Business Overview
Hochschild Mining Plc (LON: HOC) is a precious metal maker company, with a focus on the good quality of gold and silver deposits. The company’s business operations spread across the Americas for more than 50 years. The company is presently operating in 3 underground mines in southern Peru and one underground mine in southern Argentina.

Guidance for the Financial Year 2020
On 22nd November 2019, Hochschild Mining announced guidance for the financial year 2020. The company’s output guidance remained on track at 457,000 ounces of gold equivalent or 37 million ounces of silver equivalent. The group’s overall attributable production target for the financial year 2020 stood at 35 million silver equivalent ounces or 432 thousand gold equivalent ounces. From Inmaculada, the company expected a record output of around 257 thousand gold equivalent ounces in 2020. Strong production of 14 million silver equivalent ounces is anticipated from the 51 per cent owned San Jose mine in Argentina. The company expects its production to be 7 million ounces of silver equivalent from Pallancata.

In 2020, the all-in sustaining cost from the operations is expected to be in the range of $1,015-$1,045 per gold equivalent ounce, which includes a project of $22 million to develop the tailings storage facility at Inmaculada. For 2020, the overall capital expenditure budget will be in the range of $115-$130 million allocated to development and sustaining expenditure.

Financial Highlights – H1 Financial Year 2019 (30th June 2019, USD, thousand)
The company’s reported revenue was reduced by 5 per cent in H1 FY2019 to $354,450 thousand versus $372,328 thousand in H1 FY2018, due to the decline in the average price of silver. In H1 FY2019, the adjusted EBITDA declined by 5 per cent to $153,734 thousand from $161,906 thousand in H1 FY2018, mainly due to the decline in the revenue and increase in the administrative and exploration expenses for the period. The total net profit as reported from the continuing operations was $16,661 thousand (H1 FY2019) versus $10,718 thousand in H1 FY2018. The total basic and diluted earnings per share were US$0.03 (H1 FY2019) against the US$0.03 in H1 FY2018. Interim dividend per share stood at 2 cents.

Share Price Performance

Daily Chart as at 18th December 2019, before the market close (Source: Thomson Reuters)

On 18th December 2019, Hochschild Mining Plc shares were trading at GBX 159.40 at the time of writing before the market close (at 1:35 PM GMT), down by 1.12 per cent against the previous day closing price. Stock's 52 weeks High and Low are GBX 232.20/GBX 153.46.The shares of the company have delivered a negative return of 24.55 per cent in the last quarter.

Conclusion
The company’s continuing strategy for the financial year 2020 is projected to provide consistent production at competitive costs, with an increase in the output at Inmaculada. At Pallancata, the company has reduced the operation's anticipated production target to 7 million silver equivalent ounces.

The group’s top-line and bottom-line performance declined in H1 FY2019 period. Despite the dismal fiscal performance, the group is anticipating a rise in demand for both silver and gold. The growth prospects of precious metals will increase in the year 2020, as the international financial markets started experiencing volatility.

The group’s growth strategy revolves around lower costs, optimising projects at earlier stages and strategic partnerships to maximize the shareholders’ value. The group’s board declared an interim dividend per share of 2 cents, which reflects the ongoing successful operational and strategic performance.

Over the course of 4 years (FY14 - FY18), the company’s revenue surged from USD493 million in FY14 to USD704.3 million in FY2018. Compounded annual growth rate (CAGR) stood at 9.33 per cent.

Therefore, based on the above rationale, we have given a "Hold" recommendation at the current price of GBX 157.30 (as on 18th December 2019, before the market close at 12:05 PM GMT).

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