Investors punish Hochschild after miner’s rising costs hit profits

JITTERY investors ruthlessly punished Hochschild Mining

yesterday as shrinking profits hit by rising production costs sent the precious metal miner sliding 18pc to the bottom of the FTSE 250.

The gold and silver specialist’s boost from the metals’ recent rally was wiped out in a single session after it reported first-half pre-tax profit had dropped just over a third to $39.9m (£31m), as mine costs in Peru and Argentina climbed.

Although Hochschild remained on track to meet guidance and revenue edged up slightly, analysts decided that the South American miner’s valuation had become frothy with JP Morgan and RBC Capital Markets downgrading it.

Tyler Broda, an RBC analyst, argued that while Hochschild held “strong long-term potential”, the “reserve-constrained” Arcata mine and “inflationimpacted” San Jose mine reduce its estimated profitability.

Hochschild swung back to a profit earlier this year after three years of losses but profit margins dwindling again pushed the miner down 57.6p to 259.4p.

Other mining stocks also stole the show on a quiet London market with the price of zinc advancing to its highest level in a decade helping top producers of the

metal Glencore and

Vedanta Resources gain 14p to 345.3p and 49.5p to 750.5p, respectively.

BHP Billiton was boosted 26p to £13.68 after activist investor Elliott Advisors revealed that it had upped its stake in the Angloaustralian miner to 5pc, increasing the probability that the hedge fund’s list of demands to improve returns will be met.

The bullish mood on European equity markets continued as the FTSE 100 clawed back more of the ground lost in last week’s North Korea sell-off. Buoyed by mining heavyweights swaying back into positive territory following Tuesday’s losses across the sector, the blue-chip index finished 49.18 points higher at 7,433.03. Elsewhere, software firm

Sage Group jumped 21p to 704p after UBS upgraded the stock to “neutral”, praising its recent acquisition of Intacct.

It told clients that the $850m buy had filled a key gap in Sage’s cloud portfolio and, if executed well, could put the company on the front foot to help tap Europe’s transition to cloud computing.

While the acquisition was costly, it did lift the pressure off the firm to bump up spending on its underinvested research and development division, it argued.

Finally, insurer Admiral suffered its worst day of trading in a year, diving 131p to £20.47, a 6pc plunge, as climbing costs in its personal injury division weighed on profits.