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Hello, and welcome to the Hochschild Q2 2018 Production Results. [Operator Instructions] Just to remind you, this conference call is being recorded.Today, I'm pleased to present Ignacio Bustamante, Chief Executive Officer. Please go ahead with your meeting.
Thank you, Nez. Good morning, everyone, from Lima, and welcome to our second quarter production conference call. I'm Ignacio Bustamante, CEO, and as usual, with me is Ramón Barúa, our CFO; and in London, is Charlie Gordon, our Head of Investor Relations.As we normally do, I will make a few summary comments on this morning's announcement, and then I will open up for any questions that you may have.As you may have read in the press release earlier, our operations have delivered another strong quarter and this has, therefore, added up to the largest half of production in Hochschild history. As well as that, our brownfield exploration program is really building momentum, and we expect to be able to update on resource additions at the Inmaculada in August.Looking in a little more detail at the operational performance. Second quarter attributable production was 69,000 ounces of gold and 5 million ounces of silver, which combined, makes 136,000 gold equivalent ounces or 10.1 million silver equivalent ounces. This was another strong result and almost 8% up on the same period of 2017. And it hardly adds that we are on track to meet our production target of 514,000 ounces of gold equivalent or 38 million silver equivalent ounces. Inmaculada has enjoyed another robust period with gold grades, again, better than expected and leading to output of 66,000 gold equivalent ounces. This, of course, adds up to a record half of production of approximately 138,000 gold equivalent ounces. But I should remind you that in the first quarter, we did have some ounces which were in the processing stage as the year turned. So this one-off boost to production will not recur in the second half, and therefore, you will not see quite a performance of H1.Over at the Pallancata operation, grades continue to be strong. This is coming from better-than-expected grades from the Pablo vein material, from developments and also from ancillary veins. Of course, this is expected to be only temporary, and once we see Pablo fully ramped up to 2,800 tonnes per day sometime in the fourth quarter, this should fall as expected. We have not quite reached the expected 2,200 tonnes per day from Pablo at the end of June due to a small delay in the installation of the ventilation systems, but overall Pallancata has had a really good first half, producing 4.2 million silver equivalent ounces, which is a 30% improvement on the same period of 2017.In Argentina, San Jose has once again been steady with production of 3.4 million silver equivalent ounces and this, therefore, amounts to a first half of -- first half total of 6.5 million silver equivalent ounces, very much in line with last year. We have also been steadily working on the hydraulic backfill project, although poor weather conditions had affected deliveries of materials and equipment, so we will be testing the process next month and it will be full operation by October.Arcata's performance this half has been very much in line with our plan, producing another 1.1 million silver equivalent ounces in Q2, bringing the total to 2.2 million ounces, and therefore, well on track to keep the full year annual forecast of just over 4 million ounces. As I have stated before, we will be making every effort to improve the mine's cost position through efficiencies and through the current aggressive drilling program.Turning to our brownfield program, we have made some really good progress in the second quarter, particularly at Inmaculada and Arcata. In what is the first campaign at the deposit for 7 years, the second quarter's drill results continue to indicate that we will be able to deliver substantial additions to Inmaculada's resource base, close to existing mine infrastructures. We have been focused on the area to the east of the Angela vein and have executed almost 20,000 meters of resource drilling for a number of new veins, including Millet, Divina and Lola. I'm expecting to be able to give you an update on the estimated amount of resources we have discovered so far at the interim results next month.At Arcata, we're concentrating on an area to the north of the current mine infrastructure, where there are resources that we believe have strong potential to be quickly added to the short-term mine plan. In Q2, we continued with over 2,000 meters of drilling for potential at the Silvia and Anomaly North structures, but also carried out 10,000 meters of resource drilling at structures, including Ruby 2 and 3, Cristina, Rosalia and Pablito East. It is worth emphasizing that we have made a decision to prioritize underground development work on these veins, instead of converting them into inferred resources. We will give aim to give you a further update in Q3.At San Jose, we did carry out some drilling in Q2 before the winter weather disrupted progress. These targets were the Maia and Guadalupe structures to the south of the current deposit. We have included some early results in the release, and we'll resume drilling in September when the weather improves. We will also restart the program at the Aguas Vivas deposit to the northwest.Pallancata's brownfield aims this year are more about securing exploration permits for the 2019 drilling program, which we believe could be very exciting as it is expected to improve the Pallancata East area, the Cochaloma structure to the southeast and, most of all, the Palca zone further to the south.On the financial side, we have generated a strong free cash flow this quarter, so our financial position continues to improve with a cash balance at the end of June of around $142 million and net debt now down to only $66 million.Turning to the outlook, you can see that with our really strong first half performance, we're well on course to deliver our production target for the year of 514,000 gold equivalent ounces or 38 million silver equivalent ounces. And I can also confirm that our all-in sustaining cost forecast of between $960 to $990 per gold equivalent ounce is also on track.And with that, I would like to open up to any questions that you may have.
[Operator Instructions] Our first question comes from the line of James Bell from RBC Capital Markets.
Just a quick one on Inmaculada and the brownfield program. I just wondered if you could give us some more details on what category of resource we could expect with the H1 results in August. And then maybe some more color on, if you have a substantial resource there, what the time line might be around the potential expansion that you mentioned previously?
Sure. James, thank you for the questions. So regarding the first question, the type of resources that we're planning on giving by August are inferred resources already. So more than potential, we are planning on giving inferred, and the focus is going to be mostly on 2 structures. It's going to be mostly on Millet and Divina structures. In the meantime, we also expect to give some updates on some further drilling resources we're getting in other areas, such as Misterio and Lady structures that we are also drilling as we speak. But those would most likely be on the potential category at this time, hoping that by Q4, we are going to give a further inferred resource update also on those new structures. So again, by August, inferred resources in Millet and Divina, and by Q4, some additional inferred resources on Lady and Misterio. And regarding the question about the potential expansion of Inmaculada, that's something that we still would like to wait until we have the full picture. So far what we're looking is, is to see material increases in resources, and we're very excited with the findings that we're seeing, but we want to get a full picture of what comes ahead of us so that we can make a more informed decision. Because remember that there are 2 things in consideration. First one is that we want to reach our goal of 5 years of resources, plus 5 years of reserves, but also we want to see if we can expand the capacity of Inmaculada. So we want to wait until the end of this campaign and try to make a more informed decision based on what we find.
[Operator Instructions] As there are no further questions, I hand back to the speakers.
Okay. Thank you very much, everyone, for participating in today's call. If you have any further questions and you didn't have the chance to make them today, please feel free to contact directly Charlie Gordon at our London office. Thank you, again, and I look forward to speaking with you soon. Goodbye.
This now concludes our conference call. Thank you all for attending. You may now disconnect your line.