Hochschild Mining (LON:HOC) have given their shareholders an update regarding their performance in the final quarter of 2019.
The firm gave a mixed update to shareholders however shares have stayed in green.
Shares in Hochschild trade at 168p (+2.44%). 15/1/20 12:24BST.
The firm said that its gold production totaled 78,050 in the three month period, however this saw a dip of 4.1% compared to the 81,370 total which was reported in the third quarter.
On a better note for shareholders, gold production figures were higher than a year ago where the fourth quarter figure in 208 was 73,100.
This was driven by a “better than expected” performance from the Inmaculada mine in Cusco, Peru.
Looking at silver production, fourth quarter production once again fell by 12% giving a total figure of 4.6 million ounces. In the third quarter, the figure delivered was 5.3 million and on a worse note, year on year silver output fell by over 20%.
On an overall basis, 2019 production for gold was 570,500 gold equivalent ounces and 46.2 million silver equivalent ounces, both down 3.0% year-on-year.
Hochschild told shareholders for 2020 that it will expect a production guidance of 422,000 gold equivalent ounces and 36.0 million silver equivalent ounces.
The firm added that total sustaining and development capital expenditure will be expected to be approximately $115-130 million including $22 million expansion of tailings storage facility at Inmaculada.
Ignacio Bustamante, Chief Executive Officer said:
“I am pleased to report that we have delivered a stronger than forecast final quarter. Consequently, the overall 2019 production figure of 38.7 million silver equivalent ounces is comfortably ahead of the 37.0 million ounce target and includes record contributions from our Inmaculada and San Jose mines. Furthermore, our costs for 2019 are expected to be in line with guidance. We have also substantially improved our financial position with strong free cashflow generation and the refinancing of our short-term debt with a new low cost $200 million loan.
“At Inmaculada, we have continued to deliver exciting drill results that are further adding to the resource base. In addition, our 2020 brownfield drilling programme is set for an early start in Peru with the welcome news that we have secured permits to drill at the exciting Pablo Sur and Cochaloma targets close to Pallancata. We will provide updates on progress at these and other campaigns as our exploration programme advances.”
Production cuts give shareholders advanced warning
At the end of November, the firm saw their shares plummet as it announced it would be cutting its 2020 guidance for its Pallancata project in Peru.
Hochschild said it is still “firmly on track” for its 2019 output guidance of 457,000 gold equivalent ounces or 37 million silver equivalent ounces.
Hochschild added that its overall production target for 2020 is 432,000 gold equivalent 35.0 million silver equivalent ounces ounces, which includes a drop in Pallancata’s expected production to 7 million silver equivalent ounces.
Anglo American – a fellow Peruvian Miner
Anglo American (LON:AAL) are another firm that operate in Peru, and work on copper mining.
The firm followed in a similar fashion to Hochschild Mining, where they saw their 2020 output volume expectations reduced in December.
Anglo American’s copper production guidance for 2020 has been cut to 620,000 tonnes to 670,000 tonnes, with the upper limit of the range previously 680,000 tonnes.
Diamond output guidance for 2020 fallen to between 32,000 carats and 34,000 carats, from 33,000 to 35,000 carats before.
Additionally, Iron ore production guidance from Kumba Iron Ore Ltd (JSE:KIO) in South Africa has been fallen to between 42 million to 43 million tonnes from 43 million to 44 million before.
Additionally, it was reported that the firm was posing a question to Sirius Minerals (LON:SXX) over a merger deal.
Talks of the deal are still young, however Anglo have reportedly offered 5.5p per share for Sirius, giving a total valuation at £386 million.
The strategic review conducted by Sirius outlined the development plan for a project in North Yorkshire, as the firm looked at their funding options.
Sirius also noted that they were on the search for a partner firm to sustain this project and henceforth Sirius said they will slow the development of its polyhalite mine.
Shareholders of Hochschild should not be so concerned with the production figures being lower than expected as it seems that the firm has a concrete vision going forward for 2020, and this could see long term rewards.
