Hochschild shares bump higher on record production

Courtney Goldsmith
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Hochschild produces silver and gold (Source: Getty)

Shares in Hochschild Mining lifted more than five per cent today after the miner hit record quarterly production, calming investor concerns about its performance after its stock tumbled over the summer.

The figures

For the three months to the end of September, the miner produced 5.3m ounces of silver and 67,234 ounces of gold. It also produced 10.3m silver equivalent ounces and 139,388 gold equivalent ounces.

The firm said it was on track to deliver its 2017 production target of 37m silver equivalent ounces at an all-in sustaining cost of $12.10 to $12.70 per ounce.

At the time of writing, shares were up 4.79 per cent at 231.80p, making Hochschild one of the top gainers on the FTSE 250 index.

Read more: Shares in Hochschild are tumbling after profit dropped in the first half

Why it's interesting

Hochschild's higher output was driven by better performance from its Inmaculada and Pallancata mines.

Over the quarter it received a surface drilling permit at Inmaculada, which allowed it to complete a 3,600m surface drilling campaign, and it secured all drilling permits for the Arcata 2017/18 brownfield exploration programme.

"Permits are key to Hochschild's exploration activity," said Richard Hatch, analyst at RBC Europe.

"The company's exploration potential is a key driver of valuation upside, we believe," he added.

In August, the miner's shares took a battering after half-year profit dropped more than 30 per cent due to higher costs. All-in sustaining costs had risen 10.1 per cent to $12 per silver equivalent ounce over the period, in part due to increased investment in brownfield exploration.

What Hochschild said

Chief executive Ignacio Bustamante said the company was "firmly" on track to hit its 37m silver equivalent ounce target for the year.

"Costs remain under control and we can look forward to our financial position improving in the near future with good cashflow generation and a planned debt re-financing in the first quarter of next year.

"We are now in the middle of our brownfield exploration campaign and have seen some encouraging results from Arcata, San Jose and also at Inmaculada where underground drilling has already revealed a number of new veins close to the original Angela vein."

Read more: Hochschild Mining beats targets to hit record production of gold and silver

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