During a presentation at its Capital Markets Day in London, Hochschild Mining (LON: HOC) announced that brownfield drilling this year at its Inmaculada underground mine in Peru has added inferred resources of 95.1 million ounces of silver, or 1.3 million gold-equivalent ounces.
The additional ounces (in 9.25 million tonnes grading 98 grams silver per tonne, 3 grams gold per tonne or 320 grams silver-equivalent per tonne) will extend the mine life to more than 12 years by the end of 2018, up from six years as of the end of 2017.
The increase is “a record for any Hochschild asset,” Ignacio Bustamante, the company’s CEO, declared during the presentation.
“Furthermore, this is in our largest ever mine in terms of ounces,” he added, noting that the mine makes up about 74% of the company’s cash flow.
“Although we have been mining underground for several decades, we have always reported a relatively short mine life,” he said. “Such a significant addition has already changed our approach to mining and is also just the beginning, as we are continuing to develop this exciting district as well as our other attractive properties in Peru and Argentina.”
Hochschild estimates that all-in sustaining costs will increase by about US$75 per gold-equivalent oz., from US$725 per gold-equivalent oz. to US$800 per gold-equivalent oz., to convert the new ounces to reserves.
First production from the areas holding the new resources should start in 2020, the company estimates.
Hochschild’s 100%-owned Inmaculada is a 20,000 hectare, two-thirds gold and one-third silver mine in southern Peru’s Ayacucho Department. The mine sits at an elevation of 4,400 metres above sea level.
In addition to Inmaculada, its flagship asset, Hochschild operates three other underground precious metals mines in South America: Pallancata and Arcata in Peru, and San Jose in southern Argentina.
Hochschild’s 100%-owned Pallancata mine is 112 km from Inmaculada and sits at an elevation of 4,600 metres above sea level. It started commercial production in 2007.
Arcata is in southern Peru, is about 160 km from Pallancata, 300 km from the city of Arequipa, and sits at about 4,600 metres above sea level. Hochschild developed the mine in 1961 and poured its first concentrate there in 1964. It owns 100% of the asset.
San Jose, in Argentina’s southern Santa Cruz province, is about 1,750 km southwest of Buenos Aires and 20 km north of Goldcorp’s (TSX: G; NYSE: GG) Cerro Negro project.
Hochschild owns 51% of the mine and McEwen Mining (TSX: MUX; NYSE: MUX) owns the remaining 49%.
In terms of the company’s production profile, Inmaculada makes up 47%, Pallancata 23%, San Jose 15% and Arcata 12%.