Q2 2020 First Quantum Minerals Ltd Earnings Call
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 will be a question and 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 he would like to withdraw your question press the pound Jackie. Thank you Mr. Clive no President and director a first quantum minerals you may begin your conference.
Thank you operator, and thanks, everyone for joining us today.
Joining me on the cold to Die affiliate, Pasco, Chairman and CEO.
Yes, Matt CFO.
Since our school director strategy.
Yeah, well general manager Finance and Simon Mclean group reporting controller on Rudy, Bob and false director of operations I'm here.
As usual before we proceed I would draw your attention to the fact that over the course of this conference call, we'll be making several forward looking statements and as such I encourage you to read the cautionary notes that accompanies our second quarter, Andy and I and the related results news release as well as the risk factors that particular to our company, which are detailed in our most recent.
<unk> annual information form an available on our website don't see though.
A reminder, presentation, which accompanies this conference call is available on our website.
So as usual I'll get 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 as a pandemic continues we have seen some easing of restrictions related to cobiz in a few jurisdictions.
Others, new tougher restrictions being put in place.
This call is now the second time of the majority of the participants are dialing in from hope 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, we're beginning to deal with cobot 90 units of serious impacts from being better understood Simos, we had put in place various protocols and measures to protect our employees and communities, but otherwise our operations continue to operate finally normally.
In early April as you know a suspension of labor in Panama resulted in public upon them all the placed on preservation unsafe maintenance, which impacted production significantly.
However, as recently announced in early July we were giving the go ahead to resume operations.
Now back on track to deliver our revised production expectations, Jason will provide more detail on there too, but yet cobre, Panama during the quarter and what we're planning for resumption in ramp up and tiles.
Despite the suspension of Cobre, Panama the quarter was really solid both operationally and financially.
We delivered a significant improvements in cost and 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 all those the start of the quota production was at its highest level. Since 2018 costs were right. 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 restarted rump up to full production continues.
We had an additional nickel shipment in June and deliveries are expected to continue monthly for the rest of the yeah.
Although the impacts of the pandemic. That's our operations has been manageable so far and hasn't had a relatively modest impact operationally I do need to acknowledge the impact upon dynamic has had on our workforce many of whom have been unable to return to the families in homes for extended periods as a result from quarantine requirements.
Rotation timings and travel restrictions.
On behalf of the entire company 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 in your colleagues in the five members our workforce in Panama 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 we focus on measures to prevent transmission of curve at 19, amongst our workforce and 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 at Cobre, Panama through the construction phase until being pointing to appointed director of strategy early this year.
However, he has continued to provide oversight as the operation navigates 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.
As Claude mentioned at the beginning of the quota during the first week of April the Ministry of Health of the Republican Panama ordered the temporary suspension of labor activities on thought in risk to the cause of non thing pandemic.
Ill emphasize that fiscal into Mexico early in response to the pandemic when coated 19 with declared an international public health emergency the company moved quickly to introduce health and sanitation protocols across all of it thoughts.
At the beginning of April Cobre, Panama, we had already implemented health and sanitation protocols and reduced the personnel on thought dance around 2800.
In response to the Ministry of Health resolution the company place Cobre, Panama on preservation Sykes might since beginning on the seventh April.
In order to ensure the safety <unk> protection of personnel the environments and also yes it.
And personnel levels were just down to the 800.
Claude 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 pull in my.
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 much on their response to the water 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.
Voice being committed to giving back to our communities around the mine and providing help and support when we can.
In order to send telling them on cobre, Panama implemented a deep disinfection program, we've been working closely with a union sale supplies and the local community. This for example, and the locals women's grew up would you have been producing many of the face masks.
And we said it very high standard for covered non same protocols on the site.
It's a testament to the hard work of each and every employee on the sought that we're able to successfully implement these standards.
Many of our people working tended 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 by mid August.
The priority for Cobre, Panama continues to be health and safety, the workforce and surrounding communities and the strict protocols and sanitary vigilance remained in place is the new normal way for working [noise].
The reopening plan provides for the safe and Senator increase in personnel and sought for men 800 that were on thought joint preservation and sex 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 quarantined.
Each movement of personnel currently in both 14 days, a preemptive quarantine with testing front and back to ensure no contagion.
We are able to run at full production with around 2200 front lawn personnel.
But we are aiming for sustainable full complement of around 3400 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.
We also adapting to push new ways of working in the case to travel restrictions such as for months and virtual maintenance support. So we can utilize they'll personnel 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 Troy and free from condensation 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 increase proportion of surface stockpiles, we processed onto 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.
For the $6 million in cost associated with placing the operation from preservation and site maintenance, where it could in April but excluded from cash costs.
For the rest of the unit costs will reduce the results of the hot production volumes.
We do expect some ongoing.
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.
So production that cobre, Panama for the full year Twentytwenty is now expected to be between 190 in 200000 tons of copper between 70 and 80000 ounces of gold.
We currently have one try and running it 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.
And very confident for the operation to be fully ramped up I'd be in August.
Our expectations for the remainder of Twentytwenty you need to 2021 now that we can ramp up to the 84 million tongue and you like three point with confidence.
We actively working on mine plans for the expansion 200 million tons per annum at present and remain on track the telling type on the 43, one or one for this expansion.
With that I'll now ask kindness to take you through the finance presentation. Thanks Dennis.
Thanks, Justin and good day, everyone and.
Like to thank you to slide ice and there's a presentation available on our website. If you want to follow that in the presentation as cold as Libya.
In summary, total copper production wasn't along the same quarter 29 team.
Total unit cost C and all in sustaining cost achieved the lowest unable to three years.
Internal performed exceptionally and this quarter.
Predictions as a full quarter between 18 with record low unit cost.
They were robust performance has said that can change here well from grain.
So operations, achieving a reduction in unit cost and consistent levels of production.
Well for grains see one whats the medicine over a decade the newest report at all in sustaining cost.
Production benefited from this crews is 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 say maintenance man.
Copper prices, but relatively low.
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.
I will talk to this as well as you know nickel hedge program in more detail late in the presentation.
He is also hates hundred 51 million beat as ultra low sulfur diesel 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.
Production is expected to 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 29 team.
The internal performance was particularly pleasing the highest stupid.
Bobby production to went up its highest quarterly levels 11 for seemed higher than the same quarter in 29 team.
Consents you delivered another robust performance with higher throughput and recoveries maturing oval production wasn't along the same quarter between 90.
That's cruises operated at normal throughput cables compete to the same quote and 29 team.
Which was impacted by the nine slippage.
Okay, Great Panama production last night with them and as a result.
Installation and maintenance operation.
Oh production 55000 ounces was lower than the same quarter, threenineteen, reflecting preservation safe Maintenances, Kobe, Panama and planned maintenance at consent.
Turning to the next slides financial overview compared to EBITDA, all $352 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 agreement. So.
It was a competitor for loss of $84 million in the quarter and a comparative loss of 12 cents vishay.
And they find its expensive hundred $86 million has been recognized.
Which a significant portion, but previously being eligible for capitalization and the same period of 29 Ti.
But it's not like Spain's put on that level declaration of commercial production that can be Panama.
Net debt was marginally higher than the previous quarter infected by timing of says Preservations site maintenance period to Panama and wrap up cost at Raven. So.
In addition, the phasing of tax payments was relatively high in this quarter.
And then go to slide 11, which has got the competitive changes in comparative EBIT Dutch depicting net and showing the impact that made to prices the production, but also offset by benefits on the hedging.
And the ramp up costs that driving school.
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 level for three years.
Oh, all in sustaining cost of $1.62 profound and see one cash cost was $1.20 per pound for the second quarter of 23.
The 15 since the pound.
I just felt since the town decrease respectively compared to the same period of screening on TV.
That was he wants cashcall the snakes in particular decreases at Zambia operations due to lower fuel costs.
Bubble Forex no live maintenance.
They have consistency and increased production that seem to.
Sentinel achieved a record lows see one cash costs of $1.36 path.
That will see one cash costs over a decade development grain, but lower mining.
Cost and higher realized gold prices.
Lowest reported all in sustaining cost.
Do you want cash costs include contribution from Cobre, Panama off adult Usseventy, two profound which is higher than planned as it was operating at a preservation of maintenance.
No. We're all in sustaining cost are fixed notice you one cost combined with no royalties.
Turning to the next slide corporate hedging program outlook.
Corporate hates president has been extended to the same between Q1.
Interest the ability of catchphrase, while maintaining compliance with financial.
Covenants that the fluctuations in commodity prices.
The bar chart represent.
Presented here shows you split between swaps in Columbus.
Tweet tweeting aren't your line.
The company it and margin copper full would sell contracts.
A little bit more than 210000 ton.
At an average probably $2 71.
Pound outstanding with Securities to the same between Q1.
In addition, the company has and margin zero cost on the sales contracts.
Well, we're just a bit more than 200000 tons at a weighted average price or.
You don't have a 70.
Pound for pound took about 10 to 294.
Outstanding debt maturities to July 21.
Okay, Okay half of the expected copper sales in the next 12 months headset inevitable caused to dollar 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, the balance with maturities to pay between Q1.
Turning to the next lots of data and liquidity profile.
Company ended the quarter to $892 million, Nate unrestricted cash and cash equivalent and was in full compliance with all its financial covenants.
Taking into account for cost to operating cash inflows capital expenditure outflows.
Saleable 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 these 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, it's not about Kristen temporary Panama copper and gold guidance have been reviews falling its preservation.
Maintenance if operation.
Production guidance, what other copper operations remains unchanged.
Total copper production guidance is now 725002, seven under 70000 tons compared to 755.
To 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 15000 to 70000 tons.
Cash cost audiences remain unchanged.
And as not being introduced as Cabot 19 dispose a.
Additional risk.
But we have been operating over the past quarter at the low end of the C. One gardens and slightly below guidance ordering sustaining cost.
Capital expenditure guidance remains unchanged.
With a change allocation to reflect the central sustaining expenditure phasing of expenditures weather 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 Becca to climb.
Thanks on us 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 that came in a roster.
[noise].
Your first question comes from Orest, well, Colorado [noise] from.
Yep I scotiabank.
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 trying to 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 at Asus.
Final four 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 330 Katie.
Hi, Auris no, we're not changing that guidance at the moment Oh, 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.
But we comfortable in that capitalized stripping level in terms of a impact for next year. So at the moment this not change.
Okay, Great and then just finally for had us with the copper market, having perked up and with a number of other mining companies 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 I said.
Yeah, I mean as you know we.
Proactively manage out data.
So the Knicks speak maturity coming up this on 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 can you.
He shouldn't you bombs and extend that but it's a matter of market condition said determining that.
Great. Thanks very much.
Your next question comes from Greg Barnes from TD Securities.
Yes, Thank you like futures 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.
That's all yet lawn day, there was a $4 million in Q2 costs from the health and safety protocols and we'll continue with those are 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 we're running under this new normal that we'll find yourself.
So you're not expecting at a much would change in your unit cost guidance then the covering.
Multiple no.
No.
Interest in 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 is difficult at this time, but no other advancements.
And just finally from me.
At Centinela costs came down as you've noted record low cost for the quota is that sustainable or there's something in the quarter that was particulate that helped drive that low.
Rudy their onsite.
Hi, Good again, no I think that you think analyst, 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, let's say exchange they does save favorable.
In fact on on cost and I don't see.
Much of a strengthening that exchange that you will see a continuous.
Benefits on on dollar much extra insight.
You know, where the where the oil prices most of the agents they will rise bite.
And we've we've renegotiated fuel contracts and 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.
Okay. 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, Matt I recall, you. We lost you at some stage can can you repeat that please.
Sure Yeah, just in the back of your Mdna, where you have the Sentinel or will you have the cost breakdowns for each operation for Sentinel I saw gionee with only a penny a pound.
And I was just wondering if there's anything offsetting that because normally I think it's around 10 times the pounder around there.
She lifting you under one comment.
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 there to system, that's because I'm sure. Okay can I just ask about this a request for arbitration.
Can you make any comments about what what led you to.
Make that requests.
And what it pertains to.
We're advised by our legal counsel to.
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 read it properly the red no liabilities associated.
Hi, sorry, I had my me I, how can I just don't so that I have my mute button on sorry on.
I'm, just getting back to the DNA. It it's a reclassification oh the 18 on deductibles in Q1 say, it's just being transferred into mining and processing lines say, it's just a reallocation said to this news to the Tom It's funny thing.
Got it.
Okay. Thanks, Juliet and so a that I understand or just back to the arbitration question I understand you can make any comment I'm just wondering.
This is the actions something that are they a government other than be a might have expected or.
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 wanted to follow up on Oh, I think Orest question from the beginning about.
Sort of actively terming out 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 or 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 turn long term loan anymore.
Yeah, Matt, but the plan is skewed to pay it from price he self operations and cash available.
But I mean, we've we've got that option as well available if the bond market is.
The bulk up then we can always goes.
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 Oh interesting enough on Yep Yep. Please let's say, let's take 75 to <unk>, if I like to them. So I keep pressing run by the 675, you should see EM is our latest fuel costs, a say you know I.
But.
Got it that some of that there is often a bit of a change in the phasing.
Cool sort of hook to stripping for example, but some you know I I think that's not the latest guidance.
Okay. Thanks, very much that's it for me.
Oh, yes.
Yes, Jim comes from Oscar Cabrera from C.I.B.C.
Thank you operator, and good morning evening, everyone. If I may be a stagnant nox question on topics.
The reduction this year and strip things here from corporate Panama, but could you.
Hubs comment on the increase in sustaining in other topics $50 million, where that came from a what's it going.
And how do we think about sustaining capex for 21, and 22 was guided previously.
Yeah, Hi that say.
We have to make this guidance on sustaining capex is a 220.
Million dollars, Yeah, I think that we originally started with the guidance of 250 in February.
And that went down to 200, but it's an extra 20 million in time get 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 project, it's a phasing it's a phasing largely opex spend.
And it turns into it.
Sorry, what was a follow on question, what's up with US in terms of Capex. That's just any kind of handler 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 panel.
Kristen.
Yeah, Hi, Oscar Oh look it's been difficult in this new states to have the spike like discussions, which unnecessary. They do 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 slowly at this time, so no there's there's nothing to update their own on other than.
You know would be the commentary around.
The mine coming out of Altos, the temporary suspension of light, but was very positive in terms of the understanding and impacted it has in the economy in Panama and you know we did meet with with people during the call to the interests of finance and song and there's a good understanding all of the placements.
The.
On the mine in that you'd be economic outlook in Panama.
Right.
And then hopefully that goodwill carries on then lastly.
On Sunday out with the changes to the export tax.
And and ended that.
So there was about $50 million.
In.
Enough said that you got from D.A.T. can we expect anything more more things like that for the balance of the year and.
Yeah I was the government indicated how long they plan to maintain these sound.
Or eliminate the the export taxes precious metals.
Hi, This do you want to China.
Yeah.
I mean, the export tax on price has said that.
That's that's true moves so I don't think that's.
Yeah, there's a pen to put that to come back.
Soon.
I think on the E 80, you know it's sort of cutting is proceeds were.
Sometimes we get offsets and it would accrete that they these offsets now and in the quarter and then.
Sometimes sometimes its its less so it's oh.
There's no indication, but that's been the practices that yes, you get some of it back and say it and certain months then.
And have them and see it out.
Okay. So you know in terms of an effective tax rate kind of what what should we be thinking about.
Community I think you've got the effective tax rate healthy.
Yeah, I mean, this we turned into it'll take us a little bit complicated because.
They will tax credit for interest. So so so we tend to guide excluding Palomar interest round about 30% and.
Suddenly 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 follow on with some of the other comment that have been made just in terms of views on asset sales of sales of streams to help also extend that maturity runway.
Interested in your latest thoughts of 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.
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 in Q2 other copper price environment at the moment is very appealing and so actually there's a little bit.
Oh traction and things moving well there.
Yes. 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 lever 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 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 Ah Ah moment, the schedule still looks reasonable in terms of what we had thought.
And we making progress there.
That's helpful. Thanks, again, and maybe this is for Hannesson honest, maybe it's too specific but I'd be interested in your thoughts you.
You have a cap structure, a bunch of different elements some of them have a prepayment penalties.
Yes, and whole protection on the bonds or how much do you think about the negative impact of that call protection on or what you pay to pick it up versus the benefit of really extending a runaway when the market is is open as it is today.
Mcqueen, we do look todays call protection, so the 22 bonds on alcohol bullet Paul.
So that's what it easy or.
I guess, if we get a lot of caching.
You know they 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 year bonds coming up callable at par. So it does help to take it out as sort of relatively cheap cost.
Oh.
That's good problem.
Yeah.
Oh, thanks, very much appreciate kind of thing.
Your next question comes from E N raw self with Barclays.
Thank you just a follow up on Panama pull Justin I'm, just on some of that.
Good spending that you delayed and I just wanted to get a sense. So you 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 might not go well because some of its a deferrals full if you're going into next year I just wanted to get a sense. If you haven't they are ideal.
Capex for next year.
Hi Inn look I think Juliet was saying, we don't see too much change from the guidance.
Quite a lot of that is not deferral. It's more just that we found savings. This so cobre, Panama I think you know the one area, we kept pace with the mind a component of Capex looking forward is the 100 million some random expansion.
And you know we had envisage some capital in the second half of the year and we'd still like to make progress on that.
We will see how that goes in terms of permitting.
Ready to to stop at work and that's probably the major 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 no shift the showed you a little bit but that capital would be cross it.
Would be required none the less so.
It's just the it's just the scheduling element there elswit cobre, Panama the capital.
Has been side to really on on component change out because we haven't been being burning machine hours. For example on their large truck shovels and it goes really are very chunky capital commitment 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 the.
It out.
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 the work we were putting you do you need.
Can we make the mine run it at an optimum level with 100 million tons per annum, but at the levels were running at around 85, we're confident where we stand.
Okay. Thanks, and then just a follow up on Raven. So 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 did that.
That's a reflection of changes in the contract structure with long, maybe just give a sense of that and are you still planning to produce mixed hydroxide going forward or do you intend to to change some of that the analogy about them.
Well I left on SEC filing so yeah, yeah. Please.
And the probabilities almost the same as they were historically, we operating enough.
You know pit.
Called Hell ball.
The nature of its children so.
More diverse.
In the earlier days ahead.
And.
That's just something that they have to accommodate through this yeah.
There's a capital project, that's underway that takes us to shoemaker Levy.
But in the first quarter next year 2021.
And that's a much larger not so long term results.
With much easier.
Divested of geology.
Affiliation.
Great.
No.
That's really what.
You see in the projections is.
The rest of this year in Alberta and then.
Sometime early next year and moving into Shoemaker Levy and.
And that that project is.
And.
The next six nine months.
Okay, but he I mean, it is with the demand and he and I guess nickel hydroxide the intermediate products, increasing when he is there an opportunity to.
To improved liabilities and put a pricing structure, who pulled up the product.
We've done a detailed study on producing I.
Nickel sulfate pretty.
That's correct.
And.
We will go through we will not commit to doing that until.
We're in Jamaica, Levy and producing at full output.
As you know as one of the initiatives we've had people to look at.
Take mistaken.
Ravenstahl.
So we are mindful of what.
Sure.
Various parties most.
Hi, Thanks.
So in some way that's part of that arrangement or would.
They prefer if its upgraded and.
That will get determine though.
Yeah.
[music].
Thanks Institute.
Yeah, that's a physical thank you Nicole thank you.
Yeah.
Your next question comes from just 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 into Latin America for each of these years endoscopic 19 changes or any of those things.
On spending into both to talk about guide you to at this stage based on the level of disruptions you might have seen and anything that might change in your mindset on harbor deployed capital for next couple of years. Thank you.
Juliette.
Are you still on the mute.
Yeah, sorry.
In terms of allocation Oh capex.
Full pad Panama of the 850.
That that there would be about.
[laughter] about 70 million of sustaining Capex and about 150 260 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 allocated to Latin America, Peru, and Argentina in that 350 on other capex, what Randy when I'm going to do there and it feels much there wasn't much for tuck.
Okay. So they were there wasn't much capital importantly, now we have some capital in Berlin.
Yeah, then if you want to comment maybe but.
We had some discretionary spend the telamon span and Oh of up to 50 million in Louisiana.
Okay. Thank you.
Yeah.
There's a limited amount.
Allocated.
For both those projects and I, It's limited because clearly we not intending to.
Like any decisions should go ahead with that.
Project.
In the future that's an undertaking weve given to the markets at large and then Oh position.
I mean, if the circumstances went to change then we'd give a lot of wanting to.
And as to why that was happening.
There's no reason to expect that now and and see.
Relatively small allocations.
Honestly very clear thank you.
Your next question comes from E honest mythology from Morgan Stanley.
Yes, Hi, Doug good morning, and good afternoon.
A few questions left from my side and the first one on cost guidance for the year.
If we look of the Q2 run rate of dollar 20, and the fact that Cobra is ramping up there's only been closer remains probably week and that's 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 you'd be able to guidance and I'll stop here for the first question.
Yeah, I mean, I'm I'm kind of sat in his script, we we've obviously been operating at the lower end about guidance for this quarter.
Roundabout 120, and we would.
They are we to consider not marrying the guidance, but just just somewhat the risk around capability in a similar any too. So it's sort of any stop start interruptions or anything like that I suppose that I could impact too.
And not get impacts you see one and a drag and drop to say.
We were high so to come in at the lower end Guy.
Understood and then clause I'd also Jonas.
[music].
It's a good question or in that.
Yeah, obviously, we are operating at a low cost.
But but it's a fairly conservative one because.
Judy said there are quite a few.
Possible thing when it could having just come through.
As an industry that was not that easy to predict.
It would make sense for us to.
To be conservative but.
Apropos of one of the questions Greg Australia.
About.
Sustaining low operating costs.
We did hedge.
Diesel and so cool diesel it's called the heating oil that Neil heating oil, it's an index and we.
We hedged about 50% about total use for the next 12 month well through 2021.
At a time when the to give you a god because its anyway like offensive if it goes.
The oil prices $24 about which was moved from.
You don't get it for $24 about because it.
In contango Ceos goes up.
But that already looks like it was up.
So that she every month going forward.
We would look pretty good and therefore, we commit retain low operating costs and diesel.
Energy.
A significant part of the saving because that index not just relates to feel that we use.
And trucks in the light, but also to things like <unk>.
So we have tried to make sure that.
Good.
Retain those low earnings, but the Ohio side of it as you point out.
It's more a function of.
Corruption in production for some reason.
Understood. That's clear thank you and maybe a second question on the Cobre, Panama production guidance.
So if I take the low when they want 80000 pounds and assumed Q4 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 meet all gross again would would wouldn't that way to look very conservative from thoughts ramp up at point of view.
Yeah, Hi, Yunus look that's a reasonable perspective, it's just.
You know the the viruses, bringing labor in and out of the thoughts it is really what that cautions about.
I can paint a scenario for you wait we ramp up very very orderly fashion, but right now the forest in Panama, It looks like it spiked in it 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 is a large.
Audio contagion in the country.
And so we need to chip you checking people very carefully as they come through.
No potentially if you had I a group 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 just reading through the script. It looks like you have pushed saw out some of the twentytwenty conflicts items into next year. So I'm trying to figure out how much of said you get sort of either FX or just overall like up excess savings.
Yeah, and I thought.
I mean attended of Capex, We go for Capex got into the LTV is really in the yet so.
We left some savings system rollout with that.
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.
It's a detail exercise that we go through end of the evaluate the new plan.
I think it's probably safe to stick or sort of similar numbers will now.
Okay. Thank you very much.
Your next question comes from Dalton Barretto.
From 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 get state fair to say no to that.
Okay. 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 at last pretty fast.
And how should we think about basing that those those projects over the next couple of years.
Phillip can you address someone yeah.
Dalton, we will during the third quota.
Everybody anniversary quote unquote it.
Come up with a 43, one I one for kinda century.
And that will lay out.
Obviously, how one takes place.
Concerns you all body.
In the course of defiance reserves, Oh, probably give a an alternative to because.
There are awesome.
Different routes of Atlantic.
And it's probably best if we leave out till then because you need to all the figures.
Uh huh.
Speculate.
At this stage.
Okay and the the refinery at lost Creek, so just thinking around that.
Oh.
That's not currently planned.
Exercise as much as any 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.
It is very different position for us and what I mean, my does of course.
The next couple of years, all night I am.
[noise] discussions you just been having with Honda and to do with debt reduction the line.
And on this.
Oh and shut off pictures change, we know thing to undertake huh.
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 are no plans for the export tax on precious metals to come back at this time.
Well look I say I can't comment on that we'd now you know.
They they smoke you know I don't have any thoughts as to when it will come back or not.
Compelling.
I will now.
Thank you know to Texas.
If you look at east vehicle is changing quite rapidly I think most recently it's been.
On 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 and yeah.
<unk>.
Some some relief in terms of certain of those previous text made is that they introduced.
Great. Thank you that's all for me.
As a reminder, if he 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. A question right I know I ask I feel like every quarter, but could you just.
Maybe refresh or just update if there are any on the additional kind of below cash flow from US 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.
In 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 by the end date their cost that we normally get it up 30% March.
Got it okay. So 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.
770 to 89 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 modeling correctly or below the cash from ops line correct <unk> versus the.
Cash interest is about five.
The million dollar so so 550 million in total for the year.
You've got that roughly a 100 also for the Alley sneaker payment that you in November.
Well as opposed to be the.
So major.
Oh, the items I mean, Techxtend Davis of course, and we've talked about the effective tax rate but interface.
According to what they think of process.
Got it and then I'll just ask if it's possible to Ah. So provided what is bickering you know immediate change with the 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 if it looks nothing close I understand okay. Thanks honest I appreciate it.
All right.
And now I'd like to turn the conference back over to Mr., Clive Newell for closing remarks.
Hi, 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 you soon 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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