Hochschild Mining plc (HOC) Earnings Call Transcript & Summary

Good day, and welcome to the Hochschild Mining Second Quarter 2024 Production Results Conference Call. [Operator Instructions] I will now hand you over to Eduardo Landin, CEO, to begin. Eduardo, please go ahead.

Good afternoon, everyone, good morning reviewing the Americas. Hello, and welcome to our conference call to discuss our second quarter production results. I am here in Lima, with Eduardo Noriega, our CFO; and in London, Charlie Gordon, who is our Head of Investor Relations. Group production in the quarter was just over 83,000 gold equivalent ounces or 6.9 million silver equivalent ounces, which is a solid 19% improvement on the first quarter and clearly shows the first material contribution from our new Mara Rosa mine. The half year results was almost 153,000 ounces coal equivalent or 12.7 million silver equivalent ounces. Inmaculada output was 35,600 ounces of gold and 1.6 million ounces of silver, which is a core equivalent total of 54,600 ounces. This is considerably an 18% improvement in the same quarter of last year when delays to the permit decision impacted mine development and consequently product. Recent continued improvement project at the site have also contributed to a better-than-expected tonnage and grade. Production for the 6 months of the year was 109,500 gold equivalent announce. In Argentina, I have to report after the customary short first quarter, which contained a tough seasonal vacations. The operation delivered better than forecast rates, although this was partially offset by lower tonnage. Output increased by 9% versus the first quarter to 2.5 million silver equivalent ounces, which gives a first half total of 4.7 million ounces. This mine has always being way towards to the remaining quarters of the year. and we expect the same in 2024. Turning to our new Mara Rosa mine in Brazil. As you know, we reached commercial production in May, and see them, we have seen the plan reach 7,000 tonnes per day, which is nominal capacity expected. There are a number of optimization initiatives running at the operation at the moment, and therefore, we believe that we can reach a stable 8,000 tonnes per day target in the near future. We expect a second half of 2024 in Brazil to be very strong. In particular, the fourth quarter is forecast by almost 45% of the total production of the year. In terms of cost, the company as a whole, I am pleased to say that we are reiterating our 2024 guidance which, if you remember, is between $1,510 and $1,550 per gold equivalent ounces. Our brownfield campaign has continued in the same quarter -- in the second quarter, sorry, and I am pleased to report that we have had some encouraging results on Mara Rosa, where we are currently drilling to add resources below the existing pit. In addition, results Inmaculada has been consistently strong, especially with the new Tesoro and Nicolas space. And we expect to be able to deliver substantial additions at Inmaculada resource space by the time the year ends. Let me say also that Monte do Carmo, Cerrado Gold shareholder meeting approved our option. And at the moment, we are doing some technical and brownfield exploration works in order to take the decision on the option that we acquired next year basically. On the financial side, we have approximately $89 million of cash which translates to a net debt of $770 million and a net debt to the last 12 months EBITDA of 0.8x. So in summary, we have delivered another solid quarter with the operations very much on track to meet our 2024 production and cost guidance target and we are excited by the prospect of the strong second half at Mara Rosa and our other operations. We continue strong -- with strong precious metals. This Should lead to a significant cash flow generation. With that, I would like to open for questions. Thank you very much, and good afternoon.

[Operator Instructions] We will now take our first question from Laura Cunningham from RBC capital Markets.

I just have 2 questions on my side. The first one is, are you still looking to expand the capacity of the processing plant at San Jose bay? And have you spent CapEx on that yet? And for my second question, I'm just -- I just wanted to know if you could provide some guidance on the great profile for Inmaculada. Are you expecting similar rates for the rest of the year? And what part of the better performance is due to dose improvement projects at the mine?

Okay. Let me first tell you that we are already spending money, CapEx money in San Jose expanding the [indiscernible] up to 2,000 tons. And we expect to see that project at the end of this year. So I mean it will be around $10 million. And the second question was about the improvement project in Inmaculada, we have had consultants working with the team and we have been able to improve efficiencies at the mine. To give you an idea, today, we have 40,000 tonnes in addition to the production that was funded at the beginning of the year.

We will now take our next question from Cody Hayden from Berenberg.

It's on the Monte do Carmo project, and specifically, the $45 million to paid in installments if the option is exercised. I was wondering if you would be able to share any detail on the structure of the installment as well as on any time line that you can be expected to be shared on deciding if the option will be exercised?

Eduardo, go ahead you can answer the question. Thank you.

Thank you very much, and thanks for the question on Monte do Carmo. So we have paid already $15 million, $15 million to -- have the option. And now that the -- the option has been approved by several shareholders where as Eduardo described, we're working on the exploration plans and doing some technical work. The next payment will be associated on us -- accepting the reduction. So depending on when that -- when that occurred, we will have to be at that time or close to $10 million, then we will have to pay. On the first year anniversary of the auction, another $20 million. And then finally, we will pay an additional amount when the mine starts production, so $45 million in total it the remaining payments for -- to secure the reputation Monte do Carmo if we decide to exercise the option.

[Operator Instructions] And as there are no further questions at this time. I'd like to hand the call back over to Eduardo Landin for any additional or closing remarks. Over to you, sir.

Thank you very much. Well, nothing else, really, thank you for being here, especially at the end of July that I know there is holiday time in Europe. So thank you very much, and we will keep in contact. If you have any further questions, please refer those questions to Charlie Gordon or Eduardo Noriega, me to our e-mails. Thank you, and good afternoon.