Okay. Morning, everyone. Here is Eduardo Landín. I am the new CEO of Hochschild Mining. Let me say that I have been in the role for 10 days now. First of all, I would like to thank Ignacio Bustamante for his contribution to the company in the last 32 years, and also for the transition period that has been very positive for the company and for me. Today's presentations, I'm going to give you some highlights of the H1 results. First of all, we have a robust operational and financial performance. Revenues of $314 million, EBITDA around $100 million. Our cash balance is $94 million. The all-in sustaining cash costs of $1,572 per ounce of gold.
We have recently a revised 2023 production target. It would be between 209,000 and 213,000 ounces of gold. And our revised all-in sustaining costs target, it will be between $1,490 and $1,580 per ounce. The good news is that Inmaculada MEIA was approved on the first of August. Mara Rosa is progressing on time and budget. Once we got the Inmaculada permit, we have restarted the brownfield exploration program at San Jose, also at Inmaculada. And as I said at the beginning, the leadership transition is complete. So we consider that we are in a position ready to deliver a sustainable growth. If we can go to page number 4, please.
We have a very strong half ESG scorecard. I would like to remark the historical low in the Lost Time Accident. I mean, we got 0.84, which for underground mines is a world-class level. And on the severity index is also very, very low, it's around 32. I would also mention that our ECO Score is a very good level, 5.89 out of six. And also, we are still working with the communities. 53% of the workforce are coming to local, local communities. And we have spent $190 million from 2022 on the local procurement.
As you can see on the right-hand side of the page, we have been increasing the latest score on the rating agencies. I mean, five out of six has improved. So this is a significant progress on the ESG. Now, I'm going to pass the presentation to Eduardo Noriega for the financial results. Thanks, Eduardo.
Thanks, Eduardo. On page six, we're having here the results of H1 2023. A robust set of results given the challenging environment we had in the period due to a delay on the approval of Inmaculada MEIA. Revenues were $314 million, and we recorded an adjusted net loss of $1.9 million, and an adjusted EBITDA of $99.5 million. Variations versus the previous period, H1 2022, start with revenues being 10% lower than the previous period, mainly as a result of the scheduled lower production, but also a delay on the approval of the MEIA of Inmaculada, and lower silver prices, which effects were partially offset by higher gold prices.
Cost of sales increased by 4%, mainly due to temporary changes in inventory, higher depreciation, and lower production, as explained in the revenue line. Exploration was lower, mainly due to the cash optimization measures that we took regarding the delay of the Inmaculada MEIA, but also we didn't have expenses in Snip, which were accounted in 2022. Net interest were lower, mainly due to lower FX transaction costs in Argentina. And also, I would like to highlight in the income tax line, that it includes the special mining tax and royalties in Peru, both accounting for $2.7 million. And we also have an FX impact on the deferred income tax from the devaluation of the main Argentinian peso of $1.9 million.
We also recorded exceptional items in the period for $48.3 million, mainly in our non-core assets, Azuca and Crespo, for $42.3 million associated to market conditions and inflation. Also in San Jose, we recorded an impairment of $17.4 million due to increased local inflation and increase in country risk in Argentina. And we recorded an impairment in Aclara due to the higher perceived risk due to the permit delay, and the impairment was $7.2 million. But then we had a positive effect from tax of $18.6 million. If we can go, please, to page seven. The cash recorded by the end of the period was $94 million, starting from $144 million.
As you will see here, we had strong generation from Inmaculada with $63 million. San Jose contributed with $11 million of cash generation. In Pallancata, we used $9 million. Brownfield programs accounted for $11 million, and corporate expenses, $18 million. We paid $5 million of taxes, mainly royalties and corporate social responsibility taxes in Argentina. Under care and maintenance and closure, we used $8 million, $9 million of net interest, and we had a positive working capital and other variation of $2 million. As you will see, most of the cash was used to develop the Mara Rosa project, a project in which we invested $67 million in the period.
On page eight, our all-in sustaining cost for H1 was $1,572 per ounce of gold, and we are increasing our guidance, as shown in this slide, from $1,370 to $1,450. No, that's the original range, and the new range is $1,490-$1,580 per ounce of gold. This increase is mainly a result of the delay in the approval of Inmaculada's MEIA. But also, we decided to accelerate the mine development CapEx in San Jose by $11 million this year.
As you can see, Inmaculada's all-in sustaining costs is impacted by lower production, which dilutes our fixed cost among lower ounces, and this effect is partially offset by lower CapEx that we expect for the year. In San Jose, we had $21.5 per ounce of silver, and in the second half of the year, we expect to have a lower all-in sustaining cost than what we had in H1. In Pallancata, also in the second half of the year, we're gonna have a lower all-in sustaining cost, and the revised guidance is shown in the last column of each of the mines presented in the slide.
If we move to page nine, our capital expenditure for the period was $62 million in all our operations, and we're increasing our guidance from 125, from the range 125-135, to revised guidance of 131-140 million dollars. The CapEx, in general, the CapEx has been increased, mainly associated to the accelerated CapEx in San Jose for $11 million, and this effect was partially offset by lower CapEx in Inmaculada, a CapEx that will not be able to execute the full amount originally scheduled due to a delay in the Inmaculada permit.
In H1, as you will see, our all-in sustaining- our CapEx, sorry, is, is lower than what we will have in our, in the second half of the year, mainly due to a MEIA delay, but we are, we have a plan to recover most of, of the CapEx original, original, originally scheduled. The Mara Rosa construction CapEx is- has not changed. It remains at between $100 and $110 million for the year. And for, for the period, the total CapEx recorded was $65 million. These capital expenditures do not include the exploration, our exploration budget, which is around $20 million for the year. If we go to page 10, the company continued using our- its finances to finance its near-term growth. The, what...
In Mara Rosa, we have executed $127 million of CapEx, and there's $73 million remaining CapEx for completion. We have $94 million of cash, and we have an existing debt of $300 million as of June 2023. We have an additional $200 million debt facility, which give us flexibility to keep to complete the construction Inmaculada of Mara Rosa. Yeah, I have to say that in August 2023, we drew down $60 million from this facility, which is a five-year facility with two years of grace period at a rate of SOFR + 2.05%. We also executed hedges for that that will support the future cash flow of the company.
Those represent close to 10% of our total production per year at very interesting prices. You will see there that our hedge prices go from, for gold, $2,047-$2,206 per ounce of gold. On page 11, we have our 2023 revised guidance I referred to in the previous slides. As you will see, most of the changes have to do with the delay on the MEIA affecting our production, and therefore, our all-in sustaining cost in Inmaculada and our decision to accelerate the development capital in San Jose. With that, I return to Eduardo Landin.
Thank you, Eduardo. Okay, we're going to page 13, please. What we have in front of us is an exciting future for the company. With Inmaculada, MEIA being approved for the next 20 years, that represent a huge, huge potential to explore in a very impressive area. Then we have Mara Rosa first production in H1 2024, on time and budget. And of course, we have Royropata, a new discovery. This is a fantastic discovery, totally open, yeah, and waiting for further permits to be drilled in the new area. I would say that this is a undervalued near-term growth story that I'm going to tell you in the next slides. So first of all, we have Inmaculada, page 14, please. We have Inmaculada MEIA approved for the next 20 years.
As you know, Inmaculada is our flagship asset. It's been producing stable since 2015 with a production record. As Eduardo Noriega mentioned, 2023 was impacted by the permit delay, and that's the reason we have already presented a revised guidance. The good thing is that we have a strong potential to increase production and reduce costs with high-grade resources. If we go to the next page, we can see the other operating mines. We have Pallancata. I mean, Pallancata, as I said, the future of Pallancata is Royropata, and we will be working to get that permit. And the idea is to put this unit on care and maintenance, probably on Q4.
San Jose, as you know, we have been operating that mine since 2007 with a very, very impressive grades. And there is an upside in Argentina now, that with the Argentine elections, we will have an improvement of the economic conditions, i.e., devaluation and a reduction on inflation. If we go to page 16, please. We have the Mara Rosa Gold Project, which is close to production. Let me give you some highlights. The Mara Rosa project is located in Goiás, Brazil. It's a very mining-friendly jurisdiction. The project has very robust economics, especially at these prices. And we are planning the first production on H1 2024. Also, we have...
I mean, we have a very big land package, and the idea is to optimize and explore to extend the life of mine and also improve the project economics. To give you some life of mine details, the initial life of mine is 10 years. We will be producing an average of 80,000 ounces of gold, but from year, I mean, from year one to year four, we will be producing 100,000. The all-in sustaining cash cost average for the, I mean, for the life of mine is $1,000 per ounce. We have an initial CapEx of $200 million, and as I said, we will be on time and budget, and a sustaining CapEx of $40 million.
The NPV at $1,600 gold is between $150 and $160 million, and the IRR at that price is between 18% and 20%. So a very impressive project economics. Talking about reserves and resources, in reserves, we have 24 million tons with 1.2 average grade, which represent nearly one million ounces of gold. I'm sorry, one million ounces of gold. If we can go to page 17, the current progress of the Mara Rosa project is 92%. As I said, we are progressing on time, on budget. We have all the equipment at the site. We have started the pre-stripping.
The dry stack construction is already started also. The good thing is that on health and safety, we have been able to accomplish 3 million hours without one lost time accident. That's really for a project, it's very, very impressive. And we have our ESG program, I have to say that we will have 320 people employed from Mara Rosa and Amaralina towns, which are the closest towns to the project. At the end of this presentation, I'm going to show you a video on the progress of the project, so you will see how advanced it is. If we go to the next page, page 18, please. You can see the impact in the portfolio that Mara Rosa represent.
In terms of reserves, we nearly doubled our reserves. That, that represent an increase of 75%. If we compare production, I mean, the estimated production on 2023, and we consider that we will have, on 2024, the same production, in theory, our production with Mara Rosa will be around 395,000 ounces of gold. Yeah? And the all-in sustaining cash cost that at the moment is around $1,500, Mara Rosa will add this production with a all-in sustaining cash cost of $1,000. So it's, it's very good news in every sense. If we go to page 19, I would like to give you some color on our exploration in the Southwest Peru Cluster. As you can see on the map, on the right-hand side is a geophysics map.
That map represent 30 miles per 30 miles area, so it's a, it's a, a very big area. We have been producing from this district from 2003. We have produced 3.4 million ounces of gold from Inmaculada, Pallancata, and Selene. We have a very strong potential to discover significant additional ounces. I mean, Royropata has already a 0.6 million ounces of gold, and we have further targets like Eduardo Belt, San Francisco, Royropata, and Condorillo. So this is a great district, and it's a real strength on the whole Peru portfolio. If we go to page 20, you can see there the potential exploration areas for Inmaculada. We have the Eduardo Belt, which, if you can see on the map, we have the fault Eduardo and the fault Lia.
We have already discovered the Angela Northeast resources, and we know that we can have Josefa, Lia, Luz, Laura, and Mila as additional veins, similar to the one that we found in Angela Northeast. So, just to give you an idea, during 2019 to 2021, we have discovered 1 million ounces of gold in this area. So plenty of potential targets for 2023, and it's something that we have already started. Yeah. If we go to page 21, we have a Royropata discovery at Pallancata. I mean, it looks like a long-term area. This area has already 51 million ounces, but we consider silver... But we consider we could have minimum another 50 million ounces of silver.
We expect to get the drilling permits on May 2024, yeah, to start doing exploration and try to bring more resources to the area. Also, we have another structure called Bolsa, which is on the left-hand side of the map, and that's a new area west to the Royropata, and that also has a very impressive potential. If we go to page 22, we can get in the detail of Royropata. As I said, we have already 50 million-51 million ounces of silver equivalent that's already in place. That means that we will increase Pallancata resources by 108%. The mineralization at Royropata is very impressive.
We have a 5 meters width and nearly 900 grams of silver in that area, and that means it's a fantastic rate, and that could lead us to use massive mining methods with very, very low cost. At the moment we are doing the permit. Yeah. I have to say that if we compare this permit with the one at Inmaculada, this area is smaller. Yeah? We have in place a PMO structure, so project management office, to deal with this with this permit, and also all the lessons learned from Inmaculada, we have already implemented on the strategy to get this permit.
One of them is that we should work with only one consultant for the environmental alone, and also for the engineering studies. In this case, we chose Ausenco, which is a very well-known international engineering company. As you can see on the graph on the right-hand side, from 2026-2027, we could restart the Pallancata operation, counting with Selene plant. And now that we're going to go care and maintenance, of course, we are going to maintain the mine, dewatering the mine all the time and to try to keep that in order. Down the page, you have the resources.
I'm not going to get in that detail, but, I mean, there is, a, an increase in the resources with an average grade- with much better average grade, which is a result of the discovery. Finishing with the Peruvian mines, we can go to, Volcan. As you know, Volcan is, located at the Maricunga Belt in Chile. I mean, it's, it's a place where... I mean, they, they have been producing 100 million ounces of gold in the past. There is several operating mines, and, there is some support, on the infrastructure. We believe that Volcan is a really good opportunity, is... I mean, we have a, a Volcan project, 9 million ounces of gold, with a average grade of 0.6.
We recently finished a PEA, yeah, and a NI 43-101 update of our resources. The result is good, yes, but the CapEx is around $900 million. So we believe that it's not the opportunity right for us, based on our capital allocation. And that's the reason we decide to look for a strategic alternative through M&A, or to sell the project, or to do an IPO. That's things that we are looking for. If we go to page 24, well, in this page, we can see that the valuation of the Hochschild share at the moment is very low, yeah? And here we can compare ourselves. The enterprise value versus EBITDA is 2.4 for us.
As you can see, Fortuna is in the mean, Coeur Mining has a bigger ratio. Price to NAV, exactly the same. We are 0.7. There is plenty of mines, I mean, operating companies that has better. Free cash flow, we have 18.6, and there is companies that has higher. I mean, Fortuna has higher. So with Mara Rosa completion, we believe that there is the opportunity to re-rate the value of the company. I mean, at the end of the day, we have the MEIA approval. We have Mara Rosa that is close to production, and then we have Royropata, and that's 3 excellent opportunities to develop the growth strategy of the company.
In summary, Inmaculada MEIA approval, 20 years ahead to do exploration in a very impressive land package. Mara Rosa close to completion. Royropata set to deliver a medium-term growth. We believe that we are on the borders of the mineralization, so there is a huge potential there. At the moment, highly compelling valuation. The leadership transition has been complete. I feel ready for the role. Also, we will have a Capital Markets Day in November, where we will present the strategy of the company, and of course, we will try to present some projections, you know, that we know that the market desire. That's all for me. We will now play the video of Mara Rosa, and of course, we are available for any question that you might have.
Thank you very much for your attendance.
Ladies and gentlemen, if you wish to ask a question over the phone, please signal by pressing star one on your telephone keypad. If you wish to cancel your request, please press star two. You may also submit your question via the webcast. Just write your question in the box and click send. Now, the first question comes from Richard Hatch from Berenberg. Please go ahead.
Thank you, and yeah, good morning, Eduardo and Eduardo, and thanks for your time. A few questions. First one, are you able to give us any kind of steer on 2024 volumes, at this point, just given the fact that you've given us updated guidance for the balance of 2023, and are you able just to give us a bit of a steer on that? That's the first one.
Well, the thing is that we are planning to present that in the Capital Markets Day in November. At the moment, we are working on our budget, also on the strategy development. So I will not be able to give you that data at the moment.
Okay.
But saying that, I mean, I would say that production-wise, that Inmaculada will be more or less at the same level. Mara Rosa, it really depends on which stage we will be able to start production during each one. But, I mean, let's say that we'll be able to produce around 6,000-7,000 ounces of gold per month. Yeah. So it really depends on when we finish the project. Pallancata will be on care and maintenance. And San Jose, we expect to be at the same level of today.
Okay, that's really, really helpful color. The second one is just on the permitting at Royropata. I mean, it sounds like you've kind of learned your lessons from Inmaculada. I mean, are you confident of the timeframe of what you've put down, just given the sort of the challenges that you've had with Inmaculada? And also the kind of steer of volumes from sort of 2026, is that again something which you feel sort of confident that you can deliver to the market?
Yes. Let me say something. First of all, the Inmaculada area is a huge area, and it's been a huge effort from the company, I mean, to get 20-year permit. We cannot compare the land package of Inmaculada with Royropata. It's much smaller. And of course, we have applied the lesson learned, you know, from Inmaculada, of course. I mean, we can say that we expect to have around three years. Yeah. But that really depends. I mean, it depends on our work, but also depends on the Peruvian government. We've been talking to the Peruvian government, and they have the best attitudes with us, and they know that we are pursuing that permit.
But at the end of the day, it's something that they will play a fundamental role on this permit. So our best estimation is three years, and we believe that it's achievable. But let me say that, I mean, again, I mean, it's dependent on us. We will do our best. We already implemented every single thing to do the best we can, but it's really depending on the government. So I would say that that's the current situation.
Okay. Good luck with it. Thank you. The next one-
Mm-hmm.
Just on Volcan. Just on the 1.5% royalty for $15 million that you signed with Franco-Nevada. Just to clarify, when should we expect that to hit the bank? And is that just an example of you just trying to create a bit of value from this non-core asset?
Let me pass this question to Eduardo Noriega, please.
Good morning, Richard, and thank you for that question. On Volcan, the money is already in escrow, so we are just waiting for the registrars in Chile to register the royalty, and it should be pretty shortly that we receive that cash.
Okay, cool. And then while I've got you, Eduardo, my last question, just on Mara Rosa CapEx, can you just help me with the math on it? So you spent $65 million in the first half of this year. I think the results say $54 million remaining CapEx expenditure in H2. But I think the guidance is unchanged, $100 million-$110 million. So, on my math, that means that your H2 spend should be $40 million, not $54 million. Can you just help me square that, please?
Thank you. Thank you, Richard. No, from the CapEx that we recorded in Mara Rosa of $65 million, actually, construction CapEx is 58, roughly. The rest is capitalized expenditures, is expenses, mainly, finance expenses that we can capitalize, according to as per IFRS rules. So the remaining CapEx for this year is around between thirteen to twenty-four, sorry, between $47 million and $58 million, that we would be expecting to incur in the second half of the year.
Okay.
Meaning CapEx will be completed in 2024.
Understood. Brilliant. Thank you, guys. Have a nice day, and thanks for your time.
Thank you.
Thank you, thank you.
The next question comes from Ian Rossouw from Barclays. Please go ahead.
Morning, gents. Just a question on Pallancata. Could you give an estimate what the sort of one-off closure cost would be that you expect to incur this year, and then what the ongoing care and maintenance costs would be going forward until you restart?
Thank you. On Pallancata, our estimated annual care and maintenance cost is close to $6 million per year, and then we would expect closure costs, meaning a temporary closure cost, mainly of $8 million, roughly.
Okay. Thank you. Will all of that aid be incurred this year if you close the asset, with the-
The $8 million, yes. The $6 million, no, it's, it's annual, so it will be only a portion-
Yeah.
O f it that will impact the 2020, 2023 results.
Okay. Perfect, understood. And then just on how should we think about the costs down the line? You said obviously three years for the license at Royropata. I mean, how should we think about potential restart costs? I mean, obviously, mine development, but is there any incremental cost for the plant that's required, et cetera?
Well, I mean-
Apart from working capital.
Yes. I mean, the fact that we are going to spend $6 million on care and maintenance, that would mean that we will maintain the mine, I mean, ready for operation. That would include maintenance for the plant and also dewatering the mine. So I don't expect to have any extra cost to restart the mine. Of course, once we finish the engineering, we will have the amount of development and all the infrastructure that has to be done in order to get to production, but that will be part of the information that we will, I mean, present, you know, during the Capital Markets Day . It's something that is, I mean, the engineering is under development, and we don't have the figures yet.
I expect to have that in November. But what I can say is that, I mean, with that grade and with that width, yeah, it will be a very, very attractive cost.
Okay. All right. Thank you. Yeah, I think that's all for me. I'll sort of follow up offline. Thank you.
Thank you very much for your questions.
Thank you. There are currently no further questions in the phone queue, and as a reminder, to ask a question over the phone, please signal by pressing star one. We will pause for just a moment to allow you to signal. We have a follow-up question from Ian Rossouw from Barclays. Please go ahead.
Thanks. Just one on Argentina, and then could you perhaps just give us an update on what the sort of current situation is around exchange controls, just the ability to take funds out? I mean, what, what's the sort of losses you're currently incurring to take money out of the country, just if you need to buy government bonds?
Thank you. Thank you, Ian. So in Argentina, what we have seen in the last couple of years is a net inflation situation, where local inflation has been higher than the devaluation. And that certainly has put the country in a difficult situation. And for us, of course, costs have been increasing in the last years due to that situation. Right now, the cash that we are generating in Argentina, we are using it to repay a local debt that we have, working capital debt. No, we were generating cash. We are not converting. We're not buying dollars to send them out of the country so far this year.
To do that, you need to access the secondary market, no? Which we haven't done, but we know that the cost to do that is close to 50% of the amount that you are planning to send out, no? Now, there are elections, as you probably know, there are elections coming, and the market is expecting a change, a significant change. All of the candidates have expressed in their plans their interest to resolve, to have a more permanent solution to our situation in Argentina, and we have different flavors within those candidates. I guess, in the best case scenario for exporters like us, no, a, a, a...
The valuation is expected, strong valuation is expected in the coming months or years, but again, that will depend on the results of the election, no? We will see upside in Argentina if, when the, you know, when a new government takes place.
Okay. That's very clear. Thank you very much.
Thank you. And as there are no further questions in the phone queue, I'll hand the call back over to Charles for any web questions. Thank you.
There are no questions yet on the webcast currently.
Okay. Thank you very much for your time and your attendance. Let me say that we'll be on the Capital Markets Day in November. We will present the global strategy of the company. In the next months, we are going to work very hard on our budget and our strategy and on operational plan. Again, thank you.