HCHDF - Hochschild Acquires Amarillo: A Look At The Transaction

• Hochschild Mining announced that it would be acquiring Amarillo Gold earlier this month, a development-stage gold company with the Posse Gold Project in Brazil.
• Despite a large premium from a share price standpoint, the deal was done at very attractive metrics, with Hochschild paying less than 0.40x P/NPV (5%) at $1,700/oz gold.
• This deal improves the Hochschild investment thesis, boosting production at what should be higher margins, and reducing reliance on Peru, which it currently relies on for most of its output.
• Having said that, while I think this deal does improve the Hochschild Mining investment thesis, I continue to see much better ways to play the sector, preferring to avoid Peru-dominant producers.

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