Hochschild Mining beats fourth-quarter guidance despite minor slowdown

Boosted by the first full year contribution from the flagship low cost Inmaculada mine as well as the strongest performance for six years from the Arcata mine, the FTSE 250 miner delivered a record annual attributable production for the full-year 2016 of 35.5m silver equivalent ounces, up 31% versus 2015, and 479,600 gold equivalent oz, up by almost a third.

Silver was slightly higher than the raised guidance of 35Moz from its original 32Moz, though the fourth quarter was lower than the third.

Furthermore, Hoschchild said the all-in sustaining cost (AISC) remains “on track” to meet its revised $11-11.5 per oz guidance.

Even though production at Pallancata has been on pause since November due to ongoing discussions with the local community, for 2017 the company guided for 37Moz silver equivalent oz at a higher AISC of $12.2-12.7 per oz because of the recently announced increased exploration and one-off investment to develop the Pablo vein at Pallancata.

"We are also targeting a fifth consecutive year of production increases and, despite the rise in brownfield investment, cost control at all our mines will remain a priority," said chief executive Ignacio Bustamante.

He said the result from 2016 This result includes a successful . In addition, we maintained our focus on debt reduction and used excess cash flow to materially reduce our leverage ratio, beyond the guidance provided for the year.

Hochschild said that excluding the brownfield drilling and Pablo one-offs, AISC would be $11.5-12.0 per oz.

The company reported having roughly $140m cash, up from $96m at the end of the third quarter, while net debt has shrunk to $183m in three months and from $366m a year before.

Analysts at RBC Capital Markets said the Q4 production numbers were slightly weaker than expected and they reduce their price target to 290p from 330p

"Although this was mainly at low-margin Pallancata, 2017 guidance suggests a slower ramp at Pablo and higher group capex and costs. Pablo will be H2-weighted but we continue to expect the shares to outperform with the March resource update a catalyst."