Hochschild cuts production targets after pre-tax loss

Hochschild Mining (LSE: HOC) lowered on Wednesday its full-year production guidance after swinging to pre-tax losses of US$66.1 million ($90.3 million) in the half-year compared with a profit of US$5.4 million in the same period of 2022.

The precious metals producer said the negative figure was caused mainly by two impairments totalling US$66.9 million related to losses at the Azuca and Crespo projects in southern Peru, as well as delays in securing a modified environmental impact assessment for its flagship Inmaculada gold-silver mine, also in Peru.

Hochschild also mentioned accelerated development costs at its 51%-owned San José mine in Argentina, as well as an updated valuation of the company’s investment in Aclara Resources (TSX:ARA) as factors contributing to the half-year loss.

Adjusted earnings before interest, tax, depreciation and amortization fell 24% to US$99.5 million from US$130.5 million in 2022, while revenue dropped 9.7% to US$314 million from US$347.8 million.

Adjusted earnings before interest, tax, depreciation and amortization fell 24% to US$99.5 million from US$130.5 million.

The company lowered its full-year production guidance for gold and silver to 289,000-303,000 gold-equivalent oz. and 24 million-25 million silver-equivalent ounces. The previous targets ranges were 301,000-314,0000 and 25 million-26 million, respectively.

Its full-year guidance for all-in sustaining costs was also lifted to US$1,490-$1,580 per gold-equivalent oz. and $18-$19 per silver-equivalent ounce.

Winds of change

Hochschild noted that following the approval of the new EIA for Inmaculada, it’s in “an excellent position” to unlock the mine’s geological potential.

The permit, valid for 20 years, allows Hochschild to resume brownfield exploration and develop high-grade reserves and resources at the property, it said.

Besides delays in securing Inmaculada’s permit, the company has recently had to deal with protests and civil unrest in Peru affecting the operation, as well as the departure of CEO Ignacio Bustamante at the end of August.

“I would like to express my gratitude to all stakeholders for their ongoing support in what has been a prolonged period of uncertainty for the company,” new CEO Eduardo Landin, said. “We are, however, entering a new phase with renewed impetus, and we are looking forward to a busy second half of construction and exploration…as we work to deliver on our commitments to all stakeholders.”

The Mara Rosa open pit gold mine is expected to begin production in early 2024. Credit: Hochschild Mining

Commissioned in 2015, Inmaculada consists of 40 mining concessions and is responsible for the lion’s share of the company’s overall production.

Hochschild said its Mara Rosa project, in Brazil, was advancing on budget and on schedule, with total project progress being at 92%. The company expects first production from this mine in the first half of 2024.

Hochschild shares were down 1.3% to £84.15 ($143.63) in London on Wednesday afternoon, valuing the company at £438.8 million. Its shares traded in a 52-week window of £50.40 and £95.55.