Recent precious metals pricing volatility - against the background of general cost pressures at mining companies - explains the big fall in half-year profits at South America-focused gold and silver miner Hochschild. Indeed, the group saw unit costs per tonne rise 20 per cent to $71.60 (£45) in the period, while average silver prices slipped 14 per cent - leaving the shares looking up with events.
Falls in production across Hochschild's prospects had been expected as the company is in the process of extending the life of its Peruvian mines. In fact, Hochschild mined an average of 10.2m ounces of silver equivalent during the half, down 8 per cent - although management still expects to hit its 20m ounce production target for the full year.
The big hope for Hochschild this year, meanwhile, is that its Crespo and Inmaculada prospects prove to be as abundant as initial tests have suggested. When fully developed, both mines should increase production by 50 per cent, but getting construction started by the year-end or early 2013 will depend on obtaining the necessary permits. Management has cautioned, however, that the process for obtaining those permits has become increasingly complex.
Prior to these results, Collins Stewart was forecasting adjusted full-year EPS of 51.6¢ (49¢ in 2011), rising to 70.6¢ in 2013.
HOCHSCHILD MINING (HOC) | ||||
|---|---|---|---|---|
| ORD PRICE: | 441p | MARKET VALUE: | £1.49bn | |
| TOUCH: | 438-441p | 12-MONTH HIGH: | 558p | LOW: 365p |
| DIVIDEND YIELD: | 0.9% | PE RATIO: | 24 | |
| NET ASSET VALUE: | 306¢ | NET CASH: | $392m | |
| Half-year to 30 Jun | Turnover ($m) | Pre-tax profit ($m) | Earnings per share (¢) | Dividend per share (¢) |
|---|---|---|---|---|
| 2011 | 497 | 231 | 29.0 | 3.00 |
| 2012 | 355 | 92.3 | 8.00 | 3.00 |
| % change | -29 | -60 | -72 | - |
Ex-div: 29 Aug Payment: 20 Sep £1=$1.57 | ||||
