Shares in Hochschild Mining (HOC) rose 7 per cent on results day despite news of a $70.8m (£47.8m) net earnings loss. Times are tough for precious metals miners, and last year's loss compares favourably with the previous year's - though that rests mainly on $227m in one-off impairments and finance costs booked in 2013.
Nevertheless, the South American precious metals miner continues to make genuine operational progress. Hochschild’s capital allocation has been revised to take account of the weaker price environment. But full-year production of 22.2m silver (equivalent) ounces easily exceeded the 21.0m ounce target, and the miner has set a target of 24.0m ounces for this year. Meanwhile, all-in sustaining costs per ounce fell by 6 per cent to $17.40. That's ahead of initial guidance, and the miner is now confident of reducing costs to within the $15-$16 range in 2015.
Hochschild took advantage of periodic improvements in precious metal prices to hedge just under a third of last year's production. It will continue the practice during 2015 as the miner transitions to a low-cost production profile, with the commissioning of the key Inmaculada project on track for the second quarter of this year. After an initial ramp-up period, Inmaculada is expected to deliver an average of 12m silver (equivalent) ounces per year.
JPMorgan Cazenove gives a net present value of 125p a share.
| HOCHSCHILD MINING (HOC) | ||||
|---|---|---|---|---|
| ORD PRICE: | 71p | MARKET VALUE: | £259m | |
| TOUCH: | 70-71p | 12-MONTH HIGH: | 188p | Low: 61p |
| DIVIDEND YIELD: | nil | PE RATIO: | na | |
| NET ASSET VALUE: | 218¢ | NET DEBT: | 39% | |
| Year to 31 Dec | Turnover ($m) | Pre-tax profit ($m) | Earnings per share (¢) | Dividend per share (¢) |
|---|---|---|---|---|
| 2010 | 752 | 289 | 46.0 | 5 |
| 2011 | 988 | 421 | 49.0 | 6 |
| 2012 | 818 | 212 | 19.0 | 6 |
| 2013 | 622 | -120 | -36.0 | nil |
| 2014 | 493 | -68.2 | -19.0 | nil |
| % change | -21 | - | - | - |
Ex-div:- Payment:- | ||||
