Hochschild Mining PLC

LSE:HOC

Q2-2025 Earnings Call

[Operator]

Hello, and welcome to Hochschild Mining's 2025 Interim Results Presentation. [Operator Instructions] I would now like to hand the call over to Eduardo Landin, Hochschild Mining's CEO. Please go ahead, sir.

[Eduardo Landin, executive]

Good morning, everyone, and welcome to our conference to present the H1 results. Charlie Gordon is in London and Eduardo Noriega and myself are in Lima. I would like to start going to Page #3, please, where is key H1 2025 takeaways. During H1, we have been able to produce 161,000 ounces of gold, which is 6% up compared with 2024.

Our revenues has been $520 million. Our adjusted EBITDA went up 27%, up to $225 million. All-in sustaining costs has been up also to $1,914 per ounce, and we will explain why during this presentation. Our cash position on the 30th of June, it was $110 million, and our net debt was $202 million. We have an interim dividend announced of $5.1 million. And the good news about Mara Rosa is that the plant has restarted.

Going into the H2 2025, Mara Rosa reorganization is progressing really well. Management transition is complete. The new head of Brazil is appointed is Ediney, is a very well-qualified mining professional with a lot of experience, especially in the area of Goiás. The Royropata: MEIA is advancing. We are now preparing the papers to be presented to the government.

Monte Do Carmo, we continue with engineering, we continue trying to monetize the noncore assets. Remember that we define between core assets and noncore assets. And our revised production guidance for 2025 is going to be between 291 and 319 (sic) [ 291,000 and 319,000 ] ounces of gold equivalent. We continue with very strong ESG metrics that I will present during the presentation.

If we go to Page #4 of the presentation. We have our performance in ESG. I have to say that we are very pleased with the safety results. As you can see, our frequency rate is 1.08, which is very close to 1, is a very good rate. We are the first mining company to achieve DNV Level 2 in 2 of our operations in San Jose and Inmaculada. Our environmental performance is close to record, record time. And you can see our ECO score, our water consumption and the waste recycling rate has improved from the past year. We have also improved our total local workforce up to 66%, which is very good, creating jobs in the area where we have the influence. And also, we have improved and increased the local procurement in order to make businesses around our communities. We have signed the UN Global Compact. And we have been included on the FTSE4Good Index Series.

Now I pass the presentation to Eduardo Noriega, our CFO. We can go to Page #6. Thank you.

[Eduardo Noriega, executive]

Thank you, Eduardo, and good morning, everybody. Our financial results in the first half of the year were very strong with stronger production and higher prices. Our revenue was at $520 million higher than what we had in 2024. Attributable net profit was $60.1 million, also better than the number recorded in 2024, and our adjusted EBITDA was also strong at $224.5 million.

As I said, production was stronger, mainly due to the incremental production from Mara Rosa in 2025. Gold prices were 28% higher and silver prices were 25% higher than last year. Our cost of sales increased mainly associated with the higher production volume. We also had net inflation in Argentina and the higher gold and silver prices had an impact on royalties, workers' profit sharing and other elements of the cost. So that's another reason for our cost increase in 2025.

Selling expenses came -- were higher mainly due to the incremental cost of Mara Rosa, the incremental production from Mara Rosa. Under other expenses net, we recorded an adjustment to the mine closure provision in -- mainly in 2 projects that are not producing Ares and Sipan. So that explain $11.5 million. And also in Argentina recorded in other expenses -- sorry, in other income, the FX benefit or the FX program that the Argentinian government have for exporters was stopped in April. So as a result of that, we had lower other income by $5.4 million.

Interest -- net interest. We're also higher mainly associated to lower gains in excess cash invested in Argentina, $3.4 million, lower capitalization of interest expenses and these 2 effects were offset by lower average debt and lower interest rates. In terms of FX losses, we recorded $1.5 million of a loss in H1 2025, but that number was lower than the loss recorded in 2024 by $3.1 million.

In terms of income tax, our effective income tax rate was 39%, but this number includes the special mining tax and royalties in Peru for $10.7 million, excluding these effects, the effective income tax rate would be 29%.

Finally, under exceptional items, we recorded a reversal of the impairment of Volcan and that represented $30.8 million of exceptional items in 2025. On the following page, Page 7 of the presentation, balance sheet evolution. We can see here the strong cash generation capacity of our assets with Inmaculada $132 million, San Jose $25 million, Mara Rosa breakeven due to the operational challenges with $2 million. We used $17 million in exploration budgets and $27 million of admin and corporate expenses. We paid $15 million in taxes.

We executed our mine closure plans and pay for care and maintenance expenses by $12 million. Net interest paid were $9 million, we paid $12 million of dividends, $10 million to Hoch shareholders and $2 million to our minority partners in San Jose, our mine in Argentina, McEwen Mining $2 million. And we had a temporary change in working capitals, mainly associated who trade payables and inventories of $29 million.

Finally, on the last 3 balance of this chart, we used $10 million of Monte Do Carmo, $3 million in Royropata project as we paid a capital equity in -- we participate in the equity ratio of Aclara with $5 million. So with that, our ending balance for the period was $110 million.

On the following page, Page #8, on cost drivers. When comparing our cost to 2025 cost versus the 2024 cost. We can see, as expected, in Inmaculada all-in sustaining cost was $1,535. This cost, as planned, was higher than the H1 2024 numbers, mainly due to higher volumes produced and the impact of higher prices in corporate profit sharing.

In San Jose, the costs were also higher, mainly due to higher prices impacting royalties, selling expenses the elimination of the FX export benefit that I explained before. We also saw net inflation in Argentina, particularly in the labor market. And finally, we are mining lower grades in 2024 -- in 2025 versus 2024.

In Mara Rosa, our all-in sustaining cost reflects the challenges that we already explained, and we are in the process of resolving. We adjusted our guidance in Mara Rosa and also included these external impacts in Argentina to adjust the guidance in San Jose as well. Inmaculada, when compared to -- when comparing the full year all-in sustaining cost, the impact from higher prices impacting workers' profit sharing and inflation is -- are being offset by efficiencies and savings. So we're maintaining our guidance, and the operation is performing very well.

In San Jose, when looking at the revised guidance versus the previous one, our higher prices are impacting royalty, selling expenses by $90 per ounce approximately. The elimination of the export tax of the FX export benefit represent like $61 per ounce. And also inflation represent $36 per ounce of incremental costs, but these effects are being partially offset by cost efficiencies especially at the mine level.

In Mara Rosa, the all-in sustaining costs that we are providing as new guidance includes $18 million of incremental CapEx or initiatives to resolve operational challenges, including the thickener as well as there were $6 million of extra costs mainly in Q1 associated to our -- the efforts of the operation and a time to resolve the filtering and maintenance issues resulting from the challenges and the rainy season.

If we go Page 9, where we have the capital expenditures. We are -- as I said before, we're maintaining our CapEx guidance for both Inmaculada and San Jose. And in the case of Mara Rosa, we are reflecting in the new guidance the $18 million -- between $18 million and $20 million incremental CapEx to resolve the Mara Rosa challenges. This includes the thickener.

On the following page, Page #10 of the presentation. The balance sheet of the company remains very strong with cash of $110 million, net debt of $202 million, which represents, an improvement versus the $216 million that we recorded as of December 2024. Our net debt-to-EBITDA also improved to 0.43 versus 0.5 recorded in December '24.

We still have $180 million of undrawn debt from the $300 facility that we have with relationship banks at very good terms, as you can see in the presentation. Another positive news from the company that we restored our dividends in -- with a full year 2024 results. And following the UN policy that we communicated to the market, we're now announcing an interim dividend of $0.01 per share, which represent $5.1 million total. I also would like to mention in this slide that we decided to roll forward 29,000 ounces -- sorry, 21,000 ounces of gold that we had -- we hedged production that was hedged in the second half of 2025, and we roll it forward to 2028.

With that, I return the presentation to Eduardo Landin.

[Eduardo Landin, executive]

Thank you, Eduardo. Thank you for presenting the results. Okay, in this part of the presentation, I'm going to go through the strategy and also, I will present the operations this H1. If we can go to Page 12, you can see there our strategy that we continue believing that delivering -- I mean, deliver growth and profitability. We have the first pillar, which is brownfield. I mean, brownfield is the way to generate long-term value to discover new ounces, extending the life of mine of our existing assets. And also extending the life of mine of our existing projects.

Of course, we are focused on mineable resources because we want to -- every single resource that we found, we would like to go through the plants. In terms of the operational efficiency, we have on site leadership. We like to be at the sites. We have lean philosophy across the company. We try to find cost efficiencies, and I will give you some samples. And of course, we have demonstrated that we have the capacity to develop projects.

On ESG, as I mentioned at the beginning of the presentation, we have a world-class safety performance. We are very focused on water management. We have a new community approach, and we didn't have any blockages or any problem with the communities in Peru for the past 2 years. We are management, our talent way to -- that people be happy working with us. We have said ESG KPIs for 2030 and of course, we have very strong corporate values.

And in terms of the disciplined capital allocation through our balance sheet, we can fund our organic growth. We are committed to debt repayment. We are committed also with investors on capital return. The reason why we have this new dividend policy, and of course, if we decide to go and acquire an M&A asset, it should be value accretive to make sure that it's profitable at low prices, basically.

So if we go into Page 13, our Inmaculada asset. You know that is in Ayacucho, a very high 4,700 meters above sea level. It's an operation that has been operating very well for 10 years. During H1 2025 produced 106,000 ounces of gold equivalent, which is above the market guidance at least on track to meet the guidance between -- I mean, around 200,000 to 210,000 ounces.

As you also know, we have a very large regional land package, and we believe that as well as we did in 2024, we will be able to increase the inferred resources in 2025. If we go to Page #14, you can see there the evolution of the brownfield strategy between -- in 2024, as I said, we had 1 million ounces of gold equivalent. And we believe that this year with the 35,000 meters drilled, and we will be able to add something around 0.5 million ounces of gold equivalent.

If we go to the next page, we have our Royropata project. Probably this is the most important projects that we have today in Hochschild, it's also located very close to Inmaculada and Ayacucho, is our own underground Pallancata operation that operates between 2007 and 2023. Today, what happened in the past 2 years is that we have had a very important resources, amount of resources in the Royropata zone, I mean, this project is going to use the Selene plant, which is ready to start production.

Very good news is that we were able to close the easements with the communities in 2024, which is probably the most difficult and the main step towards to get the permits. And today, we are working with our consultants with Stantec and Ausenco in order to create the documents based on all the studies that we have done during 2024 at the beginning of 2025 to file the modification and environmental application in August 2026. We believe that in a year from August 2026 until July 2027, we should get the environmental permit.

And as you can see, Pallancata has increased their resources big time, yes. And today, since we have those grades and the width of the veins, we believe that we have a very, very powerful operation that will start producing between 2028 and 2029.

On the next page, Page 16, you can see the evolution of the brownfield exploration. In 2024, as I said, we have 1.3 million ounces of gold equivalent in different veins. And on 2025, we have continued doing some infill drilling to make sure that we convert the inferred resources into measure indicated and also discovering new possible veins around Marco vein.

Going to Page 17, we have Mara Rosa. Mara Rosa is an open-pit mine in Goiás state, has produced close to 30,000 ounces in the H1 2025. As you know, we found important issues together with the heavy rain season at Mara Rosa in May 2025. Immediately, we took control of the situation. We reorganized the country, the management, everything. And I am very proud to say that in 3 months, we have been able to turn around the situation. Of course, results are going to be slower than we would like, but we believe that we are in the right track to make sure that 2026 is going to be a good year for Mara Rosa going forward.

I mean the filtering issues, that was the main issue in terms of mechanical problems has been resolved in 2 of the filters. And based on this situation, we have reduced our guidance -- production guidance to between 35,000 and 45,000 ounces for a full year. We know that it's low. But we are sure that this is the way to make sure that we solve all the problems, and we turn around this asset that we believe is still a very good asset for the company that can bring a lot of value at current prices. And we know that we have now the right people and the right things to do from now.

Let me explain what we have done in 3 months. I would like to congratulate the team because they have done a fantastic job in 3 months. If we go into the main improvements in the mine, we have improved the mine movement, the haulage distance, the haulage speed, the loading fleet availability at the plant, we review all the maintenance, I mean, preventive maintenance for the crushing and the milling area, and now it's totally ready to reach this area of the plan, 7,000 -- between 7,000 and 8,000 tonnes per day.

And in terms of the organization, we have a new head of Brazil. We have a new mine manager. We have a new governance structure which is the principles to make sure that everything is going to be run correctly. In terms of the filtering, which is the issue, and I have to say that it's an issue in every single mine operation that has dry stack. We have been able to repair 2 of the main filters. We have 4 filters in total. These 2 filters are working steadily. They are reaching the humidity that we need in order to do dry stack. We brought the manufacturer experts at the site to asset with the filtering operations. As I said, we restart 2 of the 4 filters.

The second 2 is going to be started in October, what we finish the repairs. And also, we have been able to solve the situation of the space that we need in order to put details in place, compacted and ready to receive the next rainy season. Also, in order to prevent the effect of the rainy season, we are planning to install a roof area around the filtering plan to make sure that we have the space, the dry space, to make sure that we manage the tails during the next rainy season.

I believe that we have done a very good job. We are making sure that we do everything that it needs to make sure that the site is going to be producing the way we designed at the beginning when we acquired this asset. Something additional is that we decide to install a new thickener, a tail thickener is already purchased.

It's already -- I mean, the engineering related to this thickener, the integration with the plant is ongoing today with Ausenco. We believe that we will be able to install this thickener and be part of the production in H1 2020. I mean, we're aiming to do it in Q1 2026. But of course, it depends on the delivery time of the equipment. And so that's the reason we state that it will be during H1. But I have to say that our aim is to improve and to increase production during 2026 as much as possible because it's the way to get the best possible cost and that's our main objective for Mara Rosa to get the maximum production and also to get the best possible cost.

On the next page, on Page 19, you can see the open-pit that today is organized, is dry. We have been pushing back the pit. On the next photograph, you can see the filtering plant already working. You can see on the next picture, the dry stack, the material totally dry and ready to be compacted -- you can see the tailing after filtering process totally dry with that light gray color that represent that the humidity is very low. You have a picture there of the thickener that we're going to install. It's a 37-meter thickener to make sure that we have the percentage of solid that it's needed to be, I mean, for the tails to be filtered and reach between 7,000 and 8,000 tonnes per day.

And you have on the last picture, the filtration area roofs that we are going to install before the rainy season starting, let's say, in October, November 2025.

In terms of exploration, if we go into Page #20, you can see that the potential of Mara Rosa is huge. We believe that from now until 2030, we can add another 1 million ounces of gold equivalent. We have a lot of -- I mean, we have been drilling, and we have very good intercepts on the extension of Posse. We have some drills in [indiscernible] that, I mean, shows that the mineralization is there. And we will continue working on this plan to make sure that adding resources, extend the life of mine of Mara Rosa makes this project much more proper.

Going to Argentina, Argentina, I have to say that production wise is doing quite well. It's an old mine. It's been producing from 2007. Today, we are currently mining on the vein borders. And as you probably know, the uncertainty is there for grades, sometimes we get lower grades than we expect. But we continue working on trying to discover new resources to make sure that we bring lifeline to these assets.

And in 2025, we have implemented some efficiency projects. Let me say that in the month of July, I mean, the mine has been able nearly 2,000 tonnes of mining output and the plan -- remember that we expanded the plan last year, and the plan is running at 2,100 tonnes per day.

So we are trying to increase the mine throughput in order to dilute the fixed cost that, of course, is affected by what Eduardo Noriega explained by these external factors that we are trying to compensate with efficiencies. We believe that we have a good chance that from October onwards that we had the elections in Argentina, the Milei's government could evaluate the currency because at the end of the day, is -- I mean, the country needs to be much more competitive in terms of salaries in dollars.

Going San Jose exploration potential, we continue trying to bring, as I said, resources to the mine area. But also, we have extended our exploration activities to the region. And from now until December, we will try to drill 2 new projects called Celestina and Martes 13 to try to see if we could bring new potential and new opportunities in Argentina for us.

We believe that Argentina is in the right track in order -- I mean with the measures that the government has taken in the past months. So we are trying to bet for creating new businesses in Argentina from now. In general of the valuation opportunity and is the normal market reaction since we have the Mara Rosa issues, as I said, that we are already in the right path to sold them. That has affected to our valuation. But we believe that today, if we compare our valuation with our peers, we are still low, and we are still a very good opportunity for investors.

As a conclusion, we continue being a company that are totally focused on our core business and delivering a profitable growth. As I presented, we have a world-class ESG performance. We took control of the Mara Rosa situation, and we have done many, many things in 3 months, and we're in the right way, in the right path. The management transition is complete. Inmaculada is outperforming as has been doing for the past 10 years.

Monte do Carmo, we continue believing that it is a very important project for us. It is our -- it's going to be our second operation in Brazil, and we want to make sure that through engineering, doing all the engineering by the book, we make sure that we develop a project that it will be very powerful for the company. Our brownfield program continues. And as I said at the beginning of the presentation, is one of our pillar to growth to extend life of mine of our existing sites.

Royropata continue to be the best possible mine that Hochschild could wish in the future. We have many good resources with very good width, very good grades with a silver content, which is very high, probably one of the highest today in the world. And it's a project that can deliver more than 100,000 ounces from 2028, 2029. We have in place a very disciplined capital allocation strategy, and we have demonstrated that with the balance that Eduardo Noriega has presented.

And the -- also the interim dividend has been announced with that $5.1 million. So that's the summary of our H1 results. What I want to say finally is that we are in the right track. We would like you as an investor to give us some time to make sure that we finish this job and we are bringing Mara Rosa on track as we defined at the beginning when we acquired this asset. Thank you very much.

[Charles Gordon, executive]

Thanks very much, Eduardo. I'm just going to start the questions that we have on the webcast. The first question, grades at Inmaculada declined significantly in the first half, and it was highlighted in the release that this was planned. But production was still 106,000. You expect grades to improve but maintaining the guidance at a maximum 209,000 ounces. Please explain why the output in the second half will be lower when the grades are expected to increase. Is there some sort of closures or something?

[Eduardo Landin, executive]

I mean basically, what we want from Inmaculada is to produce 200,000 ounces and a very good all-in sustaining cash costs. And we have different veins around Inmaculada, and we can decide which -- I mean what level of rates we can pass through the plan. I mean today, the plant is operating at 4,100 tonnes per day with very good recoveries. We don't want, I mean, to go higher than our reserve grade. So that's the way we are going to manage Inmaculada. I mean, to make sure that we accomplished with the guidance and to make sure that the costs are extremely competitive based on the fact that we have the [Technical Difficulty] that is 30,000 ounces. And of course, we have the -- all the other ounces that they will be affected by the higher prices of gold and silver. So I mean the way we want to do it is the way I just explained.

[Charles Gordon, executive]

The next question is Volcan carrying value has been uplifted $72 million. What is the basis for this valuation? And how far are we from the monetization of this asset?

[Eduardo Landin, executive]

I would like to pass that question to Eduardo Noriega.

[Eduardo Noriega, executive]

Thank you, Charlie and Eduardo. Note that the conditions -- the market conditions for gold assets especially large assets like Volcan have improved materially. So that is a fundamental for our -- for that decision. And Volcan, as you know, is a very large gold project in the Maricunga belt in Chile, where there is a renewed interest from investors. I think the results that we're seeing from the technical studies that we're performing in the project are also very, very strong and promising. So the fundamentals for the project together with a very constructive market is -- are helping and will help us go through the -- our strategy to continue add value to Hoch shareholders through Volcan.

How far are from monetization? We're working on that. We're doing very good progress. So I will not make any specific comment on when, but it's progressing very well.

[Charles Gordon, executive]

Thank you very much. This next question is relatively long. In 2026, are we going to see a benefit in all-in sustaining cost from higher ore mined versus gold produced in 2025. I think this refers to Mara Rosa. Are stockpiles higher than originally planned? And have you been able to access higher grade ore. So I think that's the first part of the question, which maybe you could answer.

[Eduardo Landin, executive]

Yes. I mean in terms of the grades, what we would like to do in Mara Rosa is to mine the average grade of the reserves. Of course, the initial plan was to pass through the plan, the -- I mean the most higher rate of the deposit but that depends on the pushback that we are able to do on the brand -- on the mine, sorry. And as I said, Charlie, for us, it's very important to maximize production in 2026. And of course, to try to get the less possible cost.

At this time, what we are doing is the reserves based on our June results. And the reserves is the input for our budgeting process. And we -- I mean we're just starting that. I mean, the Brazilian team and also the corporate team is focused, of course, to continue solving the problems and to make sure that we're delivering on the filtering plan and also to install the thickener and to make sure that everything is as planned at the beginning.

And of course, the second objective for the Brazilian team is to make sure that we tailor a very good budget for 2026 to make sure that we come back to the figures that we put on the table at the beginning. Saying that, I mean you have to know that the -- I mean, the thickener, which is a very important component for the filtering plant to perform, let's say, 7,000, 8,000 tonnes per day, we depend on the delivery time of the manufacturer, yes.

And today, what we know is that there is the possibility to be able to finish that in Q1 2026. But of course, we are going to have the rainy season, depends on how heavy is that rainy season because we have to do civil work, and we have to do a lot of work to install a thickener. It's a big thickener, but we believe that is the right -- I mean, the right way to act to make sure that we will have a very stable operation from H2 2026.

[Charles Gordon, executive]

And there is a follow-up because I think a few people have asked this, what kind of AISC levels do you envisage for Mara Rosa going forward?

[Eduardo Landin, executive]

I mean it's a different question. I would like to come back to the original all-in sustaining cash costs. We declared between $1,100 and $1,300, yes. But it's hard to say today because I mean it has been a lot of inflation in the market -- in the mining market with this current prices, everyone wants to participate of this party, especially suppliers, contractors, and there is a huge demand on contractors in Brazil, I mean, we are thinking to have our own operation because, I mean, it's difficult. It's difficult to manage this situation.

But of course, we are totally focused on trying to reduce cost, yes. And -- it's too early for me to give a guidance because I want to make sure that we go through the reserves, we go through the budgeting process. I'm going to be very, very involved myself in every single meeting to make sure that we revise the -- I mean, all the budgeting figures to -- I mean, to try to make the organization to have the best budget possible, yes.

As you know, I am playing 2 roles the CEO and the COO for the past 3 months. Today, we have a very strong candidate to fulfill the CEO role. I cannot say yet who is a person because we have some confidentiality agreements with him, but he's joining on the 15th of September. So on top of that, we have been able to fulfill all the management and positions in Brazil. Today, we believe that we have a very good COO to join the company on the 15th of September. And it's going to help a lot during this process to make sure that we bring know-how to the company, especially on planning. And that's our aim. That's our main objective to make sure that we maximize production in Mara Rosa that will present the lower possible cost. And that with every single site.

But of course, we don't want to mine higher grades in order to give production. What we want is to continue mining with average reserve rates and make sure that we extend our life of mine and that we can mine our mines for a long term even if we have a lower prices. That's what we say.

[Charles Gordon, executive]

I think it might be an idea now just to go over to the phone line. So Sergey, do we have any questions on the phone lines?

[Operator]

[Operator Instructions] And our first question is from Marina Calero from RBC Capital Markets.

[Marina Calero Ródenas, analyst]

Can you hear me now?

[Operator]

Yes, we can.

[Marina Calero Ródenas, analyst]

I just have a couple of questions. The first one on Mara Rosa, a follow-up on the discussion on grades. I think the original DFS had grades in excess of 1.4 grams per tonne for the first 3 years. Do you still seeing this achievable? And then the second question is on Monte Do Carmo, how has this experience at Mara Rosa changed? How is that changing your approach to these projects? And do you still see potential for the investment decision to be made next year?

[Eduardo Landin, executive]

Yes. Well, Marina, let me answer your first question related to the grades. I mean, the grade, we have been done through the past 4 months [indiscernible] we have confirmed that the resource grade is there, which is very important. I mean, to be able to mine 1.4 grams for the first 2 years. That is possible, but that is difficult. And why? Because you need to mine the high-grade area and send that to the plant and defer the low-grade area and pass it to the stockpiles. Stockpiles that you're going to pass through the plant in year 4, 5, 6, 7. That's how we design the project.

So what we are planning to do is that, yes, but we need to make sure that the -- we have the know-how to do that. That's the reason we have brought a very high experience and competence professionals on the mine area and the combination of having that know-how plus having good contractors that execute that strategy, that is possible. So our aim is to do that because we believe that the -- in terms of the net present value of the project, that's the way it should be, okay?

And then later, when you have low grades, you have moved a lot of waste from the mine, and you have a lot of ore with lower rates, but your cost is going to be lower because you don't have to push back the open pit. So the answer to you is we will try to do that. But the good news is that the grades are there, okay? In terms of Monte Do Carmo, I mean, Monte Do Carmo was also managed by our own management, okay? And what I have done because I took control also of the project is to make sure that everything is done by the book, and we don't make any mistakes. So the detailed engineering of the plant continues. What we are doing at the moment is some geomechanical studies to make sure that the pit is well designed and some hydrological studies. But those studies are going to be finished at the end of the year. So we will be able in -- after the rainy season, which is March, April 2026, we could be in the position to make a decision to go ahead and build Monte Do Carmo.

So that the studies that I decided to do parallel to the development of the retail engineering of the plant. They are parallel, as I said, yes. And of course, it will lead us to do -- I mean, to take a decision in 2026. In 2026, we will have something like 6, 7 months in order to start the project. And of course, we can do a fast-track strategy to have the civil engineering -- detailed engineering to be able to start the project during that there are no rainy season, okay?

[Operator]

And we will take our next question from Will Dalby from Berenberg.

[William Dalby, analyst]

Just a couple from me, more on Mara Rosa. The first one, can you maybe just give a bit more detail around the mining, the contractor side? So obviously, been a few challenges flagged there, some of them rainy season induced, but it seems kind of more intrinsic issues on the contractor side. Is that something that the downtime in the plant has given you buffers so that you've been able to address, or do you think there's still work that needs to be done on the actual kind of mining productivity side? That's the first question.

[Eduardo Landin, executive]

Well, I believe that there is something to do, I mean, continue improving the mining operation. I have to say that has improved a lot. We have launched a tender to increase our capacity by 30% because we want to make sure that we move as much as possible waste to make sure that we make the ore available for the rest of the year and also for 2026. So I mean we will have 2 contractors soon, it will give us an additional capacity. And of course, we will continue with improvements that I already mentioned, like the haulage distance, the haulage speed, the loading, we are doing some drilling and blasting improvement with consultants. I mean we are taking the mine as a whole, and we have a lot of productivity projects in place to make sure that we take that mine to the best level possible.

[William Dalby, analyst]

Okay. That's helpful. And then maybe just a second. Can you maybe say the percentage of throughput you think you can achieve at Mara Rosa without the thickener that's coming in H1 next year? After the additional sales that are brought on from October.

[Eduardo Landin, executive]

I could give you -- I mean it's a difficult one, that one, but -- let me say that each filter, we believe that it could go up to 1,500 tonnes per day, okay? So if we are able to bring the 4 filters to work together and that's the aim in October, we could go up to 6,000 tonnes per day. Saying that, our projections, I mean, the 35,000 to 45,000 ounces are a little bit more conservative because -- I mean, that could be the maximum rate that the filters could reach without the thickener, okay?

But of course, as I said, our aim, it will be to try to maximize production not only in 2026, but also in 2025. So we'll do the best possible management and continue working with ANDRITZ.

I mean, I would say that the good news is that we have proved that the filters, the press filters work for dry stack. And that was one of the uncertainties that I had when I took control of the situation because the management that we used to have before believed that the filter did not work. So working with ANDRITZ Andre close with them, giving them a management contract and working together with them in a very good relationship, we have demonstrated that the filters work. So that's very good news.

[Operator]

We'll take now our last question in the phone queue from Felicity Robson from Bank of America.

[Felicity Robson, analyst]

Do you expect any technical difficulties from tying the thickener into the process? And secondly, will you need to make any changes to the dry stack tailings facility.

[Eduardo Landin, executive]

Could you repeat the second part?

[Felicity Robson, analyst]

Do you expect to make any changes to the dry stack tailings facility?

[Eduardo Landin, executive]

No. Well, let me first answer the question. I mean, we have a huge experience operating thickeners because we have thickeners everywhere in Inmaculada, San Jose. We have a thickener working in upper leaching, thickener in Mara Rosa. So of course, I mean, the time that we have put in place consider the commissioning of the filters and the start-up of the -- sorry, of the thickener and the start-up of the thickener. But I don't believe that we will have a technical difficulties in order to start up a new thickener in the process.

Of course, what we are doing at the moment is detailed engineering. I mean, we have done a basic engineering to make sure that the thickener could be part of the process. And what we are doing now is a detailed engineering with Ausenco to make sure that the integration of the thickener is the way it should be with the pumps, with the piping and with everything to integrate the way it should be on the -- in our flow sheet, okay?

In terms of the dry stack area, I mean, we have a plan to make sure that we continue giving availability, I mean, surface available to have the area to deposit these dry tails and compacted them. The plan today consider area that could give us capacity until December 2026. And then the project initially at the beginning of the project, it was considered that it will have some CapEx in order to extend detailing area to extend the tailing area. Because at the end of the day, I mean, every single square meter of tailing area, it has some lifts. But once you reach the maximum lift for stability, you need to increase the area. So -- that's the original plan.

And today, we will continue preparing the area with geomembrane and to make sure that has the channels and everything, in order to have a normal dry-stack operation. Let me say that we manage a dry stack operation in San Jose, and it has been managed for the past 7 years, and we never had any problem whatsoever, in order to manage a tail -- a dry stack operation. So we have the know-how. And of course, Brazil has a very good technical people that we need to bring.

And today, we have -- I mean we have brought in the past months a manager just for the filtering plan and for the tailing area and it's an expert that has been working on this kind of deposits for the past 20 years. So we believe that we have the right talent, and we have the area we need to bring the contractors to make sure that we continue expanding the area to have the capacity.

[Operator]

With this, I'd like to hand the call back over to Eduardo for any additional remarks or closing remarks.

[Eduardo Landin, executive]

Well, thank you very much for attending this call. I'm totally aware that the situation in Mara Rosa has been a problem, but I feel very proud of the Hochschild team that took a very quick response on the situation. The corporate team went to Mara Rosa took control of everything. We put in place is all the solutions to the technical problems. And today, I believe that we are in the right path to make sure that together with the extension of resources in Mara Rosa, we could have a very profitable project.

I would like to ask for some patience because I know that it's something that makes a noise to our performance. But I believe that we have Inmaculada, that is outperforming, we have San Jose that out of the external factors is an operation that is running really well, and we believe that there is a space for improvements in San Jose.

And Mara Rosa will come back much stronger, much, much better. So it's a matter of time. And I believe that in 2026, we will give them, and it will give you some surprises. So also in terms of ESG, as you see, safety is our first priority, we continue doing great things on the environment part, on the communities, and we believe that we are a very good option for investors because our valuation today is lower than our peers and we believe that we can perform in order to increase that value.

Thank you so much for being here. And of course, some of you I will see you next week in London. Thank you.