Member Info for TheOracleofOmaha

What did you have hoc's intrinsic value at back in 2017? Vrs what do you have it at now?

Hocs portfolio of mines has changed a fair bit over the last 8 years (atleast over the last 3yrs)

I like the shiny

All four are arguably inflationary, and the independent central banks should not respond with easy money. The east asian ones most likely will (japan with very little inflation and china with basically no inflation and with having a large net export).

In most western countries, governments will respond to recessions, trade wars and disruptive geopolitical events with inflationary fiscal policy. The leaves only monetary policy to combat inflation (which is already on the high side of 2-3% "optimal" for most). I think stagflation is on the cards in worse case scenarios unfortunately. (But perfect for gold)

Gold could reach $3500 this year, but how likely it is, I found very hard to predict.

In terms of things that should push gold up and their likelihood this year IMO:

Inflationary recession (stagflation) - reasonably high likelihood but also investor demand relating to this, I think, is already somewhat baked in, in recent months.

Trump trade wars - I didn't see this coming at least not to the scale we have seen, thankfully (for us at least) is wasn't just rhetoric. Will the tariffs be dropped? Are there more to come? I honestly struggle to predict what tariffs will actually sit over the next 4 yrs, but I do think it will have a significant impact on investment demand for gold either way.

Iran's nuclear program attack and Iran's potential retaliatory strangling of the strait of hormuz - Although I believe this one is of low likelihood, I also believe the impact on the gold price will be significant. To briefly explain there are factions in the white house and knesset who want to destroy Iran's nuclear facilities and the fear being the most asymmetrically destructive response Iran could do, would be to effectively close the strait down to any commercial activity. Due to the amount of resources that pass through the straight it would have a big impact on certain economies (east asia).

China naval blockade of Taiwan - Obviously this would be a major geopolitical event and cause lots of money to rush to safe havens. I think its more likely than most, but is still a very low likelihood of happening this year.

So I would say I'm slightly bullish on gold even at a record high price of $3000 but believe large drops to $2500 are fairly likely (say >15% chance), as well as large increase to over $3500 (say >20% chance ) this year. Despite this, if I could press a button and lock in $3000 gold for the year I would. Hoc is very profitable at these levels with major production growth ahead and with a valuation of £1.2b. I'd rather "lock in", so to speak, a highly probably 66% return from here than a (imo) more optimal but less certain larger return.

"I mean Royropata could become the new Inmaculada" Mr Landin

To be honest if you look at the numbers it certainly comes to far more than the 100k ounces they have as the average annual production 3000tpd * 7.1 gpt *350 (production days, does anyone know what is most likely figure? I believe most mines usually operate 24/7) * 0.035 (grams to ounces =. Comes to around 260k ounces.

Just imagine making $2000 on 260k all from an initial capex of $60m. I was previously more excited about monte potential but nothing beats this.

2.8moz is fantastic for a miner of this size and at around $12 an ounce discovery, chat gpt says industry average is $40-$50.

Tbf Sotolo I think most miners usually only hedge to de-risk. Of course when your bullish on PMs you dont want to see potential revenue reduced but if we were siting at $1600 gold and $20 silver the business would be in real trouble and the hedge could be make or break.

All in all not a bad rns, hoping we get 3 more rns in the not to distant future. Being, royropata permit, monte license and volcan sale.

Gold over 2900 production up this year with large increase due in 2027. All from a profitable 2024 base. 2025 should yeild large returns.

2025 is will almost certainly be very profitable, relatively we dont have much debt. Heck if volcan is sold, with where gold is now, that a lone could well wipe out all of our debt. Not to mention we have a 300m green credit line than is only 10% utilised.

The average gold price from 2024 is significantly below the current 2025 average gold price and like you said 2024 had a significantly bigger % of production hedged at lower prices than 2025. So with investing being a forward looking game any profit in 24 will heavily indicate large profits in the future.

They have mentioned divds returning a couple times so a symbolic one at some point this year is likely if only as a box-ticking exercise. Ultimately the more aggressive mine development is the sensible use of capital in current circumstance than distribution to sh.

Its a very high cost silver mine with not short term plan to reopen. Altho if you believe silver will rise we may have gotten more for it later on.

Sotolo there are no new hedges, the 50k mara rosa hedge was taking back when the mine was being developed to de-risk the project.

I'm kinda surprised new hedges haven't been made considering how low HOC's valuation is.

It would be even more of a head-scratcher trading at £1b valuation if a 2025 rev of $1b was locked in on the pm price side (providing production guidance is meet). Imagine if all future gold and silver was locked in at current prices, (if production targets are met) the rev would be in the $1.6b range from 2027 onwards.

Not to say I'm in favour of large hedging especially not at silvers spot price, but for many of the more risk adverse stakeholders at Hoc it seems like a no brainer for gold.

The other thing I take from the presentations is "2024 FY Results: strong additions

expected to be announced" is on both Inmaculada and Royropata slides and made to stand out in bold font.

They did seem upbeat/excited when referencing drillings results to be released after they are audited back on the q4 production call .

The BMO presentation pdf doc is up on Hochschild's website, page 20 has some explanation on the cost increases. Shame it wasn't clarified on the call last month, would have cleared up some of the doubt.

" Key cost increase components

Capex

Inmaculada

• Tailings expansion brought forward to 2025 (45%)

• Development metres in Nicolas and Tesoro veins &

poorer rock quality (25%)

San Jose

• Development metres from conversion of Cut & Fill

to long-hole stoping & new Frea zone (30%)

Inflation

• San Jose (85%)

• Mara Rosa (10%)

• Inmaculada (5%)

Capex carry-over

Inmaculada

• Delayed completion of 2022/23 projects

Exploration

• Not included in 2023 forecast "

Ditto, even without monte and royropata my model comes out a fair bit above £1b. and I think im leaning conservative on just about ever figure haha. (thats at current spot prices)

Gold hedged at these prices could very much derisk future profits, so we could be at risk of a take over bid with a 50% premium. But hopefully Eduardo Hochschild wont be willing to let go of the family heirloom.

Full year results out on the 12th march

Hoc is trading were it was 4yrs ago.

4 years ago vrs now:

full year operating income (2020) : $107.8m

Only Half year operating income (H1 2024): $96.3m (most likely H2 2024 will be above $107.8m alone)

Full year net profit (2020): $36.2m (pre-exceptional)

Half year net profit (H1 2024) : $64m (pre-exceptional)

EPS (pre-exceptional) 2020: 0.06p

EPS (pre-exceptional) for only first half of 2024: 0.10p

4 years ago there was no Royropata and no Monte do Carmo. The 2020 numbers also include Pallancata that was I'd imagine widely believed to be in its last few years of production.

On the other hand, Hoc had a small net cash position end of 2020 vrs a net debt of $216 (end of 2024).

I'm a firm believer in a free market being systemically efficient (i.e. the system itself amplifies efficient behaviour and diminishes destructive/inefficient behaviour) but the "efficient market hypothesis" where assets are accurately priced on all available data is blatantly flawed. Please see exhibit 1 - Hoc 2021: £950m vrs Hoc 2025: £950m

The only rocket fuel I can think of is clarity on future costs.

If you could get your crystal ball out and tell me for certain aisc would be: 2025 $1600, 2026 $1650, 2027-32 $1400. I'd be a buyer at £3.67 per share (double what its trading at today). I have no confidence in predicting cost for Hoc.

If you look at the political landscapes of the major economies across the world, it very hard to believe political stability wont continue to degrade. That a long with late stage long-term debt cycle and imo there very little chance gold declines from current levels.

As for silver idk, cpm group have it averaging 36-38 over 2025-2026 with most of the climb happening in q1 which we haven't seen yet.

The higher our costs the more levered our p&l is to the gold price.

Respectfully you should hold management to a much higher standard than the uk government ;)

20% change in forecast in 3months without clear reasons isnt good at all. Like they indicated, they probably are sandbagging the 2025 aisc guidance. Its not terrible news but its communicated so poorly it adds doubt. And you deal will doubt by discounting your valuation of the business.