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Hope you all held your nerve this morning!
An IC tip is not necessarily a good thing :)
From IC
Take another look at Hochschild Mining as it regains its shine
South American gold and silver miner will consider return of dividend at mid-year
March 13, 2024
by Alex Hamer
Cash profit climbs on improved gold prices and weaker Argentinian peso
Push into Brazil continues with new mine purchase option
Even for a company that specialises in digging, Hochschild Mining (HOC) has done well to unearth a better portfolio within just 18 months. The South American company has been weighed down by expensive operations and a permitting hold-up at its key mine, Inmaculada.
But the completion of a new mine in Brazil and a path to improving the Peruvian operations does put it on the upswing.
Adjusted Ebitda for 2023 was $274mn (£214mn), up 10 per cent on the year before. A $34mn drop in exploration spending and $21mn boost through an Argentinian preferential exchange rate programme also helped this figure, although it is still $100mn down on 2021. Analysts see improvement again this year thanks to the higher gold price and cheaper production at the new Mara Rosa mine. Production in 2023 was 300,749 gold equivalent ounces (oz), which includes silver, and the guidance for 2024 is 343,000-360,000 gold equivalent oz.
The realities of looking for profitable new operations was obvious in the 2023 income statement: reported profits fell on $80mn of impairments and another $17mn came from a write-down on the mining unit of San Jose in Argentina.
Debt rose in the year due to the Mara Rosa construction cost. Chief executive Eduardo Landin said the company would consider bringing back a dividend once Mara Rosa hits commercial production, expected mid-year.
Landin, who said Peru was more stable even after a change of prime minister last week, also flagged a greater commitment to Brazil through a new option over another brownfield project, Monte do Carmo. He said this could be another Mara Rosa, if further exploration confirms the seller’s pitch in the next 12 months.
Hochschild still has a way to go to balance out its new growth spending with managing some still ageing and expensive mines, like San Jose, but it is cheap enough and has good enough prospects to warrant getting back in. Buy.
Note last year interest paid on loans was $28.9 million (2022: $15.3 million) due to rising interest rates however the overall debt on the balance sheet has increased too. Factoring in the continued rate rise through the period, the reduction in liquid cash and reliance on fully drawn-down loans I'd imagine interest this year will be considerably higher once more.
Regardless of whether margins improve this year the company is highly geared in a high rate environment with extensive capital costs outstanding. Not one I'd buy over other more attractive producers at this level
From IC
Hochschild still has a way to go to balance out its new growth spending with managing some still ageing and expensive mines, like San Jose, but it is cheap enough and has good enough prospects to warrant getting back in. Buy.
Range 85p to 120p - nothing has changed - trim add - way to go. Part added 101p purchases after 110/112p sales nice turn .
Will add as usual at 80p 90p if if comes again but who knows.
Let's be honest, it was almost certain that divis won't be reinstated just yet. In 2024 sorting out the debt is high up on the list.
Yes. Pretty strange. Looked a solid set of results, in line with communication and expectations. Maybe just some unfulfilled dividend expectations?
Very poor, hopefully it will hold 100p
-7% is not the reaction I was expecting
Maybe we can but hope but a consultancy group, in on the act, that´s never going to ensure a good night sleep for me.
55p seems so last year. To have abd to hold. Add & trim to 🏆 win.
Well no dividend again, but understandable as they still need to conserve cash to pay down big debts of last couple of years with the heavy expenditure on Mara Rosa etc to buy production to make up for ounces they have lost at their tired mines. About time. However IF gold prices hold up or rise and IF no more disasters political or natural, then the future looks good, jam next year but better than the last couple of years’ marmite imho
Analysts at Canaccord Genuity initiated coverage on silver and gold miner Hochschild Mining at 'buy' with a 145.0p target price on Thursday, stating its Mara Rosa project was a "potential catalyst for turnaround".
Hochschild Mining operates three gold mines located in Peru and Argentina and is currently in the process of constructing its fourth mine located in Brazil, which Canaccord Genuity believes could be at "a profitability inflection point" for the first time in three years.
Canaccord thinks 2023 will mark an adjusted underlying earnings low of roughly $200.0m, driven by weak production at its Inmaculada and Pallancata mines but also higher costs across all operations. However, the analysts also noted we were "almost at the point" where 2023 was in the rearview mirror.
"Production guidance for 2024 given at the recent capital markets day was much stronger than we anticipated at Mara Rosa - we think reflecting management confidence in the ramp-up ahead. We forecast 70k oz of production in 2024, below guidance of 83-93k oz. Overall, this leaves our 2024 attributable production forecast at 331k oz vs guidance at 343-360k oz," said Canaccord.
"We forecast operating costs to remain high in 2024, as well as capex. For this reason, we forecast peak net debt in mid-2024, followed by a significant deleveraging to occur from 2H24 all the way into 2026. We also use a conservative gold price forecast of sub-US$2000/oz until 3Q25, which we think provides some potential upside to our forecasts should gold prices hold."
The Canadian bank also reckons that the first gold pour and commercial production at Mara Rosa should provide two strong near-term potential catalysts for Hochschild in the first and second quarters of 2024, respectively
125 seems to be a reasonable near term target if 108 holds
Surprised not more interest in HOC. If this breaks above 111p then blue sky until 150p... Gold hitting new highs. Buy and Hold. Could hear news on dividend on Wednesday.
The Oracle is quite right, Hochschild is now a gold miner with a bit of silver
I think historical it was, but as of auag prices today we are mainly a gold miner.
Inmaculada (main mine) is currently around 70% gold.
Pallacanta - in care and maintenance till new permit in 3yrs at current prices about 70%silver
Mara Rosa - is all gold (about half the production of Inmaculada, i think, but at lower cost)
San Jose - is small and i think its around 50/50
The recent Monte Do Carmo project is all gold.
Then there a couple retired mines that are not economical to mine at the moment that are mainly silver.
please correct me if im wrong ;)
Does this get viewed more as silver or gold now?
Stanley
You could be right I hold a core here. 107 to 89 to 109 in the space of a few weeks.
Travel of 18 +20 = 38p a 109p share, well worth catching as much as you can rather than holding. Should be 250p now the Peru licences are behind and the metal prices breaking out.
But not in a straight line.
Hello @Woodster, Tony's probably looking at some TA indicators, such as RSI, where on smaller time frames we are in the overbought territory. Believe it or not, I sold my entire HBR holding in December just 2 hours before the RNS dropped late in the afternoon and the SP surged by 40% in the same trading session, and that's after holding for months... so I'm very cautious with Hochschild and wouldn't sell purely based on TA ahead of next week's presentation. #notAdvice
We seem to have a momentum and the price of metal also
Call me greedy, but it’s too early for me to trim :)
Not sure about overbought - have you seen the gold price?
The 2023 results are out next week and our new CEO will present his vision for Hochschild. 109 seems to be too cheap to sell, imv.