It's amazing how much damage a 20-30 per cent fall in precious metals prices can do to a miner's bottom line. Hochschild Mining (HOC) saw gross profits from its silver and gold mines in Peru and Argentina fall to $75m (£48m) in the six months to 30 June, down from $180m in the same period last year despite similar production figures.
Falling precious metals prices also forced the company to book $59.1m of impairment charges and severance payments, although this was less than the $200m some analysts had feared. Even after stripping out the exceptional items, Hochschild still recorded a $25.2m loss in the period after taking into account large administrative and exploration expenses, as well as some foreign currency losses.
With low prices seemingly here to stay, Hochschild's management has now turned its attention to cutting costs. The programme seems to be coming along well: the company says it has found about $200m in potential cost savings by slashing its exploration budget, trimming corporate overheads and spending less on maintaining its current mines.
Analysts from Citigroup forecast pre-tax profits of $27.7m in the current year, with a loss per share of 4¢, falling to $7.3m and a loss per share of 6¢ in 2014.
HOCHSCHILD MINING (HOC) | ||||
|---|---|---|---|---|
| ORD PRICE: | 227p | MARKET VALUE: | £767m | |
| TOUCH: | 226-227p | 12-MONTH HIGH: | 527p | LOW: 135p |
| DIVIDEND YIELD: | 0.8% | PE RATIO: | NA | |
| NET ASSET VALUE: | 301¢ | NET CASH: | $91m | |
| Half-year to 30 Jun | Turnover ($m) | Pre-tax profit ($m) | Earnings per share (¢) | Dividend per share (¢) |
|---|---|---|---|---|
| 2012 | 355 | 92.3 | 8.0 | 3.0 |
| 2013 | 309 | -48.7 | -10.0 | nil |
| % change | -13 | - | - | -100 |
£1=$1.56 | ||||
