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Scotiabank (TSX:BNS) initiated coverage on Hochschild Mining Plc. (LSE:HOC) (OTC:HCHDF) with a Sector Outperform rating and a price target of GBP3.50 on Friday. According to InvestingPro data, the stock has seen a significant 31.91% YTD return despite an 18% decline in the past week, and current analysis suggests the stock is trading below its Fair Value.
The bank cited Hochschild’s strong growth profile compared to peers in the precious metals mining sector. Scotiabank forecasts the company’s production will expand at a compound annual growth rate of 10.7% from 2023 to 2028, significantly outpacing the peer average of 4.8% on a gold-equivalent basis. This aligns with the company’s impressive 36.61% revenue growth in the last twelve months and strong financial health score of GREAT on InvestingPro.
Scotiabank expects Hochschild to advance from a small producer to the intermediate producer category. The company’s growth trajectory is supported by multiple projects, including the recently developed Mara Rosa mine in Brazil, which is currently facing temporary operational challenges.
The Royropata project in Peru and the Monte do Carmo project in Brazil are expected to drive further production increases, with Scotiabank projecting the company will reach 555,000 gold-equivalent ounces by 2030.
Scotiabank’s analysis assumes Hochschild’s 51% stake in the San Jose mine in Argentina will be fully depleted by 2029, yet still maintains a positive outlook on the company’s overall production growth.
In other recent news, Hochschild Mining has reported production challenges at its Mara Rosa mine, which have significantly impacted its output. The company produced approximately 25,000 ounces by the end of May, falling short of its 94,000-104,000 ounce guidance. As a result, Hochschild Mining plans to conduct a comprehensive review and temporarily suspend the processing plant for about six weeks. Despite these setbacks, BMO Capital reiterated its Outperform rating with a GBP3.00 price target, noting that production at Hochschild’s Inmaculada and San Jose operations remains on track.
Meanwhile, RBC Capital Markets has upgraded Hochschild Mining from Sector Perform to Outperform, raising the price target to GBP2.70 from GBP2.60. This upgrade comes as Hochschild Mining’s stock has underperformed compared to its peers in the gold and silver mining sectors. RBC Capital’s analyst, Marina Calero, highlighted that the company’s current valuation presents a favorable risk-reward profile despite a challenging outlook. The revised price target reflects updated commodity price forecasts, suggesting potential improvement in the company’s performance. Investors will likely keep a close watch on Hochschild Mining following these developments.
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