Analysts at Berenberg reiterated their ‘hold’ rating on precious metals group Hochschild Mining on Friday, labelling the company’s 2020 performance a “miss”.
Berenberg said Hochschild, which has a portfolio of three operating mines in South America producing roughly 38.0m ounces of silver equivalent every year, was presently experiencing a slightly lower level of production at the sites due to Covid-19 volatility.
The German bank also stated it believes a medium-term grade decline was on the horizon at Hochschild’s key mine, Inmaculada, something it said was not currently priced into expectations.
“We think this will result in lower FCF generation and, potentially, depending on the severity of the grade decline, push the company into an M&A transaction to fill the gap of falling grades with another asset,” said Berenberg.
“We believe that the current valuation prices in a more-than-optimistic case in terms of mine lives, grade and commodity prices,” concluded the analysts, who also reiterated their 230.0p price target on the stock.
