Hochschild Mining achieved record rates of production in the first half, but profits were down after a 22 per cent drop in realisable silver prices.
Latin American-focused precious metal miner pushed through cost reductions to offset some of the impact - unit costs per tonne on underground operations fell by 10 per cent, and administrative expenses were down 34 per cent at $23.5m (£14.2m). But, a 17 per cent capacity increase meant the cost of sales was up by a quarter to $124.6m, although the company is on track to achieve its full-year production target of 28m silver equivalent ounces. Hochschild has also taken steps to maximise income by converting all the production output from its flagship Arcata silver mine in Peru to doré, a processed product that attracts a significantly lower price discount than unprocessed ore.
Profits were also hit by losses on forward sales contracts which totalled $18m. Together with increased levels of investment - which pushed up borrowing - finance costs increased sharply to $27.2m. Hochschild has increased its ownership in Gold Resources Corporation in Mexico from 5 per cent to 17 per cent at a cost of $18m, and also acquired Southwestern Resources for $19.2m.
Investec expects full-year normalised pre-tax profits of $122m and EPS of 16.5¢ ($44.1m and 8.25¢ in 2008).
| HOCHSCHILD MINING(HOC) | ||||
|---|---|---|---|---|
| ORD PRICE: | 269p | MARKET VALUE: | £ 826m | |
| TOUCH: | 266-269 | 12-MONTH HIGH: | 335p | LOW: 65p |
| DIVIDEND YIELD: | 0.9% | PE RATIO: | NA | |
| NET ASSET VALUE: | 161¢ | NET DEBT: | 40% | |
| Half-year to 30 Jun | Turnover ($m) | Pre-tax profit ($m) | Earnings per share (¢) | Dividend per share (¢) |
|---|---|---|---|---|
| 2008 | 232 | 69.6 | 11.0 | 2.0 |
| 2009 | 231 | 37.7 | 8.0 | 2.0 |
| % change | -1 | -46 | -27 | - |
Ex-div:02 Sep Payment:22 Sep £1=$1.65 | ||||
