By lunchtime Wednesday (27 August), the Hochschild Mining (LSE:HOC) share price was the biggest faller on the FTSE 250 following the release of the group’s H1 results (the first six months of 2025).
The company has interests in two gold/silver mines in Peru and Argentina as well as one gold project in Brazil. And with the price of precious metals soaring this year, it’s not surprising the group’s done very well.
A closer look at the numbers
Compared to the same period in 2024, the latest half-year results showed a 33% increase in revenue and a 27% rise in adjusted EBITDA (earnings before interest, tax, depreciation and amortisation).
But given that gold-equivalent production was only 5.8% higher and that the group’s All-In Sustaining Cost (AISC) was up 33%, it’s clear that higher metals prices have played a huge part in this impressive result.
However, in Brazil, the miner reported “heavier-than-usual seasonal rainfall and contractor performance issues”.
This resulted in a downgrade in its 2025 production guidance for the country, from 94,000-104,000 ounces to 35,000-45,0000 ounces, with a corresponding impact on the group’s overall forecast.
At the same time, it’s also revised upwards its estimate of costs by around a quarter, blaming “sustained inflationary pressures” in Argentina as well as additional export taxes and royalties arising from higher gold and silver prices.
| Measure | Previous Guidance | Current Guidance |
|---|---|---|
| Output (gold equivalent ounces) | 350,000-378,000 | 291,000-319,000 |
| All-In Sustaining Cost ($ per ounce) | 1,587-1,687 | 1,980-2,080 |
A combination of lower output and higher costs is damaging to the group’s bottom line. Taking the mid-point of its guidance and a current gold price of $3,381 an ounce, I’ve calculated that this could lower this year’s earnings by $223m (£165m at current exchange rates).
| Measure | Previous Guidance | Current Guidance | Change |
|---|---|---|---|
| Revenue ($m) | 1,231 | 1,031 | -200 |
| Cost ($m) | 596 | 619 | -23 |
| Profit ($m) | 635 | 412 | -223 |
On digesting the news, investors wiped around £250m off the company’s market-cap. Despite this, the group’s shares are still up 31% compared to a year ago.
Never easy
It’s a reminder that mining’s one of the most difficult industries in which to operate. And even if everything goes to plan from a production perspective, a miner’s unable to control the price it receives for its output. Sometimes this works in a company’s favour (as we have seen from today’s results) but it can also go the other way.
That’s why share prices in the sector can be volatile.
Having said that, a sharp pullback can represent a buying opportunity. After all, the gold in Hochschild’s Brazil mine isn’t going anywhere. It will still be there next year. And as we are frequently reminded, there’s a finite supply of gold and silver so there should, in theory at least, always be upwards pressure on prices.
But I don’t want to invest. Although the gold price has risen 28% since the start of the year — and silver is up 32% — it’s plateaued since its sharp rise following President Trump’s ‘Liberation Day’ tariff announcements. This is a reminder of what’s driving the current rally, namely global economic uncertainty.
If we were to enter a period of calm, I suspect precious metals prices would start to come down. This may or may not happen. But this lack of clarity doesn’t sit easily with my cautious nature.
I have nothing against Hochschild Mining. However, for the reasons outlined above, the sector in which it operates just isn’t for me.
