London-listed precious metals producer Hochschild Mining more than doubled its first-half adjusted earnings to $491.5 million as surging gold and silver prices offset lower production.
The mining company reported that adjusted earnings jumped 119 per cent in the six months to June 30, up from $224.5 million in the same period a year ago. Revenue for the half-year rose 62 per cent to $844.4 million.
Pre-tax profit for the period increased to $365.8 million from $109.3 million. Shares in Hochschild Mining jumped over 7 per cent to 670p in early trading, bringing gains for the year to 37 per cent.
Higher precious metals prices provided the primary momentum for the financial gains. The group reported that its average realised gold price surged 47 per cent to $4,166 an ounce, while its realised silver price jumped 130 per cent to $77.80 an ounce.
The strong market prices helped offset lower overall output and higher operating costs across the group's operations. Hochschild operates precious metal mines across South America, primarily producing gold and silver.
Production and cost guidance
Production fell from 165,176 ounces to 151,830 gold equivalent ounces in the six months to June 30. The decline was primarily driven by planned lower ore grades at the company's Inmaculada mine in Peru.
In Argentina, the San Jose mine achieved an 8 per cent increase in gold equivalent production. Hochschild also reported continued progress in turning around its Mara Rosa operation in Brazil.
Hochschild maintained its full-year production target of 300,000 to 328,000 gold equivalent ounces. However, the business raised its forecast for all-in sustaining costs to between $2,380 and $2,500 per ounce, up from its previous guidance of $2,157 to $2,320 per ounce.
Chief executive Eduardo Landin said: "Whilst costs for the year are now expected to be above our original guidance, this primarily reflects the impact of higher precious metal prices, which are being seen across the industry and have significantly increased export taxes in Argentina, workers profit sharing, royalties and other production-linked costs, as well as stronger-than-expected local currencies across all three of the Company's operating jurisdictions."
Cash generation and interim dividend
Despite rising cost pressures, strong cash generation enabled the business to shift into a net cash position of $51.1 million at the end of June. That compares with net debt of $20 million reported at the end of last year.
Following the cash flow improvement, Hochschild increased its interim dividend to 4.0 US cents per share, equivalent to $20.6 million. That represents a significant rise from the 1.0 cent per share paid out a year earlier.
Chris Beauchamp, chief market analyst at IG, said: "It has been a good time to be a gold miner, and for their shareholders too, even with the months-long decline since the peak of the frenzy in Q1."
"Like its bigger peers, Hochschild Mining is also able to reward investors for their patience, and with the debasement trade apparently back from the dead there are reasons to expect the good times to keep on rolling," Beauchamp added.
