Hochschild Mining CEO Eduardo Landin on mining in South America

Key Concepts

• Backwardation: A market condition where the spot price of a commodity is higher than the price of futures contracts, indicating immediate supply shortages.
• Strait of Hormuz: A critical maritime chokepoint for global energy and metal supplies; disruptions here are driving price volatility.
• US Midwest Premium: An additional cost added to global aluminum benchmarks for delivery to the U.S. market, which has nearly tripled recently.
• Critical Minerals: Strategic materials (e.g., rare earths, tungsten, antimony) essential for defense, AI, and energy transition technologies.
• Brownfield Exploration: Exploration activities conducted near existing mining operations to extend mine life or increase reserves.
• ESG (Environmental, Social, and Governance): A framework used by mining companies to manage community relations, safety, and environmental impact to secure a "social license to operate."

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1. Aluminum Market Dynamics

Aluminum is currently experiencing a "perfect storm" of supply constraints and rising demand.

• Supply Risks: Conflict in the Middle East and the potential closure of the Strait of Hormuz—a conduit for over 5 million metric tons of aluminum annually—have pushed prices higher.
• Inventory Crisis: Global stockpiles (LME, CME, Shanghai) are at historic lows, covering less than 5 days of global supply.
• Price Performance: LME aluminum reached $3,685/metric ton, with spot premiums hitting levels not seen since 2007.
• Industrial Impact: The U.S. solar industry is facing a 20% increase in racking costs due to aluminum shortages, threatening the viability of marginal projects.

2. The "Scarcity Meme" and Tin

Unlike aluminum, tin’s price surge is driven more by investor sentiment than immediate physical shortages.

• Market Performance: Tin is up 36% year-to-date, trading near all-time highs ($55,225/metric ton).
• Structural Drivers: Tin is increasingly viewed as a critical component of the "AI trade" due to its use in circuit board solder for robotics and IoT.
• Investment Narrative: Investors are pricing in "future structural scarcity" despite stable current production and rising LME stocks.

3. Mining Industry Trends & M&A

• Consolidation: BlackRock advocates for large-scale M&A to create liquid, investable assets for generalist investors, arguing that larger companies are better equipped to build complex, capital-intensive projects.
• Defense-Driven Listings: There is a surge in mining companies (particularly in antimony, tungsten, and rare earths) seeking U.S. listings to pitch themselves as strategic suppliers for the Pentagon.
• Geopolitical Risks: Chinese regulators are scrutinizing the $4 billion acquisition of Allied Gold by Zijun Gold due to valuation concerns and the risks associated with operating in Mali.

4. Case Study: Hochschild Mining

Eduardo Landin, CEO of Hochschild Mining, provided insights into the company’s strategy:

• Strategic Focus: The company remains strictly focused on precious metals (gold/silver) to maintain a clear investment thesis, spinning off non-core assets like rare earths (Aclara).
• Growth Strategy: Hochschild aims to reach 500,000 ounces of gold equivalent production by 2029 through brownfield exploration (e.g., Royata) and new projects (e.g., Monte do Carmo in Brazil).
• Community Relations: Landin emphasized a shift from "transactional" community engagement to an active, long-term partnership model, which has resulted in zero blockades since 2023.
• Capital Allocation: The company’s priority is debt reduction, followed by funding internal growth projects rather than share buybacks.

5. Notable Quotes

• Olivia Markham (BlackRock): "Commodity demand is simply accelerating and the commodity intensity of GDP growth continues to go up. And when you look at every exciting theme that’s going on in the market, it all leads back to mining."
• Eduardo Landin (Hochschild): "You need to abandon that transactional situation where [communities] stop you because they want some money... You have to build trust—that’s the most important thing."
• Britannia Global Markets: "Aluminum remains a standout story. The extreme backwardation highlights the severity of the squeeze."

6. Synthesis and Conclusion

The metals and mining sector is transitioning from a period of historical oversupply to one of structural scarcity. The market is currently bifurcated: industrial metals like aluminum are reacting to immediate geopolitical supply shocks, while others like tin are being driven by long-term "scarcity memes" linked to AI and defense. For mining companies, the path forward involves navigating high inflation, securing a social license through active community integration, and focusing on capital discipline to fund the next generation of projects in stable jurisdictions like Latin America. The overarching theme is that the "commodity intensity" of the modern economy is forcing a re-evaluation of mining as a foundational pillar of national security and technological growth.