Q2 2020 First Quantum Minerals Ltd Earnings Call
[music].
Good morning, My name is Cindy and I will be your conference operator today at this time I would like to welcome everyone to the first quantum minerals second quarter earnings results Conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there would be a quick.
<unk> answer session. If he would like to ask a question. During this time simply press Star then the number one on your telephone keypad. If you would like to withdraw your question press the pound hockey. Thank you Mr. Clive no president and director of first quantum minerals you may begin your conference.
Thank you operator, and thanks, everyone for joining us today.
Joining me on the culture, Diastolic, Pasco, Chairman and CEO honest my CFO.
Just impossible director of strategy.
Yeah, well general manager Finance I'm, sorry in Mclean group reporting controller on Rudy bottom hole structural operations on Bill.
As usual before we proceed I would draw your attention to the Fox sort of what culture. This conference call, we'll be making several forward looking statements.
We're also trying encourage you to read the cautionary note that accompanies our second quarter, Andy and I and the related results news release as well as the risk factors.
Particular to our company, which are detailed in our most recent annual information form an available on our web sites on sito.
A reminder, that the presentation, which accompanies this conference call is available on our website.
So as usual I'll go to started with some opening remarks interest and will provide an update on cobre, Panama before harnesses review the financial results. We'll then open launch and take your questions.
Again that continues to be very little its usual. These days is the pandemic continues.
I've seen some easing of restrictions related to cobot in a few jurisdictions, but didn't know those new telford restrictions being put in place.
This call just now the second time of the majority of the participants are dialing in from home. We all hope for whatever the next few weeks some kind of normalcy will resume as more offices open.
At the start of the quota globally governments were beginning to deal with covered 90 units serious impacts from being better understood. Simone we had put in place various protocols and measures to protect our employees in communities, but otherwise our operations continue to operate Friday normally.
In early April as you know a suspension of labor in Panama resulted in public tell them all the placed on preservation and say maintenance, which impacted production significantly.
However, as recently announced in early July we were giving would go ahead to resume operations and we are now back on track to deliver our revised production expectations, Jason will provide more detail on there too, but yet cobra upon them out in the quota and what we're planning for resumption in ramp up and trials.
Despite the suspension of Cobre, Panama the quarter was really solid both operationally and financially.
We delivered a significant improvement in costing production consistence consistent with the revised guidance I'll see you on costs. The low end of the guidance range and our all in sustaining costs were better than guidance.
Consensual study with improved throughput and recoveries on both mix and so far it's all seconds.
Thanks, and almost all the quota production was at its highest level since 2018 costs <unk>. That's a record low as a result of increase throughput low fuel prices and currency depreciation.
In May Ravenstahl shipped its first nickel has restarts and ramp up to full production continues.
We had an additional nickel shipment in June and deliveries are expected to continue mostly for the rest of the yeah.
Although the impact of a pandemic. That's our operations has been manageable some fall and hasn't had a relatively modest impart operationally I do need to acknowledge the impact from dynamic has had on our workforce many of whom have been unable to reach into that families in homes for extended periods as a result from quarantine requirements.
Rotation timings and travel restrictions.
<unk> for the entire something I'd like to think are people, who have made these personal sacrifices we recognized a significant contribution they continue to make to the success of the business.
I'd also like to express Allison's sincere condolences to the families and colleagues in the five members our workforce and put them all the perished as a result of curve at 19.
The company continues to place top priority on health and safety throughout our operations and this will continue in future as refocus on measures to prevent transmission of curve at 19 amongst our workforce in communities.
Now I'd like to turn things over to Christian to provide an update on cobre, Panama as most of you know Christian was GE I'm or cobre, Panama answers, a construction phase until being pointing to appointed director of strategy early this year.
Whenever he has continued to provide oversight as the operation navigate the current unique environment. So over to you Justin.
[noise], Thanks, Clive and thank you to everyone who's joining the call.
Certainly the second quarter Cobre, Panama was a challenging period.
But they were some strong success is along the way and we're confident in the ramp up for the remainder of the.
This call I've mentioned at the beginning of the quota during the first week of April the Ministry of health filled the Republican Panama ordered the temporary suspension of labor activities on thought <unk> through the cause of non thing pandemic.
I will emphasize that fiscal into Mexico early in response to the pandemic when coated 19 with declared an international public health emergency accompany moved quickly to introduce health and sanitation protocols across all of it sounds.
By the beginning of April Cobre, Panama, we had already implemented elephant sanitation protocols and reduce the personnel on thought dance around 2800.
In response to the Ministry of Health resolution the company place Cobre, Panama on preservation Sykes mind since beginning on the seven type pool in order to ensure the safety and protection of personnel the environments and also yes. It.
And personnel levels were juice down to that 800.
Clyde mentioned the tragedy the tragic loss of five members about Oh my colleagues from Cobre, Panama has just come to symptoms associated cause that no one thing and I for one night.
We extended our deepest condolences to their families and we'd also like to thank the medical stuff from the Ministry of health.
Treated out Paypal in hospital, and those who continue to work on resolving the water pandemic in the country.
We've been working with a couple months on their response to the want a pandemic and this includes donations of medical equipment, including P.P.A. testing kits and I see you equipment.
We've been helping to support families in need with food and supplies enough surrounding communities.
We've always been committed to getting back to our communities around the mine, providing help and support when we can.
In order to send towards them on Cobre, Panama implemented a deep disinfection program.
Be working closely with a union sale supplies and the local community. This for example, and the locals women's grew up would you had been producing many of the face masks.
And we said it very high standards because at 19 protocols on the thought.
It's a testament to the hard work of each and every employee on the sought we're able to successfully implement these standards.
Many of our people working standard rotation throughout the quarter away from the families and we thank them for their commitment support.
The temporary suspension orders from the Ministry of Health, we lived through the law and we announced shortly thereafter, the resumption of normal operations. We've implemented are ready reopening plan under which we expect operations to ramp up to full production bought me to August.
The priority for Cobre, Panama continues to be health and safety, the workforce and surrounding communities and the strict protocols and send a tree vigilance remained in place at the new normal life working [noise].
The reopening plan provides for the safe unsanitary increase in personnel and saw it from an 800 that were on sought to preservation and Sykes maintenance.
At the end of last week, there around 1450 personnel on site and we expect to be at around 1850 personnel by the end of this week with another 600 personnel already in preemptive corn team.
Each movement of personnel currently involves 14 days, a preemptive quarantine with testing front and back to ensure no contagious.
We are able to run at full production was around 2200 front lawn personnel.
Aiming for sustainable full complement of around 3400 to people back to saw it in a phase manner and in line with the health protocols.
[noise] only essential frontline personnel on the priority list to return to sought and our support areas are working remotely or thought.
Also adapting to push new ways of working in the case to travel restrictions. That's his remarks and virtual maintenance support. So we can utilize they'll personnel that expertise from their home countries.
In terms of production during Q2, we did run at a reduced level of operations really in order to keep watchful equipment woman draw and free from compensation in the Panama climate and to ensure good environmental standing.
We were cycling through each mill train running one at this time and as a result, we produce rent 21000 tons of copper and 7800 ounces of gold in the quarter.
Recoveries were slightly impacted by the increased proportion of surface stockpiles, we processed under the restricted operations, but we do expect recoveries to return to normal levels for the rest of the.
The cash cost of production in Q2 reflect the lower production level and included within the C. One and all in sustaining cost is $4 million associated with health and safety protocols.
The $6 million in cost associated with placing the operation from preservationists life mine since we're in could in April but excluded from cash costs.
For the rest of the unit costs will reduce the results of the heart production volumes.
We do expect some ongoing.
Our health and safety coasts.
In terms of guidance, we've taken a cautious approach we recognize there's some risks out about direct control, which my yet to matches the results of the pandemic.
The production that cobre, Panama for the full year Twentytwenty is now expected to be between 119 200000 tons of copper between 70 and 80000 ounces of gold.
We currently have one try and running at near capacity and won't bring up the remaining two trains over the next few weeks, we do have some catch up on preventative maintenance, but.
Stand very confident for the operation to be that fully ramped up I'd be in August.
How expectations for the remainder Twentytwenty you need to 2021 now that we can ramp up to the 84 million tons annually through <unk> with confidence.
We actively working on mine plans for the expansion 200 million tons per annum at present and remain on track with a tolling type on the 43, one or one for this expansion.
With that I'll now ask comments to take you through the finance presentation. Thank send us.
Thanks, Justin and good day, everyone and.
Like to take you to slide ice and there's a presentation available on our website. If you want to follow that.
Presentation, and it's cool overview.
In summary, total copper production wasn't an onsite quarter 29 team.
Total unit cost see one and all in sustaining cost achieved the lowest level three yes.
Internal performed exceptionally and this quarter.
The highest production since the fourth quarter between 18 with record low unit cost.
They were robust performance has said that can change he has helped me grain.
But that's operations achieving a reduction in unit cost and consistent levels of production.
Grains see one wants to know isn't over a decade. The news report at all in sustaining cost.
Production benefited from this cruises operating at normal levels compared to the impact of the law Landslip reached last year.
That's just in Atlanta highlight that they must reduce production that Kobe, Panama as it operated under preservation and site maintenance man.
Oh prices, but relatively low much of the quarter, but up trended upwards from end of June into July.
As a result of the recent increase prices and given uncertainty around the impact was covered 90.
Okay Company is taking the opportunity to extend its corporate sales age program out to the same between Q1.
Mitigate any future prices.
I will talk to this as well as you know nickel hedge program in more detail like taking the presentation.
He is also hates hundred 51 million beat as Oh no.
Oh, that's seasonal as part of cost management strategy.
[noise] Ravens little compete at the commissioning two hypatia acidly circuits in April and May respectively.
With the fish shipment of nickel occurring in the quarter.
No action as expected can you continue to ramp up through out okay cool.
Turning to slide nine on production.
Total production for the quarter <unk> hundred 69000 tonnes was lucky higher than Q2 between 290.
Seasonal performance was particularly pleasing the highest stupid.
Savi production to one up its highest quarterly levels 11 for seemed higher than the same quarter in 29 team.
Consensus you delivered another robust performance with higher throughput and recoveries maturing oval production wasn't along the same quarter between 19.
This cruises operated at normal throughput cables compete in the same quote and 29 team.
Which was impacted by the nine slippage.
Okay, Great Panama production last night and as a result.
Installation and maintenance operation.
Oh production of 55000 ounces was lower than the same quarter between 19, reflecting preservation safe Maintenances Kobe, Panama unplanned maintenance at consent.
Turning to the next slides financial overview, comparative EBIT don't see under $52 million in the quarter benefited from favorable movements.
Each program.
And foreign exchange as well as labor costs.
It would gain these gains were offset by 12% lower market copper price as well as cost and ramping up production a great muscle.
It was a competitor for loss of $84 million in the quarter on a comparative lots of 12 cents vishay.
And they finance expense $186 million has been recognized.
Which a significant portion.
He'd be eligible for capitalization and the same period was between two non tea.
But it's no expense following that letter declaration of commercial production that can be Panama.
Net debt was marginally higher than the previous quarter. It impacted by timing of says Preservations site maintenance period of Panama and wrap up cost Thats right and so.
In addition, the phasing of tax payments was relatively high in this quarter.
They go to slide 11, under which is could be competitive changes in comparative EBIT Dutch depicting net and showing the back of the metal prices the production, but also offset by benefits on the hedging.
And the ramp up cost of driving so.
Turning to the next slide slide 12.
Copper unit.
Cash costs I see one and all in sustaining cost for the quarter with the lowest levels, we'll see yes.
Oh, all in sustaining cost of $1.62 profound and see one cash cost was $1.20 pounds for the second quarter of 23.
[laughter], even since the pound.
It seems the town decrease respectively compared to the same period of screening 19th.
That was he wants cashcall the snakes in particular decreases at Zambia operations due to lower fuel costs.
Favorable Forex Nolan maintenance.
We have concerns yen increased production it seem to.
Sentinel achieved a record lows see one cash cost of adult city seeks a path.
No we see one cash costs it over a decade development grain with lower mining cost and higher realized gold prices.
I wish reported all in sustaining cost.
Do you want cash costs include contribution from Cobre, Panama off $1.72 part, though.
Which is higher than planned as opposed to operating in a preservation of maintenance.
No. We're all in sustaining cost are fixed notice you one cost combined with no royalties.
And it could the Knicks slot corporate hedging program outlook.
Okay hedge program has been extended to the same between 81.
Interest the ability of catchphrase, while maintaining compliance with financial.
Evidence that the fluctuations in commodity prices.
The bar chart represent.
As entity as shows you split between swaps and collars tweet tweeting aren't your line.
The company it and margin copper for would sell contracts.
A little bit more than 210000 ton.
At an average probably two dollar 71.
Pound outstanding with maturity keys to December 21.
In addition, the company has an margin zero cost, calling it the sales contracts.
Well, we're just a bit more than 200000 times at a weighted average price or.
You don't a 70.
Pound for pound at the bottom to to 94.
Outstanding debt maturities through July 21.
Okay, Okay half of the expected copper says in the next 12 months hedged at an average fuel cost to build a 70 per pound.
The company also has.
Just under 8000 tons of ammonia and nickel forward sales contract at an average price 60 to 76, but down the securities to pay between Q1.
Turning to the Knicks lot of data and liquidity profile.
Company ended the quarter to $892 million, Nate unrestricted cash and cash equivalent and wasn't full compliance with all its financial covenants.
Taking into account for cost operating cash inflows capital expenditure outlays.
Sellable cashing committed facilities.
The next big Seth sufficient liquidity through the next 12 months to carry out operating and capital expenditure plans and remain in full compliance with its financial covenants.
Continue to take action to manage operational process and also to further strengthen the balance sheet.
Turning to the next large twentytwenty guidance as noted by Kristen Cobre, Panama copper and gold Guardians have been reduced supporting its preservation.
Maintenance theater operation.
Production guidance, what other copper operations remains and change.
Total copper production guidance is now 725002 sitting on a 70000 tons compared to 755.
800 of 5000 tons gardens previously issued.
Oh God Enphase gold got incipient reduced to 250 to 250000 ounces at 20000 ounce decrease from previous guidance.
Nickel production guidance a driver so has been narrowed to 15.
<unk> to 70000 tons.
Cash cost guidance has remained unchanged.
Not be introduced as Cabot 19 dispose.
Additional risk.
But we have been operating over the past quarter at the low end of the C. One gardens and slightly below guidance cohort in sustaining cost.
Total capital expenditure guidance remains unchanged.
And with a change allocation to reflect the central sustaining expect mnuchin phasing of expenditures wireless reduced capitalized stripping at Kibali Panama.
Full year depreciation expense guidance has been reduced by $50 million to reflect reduced every penman production.
Thank you and I will now and back a bit supply.
Thanks, Dennis So operator can you. Please open the lines to take questions.
As a reminder, if he would like to ask a question. Please press star one on your telephone keypad and we'll pause for just a moment to compile the <unk> roster.
[noise].
Your first question comes from Orest.
Ocado [noise] from.
Scobey up I Scotia Bank.
Hi, Good morning Trust and a couple of questions about that Cobre, Panama, just curious what the ramp up now and the workforce Remobilizing. When do you exactly expect to achieve that 85 million tonne throughput rate on a sustainable basis.
Hi, colorist, yes, they as I said, we we can run all three trains with about 2200 people, but that's really the frontline guys <unk> driving trucks a deal prices on the price this plot, we'd like to get it.
Assignable full levels at about 3400 people on thought and we'll fight that obviously mid August we were comfortable in that.
On a sustainable basis, we'd like to have that 3400 people and that would underline that capability and that will come from mid August I think it will just get more and more reliable across the U.S. So Q3 will still be in a ramp up because of the.
You know the Workover.
July August and then into September and I think you'll see Q4 at a fairly steady level Oh going well.
Okay and do you given the extended a curtailment. This year do you see any risk to the current guidance for 2021 at Cobra, specifically, the three tend to Threethirty Katie.
Hi, Auris no, we're not changing that guidance at the moment.
Yeah as as in the capital Slide we were looking at.
Discretionary and making sure that every capital dollar that we spend is appropriate and that includes capitalized stripping out, but we comfortable in that capitalized stripping level in terms of a impact for next year. So at the mine that does not change.
Okay, Great and then just finally for had us with the copper market, having perked up and with a number of other lighting company starting to term out debt I'm. Just curious if your next just given the amount of debt maturity you have a starting in 2022.
Hi or is that.
Yeah, I mean, a you know we.
We proactively manage out dates.
So the Knicks speak maturity coming up besides bank maturities that sort of amortized through that period is is there 22 bond Dave you mentioned.
And look we tend to be opportunistic in that so if the market is they will will then extend those maturities and go back and.
He shouldn't you bombs and extend that but it's a matter of the market conditions determining that.
Great. Thanks very much.
Your next question comes from Greg Barnes from TD Securities.
Yes. Thank you. Thanks, you Trust and again on the protocols safety protocols, you put in place that Cobra, social distancing I assume I'm happy.
Do you think that will be an impact on costs.
Hi, Greg it.
It's all yet lawn day, there was a $4 million in Q2 costs from the health and safety protocols and will continue we we'd though is a more stringent protocols and at weren't cost.
More than that because that included a lot of the disinfection and cleaning and so on so to a marginal cost, but yes. It is it will carry on because.
Running under this new normal that we'll find yourself.
So you're not really expecting at a much would change in your unit cost guidance then recovery.
There's multiple no.
No.
Interest and my astute last quarter about the Shanxi situation there has been some recent.
Noise around that any further comments on discussions progress what have you.
It continues in in good old Oh, sorry.
Regular email regular communication the face to face communication, it's difficult at this time I, but no other advancement.
And just finally somebody that's centinela costs came down as you've noted record low cost for the course is that sustainable or there's something in the quarter. There's this particular that helped drive that level.
Routinely onsite.
Okay, Yeah, no I think good. Thank you know, there's obviously think like fantastically well under production levels up mining is looking good so that consistently good.
Production looking at some.
Next let's say to July.
I see the exchanges does that mean clutch exchange rate as favorable light vehicle.
In fact on on costs and I don't see.
Much of a strengthening and then exchange that you will see a continuous.
Benefit on on dollar much extra inside.
You know, where the where the oil prices most of the agency will rise bite.
And we've we've been negotiated fuel contracts of ensure that we have.
Excellent.
Diesel fuel costs for the remainder of if you're going into next year. So I think seem to know is said to continue to embrace throughout this year.
[noise] attaching thank you.
Your next question comes from Matthew Murphy from Barclays.
Hi, I'm, just as a follow up to that one the the Sentinel a DNA I notice was only a penny a pound I'm not sure where there any funny isn't that a number offsetting DNA.
Yes.
Sorry mathematically you we lost you at some stage can can you repeat typically sure yeah. Just in the back of your Mdna, where you have the a sentinel or will you have the cost breakdowns for each operation Percentand. All I saw Gionee was only a penny a pound.
And I was just wondering if there's anything offsetting that because normally I think it's around 10000 foot pounder around there.
Sure he you and good ones coming from that.
Oh.
We can follow up if it's too detailed right now, let's let's get back to you later on the call at once said you. That's a system that's because I'm sure. Okay can I just ask about this request for arbitration can you make any comments about what what.
Due to make that request.
And what it pertains to.
We're advised by our legal counsel.
To provide no comments on this issue. So I'm afraid we we don't have anything to walk is that pretty clearly set out in the M. DNA.
I would like to just to confirm that.
There is no liability associated with that but a number of questions.
Prior to this coal, but if you ever read it properly the red no liabilities associated.
Hi, sorry, I had my me I, how can I just thought so they have my mute button on sorry.
I'm just going back to the DNA. It it's a reclassification of of the 18 on deductibles in Q1, so it's just being transferred into mining and processing lines say, it's just a reallocation said so there's no sort of Tom It's funny thing.
Got it.
Okay. Thanks, Juliet and so a that I I understand or just back to the arbitration question I understand you can make any comment I'm just wondering.
This is the action something that are they a government of Zambia might have expected or.
Mike would you have a given on some warning that you were going to take that action before you did it.
I think no comment is best.
Okay.
Thank you.
Your next question comes from Matthew Fields with Bank of America.
Oh, hi, everyone I I just want to follow up on Oh, I think Orest question from the beginning about.
Sort of actively terming out your your maturities.
The first kind of turn learn term loan amortization came this quarter and you got another one in the back half of the year is the expectation that that term loan amount will be handled with free cash flow generation in cash on hand.
Or where would you rather kind of be more active in sort of.
During the bond issues to clear out revolver and clear out term long term loan anymore.
I'm not the plan is to to pay it from price he self operations and cash available.
But I mean, we've we've got that option as well available at the bond market is.
The bulk up then we can always go.
You know look at terming out some of that's true.
To access to the bonds.
Okay.
And then second your your Capex is trending well below the 675 guidance I think 300 for the first half is there risk.
To the downside on that full year number if you can sort of fine savings throughout the year should we.
Should we sort of air to the lower side of that 675 number.
Or their big Big chunks of things happening in the second half that will sort of balance that out.
Click arguably I talk to you luck on Christmas on Yep Yep. Please let's say, let's take 75, it's not it's I'd like to them talking one person run by the 675, you should see EM is our latest forecast they say you know I.
But to get is that something that there is often a bit of a change in the phasing.
Cool CFO to stripping for example, but some you know I I think that's not the latest guide.
Okay. Thanks, very much that's it for me.
Your next question comes from Oscar Cabrera from C.I.B.C.
Oh, Thank you operator, and good morning, everyone. If I may be a stagnant Nox question on Capex.
The reduction this year in stripping skier from corporate Panama, but could you perhaps comment on the increase in sustaining in other topics $50 million, where that came from what what's it going.
And how do we think about sustaining capex for 21, and 22 was guided previously.
Yeah, Hi, the I'm, saying.
We are at the latest guidance on sustaining Capex is a 220.
A million dollars yeah, I think that we originally started with the guidance of 250 in February and not went down to 200, but it's an extra 20 million in time been operations for essential sustaining spend on.
Equipment and mine fleet, they say that says that that's part of the 20. The other 30 million is for.
I spent a non sustaining spend in Panama, including on the T.N.S.
Some some expand sundry capex and small projects. It is it's a phasing it's a phasing largely opex spend.
And he turns into it.
Sorry, what was the follow on question, what's up with US in terms of Capex. That's just any kind of indolent for next year I I still stick with the Guy the guidance that we gave which I think with <unk> with round about 250, probably.
Right.
Thank you and then I'm just wondering if you have heard anything else.
When you have any updates on the no nine discussion with a different and they said they're going into file.
Kristen.
Yeah, Hi, Oscar Oh look it's been difficult and this interest I used to have the type type discussions, which a necessary. They did the constructive dialogue was ongoing but at this stage with the situation in Panama and more broadly travel and so on a is it the.
Uh huh.
Things are progressing but slightly at this time, so no. There's there's nothing to update their own on other than.
You know the commentary around our them on coming out of Altos. The the temporary suspension of labor was very positive even Tim so the understanding and impacted it has in the economy in Panama and you know we did meet with people during the call to the interests of finance and song.
And there's a good understanding oh the placement so the.
On the mine in the economic outlooks in Panama.
Right [laughter] hopefully that will.
I will carry on then lastly.
On sound, yeah, with the changes to the export tax and down and ended that.
So there was about $50 million in.
Enough said that you got from BB 80 can we expect anything more more things like that for the balance of the year.
And.
No I was the government indicated how long they plan to maintain these sound.
Or eliminate the.
The export tax on precious metals.
Hi, This do you Wanna Teva.
Okay.
I made the export tax on price has said that.
That's that's true moves so I don't pick that's.
There's a penny for that to come back.
Soon.
I think on the E T.
It's sort of the cutting is proceeds way.
Sometimes we get offsets and with that they these offset snow in the quarter and then.
Things, sometimes its its less so it's oh, so there's no indication, but that's been the practices that yeah, you get some of it back and said and certain mindset.
And as amounts you down.
Okay. So you know in terms of an effective tax rate kind of what what should we be thinking about.
June if you think you've got the effective tax rate healthy.
Yeah, I mean this.
We we turned it I don't see gets a little bit I'm complicated because of.
They will tax credit for interest. So so so we tend to guide excluding Palomar interest round about 30% and you know, we're certainly seeing it at that level of level at the moment.
Okay, well thanks, everyone.
They say.
Your next question comes from Karl Blunden with Goldman Sachs.
Hi, good morning, Thanks for the time.
It's a phone with some of the other comments that have been made just in terms of views on asset sales or sales of streams to help also extend that maturity runway.
Be interested in your latest thoughts are those I still looking into something like that and then.
I can those transactions progress just given that difficulties with diligence under covered right now.
You want to do a christie.
Sure Cliff. Thanks, Carl look I think at the moment, the the outlook cool or the environment for that is certainly improved I think from earlier in Q2 other copper price environment at the maintenance is.
I'm very appealing and so actually there's a little bit of traction and things moving well there.
Are you.
You asked a good question on due diligence, obviously any transactional that night you will recall people on the ground and you know that's that's probably into the.
The the.
The the key to leave <unk> to to make happen, but in the interim we've been able to do a lot in terms of virtual management presentations videos and so on and there's a lot of technology around that.
Enables wanted to keep some progress and I think we starting to see some freeing up of travel and and people being able to move.
From country to country and that certainly pot amendment, the should you'll still looks reasonable in terms of what we had thought.
And we making progress that.
That's helpful. Thanks, again, and maybe this is for harnessing honest, maybe it's too specific but I'd be interested in your thoughts you have a cap structure a bunch of different elements some of them have a prepayment penalties.
That's a whole protection on the bonds or how much do you think about the negative impact of that a call protection on what you pay to pick it up versus the benefit of really extending a runaway when the market is open as it is today.
Look we do look to this call protection said, the 22 bonds on L. callable at Paul.
So that's what it easy or.
I guess, if we get a lot of caching.
You know the you've just got away it up the cost of servicing the databases that.
The call premium.
But it's sort of.
You know that every good performance coming up callable at par. So it does help to take it off that sort of a relatively cheap at cost him.
Okay. That's good problem.
Yeah.
Oh, thanks, very much appreciate kind of thing.
Your next question comes from Ian Ross shelf with Barclays.
Thank you just a follow up on every Panama pull Justin I'm, just on some of that <unk>.
<unk> spending that you delayed I just wanted to get a sense. So.
You said, you're comfortable with production, but just wanted to get a sense of how much of that is sort of deferring into next year and then maybe junior just for the go to group and I recall, you said in the Q1 presentation that Capex guidance my thought that well because some of its a deferrals full if you're going into next year I just meant to get a sensitive.
I haven't they do ideal.
Capex for next year.
Hi, you look I think Juliet was saying, we don't see too much change from the guidance.
Quite a lot of that is not deferral, what's more just that we found savings there. So it cobre, Panama I think you know the one area. We kept the mind a component of Capex looking forward is 100 million tonne per annum expansion and you know we had envisage some capital in the second half of the year and we still.
Back to make progress on that.
We will see how that goes in terms of permitting.
Ready to start that work and that's probably the might do one from cobre, Panama This sustaining capital and so on that you see a <unk> for the businesses in the tailings and that needs to happen in order what we've done there is.
Shifting to shed jewel, a little bit, but that capital would be cross it would.
Be required nonetheless, so its just the it's just the scheduling element there elswit cobre, Panama the capital.
Has been site really on on component change out because we havent been being burning machine hours for example on their loud shrunk shovels and it goes really are very chunky capital commitments to to the the undercarriage change on the page on the the pay not shovel and so when we not burning the machine hours, we were able to push that.
But the depreciation of that <unk> reflects a in elsewhere in the business.
They are I don't think will be changing the guidance and that was the comment from from Juliet for next year's capital.
And in terms of Cobre, Panama, we were comfortable with the level that we were spending in the mine in order to keep production portfolio correct for next year. The work that needs to go in and what we were putting these he's can we make a the mine run into it and an optimum level with 100 million tons per annum, but at the levels we run.
During its around 85, we confident where we stand.
Okay. Thanks, and then just a follow up on Ravenstahl you produced a quite a small small would have nickel. So I'm not sure. If it was representative but it looks like the probabilities are up a little bit does that.
That's a reflection of changes in the complex structure with long, maybe just give a sense of that and I used to planning to produce mixed hydroxide going forward or do you intend to do change some of that the apology around them.
Oh that onsite clothing.
Yeah, Yeah. Please.
And then the probabilities almost the same as they were historically, we operating it up.
You know.
That's called Hell ball.
And it.
The nature of its Charles Yes.
Slightly more diverse.
In the earlier days.
Huh.
And.
That's just something that you have to accommodate through this yeah.
There's a capital project that's underway it takes us to shoemaker Levy.
By the into first quarter next year 2021.
And that's a much larger not so long term results.
With much easier.
Divested of geology enough at full Beneficiation.
Right.
No.
That's really what.
You see in the projections.
The rest of this year in Alberta and then.
Sometime early next year moving into Shoemaker Levy and.
And that that project is.
And it'll carry on the next six.
Okay, but he I mean it.
With the demand and he and I guess nickel hydroxide, the intermediate products, increasing many better an opportunity to.
To improve pay abilities and for the pricing structure full pulled up the product.
We've done a detailed study on producing I.
Nickel sulfate that's pretty.
That's correct.
And.
We will go through we will not commit to doing that until.
In shoemaker levy on producing at full output.
As you know as one of the initiatives we've had people to look out.
Taking mistaken.
And Ravenstahl.
So we're mindful of what.
Sure.
There is parties most.
Hi, Thanks.
So in some way.
One of that arrangement or would.
They prefer if its upgraded and.
That will get determined.
Outcome excess.
Thanks Institute.
Yeah, that's that's useful thank you.
Thank you.
Your next question comes from jet tender goal from Exane P. in BNP Paribas.
Hi, good morning, or just one question on Capex. It looking at 20 running 22 out of it 50 would go to 50 stripping and you mentioned do 50 on sustaining so out of the remaining 350, how much if I look at due to Latin America for each of these years endoscopic 19 changes or any of those things.
Things on spending into both the talking about Guy and at this stage based on the level of disruptions you might have seen and anything that might have changed in your mindset on how to deploy capital for next couple of years. Thank you.
Juliette.
Are you still on the mute.
Yes, sorry.
In terms of allocation of a capex.
Full package Panama of the 850.
That that would be about.
Split about 70 million all sustaining capex and about 150 360 of expansionary. Another project Capex and then a portion of the stripping about 75 million little say relates to either pay panel.
So just to just to be clear how much is ever get to do Latin America, Peru, and Argentina in that three you should see Oh, the capex, what Randy when I'm going to do they ended feel much there wasn't much for tuck.
Okay. So there wasn't much capital imports from T. now we have some capital in <unk>.
Yeah, then a follow up you want to someone who might be better.
We had some discretionary spend the elements, Ben and well have up to 50 million in Louisiana.
Okay.
Yes, Uh huh.
A limited amount.
Allocated.
But those projects and I, it's limited because clearly we are not intending to.
Make any decisions to go ahead.
A significant project.
Andy in the near future that's undertaken weve given to the markets lodging button that position.
I mean, if the circumstances went to change then we'd give a lot of wanting to.
As to why that was happening.
No reinforced expect that now and see.
Relatively small allocations.
I just would like to thank you.
Your next question comes from the honest that's falling from Morgan Stanley.
Yes, hi, there good morning, and good afternoon.
Your question slots from my side and the first one on cost guidance for the year.
If we look of the Q2 run rates out of dollar 20, and the fact that Cobra is ramping up there's something closer remains probably week and that three cents savings that you mentioned, Zambia looks like age to cost levels could also be quite low so under what.
Scenario would costs coming close to the need to Laurie, Oregon High end of the range given that you haven't really changed anything in the little guidance and I'll stop here for the first question.
Yeah, I mean, I'm I'm kind of on site in his script. We we've obviously been operating at the lower end about guy, but this quarter roundabout 120, and we would you need a we'd consider not ignoring the guidance, but just just some of the risk around K betting.
Several or any sort of any stop start interruptions or anything like that I suppose that could impact too.
Not cutting pack C C and ER and right and a ground upset say yeah, we were hateful to come in at the lower end Guy.
Understood and then clause I'd also like Jonas.
It's a good question.
And that.
Obviously, we are operating at a low cost.
But then it's a fairly conservative one because.
As Judy said there are quite a few.
Possibly things that would occur on having just come through a recent history that was not that easy to predict.
Makes sense for us to.
To be conservative but.
I proposed one of the questions Greg asked earlier.
About.
Sustaining low operating costs.
Did HAGE.
Diesel and so cool diesel it's called the heating oil that New York heating oil, it's an index and we.
We hedged about 50% about total use for the next 12 months.
2021.
At a time when the to give you a guy because its anyway offensive if it goes.
The oil prices $24 about which was moved from.
You don't get it for $24 about 'cause it.
In contango as the years goes up.
But that already looks like it was up.
Well that she every month going forward.
We would look pretty good and therefore, we can retain low operating costs and diesel.
Energy.
A significant part of the saving because that index not just relates to the fuel that we use.
And trucks in the light, but also to things like.
So we have tried to make sure that.
Good.
Retain those low earnings, but the Ohio side of it as you point out.
More a function of disruption in production for some reason that she push.
Understood. That's clear thank you and maybe a second question on the Cobre, Panama production guidance.
So if I take the low when do you want to 80000 pounds and assumed you floor is back to normal that suggests that you make no real progress on volume growth in Q3 relative to Q2.
Given that you already ramping up and assuming you get to the full run rate by me. It. All goes again would would wouldn't that way to look very conservative from thoughts ramp up a point of view.
Yeah, Hi, Yunus look that's a reasonable perspective, it's just.
You know the vigorously, bringing labor international the thoughts it is really what that cautions about.
I can paint a scenario for you wait we ramp up very very orderly fashion put right now the parse in Panama It looks like it spiked and reach maximum but that would be very early to say that I would we in a definitive fashion. So we just the way that there's a large.
Audio contagion in the country.
And so we need to eat chicken people very carefully as they come through and no potentially if you had I agree come through.
And there was a co transmission than we would need we would delay that that group of people coming in so it's that kind of thing that would not be back, but otherwise yes. It in an orderly fit I intend to do everything ran like Clockwork, then I think yes, we would definitely be pushing those numbers.
Understood and just the last question from there again on on topics.
I'm just trying to figure out thinking about the guidance for next year, how much of the reiteration of the 2021 campus guidance.
Reflect the ethics, James particularly in Zambia, because it's just reading through the script looks like you have pushed saw out some of the twentytwenty capex items into next year. So I'm trying to figure out how much of said you get through either FX or just overall like up excess savings.
NSR.
I mean, a tender capex, we guided for Capex guidance for the L. T is really in the yet so.
We'll have some saving system rollout with it.
I don't want to.
Commented detail on next year's Capex, then we should be ballpark, the same sort of number but I don't want to.
That's a detail exercise that we go through end of the evaluate the new plan.
I think it's probably safe to stick to sort of similar numbers come out.
Okay. Thank you very much.
Your next question comes from Dalton Barretto.
I'm cannot accord.
Hi, good morning, and thank you.
Hi, Bob I know you can't comment on the arbitration, but I'm wondering if you can tell us whether or not the arbitration is related to the renewal of the mining concession that can sanjay.
I guess fight fair to say no to that.
Okay got it thank you for clarifying.
Second question I'm wondering what we can see update on the S. Three projects as well that's the Polymetallic refinery I'd love to criticize and how should we think about eating that those those projects over the next couple of years.
Philip can you address that one yeah.
Ultimately, we will during the third quarter.
Hi, everybody anniversary quote unquote.
Come up at a 43, one on one for kinda century.
And that will lay out.
Obviously, how one next please.
The concerns you all body.
<unk>.
Of course in defiance reserves, Oh, probably give a an alternative to because.
The awesome.
Hundreds of and can take.
And it's probably best if we leave out till then because you need shield and figures.
Uh huh.
Speculate.
The stage.
Okay and the at the refinery at lost Creek fast just thinking around that.
Oh.
That's not currently planned.
Exercise as much of anything because we have to go to an underground mine, it's a significant capital expenditure.
Which we've not planned to do.
On this.
As the market is ER.
Yes.
Different position for us and what I mean, my does of course.
The next couple of years on their name.
Discussions you just been having with Honda stuff to do with debt reduction the light.
And on this.
Total pictures change, we know thing too.
Take a.
Major capital works.
Right.
Great. Thank you and then just maybe one last clarification on something on I said earlier. So honest did you say that there were no plans for the export tax on precious metals to come back at this time.
Well, because I can't comment on that we'd now you know.
They they smoke and I don't have any thoughts as to when it will come back or not.
Good morning.
Yeah, well now.
Thank you know to Texas.
If you look at history at all.
Changing quite rapidly I think most recently it's been.
In a better frame of mind over the last Fabrica, yet again, the hall, where they have seen.
Yes, so a bit more stability in terms of the Texas in Zambia and <unk>.
Some some relief in terms of certain of those previous that's made is that they entities.
Great. Thank you that's all for me.
As a reminder, if you would like to ask a question. Please press star one.
Your next question comes from Brian loudly with Barclays.
Hey, guys are good morning. Good afternoon. Thanks for fitting me in just a real quick on the cash flow side of question right I know I ask I feel like every quarter, but could you just maybe.
Maybe refresh or just update if there aren't any on the additional kinda below cash flow from ops, you know cash usage, you know I, notably ask on interest expense was there just a small like timing difference in terms of when the cash outflow was relative to I think it's like your 23.
25 notes I think the coupon is practically April 1st, but maybe maybe it was paid at the end of last quarter and that might you know explain why a interest expense was only a interest expense Cascade was only I think 66 million this quarter.
Yeah, Brian you you answered your question there that's that's correct.
On the physical April so what we typically have to get it to the agent fighting to date.
<unk> said, we normally get it out study based on March.
Got it okay. So I I thought that might be it but I just wanted to confirm but again you know in terms of cash interest expense I know we get this question a lot.
The 770% to 80% or a total guidance obviously, there's some non cash in that could could you just refresh what the current view is a cash interest expense and then as well you know any additional cash items I know I think it's 95 or 100 million kind of at the end the year.
So it sort of course group is there any other items that we should just make sure. We're we're modeling correctly or below the cash from ops line correct <unk> versus the.
Cash interest is about five.
$2 million was up 550 million in total for all the yen.
You've got that roughly a 100 to settle the Elie sneak a payment that you in November.
No as opposed to be the.
No major.
Well the items on the text and Davis of course, and we've talked about the effective tax rate but interface.
The accordance with a single process.
Got it and then I'll just ask if it's possible to Ah. So provided what is bickering no immediate change would be April amendment, but what's the current margin or or or total interest expense on your term loan in revolver I know that's not something that you know I think it's typically disclose.
But again the question, we get a lot from investors or if you could provide.
I can think good clip in March and disclosed.
Okay, Yeah, I didn't know if that's something you'd be willing to share, but it but it's not something you can disclose I understand okay. Thanks honest I appreciate it.
All right.
And now I'd like to turn the conference back over to Mr., Clive new tool for closing remarks.
Thank you very much operation thanks, everybody for joining today. If we are you have any follow up questions feel free to call myself or Lisa Doddridge, and we'll get back to since become so look forward to talking two and three months time.
Hi.
Yeah.
Ladies and gentlemen, this does conclude today's conference. Thank you for participating you may now disconnect presenters. Please held.
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