Hello, and good afternoon, ladies and gentlemen. Welcome to today's virtual non-deal roadshow. My name is Julia Parent, a virtual event moderator here at Renmark Financial Communications. On behalf of our team, we'd like to thank everyone in Atlanta and surrounding areas for joining us today for the presentation of Mineros S.A., trading on the Toronto Stock Exchange under the ticker symbol MSA. Presenting today is Andres Restrepo, President and Chief Executive Officer, Alain Wansiez, Chief Financial Officer, and Ana Wilkinson, Vice President, Investor Relations. And with that, I will hand it over to Ana.
Good afternoon for those of you joining us from the East Coast of North America, and good morning to any of you joining us from Colombia or the West Coast. On behalf of Andres, Alain, and myself, we would like to thank each of you for joining us today from wherever you are logging in. Before we start, please note that during our presentation, we will be making forward-looking statements, which may include some non-IFRS measures to enable you to compare us with other gold producers. Accordingly, we caution you that our forward-looking statements are conditional on certain assumptions management has made, which may or may not end up being accurate. Accordingly, we draw your attention to the usual disclaimers and encourage you to read our financial statements and related management discussion and analysis for the second quarter and first six months of 2024 .
Joining me on the call today are Andres Restrepo, President and CEO, and Alain Wansiez, CFO of Mineros. Following my opening remarks, Andres will lead you through a discussion of our businesses and key metrics. He will then turn the call over to Alain to discuss our current financial position and results for the second quarter and first six months of twenty twenty-four. Alain will then turn the call back to Andres to discuss our operations and opportunities for the future, following which we will open the call to questions. With that, I will turn the call over to Andres.
For those of you who are unfamiliar with Mineros, this is a 50-year-old mid-tier dividend-paying gold producer that is listed on the Colombia Stock Exchange and also on the Toronto Stock Exchange, with an excellent mix of investors and coverage by analysts, both in Colombia and Canada. Our strengths are, and the reasons why you should be interested in this company, are based in our lengthy and impressive record of profitability, our diversified asset base with producing mines in Colombia and Nicaragua, our management team, our pipeline of organic growth opportunities, and our social license to operate in both countries, Nicaragua and Colombia. Finally, Mineros has a very robust dividend payment history, and currently, our stock has a yield of about 12%, given the fact that our shares are undervalued.
As you can see, we have consistently produced over 250,000 ounces of gold over the last five years. This year, we estimate that the level of production will decline modestly due to the sale of Gualcamayo, our Argentinian asset, in the third quarter of last year. We also provided guidance that our all-in sustaining costs would remain largely flat this year, but we have seen upward pressure on these costs due to the fact that the Colombian peso is strong relative to the dollar and to the high gold price, which affects both our cash costs and all-in sustaining costs in Nicaragua. It is important to understand why this is so. In Nicaragua, a portion of our production comes from treating material purchased from artisanal miners with whom we have agreements.
The payment to the artisanal miners is a calculation based on the spot price of gold and includes an estimate of the amount of gold contained in the material, based on three random samples of the ore and the expected recovery of gold. Accordingly, the higher the spot price for gold, the higher our costs to purchase the material, and the opposite is also true. Given the current outlook for gold, we expect that the costs might continue to range higher in 2024 . This business model has consistently produced robust financial results. Going forward, these results will come from a streamlined portfolio of assets now that we don't have Gualcamayo in our portfolio. At the end of the second quarter, our balance sheet remained really strong, with $27 million in cash and a net debt of $1.9 million.
We have paid out more than $95 million in dividends in the last five years, and at our shareholders' meeting, held in March 26th this year, the shareholders approved a regular dividend of $0.075 per share and a special annual dividend of $0.025 per share. At this time, I'm going to turn the call over to Alain to describe our financial position and financial results for the second quarter and first six months of 2024.
You can see that the Adjusted EBITDA from continuing operations during the second quarter of 2024 over the second quarter of 2023 , and averages above $44 million per quarter, resulting in roughly $177 million in EBITDA in the trailing 12-month period. Touching on the second quarter financial results.
...We note that the growth in revenue was largely due to higher average prices and an increase in the amount of silver sold, that offset, with modestly lower gold production. The cost of sales increased because it was more costly to purchase artisanal material, given the price participation of the artisanal miners in a rising gold price environment, and because of the devaluation of the U.S. dollar against the Colombian peso, resulted in higher costs for maintenance, materials, services, and labor in the Colombian operation. Gross profit and Adjusted EBITDA increased by 1% and 4% respectively due to the increases in revenues, notwithstanding the higher costs of sales. Profit from continuing operations decreased mainly due to the higher costs to purchase material from artisanal miners and higher foreign exchange expenses, as well as higher tax expense.
The loss from discontinued operations decreased to zero because of the sale of Gualcamayo in September 2023. In the first six months of 2024, the same factors were influencing revenue, cost of sales, gross profit, and Adjusted EBITDA. The unique factor lowering profit from continuing operations in the first six months of 2024 was an insurance payment we received of about $5 million in the first quarter of 2023, so that's last year, for the sinking of one of our dredges during a tropical storm that happened in 2022. Our production from continuing operations varies quarter to quarter from a consistent minimum of 50,000 ounces per quarter, and we are on track to hit our guidance of between 210,000 and 230,000 ounces of gold for the year.
We expect that our ability to generate significant cash will continue, particularly in this gold environment. At the same time, cash and all-in sustaining costs have both risen due to the strong Colombian peso and the pricing structure of our purchases of mineralized material from artisanal miners in Nicaragua. As we touched before, we expect all-in sustaining costs to be stable, if not a bit higher, but we don't expect this to affect our margins. At this point, I will turn the call back to Andres.
I'd like to spend several minutes describing our operations before discussing future opportunities for organic growth. Let's start with Colombia. We are located in the north of Colombia and in the northeast of our state, Antioquia, where the Medellín River flows into the Nechí River. As the river drops in elevation and the rivers combine, the geological prospects for the deposition of gold are ideal. Here, in close ponds, we employ high-tech dredgers to gather gravel and sand, which we subject to a gravity process, liberating the free gold from where it was deposited eons ago. Over the past several years, we produced just under 100,000 ounces of gold each year at costs that, while rising modestly, still provide very attractive returns. In advance of the dredgers, we explore, we inventory the flora and fauna, and carefully remove thousands of species, which are kept in temporary nursery.
The ultimate rehabilitation of the closed ponds is accomplished with the plants from the nurseries, together with the now barren sand and gravel. In addition to our mining activities, we have partnered with local communities to provide education, training, and resources related to beekeeping, reforestation, and our rubber plantations. Turning to Nicaragua, we operate two ramp-access underground mines near the town of Bonanza, which is located about 230 km northeast of Managua. Gold production in Nicaragua has been quite stable, running between 123,000 and 133,000 ounces since 2019, and we expect to produce near the top of that range this year, with approximately 70% of that production coming from the purchase of third party ore supplied by artisanal miners.
All-in sustaining costs have been creeping up, largely due to the rising price of gold and the nature of our agreements with the artisanal co-ops. Under the Nicaraguan government, artisanal or informal mining is legal. Under this model, we work with over 1,500 collective groups organized into over a dozen co-ops that have been certified by the local government. The ongoing process of building a win-win relationship built on mutual trust and respect is something of which we are tremendously proud. Working with the co-ops, we have seen the rise of informal groups who are committed to good environmental and social practices, who comply with safety standards, and who are insured. The artisanal miners and our industrial mining practice coexist and participate in a model that promotes economic and social development and prosperity.
Moving from our present, I would like to discuss what we intend to pursue next. We continue to work to advance the Porvenir project to its next stage of economic assessment, and we continue to define additional reserves and resources in the vicinity of our operations. In addition to this, we have two satellite targets on our property in Nicaragua and La Pepa project in Chile, where we have 20%, a 20% interest. One potential future in Nicaragua may lie in the deposit, in a deposit along trend and southeast of the Pioneer and Panama mines at the Porvenir deposit. We have identified there a polymetallic mineralization bearing gold, silver, and zinc. Mineros updated the mineral resource model by incorporating all drilling data collected from 2023, from the 2023 campaign.
The completed model is under review by SLR in Canada, including ongoing updates to the geometallurgical assumptions. The updates to the assumptions, together with the analysis of the 2023 metallurgical test work, is underway, and the company expects to receive the results to update the geometallurgical model in the second half of this year. In light of commodity market conditions, management is proceeding logically and methodically to upgrade mineral resources and mineral reserves and refine potential approaches to develop, described in the pre-feasibility study completed on the Porvenir project last year, with a view to maximize the value of the asset and the projected returns. Accordingly, the company has delayed preparation of the pre-feasibility study optimization to 2025. As you can see, we have a large land package in an excellent, highly prospective location. Porvenir is not the only target of interest.
At the Luna Roja deposit, the company is focusing on expanding current mineral resources and identifying new targets around the main deposit. Mineralogical studies are underway, and we plan to conduct field work focusing on geophysical anomalies starting the fourth quarter of this year. We have a long-standing commitment to ESG, supporting local communities and adopting environmentally friendly initiatives, and along with strong corporate governance and transparency. We encourage you to read our 2023 sustainability report. You can find it on our website under the Sustainability tab. Our board of directors is made up of nine independent members. You can see them here in this slide, with broad experience in the mining and financial industries, six of whom are new to our board, bringing a fresh perspective. There are also four board committees, which are Audit and Risk, Corporate Governance and Sustainability, Business Opportunities and Optimization, and Executive Compensation.
Last but not least, these slides present the bios of us, the management team of Mineros. This is a management experience in building and operating gold mines. Mineros has been operating for almost 50 years in Colombia and more than 10 years in Nicaragua. With this, I open the meeting for questions. Thank you.
Thank you for the presentation. We will now move on to the Q&A for today's presentation. Your first question today is for Alain. A viewer is asking: How do you calculate forward guidance on the artisanal production?
We have been doing this business of artisanal miners since we bought Nicaragua, so we've been in the business for around 11 years, and what we have seen is that artisanal ounces or production can be very well related to historical production, so we look at the last three, four years, and we go forward one more year, and that's how we estimate our artisanal production. Our artisanal production gold ounces are not in resources and reserves, so that's why we do it historically. It's not part of our NI 43-101 information.
Are you currently hedging gold prices at all?
No, we are not currently hedging gold prices. We had some small hedges the first six months of this year that we took last year for some of our Nicaraguan operations, but no longer. There are zero hedges at the moment.
How comfortable are you paying out the dividend, and what is the payout ratio?
We're very comfortable paying dividend, and we have paid dividend for almost the last 40 years. We're one of the strongest dividend payers in the gold industry, I believe. Historically, over the last the average of the last seven, eight years of payout ratio has been 35% of net income. However, if you see our financials on the last two years, we have had low net income. However, we have maintained our dividend payout at a gross level. So the last two years have been much higher, 200% or even higher, but historical is 35%. We produce a lot of cash. We are a very good cash producer, and we like to treat our stockholders nicely with these dividends.
We have been able to do it, even with low net income years, as last year or the year before.
Your all-in sustaining costs have been rising over the past few years. Do you see them stabilizing?
... Yes, all-in sustaining costs have risen for because of three particular variables, and those are increasing environmental costs, which I do see them stabilizing because of the revaluation of the peso compared to the dollar. What I see is that the peso will probably devalue at a normal rate, and hence, that cost will start to decrease slightly. Because of the increase in the gold price, as we mentioned in the presentation, much of our cost is buying from artisanal miners, and we pay a percentage of the spot price. So if gold goes up, our costs go up. If we assume the gold price stabilizes, then we do expect AISC to stabilize. Of course, if gold continues to go up, our costs will go up accordingly, but also with our income.
It's not a bad thing that our costs go up. When our costs go up because of gold, it's because our income is also going up. And we are naturally hedged. If gold price was to go down, our cost will go down respectively.
Do you plan to accelerate your debt repayment in the coming year, given your healthy cash balance?
No, that we don't expect so, and this is why. We try to balance our cash situation with our dividend payments, so we want to have a little bit for both, and more than half of our debt is in Colombian pesos, and again, the Colombian peso is a weak currency compared to the dollar, and as the Colombian peso devalues, we will be in a better position keeping the debt in weak currency. So that's why we expect to pay it naturally. We don't have a lot of debt. We have a total debt of roughly $30 million, and that will naturally extinguish itself in the next two or three years.
What do you expect to spend on new equipment for your alluvial operations in 2025?
We're currently buying a new dredge. It's already in place. I think it's going to be commissioned in the next two weeks. We bought a second-hand dredge in Brazil, brought it to Colombia, and are commissioning it as of today, and in about two weeks, we will have that new dredge in operation. We will hopefully have more dredges in place due to our formalization program in Colombia. What we have now is that we have a coexistence of our own dredges with formalized dredges in our package, and that gives us a strong social license and also allows us to dredge areas that have lower grades, so from our own equipment, with...
I think we will stop for the time being with this new dredge that we bought, but with formalization, we might increase a little bit our dredging capacity.
Is there a certain life cycle for the dredging equipment, or can they stay in operation indefinitely with proper maintenance?
The second message is the right one. They can stay in operation if we give them proper maintenance. We have done more than that. We have upgraded some of our dredges to incorporate new technologies. For example, some of our dredges are from the 1930 s, and we have refurbished them, but also equipped them with GPS system, so we can control the whole dredging process.
What are the risks of operating an alluvial project versus an open pit or underground mine?
The main risk operating on alluvial project might be maybe connecting our ponds with the river, maybe. When we move our dredges north, we build, like, a temporary dam to separate our operation from the river in order to prevent sending sediments to the river. But the correct way to operate this mine is as we operate it right now. Dredging is really efficient. Using water to do the separation and no reactives or chemical substances at all is very environmentally safe, and it has a very good cash cost and very good all-in sustaining costs. So we plan on carrying on operating in this fashion. It's quite unusual.
We don't think there is an operation of this size currently in the world, none of what we know, and it's really efficient, and we have been able to incorporate new technologies that make it even more efficient. We have another 10-12 years of life of mine, and as we see it, we will finish this operation maintaining the current technology.
What efforts are in place to improve relations with indigenous leaders in Nicaragua?
We have very good relations with indigenous communities in Nicaragua. As a matter of fact, part of our team is Mayangna, and some other part of our team is Miskito. In our mine, all the signs are written in the three languages: Spanish, Mayangna, and Miskito. We have very good relationship with the communities. Part of our social program includes doing some investments to increase their status of life, and we have had very smooth relationships with them.
Would you likely look at South America for any M&A activity?
We are currently looking for opportunities. We're always looking for opportunities, and we are interested in Latin America. We're interested in this same time zone, but we don't have anything like material to communicate to the market right now. But we keep on looking for opportunities in the region, in this time zone, both in North America and in South America.
... The company is considering financing possible M&A with equity capital. Does it mean that management reckons current share price as fairly valued?
Not really. It all depends on the potential M&A target. If their stock is as undervalued as us and the transaction is not diluted, we will consider it. If the stock is very high valued, we will prefer cash for the transaction. It also depends on what they want. Sometimes you have to sacrifice a little in the present to project a better future. If we have some confidence that a transaction will bring a re-rate, we might propose to our shareholders to take that risk.
Yes, and it also depends on the size of the transaction.
Mm-hmm.
A small transaction we can do with cash or even debt, but maybe a big transaction, we need a mix of the three, including equity. It also depends on the size.
Are there any avenues available to move away from having operational costs move in the same direction as rising gold prices?
In Nicaragua, if we go ahead with the Porvenir project, we will have less exposure to artisanal ore, and then we will have less impact of the gold price. But I want to reinforce the message that Alain gave you. When the gold price goes high, yes, our costs increase, but our revenue and our net profit increases more than the costs. So it's like a natural hedging, so it's not bad news. It's not bad news. If you look at the costs that are not relating to buying artisanal ore, our costs have decreased permanently since 2013 that we bought the company. We have incorporated new technology in the mining process. We have increased recovery, and those costs have consistently gone down. The cost related to the price of ore is not really bad news.
It's a hedging, and it gives us a lot of consistency. One thing you can see in our results is that they tend to be really consistent in time, and this model of buying ore from artisanal miners provides us with a strong social license, like a natural hedging. We fulfill our promise, which is that we will work for the well-being of everybody, that when we get into a territory, we are aware of the fact that we are going to generate environmental, social, and economic costs. But we will be able to generate environmental, social, and economic revenues that will like offset those costs greatly. So we don't really see that as bad news. We see it as good news.
We hope for the gold price to stay as high as it is today or even go higher, and it's good to have these meetings because then we can explain to you, the investors, that you don't have to take that information at face value. If you look more in-depth, you will realize that that is not bad news. We're talking about Nicaragua. In Colombia, the increase of costs is due to revaluation of the peso. We don't see it as a permanent situation. We think the peso will slowly devalue against dollar. We'll see.
Thank you so much for elaborating on that, and thank you for your answers. If you did not get a chance to submit your question, feel free to reach out to your account manager here at Renmark. This concludes our presentation for today, but before we go, I will turn it back over to Andres for final remarks.
We hope to have you as investors of Mineros, and if you are investing in Mineros already, we hope to have a, like, renewed confidence in us, your administration team.
Once again, this was Mineros S.A., trading on the Toronto Stock Exchange under the ticker symbol MSA. Thank you again to everyone in Atlanta and surrounding areas for joining us today. Stay tuned for other presentations in your area. Thank you, and see you next time!