Hochschild Mining plc ($HOC)

Okay. Good morning, everyone. Welcome to Hochschild financial presentation 2025 results. We have very good news today. Let me go to, first of all, the disclaimer, and that's the basically takeaways. As I said, 2025 has been a very good year with the strongest ever financials. We produced 311,000 ounces. The revenue went up 28%. The EBITDA went up 39%, up to nearly $600 million. Our attributable all-in sustaining cash cost was $2,138 per ounce, and we end up the year with $317 million in cash. Our net debt was $23 million. Dividend is going to be 5p. And we have had a significant amount of resources, 1.7 million ounces gold equivalent, especially at Inmaculada and also at Royropata. What's going on in 2026? I mean we will continue developing our projects. Mara Rosa, all the turnaround project is on track. The management transition is also complete. We have a new COO in place, and he's choosing his team in Brazil. Royropata MEIA is on schedule. I mean, we have been working with Ausenco to make sure that the document will be ready in July to be presented to the new government in Peru. As you know, we have elections. Then, of course, we will continue with the non-core assets to be monetized. And strong ESG metrics continue, especially I'm very -- I feel very proud by our safety performance. We closed the year with 0.97 frequency rate. And also Tiernan Gold and Aclara is -- I mean, we did the RTO and Aclara continue with the permitting processes in Brazil and in Chile and also working on the vertical integration. If we go to the next page, 2.5 years ago, we said that we will be focusing in our precious metal assets and the focus for these 2.5 years has been at Inmaculada, Mara Rosa and San Jose. Also, we said that we will be focused on developing the new 2 projects, Monte do Carmo that we acquired and Royropata is a brownfield discovery and also delivering on non-core assets that we said that they were non-core and we would do something about it. I mean what we have done is monetize Tiernan Gold, Aclara for sure and Crespo, Azuca and Arcata that we sold. Going to the ESG performance. As I said, we feel extremely proud with our safety track record. It's a world level -- world-class level achievement. Also on the environmental performance, we are near perfect score. As you can see on the graph below, I mean, we have been always maintaining above 5.5 out of 6. We feel also very proud that we have increased the local workforce, I mean, giving a job to people that lives close to our sites, 66%. And also in terms of energy, we have been able to pass all the energy contract to renewable. That's very important for us. And finally, we have included -- we have been included on the FTSE4Good Index series, which is also very good for the company. Going to the financials, I would like to introduce Eduardo Noriega that will help with the presentation. Thank you, Eduardo. Go ahead.

Thank you, and good morning. As Eduardo said, we have a strong set of financial results during 2025, mainly driven by the strong metal prices. As you can see, our revenue was more than $1.2 billion, attributable net profit at $159.6 million, EPS at $0.31 and adjusted EBITDA very strong as well at $584 million. In terms of revenue, as I said, the revenue was higher, mainly explained by strong metal prices. As you can see, gold price was 37% higher than last year and silver price was 54% higher. The strong metal price conditions partially offset -- more than offset the challenges that we had in Mara Rosa, which are being resolved. I have to say that in terms of production in 2025, we -- in Argentina, we're producing 100% concentrates to benefit from the strong commercial conditions of concentrates compared to dore. Cost of sales were 12% higher than last year's, mainly associated to higher production volumes, both at San Jose and Inmaculada. And we also had the fixed cost at San Jose during the stoppage period and during the ramp-up period. Finally, higher prices had an impact on royalties and workers' profit sharing, mainly in Peru. In terms of admin expenses, we had higher expenses, mainly associated to higher professional fees associated to transactions we closed during the year, mainly the RTO of Tiernan, and we also had higher workers' profit sharing associated to higher prices. Under others, net, we had higher net expenses mainly associated to the elimination of a benefit that we had in Argentina, an export benefit that was eliminated in April 2025. And in 2024, we had it for the full year, explained around $13 million. And we also had adjustments to our mine closure provisions for $9 million, aligned with our plans and the execution of the closing plans of our projects. Net interest -- net interest expenses were higher, mainly associated to 2 noncash events: one, the change in fair value of Monte do Carmo's royalties agreement with Sprott, which had an impact of $7.5 million and the unrealized fair value losses of Tiernan warrants issued in the capital raise of $7.4 million. As I said, both noncash effects. The effective tax rate for the period was 39%, but from which around 6% were represented the special mining tax and the royalties in Peru that, as you know, are calculated as a percentage of our operating margin, operating income, but is booked in the income tax line. We also had withholding taxes of that represented a 2% increase in the effective tax rate. Before these impacts, our effective income tax rate would have been 31%. Finally, under exceptional items, we had a net impact of around $47 million, mainly associated to the reversal of impairments in Aclara, Volcan, and San Jose. So none of our assets have impairments now, and that had a positive impact in the exceptional column of $79 million pretax. And we also had a negative exceptional impact of $26 million on the revenue due to the rolled-forward of some of the hedges that we had from H2 2025 to H1 2028. So that mark-to-market of those hedges passed through the P&L in 2025 under exceptional items. In terms of cash evolution, our cash increased materially from $97 million to $317 million, mainly driven by the strong cash generation capacity of our Inmaculada mine, $315 million. We had $162 million generated in San Jose. We used $30 million in Mara Rosa to recover from production challenges. We had $33 million invested in exploration programs, $57 million of corporate expenses. And then after the blue column, we had taxes paid for $36 million. current maintenance and closure plans for $34 million. We paid interest net of $15 million. We had a temporary increase of indebtedness of $24 million. We paid $17 million in dividends, mainly the $10 million final dividend of 2024 paid in June and $5 million of interim dividend of 2025 paid in September. And we had a temporary negative change in working capital of $54 million, mainly associated to our decision to produce more concentrate, which has more -- higher DPO and also a temporary accumulation of stockpiles in Mara Rosa and Inmaculada as part of our production plans. Monte do Carmo, we invested $30 million from which $13.5 million is a buydown option of the Sprott agreement at Monte do Carmo. And also, we had the early settlement of the deferred consideration at Monte do Carmo of $9.75 million. That's included in the $30 million. We invested $7 million in Royropata. We made a capital injection in Aclara to retain our 20% share of $8 million. And of course, we executed the RTO of Tiernan, which brought $40 million of additional cash to the group at a consolidated level. In terms of all-in sustaining cost, our all-in sustaining cost, I don't know if I -- our all-in sustaining cost was $2,138 per gold equivalent ounce in 2025, as expected and as guided, higher than what the all-in sustaining cost that we had in 2024. If we look at each of the mines in Inmaculada, we had lower grades, partially offset by higher processed tonnage. We also had the impact of prices in our workers' profit sharing and commercial discounts. In the case of San Jose, our margin -- sorry, our production plan was in the border areas of the deposit, giving us lower grades also as anticipated. We had the impact again of higher prices in royalties and export taxes. And as I said in the P&L explanation, we -- in 2024, we had the FX export program that was suspended in April 2025. In the case of Mara Rosa, the all-in sustaining cost was a result of lower production volumes and grades and of course, the CapEx that we incurred during the year to address the operational challenges that we had. Capital expenditures, we had $203 million of sustained CapEx in our 3 mines. In Inmaculada, we're including mine development costs, mainly $80 million, tailings dam expansion of $17 million incurred during the period. We also invested in our reverse osmosis plant to dewater the tailings dam of Inmaculada. In San Jose, we had mine development cost of $26 million, drilling of $3 million and mine raised borrowing for $2 million. In Mara Rosa, we invested in our plant and filter improvements for $16 million, and we also invested at the mine, as you can see in the slide, stripping programs and sustaining CapEx, both combined $17 million. In terms of the balance sheet, we have a very strong -- we ended up with a strong balance sheet with $317 million in cash and net debt of $23 million. We continue deleveraging the company with a net debt-to-EBITDA ratio at 0.04x, well below the threshold that we have -- that we indicated in the -- throughout the cycle. The company is well positioned to invest in our growth projects, Monte do Carmo and Royropata. And as I said before, this strong balance sheet will give us the opportunity to do so. We -- as you are aware, we also -- we announced our dividend policy a couple of years ago, and this is the first year in which we are executing the policy at a variable rate. Our dividend policy considers distributing between 20% and 30% of the attributable cash flow of the company with a minimum annual dividend of $10 million, subject to be -- to have a net debt-to-EBITDA ratio of below 1.5x. We paid $5 million of interim dividend in October 2025, and we are now declaring a final dividend of $0.05 per share, which accounts for $26 million, taking the total dividend paid for the period to $31 million. We're showing in this slide the dividend calculation. And as you can see, our total free cash flow is $193 million and the nonattributable piece of that free cash flow mainly associated to Argentina, which also generated a strong cash of $54 million, bringing the attributable free cash flow to $139 million. Back to you, Eduardo, for the strategy section.

Thank you, Eduardo. This is a picture of the Brazilian team. Cash is in the middle. We go to the next page. This slide is just to remember the strategy that we designed during -- I mean, back in August 2023. We said that brownfield will be a very important pillar. We believe that it is a long-term value. Discovering new resources is where the value -- the maximum value is for the mining business. And through brownfield, we extend the life of mine of our existing assets. So it's important that also brownfield is very well focused on mineable resources. I mean there is this tendency of bringing resources, but at the end of the day, you want very good quality resources. Then the second pillar is the operational efficiency. Something very important for us is to be on site. I mean the leadership has to be visiting the sites, and we have been doing that for the past 2.5 years. Also lean philosophy across the company, cost efficiencies through programs. And of course, at the time to develop the new projects is to know how to develop on time and on budget. ESG, world-class safety. As I said, we feel very proud. Water management focus is very important. We implemented a new community approach, and I have to say that we didn't have any blockages or any problem with communities for nearly 3 years. That's very important. Talent management with very good objectives in place. And of course, all our KPIs, ESG KPIs in place for 2030. Finally, the fourth pillar is the disciplined capital allocation, funding organic growth through our balance sheet, of course, pay the debt if we can, capital returns through our policy -- dividend policy. And if we do any M&A, it has to be value accretive as we have demonstrated in Mara Rosa and also at Monte do Carmo. As I said, brownfield is very important, and we have demonstrated that during 2025, where we have had 1.7 million ounces of gold equivalent. Out of 1.7 million, 1.1 million has been discovered in Royropata. And of course, as you can see, we made in 2024, some projections of resources to be discovered from 2024 to 2030. But today, on 2026, at the beginning of 2026, we have 4.5 million ounces in resources in our base resources. And as you can see, the performance in Inmaculada, we brought 0.5 million ounces in -- as I said, in Royropata, 1.1 million. And also in San Jose, we have been able to replace partially the -- I mean, the production. Inmaculada continue being our flagship mine is producing above 200,000 ounces per year with very good all-in sustaining cash cost. We continue having a large regional land package with a huge potential. And as I said, we have been able to add more resources during 2025. In the last 10 years, we have been able to discover 80 new veins at Inmaculada. We have brought 5.2 million ounces of gold. And in 2026, we have plans in the Southeast and north of Inmaculada. We are going to drill nearly 18,000 meters and we are aiming to bring at least 250,000 ounces. As you can see on the map, there is many places with potential veins that there are still -- I mean, that we have still the possibility of discovering them. Then going to Royropata. As I said, Royropata is a major brownfield discovery. We have today nearly 3 million ounces of gold equivalent with very good grades. We are talking about like 550 grams per tonne of silver. And this deposit is most silver. It's like 90% silver. The good news is that average width of the veins is like 30 meters or more. So it's going to be a very productive mine once we put it into production. Today, we have the agreements with the communities. That's very good, and we did that in 2024, all the easement. And we are working with Ausenco and also with Stantec as a peer reviewer to present to the Peruvian government a very solid and -- I mean, very solid and very well done technical document to be evaluated by the new government. So we expect to file this in August 2026 once we have the elections and to be approved a year after. As I said, we have had 1 million ounces in Royropata. But the good thing here is that we have all these -- I mean, all this discovery is around here, and we have all these new veins, continuation of the current veins that could be add more resources. So at the end of the day, Royropata could become a massive deposit that it will bring a very profitable production to the company from 2028 onwards. Also at the regional level, you can see here, we have Inmaculada, in the South, Pallancata and Selene. And we have different targets. Condorillo, we have Minascucho in Inmaculada. We have [ Saycata ] and [ Gaby Marina ] close to Selene. So there is a lot of regional potential to bring new deposits with a potential of 3 million, 4 million, 5 million ounces of gold equivalent. So that's -- this land package has a huge value in terms of our strategic brownfield strategy. Then go to Mara Rosa. Mara Rosa is an open pit gold mine, as you know. We have 1 million ounces resource. We have been able during 2025 and 2026 to reorganize and to stabilize the output. Ramping up to full production, it will be on H1 2026 once we have the signal in place. But I have to announce that today, the crushing, milling and filtering plant is performing at nameplate capacity. So the signal is going to give us flexibility, but I mean, the capacity is already reached. And also the dry stack, which is a difficult thing to do in a rainy environment is totally controlled. Well, here, we have some details of everything we have done. I would say that the only thing is pending is the overlap of the contractors, the mine contractors. We have done a tender, and we have select Fagundes. Fagundes is one of the best Brazilian contractors in the whole country. And we have a plan to the overlap between R&D and Fagundes from now until July, more or less, yes. So from July onwards, we will have a mine output of, let's say, 80,000 tonnes, and that will give us the opportunity to push back the mine and also to make available all the ore to pass through the material through the plant. As you can see, production KPIs evolution, they are extremely positive. Here is December and you have February and everything has increased. The crushing, milling and also filtering are above I mean, these levels in November, December that they were very low. Better than text and voice pictures, and you have the mine here. I mean you have the filters working. This is the dry stack. Even in the rainy season, you see that it is totally compacted and ready. And this is the [ signal ], the fabrication, production of the walls and also the civil installation on site. And also, you have some roofs that we have installed around the filtering plant to make sure that we have the area protected during the rain. Also at Mara Rosa, we have still a lot of potential on brownfield exploration, and we are drilling. As you can see, Posse is here, and we have all this area for possible incorporation. So at the end of the day, the strategy is the same. I mean, we would like to add at least a year of resources every single year. So -- in that sense, we can maintain that 1 million ounces in terms of resource base, producing like 100,000 -- well, let's say, 80,000 between 80,000, 90,000 ounces per year. Monte do Carmo, you remember that we acquired this project, we paid $60 million, is located in Tocantins, that's north of Goias, close to Mara Rosa. We have -- I mean, it's fully permitted. And today, what we are doing is a gap analysis to make sure that all engineering is correct. We are completing the engineering on the, I would say, at the end of May, and we will be trying to present an economic case in June 30. That will be around June 30. That's our objective. Good news is that we have repeat all the metallurgic tests, and we got 94% recovery, which is extremely high. That's very good news. All the geotechnical studies are nearly finished to make sure that the pit is stable and everything. Transmission line has already the permit and is ready for construction. And as I said, I mean, we will update the economics in mid-2026. We aim to start production in 2028 if we start construction on July 2026. San Jose is a mine that commenced in 2007 -- back in 2007, a year after I joined Hochschild. 2025 production has been very good, 120,000 ounces, and we believe that this year is going to be more or less the same. During 2025, we have been implementing cost-effective measures at the whole process. And I mean, we are trying to contain cost as low as possible in an environment which is difficult. As you know, Argentina has a lot of inflation during 2025 and worse even before. But I mean, the team is working there. The grades are there. There is a huge cash generation in San Jose, which is very positive for us. In terms of exploration, San Jose still has a lot of potential, not even -- not only on the mine area, but also on the district. This is Cerro Negro and this is San Jose. So there is a lot of mining properties that we own, and we are exploring with new technology. But also in Santa Cruz province, we are mapping and sampling a couple of projects that it could be a new future discovery. Well, in terms of valuation, I have to say that once Mara Rosa turnaround is nearly finished, we continue having a very strong Inmaculada performance. And we are one of the few mining companies that have 2 projects -- developing projects that I mean, could represent an increase in production of 60%. So it could be -- it could mean that Hochschild Mining could reach 0.5 million ounces of production in 2028. I believe that there is still a very important valuation opportunity for investors. So that's very good news for us, for shareholders also. And I believe that the performance of our share has been very impressive, and I am very proud of the team, the work that they have done. Finally, as a conclusion, 2025 has been a very strong year in terms of financials. It's important not only the financial, but also the ESG performance is we continue having a world-class performance on safety and environment and also very -- I feel extremely proud of the community relations situation. We have a great team in place that they have changed the way we relate with communities. Also, we have executed the turnaround on Mara Rosa. The management transition is in place. I feel very comfortable with the actual management team. Inmaculada continued having a very solid performance. Tiernan is already listed on the TSX, and it has its own future from now on and also $31 million on dividends. The future is, of course, completing Monte do Carmo economic assessment and starting construction, brownfield program to continue delivering new resources to extend life of mine. Royropata, as you can see, that's the most important projects that we have at Hochschild, 3 million ounces, most of it silver, huge veins, continuation. It seems like a very, very good deposit. We will continue with disciplined capital allocation to make sure that money is well spent. And of course, the investment in Tiernan and Aclara has become a value of $300 million plus, which is very good for the company. I have to say that 2.5 years ago, we said that we will be focused on core assets and delivering profitable growth. And today, we feel very proud that we have accomplished our promise. Thank you very much.

Thank you for the presentation. We have had a number of questions, please submitted and submitted live. [Operator Instructions].

The first question is, Inmaculada seems to be doing a lot of the heavy lifting again. Are we too reliant on that one mine at the moment?

Okay. Inmaculada is a mine that has been producing since 2015 and average has been produced 200,000 ounces of gold. Today, we have an important amount of resources. And now in June, we will have the new life of mine. I have to say that we have had 0.5 million ounces of inferred resources on 2025. So I believe that, that mine is going to continue with very good health -- I mean, with very healthy production and also very good cost.

Thank you. The next question is -- if gold and silver prices stay around the current levels, how much free cash flow could Hochschild generate?

I would like to pass that question to Eduardo Noriega.

Thank you, Eduardo. So the cash generation capacity of the group is very strong as we have demonstrated that in 2025. If spot prices remain as they are, which are higher than the average we had in 2025, the cash generation capacity could be depending on how much we invest in our developing projects, but taking into account what we have, the plan that we have in front of us, it could reach $500 million per year, more or less.

Thank you very much. The next question is, as a shareholder, I'm pleased to see the balance sheet improving. With net debt much lower, how should we think about the balance between reinvesting in the business and increasing returns to shareholders?

Thank you, Charlie. Our capital allocation policy takes into consideration that our first priority is to develop our short-term growth strategies. In this case, we have 2 projects that we need to build, one Monte do Carmo, the other one in Brazil, the other one Royropata in Peru. And between both, we think that the CapEx could be around $500 million. So the second -- and of course, we also invest in our brownfield exploration plans. In 2026, we expect that budget to be around $38 million. The second priority is to pay down debt, and we continue doing so, and that's what we're going to do in 2026 as well. And third, capital returns. And for that, we have implemented a dividend policy that takes into account distributing between 20% and 30% of our free cash flow. And that's also being executed and where that's how we estimated our dividend of -- total dividend for the 2025 period of $31 million. And then, of course, being prices as they are our fourth priority, which is inorganic growth or M&A needs to -- also needs to be taken into consideration. And the strategy that we're following today is making sure that we strengthen our balance sheet as much as we can so that when the opportunity comes, we are prepared to keep growing the company through acquisitions as we did in the last 3 years with Monte do Carmo and before that with Mara Rosa in Brazil.

Thank you. The next question is, from management's perspective, what is the biggest operational risk facing the company that investors might not fully appreciate?

Well, I would say in terms of risk, I mean, we have an electoral year in Peru. And of course, we are presenting the new environmental permit for Royropata. So I would say that there is a risk. I mean it's not a big risk because we have been operating in Peru for many, many years in different situations. But that would be a risk that I would point it out. On the other side, I mean, I don't see a major risk. I mean, the normal risk of mining operations that, of course, I mean, we know exactly how to deal with them.

Thank you. The next question is, Hochschild has historically operated in parts of Latin America where permitting and regulatory environments can change. How do you balance geological opportunity with political risk when you decide where to invest next?

Well, as you probably know, I mean, we've been in Peru for many years, and we have been working in many different situations. Also, I mean, many years ago, we decided to expand our operations to Argentina. And today, we believe that we are very good operators in Argentina, where we know very well the country. And 5 years ago, we decided to diversify risk and we decided to go to Brazil. We acquired Mara Rosa. And after a period of time, we acquired also Monte do Carmo. So we believe that we have diversified risk expanding our operations in Brazil. I mean, we feel extremely comfortable in Peru, and that's the reason, I mean, we found this very good deposit in the new brownfield discovery, which is Royropata. And therefore, I mean, being working in these 3 countries, we believe that we have diversified the risk, and we feel quite comfortable in terms of permits against the production, I mean, the opportunities that we have.

Thank you very much. The next question is, given that fuel and energy are significant costs in mining operations and tensions in the Middle East are happening, how exposed is Hochschild to rising energy prices?

But I would say that for us, it's an important cost, yes. But I mean, in Peru, I mean, still today, there's not been a raise of energy cost. We have some stocks in all our operations. I mean, we will be exposed to any -- I mean, price raise on diesel or -- but I mean, I believe that it's not going to be that significant.

Thank you very much. The next question on a similar line. Has the current geopolitical environment created any supply chain challenges for the business, particularly around equipment, chemicals or shipping routes?

Well, I mean, I will pass the question to Eduardo Noriega in terms of commercial challenges. But in terms of supply, I mean, we buy iron balls, we buy cyanide, we buy steel in general, and we didn't see any problems in those products. In terms of the routes, Eduardo?

Thank you, Eduardo. We're monitoring closely the situation in the Middle East and how that may impact the worldwide supply chain of different materials. So far, as Eduardo pointed out, we're not seeing any impact on the business. We don't import directly from that part of the world. So on that front, I think we are -- that the risk is well monitored. In terms of our exports, we also do not export to the Middle East any of our products. And we are monitoring the global routes or routes regarding our exports of concentrate. Most of our dore production goes to the U.S. to Canada and also to Switzerland. But so far, no impact on Hochschild.

Thank you very much. The next question is, when do you expect Mara Rosa to reach steady-state production and steady-state cost levels?

Well, I believe that Mara Rosa is going to reach steady production on H2 2026. We are doing everything in our hands and as I said, I mean, today, we have already reached nameplate capacity at the plant, and we are in the middle of a change of contractor at the mine, where I believe that it is going to result in an increase of the mining output. And with that, I mean, we will reach maximum capacity at the mine.

Thank you very much. The next question is, can you share the expected time line for the Royropata project? And any comments on the outlook for the mining industry in Peru as we approach presidential elections?

Well, I mean, the timetable, the schedule for Royropata is as follows. We are planning to present the documents to the government -- to the next government in July, August, taking into account that we have now in April, we have elections and the new government will be in charge from July onwards. So we are planning to present that document, and we expect to have a year of evaluation. So we expect to get the environmental permit in July, August 2027. Then we have the operational permits that will come, let's say, in a year. So we expect to start developing the mine on June, July 2028 and start getting production at the end of that year. I mean in terms of the mining -- I mean, the mining industry situation based on the elections, I mean, we don't expect any major changes on legislation. And I mean, today, Peru is an extremely important part of the copper and gold and silver industry. And we don't expect any changes on that based on the elections.

Thank you. The final question is ESG and CSR are important when looking at investing. How are you giving back and protecting the communities you work within -- work in?

Well, I have to say that 2.5 years ago, we decided to change the strategy with communities. We -- I mean, we complete a new team. The team really has been very close to the communities, working on their developments and giving a lot of jobs in the areas. That means that, I mean, communities are getting better in time. And I have to say that we didn't have any problems blockages or anything like that in the past 2.5 years. So that situation reflects that we are doing in terms of the community relationship, we are doing much better than we used to do it 3 years ago.

Thank you. That's all the questions we have time for today. I'll now hand back to the management team for any closing remarks.

Okay. Let me say that today, Hochschild is very well positioned for the next step. We have Mara Rosa turnaround already done. We have Inmaculada with very strong performance. And we have in the next few years, Royropata, Monte do Carmo as a growth opportunities. If we analyze our valuation against our peers, we are still below. So I believe that there is a very good opportunity on investment -- on investing in the Hochschild shares. Thank you very much for your presence.

Thank you to the management team for joining us today. That concludes the Hochschild Mining investor presentation. Please take a moment to complete a short survey following this event. A recording of this presentation will be made available on Engage Investor. I hope you enjoyed today's webinar.