What obstacles did Minera Poderosa encounter during 2023 that impacted its operations?

In 2023, as the world began its post-pandemic recovery, we resumed our energy and brownfield exploration projects that were left pending. However, we faced significant obstacles due to criminal activity linked to illegal mining and road blockades that interrupted mineral transportation to our plants for 48 days. 

Despite our efforts to maintain production, we had a setback resulting in a reduction of 28,000 oz/y of gold output, below our estimated production of over 290,000 oz/y. In this context, the authorities became aware of what we had been claiming for several years, and the National Police was deployed, declaring a state of emergency in the province of Pataz. While this intervention brought some relief, our operations were again interrupted in August by incidents related to terrorism, including attacks on high-voltage towers, which halted our activities. 

We hope this situation is resolved so that operations can resume smoothly. We are focused on replenishing reserves and considering expansion plans. Our two plants process 1,800 t (1,000 in Santa María and 800 in Marañón), a pace we aim to maintain for two or three years to increase reserves to 1.3 million oz, compared to the current reserves of 802,000 oz. We will consider expansion once we surpass 1.2 million oz in reserves, especially at our Marañón plant.

How is the 2024 investment split between exploration, energy and infrastructure projects?

Our investment program for 2024 amounts to US$130 million, with US$70 million allocated to geological projects and the rest to energy infrastructure. In our exploration plans for 2024 we have scheduled to carry out about 70,000 m of mining work to replenish gold reserves and achieve a 10 to 15% increase. Regarding greenfield exploration, we are focusing on our Palca project. In the Montañitas area we are working with communities to negotiate and reconcile their high expectations with the realities of a medium-sized company. Once we reach a point(s) of agreement, we can consider initiating an environmental impact assessment. 

In terms of cost reduction, we have a fairly aggressive program to reduce costs, and we aim to inaugurate the Chacparrosas project in March 2024, connecting the Santa María treatment plant to the national power grid, reducing our dependence on oil. We are investing in an 8-MW photovoltaic plant and a hydropower project estimated to generate 11 MW by 2027. These initiatives ensure both reserves and energy for future production expansions.

What progress has Poderosa made toward achieving remote control in its operations?

Connectivity is crucial for implementing machine learning throughout the organization. During 2023, our focus has been on improving connectivity, aiming to complete the fiber optic setup by 2024.

Machine learning has proven to be beneficial in geology, generating geological models to streamline reserve identification. In planning and engineering, our goal is real-time automation whenever possible. In our Marañón Plant, for example, automation is already widespread, with efforts underway to move mills towards autonomous operation and gradually extend this autonomy to mining operations. Achieving remote control of jumbo or scoop equipment may take a couple more years; however, it is an objective we are constantly advancing towards.

What opportunities and challenges do high gold prices present for Poderosa?

The following two years are expected to be a period of relative prosperity in the gold market, with the minimum expected price being US$1,800/oz. While gold prices remain favorable, our operating costs continuously increase, with a 6% increase in 2023 compared to the previous year and a projected 5% increase for 2024. Despite this, our cost per ounce is approximately US$1,200, allowing us to continue investing in exploration projects. It is worth noting that while high gold prices are advantageous, they also act as a double-edged sword by incentivizing informal and illegal mining activities.

What is the planned production target for Minera Poderosa in 2024?

We plan to produce 256,000 oz in 2024. The first quarter has fallen slightly below our expectations. Assuming illegal mining activities do not disrupt our operations, we anticipate smoother operations. 

Successfully meeting our production targets will foster the growth of Compañía Minera Poderosa and enable us to adhere to our budgets and investment programs, consequently reducing costs. Mine sustainability depends on operating expenses; therefore, achieving cost efficiency is crucial.