Q3 2019 Earnings Call
Ladies and gentlemen, this is the operator today's conference is scheduled to begin momentarily until that time. Your line will again be placed on hold thank you for your patience.
Time, I would like to welcome everyone to the first quantum minerals third quarter earnings results Conference call. All lines have been placed on mute to prevent any background noise.
After the speaker's remarks, there will be a question and answer session. If you would like to ask a question. During this time simply press Star then the number one on your telephone keypad. If he would like to withdraw your question press. The pound key. Thank you Mr. Clive Meanwell, President and director of first quantum minerals you may begin your conference.
Thanks, operator, and thank you everyone for joining us today.
Joining me on the cold today kind of my CFO Christian School General manager Cobre, Panama, Juliette Wall General manager Fine and Simon Mclean group reporting controller.
As usual before we proceed I would draw your attention, but over the course of this conference call, we would be making several forward looking statements and also try encourage you to read the cautionary note that the Companys third quarter Mdna unrelated results released the news release as well as the responses but.
You bet to our company, which are detailed in our most recent annual information form and available on our website.
Let's talk from quantum dot com on sito.
A reminder, presentation, which accompanies this conference call is available on our website can be accessed either in the event section under the investors Tom all through the Q3 2019 results conference call button under the new section.
Okay.
So kind of started with some opening remarks before.
Reviews. The financial result, then we'll open the lines take your questions.
How do you would've seen with our results released yesterday and in a separate one a week ago Cobre Panama is now.
Commercial production Needless to say this is a very proud torn for all first quantum of so many reasons.
Many of you would have been with us when we start we've begun this journey leading to the acquisition of the project in 20 said team. It was a bold move on our part, but we have done extensive due diligence we knew all capabilities and realize the value we can bring to this project.
When we're able to get on site out team applied that skills and redesign of the majority of the project and exchange just about everything that was being done before we got back those decisions together with our learnings from all Sentinel project laid the groundwork for cobre, Panama to get to the stage in such a short time from first all through the mill.
Of course, the best probably the only as good as its execution and say that all people I'm, particularly out projects team. Once again proved why they all leaders in our industry.
During these challenging times, our industrial company a pace over the past few years, they somehow found a way to keep moving the project forward.
So here, we are today expecting to be operating at an annual throughput at least 72 million tons by yearend and probably more.
And set to increase to the 85 million tones.
The next yeah.
This will be achievable once the I know, it's fully operational which is expected during the fourth quarter.
Oh, the ramp up continues its reasonable to expect Cobre, Panama unit cost of production to settle in at a significantly lower right. The current levels. So as you can see cobre, Panama is a truly impressive operation that is very quickly establishing itself as a cornerstone asset for first quarter.
To them.
With that come to be added benefits of greater geographic diversity, and a significant cash flow potential.
Turning now to operations during the quarter. The Cabreva Palomar effect was clearly evident even just one month of commercial production and sales revenues and earnings.
And our other main operations Sentinel turned in another solid quarter with lower grades offset by higher throughput higher equipment availability and improve no performance.
Las Cruces began its recovery from a London slippage earlier in the about how we're caught up to work through a failure ball mill caused by the.
Thick enough of the all of the old feed which resulted in several lost days of production.
So the remainder of this year at all priorities of Las Cruces, South finalizing the remediation of the mine and optimizing cost and cash flow.
Research on the technical and economic feasibility of the poly metallic refinery project is also expected to continue.
Concentrate copper production was affected by the expected decline, even grades and the oxide circuit and lower recoveries across all three seconds.
Gold production Harbor benefited from from some operational enhancement projects recently completed and whatever 20 parks and higher than compared to last years quarter.
Throughput smelter was lower due to plum upon two week shutdown maintained its consistently high overall copper recovery rates up 7%.
Moving onto other items in Zambia, they propose replacement of the 18 with the sales tax and I was just over a year ago was scrapped during the country's latest budget. Instead. The intention is now to make adjustment for the current V.A.T. system.
We continue to see clarification on these changes to determine the impact from our cost structure in Zambia, which is yet on that.
You would have also seen a shot news release, we put our place in September confirming discussions raw regarding a potential sale of a minority interest in.
Zambian copper oxide.
As I'm sure you can appreciate companies how these types of discussions from time to time, but I do want to reach right. There's no guarantee that a transaction will result from them and we won't be making any further comments on this during this call.
So to wrap up my comments, it's fair to say, it's a special moment in the evolution of first quantum as our largest unlike the almost complex project today says into commercial production.
I would also already tried the commitment we made to take a poll for.
For major project investment to de lever the balance sheet and in time to reward our shareholders, but I patient support of our vision and strategy.
Well I'll hand over to has to take you through his review.
Thanks, Jonathan Good day to everyone.
And I'll turn to the quarterly production slots and Islam made shouldn't cobre, Panama was displayed in commercial production on first of September .
It produced 56000 tons of copper and 21000 ounces of gold in its second full quarter of production.
Which 19000 tons of carpet and 8000 ounces of gold were deemed commercial.
This late to oppose quantum's highest quarterly copper production exceeding the same period last year by 27%.
Gold production of 70000 ounces was 56% higher.
The same period in 2018 affecting every pediments contribution of 21000 ounces and high production that can sachi pulling operational enhancements.
These include it installation of additional gravity concentrated.
Turning to the next lock financial overview.
Imperative EBITDA off so you ended up 54 million reflects an 8% reduction in realized copper prices and level volumes that that's crucial send consigned G.
Benefits from $67 million contribution from Cobre, Panama, and an $18 million gain realized by copper.
Sales H. program.
Compared to earnings with 14, sainsbury lower than the comparable quarter of 2018.
And what impact it binding interest charge of $64 million of which $49 billion relates to cash payments that we.
Previously have been eligible for capitalization that is now of expense fallen declaration of commercial production that company Panama.
The increase in they dates reflects the cobre, Panama capital expenditure program, which is now nearing completion.
Turning to the next slide on quarterly unit cash cost Cabot, Panama and its first month of commercial production delivered a C. One off $1.30 for the pound.
And all in sustaining cost of $1.56 abound.
An amazing result in early stages of commercial production and overtime, we expect a cost structure.
That's correct that amount to improve as throughput in production levels increase.
Overall year to date kaposi, one and all in sustaining costs within full year guidance.
The C. One costs of $1.36 foot down plus five cents higher than Q3 2018.
And four cents higher than Q2 of this year.
<unk> production at less criticism can sand she impacted group see one by four cents and two cents respectively.
All in sustaining cost.
In fact, it further by timing of sustaining capital expenditure consensual that's one of the increased Zambia royalty right.
[noise], sending to the copper hedging program slide.
Company continues with its hedge program to choose stability of cash plays while maintaining compliance with financial covenants.
As of today the company at 50000 tons of zero cost collar call us with maturities to Fabry 2020 at a weighted average price is off to dollar 65 to bounce to $2, 81% bound.
And the city saving in the whole thousand tons of an margined copper for what sells contract at an average price of two dollarssixty six per pound.
Lets maturities are up to the same between 19.
Approximately one third of remaining expected couple thousand 2019 H.
<unk> and margin for it and zero cost collars sales contracts at an average scroll price of $2 65 abound.
Cool no says an end margined nickel forward sales contract or just over 12000 tons.
At an average price of $6 77 per pound outstanding with maturities through to February 2021.
Thanks, and then it slot next slide on Dayton liquidity profile.
The company ended the quarter with $406 million of Nate unrestricted cash and cash equivalents. In addition to $470 million of committed undrawn facilities and this complied with all financial covenants.
Taking into account full cost operating cash inflows.
Capital expenditure outflows and available committed facilities.
The company expects to have sufficient liquidity through the next 12 months to carry out its operating and capital expenditure plans and remain in full compliance of its financial covenants.
Company continues to take action to manage operational and price risk and further strengthen the balance sheet.
The total that receivable accrued by the Companys Zambian operations at the date of claim was $823 million.
The carrying value at the end of the quarter was 412 million, reflecting the devaluation of the Zambia, Quach, Huh, which resulted in $226 million decrease and an application of discount for the time value of the total receivable to expected repayment, although hundred 95.
Again dollars.
All Zambia bets balances announced categorize as non current.
Finance charge of $25 million had previously been recognized to reflect the impact of discounting the balance ever they expect a timeframe to repayment and a further $160 million fondness charge was recognized in the quarter, representing the discounting of old Zambia best balances.
For the expected timeframe to with payment to using a Zambia quach on local risk free right.
The company isn't regular discussions with the relevant government authorities and continues to consider it that the outstanding claims are fully a recoverable.
Turning to the next slide to Zambia budget.
It's 2020 national budget presented on the 27th of September It the government of the Republic of Zambia announced that the sales tax which is intended to be introduced in January 2020 will no longer be implemented and the current that regime will be maintained.
The budget included certain changes to the rules on VIP non deductions, which are listed out in this slide and in the M.D. at night.
Detailed guidance on these changes has not yet been issued by the Zambia revenue of 30.
And the toll further clarification is given on definitions and rules, it's not possible for us to communicate the exact impact of these proposed changes. However, we anticipate that the impact on C., one will be less than the previous the proposed south stacks.
Turning to the next lot of capital expenditure guidance on total Cobre, Panama project capital expenditure remains unchanged at $6.7 billion.
And expenditure in the quarter for that project was $193 million.
It's also important to note that capitalize pre commercial up operating results at Cobre Panama.
Excluded from these tables.
And exclude it from gardens and it resulted in a cash inflow and a reduction of the capital program of $137 million for the quarter and 19 $1 billion year to date.
Got inside the company sustaining and other projects includes expenditure relating to commit Panama witching goods expenditure to enable commencement of the expansion to 100 million tons per annum capacity.
Including the initial development and engineering work, allowing for mining to proceed to the cleanup pet.
Other projects in 2019 include the trolley assist expansion and seem to know remediation work at Las Cruces. Following the January land slippage.
And cost.
Associated to allow the restart of Raven so.
Cobre, Panama depreciation commenced in September following the declaration of commercial production.
And it is expected to range between 100, 4500 $665 million and the full months ending 30 post December 29 team.
And just the last comment on guidance in terms of guidance, we've reaffirmed up 2019 gardens.
We only typically updated guidance once a year for the out two years and that's normally in February of each year.
Following completion of the review.
And the approval of the longer term plan set to avoid a misunderstanding, we only publish updates to the out to use and frame fabry going forward.
Thank you and with that all Antech, however to Todd.
Hi, Thank you heard us so operator, if you could open the lines for questions. Please.
At this time I would like to remind everyone in order to ask your question. Please press Star then the number one on your telephone keypad again that is start the number one on your telephone keypad.
Our first question comes from the line of Orest Wowkodaw <unk> with Scotiabank. Your line is open.
Hi, Good morning couple of questions on Cobre, Panama first of all pretty impressive cash costs in that September month of $1.34.
Do you think those are sustainable over the next 12 months or or could we actually see those maybe trend higher because of lower grades in the in the short term before they move lower towards 120 number longer term.
Interest and who would be happy to answer that one.
Hi, Thanks for the question.
He obviously, we're very happy with the with the performance in the it today and I think it is sustainable is the short answer though yeah for the rest of the you. The project does continue in ramp up our guidance remains firm.
And I do think that next year, you will see that number was reduced from this level exactly where it ends up by the ended the year in the fourth quarter by the fourth quarter.
We haven't got affirm indication that we providing at the moment, but I think it will be at these levels when you're about next year it trending lower as as volume.
And and the rest of the the ramp up continues as Hennessy.
Excellent and interesting can you give us some color on what the gold grade and recoveries were in the third quarter.
Yeah, we can certainly the inline with what we expected. So the first of all the point to the disseminated dried that reports to the concentrate strain.
The disseminated gold is in line with what's in the 43, one I one we've seen a slight positive recon both in terms of.
Tom Seddon grade of gold, it's available but for the purposes of what we're thinking about here. We just refer to the 43, one or one number the recovery is in line with what we expected which was in the order of 50% to 55% of that disseminated goal, which is it's absolutely in line with what we expected in the 40.
Three one or one.
Intend to the non disseminated gold that is the gravity gold we had a first pool from the gold gravity plants in September .
So that is goal that we were not able to a statistically estimate in terms of bell requirements for the for the 43, one or one.
We not really giving an indication as to what we expect the recovery to be available from that gravity circuit.
But it was we certainly achieving a gold production.
From the gravity circuit and as we get some historicals under our belt I think we'd be able to produce more guidance on what that gravity gold production will be longer to.
Oh, that's excellent. Thank interesting can you provide to think color on silver.
This silver was I think slightly below what we would sit in the 43, one or one in terms of recovery, but in global picture it wasn't materially different from what we sit in the 43 one to one.
Okay and then finally finally from me just a question for how that's now that you've reached commercial production at Cobra.
Can we are there plans to to now go in term out the debts. So your maturity schedule matches or as more aligned with the life of mine that Cobre Panama.
Or a suite.
You know us we tend to look and manage the day profile. So.
With that Cobre, Panama coming along I mean, there was a big achievement for us and now we'll.
Well continue to look and manage the date, where appropriate you know market conditions allow will them well look at addressing some of the near term.
Maturities.
Okay, but it's not the ultimate goal I suppose to term out these maturities to.
Better matched the production life of Cobra.
Well look I think the production life of carbon is quite a long time. So we'll then what we'll do this you I mean, the objective stated is that will reduce overall indebtedness. So that is still the key objective for this company and but then we'll we'll look at addressing the maturities as well and Tim out some some of those Dayton.
Well it into longer term maturities.
Great. Thanks, so much.
[laughter].
Your next question comes from the line of Matthew Murphy with Barclays. Your line is open.
Hi, I'm just had a couple of follow ups on those questions. So good to hear that that cash costs sounds sustainable, but I was wondering on the Q3 result, it looked like there was a 63 million finished goods credit against cash costs can you just explain how.
We should think about that.
We just quickly looking looking that up that you haven't yet method I can assure he wants me just looking at those numbers yeah. It's on page 46 of your Mdna.
My other question on Cobre, Panama would just be on that grade profile that the technical report has the grade dropping.
Towards 0.41, so you're in better grade right now how applicable should we think about that a 0.4 versus <unk> 0.5, or thereabouts that you were running Q3.
Yeah. Thanks Matthew.
Yeah, I say, certainly we do see the grade and but take your head towards more the the 0.41, which is in the in the the technical report.
And that's yeah that the law and that we're seeing in the ore body in terms of the grade control drilling.
[noise] [noise] does that answer the question Yep Yep that's great.
[noise] I mean intensive inventory I mean that there was.
Well, it's a big movements in the coupon finished goods.
Paper, Panama say correct that you'll see nothing was higher acuity and they came down to a relatively low level at the end of Q3, yeah I can give some color to that Matthew when we started or we wouldn't it.
The certainly the run off of the.
The the first shipments out of the Port a was an interesting exercise I think we will and truly have that behind us. We've shipped 11 shipments that we did see high stock levels in the shed a when we first started up the port and what we've we've been able to do is the plate that shape now down to virtually zero, a and we just run that.
As empty as we can at the moment, depending on each for the volume of eight ships coming.
Right Okay. So.
Sorry go ahead.
So that within the C. One we typically exclude any movements in finished goods just just from that that production metrics. So that's where you're seeing there as the the the movement in the finished good inventory that is just coming through on that reconciliation between cost and south in the C. One cost.
Right Okay.
Okay. So the I mean part of the reason I'm asking is trying to figure out if there's any funnies in that number because you know you're running at only 63% of the 85 million ton per year nameplate, and so I would've thought there'd be more.
Sort of fixed cost allocation driving that number higher for September so I guess, what I'm trying to ask is could the dollar 20 by 2020 to be conservative.
I'd say is the downside possibility on now on a cost portfolio, yeah, I'm pretty optimistic about a cost I think we can do better like I'll just point out that commercial production you will recall is around just the.
Seven mills that we had in place. So that's the 72 million tons per annum, we only expect to be it I before the end of the year that doesn't that dramatically to more fixed cost profile, a fixed costs really aren't on labor and repairs and maintenance.
We don't yet have the <unk> mills. So we don't have the repairs and maintenance there and in terms of life, where I'm at about 83% of more permanent workforce I'm carrying a little bit more coming over from the project in camps and a in the team f. at the moment, but those will be sorted out in the next.
Month to month by the end of year I expect and then we should be much closer to well.
Steady state number by mid 2020 so.
There's not a dramatic difference and fix cost probably fall I don't expect from here to the 85 million case.
Got it okay. Thank you.
Yes.
Your next question comes from the line of Ralph for TD with eight capital. Your line is open.
Hi, good morning, Thanks for taking my questions.
It's certainly been impressive to watch things come together, so well that cobre, Panama Triston. My question is whereas the daily throughput now or maybe you can give us sort of an exit rate at Q3. The reason I'm asking is in the context of sort of the 72.
The five scenario and the 100 million ton expansion scenario would it be too far of a stretch to get close to that hundred million tons without incremental capital.
We see the enablement of that capital in the 6.7 billion, reflecting all your current thinking there on the expansion.
Hi, Thanks, Ralph So the question in terms of where we were at now and what we need to do to deliver the 100 million ton case in terms of capital is a number of decisions that we will.
We will follow me over the course of 2020 and 2021 towards that decision.
The first is that we will look at the ninth meal, and whether we need to add on which the ball mill.
And whether we need that in the culmination circuit.
Some questions around mine fleets, and whether we will need additional shovel and trucking capacity, but the main decision is really the whether we do you need to go to Kalina and when we need to go to Colina in terms of delivering 100 million, we can possibly do that from but take it but it's there's the possibility of congestion.
In the meantime.
We the Tms is a major element that we'd like to get underway. It started now that started in earnest in terms of delivery of the cycling the downstream cycling sand war.
But we want to see that progress well before we spending the capital towards 100 million case.
So the.
It's limited in the flotation area limited in most of the plant except surround the possibilities milling.
And then what we do on the conveyors and the crushing circuits michelina.
Okay.
Okay, great. Thanks for that and if maybe I could switch over to comply with a with a question on consumption in Zambia.
Can you update us on the smelter situation in the copper belt and when we could start to see.
Some acid availability freed up and when we can start to see those oxide grades come up again or are these relatively low grades or at least lower against my expectations are going to be the way forward I can say Angie.
I think the smelting capacity, it's still a sort of moving targets and that it's a lot of us is about what happens so the other operators from upon him an Casey EM.
I just want to some extent of Lumwana.
So route for out from our point of view.
We have sufficient capacity right now and that is likely to continue.
Whether we but when we are considering the S. Three if and when we make a decision to do anything about that then there is the consideration one of the smelter. We are working on a concept whereby we would not need to another smells has to do the S. Three but that still work in progress.
But for the time being where in reasonable shape.
<unk>.
Yeah.
Look I think Ralph and tend to the oxide gray somebody could sense you.
Well degree a decrease in the next few years I mean, as we deploy to those oxide. So I mean, you, we'll probably see that's coming.
These levels, so sort of <unk>.
Hi enough for a while I mean, you get pockets in the pet, we really do get high grades, but in the longer and you'll see a depletion of the oxide crates them I think asset we I mean, we do you to launch the asset from our smelter.
In terms of the circuit. So we would do make use of the asset as well.
It's just when we put more high again asset consuming material that we do stop all that different and white to but for that.
Of course, if what we treat that.
Yeah.
Okay very helpful. Thanks all.
Your next question comes from the line of Greg Burns with TD Securities. Your line is open.
Thank you Justin this cash cost question, a kobe, perhaps another way to go out it would be unit cost per ton.
Where are they now and what.
Where they versus what all Davis your expectations.
Hi, Thanks, Greg I don't think we published numbers on that but I certainly incentive mining cost the rod on our expectations in fact, we had.
Through the course of the project advance the mining at a cobre, Panama, so that we exposed.
A lot of the ore body and have it available for for the remainder of 2019 and 2020 production.
Because we did bounce that so much we actually slowed up mining in the last few months just to preserve cash.
Rather than than mine ore to the stockpile, we were somewhat or pound ready and waiting for the process plant.
But the cash cost per ton of that morning exercise all right on track and certainly we see it I'm heading towards the number that will compete globally. It's all electric modern fleet, we control that power cost.
And we have very large trucks, a that operate efficiently and we will go into choice is certainly by the end of this year and all of those are helping El al cash cost in the mine in the process plant. We're on track with what we had envisaged in the 43, one on one or we have.
Early on.
A few.
Differences in for example, growing media labor costs, and so on but not really material in the scheme of things, it's really around first feel that drawing media.
And getting the ball mills up and running in established I think that now we're starting to see a much steady approached fall and track record of those consumption rights and I'm confident in the numbers what we do you see is.
The port coming to an into its own in terms of delivery to our saw it ER and the the.
The freight costs that are that.
The contribute to our costs and a very effective very efficient compared to for example, as they on Zambia that is a major differentiated for this project.
And the power costs around the current coal prices very competitive and we're very happy, Iran, or and that's all the things that sitting below where we had expected things to be in the budget coal process as you will be aware a very low unemployment.
Yeah that covers the main ground them the main categories, although overall.
We remain confident that levels that we've done so far as I said I'm not giving exact numbers to the ended the year, but I think by next year.
We see a lot of opportunity to reduce the cost further.
What about the labor situation on site trusts and this is I know there was some challenges during the construction phase but now.
How do you feel about things.
Yeah.
Thanks, Greg it's it's been a major exercise in terms of training with panamanians, we seeing that training and the.
The acceptance of.
Of the mining culture, and so on has been very good and Panama, but we are unwinding a major construction project from uptake of 16 and half thousand people and so those redundancies do you have an impact on the people around us and the communities and song we working closely with.
The government authorities, who working closely with the communities around the 22 villages that are in a project affected area. We have all of those people on leases for access and for training and for progression into opportunities that we don't have available in the Permian operating stuff and we look to make sure that.
The villages around the supported it will be an ongoing challenge Greg because we are unwinding, but I think that in Panama, there's an understanding of construction. The the country itself is is built itself really on major construction projects the canal a lot of cement and industry.
The retail residential commercial building construction, the reason that sort of roots understanding of how construction project works, but it will be a challenge until we get to the sort of steady state operations numbers around.
Redundancies and getting to that that steady state life a number.
Okay. Thanks for some just on final follow up.
Maybe for you and for Clive law nine what other next steps.
Yeah, you do you see happening.
Sure say the Greg the dialogues ongoing so there's been some very constructive meetings with ministry's involve a obviously there was a hand over to the new governments that now through 100 days, an office and we've seen very positive impact of that new government and the economy and what they.
Joining in Panama that made the direction CLIA, they're interested to have mining that message is being reiterated twous numerous times that supportive of mining we do we need to clear up this loan on.
Topic. The government is aware of that and they force that many times the dialogue that we having him with them is around to educate the new government on where we stand and composition, but in terms of timing of when that will be resolved I don't have a picture of that at the moment.
But there's a clear willingness and understanding that it does need to be does need to be resolved.
Okay, great. Thanks Rusty.
Your next question comes from the line of Lawson Winder with Bank of America. Your line is open.
Hi, Thank you good morning, good afternoon, good evening all.
Just a couple questions from from me just first a follow up on your commentary around the S. Three Clive you mentioned that you're working on a solution that would not require a smelter, which obviously would be a quite.
Capitally beneficially in the sense at the capital probably be much less just curious if at this point you can update us maybe on on the capital that would be needed for a.
For Esri expansion without a smelter versus perhaps with thank you.
Listen I mean, there's other say this project is just a it's just a project at the moment when thinking about then of course, there out of the of the political issues, we need some fiscal stability before we invest anything or whether it's a new smells or or or a smaller project, but the the a new smelter is.
The the differentiator between the two is essentially it's a billion dollars.
How about you know because and what are these probably would cost. So it's a major major item. If you don't have to build out.
The project is is certainly a much better project, so, but it's a work in progress.
Okay. That's that's very helpful that.
Yeah. There was the 1 billion figure and then just moving too.
One of the other projects take care you mentioned in the text that the access agreement had been section successfully renegotiated.
Curious doesn't mean that you can now start drilling or what has to be done before you get to a point, where you can you can drill.
Oh, there is still quite a few permitting issues to hoops to go through before we can actually go on the ground there.
Lawson, but you know we are doing a we still working that we're still working with the communities and.
At some point hopefully, we'll be able to go and then really understand the nature of the ore body that we'd go.
So you know it puts it makes its still early stage project is really the point.
Yeah. Okay. That's fair that's helpful. And then just finally on Ravensthorpe I.
I mean, it sounds like you're just the way from.
Starting up the plan do you do have a good idea of when the plant will start up and what the ramp up might look at look like next year and then ultimately what throughput.
Do you see the rate and start plant getting to identify next year.
I think I mean, we are looking to staffing up in Q1 next year I think is still the case isn't it.
And I think we're budgeting for around 20000 tons next nicaragua around that or thereabouts.
So 25 going forward, though right.
25, plus yeah.
Yeah on a monthly production.
Yeah.
Quarter.
Just as the greatest slightly lower than we'd mind. Historically, so you know the production just fluctuates with great.
So I'm hearing that the the ramp up would be fairly quick.
Well our experience to date is a yes, you know once you fire up the the core about project. The you know the common sorry. It leaves the high pressure leach the so pretty ghosted plant in the power station that a it when they ramp to full production ready Robin, Yes, I think they what they think between five and six month yeah.
Yeah.
Uh huh.
And then just finally on that I mean, it struck me that the capex that you've been spending at Ravens, Sir seems relatively very very low like $1 million in the quarter. What how much is left to spend me for a before it ultimately start up.
Well the the main we can start up in the existing pit, but there's only a couple years left of resources enough. It's the move to the next pit that is whether the capital expenditure.
The largest component of losses or a.
Overland conveyor, including a bridge across a highway to the next all body. So we haven't put in the public domain name of the estimated often I think on previous calls that given an indication what do we actually Michael if you have about 60 million.
60 million.
Yeah No. These these numbers are still soft so we'll we'll inform the market when we have the phone numbers.
Yeah, I know that that's great and then would you imagine the.
Cash flow from Ravensthorpe that ultimately paying for the of the pre strip and shoemaker Levy and the overland conveyor and any other incidental capex.
Well the nickel price stays at current levels, a yet hopefully [laughter] miniature it yeah.
Okay. Thank you so much that that's it for me I appreciate that.
Thanks.
Your next question comes from the line of Matthew Fields with Bank of America Merrill Lynch. Your line is open.
Hi, everyone. Congratulations on the commercial production I covered Panama.
I appreciate that you can't comment on any potential transactions given that they might not happen and whatnot, but if there were a sale of a minority stake in your Zambian assets.
What would you use those proceeds for.
Well, it's it's all about de leveraging that's the priority.
Okay, Great and then.
You know understanding you're you're sort of 21 bonds are callable at par now you're 20 twos or not until a callable at par until May of 2020 would you focus with cash flow generation in any kind of proceeds on bank debt or more so than the front end the year of your bond maturity curve.
Met the 20 ones are callable at par on I think its 15th of February next year.
So it currently has had one or one still.
I mean, it said that's just an exercise that you have to do if you do get a chunk of cash in now I'm just going through the economics and is it better to pay up a 101 will.
And just use it to use of proceeds Karen.
Well, we use the prices currently just to repay a revolver and you can always draw on that and future but.
Yeah, I mean, it's we could either Evan you available our that calling the bonds or just repaying some of the bank revolver, which remains a available to draw on future then.
So the combination of paying down bank debt and terming out bonds is probably the better way to think about it.
Yeah, Yeah. That's a that's one of the wise to think of it a tip.
Okay, and then just you know you sort of said that the growth that you want to reduce by has been about 2 billion I.
I know it's kind of.
Your your gross debt levels have fluctuated is.
Can you give us an update on how much you want gross debt to.
Go down by before you start a major projects again.
Well I think it's it's probably still the number that we do want to reduce that by on that sort of 2 billion number.
Yes, so we do want to absolutely reduce today table.
Okay, Great that's very helpful and congratulations again.
Your next question comes from the line of Liam Fitzpatrick with Deutsche Bank. Your line is open.
Thank you.
My questions have been answered, but to a more detailed ones on Saxon and working capital I just don't Saks I appreciate the uncertainties in Zambia. If you were guiding a 45 cents a 29 for the group should we be expecting a similar or potentially materially higher rights for 2020 based on your conference standing up that often.
I didn't linked to that I think before you said the sales tax would increase costs by 150.
200 million is it your expectation that the overall impacts of the new VHP rules, whether it's through see one tax will be a similar type of magnitude and then secondly, just a working capital build have we seen most of that now with the with the run Pablo put more come through in.
In Q4, thank you.
I think boss the Judy it and then when just looking at the corporate tax rate I think on the sales tax.
And the VIP changes I mean, we don't expect the same outflow as we asked before the sort of $150 million to $200 million number.
It should be.
Less than that number.
Yes so.
Hi to quantify the number now, but it should be quite a bit less than then that previously assumed number.
In terms of working capital we.
I do expect some increasing coverage Panama consumables over the next two three quarters and you know it's going to it's not going to be $50 million, probably 20 $30 million something like that $20 million.
And then in terms of finished goods and receivables you might see.
Just depending on weather conditions, I mean, we try and do our shipments early in the quarter for the long receivables and.
Before quarter end, just to get the and inventory or fan, but you know when you get a the way the delay they might be an impact on that so you might get some fluctuations.
And the way to think about its if shipments probably on average about 10000 tons of contained copper.
So if there's a late shipments are you looking at maybe 20 $30 million of working capital.
Swing a swing in that quarter, we if there's a shipment but you don't have the receivable in this might be a 50 $60 million on the receivables.
We try many ships, if we don't run into that Evercore team, but and that might happen and friendship and that's right.
It's not a permanent sort of outflow that.
And then I've done a junior to do you guys have the corporate tax number.
I mean, yes, I mean I don't see.
Quite difficult in in terms of American looking at the time because of the impact so.
And the non deductibility, if something goes has is pushing as hard for them I mentioned, we'll step it up at the contribution Paramount pieces gets the effective tax rate should should <unk>.
Okay.
Okay I have one not just one brief follow up on calibrate I may have missed but the comments earlier, you know, suggesting that gold production into next year and 2020 , one that could be higher than what we are right in the technical report.
Lam no not significantly higher I think we we just saw a positive recon in terms of the all the the ore body model.
Oh, both on grade on tongue, but in terms of production I don't think it's materially different from the 43 one hour.
Okay. Thank you.
Your next question comes from the line.
Ryan Lolly with Barclays. Your line is open.
Hey, good morning, guys.
<unk>.
All right learning, maybe first as a as a follow up to some matts question. A couple go a couple of questions ago. Appreciate you talked about the 2 billion target, but you know I think to his point that balances are up you know over 1 billion Yelp period, obviously that ties to the cash flow burn as Cobra wraps up here, but.
Is it possible. It gets you know maybe what that ultimate goal is on the you know on the on the debt balance and maybe is there and that leverage.
Metric to keep an eye on and then I'll have a follow up thanks.
Brian I mean, we've stated the long term, we want to get below.
To Tom's as Nate day to EBIT dollars, Russia.
I think that's that's target that you should look at.
To reduce the date by 2 billion and I'm going to stick with that number. So you can try and second the more numbers, but that's the number I'll give you and then twice a day to EBITDA. So those are the numbers I'll give you.
Okay. That's I appreciate that and then yeah honest, maybe as you approach. This inflection point on cash flows is it possible to walk through for the group maybe some of the key cash outflows in 2021.
You know we know Capex you know as you have in the slides is still budgeted at 850, but I think it'd be helpful. We get some high level guidance around cash interest expense taxes working capital that anymore. You know just want to frame up all the fixed charges against this improving EBITDA profile, just keep our eye on how to cash flow trends over these next couple of years.
In relation to those debt reduction targets that you talked about thanks.
Well I think this amount weve, a there's a slide in that with the detail in terms of data amount in there.
Cash taxes, we probably looking at about.
It's probably a little bit less than $60 million 55, so we'll be $50 million im a little bit less than that $600 billion per annum.
Instead of the interest at the cash interest.
Well that should be should be reducing.
Working capital shouldn't change dramatically over the next while.
I see you Wanna team.
Major shifts and that is a little bit more in Panama, but that shouldn't change much.
Capex will provide gardens end of Q4 in terms of the new capital. So we just sticking with the numbers. We provided earlier this year full year, two and three of the sort of 850.
I want to think isn't much else what else did I cover then.
Yep.
There is 95 million a year that goes still to LS Niko as well right. Just again in terms of our cash flow buildup sure. Yes that that is correct period yeah. Okay.
Alright, Thanks, that's it or said another way I've been bad November every year. So this and this month, we'll have another.
Give or take hundred million dollars going out.
Right.
Alright, thank you so much.
Right.
Your next question comes from the line.
<unk>.
Markets.
<unk>.
Hi, Good morning. Thank you for for taking my question most of them have already been answered, but one last one.
So you mentioned that constriction of the moly moly plant has been rescheduled for the first half of 2020 I was just wonder if you could remind us what was the original plan and if there any impacts to operating costs and or capital costs due to this change. Thank you.
Sure Refile I just struggling to recall the original schedule, but I think it was originally way back in 2013, which is part of.
The current project in terms of capital. These there's no real change it it's part of the existing commitment. It's included in that 6.7, I intend to timing for that.
All of the equipment those on thought all of its really delivered its long on the thought in fact weve cost the concrete for that facility already so it's really just a that labor around erection and commissioning of that facility.
In terms of operating cost it doesn't really have much impact on their business. We expect a at current moly prices to to have a marginal cashing play from a around a million dollars a month as an order of magnitude sits in order to see a significant country contributor, but it will pay for itself.
It's really around that we can shooting the level of moly now concentrate for our customers.
We do expect at times to go through zones of Hog, Hi, moly in the in the pit we haven't seen that as yet we do we haven't counts is too high a zones, but they haven't been of any significance in terms of the impact on now concentrate quality, but the moly plant will be able to give us that flexibility when we if we do.
We see a zones with much higher Molly cried does that answer the question.
Thanks.
That's it for me.
Your next question comes from the line.
Your line is open.
Hi, folks just come back to the question on long line. So.
If you have no timing on that yet.
Discussions.
Government there is there any color or any idea of how this settles in terms of the structure.
The end up being some sort of tax or.
Change or will it be a one off payment or will there be some sort of.
Settlements.
Resolve the issue around the origination of the.
Mining concessions everything that's happening there just any color on.
He should think about have that resolves itself. Thanks.
Thanks, Paul No. We don't really have a if we haven't given affirm opinion on that yet Oh just made the comment low nine is the stability agreement what it said was 90 97 when the.
When the investment structure for Cobre, Panama was developed by the two parties that being the government of Panama and invest in mining company a loan on was the basis by which the.
Good morning regime, the mining concession that was in place at that time, or lightings royalties and taxes and song.
Total non says is those are held constant.
So in terms of the discussions at the moment that that is around the discussions.
But no we haven't given any going and some on what the settlement to otherwise what Marty.
[noise].
This concludes our session for today's call.
Turn the call back over to plan.
Thank you everybody for attending today, and we look forward to speaking to the end of the next quarter.
Thanks and goodbye.
This concludes today's conference call you may now disconnect.