Covid-19 And Its Impact on Earnings Of 2 Mining Stocks- Hochschild Mining and Kenmare Resources

Be the First to Comment Read

Covid-19 And Its Impact on Earnings Of 2 Mining Stocks- Hochschild Mining and Kenmare Resources

 Covid-19 And Its Impact on Earnings Of 2 Mining Stocks- Hochschild Mining and Kenmare Resources

Summary

  • Coronavirus pandemic has also impacted the mining industry, and some industry players are more affected than others by the new set of challenges facing the industry.
  • Hochschild Mining PLC revenue plunged to $232.0 million in H1 2020 from $354.5 million reported in H1 2019
  • A 14 per cent decrease in tonnes of finished products sold led to a decline in revenue of Kenmare Resources PLC by 5 per cent to US$116.8 million in H1 2020

The coronavirus pandemic has had an immediate and deep-rooted impact on the global economy, impacting all the industries, including the mining sector. Some industry players in mining are more affected than others by the new set of challenges facing the industry. Initially, the impact is on day-to-day operations and ways of working. Measures such as social distancing, have seen customers close access to their sites and trying to maintain operations with minimal staff. The industry is also seeing some deferral in non-critical maintenance and other non-prioritised activities.

The longer-term economic effects are quite difficult to predict this early. Obviously, there will be an impact. But even within the mining sector, it is likely to vary from commodity to commodity. We can see a picture where gold will remain buoyant as will thermal coal and uranium but iron ore, for example, might come under more pressure as it is more fully exposed to consumer demand.

Amid all the uncertainties surrounding the industry, we are discussing two mining stocks and their financial highlights.

Hochschild Mining PLC (LON: HOC)

Hochschild Mining Plc is a United Kingdom-based company, engaged in mining, processing and sale of silver and gold. It has three operating mines located in Southern Peru, namely, Arcata, Pallancata, and Inmaculada and one operating mine located in Argentina, namely San Jose.

Financial Highlights

On 19 August 2020, the company declared its half-yearly results for the period ending 30 June 2020. The total Group production was lower as compared to that of H1 2019. Though there was a surge in the average gold price of 28 per cent and an 8 per cent rise in the silver price, the revenue of the company plunged to $232.0 million (H1 2019: $354.5 million). The adjusted EBITDA was recorded as $80.6 million (H1 2019: $153.7 million), due to the reduction in the production levels. The company recorded the pre-exceptional profit before income tax as $13.1 million (H1 2019: $41.5 million), and post-exceptional profit before income tax as $6.5 million (H1 2019: $29.5 million).

While the pre-exceptional loss per share incurred by the company was $(0.01) (H1 2019: $0.04 earnings per share), resulting from the impact of an increase in the income tax arising from the impact of local currency devaluation in Peru and Argentina, the post-exceptional earnings per share also declined to $(0.02) (H1 2019: $0.03 earnings per share), because of the exceptional after-tax cost of $4.6 million, incurred as a response initiative of Covid-19. The balance sheet displayed a strong position despite the significant impact of the Covid-19 crisis with cash and cash equivalents of $162.1 million as on 30 June 2020 (31 December 2019: $166.4 million) and net debt of $58.4 million (31 December 2019: $33.2 million).

Stock Performance

Hochschild Mining PLC (LON: HOC) stock last traded at GBX 255.80 on 19 August 2020, down by 8.27 per cent from its previous close of GBX 278.00. The 52-week low/high price was GBX 92.55/317.40. It was having a market capitalisation (Mcap) of £ 1,428.57 million. The volume traded for the day was 4,273,672. The company recorded a positive return on price, which was 44.56 per cent on a YTD (Year to Date) basis.

Kenmare Resources PLC (LON: KMR)

Based in Ireland, Kenmare Resources Plc is a producer of mineral sand products. The Company has operations in the Moma Titanium Minerals Mine in Mozambique. The Company operates in more than 15 countries, supplying its products to customers. Kenmare is a well-known producer of titanium minerals and zircon.

Financial Highlights

On 19 August 2020, the company declared its half-yearly results for the period ending 30 June 2020. The revenue of the company decreased by 5 per cent to US$116.8 million in H1 2020 compared to that in H1 2019 (US$122.7 million), driven by a 14 per cent decrease in tonnes of finished products sold offset by a 13 per cent increase in the average received price per tonne (FOB). There was a decrease in the freight costs in H1 2020 to US$5.6 million (H1 2019: US$7.3 million), because of the lower shipment volumes during the period. Ilmenite revenue (FOB) increased by 8 per cent to US$80.3 million in H1 2020 (H1 2019: US$74.2 million), as a result of a 28 per cent price increase to US$217 per tonne (H1 2019: US$169 per tonne). Primary zircon revenue (FOB) decreased by 30 per cent to US$20.2 million (H1 2019: US$24.3 million) due to a 16 per cent price decrease and a 17 per cent decrease in shipment volumes.

An EBITDA of US$37.2 million was generated by Kenmare in H1 2020 (H1 2019: US$42.8 million) and cash and cash equivalents of US$98.6 million was recorded. The gross debt was US$151.3 million, resulting in net debt of US$52.7 million (31 December 2019: US$13.7 million net cash) due primarily to scheduled capital expenditure. The total operating costs of the company remained unchanged in H1 2020 at US$96.9 million as of H1 2019. It generated a profit after tax of US$12.7 million in H1 2020 (H1 2019: US$21.9 million). An interim 2020 dividend of USc 2.31 per share has been recommended by the Board, for a total distribution of US$2.5 million.

Stock Performance

Kenmare Resources PLC (LON: KMR) stock last traded at GBX 215.00 on 19 August 2020, up by 3.37 per cent from its previous close of GBX 208.00. The 52-week low/high price was GBX 169.00/286.00. It was having a market capitalisation (Mcap) of £235.93 million. The company recorded a negative return on price, which was 10.04 per cent on a YTD (Year to Date) basis.

Disclaimer

Speak your Mind

Featured Articles