JPMorgan favours Fresnillo over mining peer Hochschild

11th Apr 2014 10:57

JPMorgan Cazenove has lifted its price target for Fresnillo from 965p to 1,030p and kept an 'overweight' rating, saying it continues to favour the Mexican precious metals producer over sector peer Hochschild ('neutral')."UK silver plays' solid start to 2014 has reversed in recent weeks, as Fresnillo and Hochschild's 2013 results coincided with a period of gold and silver price weakness, providing a reality check on over-extended multiples," the bank said. "Nonetheless, the re-phasing of Fresnillo's capex associated with Saucito II and San Julian, announced with results, prompts a 7% increase to our [...] price target to 1,030p."Hochschild made "impressive progress" on cost-cutting in 2013, the bank said, with all-in sustaining costs (AISC) per ounce (oz) at its main operations falling by 14% to $18.6 and another 5% fall expected this year. "However, we estimate Fresnillo should continue to enjoy lower average costs, aided by the high-quality Saucito II and San Julian projects. Over the next 10 years, we estimate an average AISC of $13.5/oz for Fresnillo, versus $19.2/oz for Hochschild."JPMorgan has cut its target price for Hochschild from 205p to 195p.Fresnillo was trading 0.2% higher on Friday morning, while Hochschild was down 1.5%.BC