Hochschild Share Chat (HOC)

Morning.

It did, as did POLY, and they both ended up blue which likely speaks volumes.

Yes although if silver does take off around a quarter of Hocs silver is hedged at price below today’s: “ On 8 February 2021, the Group signed agreements to hedge the sale of 4,000,000 ounces of silver at $27.10 per ounce for 2021 and a further 4,000,000 ounces of silver at US$26.86 per ounce for 2022. This is to protect cashflows from the Pallancata mine in the next two years with the existing resource base.” Silver output was 20m oz in 2019, but has been falling with Arcata closed and Pallancata mining less, hence Hoc having now become a gold miner with silver, and the covid closures, so it mined 12m oz silver, nearly half, in 2020. Now, with mines reopened from Covid, if still running a bit slower, we should be between the two figures this year, but don’t look likely to regain 2019 without some extraordinary exploration news. Of course the rising price of our unhedged silver will help profits.

It's not rocket science when there's inflation all around and no western government's are willing to raise interest rates in the near future. Fill your boots time.

Shareminator, you asked me what forward aisc guidance was given for 2020 so I told you, I also said they did well to only go a bit over given covid, which of course implies covid closures affected it, but they did well. The 14.1 to 14.5 guidance was for this year so we do not yet know if they will be ahead or behind. On aisc capex this is what Hoc told me last time I asked “Then you have $11m greenfield and $14m for BL and a further $7m for the ore sorting pilot plant”. I do not think the exceptional covid costs you mention count as capex. I do think about what I write, I just write what I think, that may be different to what you think; please disagree but I am looking at the figures, do say if I get them wrong or you interpreted differently, but I am trying to explain where and why I see profits and why price has fallen. All the best and thanks!

Go be honest I wondered why we took a while to get going in comparison to Fresnillo and Centamin who rose 6% now I know and we should respond well and inline going forward now the mix of chip shortages, inflation, and post pandemic growth and it seems personal wealth increases with money in ones pocket will help a sustained recovery. Without even taking into account the rising political world turmoil and fishing. Interest rates low, falling USD and yields helps too. Happy days for a while yet I am sure!

More rubbish then..

They withdrew February guidance barely 2 months after issuing it. Are you seriously trying to argue that the company would have missed cost guidance otherwise? Hopefully you think before posting a reply..

Forward guidance of $14-14.5 per silver equivalent ounce was issued in the summer after mines reopened and production ramped up and remained unchanged for the remainder of the year. Hochschild beat this revised guidance as I mentioned in one (or possibly more) of the earlier posts. They have beaten cost guidance in most of the previous years too. I bothered to check just so I could make that point.

Again what "non AISC capex" are you talking about? Exceptional costs relating to stoppages ($44.7m) and Covid relief initiatives ($27.6m) are the ONLY major expenses deducted from the $270m EBITDA and they are NOT recurring.

The tax, royalities and depreciation (non-cash item) are nothing out of the ordinary.

Again, for your benefit, Hochschild include capex within their reported AISC.

Don't forget, this also went ex dividend today.

Hi Shareminato, in answer to your question: Forward guidance for 2020 was “All-in sustaining costs expected to be $1,040-$1,080 per gold equivalent ounce ($12.1-12.5 per silver equivalent ounce)”. Ended up at $12.8 which is pretty good considering Covid. I mention non aisc capex as I have been discussing it with Hoc, as higher and helps in working out reduction in profit. I have never suggested all capex is non aisc, but non aisc capex is a significant item, for instance with Cey it has shot up to around $200 an ounce. Nice to see a bit of a rise in light of soaring metals, for on e beating worries, have a good weekend

PWND

And what were management predicting last year? AISC came in at $12.8 per ounce despite forecasts of $14-14.5 and given they nearly always beat forecasts I will stick my neck out and say $14 is the ceiling.

Why are you segregating Capex from AISC? It is clearly listed in the AISC table and therefore already factored into the guidance.

"So costs nearing 25% up on 2019"... and silver nearing 60% up in that time... doesn't help make your point, neither does pretending all capital expenditure is separate from the published AISC.

As I've already explained the higher silver price today matters if you're comparing 2019 production of 38.7 moz vs 2021 forecast production of 31-32 moz.

$750m revenue in 2019 will be surpassed by more than $900m this year (Silver: $26/oz + Gold: $1750/oz).

Thankfully Hochschild management have a history of under promising and achieving their targets.

$1,807 / $27.2

There's +80% on offer right here peeps, believe it or not .......

BOOM!

Management is saying more than $14 silver equivalent aisc this year, actually $14.1-14.5 and then higher capex on top, or $1210-1250 gold aisc. So costs nearing 25% up on 2019 and with lower production and increased capex about 40 or 50% lower profit I guess, which justifies the lower share price before the politics, particularly with the not very exciting exploration news and Chilean politics and delay on rare earths. As ever so so so hope your optimism trounces my pessimism and proves me and management projections totally wrong

My stop loss kicked in this morning, so I’m officially on the fence for now, I can’t say I’m in any hurry to get back in..
too much of this in the headlines for now...

https://moneyweek.com/investments/commodities/industrial-metals/603192/copper-price-copper-bull-market?utm_campaign=money-morning-newsletter&utm_medium=email&utm_source=newsletter

For the benefit of those incapable of presenting the facts or prone to distorting the truth, here are the AISC on a per silver equivalent ounce basis:

2020: $12.8
2019: $11.5
2018: $12.6
2017: $12.3
2016: $11.2
2015: $12.9
2014: $17.4
2013: $18.6

Prior to this period reporting of costs was provided on a per tonne basis.

Clearly costs have not run rampant nor are they destroying company value. They have been consistently below $13/oz for the past 6 years and are considerably lower than they were prior to 2015.

AISC set against local inflation in Argentina, Chile and even Peru shows management has offset most of the inflationary pressures over this period and this is still the case if you measure the data from 2015 (when costs reduced to the current level). Only in recent years has the price of silver recovered and the company are now able to enjoy significantly improved margins on a per ounce basis.

Hochschild often beat their annual cost forecasts and even last year during the pandemic they kept costs below their revised forecasts. Now their forecast costs this year are the same (on a per ounce basis) as their revised forecast for 2020. It is completely unreasonable to assume costs do not rise of course and they are expecting to offset some of this outlined in their 2021 forecast with a substantial increase in production.

Even assuming a worst case 10% rise in AISC to $14/oz, the price of silver is more than 20% up on last years average price received and we have 4 million ounces hedged at a higher price.

"NV Gold Does $10 Million Deal with Hochschild in Nevada"

http://www.321gold.com/editorials/moriarty/moriarty050621.html

I have been in HOC for 5 years as I wanted leveraged exposure to the price of metals, silver in particular, and my broker only had UK companies HOC and FRES. Silver was $16 and gold $1220 when I started buying HOC with current prices $27 and $1790 yet my investments into HOC are in the red?? The company has significantly underperformed. All the stories about miners providing leverage to the price of metal are utter BS imo.

I Don’t want more as still have round £750k! Just holding as hoping inflation will make gold go up which is what Hoc needs plus some good exploration news, the politics is what it is and I don’t mind losing a bit and paying higher taxes if it helps the incredibly needy in Peru, but I do mind that the company hasn’t been better at finding more gold, which also means that costs have also risen stupidly, and I do mind that the main owner and his MD both sold quite a lot of shares in expectation of now, although I am pleased that they have now hedged in expectation of silver falls. The question is how low will we go before we turn, with this flighty share, the inability of gold to react to inflationary expectations now there are so many alternatives and Peruvian politics. I will go on posting that I expect Hoc to fall but then rise as I have consistently, and sadly been righter than this who kept saying it would hit 300 soon, as I believe these boards are much better when they help understand both sides of the argument and explain why price is falling when it is rather than just it is some kind of conspiracy against them

So looking at this to see if it's worth piling in again...factors against politics and the hedge....that would almost be enough for me to steer clear and say Fres is a better bet. One factor is when there is a scramble for silver miners..i am sure many newbies won't be aware of the hedge or the politics so could get a short term rally. Doesn;t bode so good for the long term though does it ? The hedge is on silver though not gold am i correct ? So a gold rally would help Hoc ....the politics cloud doesnt make me feel cozy !

Does the Morlock know which position she currently occupies ? Because from her latest warblings it would seen not !

So you keep telling us mate - just buy already ;)

Yes shame only quarter profits exposed to silver piece on top of the politics so flat or down again

$1,795 / $26.8 - could be going over the top today.

"If anyone appreciates the independence of the Federal Reserve"

Sociopaths all of them.

Yellen backtracking..

It's not something I'm predicting or recommending," Yellen then said about interest-rate rises in a separate online event hosted Tuesday by the Wall Street Journal.

"If anyone appreciates the independence of the Federal Reserve, I think that person is me," she went on, repeating comments she had made Sunday to NBC that "I don’t believe inflation will be an issue."