Hochschild Mining's 2024 Production Meets Guidance, Boosted by Inmaculada Mine

Hochschild Mining PLC (HOCM.L) has reported full-year production results for 2024, meeting its guidance and delivering a strong performance, particularly at the Inmaculada mine in Peru. The company's attributable production for the year was 347,374 gold equivalent ounces or 28.8 million silver equivalent ounces, slightly stronger than the third quarter. This outcome was partly due to a better-than-forecast performance at the Inmaculada mine, which contributed significantly to the company's overall production targets.

The company's production performance in 2024 compares well with its long-term production targets. Hochschild Mining's overall production target for 2025 is for 350,000-378,000 gold equivalent ounces. The strong performance at Inmaculada mine contributed significantly to this outcome, demonstrating the company's ability to meet its production targets and maintain a robust production profile.

However, the company's shares plunged on Wednesday after it forecast higher production costs due to soaring inflation in Argentina and a slower-than-expected ramp-up of operations at its Mara Rosa mine in Brazil. Hochschild Mining said it expected a 5%-10% increase in all-in sustaining cost (AISC) for 2024, above the previously guided range of $1,510-1,550 per gold equivalent ounce.

The company attributed the increased AISC to soaring inflation in Argentina and the slower-than-expected ramp-up of operations at the Mara Rosa mine. Argentina's inflation rate rose to 2.7% in January 2025 from 2.4% a month earlier, putting upward pressure on the company's operating costs. Additionally, the slower-than-expected ramp-up of operations at the Mara Rosa mine is also a significant factor driving up costs.

Looking ahead, the evolution of AISC in the coming years will depend on several factors, including the trajectory of inflation in Argentina, the successful ramp-up of operations at the Mara Rosa mine, and the company's ability to manage costs effectively. If inflation in Argentina remains high or continues to rise, it could lead to further increases in AISC. Conversely, if the company can successfully optimize its operations and control costs, AISC may stabilize or even decrease.

In the long term, Hochschild Mining's acquisition of the Monte do Carmo project in Brazil could offer a low-cost growth opportunity, potentially helping to offset higher costs elsewhere in the company's portfolio. However, the realization of these benefits will depend on the successful development and integration of the new project into the company's operations.

In conclusion, Hochschild Mining's 2024 production performance met its guidance, boosted by a strong performance at the Inmaculada mine. However, the company faces challenges in managing higher production costs, which will require careful attention to cost control and operational optimization. The acquisition of the Monte do Carmo project in Brazil offers a potential long-term growth opportunity, but its success will depend on the company's ability to successfully develop and integrate the new project into its operations.