Good day and welcome to Hochschild Mining PLC Q3 2022 production results conference call. At this time, I would like to turn the conference over to Mr. Ignacio Bustamante, CEO. Please go ahead.
Thank you very much, Ben. Hello, and welcome to our conference call to discuss our third quarter production results. I'm here in Lima, and with me is Eduardo Noriega, our CFO, and from London is Charlie Gordon, our Head of Investor Relations. I will talk about the operations first, and then cover our progress at Mara Rosa and the exciting discovery for the medium to long term that we have recently made at Pallancata. Good production in the quarter was just over 94,000 gold equivalent ounces or 6.8 million silver equivalent ounces, which makes it our strongest quarter of the year. Year to date, we have produced 261,000 gold equivalent ounces, and we are therefore on track to meet our full year guidance of between 360,000-375,000 gold equivalent ounces.
Inmaculada delivered a good quarter with better than expected grades and recoveries. Production was almost 40,000 ounces of gold and 1.5 million ounces of silver, which is a gold equivalent total of 61,000 ounces. Overall, in the first nine months of the year, Inmaculada's output has been almost 173,000 ounces of gold, which is a little above our forecast. Regarding the modified environmental impact assessment process, at the end of September, we completed our submission to the Peruvian government of its follow-up comments, and are currently expecting a final decision before the year end. In Argentina, San José has had its strongest quarter of the year with better than expected silver grades. Output was 3.2 million silver equivalent ounces, which therefore gives us 7.9 million ounces year to date.
Over at Pallancata, production was around 800,000 silver equivalent ounces in Q3, and since we have hedges in place for 4 million ounces of silver this year at a price of close to $27 per ounce, we are at a better position than the current silver price might indicate. Our drilling team has a few drill targets remaining within the existing permitted area during the remainder of 2022. Depending on those results and of course, precious metal prices, we will decide on whether to place the mine on care and maintenance in 2023. In terms of costs, we remain on track to hit our 2022 guidance, which, if you remember, is between $1,330 and $1,370 per gold equivalent ounces.
Turning to our Mara Rosa construction project, we have made further good headway with the total project progress at 16%. Detailed engineering is now 90% complete, and we have made good advances on the earthworks, procurement for the equipment, key equipment and infrastructure, and we have also made a start on foundations for the processing plant. We are on track for first production in the first half of 2024, which is now not too far away. Updating the Snip project in British Columbia, designs for the processing plant and the tailings and waste rock storage facility were completed in the quarter, along with an updated resource model. The study results will be available at the end of the year, and with this information, we will make a decision on plans for next year.
The key piece of news today is the discovery of a major new resource at Pallancata in an area which is known as the Royropata Zone. We have drilled high-grade structures with good widths just outside the current permitted area. You can see the results in the press release, but the highlight is undoubtedly 16.6 meters at 8.5 grams per ton of gold and over 2.5 kilos of silver. This is as good a drill result as we have ever had at Hochschild. We are aiming to complete an initial inferred resource in the next few weeks, and we will then give you some more details. Studies for this new Royropata Zone will take approximately three years, but we do believe that we have now secured an exciting medium- to long-term future for the mine.
On the financial side, we have approximately $159 million of cash, which translates to net debt of $151 million and a net debt to last 12 months EBITDA of 0.55x as at the end of September. We are in a good position to fund the CapEx for Mara Rosa in 2023. To sum up, we've had a really solid quarter of production and are on track with our 2022 operational targets. We currently expect Inmaculada's Modified Environmental Impact Assessment process to be completed by the end of the year. We are making further good progress with our Mara Rosa project in Peru, aiming to start production in H1 2024. We're really happy to announce a major discovery at Pallancata, which ensures the medium to long term future of the mine.
With that, I would like to open up for any questions that you may have.
If you would like to ask a question, please press star one on your telephone keypad. To withdraw your question, please press star two. The first question comes from the line of Patrick Mann calling from Bank of America. Please go ahead.
Hi. Good day. Thank you very much for the opportunity. I just wanted to ask about the capital budget at Mara Rosa. You know, we've seen a lot of inflation hitting other mining projects in the broader industry. How confident are you in the contingencies on that project, or should we expect? I know it's early days, but you know, how big is the risk of a CapEx overrun here at this project? Thank you.
Thank you, Patrick. We have continued evaluating this in detail, and actually have continued already building out very important components of the total CapEx for the project. We initially have, when we did our evaluation of Mara Rosa, we considered from the very beginning an important cushion anticipating some inflation and some contingencies that are already built into our $200 million CapEx guidance and budget for the future years, 2022 and 2023 for Mara Rosa. Based on the information that we're seeing so far, we believe that we are very much on track to complete it on time and on budget. You know?
Certain inflationary components that we're seeing were anticipated, some of them that might not have been anticipated have been compensated by other efficiencies obtained elsewhere. Of course, we have had the help of the devaluation of the Brazilian reals, which is a very important component in most of the most important part of the cost components of the total CapEx, you know? In short, we continue feeling confident that the project is on budget and should be built within the $200 million guidance that we gave to the market from the beginning.
Great. Thank you. Maybe another question, if I may. Just on Pallancata discovery outside the permitted area, can you just explain the steps from here? I imagine you continue drilling and then how long or, you know, just maybe how long until we could see that come into sort of move from inferred to measured and possibly, you know, into reserves and into a mine plan. Are we talking 5, 10 years, or quicker than that? Yeah. Thank you.
Sure. As we have been mentioning for some time, Patrick, we have two plans in place for Pallancata. We have the short and the medium to long-term plan. On the short-term front, as you know, we don't have too many resources left that are profitable at these prices. We are still finishing our budgeting process to see how long we can run Pallancata for into 2023. We are also looking for additional drilling targets in these remaining months of the year to see if we can come up with additional profitable resources within the operating area. On the short term, you know, looks like, you know, the end is approaching, but we are trying to see if we can extend it as much as we can.
We are going to continue giving you further updates on that. On this new area, this new area is outside of the permitted area. The plan that we have is we already are in the process of finishing an inferred resource that we expect to present to the market in the next few weeks. After that, we are gonna be doing the drilling program to turn it into measured and indicated, which we expect that is something to be completed in 2023. In parallel to that, we are gonna be starting the permitting process. The permitting process is a process that we say that should take somewhere around three years. Once that process is completed, you have to bear in mind that this is very close to our current operational area, you know?
We should be in a position that we can start the mine developments and accessing the mine, relatively quickly, and the material can be put into production immediately because it's gonna be using the same, processing facility that we have in place. It's something that we'll see for the next three to four years and not for the next 8-10. You know?
Great. Thank you for the extra detail. I appreciate it. That's all for me. Thank you.
Thank you.
The next question comes from the line of Tim Huff calling from Peel Hunt. Please go ahead.
Yeah. Hi. Thanks very much. The question I had on Pallancata has been answered, but on Mara Rosa, I mean, you guys have given the stats, everything's on time, on budget, and it's 16% complete. I guess what are the biggest hurdles left in the next year and a half as you go through the construction process? I mean, what are the things that you worry the most about? Because it is true that it's one of the questions that we get the most on Hochschild just because of inflationary measures, and it sounds like from a financial perspective you are relatively confident, at least in the near term, that that's contained. But are there any other hurdles on Mara Rosa that you particularly are keeping a close eye on in the coming 12-18?
Sure, Tim. Definitely, because, you know, we have already secured, you know, an important percentage of our total cost components, but there are still some left, although the major ones have already been secured and locked in terms of a price. As you know, inflation is uncertain, and we need to continue dealing with that. As I said, we have the help of the devaluation of the Brazilian reals that is giving us an important cushion there.
I would say inflation is something that we need to continue monitoring, although as I said, we feel confident that we are going to be within budget, but it's something that we cannot let our guard down on inflation controls. In terms of permitting, you know that permits is an ongoing process. So far we have obtained pretty much all the permits that we need for these initial stages. But along the road, there are certain other permits that we're gonna have to deal with. But they are not a bottleneck and they are not a constraint in terms of time, and they don't look also overly complex. So we should be fine also on that front.
The other one is making sure that the engineering team does the best possible job in terms of coordinating the effort of the different suppliers and contractors so that we avoid any delays on the supplies or equipment that are on the critical path. Those I would say are the key challenges, you know. So far with the way that we have seen the team managing the project and the advances that we have seen in terms of securing equipment and contracts and that sort of things, we feel very confident that the project is looking very well to be completed on time and on budget.
We currently have no question coming through. As a final reminder, if you'd like to ask a question, please press star one now. There are no further questions, so I will hand you back to your host to conclude today's conference. Thank you.
Thank you very much, Ben, and thank you very much everybody for participating in today's call. Should you have any additional questions, please feel free to contact Charlie Gordon directly at our London office. Thank you very much and have a great rest of the day.
Thank you for joining today's call. You may now disconnect. Host, please stay on the line and await further instruction. Thank you.