November 08, 2006
Hochschild Gives A South American Boost To Londons Mining Sector


Quite a feather in Londons cap to have Hochschild Mining taking a full listing. At first glance Toronto or New York might have seemed a more logical destination, but the Sabanes-Oxley Act has meant that compliance requirements in North America have reached stratospheric levels and London looked more attractive, though a full listing on the LSE is certainly no walkover. Geographically, also, it has advantages as both JP Morgan Cazenove and Goldman Sachs International, the joint sponsors, joint global co-ordinators and joint bookrunners for the IPO are both based in London, as are Canaccord Adams the co-lead manager and Nomura International, the co-manager. The shares were placed at 350 p each to raise around 270 million from institutional investors in the UK, Europe, the US and Canada. On this basis its market capitalisation is just over 1 billion which takes it straight to 99th position in the FTSE 250 Index and makes it worthy of consideration by all types of investors.

The history of this Peruvian mining company is fascinating as it comprises the mining operations of the Hochschild Group which was founded in Chile in 1911 by Mauricio Hochschild. After World War 1 it expanded into Bolivia where the target was tin and it did not start its Peruvian operations until 1925. Even then it stuck to metal trading and beneficiation until the 1940s and during the 2nd World War the Group was a key supplier of tin and other metals to the allied forces. The next major advance came in the 1960s when the Arcata mine was developed in Peru and it is still in production today. Over the next ten years or so more mines were opened in Brazil, Peru and Chile such as the well known Mantos Blancos copper mine in Chile.

It is here that the history gets a bit complicated as in November 1984 Anglo American bought the South African mining operations of Hochschild Group and immediately sold the Peruvian operations to Luis Hochschild who is clearly a descendant of the founder, though the exact relationship is not clear. Anyway it is his son Eduardo who is now executive chairman of the company, having started as a safety assistant at Arcata in 1987 and working his way up to be boss of the company 12 years later. At the executive level he is supported by Roberto Danino as deputy chairman and Alberto Beeck which is director of strategy and corporate development.

The operations sold back to Luis became the basis of Hochschild Mining which then launched an aggressive expansion campaign in Peru as well as in Mexico, Argentina and Chile. In order to spread the financial risk joint ventures were agreed with other local and overseas mining partners to develop the San Jose, Pallacanta, Mina Moris and San Felipe projects. Hochschild Mining is now the fourth largest silver producer in the world with an output of around 10.5 million ounces plus just under 250,000 ounces of gold in 2005. In that year its cash costs of production amounted to US$2.65/oz for silver and US$169/oz for gold which puts it in the first quartile of the 2005 global cost curve for both metals.

Its specialisation is in epithermal vein deposits and it currently has three underground mines Arcata, Ares and Salene - in production in southern Peru. Next up are two advanced and two early stage development projects in Argentina, Mexico and Peru and then a swathe of prospects at various stages. The overall strategy is to bring a sequence of these projects into production and the aim is to push towards annual production of 50 million silver equivalent ounces, or 830,000 gold equivalent ounces if preferred, by 2011. This is quite an uplift from the 2005 figures, but Hochschild is not the sort of company which would risk undershooting a declared target, so it may err on the conservative side.





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Big breakout here....been in and out of this one...back in !.

News and analysis, click HERE

Looks like $ weakening & gold price strengthening. Can't decide where the HOC price is going next though. Seems to trade sideways for quite a while.

Interesting RNS....looks like HOC in one way or another will be producing loads of gold as well as silver...

Lovely increase again......one of the best at the moment !.

An absolute corker of a Broker note here and from Goldman Sachs with a 425p SP target......

Goldman sees 39% upside in Hochschild Mining
10 September, 2009 09:30:20 AM


Goldman Sachs believes Hochschild Mining is a golden opportunity, initiating coverage of the miner with Buy rating and 425p price target. The broker expects rising silver and gold prices to drive strong earnings growth through 2010 and 2011 as well as volume growth from equity mines and associated ventures.

HOC Chart Looks Very Bullish

With all lower indicators positive and momentum behind the stock on a rising gold and silver price.

Initially targeting a SP of 400p here.

Hochschild Mining PLC

FORECASTS
2009 2010

Date Rec Pre-tax () EPS (p) DPS (p) Pre-tax () EPS (p) DPS (p)

Investec Securities
10-09-09 BUY 74.78 9.62 2.45 101.65 14.63 2.45

Canaccord Adams
12-08-09 BUY 6.06 2.42 23.03 6.67

2009 2010
Pre-tax () EPS (p) DPS (p) Pre-tax () EPS (p) DPS (p)

Consensus 74.78 7.97 2.44 101.65 18.51 4.40

1 Month Change 17.39 1.59 -0.02 -9.48 -2.31 -0.29
3 Month Change 17.64 1.25 -0.25 -58.35 -5.02 -3.00


GROWTH
2008 (A) 2009 (E) 2010 (E)

Norm. EPS -56.71% 34.83% 132.25%
DPS 244.20% -48.63% 80.33%

INVESTMENT RATIOS
2008 (A) 2009 (E) 2010 (E)

EBITDA 48.37m 118.97m 169.58m

EBIT 47.60m m m

Dividend Yield 1.41% 0.72% 1.30%

Dividend Cover 1.24x 3.27x 4.21x

PER 57.11x 42.36x 18.24x

PEG -1.01f 1.22f 0.14f

Net Asset Value PS 105.20p p p

LONDON, Oct 7 (Reuters) - "London-listed Latin American precious metal producer Hochschild Mining Plc unveiled plans on Wednesday to raise $250 million by issuing shares and bonds so it can invest in new mines and more takeovers, hitting its share price.

Shares in the London-listed firm slid 10.4 percent to 295.5 pence by 1505 GMT, just below the implied price of the new shares.

'We are well positioned to benefit from further investment in our asset base as well as further selective M&A opportunities,' Chief Executive Miguel Aramburu said.

'There are currently some exciting opportunities on the market,' he told a conference call.

Cazenove said the use of proceeds seemed sensible. 'The company could have done this via a rights issue but the cost and timing would likely have been greater and longer respectively,' it said in a note.

Some of the cash would be used to bump the firm's stake in Lake Shore Gold Corp back up to its previous 40 percent level after a transaction by Lake Shore diluted Hochschild's holding to 27 percent.

The firm, which cannot boost its stake to over 40 percent until November 2010, may buy Lake Shore shares on the open market or participate in any fund raising by the company, Aramburu said.

Hochschild said it also planned to use some of the proceeds to pay off $85 million of its $200 million syndicated loan facility.

FIRM'S FREEFLOAT TO RISE

Hochschild said it planned to issue up to 30.735 million shares -- representing 9.9 percent of its existing share capital -- to raise about $150 million.

Majority shareholder Eduardo Hochschild will be committing only $5 million to the placing and will therefore be diluted, increasing the freefloat, the firm said. His stake is expected to fall from about 59 percent to just over 50 percent, a spokesman said.

Hochschild -- which has six operating mines in Peru, Mexico and Argentina -- also plans to issue about $100 million of convertible bonds due 2014.

The bonds were expected to have a coupon of 5.75-6.5 percent and the initial conversion price was expected to be at a 30-35 percent premium. Pricing was due later on Wednesday"

Been creeping up since the open from 3

Surely though, sp will hit 295 again when the placing happens?

I confess, not really one I've followed but wasn't the placing price around 295p?

If that represented just 10% of the stock then I wouldn't expect the sp to go to that. Generally speaking the sp will settle below the price before placing at a % relevent to the dilution.

I took my eye off the ball there. Apologies. Placing has already happened, so onwards & upwards hopefully.

Disappointing news for Hochschild Mining...


Hochschild Mining: The FTSE 250 silver and goldmining business, which operates in Latin America, reported disappointing fourth-quarter output figures, pushing its shares lower even as it announced that full-year productin had risen by 8 per cent to a record level. Total silver equivalent output for the fourth quarter fell by 10 per cent from a year ago and by 8.8 per cent from the preceding quarter.

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Will it breach the 300p support level tomorrow? We will see.

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293p now. Agree with you 270-280p a fair price but if silver price falls further with reduced demand, 260p very likely.

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I feel this is not tree shaking.

RIO, XTA, KAZ, FRES and LMI will all have a significant downward move.