Hochschild Mining laments falling precious metals prices

Half-year results from Hochschild Mining showed tough times for the metals group, with revenues falling 13% to $308.6 million (£230.5 million).

Shares dropped 2.4% in morning trading, as EBITDA was also down, to $90.4 million. As the interim dividend has been suspended, executive chairman Eduardo Hochschild pointed to the "very difficult financial results caused by the precious metals price falls", but promised to "reassess the position subject to the overall full-year financial results".

Falling precious metals prices have hit the entire industry, noted the company: "The average selling price that we have received for our sales has fallen by approximately 40% versus the same period two years ago, with a significant portion of the fall occurring over a period of weeks in the first half of this year."

The group reiterated its overall strong financial position, with $275 million of cash, a number of unused credit lines, and a cash optimisation programme that is "already delivering benefits early in the second half".

Analyst view

Whitman Howard analyst Roger Bade said the results were saved from embarrassment by a $45.9 million revaluation of gold-mining assets transferred from "associate" to "available for sale".

"If we strip out various funnies, underlying pre-tax earnings amounted to a mere $2 million in the half," said Bade, whose rating for Hochschild was 'sell'. This was on the back of "inferior returns, a passed interim dividend and continued capital expenditure on projects that promise returns way below 25%, at current silver prices".