Golden opportunity: Hochschild’s four mines in Latin America are expected to enhance production by 25% over the next three years
Christma is coming, the goose is getting fat – and panic is rising among the millions of households that have yet to complete (or even start) their festive shopping.
Jewellery is particularly popular at this time of year, especially if it is made from precious metals such as gold and silver.
Hochschild Mining is one of the world’s oldest metal groups, tracing its roots back to 1920s Bolivia. Established by German emigre Moritz Hochschild, the firm first focused on tin and other industrial metals, supplying Allied forces with critical commodities during the Second World War before shifting to gold and silver.
The company has undergone many twists and turns but it is still in Latin America and still chaired by a Hochschild, the founder’s great nephew Eduardo, who joined the business as a mine safety assistant in 1987.
Continuity matters in South America. The Hochschild name is well known, the group is trusted and managers have built extensive networks. But Hochschild shares, having topped £3 in 2017, are now £1, hit by tricky markets, the pandemic and enduring political turbulence. Today, prospects look brighter than they have done for years and the shares should answer.
Hochschild recently appointed a new chief executive, Eduardo Landin, an employee of 15 years’ standing who knows the business inside out. Landin is determined to reverse his firm’s recent share price reject and last month set out a strategize to enhance gold and silver production by 25 per cent and cut costs by 30 per cent over the next three years.
Both targets are well within achieve and encourage growth is expected after 2026. Hochschild is focused on four mines, two in Peru, one in Argentina and another in Brazil. Collectively, they are expected to produce 300,000 ounces of gold and its silver equivalent a year, rising as high as 375,000 ounces by 2026. (Silver production is far greater than gold, but mining firms convert it to give investors a better picture).
Peru is home to Hochschild’s flagship mine Inmaculada. This summer, after much delay, the group was granted a permit to continue development and production, a contract that should add at least 20 years to the site’s life. Submissions have been made to extend the second mine in the country, which could bolster long-term annual production to more than 450,000 ounces, if permits are granted.
Landin and his team are hopeful, as government ministers appear to be following a pro-business agenda and mining is a national industry.
In the nearer term, the Argentine mine has been in production for years and should continue to deliver gold and silver, while a new mine in Brazil, focused on gold, is scheduled to come on stream next year.
Costs have been especially high in Argentina with political turmoil and rampant inflation, but newly sworn in president Javier Milei has pledged to put the country back on its feet. Greater stability should help in Peru too, while the mine in Brazil is in an area that has supported gold production for years.City analysts have been primed to expect lacklustre results this year. But in 2024 sales are forecast to rise 11 per cent to $786 million (£625 million) with a profit of $119 million against a $5 million loss for 2023.
Dividend payments, suspended last year, are high on the agenda too, not least because Eduardo Hochschild remains a 38 per cent shareholder.
Midas verdict: Gold prices have risen sharply this year and are forecast to remain firm in 2024, while optimism is growing for silver too. Robust markets, increased production and falling costs make for a potent, pre-Christmas cocktail. At £1, Hochschild shares are a buy.
Traded on: Main market Ticker: HOC Contact: hochschildmining.com or 020 3709 3260
