Q4 2019 Earnings Call
And gentlemen, thank you for standing by and welcome to the first quantum minerals Q4 results conference call. At this time all participants are in listen only mode. After the speakers presentation, there will be a question and answer session.
You asked a question during the session you will need to press star one on your telephone keypad.
Please be advised that today's conference is being recorded.
If you're a car any further assistance please press star zero.
I'd now like to hand, the conference over to your speaker today, Mr., Clive New <unk>, President and director of first quantum minerals. Thank you. Please go ahead.
Thank you operator.
Thank you everyone for joining us on what I believe is I'm extremely cold I interrupt or <unk>.
Joining me on the cold today, I feel that school, chairman and CEO, Thomas Meyer, CFO, CFO, Chris and possible General manager Cobre Panama.
Junior Wall General manager Finance and sort of Macquarie group reporting controller.
As usual before we proceed I would draw your attention to the fact that over the course of this conference call, we'll be making several forward looking statements about such I encourage you to read the cautionary note with the company's fourth quarter in 40, a and B and I and the related results news release as well as the risk factors particular to all company, which are detailed in our.
Most unusual our most recent annual information form an available on our website first high from quantum dot com and don't see though.
A reminder, presentation, which accompanies this conference call is available on our whats website.
So I'll go to start taking that some opening remarks before almost review of the financial results and then we'll open the lines to questions.
So 2019 was a transformative year for the company as we brought cobre Panama into commercial production.
Allows it allowed us to deliver yet another record quarter copper production and a new company recalled for under all production.
So all cost remained low during the quarter unfold, the well within our guidance range.
Particular costs Cobre, Panama continue to get better than we might have expected from such a new operation.
We believe there's still room for improvement because the ramp up continues.
As a result first full quarter production from Cobre, Panama also contributed strongly to quarterly cash flow reflected in our results.
Before moving on to a full financial review I think it's important to address current events.
I'm sure you're all aware of the continuing evolution of what Corona virus notes and Kobin 19, academic and its actual and potential impacts on our industry, but last time I spoke to a little more than three months ago Nobody had heard of this disease.
Despite the seriousness this epidemic, which particularly in China is already in packaging uncalled for usage supply chains sales and ultimately the copper price some of our actions earlier this year have helped to mitigate its potential impact.
Hedging program now extended through 2020 provide some protection from copper price volatility.
Our opportunist bombed topics you Buck in January 20 trends. He has strengthened our balance sheet and made a small resilience to black Swan event such as this.
Hello, Hello, Hello, physical sales of not being material effect materially affected and experts believe it is likely to be a short term event. We are monitoring the situation very closely.
So to wrap up my comments Oh performance in 2020 in the startup commercial operations Cobre, Panama has accelerated some several about strategic objective objectives, all vision to be a leading copper company has been greatly advanced our geographic diversification has been better realized.
And we have increased our cash flow generation capacity, which in turn will help us to begin to de lever our balance sheet before considering any new growth projects.
So with that I'll handover to harness to go through the financial review.
Thanks, Jonathan Good day, everyone.
I'd like to direct you to this likes to talk told I live you in our presentation.
Putting on gene was indeed, a transformative year for first quantum modify the successful delivery of cobre, Panama to the market.
And into commercial production I hate Oh Shuja.
This achievement greatly enhanced our vision of being a leading copper focus metals and mining company.
The finest perspective, we are now well position to focus 50 on de leveraging the balanchine.
Our capital commitments in Twentytwenty is expected to be the well below each of the probably a seven yes.
Have you seen with the refinancing we call completed last month consistent with this objective.
Continuing to prudently manage our capital structure.
Lets say its liquidity and financing sources.
In the fall several years they have been many uncertainties that that cause fluctuations in commodity process.
Such we've utilized H. program to many shelf commodity risk and cash flow stability.
A lot of continuing uncertainties, which now includes the economic disruption and Anna implications of the new corrective artist.
While continuing our program.
Today, we have hedged approximately a third of our expected copper sales in the first off of Twentytwenty.
The next lot on delivering on growth.
During the year, we had record copper production would save another the 2000 tons of copper.
And 257000 ounces of gold.
We have to visit thought a geographical presence with over two of Twentytwenty copper and gold production guidance coming from Panama.
Following a successful Rem initial ramp up period in 29 team.
For the full yet.
Which for the most popken consisted of four if its ramp up contributed approximately 847000 tons of copper.
Cobre, Panama will indeed be a world class operation.
Turning to the next talk on production copper production was within God Incent continues.
Year on year record breaking faint.
With copper production, increasing 64% Centstwenty 15.
Gold production of 78000 ounces.
62% higher than the same period in the prior year with annual production of 257000 ounces being 39% higher than 2018 affecting cobre, Panama <unk> contribution of 60000 ounces.
And higher gold production a concern she falling operational enhancements.
Turning to the next slide to financial overview.
Comparative EBITDA of $511 million for the quarter is 6% increase on the comparable quarter between 18.
And benefited from the contribution of $136 million from Cobre Panama.
The results were impacted by a seven cents lower net realized copper price mitigated by a 26 million dollar hedge gain in the quarter from the proper hedge program.
Comparative earnings of five cents per se.
Includes 27 cents per shale interest expense. This is new since interest is no longer being kept loss following that activation of commercial production that cover Panama.
Turning to the next slide on EBIT, EBITDA underlying competitive even though after allowing for the movements and metal prices and foreign exchange on operational cost was 10% high on the fourth quarter on the back of stronger Cobre Panama contribution.
Well, the EBITDA was lower than the previous yeah.
The full 2019 underlying EBITDA was $71 million higher than the comparative period in 2018.
When removing the impact of lower realized metal prices and favorable foreign exchange on operational cost in 2019.
The improved underlying EBITDA was due to hedge gains from them any change program combined with strong recovery Panama contribution.
These were somewhat offset by the impact of the class Crucis land slippage.
Turning to the next slide to quarterly unit cost.
I'm pleased to see one cost of $1.24 was broadly in line with the same quoted in the prior year, despite lower production at Sentinel.
These costs include the impact of coverage petty must first full quarter of commercial production with a cup of tea, one cost of $1.28 the pound.
Overall full year kaposi, one off $1.31 per pound and all in sustaining cost $1.78. The pound we're comfortably within the full year guidance.
All in sustaining cost of $1.73 preparing for the quarter increased processing.
Against the same period than the previous year increase to pick the impact of Cobre, Panama is higher deferred stripping activities.
Turning to copper hedging program outlook.
As I mentioned at the start we utilize age program to ensure the stability of cash outlays, while maintaining compliance a financial covenant covenants met the fluctuations in commodity prices.
As of today the company has hundreds of 72000.
Tons of zero cost collars with maturities to generate between two one at a weighted average price of two dollar 66 per pound to $2 92%.
62000 tons of and margined Capa full would sell contracts at an average price of $2 81 per pound.
And that runs through to peers maturity until January two into one.
Approximately a third of expect a couple ourselves in the first off 2020 hates to and margin forward and zero cost collar sales contracts at an average full price of $2 71 step down.
The company also has an end margin nickel forward sales contract of trial, just over 12000 tons at an average price of $6 77 per pound of nickel.
Maturities through February 21.
Turning to the next slide on data in liquidity profile at the year end.
The company ended the quarter with $523 million, Nate unrestricted cash and cash equivalents. In addition to the $250 million of committed ongoing facilities and is compliant 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 with financial covenants.
And as I stated earlier, we continue to take action to manage operation on a prosperous and further strengthen the balance sheet.
On January the non the company launch at attempt of an additional seven of the $50 million of bonds.
Tapping the existing 23 in 25 notes.
The company intends to use the proceeds from the sale of the nights to redeem into the outstanding 300 million dollar 21 notes tomorrow.
And we have repaid $450 million off the revolving credit facility.
The second graph depicts the pro forma debt profile post the issue illustrating the improved maturity profile.
Just a comment on invest in Zambia, the total VAT receivable value accrued by the company's Zambian operations at the date.
Of the claim was $847 million.
The carrying value at the end of the quarter was $398 million repeated reflecting the devaluation of the Zambia question.
And that accounted for $242 million and the application of a discount for the time value.
The total receivable to expected repayment of just over $200 million.
Okay, Zambia vet balances on the all Patrick process Noncurrent.
Finance charge off $192 million was recognized in the year, representing the discounting over they expect to timeframe to repayment.
We remain on regular discussions with a relevant government authorities and continue to consider that the outstanding claims.
Feel comfortable.
Moving to the next lots of capital expenditure.
Covering Panama capital expenditure for the year was $697 million.
85 million ton per annum development project.
Project construction and commissioning is now essentially complete.
Other project.
Capital expenditures and 2019 included the tailings management.
Management's facility construction costs that a company pantomime capital expenditure to nail the operation to reach 100 million tons per annum as well as the development of the cleanup at.
Also project capital expenditure for realigning of one of the.
I appreciate the Leach Autoclaves and the development of the second that concerns you.
As well as Charlie assist program its internal and remediation work at this crucis following that generate van slippage.
Thank you and with that I'll hand back over to Todd.
Thank you heard us so operator could you now and that's over for questions. Please.
Certainly as a reminder to ask your question you only to press star one on your telephone to withdraw your question press the pound or hash key please standby, while we compile the Q and a roster.
Your first question comes from the Onus, Mike Willis with Morgan Stanley. Your line is open.
Yes, Hello, I'm a couple of questions from my side first.
In terms of the power situation Zambia.
Can you provide an update in terms of power going to be looking to short term and what sort of offerings to you're seeing us we go into Q2, especially yes.
Jim upon smelter is supposed to be restarting.
And also related to power.
So the purchase agreement was asking as opposed to be renewed this year do you envisage any changes good terms, especially if we switched to a cost of service model instead of $600 and I'll leave it there. Thank you.
How much do you want to deal with us or.
All lines.
Okay.
Yes, hi.
No that's difficult time.
For this kind of.
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Okay.
And maybe the second point on the the politics Anthony.
Thats from Seattle.
Uh huh.
Well, we know it's funny.
The arrangement that exists.
From one.
International.
And most of them more goblin ball and range link.
In which she she is a supply while she Paul.
Certain charges, we won't party to that.
And.
When the power.
The chain.
Okay.
Continue mining.
And all the trailing case since then that.
Oh outcome I got it has been on them.
So we got.
I don't expect.
That could change all prices.
Oh My God.
Hi.
I say.
That's very helpful and maybe just a quick follow up on the.
The fiscal changes in Zambia, you could provide that the explicit guidance on calls so of course since bucks for Twentytwenty looks like it took a linear said your do you expect any material changes to divest met or do you have.
Hey, good visibility at this stage of the overall trends on the <unk> associate the Dupont.
I think we do have a hurdle that Uh huh.
Look we have incorporated those fiscal changes.
In our plan Sydney no guidance already so we don't expect.
Hi, Joe variation from that.
That's great. Thank you very much.
Your next question comes from jockey Pros that blocky with BMO capital markets. Your line is open.
Thanks, very much I just wanted to see what they consider cheap mine and the expansion that you're considering doing there and if you could give us an update on what the scope.
Expansion might be and timing if he had any any.
And finally, I guess, how how you'd be looking of finance that if asset sale and still on the table. Thanks.
Well look do you want to do anything.
Yeah, because we.
Hello, strong <unk> chains.
Two.
Improve the balance sheet, we actually seek to avoid any kind of works.
Extended should occur as long as Rick.
That now as far as we.
Right.
Evaluation guidance.
We would not need to have.
Spansion operating the pool.
And 2020 Paul.
That's all good job.
And we would make no commitment.
Oh, My God trend.
Another 40 years.
I'm doing this time of course, we're looking carefully.
I will walk you actually have to do.
And in the courses.
This quarter about ended this quarter, we expect.
Publish.
Technical report Wilson.
Oh International.
How about mobile.
Oh.
And then specifically with a couple of calls doesn't.
Qualifying extensional smell.
Yes.
Thanks, very much felt that's really helpful.
No.
Your next question comes from an Raso with Barclays. Your line is open.
Thanks, Hi, guys I'm just the two follow up on the Younis. His question about the sort of changes in the fiscal terms do you expect so if you.
Don't get any of the that's.
Sort of.
Receivables during the year, what do you stick. The this sort of outflows in terms of Castros would be full for the whole of Zambia.
And then secondly, just to ask about the the Raven soak restart just if you can give me give us some details on the expected cost for that's thank you.
On this do you want to do the about one first yes sure I'll do the VAT I think the with the changes in the most recent that changes.
That.
That limits anyway, some of our VIP claim so I think you on the assumption that we don't get any VIP back in India, which.
Darren.
I mean I.
I think we will get some back in this year that if we don't get any back because after all is probably in the order of about $10 million per month, so you're looking at about $120 million.
For the year.
Okay, all right. So that's similar to what it was historically.
No historically, we got more we go.
That was probably about $15 million.
The month in total so you do we were looking at hundred 90, but with some of the changes.
We now we contemplated that back any longer.
Okay.
Your next question comes from Oscar Cabrera with see IVC. Your line is open.
Okay.
Good morning afternoon are you getting everyone.
I would just wondering if you can help us out you've you've tried in the past with.
Capital expenditure.
Your capital expenditure forecast Fourq.
2020, 122, specifically to covert Panama.
Release, you mentioned it a final decision to proceed with.
Capital deployment to get the project 200 million pounds per annum.
We'll be taking later on so can you just put figures around that and.
The timing of it when do you.
If you go ahead with it when do you need to spend and what would you be expanded at all.
Justin you want to do that.
Yes sure. Thanks for the question the.
The 43, one or one provided an outline of the capital expenditure and the timetable to get to 100 million and in that document we were saying that the 100 million case would come on board in 2023, what we're saying there's no change that plan.
We have the ability to flex a little bit between but take a pit colina pit.
But there's no change from the 43, one and one in terms of timing and when we would expect to come on at this stage, what we see things, we don't need to deploy that capital this year and we weren't and certainly in the first off this year and we will be pushing out a decision.
As much as we can still meeting the timetable.
No I know the worst.
Sticking to whatever they technical report face with <unk> with a view to starting 2023 when would you take this decision.
This year.
This year.
This year. Thank you and then with respect to our two Robin Ravensthorpe and is there any additional capex that you require in 2020.
21.
This is a mention of a new deposit.
In line, yes.
Included in our projected capital.
Mhm expenditure for the <unk>.
And by that goes to show.
I'm sure. Many levy is the law, it's a long term.
Good.
That we'd like to have all pricing.
2021.
Expenditure for that.
Actually I know this.
Okay. Thank you and lastly, if I may.
In previous calls.
You have mentioned near your expectation for.
Cashcall she one crash Christian Cobre, Panama for 2021, I was wondering if you were willing to provide any.
Guidance for for this year.
How should we think about the.
Oh the progression of this cash goes I mean, you do you have done fairly well over.
The first quarter from commercial production.
Kristen.
Hello.
Yeah, I the guidance that we.
Previously provided looks very.
Conservative and we think that we will be able to achieve that what we are things that we're continuing to ramp up.
But we do see a lot of opportunity on cash costs are everywhere I look in the business from the ports in the power plant.
Through to the mine and the price this plot, we do see opportunities.
To to optimize really 2000 annoying thing was about fundamentals and making sure that we could run and making sure that we could run will twentytwenty. We can we can start to to optimize the nature of the areas and particularly on the call sort of things. So we were comfortable with a cost.
They are on progression.
Reduce.
Okay. So you know I think I, if I remember correctly, you had mentioned like.
<unk> dollar 20, you did $1.28.
First quarter.
So you know 20% lets you think is achievable.
2020.
Yeah, I think we're sticking with the guidance we provided at the moment, but yeah, we see opportunity.
Okay.
Thanks very much.
Your next question comes from Lawson Winder with Bank of America. Your line is open.
Hello, and thanks for taking the question just.
You made the comment in the release that debt.
Repayment will be a big focus in 2020 I'm just just curious in that light is a asset monetization a component of that and of course. In addition to the no substantial expected free cash flow. Thanks.
Uh huh.
Yes, what we said before anyone.
You need to consider.
Center is what's really important doesn't open pit.
In addition.
Yeah.
We would.
He.
Strategic partner and part of that business.
Benefit which will be true.
Oh I'm sorry.
I don't quite have you gotten along with all the projects.
Like that.
Relationships.
Oh, yes.
Okay.
And then just to maybe dig down on that a little bit more.
Two would a a minority interest in the Zambian assets still be a possibility and are there any conversations going on in that respect.
Oh.
Yeah, I mean, the difficulty there has only been in terms of anything scripts.
The arrangement.
I've been talking about and just to kind of.
On the wall.
So.
The actual face to face conversation.
Hello.
Thanks Aaron.
And.
But we haven't had a great expectation.
That's very much.
Oh, okay.
All right.
Okay. Thank you for that and then.
And then just one other sort of.
Point on the on the asset monetization.
Would you consider certainly got a longer term off take agreement at Cobre, Panama as part of a potential monetization.
Well.
Hi, this is strategic benefit all some longer term off take agreements.
That could easily form Paul.
Right.
Right Okay.
Okay.
Because of its availability, that's really well this year.
Streaming so.
Okay. Thanks, It's a very helpful. And then just one one question on a cobre, Panama I mean, you're already hitting pretty impressive throughput rates. Maybe this one is best for Tristan I mean, do you really need to spend more capex to get to 100 million tons per year.
Oh look we so we have a bit to do in terms of making those consistent and reliable and that's a way we say, we still ramping up really the capital expenditure for the 100 million is to give us.
It's in three areas the mining the principal one of those and that is we just need to balance.
The right of vertical advancements in particular with a with the volume that needs to come out of the pit and so for that we look to go to Galena and that's what we're evaluating an employment and that's largely what the decisions around.
To go to complain a you need to extend the conveyors and possibly invested more mining fleet that saw it that's part of the evaluation that will happen this year.
The <unk> you can do it from the take or it's just that you're right of advancement a vertical advancement my my get existed. So that's really what we're balancing off in the prices won a large portion of the work is done but we will have some one areas on trends the pumps and small items of that nature.
We might need to do some work at the port in terms of just the ability to handle concentrate and dispatched welcome to our customers.
And then we'd like to see the tailings dam come on and perform well has a in the startup period hi, it's ready on the way we bought it to get the runs on the board of the tailings dam.
Those are the considerations and the capital was really around.
The mine in those areas and I'm speaking about that.
[laughter] interest and just one more question what I have you.
The sort of cost per tonne mining cost that you achieved in Q4 at Kobe Panama.
Oh, that's sustainable.
Going into 2020 in and onward.
Hi, certainly on the Morningstar, there's no difference.
So.
<unk> and made the point before there isn't really much place for us to hide cobre, Panama, we can run the numbers there's no.
Really depends on volume through the door, we achieved the pulling through the dual then we then we get those pose cost results on there isn't any tricks that we pool to get these these costs.
For Q4, so certainly we do see opportunity to to improve further so the first trolley assists long had came onstream in December and we're now running trucks on the troubling.
We will be putting more trolley into into the take or pay.
There are opportunities for us to improve from where we Uh huh.
Thank you very much.
Your next question comes from Karl Blunden with Goldman Sachs. Your line is open.
Hi, Thanks, guys just on the jurisdictional side notice that the language didn't change about the law nine process and potential resolution in your statements is there has there been any kind of qualitative update in the last couple of months.
But when you do that one.
Yeah sure.
Oh.
Oh Altrus.
Interesting though.
Okay. So low annoying the discussions continuing we've had.
So you really the.
Progress has been in meetings in the number of meetings we've had over.
The new governments it at this time and so those there's always see discussions are behind closed doors and we're going through that process. So it's very constructive, but we don't have a timetable around.
Okay. That's helpful and I know there in the call you guys discussed the water levels, a little in Zambia I'm just interested.
It does sound like the risk is not receiving as the door level stabilizing rise, but where are the levels now versus in 2015 16, one of the power supply was curtailed isn't materially different.
There's actually a website did you can look at.
Uh huh.
At my Fingertips <unk>.
They ran about I'm very low.
Good.
Right.
She is pretty 19, because they were doing well below the wall.
And then of course haven't particularly price season.
It was pretty pool Verizon.
Type.
Anymore.
Uh huh.
Oh excuse me.
Right.
Okay.
Your next you can go away.
She's.
Got it pretty low level.
A recovery.
But it's not there.
<unk>.
Well up the with the Whipsaw. This is NBC River authority and you can see the like labels on rises say over the seasons as well.
<unk>.
And that the river flows have been particularly strong this year, which is always a good sign.
The rhythm, there's probably in Mozambique.
Thanks, a lot I really appreciate it.
Your next question comes from Orest allow called out with Scotiabank. Your line is open.
Hi, Good morning, I'm, just more on Cobre, Panama, obviously, the ramp ups going really well how quickly do you think the operation can achieve the 85 million tonne.
Okay, some of the ball or against the law smells installed.
Interesting <unk>.
Yeah, hi, or it's really around consistency, so we've been able to do.
The kind of daily volume numbers that we need to get to that level, what we need to do just be able to do that on a weekly basis on a monthly basis and that's really.
Around consistency the that's part of the ramp up curve, but it's on things like engineering.
And also training and the capability of personnel.
And so it's not really in the assets. So much anymore. We the assets will deliver it's really that we can consistently deliver the.
In terms of having supply chain, working well, which is going well so far but it's all the the alarm systems around keeping that happening every day every week every month.
So is that.
Do you think that'll take a couple of quarters to get to that sustainable rate.
We'd like to do it as soon as possible.
And it's really a that's the ramp up to so.
Yeah, we would hope to have that boy I'm sick enough for the year, but obviously with the target internally to do it.
As soon as we can.
Okay and interesting how much can you remind us how much capital is actually left to spend to get to that 100 million ton case.
[noise] Oh, I think we've given a number publicly and I'm just looking in juliane, but I haven't even the next next three years, it's about some children.
Yeah, I think that's the number in the 43, one I want and that was principally on the other mine fleet and on the can values.
The crushes I don't think that but that includes the pre strip.
Helane, which was a bit.
A little bit on top of that if we have if we do decide to go to cleaner and and I've been cleaner up is a pre strip that that you too.
Okay, but given that capitals relatively minor in the context of your free cash flow now and what you've spent for phase one why why wait till 2023, I mean, that's not a lot of capital.
Oh yeah.
Right, but he's saying is the.
During this yeah, we always expected that.
Who would push the plot that it will identify the kinds of things we need to do.
<unk> that.
It won't be tell them on timing and.
Well I do I'm coming up we have been doing.
Sterilization drilling for that comes I read.
Some of the whole tend not one thanks.
Sure.
Yeah.
And that means you got it.
I'll be she changes.
I don't want treat you take.
These are the calling exercise.
That's a combination of exactly what we would do.
<unk> expenses, which really need to do it.
If we would go to wash out.
I wanted to spend the money now action.
You called <unk>.
Well I have to do in particular.
A lot of things but.
That's exactly right.
Okay.
Okay. No. Thank you for that is there a chance that you could get to above the 85 million ton case, just based on what you have installed right now.
Yeah, well them.
Yeah understood.
Hi, This is just a number.
Sorry go ahead so.
Oh.
I think your questions do you need to spend any capital.
We've done that.
Hello.
Very minor.
Perfect.
Thank you.
Your next question comes from Matthew Fields with Bank of America. Your line is open.
Hi, everyone.
Yeah, we're kinda talk about de leveraging <unk> $2 billion, but the debt has sort of been a moving target. So now that we're active E series 3 billion total debt.
Hi, watermark from which to measure greener de leveraging our.
Sort of a low sixs.
Total total that no you're right you know what do you think about your talk.
Matt sorry that it was a little bit is stupid I think I got most of the question then.
I think the Q4 is probably our peak debt levels. So we should see de leveraging and a reduction of absolute amount of data from now on.
Going forward.
[laughter] source.
Yes.
Not really badly yeah, you broke up very badly.
Your next question comes from the line of Gordon Lawson with paradigm capital. Your line is open.
Hi, Thanks, just one question left for me I got that mall is not a large component of earnings but there were concerns of a penalty of the cobre Panama.
So could you provide any more information related to the moly plant with respect to timing and production estimates.
Yeah, I'll close to that wanted to do the Clive I'm sure Gordon the moly plant.
Yeah, It's really there is a [noise].
Just to protect in the event that we do pass through your high multi joined in the <unk>. The moly presents in the old body is not correlated to the copper and so it comes in zones.
And we haven't seen any zones that knock us off balance so far so I'm only content and feedback from customers in terms of the support the smelters has been very very positive even to the Japanese smelters.
Appeared to be the my sensitive on Holly So we haven't had any feedback who.
On our Molly content in the in the shipments I found that have gone out of Cobre Panama.
So you really deemed but this is just to guard against a when we might see signs of Mali and so we are proceeding with the project. It will happen over the course of this year, but there isn't any great imperative to fast track that or anything of that nature, sorry, it's happening in an orderly manner. So that we can de manning.
Pull back on the scale of project development Cobre, Panama and that's why we saying things are essentially finishes because we are demanding and pulling brought back to minimum levels I. If we just continue with high Manning then it it burns cash.
And that's really intense so they see the moly plant will be done over the course of the.
Okay. Thank you very much.
Your next question comes from Brian Lee with Barclays. Your line is open.
Hey, guys from [noise].
Maybe if I could start and then I'll follow up a little bit on maybe matched questions from before but just on the on the balance sheet. I think first it is his question what's the right way to think about what the right gross debt balances and then you know specifically in light of the 2020 amortization.
And do you maybe mine walking us through your near term thoughts on issuance versus pay down you know what you might do with the term loan and the and then I've a follow up after that thanks.
Hi, Brian I think.
I think we we at the gross debt level now and I said, we should see a reduction from now going forward.
In terms of Tim lines, you know data monetization I mean that is happening now and so in our bank facilities.
I mean, we continuously look at various we are actively managing the balance sheet. So it's in our plan to repay that.
So that's probably what I can sad when your follow up question.
Yeah. Thanks for that I appreciate it and then yeah. My follow up just you know outside of a capex and need 50 guidance do you is it possible honest maybe walk through just some of the other notable 2020 cash white I'm. Just so we can you know sort of level set or models for whatever is below EBITDA. As you think about were free cash flow is going to shake out this year.
Judy too and I just give them.
[noise] interest you've probably got.
He's given guidance on interest is the other one would really be tax payment.
So I'd say.
[laughter] probably.
300.
Probably about 300 of tax they still another.
Once the.
And it sneaker payments about another 100 or so in of the.
Yeah.
So those are probably the major items in that.
Got it okay. So it's it's capex, it's obviously interest taxes and then you know the 95 or 100 outlets Niko payment and then obviously whatever happens with you know that amortization on the balance sheet. Those are those are the main things to make sure. We have have regular models and it was that a fair summary, Halifax.
300, yeah that yeah yeah.
Okay.
Alright, great. Thanks, I appreciate it.
Your next question comes from Thomas Mcnamara with Impala. Your line is open.
Oh, thanks, so much.
Christen could you just.
Talk about as much as you can.
Great and recovery, so far with what you're seeing and then secondly fill up is there a cobalt aspect to Raven store. Thank you.
Yeah. Thanks for the question a grade has been way we expected to to be we we did see little bit of lower grades in January.
But we had talked about grades around 4.4, 0.42, 0.43, and we've seen that in the in the latter week January and.
February as well so we back to those numbers, that's a little bit higher than the sort of a loss of mine.
Or reserve all resorts grades at Cobre, Panama, but that that was acknowledged early on in particular, we do see those high grade that's why we started with tier.
So there isn't any change from the plan in terms of grade getting what we thought C. And then on the recovery side I guess, that's one of the the most pleasing aspects of the start up at Cobre, Panama has been the the recovery performance.
We had expected some variability early on and we expected recoveries that sort of around I'd say no below in fact, we've actually seen recoveries, a well north of that and we've seen weeks, where we've gone over 90% for the whole weak in the start up of Cobre, Panama. So we're very very encouraged by that.
We do have ongoing optimization to be done that and that's really to look at where are we losing Copa.
And it's in the normal places in the in the finds and also in the course material and so that's some of the optimization that we will continue to do.
So that we can.
Improve the recovery, but overall the stories being very positive at the start up.
And your question on cobalt, yes, that's callable.
I mean, roughly produced 30000 tons of copper.
Hum kind of old often thought all post your expectation.
Well south of that.
Uh huh.
Well thousand that's just a function startup of Copel proportionately less cobalt.
I can't comment on.
Oh I'm.
Right and so it will start.
Okay.
Okay, and producing mix hydroxide doesn't happen before.
Maybe I didn't customers about have been and.
China.
The people that were talking to survival conversation.
I've said that.
The deliveries and the like about Oh.
Normally.
Well, we've yet to see what that means inside the public <unk>.
<unk>.
Well actually dropped Todd.
In that mix hydroxide.
Uh huh.
We also come that can't be one study.
Part of the.
Proposal offering a stake in 11 school.
With some other people would be interesting.
Yes, the juice and nickel shell.
And we've done some coursework.
Producing a biggest advantage there isn't a premium and sometimes it's all the big premium, but the big advantage.
The pliable those.
Overall, the hot proportion.
Uh huh.
<unk>.
Well next time dropped cod.
I love it.
Considering purchasing cost but also.
Maybe more control.
<unk>.
Okay. Thank you from anywhere.
And then we'll see what.
Yes.
[noise] clogs like some of them offline Nicholson.
Okay.
Thanks.
Thank you and good luck with it.
Thanks.
Your next question comes from James Finnerty with Citigroup. Your line is open.
Yeah, Hi, good morning, just question I I came on the call late I mean, Mitch. This is your comments earlier regarding potential sale the junior stake in that Zambian assets being solved.
Thank you.
Yes, and we said that.
We have some ongoing.
Oh.
Yes, that's in that area.
Yeah.
Not hugely.
I'm not suggesting that it wasn't right at the moment.
The difficulty with me in place to place.
Right.
Much to happen pull off.
Yeah.
Okay. Thank you very much for this already.
As a reminder, it is star one on your telephone keypad, if he would like to ask a question.
Your next question comes from John Tumazos, with John to John Tumazos.
Mary.
Your line is open.
Thank you very much and thank you for your service company.
No copper is volatile and human behavior as volatile.
Whatever the virus passes the Chinese you're going to come out of their house.
Maybe it'll be like V.
The World War two.
Let's get to consuming again.
Would you consider shutting down your call your zero cost collars and taken a profit on them.
<unk>.
Situation, where I did see outside.
Lucrative or.
You know things broke in favor of.
We remember Phelps Dodge having lost a couple of.
Zero cost collars.
Oh for good copper market.
<unk>.
Oh, well the Uh huh.
Well now.
Oh copper hedges and so on the swaps. That's on margins are there's no margin calls on that.
On the zero cost collars I'll read it does give us protection in the longer and so the age books currently probably somewhere around $100 million. So so in the money I think we had the disclosure in the julietta.
But look at its really about managing the risk in the longer run in the company.
So.
We put it in systematically and them you know we plan into.
To deliver against that we'll evaluate the opportunities but its.
It's really therefore, the sort of risk mitigation.
John.
Oh, the exercise of hedging.
No one one that's difficult and I'm very much easier.
But we are looking at KFC, particularly actually the other way ravages of swaps.
Yeah, but in an uncertain world timing for that space.
Yes.
It's funny, we just have to keep.
Hi, this is that all the money.
I was just tonight on as to what we do.
Thank you.
Your next question comes from Sanjay I, our West Coherents capital Your line is open.
Hi, Thanks for taking my question I'm, just wanted to clarify so youre focused on de leveraging and pay down debt, but there was some talks about some expansion as well so what's the plan for any expansion is or build out.
As far as financing actually see what's come project level debt or would you use equity or how does that wind up with the overall deleveraging goals.
Okay, I think the expansions that we talked about is relatively modest an over a few years. So it doesn't require significant amounts of data and we can fund that from operational cash flows.
I understood and do you have a timeline that you guys are looking to get to that 2 billion of debt reduction.
Mm Hmm.
That's a good question I mean, it's a very highly dependent on the copper price. So.
And a stronger copper price environment like we had early in the.
Of course will happen much sooner.
You know at current levels it will take longer so.
Yeah, that's why we've talked about sort of other minority stakes our processes and so we've got various initiatives on the go to try and reach those tavis, whether its price or otherwise.
Okay that was going to be my last question. So you are reevaluating the portfolio there are other potential asset sales besides area.
Well so right now we've got as the prices on Zambia on the go yeah.
Yeah, I mean <unk>.
Let me I'm on we've actually quite quite a formal process on right.
No.
Okay understood. Thank you.
Your next question comes from Frank Duplak with Prudential.
There are no further questions at this time I will now turn the call back to climb from all for concluding remarks.
Oh, Thank you very much operator, or finally, if there any follow up questions from anybody please come talk to other myself Elisa and thank you for your participation on the call Tonight.
Hi, good bye for now.
Ladies and gentlemen, this concludes today's conference call. Thank you for participating you may now disconnect.
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