A 6 per cent rise in Hochschild Mining's (HOC) realised gold price proved insufficient to offset a scheduled reduction in annual production. The Latin American precious metals producer was also held back by a 9 per cent fall in realised silver prices for 2012, but there was no exaggerated markdown in Hochschild's share price as the year-on-year shortfalls had been foreshadowed and were broadly in line with market expectations.
Rising wage and material inflation in Peru continued to drag on profits; a situation exacerbated by a weakening US dollar. Adjusted cash profits were down by a third to $385m (£258m). Silver/gold cash costs were up by 12 & 30 per cent, respectively, and unit cost pressures will persist through 2013, with anticipated increases of 15-20 per cent in Peru and 10-15 per cent in Argentina.
Falling output and reduced grades from the ageing Ares mine in Peru continued to constrict group production, which was down 10 per cent to 20.3m silver equivalent ounces. Guidance is static for 2013, but initial development work remains on track at the Inmaculada and Crespo gold and silver projects in southern Peru, which are expected to eventually boost group production by 50 per cent. Commissioning for both projects is set for the second half of next year. Forward gold production will also be enhanced by the November acquisition of Andina Minerals for $103m.
Fox-Davies anticipates 2013 EPS of 28.4¢ (from 19¢ in 2012).
| HOCHSCHILD MINING (HOC) | ||||
|---|---|---|---|---|
| ORD PRICE: | 341p | MARKET VALUE: | £1.2bn | |
| TOUCH: | 340-342p | 12-MONTH HIGH: | 527p | LOW: 341p |
| DIVIDEND YIELD: | 1.2% | PE RATIO: | 27 | |
| NET ASSET VALUE: | 313¢ | NET CASH: | $238m | |
| Year to 31 Dec | Turnover ($m) | Pre-tax profit ($m) | Earnings per share (¢) | Dividend per share (¢) |
|---|---|---|---|---|
| 2008 | 434 | -2 | -8 | 4.0 |
| 2009 | 540 | 155 | 31 | 4.0 |
| 2010 | 752 | 289 | 46 | 5.0 |
| 2011 | 988 | 421 | 50 | 6.0 |
| 2012 | 818 | 212 | 19 | 6.0 |
| % change | -17 | -50 | -62 | - |
Ex-div: 8 May Payment: 4 Jun £1 = $1.49 | ||||
