Good morning, everyone. Thank you for joining us today for our annual results presentation. I'm Ignacio Bustamante. Also with me is Eduardo Noriega, our CFO. Let me start with the key highlights for 2022. In terms of the financial figures, you have probably seen already in the release, $736 million of revenues, an EBITDA of $249 million, EPS of $0.01 per share, cash balance of $144 million, and a net debt of $175 million. On the operational front, we have also announced the production of 359, pretty much, thousand ounces, gold equivalent ounces, at an average all-in sustaining cash cost of $1,364.
Something that is very important, as you know, is that we are expecting the Inmaculada permit decision during Q2, as we highlighted a couple of weeks ago. On the exploration front and business development front, we're doing very good progress with our Mara Rosa project, and we'll get into a little bit more detail in the presentation. We are already over 70% completion, which is very good, on time and on budget. Our attributable reserves are up by 35%, and our resources up by 18%, which is very good, and it's mostly as a result of the incorporation of Mara Rosa to our portfolio and the discovery of the Royropata resources during 2022.
Talking about Royropata, we have also announced a fantastic discovery there, which is a new resource of over 51.2 million silver equivalent ounces, still completely open to the west, and with significant geological potential. We're looking there at veins that are about 5 m wide and around 800 g-850 of silver equivalent material per ton. A fantastic grade, fantastic width, and this should be a great resource for the long term in Pallancata. As we also announced recently, we decided to terminate our option at Snip, because basically we wanted to reallocate our priorities in terms of investment and focus more on the development of Mara Rosa and Royropata. Talking about ESG, it was a very positive year in terms of safety.
Our frequency rate was at 1.37, very similar to what we had the previous year. Accident severity was 93, one of the best ones that we have had ever. Very good results. We have successfully continued implementing our Safety 2.0 program, which is basically a cultural change to make sure that people continue having safety as their top priority. We implemented the Seguscore, which is equivalent to the ECO Score, but in short, is basically a new system that allows us to track and monitor not only the reactive factors, such as frequency or severity, but also proactive measures, such as inspections, audits, training, and that sort of things. It's working out very well.
We continue working on training and helping doing safety leadership in all our different operating units. On the environmental front, also very positive ECO Score, 5.27 out of six, very similar to last year. We continue participating in the Carbon Development Plan with obtaining a B rating, which is good. We continue reporting in line with a task force on climate-related financial disclosure as well, TCFD. Working also in developing our carbon strategy. We already have our metrics for being carbon neutral by 2050. We're now working on the metrics for 2030, which we expect to disclose this year.
Continue also working on our cultural transformation plan, also to make sure that people have environment as a top priority in their minds. On the people and culture, continue working on diversity programs, continue trying to employ as much people as we can from our communities. We're at 35% already and wanting to continue growing that number. Of course, working in conjunction with our unions at all our units. Finally, on the community front, we continue investing with our communities. Last year, we have invested about $6.4 million in benefits to the local direct benefit to the local communities. Also significant purchases from our local areas, about $87 million in 2022.
Working on many different initiatives on education, on health, on water now, on connectivity with all our communities to make sure that we guarantee a better standard of living for them, because in, as you may recall, in these areas in Peru, there's very little government presence. Something that is very important here is after the good, positive success that we had with our cultural transformation plans in safety and environment, we have decided to do a similar plan for community relations, in terms of our social programs and community relations, and develop a plan that should allow us to be successful on the social front for the next decades.
We're in the process of devising that plan, and I can say that we're all very excited by the potential that this is gonna bring to prepare us for the next decade of working with the communities under completely different social and political scenarios. Those are the key summaries. I'm gonna continue talking later about the rest of the company. Now let me pass it to Eduardo Noriega, so he can walk you through our financials.
Thank you, Ignacio. On our P&L results for the year, we had a revenue of $735.6 million. A growth profit at 28%, reaching $208 million. Our net profit for the year was $6.7 million, and the attributable net profit was $4.9 million. The EBITDA for 2022 was $250 million. Now the main differences versus the 2021 results are starting in revenue. We had a lower production as guided, close to 8% in gold and silver. Silver prices also went down versus 2021 by 13%.
Our cost of sales was up $39.9 million, mainly related to the higher proportion of conventional mining methods versus mechanized mining methods that are less expensive. We also had inflation, mainly in Argentina. Our exploration expenses went up $17 million. That mainly in connection with the investment we did in Snip, our project in Ghana. In terms of finance cost variance, we had a positive variance of $11.8 million, mainly related to lower cost to acquire U.S. dollars in Argentina, which was something we had in 2021. The effective tax rate was at 72%, mainly affected by non-recognized tax losses that we had in jurisdictions where we wouldn't have operations, mainly in Ghana and in the U.K.
That explains close to 36% of the 72% effective tax rate. We also have in this line royalties and Special Mining Tax that account for another 30%, but then a positive variance of close to 24% from FX variations in Peru and Argentina. We also recorded exceptional items, mainly including a reversal of impairment in Pallancata due to a discovery that we made in the Royropata area. That was the $15.6 million, the maximum reversal we could do from accounting purposes. That amount was partially offset by an impairment of $4.2 million in Arcata, our project in Peru.
Finally, an impairment of $9.9 million in our investment in Aclara that was recognized in our half year results. If we look at our balance sheet, our cash went from $387 million at the beginning of 2022 to $144 million at the end of the period. Inmaculada generated $176 million, San Jose, $22 million. In Pallancata, we used $50 million of our cash, that helped us execute our exploration strategy, which allow us to discover the Royropata, a new area. We all invested $38 million in exploration expenses, mainly brownfield in Pallancata, but also San Jose, with positive results. Our recovery expenses, admin expenses, that accounted for $57 million.
We paid taxes for an amount of $55 million, which include $15 million, as you can see in the table, that relates to our 2021 tax charge paid in 2022. That's a timing effect. We also paid $11 million of legal worker profit sharing in Peru. We paid $21 million in care and maintenance and mine closure expenses, executing our mine closure expenses plan. $5 million of expenses related to a short-term stoppage we had in San Jose due to COVID mainly. Our net interest cost was $8 million. We raised $16 million of short-term debt for working capital purposes in Argentina.
We paid $22 million of dividends during the period, we had a temporary variation in working capital of $8 million negative. As you know, we also invested in Mara Rosa, we invested in Snip, we're showing those amounts in the right-hand side of this chart. $124 million to acquire Mara Rosa, the capex executed as of December 2022 was $76 million. In Snip, we invested $21 million in total for the period. Talking our all-in sustaining cost, we have to say that it was, for the year, $1,364 per ounce of gold equivalent ounce. That result is aligned with guidance, higher than 2021, as expected, mainly due to lower average grades in Inmaculada and Pallancata, also as expected.
The use of a higher proportion of conventional mining methods compared to mechanized methods, I referred to that on the P&L statement. Higher net inflation, especially in Argentina. Higher CapEx to access new resources discovered in San Jose. We had the impact of road blockades and temporary stoppages in Argentina, which impacted negatively our all-in sustaining cost versus 2021. These effects were partially offset by efficiencies and savings, mainly related to improvements on the use of equipment and efficiencies achieved at the team level in negotiation with vendors. In terms of capital expenditures, we invested $142 million in our operations. Slightly below than the CapEx we provided, mainly in Inmaculada due to the temporary effect of the delay in the MEIA.
This effect was partially offset by higher CapEx or mine development CapEx in San Jose to access the new resources we discovered. In terms of the Mara Rosa CapEx, it ended up being $75 million, slightly below guidance as well. This is a timing effect because the CapEx will be transferred to 2023 and 2024. In terms of balance sheet, with $144 million in cash, we're well positioned to finance our short-term growth. Mainly the CapEx that we have scheduled for Mara Rosa to complete the construction at the beginning of next year. We also would like to tell you that we closed a financing facility with 2 years of availability with Scotiabank and BBVA.
It's a five year medium-term loan with two years of grace period. Those are $200 million that we have available at a very good rate of SOFR plus 2.05%. We also have the following hedges. A couple of them were closed in the last two weeks. The first one we have for 2023, a hedge of gold of 29,250 ounces at $2,047 per ounce. We have a silver hedge of $3.3 million at $25 per ounce. This hedge was closed a year ago. The other hedge that we managed to execute in the recent days was a gold hedge for 2024 production, 27,600 ounces of gold at $2,100 per ounce.
As you can see on the graphs, the schedule for the debt repayments of the existing debt starts in December 2023, by the end of this year, with $25 million amortization. Then we have three more years to complete amortization of the loan. That's it. That's all I have on the financial section. Ignacio, back to you.
Thank you, Eduardo. We go to questions after the full presentation. Thank you, Eduardo. If we continue very, very quickly, we have our growth strategy. We want to continue growing the business. The strategy is based in three pillars. The first pillar is brownfield, basically to continue developing our resources in Inmaculada, in Pallancata, and in San Jose. The second pillar is our development projects, which is mostly focused now on completing Mara Rosa, a project on time and on budget. Also, continue at full speed with the Royropata project. We have already started the permitting process, and we're very excited with the potential that is going to have on the medium to long-term production of Pallancata.
Finally, we're going to continue looking at business development opportunities in the Americas, gold and silver in the Americas, and looking at leveraging our capacities, skills, and experience in other areas in the continent that fit our criteria. Getting to the detail Inmaculada. Inmaculada, as you know, is an asset that has been consistently beating its guidance. In 2022, we produced around 237,000 gold equivalent ounces at an average hauling of $1,059. As we talked about, we are expecting the MEIA decision during the second quarter of 2023. We're approaching the last stage.
We continue seeing a positive support from the government, you know, as you probably may have seen, in February, there was a PDAC event in Toronto. The Prime Minister was there, the Minister of Energy and Mines was there, the Minister of Economy was there, and all of them behaved very positive about mining as an important, and the most important economic activity for the growth of the economy in Peru. The fact that they wanted to promote, in particular, nine different mining projects, one of them being Inmaculada, you know? We have political support. We are seeing a significantly more active schedule in the reviews of the different governmental entities, so we're just waiting for the final decision, hopefully, before the end of the quarter.
The guidance that we have given for 2023 is about, say, around 210,000 gold equivalent ounces at an average all-in sustaining cash costs of between $1,260 and $1,320 per gold equivalent ounce. We continue having a very large and significantly underexplored exploration package. You can see there the focus for, once we get the MEIA, is going to be on this area called the Eduardo Belt, you know, which is between the Eduardo and the Lita faults, and has all these different structures, José, Fali, Luz, Laura, Mila, that we're gonna be drilling as soon as we get the MEIA permit during this year. It has a lot of potential.
You may recall that between 2019 and 2021, we discovered all this area here in Angela Northeast that gave us about 1 million ounces of gold equivalent material. We believe that this area, the Eduardo Belt area, has another 1 million ounces in potential that we should be untapping in the next couple of years, 2023 and 2024. On top of that, we have other areas in Lineamiento Tres, in the Minascucho areas, and also here in Inmaculada South, that has still plenty of potential. As we have always said, we see this as a district and an area that should continue giving us production for the next decades. For all our operating mines, we have Pallancata in Peru. As you know, Pallancata is an asset that is approaching its last stages.
It's an asset that should be getting into care and maintenance this year. We continue still looking for targets to see if we can extend it more, but no success in the permitted area so far. We have been very successful on the medium to long-term potential with this new Royropata asset that we'll talk a little bit later on. The most likely scenario for Pallancata is that it will now be getting in temporary care and maintenance until the permit for Royropata is achieved. Once we have the permit for Royropata, it's basically a mine development that we will need to do because it's gonna be processed. It's right there. It's actually less than one kilometer from where we are currently operating, but unfortunately, outside of the permitted area.
It's gonna be processed and the entire chain is gonna follow what we already have in Pallancata, you know? It should be a relatively decent CapEx and timing to production. The guidance that we have given for Pallancata, assuming production until late this year, until second half, is between 2 million-2.2 million silver equivalent ounces at an average all-in sustaining cash cost of around spot price. In the case of San Jose, Argentina, 51% owned by us, we're giving a guidance of between 12-12.4 at an average all-in of around $17-$17.7 per silver equivalent ounce. We continue adding resources. 2022 was a very successful year.
We added another 20 million ounces, which is a clear sign that the mine continues showing significant potential. We also have very interesting drilling targets for 2023 as well. Getting to Brazil, Mara Rosa is a project that we are very excited about. It's located, as you know, in Goiás, in the center of Brazil. Goiás is a state that is very favorable to mining. There are many other operations and projects there. It has very robust project economics. You can see here the highlights. It has an initial life of mine of 10 years that we believe it should be significantly more than this. Total IRR of the project between 18 and 20, with very conservative prices, particularly when considering the price of around $2,000 for gold now.
It has, like, 1.2 million ounces of resources at an average grade of 1.7. Strong local exploration potential, and we are currently focusing on trying to find more resources in Pastinho, Campos Verdes, Morro Redondo, [Philos Orongo] areas, etc . The project is at 71% progress, so very well advanced. Engineering work is pretty much complete. 93% of the equipment has already purchased orders. 83% of the project already has close contracts, so the possibilities of overruns is diminishing as we continue advancing, which is very good. We have had also the big help of a positive movement of the real compared to the dollar. We have already been operating 2 million hours without any accident, which is also very good.
Very strong safety and environmental and ESG in general standards from day one. As you can see, here some pictures of the advance of the project. Actually, yesterday we received the crushers as well. So far it's been looking very good and we expect to finish the project as we have mentioned on time and on budget. There's no reason or indication on why that wouldn't be the case as of yet. You can see the impact that this project is gonna have in the company is very material. Also, in terms of reserves, it's gonna allow us to increase our reserves by 75%. In terms of production, it's gonna allow us to increase our production by 32%.
In terms of all-in sustaining cash costs, these are our estimated cash costs for the year. You can see how Mara Rosa has a very attractive profile that should allow us to get a significantly better all-in sustaining cash cost profile on a corporate standpoint. Talking about Royropata, this is just to show you how close it is. These are the areas that we're currently operating and mining, and this is the area that we're currently working on, no? Which is what we call here the Pablo Belt, located between the Eureka fault and the Pablo fault. That is, I think like about 700 meters from the area that we're currently operating. We have been very successful.
The material that we have obtained in resources last year has been in this Royropata vein mostly, also some in Marco. For once we have start operating the area, it has the potential to waste completely open that we have not been able to drill because we can only drill from the permitted area, so we have only been able to reach this area. Once we have the permits to drill this area, we're gonna be able to prove the potential that, in our view, has potential for another 50 million and more ounces just right there, no? But just we can, we cannot drill for those reasons, but in our view, it has absolutely no reasons why it shouldn't continue. Plenty of potential in this belt.
For permitting purposes, this is gonna be also a very different process than Inmaculada, because Inmaculada, the permitted area is a very large area. Here, all the resources are concentrated in a very small area, in a very small footprint, you know? The permitting process should allow us for a much speedier and simpler process than Inmaculada one. Looking forward to that, as we say, this is the future of Pallancata, in our view. It's gonna give us enough to produce at past levels, which is always very exciting. You can see here the history of Pallancata. First, when we started with the Pallancata vein, we reached productions, you know, at some point at around 10 to 12 million ounces per year.
When we ran out of resources in the Pallancata vein, we found the Pablo vein. Pablo vein started giving us levels of production at around 10 million ounces or so. We believe Royropata should also allow us to get very close to previous production levels for many more years to come, and with a huge difference, which is that these veins that we're finding here are by far the best quality veins that we have ever encountered in Pallancata. Even though production could be at similar levels, the cash flow potential for these ounces is significantly higher than what we have ever had in either Pallancata vein or the Pablo vein. We're very excited about this. In terms of key upcoming catalysts for the company, we obviously have very interesting growth catalysts on the growth front.
Inmaculada MEIA decision, you know, which will happen, as we said, in the second quarter of the year. The completion of Mara Rosa, you know. The Royropata development that we believe continue giving us very positive news. Of course, the brownfield potential that we have in all our operations. That is underpinned by our cash flow generation, you know, from Inmaculada, from the medium-term cost reductions that we're putting in place, obviously from the cash flow from Mara Rosa once it starts operating. Finally, with a strong balance sheet to support our current operations and growth. Obviously, you can see that mostly as a result of the delay in the MEIA decision, how our stock price is significantly undervalued compared to our peers.
You know, EV to EBITDA or price to earnings, nowhere on the worst part of the curve because of the MEIA decision, basically. We do expect that that should materially change once we have the final decision. On the other hand, the free cash flow yield is by far the best compared to any of our peers for those reasons. We believe that there's plenty of potential here once we are past the MEIA decision. In summary, you know, we believe that this business has been significantly transformed with the growth options that we have that are being advanced. Inmaculada cash flow underpinned with extensive brownfield opportunities that we have seen. We believe it's an asset that is gonna continue giving us very high-quality ounces for the long future.
Mara Rosa, we are very happy with the project. Continues giving us positive surprises. Progressing on time and on budget, which is very good and very unheard of in project developments lately. We're very proud with that and very excited. Royropata discovery, which is set to deliver a very important medium-term growth in terms of ounces and in terms of average all-in sustaining cash flows profile. Of course, a highly compelling valuation. Let me stop there, just see if you have any questions. Yes. How are you?
Just, two sort of big-picture questions here. We were talking a little bit outside about the Peruvian government and how things have changed versus three months ago, six months ago.
Yeah.
Could you maybe give us a little more color there? Second one would be just around, Argentina. Things seem to be changing, some metals companies are getting special dispensations to take hard currency out. Where are you with Argentina?
Yes, absolutely. Let me cover the first part. The second part, I will pass it to Eduardo, who has been working very closely with Argentina and team to see what can we get as a mining association there in terms of things that could help us on the currency and conversion fronts. In terms of Peru, what I can tell is that we have seen a very material change with the new government in place, you know, positive material change. We have moved from a government that was, you know, at the best neutral, with many people even against mining activities and with completely different approach towards a private sector mining investment in the country, private sector investment in general.
that we are seeing has a completely different focus. It is a government that from day one, led by Prime Minister Otárola, has said very clear that the main focus of his mandate is going to be to retake the country in the growth path that it should have to help grow the country and reduce the levels of poverty and increase the average income of the people. He believes seriously that mining is going to be the most important driver for that economic growth. He is convinced of that, same as the rest of his cabinet.
From the very beginning, from the day he presented his speech to the Congress, you know, before the Congress gave him the vote of confidence, he was very clear with that. He put mining in the front of his strategy. He mentioned there that he was there to support the acceleration and development of nine different mining projects. Inmaculada was mentioned as one of those nine mining projects. From the very beginning, the attitude has been very positive. A few months later, came PDAC in Toronto. In Toronto, you know, which is something that is not that usual. It has not been that usual lately.
We had the presence of the Prime Minister, the Minister of Economy, the Minister of Energy and Mines, and the President of the Central Bank, all of them giving very positive messages around mining. Very, you know, the only presence there was enough to say that it was important for them, but also in their presentations to the press and to other companies and investors and suppliers. The messages that they gave were really, really positive. They also mentioned, again, both the Minister of Economy and the Prime Minister, they also mentioned the nine projects that they wanted to promote, and we were included in those projects. That's something that we had not seen in the past in the previous government. We believe that that is a very positive change.
We believe that the government is putting a lot more pressure because they are conscious on how important the promotion of these mining projects is to the country. They're putting significantly more pressure and completely speeding up the permitting processes, no? All across the most important projects, mining projects in the country. We feel that, no, the political support has changed materially. Obviously, they're also dealing with other matters, no? As part of this new approach, they are also working on certain changes in certain different organizations. That is taking also some time, no? At the end is gonna be an equilibrium, but we do believe that the landscape is significantly better.
Our best understanding as of today, is that we believe that the decision should be made before the quarter ends, no? We're counting on that. All in all, I would say a very positive attitude. They're still gonna have to deal with challenges, no? The social front is, I would say, right now in a relative calm, but there are certain areas of the country that continue being complex, such as Puno, for instance. Other areas that could get also into other social issues going forward, no? I think it's very important that they continue monitoring that. On our particular front, that you may recall we had certain social issues at the end of the year.
The government is doing a very good job in putting together in discussion tables, the communities, the companies with the participation of the mining sector, in order to make sure that we reach agreements and we work together on a sustainable long-term relationship. I would say very positive changes in general. Regarding Argentina, Eduardo.
Thank you, Ignacio. Thank you, Jason. Yes, we have seen other sectors requesting and having access to U.S. dollars at a special rate, like agricultural industry. In our case, we now have access to U.S. dollars at the official rate, which is beneficial for us to pay for imports. In the past, we had to go to the secondary market to acquire dollars at a higher rate. We now can do it at the official rate, which is very positive. We have also seen for mining special treatment for on the FX front for associated to specific investments, no? As a matter, as a way to promote investment in Argentina.
I would say that the mining association is working together, no, to talk to the government to see if mining in general could access a better rate compared to the secondary rate. All in all, yes, we're getting access to dollars at a better rate for imports, no? There are mechanisms that would allow us to access dollars for at a higher rate for, let's say, we paying a company bills or dividends. I would just like to highlight that we're seeing in Argentina that there's a lot of pressure from a fiscal standpoint. Due to the dry season, the agricultural business is not bringing as much dollars as expected, so the level of reserves is getting low.
I think the probability of a devaluation soon is higher than it was in the past, and that will come certainly with more flexibility to access to U.S. dollars. We see the future of Argentina, we're optimistic about what we know what will happen on that front.
Hi, Dan Major from UBS. Couple of questions. Just the first one on the specific points related to the approval of the extension environmental permit. Can you give us any color? I mean, what is the exact sort of sticking point? What's either the key final component that needs to come into place for the license to be approved?
Yes. Basically, there are several governmental entities that participate in the permitting process. And there's at the end one office that is called the SENACE, which is part of the Ministry of Environment, that makes the final decision, no? Of those entities that comment, there are some that comment and whose opinion is binding, and some that comment, but their opinion is not binding. I would say we are already very well advanced in the opinions and comments of the different stages, no?
Once that is completed, then SENACE, who has to consolidate the other observations but also has their own observations, need to be comfortable with that, review the situation, and then the one that pronounces itself is SENACE. As an organism ascribed in the Ministry of Environment. I would say we have-- We are already under the final round of observations and discussions. We have already submitted all our answers. We are still waiting for the final stage in which we're gonna be getting any potential final questions. After that, the process should be completed.
Okay. just to be clear, there is still possible dialogue that's required. It's not just-
There's-
All of they got all the information they need to make the decision.
There's ongoing dialogue, of course.
There's ongoing. Okay.
Yes.
There's not one specific outstanding issue.
No.
opposition, it's just multiple-.
Yes.
streams of
Exactly. No. I mean, it's a document that has about 40,000 pages.
Yeah, yeah.
You can imagine there are notes, comments in terms of subjects and others in terms of forms, no? It's a long document, no?
Yeah.
Obviously, you know, they are also struggling with. The government is also struggling with lack of personnel. Going through that, and we are not the only company applying for a permit, no. They have to go through that. We believe that they are already very well advanced. This is a process that has already taken us three and a half years. I would say now that the speed up and the priority level that we are seeing is significantly better now with the new government. We feel confident that the timing that we have given to the market, with the information that we have as of today, should be the right one.
Okay, thanks. Just a second one looking at the on the balance sheet. In a scenario that you were not able to extend the permit and you would have to announce to the market that you would be curtailing production at Inmaculada, can you walk us through the covenant structure on your debt and what the options would be under that scenario?
Thank you. The main financial covenants we have in our debt contracts are two. The Total Debt to EBITDA, and that's a ratio of three, a covenant of 3x . The Interest Coverage Ratio, meaning EBITDA divided by total interest of four, no? We're gonna be fine for the entire year, no? If we stop Inmaculada, we may have issues, no, at the end of the first half of 2024. I would say we have a very good relationship with our banks. We have been working with them for years, and we are working closely with them. They are monitoring this situation and they are supportive.
It'd be mid 2024 that you wouldn't incur any issues until at least the end of this year. If it did run over.
Until the end of this year, we're gonna be fine.
Okay. Thank you.
Thank you.
Thank you. Patrick Jones, J.P. Morgan. Just a question on the Mara Rosa capex breakdown, given the, you know, the focus on conserving cash at the moment. Could you just talk a little bit about how much of the capex breakdown or what's left to spend is saved for yellow goods equipment, things like trucks, drill rigs? That, you know, have you considered anything like moving that to a leasing model instead?
Do you want me to answer that?
Yes. We're looking at all options, no? Right now we are assuming that we are a The We're using contractors and we're looking at all alternatives. The advancement of the project is in very good shape, at above 70%. More importantly, as Ignacio mentioned, most of the contracts have been already closed so that the amount to be spent is pretty much fixed, no? It's a matter of executing, and the company's, and the team is executing very well on that front.
We have spent already $75 million last year. We expect to complete the guidance that we're giving is $100-$110. No, there should be something left over for 2024, no, but pretty much most of the investment is gonna be completed between now and the end of the year. The guidance remains at $198, no?
Thank you.
Yeah.
Good morning. Richard Hatch from Berenberg. A few questions. First one is just on Royropata. Your slide points to, am I right in thinking it's probably a two-year sort of suspension of production at Pallancata whilst you bring that into production?
Yes, roughly.
How much are you gonna spend at Pallancata in terms of proving up those resources into reserves and then bringing it into a position where you can mine it? That's the first one.
Yes. Basically where we stand right now is that we are going to be doing infill work in Royropata this year to prove them. The budget is not too much because of the high grades, relatively low tonnage and the concentration of the resource and the width of the structure. We're looking at probably $3 million-$4 million this year for infill. After that, after that we have that proven and put into our model, then our goal is that we're working on the drilling permit for the remaining half, or hopefully more, of the vein, so we can drill and increase the resource. In parallel, we're gonna be working on the permitting.
Once we have the permit ready, the idea is to start developing the mine and extracting those resources as much as quickly as we can, no? The mine development should be similar to all our other operations because it will be probably one mine entrance, not too much ventilation in addition to what we already have and certain new ones, because it's right there, no? We're gonna use as much as we can from the also underground infrastructure that we can for current works and use the same processing facility, no? Total capex in general for this project should be relatively low.
As in kind of what? Sort of low tens of millions, something like that?
Yes. I would say mid-tens when you take into account everything.
Yeah.
Yes.
Okay. The cost of keeping Pallancata on care and maintenance for those two years, just keeping the lights on and everything the same?
Yes. There will be an important cost at the beginning, no? Because we will need to let the people go, no? Obviously, we need to see if we can find efficiencies there and try to see if there are other alternative opportunities for them in our other operations. I would say, you know, once that happens, you know, the cost of a current maintenance when you take into account the minimum shifts that the certain pumping requirements they need to do, environmental controls and that sort of thing should be around $4 million or so per year.
Yes.
Yeah.
Thanks. Then, Eduardo, you talked about the tax kind of elastic band coming in this year from last year, where you had to pay more and the tax payment this year was a lot less than the previous year. Would you expect any significant reduction in cash tax paid in 2023 versus 2022?
Yes.
A-any-
Well-
Any movements on that like kind of a benefit to you, any rebates, anything like that we should be thinking about or not so much?
Not rebates, no. We will not have the carry, no, the carry from the previous, from the previous year being paid this year. As I said, those $50 million that were paid in 2022, no, for the 2021 period will not be impacting this year. The rest, no, the payments that will go for this period will depend on the performance of our operations during the year, so.
Okay, thank you. The last one is just on exploration spend. Obviously, Snip was $19 million, I think, in the exploration expense in the income statement that rolls away. How much are you gonna spend on exploration this year, next? What's the kind of planned budget for?
Co-corporate wise?
Yeah, corporate wise.
Yes. Corporate wise, the budget for this year has been very low on purpose because we want to wait for the MEIA. In Inmaculada, the budget is very reduced. Of course, once we get the MEIA, the idea is to put a budget in place for that. So far, we have considered a very limited, just minimum drilling in Inmaculada. Not too much. I don't know, less than $2 million a year. In the case of Pallancata, we have also a limited budget. Part of that is gonna be for the infill of Royropata. In terms of new drilling, we're budgeting around $1 million or so to be spent in looking for other potential targets.
San José is a similar budget as usual, which is around $5 million-$6 million or so. Where we do have certain budgets for drilling is in Mara Rosa in Brazil. In Mara Rosa in Brazil, we're trying to prove other targets. We're probably gonna be spending somewhere between $3 million-$4 million this year.
Okay. really, it kinda shakes out at sort of 15, 20, something like that.
Yeah.
Okay, cool. Thank you.
Thank you, Richard.
Jason, back to work again. Can I push you a little bit here on Pallancata?
Yeah.
I mean, you showed that good chart where you had the big surge in production. Then it collapsed. Another big surge in production. Then it collapsed. Now we're looking for another big surge in production. How come you guys can't manage that asset in such a way that it's not so variable? I mean, this thing you found is only one kilometer away. Like, why is it playing out like this?
Sure, sure. That's a fantastic question. I can tell you, Jason, that the most important challenge that we face, and it's not only us, it's the country. There is underground mining in the country in general, is the permitting situation. For every drilling campaign that you need to do outside of your area or the area that you know, you have to wait just an awful lot of time, and that's when these type of situations happen. If we had the permit to drill the entire area, no, these things wouldn't happen. But the problem is that you are allowed to get your permits for the area that you know, and that you have defined as a, as a reserve and is part of your mine plan.
Once that happens, you need to start getting other exploration permits, or you can drill from underground. When you drill from underground, you're limited to where you can drill and what you can test. Mostly the only resource that you have once your permit started is circumscribed to a certain area is drilling from underground, which is not easy. Then once you find something, you start getting the drilling permit, you go to another area, you could be spending one year, two years, three years in the permitting processes. That's something that in the past has not been understood by the government. I can tell you because it was a public event.
Last week, the Minister of Energy and Mines called pretty much all the CEOs of all different mining companies in the country in a large roundtable to ask about our key concerns as miners. I can tell you, not only underground miners, but the entire mining community's main concern was around permits. No? You had other issues such as no royalty use, etc. The unanimous comment was around mining permits and the time it's taking to get them. The government has created a task force to see how they can accelerate that. We have made sure also that it was very clear that they cannot treat open-pit mining and underground mining in the same category because it's completely different situation. No?
I'm sure the message came across, and we have the message from the Minister of Economy, Energy and Mines that they are already working on a task force to materially simplify the permitting process. We believe that that is gonna be the case. No, otherwise, you have those issues, no. The same thing happened to us in Arcata. In the past, no, the permission to continue drilling was pretty much immediate, and that's why we were operating Arcata for 50 consecutive years, 60 consecutive years. In the case of Pallancata, no, we have been circumscribed to that. No? That's why we decided in Inmaculada to discover as much as we can and go for the permit for the next 20 years, because we don't want that to happen to us. No?
In the case of Pallancata, no, we didn't have that option because when we got the permit in 2007, it was circumscribed to a certain area. Now, if you wanna go outside of that, you need to do a modified environmental impact statement, and that is a process that takes three years. That's the key challenge. I would say it's completely related to permit. If the permitting process was materially simplified, those things wouldn't happen, and you will have a smooth production.
Okay. Thank you.
Hi, it's Yuan Lu from Liberum. In the FY 2022 report this morning, you mentioned that while you said here that you're confident about the timing for the MEIA permit, you've also looked at various scenarios ranging from not getting the permit onwards. Could you shed some light on some of the key scenarios that you looked at?
Yes. There are basically, you know, two scenarios and one in the middle, no? The two extreme scenarios is, once we get the decision in Q2, and the decision is positive, and we can start all the mining development and production in the new areas of Inmaculada, no? That's scenario one. The worst case scenario is the one in which the permit gets denied, no? In that case, no, obviously we will need to produce Inmaculada until the end of the year and then put it on care and maintenance while we resubmit the permit, probably in a much more narrow area. We wait for that permitting time, and after that happens, we start operating Inmaculada again, no? Those are the extreme scenarios.
In our view, I mean, the probabilities of the first ones are significantly larger than the other one. There's also some potential intermediate scenario, which is that we come back with a denial for a certain reason that could be corrected, no? That we are requesting additional information, no? Those are things that could delay the process, no? I would say that scenario, no, is one into which we are assigning, no, a lower probability as well.
If that were to happen, I would say in the big scheme of things, that wouldn't be a critical thing, no? As long as they can be corrected. We believe that if there was something that could be corrected, it's something that shouldn't take us too long, because there has been three and a half years of work here, no, and 40,000 pages. Pretty much all of the answers are already there, no?
Okay. In a previous press release where you first spoke about this, you've mentioned operational factors in deciding how quickly or slowly the operation will be shut down during the second half. Could you expand on that?
Yes. Basically, the guidance that we have given is the same. We believe that if with the current permit that we have, we are going to continue operating Inmaculada until the end of the year.
Okay. The end of the year, unless the permit is denied.
Even if the permit is denied, we will continue operating until the end of the year.
Okay. Thank you.
Yes. Thank you.
Hi, it's Marina Caro from RBC Capital Markets. Given your recent experience with the permit of Inmaculada, do you think you could make any changes to the way you permit Pallancata to speed up the process?
Yes. I mean, hopefully, let's hope that the initiative of the government of simplifying the permitting process goes ahead, no? It will be very important for the entire country. They are aware of that, so we have expectations that that is going to happen. If that were not to happen, I would say the most important change in Pallancata will be to try to narrow down the area to be permitted as much as we can. When you take into account the area where the resources are and the area where the potential is, that is a small fraction of the entire property that we are permitting in Inmaculada. A tiny fraction. Okay?
There are significantly less impact, significantly less area that you need to monitor, significantly less water samples that you need to take, significantly less communities that you're gonna be impacting, significantly less issues in terms of roads, accesses, in terms of mine entrances, in terms of ventilation chutes. The impact will be significantly lower, no? The amount of engineering required to be done is significantly less as well, no? It will be a much simpler process to follow. That will be key, no? Having said that, also this one has other challenges that Inmaculada didn't have, no? The proximity to certain water bodies that we need to make sure that the engineering covers that very well.
There's also certain issues that we will need to mix that permitting with the Selene plant permitting because of new regulations. We will need to be a new process that comprises the new area plus the plant. Which also is gonna be a little bit more time-consuming. All in all, we believe that the Pallancata permitting situation itself, even if the regulation doesn't change, should be a much simpler process than the one that we followed for Inmaculada.
Thank you.
Thank you.
Sure. simple one on Snip. Could you just run through the total investment made by the group on the project and how you intend to recover that investment for investors? Also just peripherally more regarding the current price environment, you've got a couple of assets that are non-core in the portfolio. You talked about prices around about $25 an ounce historically that would, re-encourage you to look at those projects. Clearly, you've not got the bandwidth to start assets such as Arcata, etc , again. Would you look to then diverse, you know, divest those assets and monetize them in the current price environment?
Sure. Thank you very much. The case of Snip, we did a couple of investments, no? The first one as part to get the option to acquire 60%, we did a private placement in the company. I think at that point there was about 4.5% or so, $4.5 million of investment. That gave us the option to acquire up to 60%. We sold that investment with a very important profit, okay? We just kept the option to acquire up to 60% by following a certain set of investments. Since it's an option and you don't get your value until you complete your earning, if you walk away before that happens, that money is basically lost, okay?
The way we saw it was more like a brownfield, greenfield type of investment, you know, in which it was all money at risk, you know, but we believe that there was some interesting potential to continue developing the project. We managed to get in, we managed to settle there, take control of the project and assemble a very professional team, develop very good relationships with the First Nations, with the Tahltan Nation there, that we continue managing until today. At the end, you know, we got the project, we got the PA, and the PA gave us positive results. Positive results. In the meantime, what happens was that we are still struggling with investment in Mariposa.
You know, we still need to invest, you know, a total of $200 million in Mariposa. Mariposa will not stop production until next year or the guidance that we have given until H1 2024. We didn't have at that time, but we also have now this Royropata resource that is looking amazing and that is gonna require capital commitments as well. On top of that, we have also, you know, a balance sheet that we need to take care of, you know. Right now we have debt and, you know, while we wait for the MEIA permit, we need to be very careful on how we manage our balance sheet.
Taking that into account, taking into account all the different investment priorities that we had, the balance sheet, you know, the MEIA uncertainty as of yet, and putting that Snip project into our entire mix, we decided that the best use of our money was not, you know, even though we had a profitable project, was not at that, at that particular project, but to focus on the other priorities that we have within the company. We looked at different alternatives to try to see if we could monetize part of that investment, but unfortunately, we couldn't find a way to monetize it. We returned the option.
You know, the investment made is lost and it was suspense from day one because we saw it all the time as a risky investment, as a greenfield type investment. That gave us significant knowledge of the area, significant experience in Canada, significant tools to continue evaluating other type of projects of that nature. Unfortunately, you know, the investment was lost, you
know. Thank you.
Okay. I think we've got no further questions from the room. Saskia, if we can go to questions from the conference call, please.
Certainly. Thank you. As a reminder, to ask a question over the call, please signal by pressing star one. That is star one for questions on the telephone. There appears to be no questions at the moment, so I'd like to hand back over for webcast questions.
Thank you for that, Saskia. We've got no questions from the webcast at the moment. Ignacio, back to you for any closing remarks.
Thank you. Thank you very much. No, there are no final remarks. I think we have covered everything. I thank you for your time and for coming here. If you have any remaining questions, we are here today and tomorrow and, otherwise, Charlie is here as well. Thank you. Thank you again, and a pleasure to see you.