Shares in Hochschild Mining (LSE: HOC) fell by more than a fifth on Tuesday, their steepest drop since November 2021, after it announced a six-week halt of processing operations at its Mara Rosa gold mine in Brazil due to heavy seasonal rainfall.
The South America-focused precious metals miner is suspending activities at the mine’s processing plant to carry out maintenance and repair work on the tailings filtering system, which has been affected by rain and contractor-related issues. Mining operations will continue during the shutdown, Hochschild noted.
Mara Rosa, which began commercial production in early 2024, yielded just over 25,000 oz. of gold between January and May, well short of pace to meet its guidance of 94,000 to 104,000 oz. of gold this year.
That forecast will now be “significantly reduced,” the company said, adding the production shortfall will impact operational costs. CEO Eduardo Landin is to oversee a full review of mining, processing and waste management activities at the site to identify bottlenecks and stabilize output.
Hochschild shares plunged 22% on Wednesday in London to close at £2.36 apiece, valuing the company at £1.22 billion (US$1.7 billion).
Analyst forecasts
Berenberg analysts, who had previously expressed caution about the mine’s first wet season, now expect production to fall to about 74,000 oz., roughly 20% below the original target. They estimate the downgrade will hit group earnings per share by about 10%.
“The challenges at Mara Rosa have gone beyond weather-related delays and now include serious issues with the tailings filtering process,” Berenberg noted. “It remains to be seen how effectively operations can be steered back onto the right track in the near term.”
BMO Capital Markets forecasts production of 59,000 oz. this year at an all-in sustaining cost of $1,611 per ounce.
“While impacts are expected to be significant, revised guidance has not yet been provided,” BMO mining analyst Kevin O’Halloran said in a note on Tuesday. “We expect to revisit our forecast when the company provides further clarity on the scale of the impact in the coming weeks.”
Mara Rosa, located in Goiás state, is Hochschild’s first operation in Brazil, where it is expanding its footprint. Last year, the miner acquired the Monte Do Carmo project for US$60 million.
Other than in Brazil, Hochschild has mines in Peru and Argentina and is advancing development projects in Chile and Peru.
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