FYI DJ 2nd UPDATE: Hochschild 1H Net Pft Beats Views; Co On Target
(Adds details and share price)
By Alex MacDonald Of DOW JONES NEWSWIRES
LONDON (Dow Jones)--Latin American precious metals miner Hochschild Mining PLC (HOC.LN) Wednesday reported a 24% drop in its first-half net profit, partly due to losses from its hedging program, but said it remains on track to achieve its full-year production target.
The FTSE-250 miner said its net profit was $24.7 million in the first six months to June 30, from $32.7 million in the same period a year ago. The figure beat analysts' expectations of $11.6 million, according to a company consensus forecast of four analysts. Earnings per share fell 27% to 8.0 cents.
Revenue was broadly flat at $230.6 million despite a 22% decrease in achieved silver prices because the company increased production to a record high in the first half. Silver output increased 24% to 9.2 million troy ounces and gold output rose 5% to 78,000 ounces in the first half compared the same period a year ago.
The company reconfirmed that it is "well on track" to achieve its full year production target of 28 million attributable silver equivalent ounces, a 7% increase from last year's full production figure.
"With investment in acquisitions, a strong project pipeline and rigorous cost controls, we remain confident about the long term growth prospects of the business," said Eduardo Hochschild, company executive chairman.
The company declared an interim dividend of $0.02 per ordinary share.
Hochschild's bottom line was impacted by $5.7 million in realized losses and $12.1 million in unrealized losses from its forward sales hedging program.
Hochschild still has 4.6 million ounces of silver and 18,000 ounces of gold which it expects to hedge in the second half at average prices of $12.0/oz and $971.80/oz respectively. The miner's Chief Financial Officer, Ignacio Rosado, said the hedging program was only put in place to help ensure stable cashflows in 2009. The company has no plans to continue hedging its output in 2010, although it has ring fenced a portion of its silver output through options.
Rosado said gold and silver prices should trade at current levels for the remainder of the year, buoyed by investment demand for precious metals and the weaker dollar against most other currencies. He expects silver to trade within a range of $13-$15/oz for the rest of the year and through 2010. Gold should meanwhile trade within a range of $850-$950/oz during the second half of 2009, he said.
The company's Chief Executive Miguel Aramburu said he expects to deliver a good set of results in the full-year if prices remain stable and the company continues to cut costs. He said the balance sheet was "healthy" and the company didn't need to tap the markets for extra cash; the miner has enough cash on hand to fund its operations and future mergers and acquisitions, he added.
Cazenove said in a research note that Hochschild delivered "a good set of results" partly due to "impressive" unit cost reductions.
Hochschild reduced its unit costs by 10% and administrative expenses by 34% in the first half.
Hochschild, based in Peru, owns and operates mines in Peru, Argentina and Mexico. It also has a 40% stake in Canada's Lake Shore Gold Corp. (LSG.T).
The miner's shares opened initially higher due to the better-than-expected results but are now down 0.3% or 0.9 pence at 265 pence a share in line with broadly lower stocks in the U.K. mining sector.
Company Web site:
https://www.hochschildmining.com/content/index.php