild studying Inmaculada mine expansion - CEO

Bnamericas Published: Tuesday, May 10, 2016

Peruvian precious metals miner Hochschild Mining is studying a possible expansion of its new Inmaculada gold-silver mine in Peru, CEO Ignacio Bustamante said.

Hochschild, which also has operations in Argentina, Mexico and Chile, has allocated US$100mn this year to capex, including exploration, to see if it can channel ore to idle installations like its 1,000t/d Ares plant in Peru, Bustamante said.

Hochschild aims to "very quickly" determine whether it can expand the 3,850t/d plant at its US$420mn Inmaculada mine which started operating last year, Bustamante said. Its delayed US$111mn Crespo silver project, also in Peru, will have to compete with other projects in its portfolio, he said.

"Our focus this year and during the first half of 2017 will be on exploring the geological potential we have at Ares, Arcata, Pallancata, San José and Inmaculada to be able to take a decision on investments in expanding capacity," Bustamante told reporters at an event in Lima.

Inmaculada, which is on track to produce 14Moz silver equivalent this year, is operating profitably at costs of US$9-10/oz, while silver prices are currently US$17/oz, according to Bustamante.

While mining companies wrote off billions in losses due to impairments last year, the recent recovery in metals prices would appear to rule out a similar performance this year, Bustamante said. Gold and silver prices continue to be investor havens in the face of global economic uncertainty, he said.

"Prices in the first quarter have improved, so we don't see future accounting adjustments. Rather, perspectives are more favorable," Bustamante said. "The Peruvian mining sector has started off the year on much better footing than in 2015. Everyone is breathing easier."

Hochschild produced 7.44Moz attributable silver equivalent in the first quarter, up 79% from 4.15Moz a year earlier after starting up Inmaculada last year. The company aims to produce 32Moz silver equivalent this year, up 18.5% from 27Moz in 2015.

Hochschild, which sold US$350mn in bonds in 2014 to finance its projects, posted a US$67.4mn loss last year on account of slumping metals prices and impairment charges as sales fell 5% to US$469mn.


Slumping metals prices have combined with permitting delays to set back new mining projects, Peru's national society of mining and petroleum (SNMPE) said during an event ahead of the International Gold Symposium, being held in Lima from May 17-18.

Miners, which can take 10-15 years to develop a new mine, are struggling to replace their reserves because of a lack of exploration, said Jorge Ganoza, CEO of Fortuna Silver Mines which has operations in both Peru and Mexico. Mexico has fewer permitting delays than Peru, while Argentine President Mauricio Macri seeks to make his country more attractive for mining investment, Ganoza said.

"Everything related to exploration has been postponed as permits can take up to a year," Ganoza said. "We need to compete with other mining exploration jurisdictions in terms of costs. The rate we're moving at isn't sustainable."

Peru's government will change hands July 28 following a second round election run-off on June 5 between former banker and cabinet chief Pedro-Pablo Kuczynski and ex-congresswoman Keiko Fujimori, both of whom have pledged to eliminate bureaucratic obstacles to investment projects.

"Both are very aware of the importance that the mining industry has for the country's socio-economic development and that changes must be made," Bustamante said. "The key will be whether the candidate that is elected will have the disposition to be able to bring together the companies and society, and be willing to do the work that's needed to understand what the problems are and which are the main obstacles."

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