Peruvian To Join London's Band Of Mining Tycoons

Peruvian to join London's band of mining tycoons

Grant Ringshaw, The Times

22nd October 2006

A SOUTH American mining tycoon is to become the latest foreign businessman to cash in on the natural-resources boom by listing his company on the London Stock Exchange.

Eduardo Hochschild, executive chairman and controlling shareholder in the Peruvian gold and silver miner Hochschild Mining, will see his personal fortune valued at $1.6 billion (£850m) by next month's London debut.

Hochschild, the world's fourth-largest producer of silver, is planning to raise $500m from the float, valuing the firm at about $2 billion. The business is 80% owned by Eduardo Hochschild. Alberto Beeck, another executive director, has a 17.6% stake.

Roberto Danino, a former prime minister of Peru and general counsel for the World Bank, is also an executive director with a 1.5% stake.

After the float, Eduardo Hochschild's stake is expected to fall to about 60%. His decision to list the company's shares on the London Stock Exchange (LSE) will be seen as another victory for London over its arch-rival New York.

The LSE and the New York Stock Exchange have been engaged in a bitter battle to attract the flotations of foreign companies.

However, New York has suffered because of the onerous requirements of the Sarbanes-Oxley Act and the risk from class-action lawsuits in America.

A host of foreign mining and metal companies are planning to come to London. These include Severstal, the giant Russian steelmaker, and Chelyabinsk Zinc, Russia's largest zinc producer.

The Peruvian group is the world's fourth-largest producer of silver and has significant interests in gold mining. Last year, Hochschild produced 10.5mounces of silver and 233,000 ounces of gold. The group's profits are split evenly between production of these two precious metals.

Hochschild owns three mines in Peru. It also has two advanced projects in Peru and Argentina. A further two projects in Mexico are in their early stages. It has about 25 long-term development projects in Latin America in total.

Hochschild is a specialist in deep-vein underground mines, as opposed to many gold and silver mining rivals that operate open-cast mines. Deep-vein mines are typically more profitable, with Hochschild's margins running at about 50%.

The Peruvian mining giant is aiming to use the funds raised from the flotation to develop its existing projects. The group has set itself a target of doubling its combined gold and silver production by 2011 through organic growth.

However, Hochschild is also understood to be looking at a series of joint ventures and acquisitions worth between $150m and $250m each.

Hochschild was set up by Mauricio Hochschild, a German immigrant, in Chile in 1911 as a base-metals company.

After the second world war the group expanded into Bolivia and Peru. By the 1960s it had become one of the world's largest mining groups, similar in size to Rio Tinto. However, in 1984, the South American operations were sold to Anglo American.

In the same year, Hochschild bought Anglo's Peruvian interests, creating the foundations of the present group.

Hochschild is managed by an executive committee, led by Eduardo Hochschild. But the group is expected to appoint a chief executive after the flotation. The board also includes Sir Malcolm Field, a former chief executive of WH Smith, the high-street retailer.

Hochschild executives are due to meet potential investors this week.

The float is being handled by the investment banks JP Morgan Cazenove and Goldman Sachs.