Hochschild Mining plc ($HOC)

Hello, and welcome to Hochschild Q1 2026 Results. [Operator Instructions] I would now like to hand the call over to Eduardo Landin. Please go ahead.

Good morning, and hello, and welcome to our conference call to discuss our first quarter production results. I'm here visiting our San Jose mine in Argentina with Eduardo Noriega, our CFO; and in London is Charlie Gordon, our Head of Investor Relations. In the first quarter of 2026, we have delivered a total production of almost 76,000 gold equivalent ounces with a solid performance from Inmaculada and a rising contribution from Mara Rosa in Brazil, meaning that we are currently on track to meet our production and cost guidance for 2026 of 300,000 to 328,000 gold equivalent ounces at a cost of $2,157 to $2,320 per gold equivalent ounce, respectively. Inmaculada production was just over 48,000 gold equivalent ounces and in line with our plan. A slightly higher tonnage was partially offset by lower grades, reflecting higher prices during this Q and the resulting reduction in cut-off grades compared with Q1 2025. Here at San Jose, tonnage was higher than in the first quarter of 2025, although silver grades were slightly lower. It is consistent with the normal variability we see when mining in the vein border zones as well as the impact of higher prices on the cut-off grades. Production totaled just under 27,000 gold equivalent ounces and overall, the mine remains on track to achieve its annual target. Turning to Mara Rosa. The turnaround program continued to make steady progress with the operation delivering improvements in plant performance, a stronger maintenance execution and higher daily run rate across the circuit. We also continue to advance key operational initiatives, including the mining contractor replacement, which was 75% mobilized by the end of March. At the same time, the new tailings thickener remained on schedule with all major components now on site and field work preassembly well underway. We expect commissioning to begin at the end of this month with operation starting by the end of May 2026. Overall production at Mara Rosa for the quarter was 13,500 gold equivalent ounces, which was only slightly below expectations and this mainly reflects equipment availability and the impact of the rainy season of both tonnage and rates. Work at our Monte Do Carmo project continued during the quarter with some good progress across detailed engineering, equipment selection, permitting and legal work, and environmental studies. We also completed geotechnical and geomechanical studies, continued to build out our project team and progressed key procurement packages, including power, camp, earthwork and pre-stripping the contracts. The company continue to expect the project to be submitted to the Board for the final approval on the third quarter of this year. Also on Royropata, we have made very good progress. And basically, we were waiting for the results of the Peruvian elections to deliver the document to the new authorities to start the evaluation of the environmental impact study of Royropata. The 2026 brownfield exploration program has commenced across all sites during the period with early results pending, we will report the first set of results in the Q2 production statement in July 2026. Turning to the balance sheet. We have cash and cash equivalents of around $412 million, which give us a net cash position of approximately $95 million, which is a pleasing improvement from the $23 million net debt position that we report at the end of 2025. I should point out that this cash position includes $230 million held in Argentina, of which $84 million is invested in financial instruments to mitigate inflation and devaluation risk. $35 million is also held on German gold to support development of Volcan project. With that, I would like to open for questions. Thank you very much.

[Operator Instructions] Question is from Richard Hatch from Berenberg.

Just a couple of questions. The first one, just on that cash, of which $230 million gross is held in Argentina. Is there a plan to try and dividend out some of that cash to [top co] just so that you can fund projects like Monte Do Carmo? Or can you just talk a little bit about that? And then just secondly, how confident are you with your current cost guidance just in light of the inflationary environment? And sorry, last one, just any comments around the Peruvian election? Should we be worried about anything or consider anything? Or is it just business as usual?

Well, let me start with the third question, which is the Peruvian elections. As you know, we have the first round on the Peruvian elections. And unfortunately, we don't have a final result yet. It has been some problems with the first round at Lima at poll colleges. Some of them did not open and some of them opened late. So I mean, there have been many questions about these elections. At the moment, I mean, the counting is around 94% and Keiko Fujimori will pass to the second round. There is a difference between the Sanchez, which is the left-wing candidate and Lopez Aliaga which is the right-wing candidate of only 13,000 votes nationwide. So I mean there is some rumors that it could be -- I mean, that it might repeat the elections in Lima based on the situation that happened on Sunday. I believe that in any case, I mean, elections will be between for sure Keiko, and I believe that based on the situation in Lima, Rafael Lopez Aliaga has a very good chance to pass to the second round. That's my comment about election. We have to be patient. In any case, as I say always, I mean, Hochschild Mining has been working in Peru for many, many years, like 100 years. And so I mean, we are ready for any environment, of course. Eduardo will continue with the rest of the questions.

Thank you, Eduardo, and thank you, Richard, for your question. Regarding the cash that we have in Argentina, the $230 million from that total amount, which is consolidated at the Hochschild level, 49% is for our partner in Argentina, McEwen and -- but yes, we are -- we have plans to deal in that cash out so that we can fund our projects, but also reduce -- keep reducing debt that we have at a corporate level. So yes, there is a plan for that, and there are mechanisms that we are evaluating right now to execute. But it clearly shows the strong cash generation capacity that all our assets have, including our asset in Argentina, which, as you know, is a high-grade asset with a lot of geological potential. In terms of the all-in sustaining cost guidance, we are keeping our guidance, Richard, despite the fact that, as you know, gold and silver prices are higher than what we projected when we provided the guidance -- when we produced our budget by the end of last year. So despite that fact and also the fact that oil prices are going up and there is some inflation in the industry, we are working around efficiency projects and other initiatives to mitigate the inflation and pressure from vendors that we're seeing in the market. So that's what we have on that question.

We'll now take our next question from Felicity Robson from Bank of America.

Silver grades at San Jose were lower in the quarter, obviously, in line with the change in the cost of grade. How can we expect grades to develop here over the course of the year, please?

Thank you for the question. Yes, exactly. I mean there is 2 variables that affect the grades at San Jose. One is the cut-off grade, as you said, but also the variability that we are finding on the areas where we are mining. And you know that we are on the border of the mineralization. What we expect with grades, I mean, to have enough grades for sure to accomplish with the guidance of San Jose, around between 60,000 and 65,000 ounces of gold equivalent for the year attributable to Hochschild.

[Operator Instructions] Our next question is from Alfonso Salazar from Scotiabank.

Actually, the question that I have regarding the elections in Peru has been answered. But just a follow-up on that side. Can you remind us what is the political agenda regarding mining from Lopez Aliaga and Sanchez? And the second question that I have is -- also regarding the Argentina's dividend. And what is -- are you planning to maintain operations? Or is it possible to maintain operations there for longer? And what is the outlook for San Jose now that you are in Argentina as we speak regarding the opportunities to maintain operations there given the high gold price that we have today?

Look, I mean the position of Lopez Aliaga and Keiko Fujimori in terms of the mining industry, it is more or less the same. Probably during the campaign Rafael Lopez Aliaga has expressed some -- I mean he has been talking about the concessions because it was something that was on the table and he wanted to make a difference. But at the end, I mean, I believe that Rafael Lopez Aliaga is a guy that will respect current laws and the current constitution. In the case of Sanchez, it's different. I mean Sanchez is a very left-wing candidate. And of course, I mean, he's talking about nationalized companies in every single industry, I mean as well as Castillo did during the campaign. I don't know if in the remote possibility that he will become President of Peru, I'm not sure if he will be able to do so because at the end, I mean, Peru is a country that leads from exportation of the mining industry. And I mean it will be a very, very big mistake. So social wise, it will be very, very complicated. In terms of the San Jose, I mean, the availability of mineral, I mean, at the moment, we have something like 2 years life of mine. We continue having a lot of brownfield exploration. We're having some results with new areas close to the current mineralization. And I mean, if there is any comments regarding dividends, I will pass the question to Eduardo Noriega that is here with me.

Thank you very much. Certainly, we are producing strongly from San Jose. There's a lot of geological potential, and we are -- we continue finding new minerals. I have to say that historically, San Jose has always had like 3, 4 years of life of mine, but we have been able to increase the life of mine on an annual basis. So that -- and we do have a plan to execute on that. In terms of the cash that we have, I think it's a good show of how strong the cash generation capacity of our asset in Argentina has, and the task that we have in front of us now is how we use that cash to distribute to our -- to San Jose shareholders, Hochschild Mining and McEwen mining for us to continue our investments either in Argentina or in other jurisdictions.

[Operator Instructions] We will now take our next question from Marina Calero from RBC.

I joined the Q&A late, so apologies if this has already been asked. I wanted to ask a question on Monte Do Carmo. It looks like you are ready to move on with the project. Can you give us an indication on when you could start construction? And based on that, when do you expect to see first production?

Thanks, Marina, for the question. I mean, as I said, we are planning to finalize all the studies during Q2 2026, and be ready to present to the Board for final decision on construction. I mean if we got the approval, and I believe that it's a very profitable project at current prices, we will go ahead with several contracts, and we expect to start right away construction -- construction in terms of a contractor for the pre-stripping and for sure, all the movements that we will need to do before the first rainy season that would occur December 2026. In terms of the time to build this project, the first schedule that has been presented to me is like 24 months from July onwards. So I believe that we could see some initial production from Q3 2028.

Okay. That's good to hear. And I understand you have a lot of potential in the pipeline Monte Do Carmo, Royropata, but what other optionality do you have in your portfolio? Could we see Pallancata come back into production if the current spot price remains where it is?

Well, I mean the optionality for Hochschild is Royropata, the deposit. As you know, we have 3 million ounces of gold equivalent, most of them silver with high grades and very good vein width. So we believe that the optionality is there. But of course, we need to get a new permit, and that's something that we believe that it will be received around August 2027, if the government takes a year of evaluating the document that we are going to present right now. And of course, after July -- August 2027, we will have like a year of another different permits, operation permits and development, et cetera, to start production more or less at the same time of Monte Do Carmo, I would say. In terms of the possibility to start up Pallancata, we have done an initial evaluation. We have some sources, but I mean it's not that -- I mean it's not that profitable because we are talking about less than 100 grams silver equivalent. So I wouldn't like to make any expectations on the possibility of restart Pallancata because we haven't finalized that analysis. It will be something very positive to try to start up at a small rate because it could be a very nice way to do a ramp-up for the whole unit. But it's something that we are analyzing right now. And probably we could give more information on Q2 in July.

If I may add, Eduardo, to the optionality on Royropata and Monte Do Carmo that we have. I just would like to highlight that we also -- as you may recall, we have a 69% stake in Tiernan Gold, the company that owns the Volcan project in the Maricunga belt in Chile, which has more than -- or around 11 million gold equivalent ounces. It's a company that is performing very well since we executed the reverse takeover in December last year. And the other optionality that we have is not related to precious metals, but you may recall that we have a 20% stake in Aclara, the rare earth project that has a project in Brazil and a project in Chile, and that has also made significant advances in the treatment or the processing of rare earth to produce final products, mainly the magnet in the U.S. So that the performance of the Aclara is also doing very well.

And we have a follow-up question from Richard Hatch from Berenberg.

Just 2 follow-ups, sorry. First one is just for Eduardo Noriega. Just on the net cash number, just to confirm, you haven't paid your significant tax payment yet, right? That's Q2. So we would expect to see a chunky tax payment come out in the second quarter. Is that correct? And then the second one is just on strategy, just more broadly, like you've got good growth options internally, whether it's Royropata or Monte Do Carmo. I'm just wondering whether you're looking for other opportunities to think about the next project further down the line? Or do you think you're comfortable with the portfolio as it stands and you don't need to do any more to build out?

Thank you, Richard. On the tax payments and the cash balance that we have, I have to say that the 2025 tax payments in Peru occurred already in March. So that was already executed. There is -- the final payment of the 2025 taxes in San Jose is coming -- sorry, in Argentina is coming in the second quarter. So part of that temporary payment already occurred, the one in Peru and the other one in Argentina is coming in the second quarter. And the other question in terms of optionality we do believe that there is -- we're fully focused on permitting of Royropata and advancing on the engineering works in Monte Do Carmo. I think you had another question on that front. Could you please...

No, it's just more whether you needed to fill out the -- I don't think you necessarily need to, but whether you're open to filling out the project pipeline with other projects similar to Monte Do Carmo or Mara Rosa. And sorry, just to be 100% clear, like I think when you spoke at the earnings call in earlier this year, we kind of suggested that there would be something like a -- at least we had the feeling that it would be like $150 million cash tax out payment in the first half of the year. Is that still the case? So I'm just kind of -- if that's -- because if that is the case, then I'm kind of surprised that your cash balance is as strong as it is. Is there anything that we need to be thinking about there? Or is it just simply just showing the market that you're generating a lot of cash from these assets at this point in the cycle?

There is a portion of those -- of the pending taxes that will be paid in Q2, the ones in Argentina. So it's around $50 million that is pending. The rest is already in our cash balance. And regarding growth options, aside from being focused on our 2 growth projects, we also are working with our corporate development team to look for alternatives in the region. So that process is an ongoing process. We monitor all the opportunities. Although I have to say we don't have anything -- we're not -- we're in a preliminary phase identifying opportunities.

There are currently no further questions. With this, I'd like to hand the call back over to Eduardo for closing remarks.

What I would like to say to finalize this call is that we have demonstrated in Q1 that we are delivering the production that we said at the beginning of the year, which is very positive. And also that we are advancing on the 2 projects that I believe that the real optionality that Hochschild have for investors. Monte Do Carmo is a real opportunity to have a second operation in Brazil, producing around between 8,000, 9,000 -- I mean 80,000 to 90,000 ounces per year with good all-in sustaining cost and also Royropata is our new flagship. So I believe that we are doing everything in our ability to make sure that those projects become a reality, and they will become part of our portfolio to make sure that from 2028 onwards, we could add this production to our portfolio. That's it. Thank you so much for your time and for being here at the call. Thank you.

Thank you. This concludes today's conference call. Thank you for your participation, ladies and gentlemen. You may now disconnect.