Despite gold hitting highs not seen for years – $1,500 an ounce most recently – and silver finally getting above $17 (£14.10) per oz, Peru-focused miner Hochschild Mining (HOC) saw a drop in sales prices year on year in the first half of 2019. Adjusted cash profits fell 5 per cent on a year ago, to $154m, although this was 7 per cent above company-compiled consensus estimates.
Hochschild said higher grades than expected at the Inmaculada operation – one of the more pleasant surprises that can come from mining precious metal seams underground – had helped production along. Year on year Inmaculada’s silver production was down 5 per cent, but gold climbed 2 per cent to 98,610 oz. The mine’s all-in sustaining cost (AISC) was $726 per gold equivalent ounce, up 15 per cent on the year before. More costly mines plus a new tax that quadrupled selling costs to $10.5m pushed the overall gold equivalent AISC to $921 an oz, and this is likely to rise in the second half.
RBC analysts James Bell and Tyler Broda said metals prices would increase second-half free cash flow, despite a forecast drop in production. Chief executive Ignacio Bustamente floated possible corporate activity, saying “healthy cash flow generation” would allow them to look at acquisitions, as well as further brownfield and greenfield expansion.
RBC forecasts full year cash profits of $278m, climbing to $295m in 2020.
| HOCHSCHILD MINING (HOC) | ||||
| ORD PRICE: | 215p | MARKET VALUE: | £1.1bn | |
| TOUCH: | 215-215.2p | 12-MONTH HIGH: | 232p | LOW:147p |
| DIVIDEND YIELD: | 1.5% | PE RATIO: | 87 | |
| NET ASSET VALUE: | 142¢ | NET DEBT: | 8% | |
| Half-year to 30 June | Turnover ($m) | Pre-tax profit ($m) | Earnings per share (¢) | Dividend per share (¢) |
| 2018 | 372 | 38.5 | 3.0 | 1.965 |
| 2019 | 354 | 29.5 | 3.0 | 2.00 |
| % change | -5 | -23 | - | +2 |
| Ex-div: | 29 Aug | |||
| Payment: | 19 Sep | |||
| £1=$1.21 | ||||
