Gold and silver are having a moment.
Before Christmas, gold was trading at $1,980 an ounce. That was already pretty punchy, but the price has since risen 18 per cent to more than $2,300 an ounce.
Silver – sometimes described as gold on speed – has gone even further, up 23 per cent in the past four months to $28 an ounce.
And there is talk of further gains. Both metals tend to do well when investors are worried about the future, when inflation is considered a risk and when interest rates are low.
Recent enthusiasm has been driven by the first two, with central banks adding further spice. Many have been keen and consistent buyers of gold – and they are supposed to know what they’re doing. Looking ahead, interest rates are widely expected to come down, albeit more slowly than markets anticipated. When reductions start to come through, that could give gold a fresh fillip.
Bright prospects: A rising gold price boosted Hochschild
Silver and gold miner Hochschild has been basking in the precious metals’ glory. Shares were £1 when Midas recommended them in December. Today, they are £1.49, an extraordinary increase in just a few months. Hochschild is not alone in profiting from gold and silver’s recent run, but the South America-based miner has undertaken several self-help measures that should provide extra ballast this year and beyond.
Hochschild has been operating in Latin America for the past 100 years but went through a period of turmoil when government officials threatened to close its flagship mine in Peru.
That threat was finally averted last year, a new political regime is in place and the mine is back on track. Hochschild has also begun production in Brazil, on time and on budget, with a mine acquired just a couple of years ago.
Further expansion is expected in both countries with two further mines near existing sites. The group also owns a mine in Argentina which delivers high-grade gold and silver.
Chief executive Eduardo Landin is optimistic about Hochschild’s prospects – and brokers tend to believe him. Appointed last summer, Landin has spent decades in the mining industry, with a thorough understanding of potential pitfalls and how to avoid them.
Production is expected to climb from 301,000 ounces to about 350,000 ounces this year, rising to more than 450,000 ounces from 2027. That should feed into strong sales and profits growth, particularly if gold and silver prices remain high.
Midas verdict: Shareholders have reaped rewards from Hochschild and there could be more to come. Shares were trading at close to £3 before the Peruvian debacle, when gold was much less in vogue and production was lower. But a 49 per cent gain in four months is unusual, and gold and silver have come a long way fast. Cautious investors should sell half their stock at £1.49, bank profits and keep the rest.
Traded on: Main market Ticker: HOC Contact: hochschildmining.com
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