© 2024 Alpha Spread Limited. All Rights Reserved.
www.alphaspread.com is not operated by a broker, a dealer, or a registered investment adviser. Under no circumstances does any information posted on www.alphaspread.com represent a recommendation to buy or sell a security. The information on this site, and in its related newsletters, is not intended to be, nor does it constitute, investment advice or recommendations. The information on this site is in no way guaranteed for completeness, accuracy or in any other way. In no event shall Alpha Spread Limited be liable to any member, guest or third party for any damages of any kind arising out of the use of any content or other material published or available on www.alphaspread.com, or relating to the use of, or inability to use, www.alphaspread.com or any content, including, without limitation, any investment losses, lost profits, lost opportunity, special, incidental, indirect, consequential or punitive damages. Past performance is a poor indicator of future performance.
You don't have any saved screeners yet
Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Hello, and welcome to the Hochschild's Q2 Production Results. [Operator Instructions] Just to remind you, this conference call is being recorded. Today, I'm pleased to present Ignacio Bustamante, CEO. Ignacio, please go ahead with your meeting.
Thank you, [ Brad ]. Hello, and welcome to our second quarter production conference call. Here in Lima, we have myself, Ignacio Bustamante, CEO; and with me is Ramón Barúa, our CFO; and in London is Charlie Gordon, our Head of Investor Relations. As you may have read this morning, we have once again had another really solid operational quarter, producing 10 million silver equivalent ounces or around 122,000 gold equivalent ounces. As we commented after the first quarter, this is ahead of the run rate of our production forecast for the year of 37 million silver equivalent ounces or for 157 gold equivalent ounces. We have also reaffirmed that we are on track to meet our all-in sustaining cost guidance for the year of $960 to $1,000 per gold equivalent ounce or $11.8 to $12.3 per silver equivalent ounce.So to a little bit more of the detail, second quarter [ total ] production was 70,700 ounces of gold and 4.3 million ounces of silver. And this has led to the first half results for the company being the second highest on record at 245,000 gold equivalent ounces or almost exactly 20 million silver equivalent ounces. Surprisingly, Inmaculada has been a strong performer, producing almost 75,000 gold equivalent ounces with better-than-expected grades during the second quarter with grades being the primary reason. Overall in the first half, the mines have produced 135,000 gold equivalent ounces, a similar result to the corresponding half of 2018.At Pallancata, production was 2.5 million silver equivalent ounces, with tonnage slightly higher in the quarter but grades in line with expectations. For the half of a whole, the mine's output was almost 5 million ounces, a significant improvement on the same period of 2018, which reflects the continued shift to Pablo main ore.In Argentina, San Jose include another good quarter with better-than-expected grades and consistent tonnage, leading to production of approximately 4 million ounces and resulting in an H1 figure of 7.1 million ounces, a 5% improvement on the first half of 2018.I would remind you that there was no further remaining production from Arcata this quarter, so the first half results remain at 390,000 silver equivalent ounces. Our 2019 brownfield exploration program has continued, with campaigns ongoing at all our existing mines. At Inmaculada, we have found several new veins in a new zone to the west of the Angela vein, so we will continue to explore this area in the second half and look to convert these discoveries into third resources. We are also in the middle of infill drilling in and around the Millet and Divina veins and other veins that we discovered last year, and we're confident that we'll be able to improve the grade of these new resources in the near future.We have also very recently begun a campaign at Palca zone to the northwest of Inmaculada, with early results indicating mineralization. That program will continue in the second half. And we can also look forward to scheduled drilling programs at Cochaloma, and Pablo Sur, both close to Pallancata. In the last few days, we have also started a new 3,500-meter drill program at the Corina zone, which is located 15 kilometers to the northeast of our Selene plant, and we will [ aim ] to report results in the next few months. Our cash balance at the end of the period is around $95 million, with net debt now falling to $61 million, so we remain in a strong position. Q3 pricings so far has been positive, especially for gold, so cash generation should continue to strengthen further. And with that, I would like to open up to any questions.
[Operator Instructions] And our first question comes from the line of Richard Hatch from Berenberg.
Congrats on a good quarter. First one is just on Inmaculada. Just the grades, I know for Q2 were very good and your guidance for the year for gold is 170,000 ounces but it feels like you're going to beat that. So I'm just questioning why you're not raising your production guidance at this point or should we expect grades to reduce somewhat into H2?
Sure. We are maintaining our guidance because as you know, we discussed [Audio Gap] there is a lot of [ variabilities ] in these structures. So you have your model and based on your model, you can have certain differences. In some cases up, some cases down. But at the end, they all tend to get into an average of the resource grade. So in this case, we are being conservative, and we are assuming that the production will continue the same, and the grades in there that we're expecting for Inmaculada for the full year, I will say, around 4.4 grams of gold for the full year and around 156 grams of silver for the full year.
Which is lower than Q2, Q2 was particularly higher.
Yes. Q2 was particularly higher. Also that explains the difference that we had in the second quarter, well, that was positive. And also it's not discarded, it could be net off by lower grade going forward.
Okay. Thanks, Ignacio. And then -- and just on San Jose, I suppose same kind of question, silver seems to be running ahead of your guidance there as well. I mean is it [ must ] to say you expect some variability and therefore potential for it just to be trimmed down to your 6.4 million-ounce guidance and therefore just being conservative?
Well, what we expect in the case of San Jose for the full year is that we want to be getting grades of around 6.7 for gold and around 455 of silver for the full year. So that's very much in line, I will say, where we got to during the second quarter of the year. A little bit lower on gold, a little bit higher on silver. But all in all, that's what we are expecting for the year.
And just a last one, just on Inmaculada exploration. And when should we next expect to see an update on your progress with the resources there? Should we -- is it an H1 result story or is it Q3 results?
We're going to be giving updates on the -- when we do the H1 results. We're definitely going to be giving updates with the latest information. Then we will release Q3 as well and we will release Q4 as well, also. And is there something that is really outstanding and needs to be presented between those periods, we will do so.
[Operator Instructions] And our next question comes from the line of Ken Nyangoni.
Just a quick question on the accounting for the P&L from Arcata. How should we think about this? Will this be part of the underlying EBITDA or this will be treated as an exceptional item?
Hi Kennedy, how are you? This is Ramón. It will be -- how are you? The expenditures, as are shaded with the layoffs, will be treated as an exceptional item.
And there doesn't seem to be any more questions registered at this time. So I will hand the call back to the speakers for your closing comments.
Thank you, [ Brad ]. Well, thank you very much, everybody, for participating in this call. It seems like everything was pretty clear and straightforward. But should you have any additional questions, please feel to contact Charlie Gordon directly at our London office. We look forward to meeting you very soon when we announce our H1 results in London in a month or so. Thank you very much, and see you then. Goodbye.
And this does conclude our conference call. Thank you all for attending. You may now disconnect your lines.