Hochschild Mining plc (HOC) Earnings Call Transcript
July 22, 2026
Earnings Call Speaker Segments
Hello, welcome to Hochschild Mining Q2 Production Results Presentation. [Operator Instructions]. I'd like to turn the call over to your host today, Mr. Eduardo Landin. Please go ahead, sir.
Good morning, everyone, and thank you for joining us today to discuss our second quarter production results. I'm joined today by Eduardo Noriega, our CFO; and Charlie Gordon, our Head of Investor Relations. Before we turn to our operational performance, I'd like to briefly comment on the broader investment environment in Peru. We welcome the more constructive outlook that has emerged in recent months. While there is still work to be done, a more stable and predictable environment that has the potential to strengthen investors' confidence and support long-term economic growth. We remain committed to investing responsibility, developing high-quality mining project and creating lasting value for our shareholders, our employees and for our host communities and the country. Going to the production overall, we delivered another solid quarter, attributable production was just 76,000 gold equivalent ounces, taking first half production to almost 152 gold equivalent ounces. [indiscernible] delivered a strong quarter than Q1, and we are continuing to make encouraging progress at Mara Rosa as we execute our operational turnaround. As a result, we remain on track to achieve our 2026 guidance of between 300,000 and 320,000 gold equivalent ounces. Starting with Inmaculada, the operation produced just over 45,000 gold equivalent ounces, broadly in line with our expectations. Tonnage was slightly ahead of plan although it was offset by a moderate lower rate. Overall, the operations continued to perform well and remain on track to meet its full year guidance. Before I move on, I'd like to acknowledge the tragic accident that occurred at Inmaculada Bank in June. Our thoughts remain with the families, friends and colleagues of our contractors. Following the incident, we temporarily suspended activities in the operation [indiscernible] a comprehensive investigation. The finding has now been shared across all our operations, and we are implementing the lesson learned to further strength our safety culture and reduce the risk of similar events in the future. In Argentina, San Jose also had a strong quarter, producing almost 32,000 gold equivalent ounces. A slightly higher than forecast tonnage was partially offset also by slightly lower rates. And the operation remains on track to achieve its annual production target. Turning to Mara Rosa. We continue to make encouraging progress with our operational turnaround. Production improved from the first quarter supported by better plant stability and early benefit of transition into the new mining contractor, [ Fagundes. ] Our focus remains on improving mining sequence, accelerating waste movement and increasing access to higher grade ore while reducing [indiscernible] distances and strengthening our control. We are also continuing to improve filtration ability and water management. During the quarter, we began commissioning the new tailing signer, which we expect will improve processing stability, world management and tailings disposal. Alongside that, our mining converter has continued to [indiscernible] site leadership and operating routines. And together, these initiatives should support further operational improvements during the second half of the year. Turning briefly to costs. Attributable all-in costs are currently tracking around 5% to 10% above our original guidance range. That's mainly due to the impact of higher commodity price for royalties, workers' profit sharing and selling expenses, together with a strong than the expected local currencies across our operational jurisdictions and continued cost inflation in Argentina. We will provide a further update with our half year results in August and revised guidance if necessary. Looking at our growth projects, Monte do Carmo continued to advance during the quarter and has as we progress engineering and permitting activities. We are still on track to bring the project forward for an investment decision in the second half of the year. At Royropata, we are also making good progress and expect to submit the revised environmental impact assessment to the Peruvian authorities in the coming weeks. Our brownfield exploration program also gathered momentum during the quarter with encouraging initial drilling results across all the 3 operations, reinforcing the strength of our exploration pipeline. Finally, our balance sheet remains in a very strong position. We had in June approximately $309 million of cash and net cash position of around $51 million. That significant improvement from the end of the last year and reflect the strong cash generation from our operations despite paying our final dividend and distributions to our San Jose joint venture partner during the period. With that, I'd be happy to take any of your questions. Thank you very much.
[Operator Instructions] And our first question today is coming from Marina Calero of RBC Capital Markets.
You mentioned that your costs are tracking 5% to 10% ahead of guidance. Can you help us break that down between what is driven by the gold and silver prices and what is purely inflation?
Thank you, Marina. This is Eduardo Noriega. So that increase is purely explained by higher metal prices impacting royalties and workers' profit sharing and export taxes in Argentina. So it's purely because of that. There's also a minor impact due to the strengthening of the local current currencies, the Peruvian peso, the Brazilian real, and there is some net inflation in Argentina. But all those elements are also a result of the macroeconomic environment, which are pushing -- that are having gold and silver prices stronger than what we anticipated when we did our guidance.
And then a second question on Royropata. You mentioned the change in the Peruvian administration at the beginning of the call. Thus, do you see any potential changes to scope in Royropata? Or is -- do you see any potential for permitting fast-tracking or any other scope changes to the project?
Well, let me explain what is the next steps. We are going to present the document in the next few weeks. -- in a couple of weeks, probably, I mean, the official time to review these document is like 90 days, working days, Typically, it takes like around a year to review a full environmental study, which is a document that it contains like 15,000 pages. So I believe that the new government will be willing to do it as soon as possible, but it will really depend on the complexity and the team -- so at this extent since the new government is not in place, I wouldn't give any improvement. I wouldn't consider any improvements on the time. The actual time line that we have established, and we mentioned to the market it's a year for the approval and then another 9 to 12 months for the operational permits that they are next to the environmental permits.
Now we'll go to Daniel Major of UBS.
A couple of questions. Just first on the costs. You mentioned 5% to 10% above the guided range. Is that 5% to 10% above 2,320 the top end of the range or the middle of the range, like how we should we calibrate that?
Well, I will calibrate it, putting 10% -- 5% to 10% in both numbers, yes, that would be increased. It's like a new range increased by 5% to 2%.
Okay. So it's not necessarily a 5% to 10% above the top end. Okay. Yes. I mean -- yes. You mentioned it's predominantly driven by royalties and FX. What -- can you remind us the -- particularly the gold silver price assumptions embedded in your budget to generate that range?
Yes, Eduardo Noriega will answer that question.
Thank you, Daniel. The prices that we used to provide the guidance in early this year was $3,200 for gold and $34 for Silver. So in light of where prices are today, you can tell that those -- the increase in prices do have an impact in our costs.
Okay. And the same for FX, what was the FX?
No. The FX impact is smaller than what we have in prices, but it's also there -- we were expecting to have a flat Brazilian real and Peruvian sol. But we're seeing an appreciation of above 5%. So there is an impact from that as well.
Okay. But yes, the currency, I guess, has moved in the other direction to some degree towards the end of the period. Okay. That makes sense. All right. Yes. And then you mentioned expect an investment decision on Monte do Carmo towards the end of the year. Can you give us a steer about how the CapEx on that is tracking. My memory is the scope is kind of reasonably similar to Mara Rosa, but I guess yes, clearly, CapEx is going to be higher. Is it like 300 handle like sensible sort of level?
Well, yes, of course. I mean, the difference between Mara Rosa and Monte do Carmo is not the plan. The plan is -- I mean, we are designing a very similar plan with very small changes. I mean, we're incorporating a [indiscernible] in Monte do Carmo. We believe that that's a very good change. And also, we are incorporating the tailings signer and all the improvements that we have been able to review as I mean the difference, the big difference between Mara Rosa and Monte do Carmo pre-stripping that we need to do it before we mine Monte do Carmo. So there is an important amount of money there. I mean, I would say, between $50 million and $80 million, pre-stripping that we need to incorporate into the CapEx. I would say that, I mean, considering that it's going to be more than $300 million is a good assumption. But it's too early for me to give you a final number because we are reviewing, and we expect to have 100% of basic engineering in December. We are repeating some of the engineering. Remember that we did some studies, but we are not complete. And we believe that we need to be very, very responsible on this. We want to present to our Board of Directors a bullet-proof project and also demonstrate that our turnaround in Mara Rosa is totally complete. So with both things, we believe that we are going to be in a very strong position to bring value to shareholders.
Okay. That's Yes. So from a perspective of the changes you mentioned, like overall processing capacity and scope, we should think about a similar but larger pre-strip and factored in a number of the additional improvements you've already made at Mara Rosa. Okay. That's clear. And then just maybe the final one is just follows up on Marina's question. So when you say you've got roughly a year for the approval of the Royropata and then another 12 -- 9 to 12 months the operational permit, where would that take us to in terms of FID, your best guess at this point?
I mean if I -- it could be, I would say, very -- I mean, I don't know if we will have a formal FID for Royropata. I mean, Royropata is a project that -- I mean we have -- in August, we have our Board of Directors meeting and probably, I mean, we could decide to go ahead. But I mean, I mean basically at Royropata, today, the permit is the main activity and then is basically development in the mining. So I mean, I don't know if we are going to have a formal FID, I believe that we have already decided.
Sorry, maybe I'll rephrase that. When would you expect to be fully permitted then?
[indiscernible] is permitted that you expect to have -- I mean, the environmental permit in a year, okay, from today this year. And then we will have between 9 and 12 months, different permits, different operational permits that it's not the environmental agency, the one that gives to you is the mining ministry, the one that gives you consider much easier, the operational permits that they are much easier in general terms.
[Operator Instructions] We will go to [ Jasper Mainwaring ] of Berenberg.
Just following up on Monte do Carmo. Do you still expect the all-in sustaining cost to be sub sort of $1,000 an ounce, which maybe seems a bit ambitious given where costs are at the moment? Or should we be expecting costs much like the CapEx move to be higher than this with the updated economics in H2?
Well, I would say that it's too early to give a figure. Remember that I mean, we work -- when we gave that guidance, I mean, that cost guidance, we were working based on a feasibility study that was done by the seller. Today, I believe that the best thing is to finish basic engineering and construct a new cost that for sure is going to be very competitive, but we need to work it out. It's too early to give a guidance today.
Okay. Great. And then on Royropata as well, what operational grades can you guide to? Should we be sort of thinking about it as being, I know it's 350 tonne still about 1.5 gram per tonne gold or higher or lower than that?
Well, that's really measured and indicated resources, the grade that you just mentioned. I mean, we are converting all the resources today, [indiscernible] indicated. I believe that, I mean, we would consider -- I mean, if you are considering 600 grams of silver and 1.5 grams of gold, I would consider a dilution between, I don't know, 20% and 30% to calculate the final grade that it will go to the plant. Because when we -- I mean, later in the year, we'll start calculating reserves together with a detailed engineering that we are doing on the mining operation to have a base planning document for the next 15 years.
Okay. Got you. And if I could just fit in one more on Mara Rosa, do you expect the plant to hit the full run rate or what run rate should we sort of be thinking about in H2? And then should we expect it, therefore, to run at, I think, it's 2.65 million tonnes per annum in 2027, which is that profile going forward?
I mean, for sure, in 2027, I expect to have 2.5 million tonnes per year. I mean this year, what I can -- what I have been in Mara Rosa, Monte do Carmo [indiscernible] last week. And I was impressed the improvements that we have been able to put together in Mara Rosa. I could tell you that the last few days that the signer is totally in place. We are working at a rate of above 7,000 tonnes per day on the whole plant. The only thing is the mine. The mine is today the bottleneck. We got a new contractor, as I mentioned. And they are ramping up very quickly. So I expect in a month or a couple of months to be in full production, reaching the full capacity of the mine.
[Operator Instructions] Mr. Landin, we have no further questions at this time, sir. I turn the call back over to you for any additional or closing remarks. Thank you.
Okay. Thank you very much, first, to being here. Let me say that we are very positive around our operations. I mean, Inmaculada has been performed very strong. I'm sure you will finish the year also very strong. I am very impressed also on improvements that we have been able to put together in Mara Rosa. Mara Rosa, today, is a very stable operation. As I said, I mean, the mine is debottleneck today, and we have a very strong contractor that is -- has a lot of operational discipline and safety in his top of mind. And San Jose is also doing very well. On top of that, we have promising results on brownfield. And I'm sure we will bring more resources to the table from now until the end of the year. And probably the most important thing is that we are progressing very quickly on the projects. So I believe that there is a huge opportunity for [indiscernible] to produce, to increase production the next few years, and it reached much bigger value, much higher value than has today. So it's -- I believe that it's a very good opportunity for all of us. Thank you very much.
Thank you, sir. Ladies and gentlemen, that will conclude today's conference. Thank you for your attendance. You may now disconnect. Have a good day, and goodbye.
Thank you.
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