Despite volatility in global silver prices and a marked reduction in gold and silver production attributable to the group, Hochschild Mining managed to report a 42 per cent rise in adjusted cash profits to $563m (£354m) as production decline was more than offset by higher than average realised prices for both metals, which increased by 53 per cent and 25 per cent, respectively.
The precious metals group remains resolutely bullish over production prospects for its Inmaculada and Crespo projects, but fast-rising unit costs across Latin America remain a cause for concern, as Hochschild has warned of cost inflation of around 25 per cent to 30 per cent in Argentina and 15 per cent in Peru, excluding royalties. It's worth noting, too, that this year's output will be held back by declining grades at its Ares mine in Peru. As a result, full-year production guidance has been set at 20m silver equivalent ounces, representing a 11.5 per cent reduction on last year.
Still, following completion of feasibility studies in January, Hochschild is moving ahead with the construction phase of its Inmaculada and Crespo projects, which have the potential to raise current silver equivalent production by 50 per cent. Initial output is expected by the tail end of next year.
Collins Stewart expects adjusted 2012 EPS of 51.6¢ (49¢ in 2011), rising to 70.6¢ in 2013.
| HOCHSCHILD MINING (HOC) | ||||
|---|---|---|---|---|
| ORD PRICE: | 475p | MARKET VALUE: | £1.6bn | |
| TOUCH: | 474-476p | 12-MONTH HIGH: | 667p | LOW: 365p |
| DIVIDEND YIELD: | 0.8% | PE RATIO: | 15 | |
| NET ASSET VALUE: | 303¢ | NET CASH: | $463m | |
| Year to 31 Dec | Turnover ($m) | Pre-tax profit ($m) | Earnings per share (¢) | Dividend per share (¢) |
|---|---|---|---|---|
| 2007 | 305 | 117 | 28 | 9.2 |
| 2008 | 434 | -2.3 | -8 | 4 |
| 2009 | 540 | 155 | 31 | 4 |
| 2010 | 752 | 289 | 46 | 5 |
| 2011 | 988 | 421 | 50 | 6 |
| % change | +31 | +46 | +9 | +20 |
Ex-div: 2 May Payment: 29 May £1 = $1.59 | ||||
