Hochschild Mining PLC

London, United Kingdom-based Hochschild Mining Plc (LON: HOC) is a precious metal producer company with business operations spread across the Americas for more than 50 years. The company is mainly focusing on good quality gold and silver deposits. The company is presently operating in 3 underground mines in southern Peru and one underground mine in southern Argentina.

On 15^th January 2020, the company will announce the Q4 FY2019 Production Results.

2020 Guidance (as on 22^nd November 2019)
The Company stays in line with its 2019 output guidance of 37 million silver equivalent ounces or 457,000 gold equivalent ounces.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. Pallancata is anticipated to produce 7 million silver equivalent ounces.

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.

Production Update (as on 23rd October 2019)
The company has announced the Q3 2019 production report.The group reported another robust quarter with production of 4.3 million ounces of silver, 67,797 ounces of gold, 9.8 million silver equivalent ounces, and 121,395 gold equivalent ounces. The group’s net debt stood at approximately $30 million as at 30th September 2019 against the $61 million as at 30 June 2019.

Financial Highlights (six months to 30 June 2019)
The company’s reported revenue for the first half of 2019 was reduced by 5 per cent to $354,450 thousandagainst the $372,328 thousand in H1 FY2018, driven by a decrease in the average price of silver. The total basic and diluted earnings per share were US$0.03 in H1 FY2019 against the US$0.03 in H1 FY2018. Interim dividend per share was 2 cents, a surge from 1.965 cents in H1 FY18.

Share Price Performance

Daily Chart as at November-25-19, before the market closed (Source: Thomson Reuters)

On 25th November 2019, Hochschild Mining PLC shares were trading at GBX 161 at the time of writing before the market close (at 2:51 PM GMT), down by 5.35% against the previous day closing price. Stock's 52 weeks High and Low are GBX 232.20/GBX 150.50. The company's stock beta was 2.13, reflecting the higher volatility as compared to the benchmark index.

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.

In H1 FY19, the company’s top-line and bottom-line performance declined.Despite the weak fiscal performance, the group is anticipating a rise in demand for both silver and gold. With the international financial markets started experiencing volatility, the growth prospects of precious metals will increase in the year 2020.

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.

Therefore, based on the above rationale, we have given a "Hold" recommendation at the current price of GBX 161 (as on November 25, 2019, before the market close).

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