Miner could be impacted by silver price fall

By Graeme Dickson
Updated:

 

The silver price has plummeted over the last three weeks, falling from a peak of $48.00 per ounce to $34.00 an ounce.

This is bound to affect the companies that mine the commodity and if there are operational issues that plague a company, it makes a more compelling sell:

Hochschild Mining PLC chart

Hochschild Mining (HOC) has four underground silver and gold mines in Peru and Argentina with one open-pit mine in Mexico.

The San Jose Mine in Argentina has only just commenced mining operations, after the union sanctioned a 15 day production stoppage.

However, the pay dispute still remains unresolved and one wonders how much the initial stoppage will trim off brokers' earnings consensus and price targets along with concerns about further disruptions.

The £1.7 billion company has a healthy balance sheet at $525 million (£324 million) in cash but trades on a price to earnings ratio of 23.35, possibly a bit rich given the plunging silver price and production issues in Argentina.

Resistance should kick in at 600p while support could be at 400p, just a touch over the 200 week exponential moving average.

Update

Premier Oil - tipped as a sell at 1921p, the shares closed at 1834p. Continue to hold.

QinetiQ (QQ.) - suggested to sell at 121.1p, the shares closed at 116.7p. Keep the stop at 135p while targeting 95-100p.

Inchcape (INCH) - suggested to sell at 358.9p, the stock closed yesterday at 382.4p. Sit tight for now - if it closes above 415p, cut the position.

Smith & Nephew (SN.) - suggested to sell at 676.5p, the stock closed yesterday at 675.5p - the stock has perked up since it issued its Q1 results. Nonetheless keep the stop based on a close above 700p.

Carpetright (CPR) - suggested to sell at 636p, the stock closed at 687.5p after what appears to be a dead-cat bounce. Hold for now.

ITV (ITV) - suggested to sell at 78.05p last week, it closed yesterday at 66.8p. It has hit the support of the 200 week exponential moving average - take profits.

Aveva (AVV) - suggested to sell at 1591p, the stock closed yesterday at 1600p. Keep the stop at 1675p.

The writer does not hold any shares or derivatives in the above mentioned companies. The material for this report comes from Sharescope.

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