MIDAS STOCK TIPS UPDATE: Shareholders reap benefits from miner Hochschild

Gold and silver are having a moment.

Before Christmas, gold was trading at $1,980 an ounce. That was already quite steep, but the price has since risen by 18 percent to more than $2,300 per ounce.

Silver – sometimes described as gold in terms of speed – has risen even further, up 23 percent 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 concerned about the future, when inflation is considered a risk and when interest rates are low.

The recent enthusiasm has been fueled by the first two, with central banks adding further fuel. Many have been avid and consistent buyers of gold – and they are supposed to know what they are doing. Looking ahead, interest rates are widely expected to fall, albeit more slowly than markets expected. If cuts come through, that could give gold a new boost.

Silver and gold seeker Hochschild has basked in the glory of the precious metals. The shares were £1 when Midas recommended them in December. Today they stand at £1.49, an extraordinary increase in just a few months. Hochschild isn’t alone in benefiting from gold and silver’s recent run, but the South America-based miner has taken several self-help measures that should provide additional ballast this year and beyond.

Hochschild has been active in Latin America for the past hundred years, but went through a period of turmoil when government officials threatened to close their flagship mine in Peru.

That threat was finally averted last year, a new political regime was introduced and the mine is back on track. Hochschild has also started production in Brazil, on time and on budget, with a mine acquired just a few years ago.

Further expansion is expected in both countries with two more mines near existing sites. The group also owns a mine in Argentina that produces high-quality gold and silver.

CEO Eduardo Landin is optimistic about Hochschild’s prospects – and brokers are inclined to believe him. Landin, who was appointed last summer, has worked in the mining sector for decades, with a deep understanding of the potential pitfalls and how to avoid them.

Production is expected to rise from 301,000 ounces to around 350,000 ounces this year, rising to over 450,000 ounces from 2027. That should contribute to strong sales and profit growth, especially if gold and silver prices remain high.

Midas judgment: Shareholders have reaped the rewards from Hochschild and more could follow. Before the Peruvian debacle, when gold was much less in vogue and production was lower, shares traded at almost £3. But a 49 percent gain in four months is unusual, and gold and silver have come a long way quickly. Prudent investors should sell half their shares at £1.49, make a profit in the bank and keep the rest.

Traded on: Main market ticker: HOC Contact: hochschildmining.com