How will Hochschild recoup its gold mining assets?
Recent events, facilitated by the Peruvian government, have affected the operations of Hochschild Mining as the country plans to close two of its mines, leaving a void in the company’s production. The Peruvian Prime Minister Mirtha Vasquez announced that four mines would not be granted any extensions.
Although Hochschild contested the plans by the government, it has turned its attention towards acquisition in the gold mining sector as it announces agreements to buy Amarillo Gold Corporation in Brazil.
Easing disruption with a gold mining purchase
‘The acquisition of Amarillo enhances the Company's project pipeline and is the result of a long-term Company review process of a wide range of growth opportunities’, says Ignacio Bustamante, Chief Executive Officer at Hochschild Mining.
‘Posse is an attractive low-cost project with relatively near-term production and strong exploration upside potential. With our significant experience in developing precious metal deposits in the Americas, Hochschild is ideally placed to take Posse to its next stage and generate strong sustainable value for the Company and the project's local stakeholders’.
The company will use share purchase, which was completed at £0.23 ($0.40) per share, to buffer the issues it has experienced with the mining closures and build back beyond its Peruvian operations.
Moving forward with gold
Hochschild has expressed a lot of interest in the gold mining process at Amarillo. Studies have already been conducted to find near-mine potential deposits at the Posse and Mara Rosa properties. The exploration efforts have also identified multiple areas of dense gold, which stretch to 200m below the ground level.
The new leadership will result in a name change for the gold miner to Lavras Gold Corporation, which will hold a stake in the Lavras do Sul project of around C$10mn and 2% royalties from its net smelter revenue.
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