I believe that Hochschild Mining (LSE: HOC) is a share that could be capable of delivering knockout shareholder returns.
The mining ace, which digs for precious metals across The Americas, announced this week that it chucked out record amounts of metal between July and September, with silver output clocking in at 5.3m ounces of attributable metal and gold production hitting 67,234 attributable ounces.
The company lauded a “strong performance” from its Inmaculada asset in Peru, and highlighted progress at its Pallancata site in the country which is “continuing to deliver tonnage and grades above expectations.” Group silver production in the year to date stands at an all-time peak of 28.2m ounces.
Celebrating the results, chief executive Ignacio Bustamante said: “We are firmly on track to hit our 37 million silver equivalent ounce target for the year. Costs remain under control and we can look forward to our financial position improving in the near future with good cashflow generation and a planned debt refinancing in the first quarter of next year.”
Expensive but exciting
And in other developments the FTSE 250 digger announced: “The Pablo permitting process continues as expected with no major issues encountered so far.” The environmental permit expected to be received by the close of the month, it said.
Keeping the good news rolling, Hochschild added that it is now in the middle of its brownfield exploration campaign and has seen “some encouraging results from Arcata, San Jose and also at Inmaculada.” This will come as reassuring news to investors, the company’s share price having slumped in recent months on the back of worrying exploration updates.
Those expecting booming production levels at Hochschild to translate into magnificent earnings growth right away will no doubt end up very disappointed. The company is anticipated to report a 26% earnings drop in 2017 by City brokers due to the impact of heavy exploration costs.
However, the London-based miner is expected to bounce back with an 81% bottom-line improvement in 2018. And as production levels boom, operating costs come down, and a turbulent political and economic outlook likely keeps silver investment on the boil, I reckon Hochschild could prove a very savvy buy, despite its elevated forward P/E ratio of 37.6 times.
Waste not want not
Renewi (LSE: RWI) is another FTSE 250 share I am tipping to overcome some near-term obstacles to deliver robust earnings growth in the years ahead.
In the 12 months ending March 2018, the waste-to-product specialist is expected to print a 2% bottom-line decline, although it is predicted to get firing again from next year (a 73% year-on-year earnings improvement is currently forecast for fiscal 2019).
And it is not difficult to see these numbers being upgraded in the months to come as trading conditions improve in both the UK and The Netherlands. Last month Renewi advised that “overall trading for the first half is ahead of our expectations” as improving economic growth boosted waste volumes. And it again extolled the benefits brought about by the merger of Shanks and Van Gansewinkel which completed in February.
I reckon Renewi is also worth serious attention right now even given its high forward earnings multiple of 27.5 times.