Hochschild Mining PLC (OTCPK:HCHDF) Half Year 2017 Earnings Conference Call August 16, 2017 9:30 AM ET
Ignacio Bustamante – Chief Executive Officer and Executive Director
Ramon Barua – Chief Financial Officer
Charles Gordon – Head of Investor Relations
James Bell – Bank of America Merrill Lynch
Daniel Major – UBS
Good day, and welcome to the Hochschild Mining PLC 2017 Half-Year Results Conference Call. Today’s conference is being recorded.
At this time, I would like to turn the conference over to Ignacio Bustamante. Please go ahead, sir.
Thank you very much, Valerie. Good afternoon, everyone, and thank you for joining us for today’s presentation I’m Ignacio Bustamante, CEO and with me is Ramon Barua, our CFO and in London, we have our Head of Investor Relations, Charlie Gordon. We have for today a presentation that is in our webcast, so please refer to that presentation.
We’re going to be starting on Page 3. So let me start with the key highlights, and then I will hand over the presentation to Ramon Barua to talk about the key financial highlights. So we just announced results. We have reported revenues of $341 million, very close to the same revenues that we obtained in the first half of 2016. We have also announced an EBITDA of $136 million, which is slightly below that from 2016 and in line with the guidance that we gave at the beginning of the year for the all-in sustaining cash cost for all our operations.
We have also reported an EPS of $0.03; all-in sustaining cash cost of around $12 per ounce, which are slightly below our guidance for the year of between $12.2 to $12.7; cash balance of $145 million, compared to $140 million as of December 31, 2016; net debt of $165 million compared to $140 as of December 31, 2016.
We have also announced that during the second half of 2017, we’re going to be ramping up our Brownfield exploration program, mostly because we’re expecting that the permit that should come for the year to complete our operation program will be coming either in Q3 or Q4 during the year, allowing us to move significantly at a faster pace our exploration program for the year.
And finally, we have also declared an interim dividend of [$0.0138] per share, which is equivalent at – to $7 million, very much in line with what we declared during 2016. So all-in all on track to achieve our guidance and finish another strong year with very encouraging geological upside.
So with that, let me hand the presentation over to Ramon to talk about the financial highlights.
Thank you, Ignacio, and hello, everyone. In our first slide of the interim results section, we have our P&L for the first half. Although the results were not as good as last year’s, the performance was still strong, and the Company is in a robust financial health. Revenue was very similar to the first half of 2016, both in terms of volumes and prices.
Costs were higher though, some anticipated, like the increase at Inmaculada now that the cyanide detox plant and the backfill plant are fully operative; but some unanticipated, like the slow pace of evolution of the Argentine peso. These additional costs resulted in a lower gross margin of 23% when compared to the 30% achieved in H1 last year. The higher administrative expenses reflect primarily increased personnel-related costs associated to inflation and provision of share-based compensation programs.
Selling expenses were lower due to the elimination of export taxes in Argentina, and exploration was higher as we execute a more aggressive Brownfield plan this year. Other income was much lower since, as you remember; the credit we were receiving for exporting through a Patagonian port was eliminated late last year.
Our finance cost is already improving as we repay debt, although the higher interest-bearing facility; the senior notes; are still outstanding. We’ll talk about our strategy to deal with that cost in a later slide. So our attributable net income was $14.1 million, and the adjusted EBITDA was $136 million. Based on these positive results of the first half, we’re announcing a $7 million dividend for the period.
Moving to the next slide, we present the evolution of our cash balance. Our operations are generating strong cash flows, especially our flagship in mine Inmaculada, while Arcata is being carefully monitored to ensure positive results. Pallancata is transitioning favorably to its new resource, and San Jose is a steady cash generator.
These robust generation allows us to further repay $19 million of debt and pay dividends, both to our Hochschild Mining shareholders and to our JV partners in Argentina. The tax fee was relatively high as we had to pay $17 million of income tax in Argentina corresponding to profits generating during 2016. The final cash balance for the period was a solid $145 million.
Going to next slide, we’re proud to inform that we achieved all-in sustaining cost from operations at $12 per ounce of silver equivalent for the period, a better number than anticipated. The Company continues to be highly focused on controlling costs, and we’re dedicated to operating under conservative budgets at all operations.
Focusing on the chart on the top-right corner, you can see that despite a strong start, we’re maintaining our all-in sustaining cost guidance for the year of $12.2 to $12.7 per equivalent ounce of silver. Inmaculada had a strong half, but this was in part due to using up part of the high-grade stockpile it had accumulated, and Pallancata is performing better than anticipated, compensating for more challenging Arcata and the low devaluation in Argentina. Inmaculada represents 46% of this year’s budgeted production, so its very low-cost position is a key element underlying our strong cash generation.
In the next Page, we present our CapEx results. Here, we’re also maintaining guidance for the year at $120 million to $130 million. The biggest challenges we have are ensuring the tailings dam increase at Inmaculada as well as completing the infrastructure we need to operate at Pablo, the newly discovered vein at Pallancata, which has the added difficulty of obtaining the required permits in a timely manner.
At $56 million in H1, we’re almost at the midpoint of our expectations of 2017. The Brownfield budget though has been more difficult to execute given the release generated by a more cumbersome permit environment, it will be challenging to achieve the full program for the year, but we push hard to try and make it happen.
Finally, in the last Slide, we present the evolution of our financial obligations since June 2015, the date Inmaculada started operations. We have been able to repay debt by approximately $250 million since then, with just $295 million in bonds still outstanding. We have been working on refinancing alternatives and believe we can partially repay and efficiently reprofile our debt once we can repurchase the bonds starting in January of next year. The Company currently has a very low leverage and we expect the situation to further improve.
Thank you for your attention. I pass the presentation back to Ignacio and will be available to answer your questions at the end of the presentation.
Thank you very much, Ramon. So moving into Slide 11 of the presentation, we are presenting the revised core asset guidance. You can see that all-in-all, in terms of overall guidelines; they remain the same as the beginning of the year. So in terms of production, we are still guiding 37 million ounces of attributable silver for the full-year.
The composition is going to be roughly around 17 million ounces for Inmaculada; 7 million ounces for San Jose; Arcata, 5.5 million, slightly lower than initially anticipated; and Pallancata, 7.5 million, slightly higher than initially anticipated. So overall, the production guidance remains the same at 37 million.
Sustaining and developing capital, Ramon mentioned, at around between $120 million to $130 million and Brownfield guidance for the year is at around $22 million. And as you can see in the chart there, the composition should be around $5 million for Personnel, $2 million for Inmaculada, $3 million for San Jose, $5 million for Arcata, $1 million for Pallancata and around $5 million in Greenfield related expenses.
Out of those $22 million, we had stated that around $20 million are going to be accounted for in the OpEx and around $2 million are going to be capitalized as part of our CapEx budget. In terms of the revised all-in sustaining cash cost forecast per mine, you can see that the guidance for Inmaculada has not changed, remains the same at between $9.5 to $10 per ounce.
In the case of San Jose, the forecasted costs are going up a little bit from $12.8 to $13.3 to $13.5 and $14 and this is mostly the result of a slower devaluation than anticipated of the peso local currency.
In the case of Pallancata, the guidance, the revised guidance is lower than initially anticipated at $12, mostly resulting from the better grades that we are seeing coming from Pallancata.
And in the case of Arcata, the new revised all-in sustaining cash cost hit at around $17 per ounce. But the overall all-in sustaining cash cost for all our operations remains at the same level as the beginning of the year with a range of between $12.2 to $12.7 per ounce.
So moving to the next slide, the Slide 12. You can see the significant progress that we have had in the Company in the past five years, moving from 2012 production of 20.3 million ounces to the forecasted guidance for this year of $37 million. So that’s almost a 75-plus or 85% production growth. And at the same time, we have significantly reduced our all-in sustaining cash cost, going down from $21.7 to the guidance of this year of $12.2 to $12.7 per ounce. So it’s almost a reduction of cost of around 50% while delivering sustainable production – in significant sustainable production growth.
Our goal going forward is to continue increasing that trend, continue work production and continue looking at ways in which we can sustain or decrease our all-in sustaining cash costs.
Moving to the next slide, Page 13. We take a brief look at our core asset progress. Starting with Inmaculada, we have, for all our assets, short-term and long-term priorities. In the case of Inmaculada, short-term priorities are to complete the tailings dam expansion, which is advancing at a very good pace; improving logistical access, the same; convert Inferred into Measured and Indicated resources, which we are also progressing well; and to start the Brownfield drilling program in the second half of the year, which we have also started, everything that relates to the underground drilling. And we expect that by the last quarter of the year, by Q4, we’re going to be getting the permits to do all the surface drilling that we are budgeting for the year.
In terms of long-term priorities, we need to continue exploring the Angela vein extension; identify further major veins in the surrounding areas with the goal of extending our life of mine and evaluate the potential plant expansion.
In the case of Pallancata, the mining permit is now expected to be at the end of Q3, beginning of Q4 2017. Our goal is to transition to Pablo as soon as that happens, and also continue drilling to grow our resource base. In the long-term, we want to continue exploring for additional major veins, also with the goal for extending the life of mine and to fill the spare plant capacity to 3,000 tons per day. You may recall that once Pablo gets into full operation, we expect to be producing at around 2,400 tons per day. So our goal is to take it all the way up to 3,000 tons per day after we complete our longer-term exploration plan.
In the case of San Jose in Argentina, the short-term priorities are to control underlying costs; complete the evaluation of the hydraulic fill process initiative, that is looking encouraging; continue optimizing our ore control measures; and also complete the Brownfield drilling program outside the current mine infrastructure, which is also advancing well, and we expect that the second half year program should start by the end of this week. Long-term priorities, our goal is to extend the life of mine for the longer term.
And finally, in the case of Arcata, our short-term priorities are to maximize the productivity in our narrow veins, focusing on overall cost control. But very critically, we need to finish our Brownfield exploration plan to ensure profitable resources for the long-term.
And obviously, we have also significant spare capacity in Arcata. Our goal is to try to come up with additional resources that do not only increase the life of mine, but also allow us to fill the spare plant capacity to those 2,500 tons per day. And in the long-term, our goal is to extend life of mine and continue controlling costs.
Moving to Slide 14, talking a little bit about exploration. We continue believing that there’s a significant exploration upside in Inmaculada. Very little exploration has been completed so far beyond the operational area. The focus of 2017 drilling is going to be on confirming the presence of the Millet vein that you can see there in the chart, appears to the east of the Angela vein in green.
One very positive news regarding Inmaculada is that with the mine development and some additional drills and ores that we have done underground, we have been able to reassess our geological model, and that reassessment has ended up in additional 10 million silver equivalent ounces for Inmaculada, which is very positive news.
So in addition to that, we also expect that the new drilling program that we’re going to be starting this year should allow us to find additional potential resources that should allow us to continue growing the resource base in Inmaculada. But we’re at the very good track on that.
Angela vein, as you may recall, is still open along strike. But due to underground work that we need to do prior to that, that is more part of the longer-term plan. And also, we continue targeting several satellite veins surrounding the main Angela vein.
Moving to the next slide, Slide 15. We have talked about Pablo in the past. The mining permit, as I mentioned, expected to be at the end of Q3, or beginning of Q4 2017. We have also explored another vein that is the Marco vein. We have already found 1 million ounces of resources there.
But once we are also doing the underground development work in Pablo, after we get the permit, we should expect to continue exploring more around Marco and other surrounding structures, with the goal of increasing the resources close to that Pablo area. Pablo resources are now at 40 million ounces, as you may recall, with significant improvement in ounces and in grade.
Moving to Slide 16. Also at Pallancata, in addition to the focus that we’re giving to Pablo, we’re going to continue exploring all areas surrounding Pallancata that are looking very encouraging. The most relevant ones are the extension of the Pallancata vein and also the outcropping that we’re seeing at Esperanza and Cochaloma veins to the Southwest.
Moving to the next slide, Slide 17, Arcata. We have significant resource and potential drilling being carried out during 2017. We have already found approximately 4.7 million ounces of silver equivalent resources, which is very positive. We do have a target for the year of finding around 11 million ounces, so we’re in good track to achieve that target.
We also, as we have announced in the past, we have started a very comprehensive long horizontal drilling program. We started that in the first that in the first half of the year, but since those are drill holes that require all the way up to 2,000 meters, those take time to perform and also to relay the results.
So we expect that some of the results and findings are going to start being delivered during the second half of this year as well. And the focus for exploration between now and the end of the year is going to be in Alexia; Macarena East; Tunels 2, 3 and 4; Tres Reyes; Luisa and the Marciano structures.
Moving to the next slide, Slide 18. In San Jose, we are also very encouraged with the geological potential there. Following the initial drilling that we did in the first half of the year, we have also performed additional geophysics at the Aguas Vivas area in the Northwest of the deposit.
And after completing the geophysics, we are now going to start the drilling program. As I mentioned, we expect that to start at the end of this week. And in addition to that, we’re going to be doing some drilling for resource and potential for 2018 in the Platifero, Clara, Saavedra Norte veins in the San Jose block.
Moving to the next slide, our strategy remains similar to what we have discussed in the past, focusing on three pillars, and the three pillars of the core assets, exploration and acquisitions, also with short and long-term priorities for each of those. In the case of our core assets, our short-term priorities are cost control and operational efficiencies that remains top of our agenda.
We also have a priority of advancing and completing our Brownfield program and to try to fill out the spare capacity that we have in Pallancata, in Arcata and also in the Ares facility. Long-term priorities are to work towards increasing significantly our life of mine and evaluating potential capacity expansions, particularly at Inmaculada.
In the second pillar, exploration, the short-term focus is continues taking opportunities. We have also advanced very well on that. We have significantly reshuffled our property portfolio, and we have now many potential properties that are looking very encouraging for future Greenfield work and also progress our drill-ready Greenfield projects.
We expect that between now and the end of the year; we’re going to drilling at least one Greenfield project, hopefully two. And we are targeting that for 2018, we’re going to be drilling around five Greenfield projects in Peru and in other countries outside of Peru. Particularly, it could be Chile and North America.
Long term, we continue building our Greenfield portfolio and optimizing our early stage projects. Finally, on the third pillar, acquisitions, we continue looking at potential opportunities. We’re looking at potential early stage opportunities or earn-in JVs, in which we can contribute our operational expertise. And obviously, for the long-term, we’re interested in things that have significant geological upside, more than the market is currently valuing, and that could give us an important return for our investment.
And finally, moving to the next slide, Slide number 20, we firmly believe that Hochschild represents an ongoing important value proposition with a very strong production track record. We obtained a production record in , and we’re on course for another record production in 2017.
We have very efficient cost structure with significant Brownfield potential. And as I mentioned that should start moving at the faster speed during the second half of 2017. With all the potential from Pablo driving all the further growth for the Company, most of the further growth for the Company and also significant geological upside that is expecting to be untapped, with a very strong financial position; with debt reduction ahead of schedule, as Ramon mentioned during his presentation; and finally, with dividends reinstated. As you may recall, we paid $40 million in dividend last year, and we have already announced an additional $7 million for the first half of this year.
So that covers the presentation. And with I would like to open up to any questions that you may have.
Thank you. [Operator Instructions] We can now take our first question from James Bell of Bank of America Merrill Lynch. Please go ahead.
Thanks for the call and just two questions to start. Firstly, at Pablo, can you talk about how confident you are that we get the permits in Q4? And in light of that timing and the sort of 1 million ounces recently discovered at Marco, how should we think about the production volumes there next year? And then maybe just on Arcata, your revised guidance is obviously puts all-in sustaining costs above spot. Can you maybe give a bit more detail on what you’re going to do in the second half and into 2018 to get to those back to a profitable position?
Sure. James, thank you for the questions, so regarding Pablo permit, I would say, based on the information that we’re getting is impossible, let me start by saying it’s possible to predict exactly where we’re going to be getting them, because we’re dealing with the government bureaucracy.
What I can tell you is that based on the information that we’re receiving, it looks very likely that we should be getting those permits either at the end of Q3 or the beginning of Q4. We’re working very hard with the government to try to make that happen. There’s still one variable that we need to wait until the end for final confirmation, which is whether this would require a prior consultation.
If prior consultation is not required, then we believe that permits are very, very likely to be obtained within Q4. If prior consultation is required, this could potentially delay the obtention of the permits for a few months. But so far, it looks like the most likely scenario is that we should be getting those by Q4, at the latest.
Regarding Marco, Marco is still something that is very early stage. We need to work on developing Pablo first. So – and once we are there, we need to continue doing drilling from the underground. So we need to first get the permits for Pablo, continue the development of the vein, do the drilling holes and then reach Marco. So what I can tell you is that the best guidance that we can give you is that once Pablo is fully developed at 2,400 tons per day. That is going to be the most likely scenario for 2018, while we continue developing additional resources.
Regarding Arcata, we believe that the critical part in Arcata is the completion of the Brownfield plan. We as I mentioned have already found 4.7 million ounces of resources that are looking very encouraging. We expect that by the end of the year, we’re going to be finding more, hopefully that would – and hopefully, more than that by the end of the year, but that, I mean, that depends on what – on the success of our plan.
So – but what we are seeing is that most of these upside that we’re finding in Arcata should materialize in the second half of 2018. So the most likely scenario is that between the second half of 2017 and the first half of 2018, we are going to be operating pretty much at breakeven in Arcata.
Our goal is to continue working on cost control, dilution control and other cost-saving measures to try to put in line, take it back to hopefully around $16 per ounce, but in terms of projections, we believe that is going to be breakeven this second half and the first half of 2017. And hopefully, with the results of the Brownfield plan, we could significantly improve that a year from now.
Okay, thanks. And then, one more, if I may. There seems to be a bit of concern in the market about your life of mine and how that feeds into the NPV of the Company. I just wondered if you could talk about how you guys think about exploration, working to combat that. And does that inform your exploration strategy in the near and the medium term?
Okay. Well, regarding the life of mine, James, as you know, all our mines are underground mines that, by definition, work with a relatively short period of life of mine compared to open pit operations. The example I would like to give you is Arcata. Arcata has been operating for over 50 years, always with the life of mine of three years. Also, what I can tell you is that, I mean, we like the geological potential from all our operations.
We see all of them as a very long-term operation with significant geological upside that should continue giving us additional resources. But obviously, until you get there, that’s impossible to prove. It’s just past history, is geological information, geological operations, geophysical work and geological inferences that we made that allow us to be very enthusiastic about the potential in all of them.
What we did with the Brownfield long-term plan that we presented last year to the market is that our goal is to try to accelerate that, to try to get more comfort to the market about our long-term potential; and instead of working with three years of reserves, trying to come up with an additional two more years of reserves, so get to five years in total reserves; and ideally, five additional years of resources of the same quality of the reserves, so that the market will have ahead of them the next 10 years with relative certainty. We continue working towards that.
We are up to a little bit of a slow start due to permit-related matters. But I believe, in general, that the intention of the government is to simplify that and try to make that easier. So let’s say, after that initial slow start, I expect that the rest of the Brownfield plan is going to be accelerated and moving at the expected pace, with the goal of trying to prove that – those additional reserves and resources.
Okay, thanks. And just quickly in terms of your resource-to-reserve conversion on a historical basis, what has that been run rating at?
It varies a lot, James. It varies a lot. There’s no fixed number for that. I would say, depending on the case, it could be 60%. In some cases, it could be 85%. It also depends a lot in the structure, in the vein, in the grade and in the particular mining [indiscernible]. Somewhere between 60% to 85% is the range that we manage.
Perfect. Thank you.
[Operator Instructions] We can now take our next question from Daniel Major from UBS. Please go ahead.
First question is a follow up on James’ question. You’re targeting 2,400 tons a day run rate from Pallancata in terms of that ramp-up. Can you provide us just with another sort of reiteration in terms of the permitting process? I mean, is the issue with the permitting process really about not being able to explore and expand the reserves and resources at Pablo? Or is there a significant risk to your ability to ramp the volumes from the mine up. So say, for example, if the permits are delayed to the end of 2017, what is the implication on the time line before you get to 2,400 tons a day? That’s the first one.
Sure. Daniel, on that one, what we expect is that once we have the permit, which I mentioned, we have high expedition that is going to happen either at the end of Q3 or the beginning of Q4. After that, we need to start the superficial work or the surface work for the mine development, raise boring and electrical work and such.
Once we have the permit, we would expect that is going to take us, I would say, between four months to six months to ramp up from, let’s say, 1,400 tons per day to 2,400 tons per day. So that is pretty much the time line. Should be a relatively smooth transition between the 1,400 and 2,400. No, should be going up slightly by a proportionate amount to – all the way up to 2,400 tons per day.
Assuming you get the permits end of Q3, you should hit your targeted run rate end of Q2 2018.
The targeted rate should be, I would say, if we obtain a permit in beginning of Q4 then we should be getting to 2,400 I would say at the end of Q1 of 2018.
Okay. Thanks. And my second question is on Inmaculada. Your – seems likely to fall short somewhat of your exploration spend at Inmaculada. Last year reserves and resources decline by about 15% principally due to mining. Why are you falling sort of behind your expected exploration spend budget at Inmaculada? And at this point, what is your expectation on resource reserve replacement or growth for 2017?
Sure. I mean, the only reason for the delay in exploration spending in Inmaculada is related to permits and is – again, it’s not a question on whether we will get them or not. It’s a question on when we will get them. Again, we’re working closely with the government to try to come up with all their requirements and the bureaucracy and the paperwork. But we do expect that we’re going to be obtaining permits relatively soon hopefully Q3 or again beginning of Q4 as well in Inmaculada. And once that happens, we are going to be starting at full speed.
Having said that, we have already started to do some underground work that do not require the permit, and we’re also expecting that, sooner than that, we’re going to be having some additional news in terms of potential resources for Inmaculada. So we have already started the underground work, and we are going to be starting the superficial work, the surface work as soon as we have the permits. But having said that, most of the drill work that is going to be done in Inmaculada is going to be for potential resources.
Okay. I don’t think that we are going to have the time to come up with the potential resources and then convert those into Inferred resources before the year ends. We need to be very lucky in terms of permitting for that to happen. So the most likely scenario is that by the end of this year, there are going to be no additional Inferred resources only potential resources and we are going to be starting the conversion of potential to Inferred as soon as possible in Q1 2018.
Okay. So just to clear from that, your current expectation would be that resource life would decline in 2017 in Inmaculada…?
Yes, speaking of the production for the year, right, then potential resources should increase by the end of the year, and we’re going to be giving some update on that as well. But the Inferred resources are going to increase, I will say, most likely beginning 2018
We have a recall and we can now take a next question from James Bell of Bank of America Merrill Lynch.
Yes, quick one, while we’ve got you guys, on Argentina. Obviously, the devaluation is not going as fast as expected, and that led to a bit of an increase in your guidance for this year. I just wondered if you could talk a little bit about what you’re seeing in cost inflation in Argentina. And how we should think about 2018? Are we going to see devaluation in your view? Or do you think we should think of cost on a go-forward basis being higher. Thanks.
So yes, James – yes, what you mentioned is right. We were expecting higher devaluation for the year. The reality is that there are constraints to that. We did see some devaluation ramping up in the past three weeks, although there has been a correction after the primary elections that were held during the weekend in Argentina that have reduced a little bit of that impact. So I would say in general, we believe that for the end of the year, also getting into elections in October, for the end of the year, we are going to end up 2017 with inflation being higher than devaluation.
But we do – would expect that for 2018, the government is going to be much more, particularly if they are as strong as they show they are as the result of these elections, to control inflation more and also to be a little bit more aggressive in terms of the relation of the currency.
We now take our next question from Daniel Major from UBS.
Just one more for me on the debt side, assuming that you refinance the bond in January or repurchase the bond based on your current rates you’re getting in the market for alternative debt, could you give us a sense of what your annualized swing or delta in interest cost would be assuming that you execute on that bond refinancing?
Sure Daniel. This is Ramon.
Hi. The delta is going to be huge really, no, because we’re paying a coupon right now of 7.75%, no, which amounts to around $21 million, $22 million per year. And the idea is first to repay a portion of that debt outright. We have $145 million in cash, and at the end of the year, that number should continue to grow.
Remember that in the first half, we have repaid some debt. We have paid the taxes that I mentioned corresponding to 2015 results in Argentina. We had to pay bonuses to employees. So there are several things that have been charged in the first half that will not be repeating in the second half.
So our expectation for cash flow growth, of course, always depending on prices, is very important. So there’s a portion of debt that will be repaid. The rest of the funding to fully repurchase the bonds will come first. We’re not using at all our short-term lines in Peru. We have those available right now at around between 1% and 2%, so that is very, very low.
And we expect that we could easily take $100 million on those to be also repaid during 2018. And probably, just to not to have everything frontloaded, we could also do something to be repaid between – in 2019, no, so it will be like a two-year loan with a one-year grace period with rates that will probably go between 2.5% and 3.5%, no, fixed, not as a spread, no, but fixed.
So I believe that, that is going to be very good. Of course, the final delta will be paid on the split of all those three alternatives. But in any case, as you can see, we’re going to be seeing a significant reduction in the finance expense, which will go all the way down to the net income, of course, after taxes, no? But that is going to improve the P/E ratio of the Company also quite substantially, and the relative valuation of the company will certainly improve by then.
How much of the current cash balance do you intend to use the outright bond repurchase?
Look, I mean, the calculations that we have been looking at in terms of working capital that – of cash that we need on hand to absorb any changes in dramatic working capital or like we have, for example, at the beginning of the year with the stoppages of Inmaculada and Pallancata, plus to sustain any drop in prices, I mean, a conservative number seems to be around $60 million to $70 million. So everything on top of that, I think I will be comfortable to recommend using in repaying the bonds.
End of Q&A
We have no further questions on the line at this time. I would now like to turn the call back to the host.
Thank you very much, Valerie. Thank you very much, everybody, for joining us in today’s call. And should you have any additional questions, please feel free to contact directly Charlie Gordon at our London office. Thank you very much. Good bye.
Thank you. That concludes today’s conference call. Thank you for your participation, ladies and gentlemen. You may now disconnect.
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