LONDON (ShareCast) - Latin America-focused miner Hochschild Mining (LSE: HOC.L - news) is to shift to producing doré, an alloy of
gold and silver, at its Arcata site in southern Peru.
The company, which expects to invest between $25m and $30m to convert the site’s facilities, said the transition will improve operational efficiency, maximise revenue, reduce working capital requirements and enable the company to benefit from more stable commercial terms.
The company expects the investment in the conversion will pay itself back after about two years after it is completed in the second half of 2010.
Arcata produced around 10.4m silver equivalent ounces in 2008 which was sold in the form of concentrate to third parties for smelting and refining. By converting Arcata's concentrate to doré, Hochschild will maximise net revenue as commercial discounts for doré are significantly lower than the discounts applied to concentrate.
The company added that the sales cycle for doré is shorter – typically lasting 10 days versus the 60-day cycle expected for sales of concentrate.
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