Good morning, and welcome to our presentation of the financial results of Mineros S.A. for the first quarter of 2024. I am Maria Adelaida, I will be the operator for today's call. All participants are in silent mode. At the end of the presentation, there will be a Q&A session in our web platform only. Please keep in mind that this is recorded. Please consider that this conference is conducted in Spanish with simultaneous interpretation into English. We remind you that if you have any difficulties to visualize the slide on the website, please maximize the slide window. From this moment on, I'll give the floor to Alan Wancier, CFO of Mineros. Mr. Wancier, the floor is yours.
Good morning, and welcome. The original language of this call is Spanish, however, the option to listen to the call in English is available.
Before we start, it is important to advise that this call and the presentation may contain forward-looking information about the future performance of the business, and that for various reasons, these predictions may or may not be realized as planned. For this reason, we warn investors that they should exercise caution when making investment decisions and not rely solely on the information presented here. It is also worth mentioning that this presentation contains non-IFRS measures, such as Cash Cost, All-In Sustaining Cost per ounce of gold sold, average price per ounce of gold sold, Adjusted EBITDA, and Net Debt. Additional information regarding these measures is found in section ten of our MD&A, published in Canada, and can be found on SEDAR under the Mineros profile.
Today, I am joined by Andrés Restrepo, President and CEO of Mineros, Ana María Ríos, VP of Business Development, and me, I am the Financial and Administrative Vice President. Additionally, joining us by telephone are Isabel Gaviria, Vice President, Legal and Sustainability; Santiago Cardona, Vice President of Colombia; and Luis Fernando Villa, VP of Nicaragua. With this, I will turn the call over to Andrés Restrepo, President of Mineros.
Good morning. Thank you. Thank you for joining us today in the report of the result of the first quarter of 2024. We are going to develop this agenda about the highlights, financial results, results of operations, review of operations, challenges, and opportunities.
The first quarter of this year was quite positive, mainly by a 2% increase in production and higher gold prices, which were almost $186 higher than last year's price. We've had a very efficient cost management, and this increased due to higher payments to artisanal miners and the strong revaluation of the Colombian peso that was 17% during the year. The comparative results versus the ones from last year are positive. During the first quarter of 2024, we continued with our exploration campaign at the Porvenir Project in Nicaragua, and our plan is to finish the model update in the first half of 2024. We're going to see the next slide about the highlights. Okay, about the dividends.
In 2026, at our meeting of shareholders, an annual dividend of $0.02 was approved, distributed in an ordinary dividend of $0.075 annually, payable quarterly of $0.01875 each one, and an extraordinary annual dividend of $0.025 that is also paid quarterly. In this same shareholders meeting, three members of the previous board were reelected and six new members joined. Those new members that are part of our board are people with experience of the mining business, and we welcome all to our board of directors. All these members have extensive experience and the necessary qualifications to carry out this important work in a year like this, in which Mineros has a lot of opportunities to take advantage of.
During the first quarter of 2024, the price of gold has had a positive performance, trading at 6.4% above the close of Q4 2023... close at $2,195 per ounce, and as some of you may have seen in the last days, this continues with that trend. In this slide, we can see the minimum and maximum price of that quarter. In this first quarter, the fluctuation of the price of gold was positively affected by the regional conflicts, such as the one of Israel and Gaza or Russia, Ukraine, that also have increased the geopolitical risk worldwide, and also because positive data of United States economy has led the Fed to keep rates stable, which also generally influences the gold prices.
With this, I will turn the call over to Alan, who is going to explain our financial results in this quarter.
Thank you, Andres. Let's start with the income statement for the quarter. Just to remind that the figures are expressed in millions of dollars. Revenues grew by 15%, reaching $114 million, largely due to a higher average price of gold sold of 10% in comparison to the first quarter of 2023, by a greater amount of ounces of gold sold, and by the 92% increase of silver sales, about $2.7 million additional versus 2023.
The increase in the cost of sales is due to higher costs for purchases of artisanal materials, given the higher price of gold for about $4-$5 million, and due to higher depreciation and amortization by $1.1 million, and in conjunction with a revaluation of 17% of the Colombian peso. Both gross profit and adjusted EBITDA increased by 8%, thanks to the increase in revenue. Net operating income remained stable, benefiting from the increase in revenues and gross profit, partially offset by a higher exchange rate of $2.1 million, higher administrative expenses, and then lower other income of $3.2 million. Let's see the cash and the cash equivalent. It was reduced in $11 million, closing in $46 million. This is explained by outstanding accounts receivable related to shipments completed late in the quarter.
Cash flow from operations was mainly composed of income from sales of gold and silver by $88 million, net payments to suppliers, $67 million, payments for employee benefits, $14 million, and tax payments, $9 million. Cash flow used in investing activities is explained by investment in property, plant and equipment by $10 million, and intangibles, and especially exploration projects by $1 million. Cash flow used in financing activities was largely composed by the payment of dividends by $6 million, and payment of financial obligations by $5 million. Let's look at the Adjusted EBITDA. This had an increase of 8% due to a greater number of ounces sold, in addition to an increase in the average price of gold sold. Last, let's see the net debt.
A reduction in net debt is explained by a lower balance of credits and loans by $32 million, combined with a higher balance of cash and cash equivalents, $46 million. This reflects a solid cash position of the company, and this provides us with cash flows to meet our obligations and pursue our growth projects. As part of our financial strategy, we monitor the market in search of opportunities in order to be prepared when cash needs required. With this, I will turn the call back to Andrés, who is going to talk about the operating results.
Thank you, Alan. So let's start with the production, average price, and gold price and costs. This chart on this slide summarizes operating performance for the last five quarters.
As you can see in the bar graph, production in the first quarter increased 2% in comparison with the same one from 2023. The increase in production is mainly due to a 7% higher production at the Nechí alluvial property, explained by higher volumes and similar production in Hemco. Cash costs per ounce of gold sold increased by 14%, largely due to the higher cost of producing the artisanal mining as it is paid in an export price. This higher cost is due to the increment of the gold price, as well as the strong revaluation of the Colombian peso that was 17% at the beginning of this year, and that influences some of our costs incurred in that currency.
The AISC per ounce of gold sold increased by 14% due to increasing costs already mentioned, and by the 20% increase in sustaining CapEx for operations, given changes in vehicle fleets and maintenance. The average price of gold sold over the quarter increased by 10%, reaching, hold on a sec, hold on a second, please. So it reached $2,067 per ounce. Before starting with the next slide, I would like to talk about these very stable figures. We have compared against a commercial company, and you see all the quarters look quite similar. What happens is that the mining operations work on the top, so we try to maintain our plants and our equipment on the top, or, and that's why variations are very small.
There are variations in the AISC that is an indicator that is used in the industry, because this indicator includes CapEx, capital investments for sustaining, and these are more variable between one quarter and the other. But what you see is a very flat operation. When can we expect changes when you incorporate an additional operation or a project that adds or brings more ounces? What we can expect from the mining companies, if they are doing well, is that this is stable. So what happens in other businesses, and that you consider that is like a not positive signal, in the mining sector it is, because it shows that Mineros is a very consistent and solid company, and consistency and solidness when you're selling an asset that is part of our strategy is used as a refuge, it's something very good.
Okay, so now let's see the detail per operation. Let's look at Colombia. In Colombia, production in the first quarter was 19,000 ounces, which represents an increase of 7% compared with the first quarter of 2023. Remember that in 2023, we had the situation by a social situation in the country. So we had a good first quarter, and we've had better quarters, as you can see, in Q2, Q3 and Q4 from last year, and this year we're trying to work to elevate these volumes. Also, there are these alluvial elevations, and you see here higher and lower some production in some zones, and that's why we have these in the slide. We can see that in the slide.
When compared with the first quarter of last year, the all-in sustaining costs increased by 16% due to an increase in personnel costs. Remember that the salaries increment in Colombia was 11%, and that added to our peso revaluation of 17%, makes it higher in terms of costs. Also higher tax prices, and also depreciation, and because of the peso revaluation, the gross profit increased by 5%, reaching $12 million, given the increase in costs that we previously mentioned. And now we say the same, that this is a very constant operation. We see the variation in the AISC, but it's not as big in the cash cost, because it's based on the cost and it doesn't include CapEx. So in general, we see a very, very solid operation.
Let's move on to Nicaragua.
Hemco's production for the first quarter was 33,000 ounces, 33 or 32 thousand, 27, 34, 33, and this one of 27 ounces from the third quarter last year, that was when we stopped in order to intervene and with the plant. So what we usually see is the plant working on its full capacity. The AISC per ounce of gold sold increased by 15%. This is mainly explained by the increase in the price of gold, that we mentioned before, and greater purchases of artisanal materials, as well as a 64 increase in sustaining CapEx. That increment of 64% is also normal. We had a greater mining development. When you operate in an underground mine, you have to perform this development, moving this barren material, and that is accounted in the sustaining CapEx.
Also completing the commissioning of the detoxification plant for the tailings of the process. The gross profit increased by 8%, mainly due to greater silver sales. We're having a substantial increment on silver sales, which is very interesting. There is a stone from our mining property in Nicaragua that has a silver presence that is unusual. Not only... It's not that we are going to turn or become a silver mine, but it has very good or interesting findings and, or for our operation. Let's see the guidance. What are the challenges? We are going to see how the costs are and how the production will be over the guidance for 2024. We will have a production between 209,000 and 220,000 ounces.
Our cash cost will be between $1,180-$1,270, and our AISC will be between $1,430-$1,530, respectively, and we are reaching the goals without problems. In relation to this growth, our focus will be to continue with the Porvenir Project, where we want to complete the feasibility stage during the second half of this year. Focusing on and in about the Red Moon deposit, we will expand the mineral resources, identifying new targets around the main deposit. Mineralogical studies are underway. We want to conduct field work focused on geophysical anomalies, starting in the third quarter of 2024. This year, we are planning to perform 8,000 meters of drillings or perforations in Nicaragua, which is a very interesting exploration campaign. 6,500 of these meters will be in this target that is called Guillermina.
With this, I finish the presentation, and we open the session for the Q&As.
Okay, let's start with the first question. Juan Antonio Mejía asks, "Given the changes in the shareholders' composition with Sun Valley Investments Colpatria, how is the new shares composition? Should you update it for us, the shareholders?"
They acquired 22.5% of Mineros, and that participation was sold by Colpatria. Colpatria has about 7.9%, almost 8%. The other shareholders maintained the historical composition, so there hasn't been any difference or there is no change in that. So this information was communicated as a highlight and is also visible on our webpage.
Okay, we are expecting or waiting for more questions. Any other question? Andrés Vergara:
"Could you please explain how is the price composed when you buy the gold to the miners?
Does it work as a formula in which you maintain the margin over the international price? If so, which margin?
We pay the artisanal miners a percentage of the price of the day, but that percentage is not the same all the time. They bring an ore that varies in gold content. That is called, that is the amount of gold that it contains, and when they have a higher grade, we will pay a higher price. When they bring a lower grade mineral, we will pay a lower price, because all minerals have the same processing cost. So the mineral with a high grade, that's more cost efficient for us to process, that's why we pay it at a higher price. That is a variable formula in which we pay over the international price.
It doesn't create a good margin. The margin is similar to the one of our own mining. But artisanal mining has less needs of investment in terms of capital. So the AISC is better in the artisanal mining rather than in the traditional mining. But we should preserve both. For strategic reasons, we have our own ore production, and we buy to the artisanal miners that are organized in different associations or guides. I could also add here that this price, this variable price, from the purchase of the ore or mineral, when high, when the price of gold is high, the cost will increase, but it has a positive net effect on profits, and when the gold price is low, it also helps us to have, like, a natural coverage against that risk.
Another question from Carlos Quintero about the sentence from the court, about the possibility of the royalties. "What is the impact of the results, projection at the beginning of the year and versus what happens currently? And as a second question, what's the progress, rate of the exploration project in Chile?"
Carlos will respond the first question. The decision from the court is not, hasn't affected us, our financial statements yet, but if it did, what we are seeing currently is that, that is not a very material, like, figure. So we are expecting to know the decision from the court. And about the progress, of the exploration project in Chile, that is in a maintenance, like, a moment or a stage, so they invest the minimum to keep it active. Why is it that?
Because we were the partners of Yamana. It was sold, now, it, we are partners of Pan American Silver, and this is a project that is at the end of the priorities of Pan American Silver. They haven't made a decision about what to do with this project, and we are expecting that we have 20% of share or participation, and the decision is made by the greatest partner or the greatest shareholder. Nicolás Álvarez asks, "I had understood that due to the deal, the Gualcamayo operation, the cash cost and the AISC would decrease. What's the reason for that?" There are two main reasons, and that's what we are seeing today. First of all, the gold price continues to increase, and this affects us in the cost of the artisanal mining in Nicaragua in a substantial way.
That's number one. Number two, price, the price is revalued versus the price from last year, and this also affects the costs in Colombia. The increase in the cost of artisanal mining, it's not a bad—it's not bad news, because as we are paying more, we are also receiving more when we sell it. And in relation to the Colombian peso revaluation, it has been stable for almost 10 years, but last year it revalued. But we have to wait and see what happens with the Colombian peso in the next months.
This is from Andrés Vergara: "I understand that in, artisanal mining, they have a natural hedge at the gold price. I have seen that you use coverage as a derivative of the gold price.
What's the percentage of production that has this covered price with derivatives, and what is the plan for this coverage?"
Andrés, historically, we have had these full coverages, but up to now, or up to date, we only had covered 4,500 ounces of gold, 1,500 ounces per month until June. So up to date, from now on, we will have a very good exposure to this gold price, and we don't have any other external coverages in this moment. I would like to add something else. The policy or the policy considers that we cover the most challenging operations, the higher cost operations, and with the sale of Gualcamayo, both operations, Colombia's and Nicaragua's, have low cash costs. The AISC is high to complement Alan's response, because we are investing a lot in Colombia and in Nicaragua.
We are doing investments in order to increase our capacity of grinding and dredging and to reach mine zones. So there is this seasonality in this AISC. So if we don't have these investments, the cash costs of both operations will be good. It would, it has considerable margin in relation to the gold price, and it, there's no pressure to take these coverages. And it's good for the company to be exposed to the gold price, because it may generate a better result for you as shareholders, because the coverage that we had taken had a base and a limit. So that's why we couldn't allow the price to go below this floor, and but it would also place a limit in the prices of gold.
Pedro Castro wonders the same, wonders this: "Congratulations for the financial management of the company.
Only the cash will cover the financial obligations in the short and in the long term. They can also pay the debt and make capital investments and provide dividends. My question is that due to the ounces production is down due to the operation sale in Argentina, what is the possibility of the growth projects when increasing the ounces produced by the company in 2024?
Thank you, Pedro. Porvenir is a project, and we published the pre-feasibility of this project. So this project, we consider that it will produce 60 or 70 thousand ounces per year, and that would increase the Mineros production if we continue with that project. We are on a permanent search of options of purchasing, which is an opportunity that we saw thanks to be listed in the Toronto's market.
So people ask, in some conversations, they ask us, "Is it worth to be in the Toronto list?" And yes, it is. And that's one of the great benefits, is that we are in the same market with a large number of companies, which with whom we could have a fusion or small companies that we could acquire using not only cash, but also the Mineros share as cash collection. So we are permanently on the search of these projects in order to increase production. We haven't closed any deal, there's no relevant information to communicate about it in business, but we continue searching for them. This is a good time to identify these type of projects, but also we are working in our organic growth, that is with the Caribe project. The other variations are marginal.
We have the possibility of increasing our grinding possibility, product capability in the Panama plant. We also want to have some of these projects in Colombia, but that's nothing to in-. The growth will be seen when we can finish a deal of acquisition or fusion, or when we continue with our projects. So we have no more questions. I wouldn't like to leave this call without telling you that we see the good behavior of our share in the last three months, and we are going to be very active talking to investors, trying to maintain that trend, tendency.
Also, I have another question here.
This is from Joanna Rivera: "What are the strategies that you are planning to implement to mitigate the negative effects of stoppages in the processing plant in Nicaragua?"
If you see Nicaragua figures, they are quite stable. And this Nicaragua's plant is reliable, and it has a preventive and corrective maintenance plan. But also, we are creating this master plan because what we bought in Nicaragua is a plant 86 years old, and we are operating this plant and renewing that plant, and that renewal improves the reliability of the plant. And we want to do this based on a master plan, so we know that we are going to replace an old part with a new part. Where would it go? So this turns into a more modern and efficient plant. From the public situation, we haven't seen any situation that may raise a concern.
We completed unions negotiations or bargaining in both countries last year, and we have agreements with the unions that last for two years, so we don't foresee, so far, any situation in that, on that side. The public situation in both countries have been stable in our operations, and we trust and we rely that that process will continue in that way.
Well, it seems we have no more questions. Thank you so much for your attendance, and we'll see you in three months' time, or we'll listen to each other in three months' time.
Thank you so much.
We are going to finish our conference today. Thank you for your participation. You may hang up now. Thank you so much.