Release Date: August 28, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Revenue increased by 25% to $392 million, driven by stronger production and higher gold and silver prices.
- EBITDA rose by 79% to $178 million, indicating strong operational performance.
- All-in sustaining cash cost is at $1,510 per gold equivalent ounce, at the lower end of the guidance range.
- Mara Rosa mine started commercial production in May 2024, contributing significantly to revenue.
- Strong ESG performance with improved eco score and increased local workforce and procurement.
Negative Points
- Net debt stands at $271 million, indicating a significant level of indebtedness.
- Admin expenses increased by $2.7 million due to stronger prices and long-term compensation plans.
- Exploration expenses were higher due to the restart of exploration plans, impacting overall costs.
- San Jose's all-in sustaining cost of $1,809 per ounce of gold equivalent is slightly higher than guidance due to local inflation and lower grades.
- Mechanical availability issues and contractor performance delays at Mara Rosa mine affected production ramp-up.
Q & A Highlights
Q: Can you provide more details on the slow progress with Royropata's permitting and if it's still reasonable to expect Pallancata to come online by 2027?
A: We continue working on Pallancata's permit and are negotiating easements with the communities. We have closed nearly 85% of the surface easements and expect to finalize the remaining ones by November. Based on these negotiations, we believe we can bring some production from Royropata by 2028. - Eduardo Landin, CEO
Q: Regarding Mara Rosa, can you clarify the ramp-up delays and current mill throughput?
A: The nominal capacity of Mara Rosa is 7,000 tonnes per day, which we are currently achieving. We are working on removing bottlenecks to increase capacity to 8,000 tonnes per day. The issues with the contractor have been resolved, and they are now performing at 100%. We expect to be close to the lower end of our guidance for the year. - Eduardo Landin, CEO
Q: Can you explain the $8 million credit related to the government export incentive program in San Jose's all-in sustaining cost?
A: The $8 million is an incentive from the government for export companies to exchange around 30% of exports at the secondary market rate, which is higher than the official rate. This benefit is presented separately in the P&L under other income. The government is working towards unifying the FX market, which might remove this benefit but could lead to a favorable evaluation in Argentina. - Eduardo Noriega, CFO
Q: What are your thoughts on capital distributions in early 2025?
A: We expect strong cash generation in the second half of the year and will prioritize debt repayment. Once we achieve our debt reduction targets, we will discuss restarting capital returns to shareholders. We are considering creating a policy for sustainable dividends or opportunistic special dividends and share buybacks, with more details expected by early 2025. - Eduardo Noriega, CFO
Q: With Mara Rosa ramping up production, do you see potential to beat the all-in sustaining cost guidance for the year?
A: We are not planning to beat the guidance at this point due to the heavier weighting of CapEx in the second half of the year, particularly for mine development and capacity increase projects at Inmaculada. We are reiterating the guidance for 2024. - Eduardo Noriega, CFO
Q: What is the timeline for the development of Monte do Carmo?
A: We aim to add at least 100,000 ounces of gold equivalent in new resources to ensure the project's profitability. We have until February 2025 to execute the option, but if we achieve the resource target sooner, we may proceed earlier. Permitting is going well, and we see significant synergies with our existing operations in Brazil. - Eduardo Landin, CEO
Q: Will the favorable tax rate in the first half of the year continue into the second half?
A: The tax rate will depend on FX movements, but we expect to remain within or below our statutory average rate of around 34%. - Eduardo Noriega, CFO
Q: Will the working capital outflows seen in the first half of the year reverse in the second half?
A: The main movements in working capital were due to building stockpiles and inventories during Mara Rosa's ramp-up. These inventories should not increase materially in the second half, with only minor additional stockpiles expected for efficiency purposes. - Eduardo Noriega, CFO
Q: What is the progress with the sale of Volcan this year?
A: The process is moving along, albeit slower than expected. We continue to push for a positive outcome and have seen good indications of interest. - Eduardo Noriega, CFO
Q: What contributed to Inmaculada's outperformance in the first half?
A: The outperformance is due to improvements in mining cycles and increased mine flexibility after catching up on development delays. These improvements are sustainable, and we expect Inmaculada to continue performing well in the second half and into 2025. - Eduardo Landin, CEO
Q: When can we expect to see the benefits of this year's brownfield exploration program?
A: We plan to present the updated resources at year-end. - Eduardo Landin, CEO
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
