By Alex MacDonald
LONDON--Hochschild Mining PLC (HOC.LN) sees more opportunities
for mergers and acquisitions in Argentina as the country wrestles
with economic and political issues and a devaluation of the
Argentine peso helps offset rising costs, the company's chief
executive said Wednesday.
"We have to be aware that there are certain political and
economic" challenges in Argentina, CEO Ignacio Bustamente told Dow
Jones Newswires in an interview.
For instance, Argentina nationalized Spanish oil major Repsol
SA's (REPYY) controlling stake in energy company YPF SA (YPF) last
year, raising investor concerns that other assets could also be
sold. However, Mr. Bustamente said he doesn't "see a threat of
nationalization in our mines or in our industry." He also noted
that the nationalization of YPF SA was a Repsol-specific event.
These challenges have created "potential opportunities in
acquisitions and partnerships that were not available in the past,"
Mr. Bustamente said, and the company can take advantage of them. He
added that Argentina is a relatively under-explored and highly
prospective country and the precious metals producer plans to grow
its operations there over the long term.
Mr. Bustamente said Hochschild will look more aggressively at
acquisitions and partnerships as asset valuations have fallen due
to volatile commodity prices and development as well as production
setbacks at some mining companies. Hochschild will also continue to
look at acquisitions where it can gain majority control of
early-stage exploration projects, typically through investments of
$10 million-$20 million and up to $100 million-$200 million. It
would only consider a larger acquisition if it is "very synergistic
for the company," Mr. Bustamente said.
Hochschild is now focused on delivering its two advanced
Peruvian growth projects, Inmaculada and Crespo, which should
increase its attributable silver equivalent output by 50% from the
second half of 2014. Key construction permits for the two projects
are due in the second half of this year, Mr. Bustamente said.
The company confirmed Wednesday that it plans to produce 20
million attributable silver equivalent ounces this year compared
with 20.3 million attributable silver equivalent ounces in 2012.
Costs are expected to continue rising this year with unit cost per
ton in Peru rising about 15% to 20% and unit costs in Argentina
rising by 10% to 15%, partially offset by local currency
devaluation.
Earlier Wednesday, the U.K.-listed mining company reported a 63%
drop in 2012 net profit to $63.1 million for 2012. Adjusted
earnings before interest, taxation, depreciation and amortization
fell 32% due to a drop in silver and gold output.
At 1334 GMT, the company's shares were down 4.3% at 332 pence a
share while the FTSE 350 mining index was down 1.3%.
Write to Alex MacDonald at alex.macdonald@dowjones.com
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