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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This will have been a tremendous CFD for some people...danger is of a temporary drop followed by a sharp recovery in the event of non acceptance (see latest RNS)....otherwise 3 here we come (I think) !.

Think the takeover offer was cheeky and half hearted IMHO RF.

anyway....









http://seekingalpha.com/article/120862-don-t-kick-yourself-later-for-not-buying-gold-and-silver-now?source=article_lb_articles

Don't Kick Yourself Later for Not Buying Gold and Silver Now 2
by: Peter Cooper February 17, 2009

Gold is powering up towards $1,000 an ounce, and while the odd hesitation along the way is possible it will shortly cross this boundary, hit a new all-time high and then head upwards again.

A trend is your friend, especially if you take advantage of it. For gold the question is how best to leverage the up trend.

Gold and silver stocks are the answer. Conveniently precious metal stocks got really thrashed last autumn - along with gold and silver and every other asset class except bonds. So they are dirt cheap.

Rising prices

But will gold and silver equities not fall again if global stock markets tank, as they surely must with profit forecasts for the non-financials still ludicrously optimistic (face facts, for many major companies there will be losses and not profits in 2009)?

No they will not if precious metal prices are rising - and not falling as they did last autumn. And why will gold and silver prices keep on rising this time?

Well, investors are now very worried about bonds and currency rates, and that leaves gold and silver as the last safe haven in the investment universe. If there is only one investment class left to buy that ought to simplify things for investors.

Rising profits

Gold and silver producers are also big beneficiaries of falling energy prices this year, as up to a quarter of production costs go on energy. In addition, most mines are in non-dollar economies, so manufacturers have costs in depreciated currencies and income in the strong dollar.

That means that even if precious metal prices stagnate - and that looks highly unlikely - gold and silver producers are among the only commodity producers that will see profits jump in 2009.

My blog contains many articles on gold and silver which can point you towards some of the better, and riskier equity investments in this sector, and taking a risk in a rising market usually pays off handsomely.

The people who will be kicking themselves later in the year will be those who do not buy gold and silver stocks now.

This reminds me of my warning to those who did not buy Dubai property when they first had the chance, and even after a 50 per cent fall in house prices they are still 300 per cent up on their original investment!

http://seekingalpha.com/article/120907-bullish-long-term-outlook-for-gold

Thanks GF, HOC still in the rising trend !.

If this carries on to 3, I shall have to open a bottle of hock....german wine....very nice !.

do you like the modern trend of the germans making trocken? ..... personally i hate it, though to find traditionally made is not so easy ..... Berry Bros certainly used to carry a very good range and the auctions are a good source, especially if you can split the batch

Euhhhh !, not sure cynic,..... offer withdrawn...sp not affected !.

prob good new for HOC, but hard to know if price has been supported behind the scenes to make the offer look more attractive

Cyners. youl be sorryyyyyyyyyyyyyyyyyyyy.

maybe ..... certainly no bad thing that HOC did not get the deal, but gold is likely to have a pullback after its recent heady run, and with it HOC and similar .... shall continue to monitor, even when in Dubai on biz for the next week .... eat your heart out - lol!

Doing fine at the moment....I'm still in.

loads err money RF.

Missing out here cyners, dont say i didnt tell you.

loads err money.

Looks like someones tipped them ????.

get thee behind me Satan!

A $1000 an ounce soon....and after a morning tree shake, now a climb = 250p...wooosshhh !.

satan here satan....

comment from Zak Mir pro TAer this morning.

Zak Mir



Reged: 28/06/07
Posts: 652
Re: HOCHSCHILD MINING (HOC)- Bad Day-but opportun
#440004 - 20/02/09 07:57 AM Edit Reply Quote



Above the stock's 10 day moving average now at 192p it seems it should hit the old September high of 334p.

piss off you old tart - lol! ..... bt you weren't quite so chirpy earlier in the day!

Cynic, when you are in Dubai, take a good look around; is it a dying god?

Cyners loads err money.

Looks like you left the party way too early.

Think theres quite a bit left in aswell. Using daily bets to hedge my risk.

Certainly looks like there s been a slow drip out of fresnillo into this one as the rating is lower. FRES at around P/E of 21 looks a bit topy in comparison.

Expecting much of the same next week to around 330p old september high.

ps, it tends to fall away in the morning and come to life after 12.30.