Hochschild reports 'strong rebound' in profitability

Hochschild Mining reported a “strong rebound” in profitability in its first half on Wednesday, with revenue rising to $394.8m (£287.24m), from $232m a year earlier.

The FTSE 250 company said its adjusted EBITDA was $198.5m for the six months ended 30 June, up from $80.6m year-on-year, while pre-exceptional profit before income tax surged to $97.8m from $13.1m.

Pre-exceptional basic earnings per share totalled eight US cents, swinging from a one cent loss in the first half of 2020, while post-exceptional basic earnings per share were seven cents, compared to the two cent loss last year.

Cash and cash equivalents totalled $256.9m at period end on 30 June, up from $231.9m at the end of December, while net cash rose to $51.1m from $21.6m over the same period.

On the operational front, Hochschild reported all-in sustaining costs of $1,136 per gold equivalent ounce, up from $1,026 year-on-year, or $13.2 per silver equivalent ounce, rising from $11.9.

Its attributable production for the first half totalled 175,119 gold equivalent ounces or 15.1 million silver equivalent ounces, growing from 126,835 and 10.9 million ounces a year ago, respectively.

The board said the company’s brownfield programme was adding “significant” high-grade Inferred resources in the period, with 409,000 gold equivalent ounces added from the Angela North vein at Inmaculada at a gold equivalent grade of 10.6 grams per tonne, and seven million silver equivalent ounces added in the year-to-date at San Jose at a silver equivalent grade of 944 grams per tonne.

Drilling campaigns were executed at Pallancata, Corina, Cochaloma, Arcata and Crespo in the first half, with further high grade drill results achieved at Skeena Resources' Snip project in British Columbia.

Looking at the rest of the year, Hochschild said it was on track to deliver its overall 2021 production target of 360,000 to 372,000 gold equivalent ounces, or 31 million to 32 million silver equivalent ounces.

All-in sustaining costs were on track to meet its guidance of between $1,210 and $1,250 per gold equivalent ounce, or $14.1 and $14.5 per silver equivalent ounce, for the year.

“This year has seen somewhat calmer precious metals markets after the strong rises of 2019 and 2020, although silver did experience a spike at the start of 2021 to reach just over $30 due to some short-lived US retail purchases in early February,” said chief executive officer Ignacio Bustamente.

“There has been an increase in political risk in Peru and Chile, and the group continues to monitor new legislative and regulatory initiatives which could result in increased taxes and royalties, other costs and potential permitting delays that could potentially impact our exploration and operational activities.

“The second half will feature more planned brownfield and greenfield work with the aim of adding reserves and resources and identifying new projects for our pipeline.”

Bustamente said that in addition to the option on the Snip project, with the support of its new North America vice-president Tom Elliott, Hochschild would primarily focus on greenfield exploration projects in that region, and continue to assess value accretive acquisitions throughout the Americas.

“We can also look forward to introducing the market to our Biolantanidos rare earths project next month.

“We remain confident that Hochschild's ongoing solid operational performance, robust cash flow and a strong balance sheet leave us in an advantageous position to successfully execute on a busy period of exploration and business development activity.”

At 0841 BST, shares in Hochschild Mining were up 2.14% at 154.74p.