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London-listed Peruvian miner Hochschild Mining PLC (HOC.LN) Thursday said it is cutting jobs and exploration costs, delaying projects and would consider shutting mines as prices for precious and base metals fall.
Hochschild is the latest miner to announce cutbacks as it tries to reduce costs and conserve cash while waiting out a global financial downturn that has battered commodity and share prices while making credit scarce.
"We believe that this is a sensible decision and will allow the company to preserve its existing cash... and delay raising additional funds until the market improves," Investec Securities analyst Jonathan Guy said in a note to clients.
Hochschild said it is deferring almost all capital expenditures slated for 2009, including its San Felipe zinc project in Mexico, which was due to start production in 2010.
CEO Miguel Aramburu said the company also is prepared to close down mines if they become unprofitable as metal prices fall.
"If any of them cease to be profitable we won't hesitate in halting production. We will focus on producing profitable ounces," Aramburu told Dow Jones Newswires.
Hochschild is making money at all its silver mining operations currently, but is evaluating production levels for next year, said Chief Financial Officer Ignacio Rosado.
Smaller mines - Ares, Selene and Moris - would most likely be affected, though no final decision has been made. Hochschild has six mines in operation.
The company is also cutting its exploration budget, Rosado said.
Cazenove analyst Fraser Jamieson said the rollback announced Thursday would likely mean Hochschild's exploration expenses would roughly halve to $13 million next year, and capital expenditure to about $80 million from an earlier estimate of $128 million.
Spot silver prices have slumped some 56% since their peak in March at $21.31/oz, and are currently trading at around $9.36/oz. Similarly, gold is down around 28% at $740/oz from the March peak at $1,032.35/oz, having slipped to $681/oz last month.
Hochschild is the second-biggest silver miner listed in London, after Mexico's Fresnillo PLC (FRES.LN).
At 0946 GMT, its shares were down 4 pence, or 4%, at 96 pence.
Company Web site: www.hochschildmining.com
-By Jason Douglas and Jeffrey Sparshott, Dow Jones Newswires; 44-20-7842-9272; jason.douglas@dowjones.com
(END) Dow Jones Newswires
11-20-08 0458ET
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