Fresnillo plc (FRES) Earnings Call Transcript & Summary

[Audio Gap] CAF '26 was another record financial performance for the company, and I have said the key highlights out here. In particular, we saw revenues up sharply, driven by higher precious metal prices, with gross profit and EBITDA more than doubling alongside a strong increase in margins. This financial strength has allowed us to more than double the interim dividends versus the prior year, again, paying out in line with our long-standing dividend policy. We have returned over $2 billion to shareholders over the past 5 years, a record of which we are very proud. We have also used this balance sheet strength to selectively and strategically advance our business with the acquisition of Probe Gold at the beginning of the year and more recently, an investment in the project Sinda. Like Pro Sinda meets our disciplined strict and targeted criteria, giving us additional exposure to geological silver district that complement our portfolio. Turning to precious metal [indiscernible] environment going forward. The outlook for silver remains equally constructive with analysts forecasting an average 2026 silver price of $76 per ounce. In addition to our production, controlling of the cost, this metal prices gives us further confidence in our strategy. Now turning to the performance of our mines. As you know, Tomás Iturriaga has stepped down from his role as COO of the central region. And so I will present the operational overview for the central mines. Gabriel Durán, a seasoned and experienced professional mining engineer, who has been with the company for more than 30 years, and he's been coordinated in the 3 or the central district for 3 years, will temporarily assume responsibility for the region in addition, reporting directly to me. Fresnillo saw a solid first half in line with expectations. In fact, we raised guidance on expected gold grade from the Fresnillo mine as seen on this slide, where gold production increased 47.6% versus first half '25. It is worth noting the mine development rates increased 13.3% versus first half '25, supported by improved equipment availability. We are also closely managing costs. I would like to note here that the higher cost is primarily an arithmetic effect of our silver equivalent reporting under higher silver prices, but costs are a focus for us in the second half of the year. Turning on to Saucito was also in line with expectations with both silver and gold slightly below last year. The key factor remains the ongoing areas shaft connection, which reduced our volumes and increased haulage costs, this will be completed in the third quarter, improving operating efficiency and the cost profile going forward. While we optimize the mine sequence, we are reviewing the medium-term production outlook although 2026 guidance remains unchanged. On Juanicipio, continues to perform in line with our expectations with lower silver production, reflecting the planned mine sequence and expected or grade. Gold production was in particular highlight increasing 19.1% year-on-year as a result of higher grades. Overall, Juanicipio continues to demonstrate the strong operational performance. I will now hand over to Daniel for him to give a short review on the rest of the operating assets, Herradura, Ciénega, San Julian, but also the brownfield and greenfield development projects. Thank you.

Thanks, Octavio. Good morning, everybody. With respect to the Northern region operations, starting with Enauta, as you know, one of our most relevant assets. We have a slight decrease in gold production as expected during the first half of this year. This is compared to an extraordinary first semester during last year in terms of production, but also the normal decrease in head grades that we were expecting. And that is not affecting our ability to deliver on our guidance during the year in gold production. In second half, we expect compared to the production of the first half, a slight decrease in the production because we have a major maintenance in one of the main plants. We were replacing one of the bone mills, and that will hit us slightly on production. However, again, the guidance that we have for the year in gold production and in production for aragura is not at risk at all. I would say the most relevant part in the Valuta mine and district, it's the evolution of the structural projects that we are developing in there. As mentioned in the slide, the leaching part 15 and the CIC plant that you can see on the pictures were completely built last year and are at full production now. And the AD plant, the sulfides crushing circuit and some other structural projects that we're progressing in there are advancing engineering phase. So we're preparing the infrastructure in Lauda for the next 20 years coming and for the development of the district. The average grades that we expect, you can see in there, not significant changes compared to the previous years. And in terms of cost efficiency and operational performance, the result in Herradura has been sustained. Diesel is hitting us somehow and you can see that reflected in the cost. Diesel price, of course, it's a relevant factor. And inflation in Mexico also has an effect. However, we are at very competitive levels of cost in Herradura, we're very optimistic about what's coming. In Ciénega, the news are quite positive. What we have been mentioning about the plan of reshuffling the operation, expanding more on exploration, given that we still have potential is starting to deliver. The gold production increased 15% compared to the first half of previous year. And that is because the team was able to accelerate the development of the discovery, the Victoria area, that is the new high-grade gold area that we have in Ciénega. And it's going to be the support of the 3 years of production in Lane, which has -- which are very good news. Silver production, as expected, we are increasing gold rates, but silver is decreasing. So the decrease in silver production is the consequence of that. No surprises there, which is good news. And in terms of the ranges of grades expected moving forward, we increased slightly the range for gold grade this year to something close to 1.7% and silver remains at the same levels. In terms of cost containment and efficiency also, Ciénega has delivered very good results. decreasing the cost base, sustaining the overall expenditure and increasing production, hence, the results that you can see on the screen. And finally, in San Julian. San Julian, as you probably remember, has been transitioning during the last 2 years, moving to just 1 operating plant, the Vans facility. Cost structure is sustainable right now. We are very confident about the long term and the results support that. Production are slightly lower compared to last year. Grades decreased somehow. However, what we have foreseen for the future are -- these are the levels of production that we can sustain in San Julian moving forward with costs under control. And hence, we have a cash flow-generating operation for the next -- for what we see now 4 to 5 years, but exploration is still providing good results. So we expect to have a long-term operation there as well. That's on the operations side and to give a quick brief on the project side. For Fresnillo, let's start with the brownfields. As we mentioned in the last couple of meetings, we are putting in the company a strong effort, both in cost containment, efficiencies and also putting some production forward from brownfield opportunities. Marginal increases in production in our operations and in particular, from 2 of our brownfield projects that are biased Noten, happy to mention that those projects already started. In the case of Bayer, the engineering was completed. We finalized the operational model for the mine. And the final mine plan now is showing us a life of mine of 10 years compared to the original 7 that we had original. So that's good news. We already have the constructor in place. We're starting development right now and production, we expect to start in Q3 of this year, actually. The production range. It's important to have a range in there. It's between -- it's going to be in the long run between 50,000 and 90,000 ounces of gold per year with an average of 65,000. The good thing is about the grades that we have in bias. It's a low capital intensity or will be processed at the Herradura plant and the grades are very good. So the cost of production will be lower and will complement the delivery from the Herradura district in oil production. In Natuna that as you remember, is a mine that was in care and maintenance planning to be closed. We reassessed with the new gold prices and the evaluation was quite positive. So we are reopening the operation. We continue releaching the old hips. However, the restart of operations, it's going to be during the last quarter of this year with restripping of the new faces that we will have in Noche Buena. Delivery of ore of -- fresh ore will start next year in Q2 and fresh production we expect in the second half of next year coming from noon also complementing the gold production profile from the district in Herradura that we'll see, and we will start communicating moving forward, the profile that we expect from the district moving forward in the next coming years. Herradura underground, it's the deepest part of the main Herradura in pit. It's a longer-term project. However, we expect larger production from there, ranging 120,000 to 160,000 additional 1,000 ounces when it started production. We are assessing what is the right timing for the transition with the open pit and with Vias as well but for what we're seeing right now, we expect that to be in 2032, complementing production as well. In the case of Tajitos, Tajitos, it's a satellite pit 30 kilometers away from Herradura. We are progressing with metallurgical information. We needed to have some better information there to move forward, and we are scheduling the PAA for the first quarter of next year. However, in that area also, what we're thinking in the Herradura district is stop 40 kilometers core in total. We have good exploration potential. And some of that exploration potential, we see it reflected on the latest campaign in Tajitos. We're finding a new gold high-grade veins area. It's different to what we had before. So good possibilities in there under development. And in the case of greenfield projects, Roel is the first one. We mentioned this before. We were reassessing the quality of the asset and the engineering. We just completed the revised PEA and the results are quite positive. The new PEA is showing us that we have a possibility to increase the production levels from the previous ranges between 75,000 and 90,000 to an average between 90,000 and 110,000 ounces from that project. So that's good news. The critical path in here will be driven by the permitting process for sure, and we're studying that as we speak, actually. And according to the schedule and of course, subject to permitting, we expect to have the new operation up and running by the end of '29 and early 2030. One of Atos. We have mentioned this project for some time now. Now we have a very grasp of what it is in terms of production potential. It's a high-quality silver asset for the company. It will take some time to be developed given its depth. However, the most relevant thing is that we are progressing with the prefeasibility study. And now we can confirm that the production range that we expect in average in the long term. It's going to be between 15 million and 17 million ounces of silver per year, starting according to our current plant in 2033. However, we are assessing a few alternatives in order to bring that production forward at least a year. We are assessing that. Again, permitting subject to permits. We expect to start early works, main shaft and the main ramp for the project during somewhere in the second half of next year. Orisyvo continues its development, metallurgy, as we have mentioned before, it's one of the critical things, good results so far. So prefeasibility B stage continues advancing during the rest of this year, and we expect early next year. Most efforts right now in Orisyvo are around land acquisition and government and community engagement. That is an important part for the development for [indiscernible]. It's a large project, significant production, around 200,000 ounces of gold. However, large capital. So we are optimizing right now, that's part of the review of optimizing the capital expenditure in the project. And finally, or our latest project in the portfolio, the acquisition with Pro Gold, the updated PFS is ongoing. We expect to have that completed before the end of this year. Condemnation drilling started this year, good progress in there. You can see a picture of the harsh winter. However, during the first half of this year, the contamination drilling continued for the engineering efforts. Project activities are continued today. However, we have some delays about the possibility of obtaining the permits in order to continue drilling. We expect a solution on that relatively soon. However, we have to wait and see. And coming from Novel, again, production potentially starting in 2023, according to the current plan, to the current plan production that we expect is around 200,000 ounces per year. So what you can see is a summary of our portfolio of projects, sizable portfolio, gold -- mostly gold However, we have a very high-quality asset in Guanajuato in terms of silver production. So a lot of activity moving forward. Handing over to Mario for the financials.

Thank you. And if you don't mind, we'll just stay here. It's very pleasant to be here in London with this unusual hot and sunny weather. But it's nice to be here and to be able to share with you what I believe are truly exceptional financial numbers. As a matter of fact, record high setting for the first half since we did the IPO 18 years ago. And of course, this goes along with the fact that the price of silver reached almost $120 per ounce in the first half of this year, and the price of gold reached above $5,000, which at least I haven't seen. Unfortunately, prices have come down a little. So the good news is our record-setting first half of the year numbers. Second half if prices remain where they are at the current spot price, obviously would not be as good. But having said that, and if you look at the lines outlined in yellow, which are the different profit levels, you will be able to appreciate that gross profit was 131% above last year. Operating profit was 149% above last year. Profit for the period was almost tripled compared to last year, and EBITDA was almost doubled compared to last year. So let's just briefly go back to the gross profit, which was $1.3 billion above last year. And if you move up that same column, second from right to left. You will see that the main reason clearly was the increased level of adjusted revenues of $1.4 billion. And if we move very briefly to the next slide, and we look at what was behind that increase of $1.4 billion, you will see that price was -- and not surprisingly, price was the main reason. In particular, silver, where we had a benefit of almost $1 billion. The price of silver, the average realized price of silver for us during the first half of the year was $76.3 per ounce versus $33 that we saw in the first half of 2025. That's a 126% increase. So this was the main factor behind the increase in revenues, of course, gold. The average realized price for us was $4,647 versus $3,169 that's a 47% increase. So that was also a very important reason behind the increase in revenues. And even zinc did very well, 27% above last year. So prices in general, as you can see, had a very important impact. In terms of sales volume, as we knew it was going to happen, we had a lower sales volume in both gold and silver. But I do want to emphasize that we were above our budget. So this was perfectly predictable. If we go back to the income statement very briefly, I think it's worthwhile commenting on adjusted production costs. And as you can see there, we had an increase of almost 21% or $138 million. And I believe the best way to look at this is if we go to what we call the rainbow analysis, which is on Page 4. So on the right-hand side, in the green bar, you have the total variation of $138 million. And I want to draw your attention to the first 2 graphs in -- I mean, bars in yellow, which represent firstly, the behavior of the Mexican peso. And here, we're talking about the average exchange rate for the first half compared to the previous year. And we had a 12.5% revaluation. Just to make it clear, the average exchange rate in the first half of last year was [indiscernible] 20 per dollar. And what we saw this year was only $17.5 which is, as a matter of fact, the current spot price or change rate. And on the second column, you can see the impact of what we call cost inflation, and this is based on our own basket of consumables. And we're talking here about the increase in the unit price of the different items that conform our basket. And that wasn't -- actually too bad. It was only 3.25%, but that had an impact or a negative impact of $33 million. So when you add these 2 factors, that's how you get to what we call our cost inflation. Do we have that slide here? No. In the appendix, okay. So I think the main message here is to conveyed to you that 66% of the total variation in the cost of production was due to the combination of the revaluation of the Mexican peso and the -- what we call the cost inflation. Now of course, we had some operating issues that we would like to talk about. If you look at Column #5, for example, you will see that we had an increase in our operating cost at Saucito. And as you probably know, we are currently dipping in the shaft there. It's a very important project, which obviously will generate very important benefits when we concluded later on this year. But for the time being, what we're doing is we're extracting the mineral using contractors and losing mobile equipment to take it all the way up to surface. And we're no longer crushing a mineral below the ground where we typically do it before we hoisted up to the surface. So we're doing that also at the surface and using contractors. So temporarily, our cost of contractors has gone up, and it's obviously at a higher cost compared to when you operate normally your shaft. So this is a onetime. Hopefully, like I said, we will see the benefits of the new deepened shaft when we conclude that project, but this had a temporarily negative effect of $10.5 million. Now in bar #4, what we show there is the effect of the higher stripping that we recognized in our income statement related to Herradura, so as you know, every year, once reserves and resources are calculated and reviewed and the new mine plan is also defined, we calculate or estimate the strip in that we'll take on in the future. And what came out of that is that this year, we're not capitalizing any stripping at all. 100% of stripping is taken directly to the income statement, which was not the case in the first half of last year where we did capitalized. So as you can see, it's just an allocation when you look at -- when you sum what is capitalized and what is taken to the income statement is basically the same 1 year versus the other, but it's the way that we accounted for that change to applying this criteria that I just described to you. And also the fact that we have longer Hollis distances now at Herradura. Those 2 factors had a negative impact of $11.4 million. And lastly, on Bar #3, we had higher maintenance independently of exchange rates or inflation. We just used more maintenance, if you will, at several of our mines and that had an impact of $15.2 million. So in conclusion, 2/3 outside factors, $10 million, a temporary factor one time and column or Bar 3 and 4 those look like they're going to stick around for a while. If we go back very briefly to the income statement, just to comment on some of the lines perhaps. So we already spoke about gross profit, right? And we saw that the main reason for that was the increase in the prices. Now if we move to the operating profit, I think the item to comment on is the exploration expenses. We invest and miss an investment more than a cost but anyhow, it was $109 million, which was $32 million higher compared to last year, but well within the budget as a matter of fact, below our budget, and you already have the guidance that we have given for the full year. But when compared to the previous year, we are seeing an important increase. If we move further down the income statement, one important item perhaps just because of the significance in the variation is the finance income. So in 2025, you see a negative number of almost $180 million. And I'm sure you remember that back then, we simply canceled the sale stream that we had and we had that negative impact. This year, we are only recognized $25 million, which is basically the difference between the interest that we received on our cash balance and the interest that we pay on our long-term debt of $850 million, which is due in 25 years from now. Moving on down, of course, you will see higher income tax and mining rights. Remember, the mining rate that we recognize here is what we call the special mining right, which is 8% of a base that is very similar to EBITDA. So with the better prices, obviously, that mining rate increases and obviously, income tax expense with a higher price and higher profit before taxes. It's neutral to see higher taxes. I think now we can move on to the cash flow statement. And I would like to start with the very, very first line because this is the cash generated by our operations, which was almost $2.36 billion, again, record high. And we more than doubled what we saw last year. So pretty good cash generated by our operations. But this first half, we had important uses to. I'm going to mention the most important ones. Income tax and special mining rights and profit sharing. So here, we have three main items: provisional tax payments that are made from January to June, which are related to this fiscal year and you simply apply a factor over sales, and that's why you have to pay monthly and let's say that, that is a tax paid in advance relating to this year. Also, we presented our tax returns in March for 2025. And after taking out the provisional payments that we paid last year, we still had to pay around $300 million just for the 2025 fiscal year. And, of course, mining rights, which were much higher compared to last year. So that pretty much describes the $890 million that you see there. Another very important use and that I'm sure you're very happy about our dividends. If you look at dividends paid, we paid almost $800 million, and that's only what we paid in May, which was related to the final dividend for 2025. But we also paid dividend to our minority shareholders. Here, we're talking about Pan American Silver, who owns 44% of Juanicipio. So we paid them almost $200 million. So in total dividends between what we pay to our own shareholders and to minority shareholders, we're talking about $1 billion in dividends. Of course, another important news that you see there is the purchase of Prop Gold, almost $550 million. And my peers here have already talked about that important investment in a very important project for us. And 5 and last, I would say, important use of funds is the purchase of property, plant and equipment CapEx, which for this first half of the year, we used $236 million, which is higher compared to last year. So all in all, these 5 uses that I just described to you, if you add them up, it's $2.7 billion. And that's why you see a small reduction in the cash balance compared to what we began the year with, which was $2.76 billion and we closed in June with $2.5 billion, which is a very healthy cash balance. And with that, I think I will leave it at that. But before I pass it on to Octavio. I would like to make an important announcement here. Gabriela Mayor, who has been here in London for the last 14 years, as Head of the London office and also hair of Investor Relations is finally returning back to Mexico for different responsibilities now. She will now be the Vice President of Financial Planning. And I would like to introduce to you Juan Pablo Rocha, if you want to stand up, please. Juan Pablo has will be now as of Monday as of yesterday, your new Investor Relations person and the Head of the London office. So I want to thank Avior a great job during those 14 years, great effort. And I would like to ask your support as analysts and as investors for Juan Pablo, who has been with the company now for 18 years, and he was and to just today, the Vice President of Financial Planning. So we're basically switching. So people get new experiences. So that's the announcement.

Thank you, Mario. Thank you very much, Gabby, for all these years, serving our London office. I think it was an outstanding time for you, but also for the company, of course. And we are very glad to have you back in Mexico with additional responsibilities, of course. So thank you, Mario. Now turning to the outlook. Expected production, we have already confirmed we remain on track to meet our guidance for 2026, expected production for '27 and '28 expressed in silver equivalent ounces remains unchanged. However, we expect a slightly higher production of gold as we have seen from the trends in Herradura and importantly in Fresnillo and a slightly lower production of silver from Saucito. As usual, a more detailed update regarding individual metal production expectations for 2027 and 2028 is expected to be issued in Q4 production report. In terms of CapEx a good and continued experience on rationalizing and optimizing our CapEx numbers coming down to the range of $500 million to $550 million. This is through a very disciplined approach and exercise that we run across all of our operations as we go on the year -- operating year. Just a brief comment on and the time line on the different projects. Daniel mentioned already that we expect some production out of Bales this year. First, on the brownfields, Notebena, very good news as well, extending the mine, the life of the mine and seeing some production coming on next year. And then the rest of the pros that Daniel already mentioned, Rodeo, Tajitos, Herradura DeGrand, Novador, Orisyvo importantly on the silver side, Guanajuato that continues to give us very good exploration sale prices. So just to conclude, this has been an excellent first half 2026 for Fresnillo. We have delivered another solid operational performance, which has resulted in a record financial performance. We have remained committed to foster a strong safety culture protecting the environment and maintaining open engagement with our communities. While there is always more to do, I'm delighted by the way our people have embraced these priorities. Coming, and this is important from 2 years, 2024 and 2025, in which we had the adjusted production costs very much at the total production cost at the same level. We have maintained our disciplined focus on cost control and this will remain a key priority throughout the remainder of the year and beyond. We continue to invest across the portfolio and as set out today, we are advancing fantastic new products to production over the coming years. Finally, we are delivering significant returns for our shareholders in line with our dividend policy while preserving our capital for disciplined future growth. With that, we are happy to take your questions. Jason?

Jason Berkoff Bank of America. Just a couple of questions on the growth projects. So could you talk a little bit about the Canadian assets? Like it seems like there's a many, many years between now and when we might see production. And I mean you paid a lot of money for this. Why is it taking so long to bring these things into production. .

I didn't catch which project you got...

The Canadian projects, Novo Novador.

This is a strategic move, of course. Number one, the quality of the project. Number two, that goes along the lines that we tried to develop all the time. Number two, Novador, Project, which is the centerpiece of the acquisition with 8 million ounces of cola ready in resources comes along with a large land package as well for exploration. So we believe this will come as another mining district in the future, having a center piece as Novador with 110,000, 120,000 hectares of exploration -- yes. ground. So with that, we will have the Fresnillo district, of course, the Herradura District, as Daniel explained, in which we have several operating assets. Guanajuato goes along the lines of district in the future, we not only have Guanajuato Sur ready with sizable resources but also another 4 or 5 different exploration targets for the future and then Novador. So all in all, it complements our strategy in -- for the new peers.

Okay. I'm just going to push you a little bit. Why does it take so long to bring it into production? .

Well, it's a combination in which we are right now at the stage of pre-feasibility, we're reviewing that prefeasibility as well. We're going through the -- some of the permitting process. As Daniel mentioned, some of the combination drilling and then is just the time that we believe is good to bring that kind of project in the future.

So to follow up on a similar note, one of the other projects you're still talking about is Orisyvo. And I feel like that's been in your project pyramid since the time of the IPO, certainly been more than 10 years at a other Mario, maybe even 15.

Since the IPO.

Since the IPO. So it's taking a long time. So could you maybe just talk a little bit about why that is taking so long? .

Yes or receive is a special case. But you're right. I mean in the first 10 years, as you very well know, of Fresnillo, we had our full -- our hands full with different projects. Almost 1 project, greenfield product or expansion is 1 of our operating assets from 2008 to 2018. Orisyvo at that time was sizable project with sizable resources, almost 10 million ounces in resources. We thought about that as a open pit future operation, complex metallurgical process and recoveries. It took us long to really go and nail down the metallurgy there, refractory ore as well. Now we are in a way strengthening the project that has ahead of us additional challenges, indigenous consultation, high infrastructure investment, roads, it's on top of that Rarámuri Mountains range in Chihuahua. So it takes time. But I mean we like to go about developing of projects once we have everything in place so that we improve drastically the probabilities of successful these kind of projects.

Richard Hatch from Berenberg. Questions. Firstly, just on the CapEx, it's a pretty big cut $200 million in your CapEx. So can you just help us to know where that $200 million has come from just because I also know you haven't increased '27 or '28. So where is that $200 million go.

In general terms, across various areas of investment. We make sure that those investments that our operations need are deployed. The connection of the area chart that is going to be concluded. The conveyor belt at Juanicipio as well. Mining works, importantly, I mean, that's number one. Mobile equipment, some of the sustaining CapEx, we'll review it through the year. And if we can, we extend it and cut the CapEx numbers. Tailings and storage facilities as well. We reviewed the original design, the engineering and everything. And if we can regrow some of the operating design for the tennis storage facility, we do postpone that investment. What else Anil?

You cover most of the relevant factors. It's a combination between the ability to executing some of the projects, the ability to actually purchase some equipment that is not -- was not available for this year and the other is the continuous effort on reducing and reviewing what we expand on. .

But some of the important CapEx is our priority that is led.

Okay. But you're confident that you're not going to we're not going to see a creep in '27 and '28 as some of that comes back in it. .

Okay. Mario, just on the costs. Can you help us with a bit of a state of what you're thinking in the second half? You've been pretty good at controlling costs. Paysasbeen against you, but recently, it's been a bit more stable. So what are you thinking on costs into the second half?

We haven't yet seen the most important impact of the increase of the price in oil. TCL, as you know, is one very important consumable for us. Fortunately, it's become a I would say, a political issue in Mexico. So the President has tried to keep the diesel price more or less stable in peso terms. And he's been lucky because given the fact that the peso revaluated, when you look at the average price expressed in dollars of diesel, even though in Mexico, it was -- it remained constant. In dollar terms, it went up but not nearly the percentage that worldwide price has experienced. So in that regard, I think we're going to be able to maintain that. But it all depends how long and how much more the price of oil could go up and is very uncertain. I'm sure you know a lot more about that than I do. In terms of wages, we have already negotiated with the union. So we're not going to -- you don't have any risk there. In terms of other materials, like explosives and operating materials in general, Again, they're more or less linked to oil prices directly or directly. We only saw a 3.1% increase in the first half, maybe just a lag effect there that we need -- we might see in the second half of the year. But at least from our side, we're budgeting is something pretty much like what we saw I mean, budgeting for the next 6 months, pretty much in the first half.

Okay. Helpful. And then just a couple more, if I may. Just the first 1 is just on cash tax second half, should we expect any -- how you're thinking about cash taxes in the second half of the year? Taxes -- and also, you mentioned that you paid some of your tax ahead of time, right? So with the Provision of tax base. Yes. So with the gold and silver price coming lower, does that mean that you perhaps pay slightly less in the second half or not? .

Yes. Look, provisional taxes are basically paid as a percentage, a small percentage a factor that is defined at the beginning of the year, you've seen a formula that is defined by the Mexican tax authority. It's the same formula every year. So if you did very well in the previous year, that factor certainly will go up, which is what actually happened and you simply applied that factor to yourselves. And when you do your tax return on the following year in March, you do your actual calculations and you compare that to whatever provisional taxes were paid. So if the price of silver and gold go down and revenues come down and you pay exactly the same factor for that you applied in the first half, that should come down as a use of cash for the second half of the year.

Okay. And then last one, I was just curious, on Saucito, it seemed to be that you sold quite a lot less than you produced. Was there any reason for that? So 0.4 million ounces of silver versus 6.2 million produced 26,000 ounces of gold, [indiscernible] any reason that?

I think that's just probably some of the -- I'm getting a bit. Sometimes it takes time to settle the assays exchange with the met mix, so that might be the case. Nothing that I remember importantly.

We'll probably recuperate that in the second half.

This is Alain Gabriel at Morgan Stanley. A couple of questions. Firstly, on capital returns. The first half dividend came in slightly below what the market was expecting. And your dividend policy is a bit formulaic. How should we think about the framework of the year-end distribution to shareholders? How are you thinking about it? How should the market think about it? That's the first question.

Sure. In relation to the interim dividend, what we actually did is very, very simple. We simply applied our dividend policy. And as you know, our dividend policy has been for the last 18 years since we did the IPO is paying out basically 50% of our net income. So what we do is we project our net income for the end of the year. We apply 50% on that. And since we consider this to be an advanced dividend payment, we simply apply 30% on that number that we are estimating, and that is the interim dividend. So it's just pure math applied over a policy. Now I don't know what the market is thinking about the second half. But as we are using conservative prices, pretty much close to the spot price. So for the next 6 months, we're projecting around $55, the price of silver and around $4,000 the price of gold. So that's what we're projecting for the next 6 months. And based on that, like I said, we just simply apply the math.

That's very clear. And the second question is on your greenfield projects. You have 4 major greenfield projects. How do these -- the spending on these projects feed into your CapEx budget for '27 and '28 what's included and what's excluded from your -- the outlook slide that you have laid out?

'27 and '28 is not including the growth projects, CapEx there. And whenever we have a project approved, then we included in the expected CapEx...

Any initial budgets that we can think of. Any ceiling of spending that you are thinking of, including the project for '27, '28?

In '27, we don't see significant expenditure. As we mentioned on the presentation, the larger capital, but we're talking about something between $40 million and $50 million would be the start of the decline and the shaft in an auto. For the rest of the greenfield projects, we don't see construction work actually starting, so next year, nothing significant. '28 is something that we will start with you.

This Patrick Jones, JPMorgan. Maybe just a quick one on VIDEO given, obviously, similar to -- or so is 1 that's been in the portfolio for a long time. It looks like the time lines moved out just a little bit, again, closer to 2030, but the production has changed a little bit. So are you kind of building a little bit more confidence this is going to be happening and also, how long do you envision the permitting process to be if you think this could be online the late '29, early 2030?

I think permitting process, as you're aware, has been relatively complex in Mexico during the last few years. Things are improving. The reception from authorities in terms of work out with the companies, the relevant permits, it's improving. However, there is some uncertainty there. In terms of the confidence, let me call it the technical confidence of the project, the work we conducted last year and we're just finishing now. It's very solid, particularly around metallurgy that was the critical point for the project to go on and that's why we're confident about the numbers that we're showing in terms of increasing the production expectation. Roel is -- there's no simple project, but it's a relatively simple project to build that's why the execution time once we have the permit, it's well under control. We think something between 18 and 20 months for construction. So that allows us to be in the time frame that are mentioning. However, it's going to be permitted.