I would now like to hand the call over to Eduardo Landin. Please go ahead.
Good morning, and hello, and welcome to our conference call to discuss our first quarter production results. I'm here visiting our San José mine in Argentina with Eduardo Noriega, our CFO, and in London with Charles Gordon, our Head of Investor Relations. In the first quarter of 2026, we have delivered a total production of almost 76,000 gold equivalent ounces, with a solid performance from Inmaculada and a rising contribution from Mara Rosa in Brazil. This means that we are currently on track to meet our production and cost guidance for 2026 of 300,000-328,000 gold equivalent ounces at a cost of $2,157-$2,320 per gold equivalent ounce respectively. Inmaculada's production was just over 48,000 gold equivalent ounces and in line with our plan.
A slightly higher tonnage was partially offset by lower grades, reflecting higher prices during this Q, and the resulting reduction in cut-off grades compared with Q1 2025. Here at San José, tonnage was higher than in the first quarter of 2025, although silver grades were slightly lower. This is consistent with the normal variability we see when mining in the vein border zones, as well as the impact of higher prices on the cut-off grades. Production totaled just under 27,000 gold equivalent ounces, and overall, the mine remains on track to achieve its annual target. Turning to Mara Rosa, the turnaround program continued to make steady progress, with the operation delivering improvements in plant performance, stronger maintenance execution, and higher daily run rates across the circuit. We also continued to advance key operational initiatives, including the mining contractor replacements, which was 75% mobilized by the end of March.
At the same time, the new tailings thickener remained on schedule, with all major components now on-site and field work and pre-assembly well underway. We expect commissioning to begin at the end of this month, with operation starting by the end of May 2026. Overall production at Mara Rosa for the quarter was 13,500 gold equivalent ounces, which was only slightly below expectations, and this mainly reflects equipment availability and the impact of the rainy season on both tonnage and grades. Work at our Monte do Carmo project continued during the quarter, with some good progress across detailed engineering, equipment selection, permitting, and legal work, and water and environmental studies. We also completed geotechnical and geomechanical studies, continued to build out our project team, and progressed key procurement packages, including power, camps, earthwork, and pre-stripping contracts.
The company continued to expect the project to be submitted to the board for the final approval on the third quarter of this year. Royropata, we have made very good progress, and basically, we are waiting for the results of the Peruvian elections to deliver the document to the new authorities to start the evaluation of the environmental impact study of Royropata. The 2026 brownfield exploration program has commenced across all sites during the period, with early results pending. We'll report the first set of results in the Q2 production statement in July 2026. Turning to the balance sheet, we have cash and cash equivalents of around $412 million, which give us a net cash position of approximately $95 million, which is a pleasing improvement from the $23 million net debt position that we reported at the end of 2025.
I should point out that this cash position includes $230 million held in Argentina, of which $84 million is invested in financial instruments to mitigate inflation and devaluation risk. $35 million is also held in cash and gold to support development of Volcan Project. With that, I would like to open for questions. Thank you very much.
Our first question is from Richard Hatch from Berenberg. Please go ahead.
Yeah. Thanks. Yeah. Afternoon or morning, guys, and thanks for your time. Just a couple of questions. The first one, just on that cash, of which $230 million gross is held in Argentina, is there a plan to try and dividend out some of that cash to top co just so that you can fund projects like Monte do Carmo? Or can you just talk a little bit about that? Then just secondly, how confident are you with your current cost guidance just in light of the inflationary environment? Sorry, last one, just any comments around the Peruvian election. Should we be worried about anything or consider anything, or is it just business as usual? Thanks.
Well, let me start from the third question, which is the Peruvian elections. As you know, we had the first round of the Peruvian elections, and unfortunately we don't have a final result yet. It has been some problems with the first round at Lima polling colleges. Some of them did not open and some of them opened late. I mean, there has been many questions about these elections. At the moment, the counting is of around 94%, and Keiko Fujimori will pass to the second round. There is a difference between Sánchez, which is the left-wing candidate, and López Aliaga, which is a right-wing candidate, of only 13,000 votes nationwide. Yeah. I mean, there is some rumors that it might repeat the elections in Lima based on the situation that happened that Sunday. I believe that, in any case, elections will be between, for sure, Keiko.
I believe that, based on the situation in Lima, Rafael López Aliaga has a very good chance to pass to the second round. Yeah. That's my comment about the election. We have to be patient. In any case, as I say always, Hochschild Mining has been working in Peru for many, many years, like 100 years. We are ready for any environment, of course. Eduardo will continue with the rest of the questions. Richard.
Thank you, Eduardo, and thank you, Richard, for your question. Regarding the cash that we have in Argentina, the $230 million, from that total amount, which is consolidated at a Hochschild level, 49% is for our partner in Argentina, McEwen. Yes, we have plans to deal in that cash out so that we can fund our projects, but also keep reducing debt that we have at a corporate level. Yes, there is a plan for that, and there are mechanisms that we are evaluating right now to execute. It clearly shows the strong cash generation capacity that all our assets have, including our asset in Argentina, which as you know, is a high-grade asset with a lot of geological potential.
In terms of the all-in sustaining cost guidance, we are keeping our guidance, Richard, despite the fact that, as you know, gold and silver prices are higher than what we projected when we provided the guidance when we produced our budget by the end of last year. Despite that fact, and also the fact that oil prices are going up and there is some inflation in the industry, we are working around efficiency projects and other initiatives to mitigate the inflation and pressure from vendors that we're seeing in the market. That's what we have on that question.
Thank you very much.
Thank you.
We'll now take our next question from Felicity Robson from Bank of America. Please go ahead.
Hi. Thank you for taking my question. Silver grades at San José were lower in the quarter, obviously in line with the change in the cut-off grade. How can we expect grades to develop here over the course of the year, please?
Well, thank you for the question. Yeah, exactly. There is two variables that affect the grades at San José. One is the cut-off grade, as you said, but also the variability that we are finding on the areas where we are mining. You know that we are on the border of the mineralization. What we expect with grades is to have enough grades for sure to accomplish with the guidance of San José, around between 60,000 and 65,000 ounces of gold equivalent for the year attributable to Hochschild.
Okay. Thank you.
Welcome.
As a reminder, to ask a question, please signal by pressing star one. Our next question is from Alfonso Salazar from Scotiabank. Please go ahead.
Thank you. Actually, the question that I have regarding the elections in Peru has been answered, just to follow up on that side.
Can you remind us what is the political agenda regarding mining from López Aliaga and Sánchez? And the second question that I have is also regarding the Argentina's dividend. Are you planning to maintain operations, or is it possible to maintain operations there for longer? And what is the outlook for San José now that you are in Argentina as we speak regarding the opportunities to maintain operations there given the high gold price that we have today? Thank you.
Thank you, Alfonso. Look, the position of López Aliaga and Keiko Fujimori in terms of the mining industry, it's more or less the same. Probably during the campaign, Rafael López Aliaga has expressed some. He has been talking about the concessions because it was something that was on the table, and he wanted to make a difference. At the end, I believe that Rafael López Aliaga is a guy that would respect current laws and the current constitution. In the case of Sánchez, it's different. Sánchez is a very left-wing candidate. Of course, he's talking about nationalized companies in every single industry, as well as Castillo did during the campaign. I don't know if in the remote possibility that he would become president of Peru, I'm not sure if he would be able to do so.
Because at the end, Peru is a country that lives from exportation of the mining industry, and it would be a very, very big mistake, yeah? Social-wise, it will be very, very complicated.
Mm-hmm.
In terms of the San José, the availability of mineral, at the moment, we have something like three years life of mine. We continue having a lot of brownfield exploration. We are having some results with new areas close to the current mineralization. If there is any comments regarding dividends, I would pass the question to Eduardo Noriega that is here with me. Thank you.
Thank you very much. Certainly, we are producing strongly from San José. There's a lot of geological potential, and we continue finding new mineral. I have to say that historically, San Jose have always had three to four years of life of mine, but we have been able to increase the life of mine on an annual basis. We do have a plan to execute on that.
In terms of the cash that we have, I think it's a good show of how strong the cash generation capacity of our asset in Argentina has. The task that we have in front of us now is how we use that cash to distribute it to San José shareholders, Hochschild Mining and McEwen Mining, for us to continue our investments either in Argentina or in other jurisdictions.
Great. Thank you so much.
Thank you, Alfonso.
Thank you. As a final reminder, to ask a question, please signal by pressing star one. We'll pause for just a moment to allow you to signal. Once again, it is star one to ask a question. We'll now take our next question from Marina Calero from RBC. Please go ahead.
Good afternoon. Thanks for the call. I joined the Q&A late, so apologies if this has already been asked. I wanted to ask a question on Monte do Carmo. Looks like you are ready to move on with the project. Can you give us an indication on when you could start construction? Based on that, when do you expect to see first production?
Thanks, Marina, for the question. As I said, we are trying to finalize all the studies, during Q2 2026, and be ready to present to the board, for final decision on construction. If we got the approval, and I believe that it's a very profitable project at current prices, we will go ahead with several contracts, and we expect to start right away construction in terms of a contractor for the pre-stripping and for sure all the earth movements that we will need to do before the first rainy season that would occur December 2026. In terms of the time to build this project, the first schedule that has been presented to me is 24 months from July onwards. I believe that we could see some initial production from Q3 2028.
Okay, thank you. That's good to hear. I understand you have a lot of potential in the pipeline, Monte do Carmo or Royropata, but what other optionality do you have in your portfolio? Could we see Pallancata come back into production if the current?
Well
Spot price remains where it is?
Well, the optionality for Hochschild is Royropata, the deposit. As you know, we have 3 million gold equivalent ounces. Most of them is silver with high grades and very good vein width. We believe that the optionality is there. Of course, we need to get a new permit, and that's something that we believe that it will be received around August 2027, if the government takes a year of evaluating the document that we are going to present right now. Of course, after July 2026 or August 2027, we will have like a year of another different permits, operation permits and developments, et cetera, to start production more or less at the same time of Monte do Carmo, I would say. In terms of the possibility to start up Pallancata, we have done an initial evaluation.
We have some sources, but it's not that profitable because we are talking about less than 100 grams silver equivalent. I wouldn't like to make any expectations on the possibility of restart Pallancata, because we haven't finalized that analysis. It would be something very positive to try to start up at a small rate because it could be a very nice way to do a ramp up for the whole unit. It's something that we are analyzing right now, and probably we could give more information on Q2, in July.
Thank you. If I may add, Eduardo, to the optionality on Royropata and Monte do Carmo that we have, I just would like to highlight that we also, as you may recall, we have a 69% stake in Tiernan Gold, the company that owns the Volcan project in the Maricunga belt in Chile, which has more than or around 11 million gold equivalent ounces. It's a company that is performing very well since we executed a reverse takeover in December last year. The other optionality that we have, it's not related to precious metals, but you may recall that we have a 20% stake in Aclara, the rare earth project that has a project in Brazil and a project in Chile, and that has also made significant advances in the treatment or the processing of the rare earths to produce final products, mainly the magnets in the U.S.
The performance of Aclara is also doing very well.
Okay. Thank you.
Thank you. We have a follow-up question from Richard Hatch from Berenberg. Please go ahead.
Yeah. Thanks. Just two follow-ups. Sorry. First one is just, for Eduardo Noriega, just on the net cash number, just to confirm, you haven't paid your significant tax payment yet, right? That's Q2. So we would expect to see a chunky tax payment come out in the second quarter. Is that correct? Then the second one is just on strategy, just more broadly, you've got good growth options internally, whether it's Royropata or Monte do Carmo. I'm just wondering whether you're looking for other opportunities to think about the next project further down the line, or do you think you're comfortable with the portfolio as it stands and you don't need to do any more to build it out? Thanks.
Thank you, Richard. On the tax payments and the cash balance that we have, I have to say that the 2025 tax payments in Peru occurred already in March, so that was already executed. The final payment of the 2025 taxes in Argentina is coming in the second quarter. Part of that temporary payment already occurred, the one in Peru, and the other one in Argentina is coming in the second quarter. The other question in terms of optionality, Richard, we do believe that there is. We're fully focused on permitting Royropata and advancing on our engineering works in Monte do Carmo. I think you had another question on that front, no? Could you please confirm?
No, it's just more whether you needed to fill out. I don't think you necessarily need to, but whether you're open to filling out the project pipeline with other projects similar to Monte do Carmo or Mara Rosa. Sorry, just to be 100% clear, I think when you spoke at the earnings call earlier this year, you suggested that it would be perhaps something like, or at least we had the feeling that it'd be like $150 million cash tax out payment in the first half of the year. Is that still the case? I'm just kind of, because if that is the case, then I'm kind of surprised that your cash balance is as strong as it is.
Is there anything that we need to be thinking about there, or is it just simply just showing the market that you're generating a lot of cash from these assets at this point in the cycle?
There is a portion of the pending taxes that will be paid in Q2, the ones in Argentina. It's around $50 million that is pending. The rest is already in our cash balance. Regarding growth options, aside from being focused on our two growth projects, we also are working with our corporate development team to look for alternatives in the region. That process is an ongoing process. We monitor all the opportunities. Although, I have to say we don't have anything. We're in a preliminary phase, identifying opportunities.
Okay. Thanks very much.
Thank you.
Thank you. It appears there are currently no further questions. With this, I'd like to hand the call back over to Eduardo for closing remarks.
What I would like to say to finalize this call is that we have demonstrated in Q1 that we are delivering the production that we set at the beginning of the year, which is very positive. Also that we are advancing on the two projects that I believe that's the real optionality that Hochschild have for investors. Monte do Carmo is a real opportunity to have a second operation in Brazil, producing around between 80,000, 90,000, I mean, 80,000 to 90,000 ounces per year with good all-in sustaining cost. Also, Royropata is our new flagship. Yeah? I believe that we are doing everything in our ability to make sure that those projects become a reality and they will become part of our portfolio, to make sure that from 2028 onwards, we could add this production to our portfolio. That's it.
Thank you so much for your time and for being here at the call. Thank you.
Thank you. This concludes today's conference call. Thank you for your participation, ladies and gentlemen. You may now disconnect.