Q1 2020 Earnings Call
[music].
Mr. Newell. Please go ahead.
Thank you operator, and thanks, everyone for joining us today.
Joining me on the coal for their respected home, so <unk> public school chairman and CEO.
Oh, that's my CFO, Justin Post school director of strategy.
The bottom hole stricter operations Zambia.
But director of operations.
Get wall General manager financing arm in the plane group reporting control as usual before we proceed oh draw your attention to the fact that over the course of this conference call, we'll be making several forward looking statements and out such I encourage you to read the cautionary note that accompanies I'll first quarter and DNA and the relate.
Hi, good results news release.
While at the restructuring, particularly through our company, which are detailed in our most recent annual information form and available on our web sites and don't see though.
I would remind a presentation, which accompanies this conference call is available on our website.
So as usual I'll go to start to get some opening remarks before harnesses review the financial results then we'll open the lines <unk> questions.
However, there isn't so much that is usual about anything these days because we're dealing with the pandemic I think this is the first time, we'd know how to at least some of our group assembled and well in office to participate and of course, what he calls.
Today I will join you know coal those calls from our home when it's certainly an unprecedented Todd.
It's all the cost to be gum, very few people that even heard of Niccolo novartis local approve it 90, that's all last call in February it still seems like a China problem. So that was about to change dramatically.
The impacted first was not significant in our operations continued normally goes introduction of some new protocols around sanitation distancing I'm traveled issues in fact, the operations performed quite well during the quarter.
Cobre, Panama experience, some unplanned downtime, but about it that issue was resolved.
So when she was a little better than expected would improve throughput and recoveries well Sentinel remained steady.
Our cost within guidance and all in sustaining cost was a better than guidance.
There's certainly was increasing pressure on the copper prices. Despite what we consider I continue to generate strong cash flow.
We continue to advance rate and so operational readiness, what culminating in the restarted production through the atmospheric Leach April Twentytwenty, followed closely by the high pressure Leach club.
Before I turn things over to hundreds for his review I do think it started in Paul My Imitrex <unk> first condoms top priority is the health and safety safety of its employees and communities throughout the organization, we've implemented new protocols and procedures to provide protection for our workforce in the community at large.
These protocols are being developed and implemented according to the strict restrictions guidelines and regulations set out by the government and health authorities in each of our operating jurisdictions.
I'm showing some governments are put in place to mitigate spread to the virus I travel restrictions Botha closures nonessential business closures I've had an impact while business, but we're dealing with these issues I'm finding solutions.
As a result, and the government controls we had an interruption of operations at Las Cruces last a few weeks, we were able to continue to process stockpiles and the recently commenced feeding threshold from the mine.
Cobre, Panama operations have also been impacted it was placed on preservation safe maintenance on April seven although we are keeping the Paul power plant operating <unk> power maintenance activities and defeat the National Penn Panamanian grid.
As a result of these impacts we have reduced our previously announced overall production expectations for the year by some 75000 tons of copper and 30000 ounces of gold on the assumption that cobre, Panama all regimes production by the end of May.
As you would know two bucks expected we've completed a thorough review of all spending as a result of significantly reduced our expected capital spending for the year now operating costs have benefited from the decline in pricing some of our inputs together with reductions in DNA through headcount.
Actions compensation cuts for most senior staff of up to 25%.
Exploration spending will also declined in part as a result, a troubled restrictions.
And so along with financial improvements made in Q wall. The bottom top issue in January the ongoing hedge program, but more recently the resetting of bank debt covenants, all of which kinda. So we'll talk about shortly the actions we're taking it out operations with the support of the host governments and all of our employees will help us do.
With Stan these unprecedented challenges.
So with that I'll now ask kind as to take you through his review.
Thank you Jonathan good <unk>.
I would like to Jerry you dislike titled Financial Management.
[laughter] custom diminishment of <unk> capital spending and operating cost, while maintaining a high level of safety and productivity.
<unk> integrated into times, you have to do you still got into both capital expenditure and all in sustaining cost.
One of the prices have weakened as in recent months, but the companies.
And nickel eighth grade against mitigate some of the price volatility in the near term.
I think the company will say 800, an 18 million.
He is an ultra low sulfur diesel photographed cost management strategy.
Recently, we announced that we have to mean that financial covenants and at the senior team and revolving credit facility responds to uncertainty related to 'cause it Nike.
Let me dig decreased for the food school just since June 2016 liquidity improvement <unk> cash and cash equivalents 1.1 billion at school to into level.
Turning to the Knicks not company I'm not priced onto preservation unsafe maintenance.
Hey, outline some of these excellent and not being placed into preservation site maintenance. So following the decision to place can be Benjamin presume nations high maintenance if they just haven't April.
But then them up <unk> production God is between each week he has been reduced due to [noise].
218000 tons to 235000 tons.
And gold guidance produced 90000 202000.
Ounces.
Yeah, I don't know production guidance is dependent upon receiving approval from the ministry of health through public of.
Panama to.
In the preservation and site maintenance shutdown and just go means to restart operations people, who by the end up my Twentytwenty.
Production guidance all the operations.
She is unchanged.
Then I shouldn't say maintenance costs estimated at between four and $6 million per week.
Assuming the suspension on labor contracts and other variables and fixed costs.
Turning to the next launch and Twentytwenty gardens.
Sure enough just noted can be Panama, copper and gold guidance have been reduced in total.
Should goggins just now.
And when they're going to 55000 to 805000 tons compete U H and as the city to 890000 tons.
<unk>.
It'll go go guidance has been reduced to 250 to 270000 ounces.
30000 ounce decrease from gone as previously issued.
You mean should the company is reduced capital expenditure God in school tweet between de <unk> Company wants review.
The reduction of $175 million from previous guidance issued on this now down to 670 odd.
Million.
The reduction in capital expenditure will the Yankees moving construction on the full crush it seems willing to treaty treaty, one as well as deferring some pent expenditure together with the serving some process improvement and maintenance programs operations.
It's part of the cost management strategy. The at the end of the total see one cost range has been reduced cost since the town wells reinstating costs.
And guidance range has been reduced by five cents, but sounds as well.
No that production guidance and cost guidance includes assumptions on the impact of kind of at 19 on operations, including the assumptions on did you duration of their preservation them safe maintenance at cabaret Panama.
Turning to the next 90 production total copper production to the pool 295000 tonnes was 43% Hyatt and the comparable period 29 tea.
Increase reflects 56000 tens of temporary panama's contributions.
Oh production of 69000 ounces was sitting on seemed higher than the same period in the prior year the increase attributable to 23000 ounces of Kobe animal production.
And he is an excellent financial overview.
Competitive, even though wonder to 34 million don't Miss <unk> quoted is an 18% increase on a comparable quarter or 29 T.
EBITDA benefit just before the call to lift hundred 57 million contribution from Cobre Panama.
And the favorable movement in the H. program ethics, despite the impact of 8% lower realized copper price and the ramp up costs that rising so closer to $32 million.
[noise] comparative to loss of $79 million in the quarter on a comparative philosophy live in seems to shape.
Loss includes a Nick phonetics being $284 million.
Approximately $892 million would have been eligible for capitalization in the same quarter last year.
They did decrease for the first time since June 2016, a reduction of 16 month.
Turning to the next launch it highlights a bit more detail on the movements in just illustrates the impact of cobre, Panama on the EBITDA.
So turning to the next slide on quarterly unit cost hope to see one cash because of $1.50 per pound was hussein's below the same quarter in the prior year.
<unk>.
Couple of C. One cost for the quarter was a dollar city I put them.
All in sustaining cost over $1.64.
The town for the quarter decreased did you see against the same period in the previous year.
A decrease of fixed and they were totals he want to cash costs together with nowhere sustaining capital.
No just previously referred used to guidance, but all in sustaining costs I teach that down do you see upper range of C. One my father since but down.
Turning to call the hedging program outlook, we continue to utilize the cockpit.
Hedging program to ensure.
The ability of cash stays while maintaining compliance with financial covenants met the fluctuations commodity prices.
Yes, it would be hall from be expected cost to sales of 23 T. H at an average gold price of $2 60 choose the town.
The company has 11000 tons and my on margin also so poor tells contracts at an average price of $6 76, the town with maturities to fabric Treaty 21.
Companies also helps hundred 90 million.
Liters of ultra low sulfur diesel at an average so city to you. It seems that lead to help manage costs with maturities to April 221.
Killington, then they smoke.
Okay to liquidity profile at the hearing.
Well sure yet it's at the contained.
The company ended the quarter with $1.1 billion, Nate unrestricted cash and cash equivalents and wasn't full compliance with all its financial covenants.
On April 22nd space, the quoting the company amended the financial covenants and Pena 2.7 billion dollar, Tim <unk> loan and revolving credit facility.
The net debt to EBITDA ratio has been increased to five times.
So the second half of this year.
To 4.75 for the first half of next year and food Hall for the second half of next year.
The debt service coverage ratio has been decreased to one for the second third and fourth quarter or this year and food 1.21 0.1 full point.
Yeah.
Taking into account full cost discussion.
Writing inflows capital expenditure outflows and available cash and committed facilities.
And based on current assumptions of the impact of private 19 operations.
We expect a sufficient liquidity through the next 12 months to occur after its operating and capital expenditure plans into my new who cooked lunch at these financial covenants.
We continue to take action to manage operation when a prosperous and further strengthen the balance sheet.
Thank you and with that on that now back over time.
[noise], thanks, very much I Miss Thank you operator could you and I would turn over the call for questions. Please.
Certainly and at this time, we'll just remind everyone. If you would like to ask your question. Please press Star then one on your telephone keypad.
The first question is from Orest Wowkodaw with Scotiabank. Your line is open.
Hi, Good morning, [laughter] I'm wondering if we could get a little bit or color on the Dol caught impact of the suspension Echopark, Panama and I'm wondering I mean, youve, obviously cut guidance for this year I think you're assuming a essentially a two month suspension.
What kind of impact could that have to the ramp up next year based on the guidance I think you'd previously issued which was about 310.
To a higher range do you anticipate any impact.
[noise] constant where do you deal with that.
Sure Oclock, hi, or us.
Yeah. The extensively at 300000 tonne copper production per annum at that level. We we were expecting to produce be producing about 75000 tons, a quota and really the impact of co. The 19 on our business is that.
It's really just how long these that duration and in the guidance. We've lost three weeks in April so far we were saying it but that's the a lower in the pound [noise], Mike I was hoping to start in my but then it might impact production through to the end of.
June but at the upper end than I can instantly sort of mid July and then we will get back to the seven Parque das and Tom I'm per quarter and at that level.
Not particularly for Q4 and.
At the high band, if we're able to do that.
In the third quarter as well, we wouldn't see any impact into next year 2021, because we'd be at that at the 85 million tonne per annum three put right.
Oh, that's excellent. Thank you and just in terms of the restart from the covert 19 suspension you put out guidance I guess of restarting by the end of May is that indicative of what the government is telling you with respect to the appropriate restart timeline or is that just sort of.
I'm, just wondering to give us some color on the timing here.
Sure our us a lot cut I think it's like everywhere else.
One thing, we gonna see a massive greenlaw or you know or anyone come down from the pinnacle mountainside Everything's looking for business. What we have got in places a very collaborative approach with the ministry of health and the government around.
The priority being the health and take the other workforce, a and that we were able to have a clean and safe sought to do business. So at the moment, there's about a thousand 1100 people long sought and really that's on care and maintenance. The reason we you can we talk about.
Preservation excitement is that we are able to to turn the mills and that's important because in the Panama climate, we wouldn't want condensation unsold until they reach rock going into the mills the reached production happening, but it's really around ensuring that when we're ready to start to that and everybody's happy that we can we can stop.
And that will be around.
Hi, demonstrating a clean unhealthy saw it which is.
We can put in in terms of way we add is the so.
But then also I know the surrounding impact of <unk>.
Cinema and the overall trajectory goes all the transmission in Panama, They always you'd be looking at the could nationally and making the decision nationally we would hope that <unk> cobre, Panama as an isolated thought oh, he's a good candidate because its segregated from the rest of the country with it.
Reasonable ability to hold a border and then manage accommodation manage.
Personnel long sought to operate in in the very strict protocols the ministry of health has fraud.
Thanks, Tristan I appreciate it.
The next question is from Lawson Winder with Bank of America. Your line is open.
Hi, everybody a testament, maybe I can just that start out by following up on your commentary, there and preservation and they maintenance obviously the that's different.
That he then you got to Houston April 7th released when you call that care and maintenance you mentioned that rock is still going into the mill now it is that a rock of.
Hi enough greatest they'll have some some copper coming out and you know what else is involved and preservation and safe maintenance as opposed to Karen.
[noise] Charlie Lawson.
Extensively its care and maintenance, what we and we wouldn't be saying that we produced in copper mine that you know in terms of ships of all copper leading cobre, Panama. It's no. When you you you know what would be a pretty full production level, but what's important is that the mills to and that's principally focused on the preservation of the assets I'm sorry.
<unk> you know for example, those big James days, the gave us motor drives.
On on the on the Big Sag Mills on the Big Ball Mills, we wouldn't want to see any condensation. So it's important they run for continues period of time, you know some 12 hours and for that reason you know we wouldn't want to be running them empty I for that period of time. So that's why we putting rocking it's not about production, it's about keeping the assets in condition.
If you went to the other extreme which is a food care and maintenance program, you'd obviously you'd be looking to completely empty and completely shut down and then the problem is when you come to stop you have a much longer ramp up.
The reason we were able to do that is the number of people, it's not materially different between care and maintenance and won't be cool preserve I shouldn't say maintenance.
You know, it's the same workforce.
So maybe we have the people on thought were confident that they can maintain social distance that we're able to.
In the risk the job and hazard identification for each task when I saw it to manage color. The 19 to manage the transmission divorce in you know safe work practices.
And for that reason you know, it's okay to keep putting material through but we wouldn't talk about in the context of production. The other activities that are happening.
You know, we're obviously focused on the timing stand on moving that forward ER and again that's more around.
Environmental side that we managing that responsibly.
And then the other is the power plant.
Panama ER and the National grid authorities came to have that power into the grid and so at the moment.
The past section is running it sounds pretty much full production.
Okay, great. Thank you for that and then.
Just another question I Cobre, Panama, you know your guidance that normal production levels Cornbread Cobre, Panama will acquire from late they until the late January early July either $3 production that was a bit of a surprise to me.
Just curious if you just give us an detailing and why you think it would take that's a long period of time to get from a restart at the end of may to the normal.
Possibly as late as mid July thanks.
[noise], Yeah look I think the my day, it's really around where we where we would be at breakeven.
And it really depends on having a claim and ANSAC sought available.
It isn't really that ramp up its about demonstrating and and making sure that personnel a safe as part of that.
At the moment, because we have a hard border to the mine. It takes we're insisting on an isolation regime that Ah two weeks in corn team to come onto the sought to make sure that you know we don't have through the cases on the thought.
And.
You know, you'll appreciate that moving a shift workforce on than having two weeks of oscillation when they they into the guy to when they can actually work in the field, we just need to work through that in on that on a sort of context of oh of manpower in life of mine.
And that so that we can maintain a cyclical accommodation you know not be doubling up in accommodation units.
And that's really the reason there and then if we can.
Obviously, if if the curve in Panama performed somewhat better than we can start to accelerate that a little bit more I, then and that sort of metering in July.
Okay. Thank you for pretty much that color and then maybe just one final question and Cobre Panama.
I spoke about the four to 6 million dollar and care and maintenance cost. So I guess now preservation and say maintenance cost.
I'm, assuming the suspension of labor contracts and hard downturn of other variable.
And fixed costs.
I'm just curious.
Oh, it hasn't been able to sustain those labor contracts and to what degree can you effect, a hard downturn and other variable cost that Scott. Thank you.
Yes, sure. The simple answer is yes, I'm, saying we suspended.
The 7000 old labor contracts last Monday.
And that's progressing in order that according to the that was approved by Mr. Dell The Panamanian Ministry of light, but on the <unk> Friday and that's happening in order so.
That's already underway or the other turned down a cost is really as a.
I was mentioned accessing cheaper fuel prices.
And so on and that's already starting to come through to the business.
Thank you very much.
The next question is from Matthew fields with Bank of America. Your line is open.
I Havent want.
I've two questions one of the term loan and one on the revolver. Good to see you got the covenant relief in April I see from Slide 14 that 450 million is it's still do under that term loan amortization in 2020 and 2021.
Was there any discussion with the banking group for the covenant waivers that term loan amortization relief will be apart like youd, you might be able to defer some amortization totaled 21 or or even later.
Thanks, and then I've a revolver question.
Sure.
Okay.
It was right you know so I did right.
At this stage, we do have sufficient liquidity and hate crude result, but.
What we need cool the remainder of the yeah, and you see us through that period. So the plan is still to pre pay that Tim loan even the.
Hi annual installments of two to five every six months so.
So that's sort of less than you had a question on their evolve as well.
Yeah, I think so you know the January Rifai, where you did the the bond add ons you know took care of the 20 ones that 300 million stub there and then the fourfifty excess was supposed to pay revolver down, but you ended up drawing it in full.
Why the draw a fully on the revolver. It does that for 50 now sort of is that earmarked for the term loan and what this year or is it something else and then do you intend to use the 300 million accordion feature before June on that revolver.
Right, so sorry, because I think in Austin, but.
No no.
So the.
The entire when we issue that wants to pay down the revolver, which we do it but then as you as you quite a ways the circumstances change quite dramatically on them myself to an all three months and what we've seen is quite a few companies drawdown in the revolver and Weve you know we did this time.
So that's what we did just before quarter end is just true down a matter of all then I have that I find it plus cash.
I can do with the accordion feature that's just the an ability for us to bring in additional bank.
Before end of June.
Upsize that facility to 320 spend I think it's probably pay to stay in the current environments and likely to them secure any fresh cash under that facility [noise] I wouldn't count on that 300 being available at all under the facility.
Well, the incremental but genetic code.
Okay.
Thanks very much.
The next question is from Jackie principal those ski with BMO capital markets. Your line is open.
Thanks very much.
Why do you go back to the Guy and maybe maybe talk about the Capex spending that you are you heard or are you able to comment on what this means for 2021 Capex spending we assume most of that hundred 75 million gets for all will be pushed into 2021.
And that spending in that your should go up or Oh, with some of that 2021 spending discretionary and and maybe that the overall spending is gonna be similar to what they previous guidance twice.
Hi, that's doing what do.
Yeah, I can maybe do the first did you get an add on to that but like.
A lot of some of the 21. Thank you. The Rockies stated it is and discretionary as well. So you know I wouldn't add the 175 to next year I would expect next year to probably reduce from the previous levels, but Julie maybe you can then added but [noise].
Yes, I mean off topic right, but some of that is the factoring into 2021 Ah Ah things like particularly in the fourth question Sentinel, but as I kind of sad when it when it comes to 2021, but you know, we're really Oh do a full reviews.
After as well and it might be some discretionary spend goes after that as well so I wouldn't read into it that it means that Oh, right 2021 guy slowed down.
Yeah, I didn't think it will.
I think and and just shifting gears to Zambia I noticed in the M. DNA that there was the comment about how the.
The idea of revenue it's already is looking to bring some corbett mitigation measures in terms of tax relief I know a doesn't seem like there's a lot of information on those tax measures yet, but can you maybe I give us some color around.
You might expect they'll be implemented and if those are temporary.
Yeah, what they're thinking on when those would be lifted it and also if.
And you've got tax relief has been included in the new I do you want in all in cost guidance that you Kevin.
Mm.
[noise] that's all.
What do you want me to commence on that.
Well, maybe just on the garden signs yet.
Yeah.
In terms of you know why why well, obviously that no. He had been in <unk>. It at this stage, but our understanding and looking into it is that that wouldn't be a if you look.
No not debate pro for the rest of the yeah that would be a saving on C level of about 40 pool or <unk> million dollars, which is three cents at group level, probably about six cents a consent seem four cents cents no and the pay tax impact that would be about $31 million we.
Happens embed it that's in into our guidance.
At this stage, because it's not do not pay them and we're awaiting side the detail.
That's great thanks very much.
The next question is from Karl Blunden with Goldman Sachs. Your line is open.
Hi, Thanks, very much sort of time, you've done a lot of can work in terms of hedging and limiting downside on the commodity side when you're thinking about the additional sources of liquidity.
As you pack the revolver.
Could you give us.
An explanation of what those might the things continue to be worse than expected in the macros and preferences you might have some I think you've spoken about historically have been.
Secured that potential asset sales new project level debt I'm, just interested in potential liability management cutting down the line.
Oh, we <unk>, we do have some capacity still available if we want to do prepaid some on some of the screens or something like one on campus for what title. So we do have some ability to do some of that.
So got some goal that consent and she as well that.
He was looking at streaming deals that [noise].
But as an option.
A secure data city and auction because we don't have a lot of secured it does yes at levels. So we consider to introduce some I mean basically capacity within the banking group.
Introduce more that cable so that that is an option.
And then as you.
We'll be aware, we all running up process in terms of them.
Seven minority interest stake in Zambia, and rising soaked up you spoke about people that will take sometime but yeah. This is simply quite a few leave us and that's without.
Turning to the bond market at the current by month, which is probably not that attractive.
That's helpful honest.
Those levers if it doesn't seem like it a couple of months couple of quarters before you have to make a decision. They obviously you can be opportunistic and you've done a good job that part when the markets about extending maturities, but should we expect anything you're kinda more that's kind of you know you see out 2020 plays out we'll find out.
Right.
Oh, I think it comes up liquidity.
Pretty good in terms of the liquidity and we've we've now got some.
Headroom into that because with the support of L. O very supportive banking group.
So that's given us headroom in terms of covenants and we do have liquidity. So there's no immediate need to Russia and do something.
So we can take on time and.
Basically the opportunities as and when applicable and I'll put you in <unk>.
Thanks, very much good luck.
The next question is from Greg Burns with TD Securities. Your line is open.
Thank you Clive can you give us any guidance or color on whether the.
Discussions around those minority stake sales, particularly in Zambia, they reopen given China seems to be getting back to business or is that still.
A very slow process.
HM.
Triston do would you take that one.
Sure Oclock, thanks, Greg So the question.
Yeah, we sing a little bit of China, reopening and yeah, I wouldn't say that things are progressing we price, but I think the.
Analogy given to me is there's things are a little bit luckett donkey at the moment. If you were looking for an analogy locker and animal analogies you know, but you have to push the donkey Kong hard, but eventually we'll get there and I think that's the flavor. We have on things are coming out of China.
So would you push are you pushing the donkey or are they pushing it.
[laughter] donkeys moving in sit in the way, we we we'd be working on it substantially over the last few months and and I think that's.
Gives you some color as to where it gets it makes it seems to be some interest, but I wouldn't oh in terms of likelihood it's not like where it was and at this time last year.
Okay. They got their interest at the practical reality of at the moment and that is that.
Those programs initiatives have been running.
Of course, there are due diligence requirements another.
Needs to witness.
Looking at things right at the moment.
None of the potential people can actually for that.
Nobody could get into western Australia them out at all out.
So looking at Ravens thought.
It has to wait and that's part of me.
Really constraining the timing of a thing.
Progresses continue more or less of a pace.
About inhibited by the fact that.
Things that call release can be done.
I would not that is little bit uncertain, because you're not quite show in that change.
It would be different fair for different places across.
So.
Thanks, Philip <unk> as well do you have any color on covenant 19, and the spread in Zambia for example in African General.
It's the situation there the early stages, Dick anticipated to accelerate and if it does.
With the government in Zambia put travel restrictions, social distancing restrictions and things that would cause you to [noise] production a consensual Sentinel.
[noise] [noise] Rudy.
Where do you want to do that.
Yeah, it kind of text or.
Oh.
What is seen in in Zambia.
During all of this time since it is generally when we started to do.
To.
Okay.
Look for <unk> and the communities that on Mondays and Swayze, they've also done the soccer and nothing that tend to Columbia that.
That's really a generally we've been.
Evolving comedian communities and <unk> and I've had education programs my way up.
When the first cases really started.
In in March.
The.
As a lucky you know exactly how to obviously numerous examples to follow.
Throughout the world and especially the there.
So they used to the action in South Africa.
Exactly in prison.
Effectively to stick to that design if anyone April just talk.
And.
He has made it and energy for people that come into that kind of you're going to 14 day our nation.
And that is worth well there hasn't been the same sort of back on in this fictions put in place and then B S. In South Africa, Oh, Oh on New York, where any of those places.
And I want to think due to some extent didn't has had the benefit.
Yeah and that.
Xactly is gonna be the young population doesn't have the same sort of percentage of old people and it's a European countries are concerned and obviously it requires a different method of dealing with nothing is dealt with it likely markedly naturally.
Oh cells as the company has as all the others.
He said you did.
An enormous amount of all of work in screening and making a provisions for stuff and the communities.
So that they already especially aware of what's going on so.
We are now in in going into my.
It's also been has had a month with.
Oh knockdown of Boston and restaurants, and the like although yet they still have three movement is is it now and that is typically look they will then give any has he did so if all that a number of positive cases sure there's not enough better tasting as you would see in any other European comes.
Well I think that's also part of it the access to be quite honest and I don't think for one minute.
That we will find ourselves in a situation in Zambia away the guy.
What do you suppose closure of mining mining or facility.
They have.
They have clearly.
Provided.
The board.
They are actively are encouraging the mine likes to continue.
While.
Observing.
Various hygiene and.
Practices so.
I don't see.
And a situation Zambia, when we're done right now.
That's fantastic thanks, very much like huh.
The next question is from [laughter] Cabrera with C.I.D.C. you line is open.
[noise] my finger Breyer good morning.
One.
I was wondering if you could provide more called on the segmentation hope youre topics reduction of 175 million.
With respect to Lexus Daniel.
Projects or no I think you already mentioned that part of it it has to do what what sense now, but just wondering if you could provide more color on it.
Julia.
Yes, I I'm in time, so a major reductions <unk>. It will include.
Uh Huh did borrow all some expenditure on the sports Cross shopping center no since it said that they adopt an element of it and as well as well a sensational so I'm I'm getting a delay with assignment of some process improvements cautious literally assist phase four I'm fine.
Hi.
We had we have produced an element oh, a ton of in Capex that we they've had I do not think we'd be PBC centric, we have to imaging in the guidance somebody would be reduced not down.
2020 to 20 million as well that will say consign. She some defendants oh, sorry, a improvement projects such as.
It sounds like gravity go Protax and some results drilling and sometime into Oh mine fleet replacement and mixed oxide Jamison projects.
And then what.
Well, yeah, we've had some reduction rather than reduction in and budgeted.
And im on the two areas.
Oh Wow that's it.
So that probably I will say and a reduction in indices spend on Schumacher Lithia wait until <unk>. So days would be to sort of T. T area, where a capital expenditure has I find it in decide overdue.
Okay. So you know from from what I can gather your disclosure.
With about a 50 million reduction in sustaining capex, a lot of 25 million reduction in capitalized stripping.
And and so the other ones that you mentioned that is that the pool 175.
Correct correct.
And then one more thing. Please I know it is my understanding that there was approximately $10 million put aside.
Or greenfield projects.
Was that.
Completely eliminated that [noise].
Imagine when it goes to 29.
Yes, yes, it's gone down from the they eat that we had there is still twentys email may not spend.
Especially we've locked in for the time be and guide.
Okay. So that's that's helpful. Thanks, and then with respect to.
To your plans for <unk>.
I'm, showing and reporting covert bottom line I'm, assuming that although they said they put on on hold.
Can you just provide is what your thoughts on how you're viewing this expansion into into current environment.
Christian do you want to.
Absolutely, yes sure in terms of yeah. The expenditures. This year you did the major elements, we really on on design study [noise].
But at the moment.
<unk> the might work stream is really on a continued delineation drilling between <unk> and and Catalina and in particular around to the media <unk> area, which was the root for the.
The proposed a conveyor belt to go through and so that works not enormously expensive. We were already completed a substantial portion of it. So we would like to finish that off so that we can get on with the permitting.
And the environmental studies, and so on which are part of the time table. So those aren't big expenditure requirements. We think that <unk>. It's good practice to continue and getting it was done but yes, the major capital, which was even design, we sort of pushed that back it because we think we can.
Ah you know they won't be.
Too many other projects that were looking at a in the near term answer we'd be able to give some focused to that if we need to do that and for the time table. So the mine minutes. It's it's pushing back design with a view that we could bring that enlighten an accelerated as we need to.
Right [laughter] Kristen so they are 25 million in to put capital spending for stripping was that all related to covert bottom.
[noise] if it wasn't in the first quarter.
Okay. Okay. So you could you couldn't just clarify the question on stripping.
Yeah, I know like I said, you know if you compare your your guidance on topics and at the end of last year to this quarter, there seems to be about a 25 million a reduction and capitalized stripping.
Yes, yes.
That.
In time so.
Previous guidance.
It is it isn't all that it's just it's just it.
I see they largely in Panama correct that production.
Okay.
Thanks, very much then lastly, if I may.
You know.
In terms of your hedging for whole d. So.
Does that.
Fulfill your requirements for you know until April 2021.
Not necessarily.
I mean hedging is a tricky.
Exercise and we've been pretty.
Happy that we see the color price moving back of up to those 30.
We will watch it carefully.
As you all know, it's a very uncertain world and.
Its useful for us.
Two.
Sure a little more certainty or that's what we are.
He focused a lot on the second quarter this year.
And we've been doing that early in the state wet study to hedge cost 12 month, that's what took us and of 2020.
But then when the price Kim.
Went down a lot no question that we look at that.
Process.
Turning to anyone.
Reviewing.
Okay, well I think it's very much football and I'll just comment that it.
What provision made.
For capital expenditure <unk>.
Cobre Panama.
For what might be needed to achieve.
Eventually 100 million tons Ya.
But.
Until the problem is running steadily ramp up.
We always are the view that we didn't actually know what is for them as well.
And.
So what you're just seeing there for capital.
Could it amounts that were just provisional or what it might take.
I don't know something like that.
I think that.
Adam and in essence, those are no longer in there.
And we view it actually to determine rather than it is something that.
And forward, an awesome opportunities to increase the production.
Without any major capital expenditure.
For example in the nature of the drilling lost I.
We haven't yet had the chance to.
Work on that too.
So to see its impact what the benefit of one of the benefits of this period, when it's a little bit slower.
We have me I with Maxim.
Do some work and the plant and.
A variety of.
Elements that that needed what dawn.
We expect that those will.
Manifest themselves.
To some advantage when speaking wind it up again, I think testimonies, referring to that as they.
Expected capacity either.
Oh the operation later on this year.
Yeah, well is to create a thank you very much everyone and so.
Okay.
Your next question is from Matt Vittorioso with Jefferies. Your line is open.
Yeah good morning.
Let's take a quick stab at a yearend liquidity question.
He's got a little more than 1.1 billion of liquidity today and then on the on the.
You bet loan amortization.
Minus but it seems like based on your current guidance you should generating some.
Positive cash flow throughout the year. So I guess just from a high level. How do you see you know if copper were to stay or in this to 35 to 40 range just for a conservative assumption I would you see liquidity at year end with those two sort of things trying to balance each other the amortization in the positive cash flow would you see.
Liquidity meaningfully different from where it is today.
[laughter].
Look we see it is sufficient.
No that's a that spend to be my could making sort of going concerns Tyson said my conversations that we do make so.
I mean were reduced capital by quite a bit we do it and monetization is coming up.
But some of the operating costs coming down as well. So there's is quite a few moving parts to that.
That's a sufficient liquidity.
How about just as it maybe a different angle I mean do you under your current guidance in that spot copper, where it is today would you still anticipating generating positive cash flow for the full year.
Sorry positive cash flow.
We were just getting like AWS [noise] okay.
Certainly.
No I think you know the leatrice once we go back repeatedly on new Pitt capital expenditure and operating expenditure one one of exercise you know so you repeat leak out that can revisit some of these measures that we do too.
He is cost.
Yeah.
Okay all right. Thank you.
The next question is from Gordon Lawson with paradigm. Your line is open.
Hi, Good morning, following up on this ambien tax relief is there where you can maximize your via T. receivables during this period.
I think sort of how do you know the.
Yeah, Good Zambia Tech I mean, as we sit area. That's okay, just like it yet.
I'm looking at the ongoing discussions with government in terms of how to do the historic Yankee.
Yeah, but I think its age or say CMBS in a pretty tricky situation at the moment it wasn't.
Hi July so.
I wouldn't expect just.
Suddenly engine that Jim VAT receivable and hence we have classified and then on balance sheet as well as a long term receivable.
Okay and can you comment on the expected costs to wrap cobre, Panama back up.
As it relates to capex versus Opex and or is there any a estimated timeline to reach 100 million tons per year.
Interesting.
Yeah. Thanks, Mark Gordon Yeah, we haven't really changed the timing on 100 million remains the same as what was in the 43, one I want.
Well just have to look at that iteratively, obviously the focus at the mine that says on getting back into production back into the ramp up to the 85.
In terms of cost do that its Philip was was mentioning we've done a lot of work in the background now it's himself.
Making that a viable to us once we reach dot restart probably say look I don't expect you know anything really out of the ordinary in terms of cost we were continuing to make sure that we do.
The right level like expenditure for examples in the Tms and that we you know because we were at that period, where we need to be covering the broad bice Oh.
The whole the whole San wall.
And so we need to keep that work going but that's not no. We have the opportunity to do that over long periods and do it steadily in regularly so yeah, we don't see any one area, where we massively.
Please capital in fact, you know if anything things like sustaining costs. For example in the morning slate relate to no. The ongoing PCR replacement of key pots and that's directly related to the usage hours in it.
During the downturn like this change that and push out some of those PCR programs. You know that's not in the capital adjustments has yet to a great level with the so I'm because you know we would like to see where we land and how those machine now it's come out.
No I don't see any Nigeria from four large capex to get back up to 94.
Okay. That's it for me thank you.
Your next question is from you want us most bliss with Morgan Stanley. Your line is open.
Thanks, very much for taking my question. So a couple in less than my side first I'm on the sentiment regarding the the leg ulcer force crusher should we be thinking about the full year delay relative to these technical study.
Published a couple of months ago.
That's a number one number two.
Just in terms of the depreciation of the Zambian quotes or can you give us a beautiful indication on Oh, how much of dog is baked into your cash cost guidance for the year and I'll stop there for the questions <unk>.
<unk>.
On on the call chat.
Oh, not a full cost and things like that we were using a rate of around 16 50, I I think the current rate is round about 18000 could save them.
You know there, there's a little bit potential attach a lot tie them now.
[noise], what's a good.
Where do you could talk about the fourth crush them, but I'll just comment that.
When you are having to crushing and online.
There's a development process going all the time and so you need to have crushers.
In different locations.
Central has learning has three crushers.
And.
In time it needs to move.
The crusher into whats called decent cutback.
And that's where the fourth crush Olga.
But in the meantime, I have three crushers and.
They can.
Jude.
Well they need churn in fact.
At the moment sand hills, running particularly well.
And we have no reason.
Neither anyway.
Like that.
And <unk>.
And then a fourth crusher will come to come into play sometime in 2021 and that just got just provides some flexibility for them in 10 of them on plan.
It's not.
Significant change occurred to me because I have a fourth crusher other than [laughter].
Ah gives them a lot more insurance on.
Capacity with a plant.
And some bus flexibility into what I know thing.
Crushing constitute.
So it's that's the significance of that cap expenditure.
Just the nature of what pairs crushing and of course, we get the benefit of that and they'll bring us.
That's clear thank you and maybe a quick follow up if I may you talked about the process around the minority stake say libraries and be a or at the Raven store.
Is it fair to say that a stick say look cobre, Panama use off the table, even when operations normalized.
What's really happened you Wanna Trump ever Panama with.
Was that.
As a 10% halting like corridors.
And they had tried to set up.
Now onto occasions and go through a process to do that.
Well I success.
And discussions will be with cars, which is government I also process is pretty slow.
And perhaps next time, what is that it has no interest to other parties and that's because.
The original Korean ownership.
I was up 20%.
Oh Cobre, Panama in a separate company and a structured it with a Canadian company.
And when we purchased at a sneak that stake we ended up with 50%.
Of that Canadian company that Internet and trying to set.
And then your original agreements there was a fairly.
Simple and conventional right relationship between 20% any ideas that they all right that's a [noise].
Well there wasn't really much in the form of any agreement for the 50 50 I ship I.
By the sneaker corridors.
So quite a steak ended up being a 50% a chip.
Oh.
In a company that the other 50% because the operator.
Well the whole lot knows the other 80%.
And that means that [noise].
Because I'm, particularly interested in that because quite substantial amount.
So what we've been trying to do is to sort out an arrangement or that relationship that might make.
That prices what data.
As you could imagine that doesn't happen quickly.
And that's okay.
And we will have to do that possibly setting tend to set up AWS and then eventually quite encouraged.
I like that so.
It's not not today.
Easy to plot of course are that up.
And that's all process, but.
Huh.
That's very helpful. Thank you.
[noise] again as a reminder, please press star one to ask a question. The next question is from you and Russell with Barclays. Your line is open.
Thank you guys.
Just wanted to follow up on the fat or Zambian, but that balances question no non us.
I see in the quarter, you are able to offset some of these fat I assume it's sort of shot that came due in the quarter against other tax balances.
Just wanted to get a sense I mean, there seems to being the first time that you have been able to do that and maybe just comment on an expectation that at least for going forward. You would you could be able to do that.
And then the second question just.
Around the working capital side I mean, you mentioned I'm told you there was quite a sizable working capital inflow into the business. This quarter just what your expectations are for the remaining quota.
Just from a sort of ramp up effective at cobre, Panama and I'm just elsewhere across the business.
And then just lastly on the.
What trusting you were saying on the production you don't expect any impact for next year on the business, maybe just sort of across the business I'm, giving you are reducing striping do it does is that assumption that you can catch up and careful that should not pose a risk to production or.
You think that that might actually increased the risks or reduce flexibility for next year on the production side to maintain that guidance.
[noise] M N on 10 out of the bets that yes, we.
We have received a bit of <unk> obviously.
Circumstances come up, but Oh, and the reason, but more recently.
You know, we'll we'll sit you'd look at all sitting at a very well with the way.
Well if possible. So I mean that that was positive progress in August.
Cool to Yeah, and then this is this year, we second might.
Piece of paper Crazy the MBS on that front.
On the working capital.
Okay. So we are ramping up that Ravens hope so they will be small that's.
But we will incur it's some some additional ramp up that Panama or just in terms of the working capital.
Before the other items, it's just sort of large swings at quarter end, [noise], which were trying to eliminate sometimes.
Finished goods and.
And receivables.
But I wouldn't expect a race to change, but much left some possibly some reduction on the inventory over the next.
It's just what the restriction a movement.
Basis.
Okay.
Okay. Thanks.
[noise] beyond aim to address the the question on.
On deferred stripping.
With me speaking from the current Panama, So I'd for us is that.
Disseminated soulful I'd Oh, we have much less of those.
One Weiss contacts it's much more about.
The the grade of the block that's in front of view.
And you know which of those grades you selecting to take the crusher sorry, if I, we do have some ability and its scope was mentioning in terms of the plant throughput to take additional blocks a into the into the mill. If we can get the ball him. A you know often above sort of a target right. So we.
There is some risk they of course, if you you know if you would.
Simply high grading, who deferring pure stripping.
It's slightly more do you want cobre, Panama, because we could take that block to the mill a if we have the volume and spice available to take that block that's really what we're thinking in what the mine exercise will be as we ran pop is to be pushing the grade it's going to the meal lower Laura on producing.
More and more incremental.
The next question is from Nick Jarmoszuk with Stifel. Your line is open.
Hi, Thanks, Interestingly the part of question regarding a JV.
And the debt issuance <unk> question on or would you consider issuing any equity or equity linked securities yeah.
If you need to the liquidity to address the debt maturities.
I think the short answer is no.
Okay.
And then on the concentrator mining license I have my notes. It expires in 22 is that still the case can you talk about when you start discussions and are now with the government to extend the license.
Well, we didn't sorry the studio.
Already in both cases in doing that something that's the unforeseen issues that [noise].
Okay. When should we expect some sort of news there or what sort of can you just discussed what sort of term you're looking for.
Hey.
It's like.
Can you repeat that Pizza then yeah.
Oh I was curious maybe discuss what sort of what the duration of the mining license would be that you're looking for.
I would just be a a new will oh, the current license, which looks to be in for 25 years, which covers the might kind of mine life of about 20 years. So that's should should be fine.
Okay, and then are you expecting any material changes from the current one.
[noise] material changes in the license itself.
Yes, yes.
No not at all.
Okay, well thank you.
Your next question is from worst.
It's Scotiabank your line is open.
Hi, Thanks for taking the follow up I'm just curious if we can get some color on when they update it [noise]. She took a core part maybe released.
I think it's a it's sometime later this year, but yeah, we haven't sort of pinned to date, yet I don't think.
Okay, and then in terms of the energy cost I mean, obviously diesel fuel has come down significantly can you maybe give us kind of a broad idea of what that might represent with respect to cost savings I mean with energy pricing falling in half.
Maybe quantify what that might do from a C. One perspective across the portfolio.
I I think can be append to cease to the slide presentation, we we get some sensitivity on.
Oh, Yeah, a little movement say, you know, 10% Naismith, you know oil price, including an heck impact.
It seems to have an impact about $5 million.
You didn't have to hedge and say it would be about $10 million.
So let's say for example on time I'm being appealed cry.
[laughter] sensitive to the fuel price, but there will be some additional color.
It's just trying to cross then they could have done a premium oh.
I'd say.
Right.
Elements.
Well, let's it'd be too.
It doesn't feel like we give a sense I think on page 19.8 like that.
Okay. Thank you and then finally, just an accounting question.
Can you explain the how what the accounting treatment is at Cobra, Panama with respect.
Precious metals on the stream because it looks like your grossing up revenue kind of far greater than even the market value of the precious metals and then offsetting that with some kind of cost increase for refinery back credits I've never seen this before can you just walk us through that.
I saw in their own all maybe take that question.
So he tends to be the revenue unwind is here to the stream, we we recognize the sound of or the gold and silver between constraint so for them.
That was part of the even stream, we we and what not deferred revenue, which which includes the deposit was received in the construction phase of Panama, and then you'll be on getting amounts as well.
From an accounting perspective, though I mean.
<unk> really I'm not revenue.
The gold and on the screen, which is switching since you've got on wine together with the goal is.
For the copper in concentrate.
Coming through at cost so there's a it's a cost of the.
Funny about credit semi patches to satisfy about.
So it so you know so your gross profit really so.
Okay, but your cash cost per pound reported.
And they are they a clean number or or are they using an inflated precious metals right rather than that it's in that number say within within the byproduct credit. We are we are seeing the did the byproduct credit from the gold and silver concentrate was one of the net impact to the Oh.
The streaming agreement as well so not that would include the revenue under the cost of the muffling about credits that fits in that number so we're not breaking out the impact.
Perfect. Thank you very much.
There are no further questions at this time, we'll turn the call back to Mr. Newell for any closing remarks.
Oh, Thank you very much everybody. Thank you to the a they first quantum team as well for the call today and if you have any further questions you know I watch a cold call myself, all Lisa hopefully we can on so those for you so look forward.
Seeing your well some of you again next week, we'll hearing from some of your again next week the H.M. otherwise a.
Well talk to you in the next year into next quarter. Thanks Bye.
Now.
This concludes today's conference call you may now disconnect thing.