Hochschild (HOC) shares dip 45%: Can you expect an early bounce back?

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Hochschild (HOC) shares dip 45%: Can you expect an early bounce back?

 Hochschild (HOC) shares dip 45%: Can you expect an early bounce back?
Image source: Evgeny_V, Shutterstock.com

Highlights 

  • The shares of Hochschild Mining slumped on Monday due to the uncertainty associated with its flagship Inmaculada mine located in Peru’s Ayacucho region after the government ruled out timeline extensions.
  • The Head of Cabinet in Peru has also announced that approvals will no longer be offered for additional exploration or mining activities.
  • Any change in the ruling is also expected to affect operations at Hochschild Mining's Pallancata mine.

The shares of Hochschild Mining Plc (LON: HOC) slumped by around 45% to currently trade at GBX 91.40, (at 9:28 AM BST) on Monday, 22 November 2021. The market cap of the company stands at £845.84 million.

What led to the slump?

The shares of Hochschild Mining slumped due to the uncertainty associated with its flagship Inmaculada mine located in Peru’s Ayacucho region after the government ruled out timeline extensions for mines operating in the country. Any change in ruling in Peru is also expected to affect operations at Hochschild Mining's Pallancata mine. The Head of Cabinet in Peru subsequently announced that approvals will no longer be offered for additional exploration or mining activities associated with these mining operations.

The London Stock Exchange (LSE) listed mining firm clarified that it had not obtained any official communication from the Peru government, and also dismissed environmental pollution claims related to the company’s mines.

Hochschild Mining announced that the company would cooperate with the government to resolve misunderstandings associated with its mining operations. The company will also use legal options to defend its rights to continue mining operations in the country.

Q3 Production update

Hochschild Mining is an FTSE 250 listed gold and silver mining company with operations spread across Central, North and South America. The precious metal mining company is based out of Lima, Peru and operates through a corporate office in London. It employs over 5,000 people in the country.

Hochschild Mining, production report for Q3 and the 9 months ended 30 September 2021 posted the strongest quarter year-to-date (YTD) with the production of gold at 58,252 ounces, and silver at 3.0 million ounces. In Q3 2021, Hochschild delivered 93,630 gold equivalent ounces or 8.1 million silver equivalent ounces, demonstrating an increase of 5% quarter-on-quarter, driven by strong production at its Inmaculada mine.

Hochschild Mining announced that it is on track to deliver its overall production target for 2021 at 360,000-372,000 gold (31.0-32.0 million silver) equivalent ounces. The company’s Brownfield programme added 43.4 million silver equivalent ounces YTD from Angela North vein at Inmaculada mine and 9.1 million silver equivalent ounces at San Jose in Q3.

Financial performance

Hochschild Mining reported revenue of $394.8 million for H1 2021 up from $232.0 million in H1 2020. Its profit before tax (pre-exceptional) was $97.8 million in H1 2021 compared to $13.1 million in the same period in 2020.

Hochschild Mining declared an interim dividend of US 1.95 cents per share (amounting to US$10.0 million) for H1 2021 ended 30 June. 

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