Hochschild hits 2009 production target and increases focus on exploration in 2010

During the three months ended 31 December 2009, Hochschild Mining (LSE: HOC) produced 6.8 million silver equivalent ounces, taking full year production through its targeted 28 million attributable silver equivalent ounces. At 28.2 million ounces, silver production in 2009 increased by 8% on the previous year. Hochschild has once again delivered on its production targets and proven the operational strength of the business, chief executive Miguel Aramburú said.

Overall Hochschild produced 18.8 million ounces of silver and 156,800 ounces of gold in 2009, which represents a record year of production.  In addition to its increased production the precious metals miner has also focused on cost management. During the full year Hochschild hit its cost control target, reducing its unit cost per tonne by at least 5%.

“Following our capital raising in October 2009, we have already increased our strategic investments in Lake Shore Gold and Gold Resource Corporation which will add to our production in 2010”, Aramburú commented, “We have also prepaid a portion of our debt facility which provides increased financial flexibility and allows us to deliver our growth strategy."

The company said it has a solid financial position, with total cash of approximately US$75 million. In October 2009, Hochschild raised US$260 million through an equity placing of US$145 million and US$115 million issue of senior unsecured convertible bonds with a coupon of 5.75%.

After the US$200 million pre-payment of the company’s syndicated loan facility, Hochschild invested a proportion of the proceeds into its North American investee companies. The company increased its stake in Lake Shore Gold (TSX: LSG) to 38%, with a C$139.5 million investment and invested US$16 million in Mexico operating Gold Resource Corp (OTC: GORO) taking it stake in the company to 27%.

Looking forward the FTSE250 constituent will have a continued focus on exploration in 2010 with a US$50 million exploration budget, a 67% increase on the previous year. The company is focused on brown-field exploration in order to expand the mine life of its Arcata, Pallancata and San José operations. According to Hochschild, the drilling programme at the company's Arcata silver mine in southern Peru, is delivering positive results with the discovery of three new mineralised structures in close proximity to the property's existing Mariana vein.

In green-field exploration, Hochschild has an active pipeline with numerous projects in Argentina, Canada, Chile, Mexico and Peru, which are at various stages of development.

Hochschild is targeting a further production increase in 2010, planning to produce 29 million silver equivalent ounces, which includes 2.7 million silver equivalent ounces from its interests in Lake Shore Gold and Gold Resource Corp.  http://www.proactiveinvestors.co.uk/companies/news/12414/hochschild-hits-2009-production-target-and-increases-focus-on-exploration-in-2010-12414.html