Hochschild chairman sells £120m in shares

Precious metals miners have had a charmed run in 2020 for the most part. While there were some shutdowns, most producers saw earnings skyrocket as gold cracked $2,000 (£1,488) an ounce (oz) and silver stayed comfortably above $20/oz.

Hochschild Mining (HOC) was not so lucky as the Peruvian government brought in tougher restrictions than most other mining countries. Hochschild’s largest mine – Inmaculada – was closed twice this year, in April and July, to stop Covid-19 outbreaks from worsening. 

Its production will likely be down 40 per cent from 2019, putting unit costs under pressure. The higher precious metals prices have insulated the company from a collapse in earnings, however, and the board has brought back the half-year dividend, which will be paid on 31 December. 

In one of the largest deals of the year, Eduardo Hochschild has offloaded over £120m in shares, although the miner said this does not amount to the company chairman bailing out. The 200p a share sale, equal to 12 per cent of the company’s shares on issue, was undertaken because “Mr Hochschild believes now is an appropriate moment to recycle some capital from his holding in the company to facilitate investments elsewhere across his existing businesses and in new opportunities”. The chairman now holds 38 per cent of the miner. His grandfather founded Hochschild over a century ago, and the company listed in London in 2006. 

The strike price was 15 per cent below the closing price on the day prior to the deal, and the company fell to 198p on the next day of trading. Fellow Americas-focused precious metals miner Fresnillo (FRES) has been one of London’s best performers this year, climbing 76 per cent to 1,136p. Hochschild’s share price is up 12 per cent from the opening 2020 price of 176p - so perhaps it was an opportune moment for the chairman. 

The march of the precious metals prices slowed in the past two months. Gold dipped below $1,800/oz and silver came back from almost $30/oz. The continued equity boom, at least in the US, and the upcoming distribution of Covid-19 vaccines could see investors moving away from precious metals. This could be Mr Hochschild’s approach – although Fresnillo investors would be in a far better place to take profits. We maintain our buy rating on Hochschild at 192p.