Hochschild Mining plc (HOC) Earnings Call Transcript

Hello, and welcome to the Hochschild Mining Q3 2026 Results Presentation. [Operator Instructions]. I would now like to hand the call over to Eduardo Landin. Please go ahead, sir.

Hello, everyone, and thank you for joining us to discuss our third quarter production results. I am joined today by Eduardo Noriega, our CFO; and Charlie Gordon, our Head of Investor Relations in London. Overall, we delivered a strong operational performance during the quarter with attributable production of just over 74,000 gold equivalent ounces. That takes production at the first 9 months to almost 226,000 gold equivalent ounces. Inmaculada continued to perform in line with our expectations, and we made particularly encouraging progress at Mara Rosa, where the operational turnaround is now nearing completion. We remain on track to meet our full year production guidance of between 300,000 and 328,000 gold equivalent ounces. Starting with Inmaculada, the mine produced just over 45,000 gold equivalent ounces in the quarter, broadly in line with the previous quarter. Tonnage was slightly ahead of expectation, although this was offset by lower gold grades. The operations continue to perform well and remains on track to achieve its full year production guidance of between 174,000 and [ 185,000 ] ounces equivalent ounces. In Argentina, San Jose produced approximately 23,000 gold equivalent ounces, on a 100% basis during the quarter. Production was lower than Q2 with both tonnage and silver grades lower as mining was concentrated in the border areas of the veins, we expect grades to recover during the fourth quarter. Turning to Mara Rosa. I am pleased to report further progress in our operational turnaround. Production increased to just over 17,000 gold equivalent ounces in Q3 compared with approximately 14,600 ounces in Q2, and September was particularly encouraging with production of just over 8,000 ounces, making the strongest month of the year so far. During the quarter, our new mining contractor complete their ramp-up to planned capacity. With material movement reaching nameplate levels towards the end of the period. Better haulage roads, improved access routes and more productive pushback activities have also helped us to gain access to higher grade areas of the mine. We expect this to lead to continued improvement in the fourth quarter. In the plant, the new thickener was stabilized and is performing above expectations. And this has reduced filtration cycle times, restore continuing in detail disposal and resolve all the water management constraints that we experienced in the first half of the year. Taken together, these developments leave us well positioned for a stronger last quarter, and we maintain Mara Rosa's full year guidance of between 67,000 to 80,000 gold equivalent ounces. Turning briefly to costs. We remain on track to meet our revised all-in sustaining cost guidance of between $2,380 and $2,500 per gold equivalent ounces. This is despite the continued inflationary cost pressures in Argentina. Looking to our growth projects, Monte do Carmo in Brazil continued to advance with engineering and studies progressing on schedule. including updates to the mine plan whilst we accelerate procurement of critical long lead items. Early infrastructure works and permitting activities are also moving forward, and we remain on track for a final investment decision in December. At Royropata in Peru, as you know, we achieved an important milestone in August with the submission of the modified environmental impact assessment to the Peruvian government. Once again, it's worth me highlighting their state commitment to investment and growth in the mining sector, and we look forward to progressing this high-quality project as we move into 2027. Our brownfield exploration program also continued in the quarter with further encouraging drilling results at Inmaculada San Jose Mara Rosa as well as exploration work at Monte do Carmo. This activity continued to support our long-term resources pipeline. Finally, our balance sheet remains strong. At the end of September, we had almost $350 million in cash, leading to the net cash position of around $91 million, reflecting strong operational cash generation. Overall, we are encouraged by the progress made during this third quarter, particularly at Mara Rosa, and we remain focused on delivering our full year targets with advancing our 2 growth projects and adding more ounces to the resource basis. With that, I will be happy to take your questions. Thank you so much.

[Operator Instructions] We'll take our first question from Felicity Robson from Bank of America.

At San Jose, how much of the Q3 weakness do you view as purely weather-related versus reflecting the position within the veins? And what gives you the confidence in the expected grade recovery during Q4?

Well, basically, I would say that it's 50-50, the weather effect and the grades. But we expect that since we are going to the fourth quarter, I mean, the weather will be quite good. So we will not be -- we will not have any problems with weather. And so we expect to have the plant at nameplate capacity. And related to the grades, I mean, it's true that we are at the border mineralization. We continue doing some infill drilling to make sure that we have better certainty on grades. And we expect to -- I mean, to accomplish the grade that we have planned in order to get to the -- to our guidance production.

We'll now move to our next question from Daniel Major from UBS.

I appreciate you're going to give longer-term guidance probably with the fourth quarter or next year's guidance with the fourth quarter or the full year numbers. But maybe if we could just talk a little bit about the trajectory into next year at a high level. Two elements. One, encouraging to see you've got Mara Rosa back to a more normalized production run rate. Can you just give us a sense of where you expect to see that kind of normalized production and costs into 2027? Should we look at the second half of 2026 as a sort of normalized run rate? And then I guess a similar question on the cost front. Would you expect to see costs come down in this kind of environment? Or is it much more sort of the operation running normally mitigates inflation? That's the first question.

Well, let me start with our projections for 2027. I mean, we haven't finished the budget exercise yet. But as we said, we would like to see Mara Rosa between 80,000 and 85,000 ounces per year. With these current rates, we believe that we will be able to achieve that. I mean, the operation has been prepared for the rainy season. You know that we have the global [ Efecto ] El Nino, and we are getting ready for that situation with many, many actions and initiatives in Mara Rosa. So what I expect is that level of production at Mara Rosa. In terms of cost, I mean, we have demonstrated that it's possible to have very good cost at Mara Rosa, very competitive because September, we got a very good figure, very competitive. I mean, cost will depend, of course, on the run rate and the production of ounces but also on the initiatives that we are putting together during this budget process in order to lower down costs and be much more competitive. Saying that, I mean, there is a huge inflation on the sector. And I mean, we expect if the gold price continue growing during 2027, there will be some costs related to the price -- I mean, to the metal prices that we will have to encourage. So that's -- I don't know if that was -- that answer your question. I believe that your question was related to Mara Rosa.

Sure. Yes, that's useful. I mean the next question, again, is kind of directionally. If we think about either all-in sustaining costs or group total cash costs into 2027, I mean, should we expect directionally given the inflationary backdrop, moderate inflation in unit costs? Or is there any mitigating factors that would mean that, that wasn't the right kind of assumption?

Let me pass this question to Eduardo Noriega.

Thank you, Daniel. As Eduardo said, there is inflation in the industry, and we are working on initiatives to mitigate that inflation. If we look on a mine-by-mine basis, in the case of Inmaculada, I think we have a very robust production and good initiatives to keep cost down. We also need to look into the budget and see what are the projects that we have. We're looking to expand and taking some capacity, but that may have a temporary impact. But I think Inmaculada, as I said, is pretty much well positioned. In the case of San Jose, also, it's heavily dependent on inflation and devaluation. But being said that, the plan for San Jose is also to bring initiatives to reduce inflationary pressure both locally and at a global level. In the case of Mara Rosa, the all-in sustaining cost for next year should be better than what we had in 2026, where we had to implement different measures to recover full operational capacity. So that's what we can tell you about the cost, Daniel. We are working on the budget, and we will be able to provide guidance by the end of 2026 when we announce our Q4 production report.

Okay. So it sounds like at a group level, measures to mitigate inflation rather than deflation in unit cost is kind of what we should be thinking about limiting the inflation. Is that right, high level?

High level, yes, we still need to complete our...