Market report: Hochschild’s silver lining ignored as City focuses on cloud of higher costs

A surge in the silver price has served Hochschild Mining well over the past six weeks, but it had only itself to blame as its recent stock market rally unravelled today.

Shares in the FTSE 250 silver miner plunged 54.92p, or 17%, to 273.1p as it revealed pre-tax profits fell by a third to $40 million (£31 million) in the first six months of the year. Revenues were flat at $340 million.

The South American miner said that although production had increased 9% in the period to 8.9 million ounces of silver, the cost of production surged 10% to $12 per ounce, only a few dollars below the present silver price.

There were several factors for the higher costs, including an end to rebates in Argentina.

Despite the sharp drop, the shares are still trading higher than in early July before the silver surge took hold.

Hochschild was by far the biggest casualty on the mid-cap index on a day when stocks were generally in positive territory.

The FTSE 100 moved 45.22 points, or 0.6%, higher to 7429.07 as it continued to recover from losses last week amid rising tensions between the US and North Korea.

Investors logged onto accountancy software firm Sage after a strong endorsement of its latest acquisition.

UBS removed its Sell rating and upgraded the shares to Neutral, deciding that Sage’s takeover of US cloud firm Intacct was a good deal, even if it has to part with £650 million. “Price apart, we like the Intacct acquisition,” said Michael Briest.

“It fills a key gap in Sage’s cloud portfolio,” the UBS tech analyst said, adding, “if Sage is quick to internationalise it, it can put the group on the front-foot in addressing the shift to the cloud in the UK and elsewhere in Europe”.

Airline stocks again gained altitude on the back of yesterday’s news Air Berlin, Germany’s second-largest carrier, has filed for insolvency.

EasyJet, which has been named as a potential buyer for parts of Air Berlin, rose 22p, or 1.7%, to 1344p. Jet2 owner Dart Group was up 11p at 543.5p.

Sirius Minerals, the company developing a potash mine under the North York Moors national park, edged up 0.4p, or 1.5%, to 27.56p.

The rise came as it confirmed the shaft sinking contract had been awarded in its half-year results, which revealed a £15 million operating loss.

IWG — the serviced office group formerly known as Regus — shrugged off a downgrade from Peel Hunt as it climbed 3.53p to 301.9p. The broker cut its rating from Add to Hold after last week’s “disappointing” results.

Investors welcomed the appointment of Jim Johnson as chief executive of Hunting. Shares in the oil services firm were up 9.35p to 437.9p.

Online procurement minnow CloudBuy, whose boss Ronald Duncan once claimed it could become bigger than Apple and Google, was off 0.01p at 2.59p on AIM as it revealed that revenues in the first half of the year rose just 4% to £800,000.