Berenberg initiates coverage on miners Hochschild and Polymetal

Berenberg started off Hochschild at 'sell', because while it considered the group to be "a stable business" in the near term, looking further out, it believed the market had not priced in "a material drop in grades" from Hochschild's key mine, Inmaculada.

Based on resource data, the German bank thinks "there is a looming risk" that grades could fall up to 35%, as mining transitions from the existing Angela vein to Millet in 2022.

"As this nears, we see downside risk to medium-term consensus expectations," said Berenberg, which issued the group with a 165p target price.

"While there is some scope for exploration and/or positive grade reconciliation to fill this gap, we think that time is running out for the drillbit to deliver."

As far as Polymetal was concerned, Berenberg started off coverage on the group at 'hold', branding it a "great stock" but at an already "fair value".

Berenberg, which gave Polymetal a 970p target price, said it really liked "the Polymetal story".

"We think of it as a 'Russian Randgold'," said Berenberg. "It knows its core geography (the former Soviet Union) and sticks to it; it favours mine development over large-scale acquisitions of producing assets; it is focused on exploration and creating value through the drillbit and early-stage development stories; and it aims to generate attractive shareholder returns, both through the share price and via dividends."

Given the above, Berenberg said it reckoned Polymetal was "a great gold mining company"; however, at the current share price, the analysts said, the stock was already fairly valued.

Nonetheless, they recommended clients "look for any pullbacks in the gold sector to opportunistically build a position."