Q3 2020 First Quantum Minerals Ltd Earnings Call
[music].
At this time all participants are in a listen only mode. After the speaker presentations, there will be a question and answer session.
Ask a question during the session you will need to press star one on your telephone.
Please be advised that todays conference is being recorded. Thank you I will now turn the call over to Clive Newell, President and director at first quantum.
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All right. Thank.
Thank you everyone for joining us today.
Joining me on the call today up from school, Chairman and CEO, Thomas <unk> CFO, Justin Pasco director of strategy Junior well general manager of finance.
Simon Flying a group reports in controller.
As usual before we proceed I would draw your attention to the fact that I've what course of this conference call, we'll be making several forward looking statements.
Sunshine I encourage you to read the cautionary note become a company's Alpha course, Randy and I and the related results news release as well as the restructure is particular to our company, which are detailed in our most recent.
On information from and available on our website and don't see though.
A reminder, presentation, which accompanies this conference call is available on our website.
So as usual I'll get started with some opening remarks, and just can you provide an update on cobre, Panama before harnesses review of the financial results. We will then open the lines to take your questions.
So during the third quarter, we together with the rest of the world of continued to deal with the impacts of the COVID-19 pandemic or in some jurisdictions. There's been some easing up of restrictions relates to the vars in others knew or tougher restrictions being put in place as we never seem to be doing the second.
Wave.
However, despite these continuing restrictions the third quarter was solid operationally and financially overall.
Concentrate performed well with higher throughputs across all three circuits, but with production being impacted by lower grades and recovery on the oxide circuit.
During the quarter, we filed an updated 43 101 technical report concentrate showed an impressive increase in mineral reserves and resources and the potential of an expansion would maintain or and how much production levels and increased mine life.
I think this <unk>. This report highlights the genuine calls here just write offs.
Over the next few years will continue to refine the expansion before making a formal construction decision on balance sheet fiscal issues allow.
Sentinel performance is exceptional as rina alluded to in our release just prior to the end of the quarter.
Higher throughput in grades led to record production, which drove a record low cost or weaker cuattro low fuel and maintenance costs did help.
At Cobre, Panama and in July we began the process to resume normal operations, a big part of which was bringing a large number of people back on the site without compromising carbon safety.
The ramp backup was completed early in early August ahead of schedule.
We are very pleased at Cobre, Panama continues to be virus free just needed to provide more detail on cobre, Panama ramp up on the increase in our expectations.
We delivered another quarter of improved production cost and have revised our expectations accordingly, hundreds for provide more.
On our updated guidance for production cost shortly.
Late in the quarter, we took advantage of an opportunity to continue to manage our debt profile with a successful senior notes offering the proceeds from which have been used to extend our debt profile.
Through the quarter, we of course continued with the various protocols and measures that we have in place to protect our employees and communities. We will continue to practice the highest standards of health and safety protocols and to focus on measures to prevent a manage the transmission of COVID-19 amongst the workforce in those communities.
Although the impact of the pandemic at our operations has been manageable so far and has had relatively modest and parts operation me I do need to acknowledge the impact to the pandemic continues to have an hour false many of whom are far away from my family and homes for extended periods as a result of Poland gene requirements.
Station timings travel restrictions et cetera. So.
So on behalf of the entire company I'd like to thank all of those people that made these personal sacrifices and.
We recognize a significant contribution they continue tonight's the ongoing success of the business.
So without any further Ado I'll handover to trust them to talk about public. Thanks.
Thanks, Chris.
Thanks, Claude and thank you to everyone joining the call.
As Claude mentioned there the performance at Cobre, Panama was very strong in quarter three more in rent back though.
Running on all three trains from the period of preservation site maintenance in July.
Back to full production in August slightly ahead of expectations.
Copper production to cover Panama in the quarter was 62015 fourth time.
In concentrate significantly higher than in the same period in 2009 thing a cost of production at Cobre, Panama in Q3 were also pleasing, especially given the ramp up phase in July and August as we stated in the Mdna for Q3. The C. One for the quarter was a dollar and six per pound and all in sustaining costs were done with anyone.
I couldn't Panama.
The success of the ramp back up to operation on all three trains is testament to how people may have to put into the presentation, it's like maintenance regime.
In Q2, the thought was reduced to around 800 personnel due to the impact because no one thing health particles.
So unless able to keep the assets and our environmental and safety performance in good standing and it's paid off in Q3 in terms of ability to reestablish a quickly and smoothly.
As Claude said, we would like to recognize the many employees who went above and beyond that.
G T in terms of the efforts to support the operations.
Including some stuff who were on thought for long periods away from their families.
In October cover panel reached a milestone of 10 million man hours without a lost time incident, representing a period of more than eight months.
Although we have achieved this milestone previously in the project size. This is the first achievement in the commercial operation sizeable Amman Testament to all the employees on site.
Nonetheless, if it on site, you'll recall is continued vigilance reinforcement.
I think quarter to the saw continued in Q3 under the new normal health and send a 3.9.
No new cases of coated knowing things have been detected on sort of cobre, Panama more than five months and certainly my.
By October Cobre, Panama had reached 3400 personnel on site, which is the full capacity of the solar under the new normal Hilton century protocols. This respect we continued to receive strong government append must support on the talk about probably about 2020, the Ministry of Health issued resolution three I know like six which under the law.
The current staffing capacity the mine and that we continue with our current health and safety Senator protocols with respect to the control comes in Washington.
The cost of these measures are not hugely material to the cost structure of the business and that will remain in place in order to have long sought.
We'd like to think how many local and international supplies. It also subscribe to these hills protocols almost thought and have supported our efforts to manage our supply lines and reducing costs of course.
We also continue to help in the communities the Rams Coker Panama in October the Cobre, Panama Foundation signed its first contracts and the establishment and startup of this foundation and the operations phase of the mine owners, our commitment to Panama into that yet so I.
For the loss of operations.
We have transferred an extended their previous arrangements for infant nutrition in ceramic communities. This month into the newly established foundation.
We continue.
[laughter] provide medical in PPD support for the government of Panamax respond the pandemic in the water community.
Reflecting the strong operational performance its ramp up from a preservation and say maintenance racing Cobre, Panama has increased the copper production guidance for full year Twentytwenty two between 190 to 240000 tons an increase of 10000 comes to the lower end of the range of 4000 tons.
End of the range this underlines our confidence.
Neil pricing for the remainder of the year gold production guidance for the full year twin peaks. When he has also been increased to between 75090 4000 ounces an increase of four cents now.
This month October Weve untied undertaken a fairly major shut down for the first change out of the crushed ore stockpile sheet mill and this maintenance is part of the normal course of operations that is infrequent thing underneath the crushed ore stockpile and required seven days closure of both train one and train two with a milling area.
The stockpile shoot lawn work was completed on time, and we are now back up and running on two trains the third try and expected to come online be somebody.
The shutdown will have an impact on our cost and production for this month about talking about however expect in November and December to be somewhat lumpy.
In terms of continuing or ramp up to consistent achievement was the 84 million ton perama annualized throughput right a couple of Panama.
In addition, we continue to look at the expansion project from 95 to 100 million tonnes per annum.
And this is dependent on the decision to proceed with the capital expenditure across the Peter 21 to 2023.
At this stage, we remain confident that the time table is set out in the North 43, one or one technical report to achieve 100 million tonnes per annum 2023 is achievable.
A decision on the capital expenditure program will be nice later this year or early next year.
With that I will now ask Dennis to take you through the phone its presentation. Thanks.
Thanks, Justin and good day to everyone.
Lucky directly to the slides.
Maybe he could slide 18 that compete presentation.
As Tom just say record copper production at you to the company's largest operations drove the strong operational performance in the quarter.
Which coupled with the increased metal prices and favorable operating costs meant that that can be achieved at a significant increase in EBITDA and a return to positive Nick annexe inclusive of net finance expense as well as starting to reduce its Nate <unk> position.
The resilient and robust operational and financial performance of the company's operation.
That's resulted in increased total copper and gold production guidance any <unk> cost guidance.
Total copper production was 10% higher than the same period in 2019.
<unk> production at both seasonal antibody Panama.
Exceeding last year's peak initial production total copper was.
36% higher than the comparative quarter.
It was another exceptional quarter for Cintas, producing 71000 tons.
Achieving its highest ever quarterly production and record low cash cost.
Great pediment performance was impressive as it ramped up from preservation and site maintenance group.
Production levels in all this.
Cash cost of production was at his gave us the lowest level in four years with almost all copper operations <unk> living a reduction.
Notable the lowest see one.
And all in sustaining costs that cheap at Sentinel and welcome Greg.
Comparative EBITDA of $641 million increase by 81% from the same period in between 19.
Its highest commercial production volumes and a 6% increase in that realized copper price as well as lower costs and foreign exchange.
During the quarter the company State date could you just buy into the $18 million. He just gave us even in the hall billion dollars.
On September 18.
The company issued the redemption notice for 850 million senior notes due in Twentytwenty.
With the company competing the offering up to $1.5 billion senior notes due in 27.
On the upside to the fist.
Turning to the next slide can production total copper production for the quarter were 211000 tons was 10% higher than Q3 2019 sentence performance as mentioned was exceptional teaching 71000 tons.
25% higher than the same period in 2019 with highest street boot and higher grades at boss he that previous kooky record production.
<unk> G 2018, I, 16%.
Well, that's a companion animal was strong at 62000 tons.
Successfully ramped up to full production levels movies.
Copper production quarter was 10% higher than the same period in 2019 and this includes the pre commercial portion of the production.
Production also benefited from this piece is operating at normal levels compared to the back up the land slippage, including 19 in a robust performance well grant.
Essentially delivered consistent throughout the quarter Wall Street was higher.
Copper production was slightly lower but from reduced grades and recoveries both.
Oh production of 70000 ounces was 4% higher than the same period between the 19 afflicting the food production levels, that's tied with animal.
Turning to the next slide well quarterly unit cash cost.
Hi production.
Cost and favorable foreign exchange driven unit costs.
The lowest level in four years okay.
All in sustaining cost was $1.40 I sit down and see one cash cost plus a dollar and seven cents per pound till the third quarter of Twentytwenty.
At 29 cents, but pound and a 38.
Since but bound to decrease respectively compared to the same period in 2019.
Let's see one cluster makes it particularly favorable cash cost at about high.
Hi production it seems a little unlevered, Zambia fuel and maintenance costs were favorable FX movements as well.
Now while all in sustaining costs are fixed the let's see one costs combined with lower sustaining capex at Sentinel and Concentrix.
I think it'll achieved record low C on costs, but the dollar tree on that balance.
And record low all in sustaining cost of $1.77 cents per pound.
Welcome to grain chief to slow us see one cost well over a decade of 24 cents per pound.
The mining costs fuel prices and high I realized gold prices and its slow it is that reported all in sustaining cost.
Oh, great venomous contribution to total C cost.
It was a dollar and six cents per pound.
Turning to the next knocking Twentytwenty guidance.
Following a strong performance this quarter and guidance has been increased for copper production to a range of 750000 tons to 785.
Thousand.
It was an increase of 25000 tons to the lower end of the range and 15000 tons because at the end of the range.
They had enough guidance has increased 290 to 205000 tonnes assistant stated earlier.
While Sentinel copper guidance has been increased to 240000 tons to 250000 tons of copper.
So it would be an increase to last through system level of grains copper production guidance.
Gold production guidance has been increased to 245000 tons and 260000.
Yes.
An increase of 50000 ounces to the lower range and <unk> thousand to that range increase.
Increased production high gold prices and the lower operating cost environment.
Foreign exchange has allowed to improve cash.
Cash cost guidance all in sustaining cost has been reduced to $1.60, a bounce to $1.70, but bell lost cash cost guidance, including Panama as be narrow it we'll see one cash close to $1.20 per pound to $1.50 for about.
Got it and so driving so production as being produced 18000 tons to 15000 tons of nickel.
Total capex guidance remains unchanged at $675 million.
The audience.
Underlying fixed it that's right exceeding public interest has been revised.
She will allow for non deductibility of hedged movements.
Turning to the next slide financial.
Competitive EBITDA of $641 million in the quarter was 287 million or 81%.
Higher than the same period between on T. EBITDA benefited from higher commercial.
Copper and gold sales volumes from Cobre Panama.
Hi, I realized copper and gold prices lower operating costs and favorable foreign exchange.
I don't have any species of nine cents in the quarter.
Indeed, it Nick finance expense of $179 million compared to $59 million experienced in the same quarter and 2019.
When an additional $146 million was also kept lost to public and not getting the pre commercial production phase.
They do produce $513 million in the quarter with higher competitive EBITDA less capex.
The next slide show comparative EBITDA.
And.
I'll just changes they were let's say.
It's just the movement in the <unk>.
That commodity price as well as increased production.
Labels, and then sales for labels.
Turning to the next slide <unk>.
Oh, Dicks and liquidity profile.
The company ended the quarter with none of it was $15 million unrestricted cash and cash equivalents and wasn't full compliance with all financial covenants.
September 17th the company announced the operating and pricing of $1.5 billion of 6.875% senior notes due in 2027 system.
Settlement took place on October the fist.
On September 18th the company issued a notice of redemption of the outstanding senior notes due in Twentytwenty two to be redeemed at par.
I see so funny Paul will.
We used to policy to repay the existing revolving credit facility and redeem in food attempt lease outstanding.
Senior notes due in 22.
On a per capita 90 next business day following the redemption date.
Taking into account full cost operating cash flows.
<unk>.
Capital expenditure outflows and available cash and committed facilities company expects to have sufficient liquidity through the next 12 months to put out its operating and capital expenditure plans.
We remain in full compliance with financial covenants.
Can you to take action to manage operational process can further strengthen the balance sheet.
Turning to the corporate hedging program Affleck proximity.
Approximately half of the expected copper sales in the next 12 months all hedged.
The bar charts present.
Presenting to you shows you the split between swaps and collars at.
We need to have a that the company had.
Margin copper forward sales contracts for 202000 tons at an average price of $2 edgy cheap but pal.
Standing with periods of maturity to December 21.
In addition, the company and margin zero cost collars sales contracts for 207000 tons at an average price of $2 76, but down at.
At the bottom end to $2 99 found on the ethane outstanding with maturity students in between two one.
The company also as.
Just over 4800 tons of an margin nickel food sales contracts at an average price of six Dollarsseven defines the filmed maturities to fit between two one.
Thank you and I will now hand back over to Todd.
Oh, sorry, thank you very much on this I'm Kristen and so operator could you now open the line for questions.
As a reminder to ask a question you will need to press star one on your telephone to withdraw your question press the pound or hash key please stand by while we compiled the Q1 day roster.
Your first question comes from Greg Barnes with TD Securities.
Thank you and if you just ran through the copper hedge book.
I understand why you had that in place, but is it time to let that stuff to wind down.
Where the coal price looks like and Cobra is back up to capacity.
Hi, Crikey Ed.
The kids it's.
You know the copper market is in a much more positive environment at the moment.
Hi, EBITDA is still uncertainties around on the books.
Just given the current state and part of it and the like so.
Weve as stated previously we said.
I live which at the moment and yes.
And we want to secure a sort of a.
Protect the downside risk in the company and therefore, we sort of typically go in about half and half in terms of color and.
And swaps.
And as it rolled off during the quarter, we just replace it with sort of new and higher prices.
Process so.
We're lucky to continue for.
For a bit longer follow up I don't know if you've got something else.
Yes, Hi, Greg Thanks for that question, we had a policy it's.
Historically have not hedging.
And there was an exception for that because we're in.
We needed to borrow money to ensure that we could undertake on capital works.
As much as why is the same way as a bank would.
Alright, if they were lending us money.
And of course in a rising market youre slightly behind it.
It looks disappointing.
But.
But the key to it is true they retain that entire European cost.
Ah some peak along the way.
Oh predict until you're gonna pasta.
And for as long as our debt.
Our leverage is as it is and that's the way.
Yeah.
Honestly was commenting on it.
The the policy will be that we will hedge we.
We could imagine that in the next few years that you.
Coverage requirement I'm in the debt requirement on the servicing costs would have tempered somewhat.
And then we could move away.
From the same level of hedging maybe we'd have a small level of hedging to protect what was outstanding.
And then eventually win with very little debt and alike. I think it would be nice to have that kind of policy, where we didn't hedge at all live with Americans as it goes up and down.
Okay, Okay fair enough well.
While I have you fill up just nonconsent sheet less three.
Expansion why don't you want to call. It now what do you need to see.
From the government I suppose.
To make a go decision on that project.
[laughter].
Certainly.
Stability.
And we expect that during the course of this next year.
I have the opportunity to.
The age with government and resolve.
A position that would give us some.
Security going forward.
And capital expenditures of that sort.
Oh, okay.
Can be easily made victim later on all the changes to fiscal policy and they're like Richmond and damage.
The assumptions made at the beginning and that's really want to try and get cost.
Our dealings and position with government at the moment, Oh very benign and.
Certainly they've been.
Very co-operative unhelpful through the period of Covance.
A number of other types of power supply them in good shape.
So it's a relationship that will build on and.
And what is difficult times for them.
To give us nothing more than.
Certainty as to how we go forward over the next decade or two.
And that's what you need for that investment.
That's that's a large part of it.
Because I think with that kind of confidence.
Our shareholders a pill happy hour about that increased exposure, which just replacing some of the debt replacement that would be going on.
Yeah.
Okay. Thank you that's it for me.
Your next question comes from Orest Wowkodaw of Scotia Bank.
Hi, good morning, I'm really impressive cash costs at Cobre, Panama, there in the third quarter, especially if you're wrapping up a dollar six per pound C. Warren.
Just curious if we should anticipate those to start normalizing back up.
Starting in Q4 and beyond if as grades come down or we should still be thinking about kind of that 120, a pound to come 130, a pound range of its kind of a more sustainable cash cost number or something actually change here.
Hi club in the city.
Yep Yep. Thanks, Yeah. Thanks, Orest, you know look there wasn't anything particular in Q3.
To to really pull them cash costs at all I think were hmm and was particularly pleasing given the ramp up. So we didn't have the sort of first half of August of production to assist with those cash costs, but we I think we'd like to see a little bit more and a little bit further particularly in.
Into some areas as we get into a teacher and then into cleaner as part of the 100 million before before we we moved away from the guidance that we provided I think what you're seeing there is the potential for for cobre, Panama to perform and so.
It's exciting for us, but at the moment, we would stick with the ones that we provided.
Okay sounds like you're actually though a indicating there could be some upside to the guidance in the future, which is great and then just changing gears with respect to a more corporate policy can you give us an update on where things stand or what are the discussions have resumed and whether it's a priority with respect to.
You are a minority interest sale in either Zambia or cobre Panama.
Sure Club I can take that one again.
Look.
As Claude and enhance the pointed out does that mean assets continued to perform very well in Q3 and combined with the ongoing rebound in copper gold nickel prices.
And if they do the uplift in resources in the consent. She 43, one on one technical report, we really believe.
Zambian assets to make a compelling value proposition the horse the minority stake sale prices continues but there is no further upside.
From Q2.
What we said last call.
It is it still a strategic priority, though in terms of accelerating the deleveraging through that kind of transaction [noise].
Course, we continue with it on that basis, but we are watching but the copper prices in particular very closely.
I I think Keith.
The outlook continues to broaden for Copa then we'll continue to convert that yes.
Thank you.
Your next question comes from the line of Jackie Principal ASCII BMO capital markets.
Thanks, very much I guess, just maybe circle back on the question about the expansion of Cobre, Panama, So 100 million tons per year run rate.
Can you give us a sense because I think the last few times. The company's commented on this you sounded pretty optimistic that a that there might be some de bottlenecking you could do.
Which might bring down the ultimate cost of that expansion can you give us a sense like I know, it's been early and you guys kind of just restarted but how how are you seeing the.
Congress to that 100 million tiny your run rate and do you have any sense that you might be able to to did you have some cost savings in your plan to achieve that that rate or is there any any equipment that you had baked into the estimates that you've maybe don't need at this point.
[noise] Kristen.
Uh huh.
Sure. Thanks Jackie.
No I think it would be too early for us to to go out and Linda in terms of reductions to set capital cost what we sit in the 43, one or one was in the order of $300 million to $400 million that expansion and we stick with that the principal components of that on the.
The stripping at Galena is included in that.
Some upgrades in the ports this plant, which is essentially the the can buy a combined system and not Oh, no one meal, a full meal with six full meal.
And then Dan.
Morning, Floyd and those three elements remain the case.
In terms of what would be required to go through 100 hundred moving and we would really need to go through so detailed engineering.
To get in further refinements on those numbers and that will be you know that's the.
The sequence, we will go through in terms of.
Hundred million.
Expansion, but we're not there yet in terms of T cell engineered.
Is there a chance that you could complete and detailed engineering over the next few months or or however over the next period, where you're maybe maximizing the throughput out of existing mill configuration, and and at that point, but still a possibility that that that might be an opportunity for you is that still possible.
Yeah, I think our key focus in.
The milling circuit is to understand the combination on the.
The problem rewards as we deepen now undertaking so we got a good view.
Okay or what the.
The take or looks like and and it's analogies of course colina, So that will give us a lot of information towards that point.
Got it okay. Thank you and maybe if I could just switch gears and ask about Ravens or I mean, then the results in the quarter was probably the so I guess the most negative spot in your home.
Your whole earnings update and I know you guys are still working on on Shoemaker Levy. There is is there can you give us an update on on Ravensthorpe is is it all kind of going according to plan and and maybe also if you could just talk a little bit about strategic investors a strategic options that you're seeing there is it is it still too.
Too early.
To comment on that do you need to see shoemaker Levy in production before you would entertain a strategic partnership at Reed and Barbara how like what's the current thinking on on that.
Philip do you want to do that one.
Yeah, Okay cool.
There are two to be.
When we started up again at Reagan. So we're also starting.
And you all body or an old body, but we've only.
Only taking a set amount of the coal which is helpful.
This proved to be more varied than.
Good.
And I think one of the factors of the care and maintenance is that they all elements of the plan but.
Off to start to run.
Demonstrate a need to be changed or modified and that's what you're seeing in those resolved.
Okay. That's that's.
It's getting up and no happening anyway.
But as far as the strategic view goes certainly shoemaker Levy, which is a.
I'm much more consistent and much larger long term whole body.
It is one that we.
We think would be useful to be.
Awesome production before we moved forward with.
In our conversations with that are not waiting for.
And.
Well I think good.
There's nothing in what we've been doing.
Which is different from the expectations.
Right.
Public Journal neutral.
Yeah.
Okay. That's great. That's all the questions I have thank you.
Your next question comes from the line of Matthew Murphy with Barclays.
Hi, I'm just had one on Zambia seems like the country is headed for a default and just wondering if.
If there's any implications.
For for yourselves on the ground any impact.
Sure and then maybe just as a slightly longer term view on that I'm just interested in Philip's comments that maybe in the next year you'd get some more clarity around.
The long term you know fiscal picture and just wondering what.
If there is any sort of events.
On.
That are planned or discussions plan that gives you the confidence you might get that clarity on that kind of timeframe.
I think.
Tony.
View on that.
Express.
Is that in the discussions that we've had.
Ministry of finance to community he is a recognition.
That's what mining companies need.
And that's positive and therefore, it's going to end up being the DHL and the nature of how one.
Put set in place.
In other words, we are not pushing against.
And all that is reasonably.
I mean, that's open and then we can go out and talk about.
Sure in trenches and as soon as there is nothing we've seen in their current activities.
Changing.
From a policy of keeping that stability.
The purpose of what we want to do it of course is to ensure that that.
Perpetuates through various governments because of the time.
<unk> line that we named for an investment of that show up.
And that will be in a conversation that you're going to have to have.
In the new year this year hasn't been an easy time for anyone because obviously there are so many restrictions I really expect that.
[noise] towards the.
Second quarter of next year, we'll have an opportunity to.
Just on some of those conversations.
Got it thank you.
Your next question comes from the line of Matthew Fields with Bank of America.
Hi, everyone.
All right a couple of balance sheet questions for me.
So I noticed you paid down another 100 million of debt in the quarter. So were down kind of from that 8.8 billion total that high watermark in one case each one with.
You know you've often talked about reducing total debt by 2 billion. So it was up 8.8 billion kind of high watermark that we should think of so $6.8 billion or around there is kind of the target for where total that is.
It's supposed to go.
I'm confident that yeah.
We ended the day cables you saw early in the year.
Hi, Mark in terms of that.
And I mean, what you should see from now going forward. It's just the de leveraging get better net reduction of the absolute debt numbers as well.
Obviously, the current higher copper price and.
<unk> operational performance shoot 'em should accelerate that you know and that's in the absence of any but.
Potential strategic deal that we talked about a video of minority stake so.
Okay and is there a target sort of where you ultimately want to see that number go.
The you know sort of.
Hi, Nate <unk> net debt to EBITDA number.
Number of sort of around two or below that would be the target I think if you then.
You've also got to look at the absolute amount of data in that or they may take time, but in total, but you know so sitting at reducing it by $2 billion with the you know that should be a priority and that's what we're working on are focusing on.
Okay.
Thank you and then and then on that minority stake sale potential.
It is the use of proceeds in your eyes, most importantly, going to de leveraging or is there some kind of capital returns to shareholders and this copper price environment or even.
Some M&A as a buyer of some development projects out there can you just talk about sort of capital allocation in any potential minority stake sale proceeds.
Kristen do you want to do it takes that long.
Well Philip.
Yeah.
Okay.
With several different question than that.
Certainly apologies reduction of debt.
And that will be largely where the the funding.
That would go to would be to reduce our debt.
You know we recognize that in.
Within <unk>.
Next year or two we will need to review our dividend policy.
And start to return something John.
Shareholders.
As far as capital is concerned certainly there is no intention trust you are going to make an acquisition of any project will need to.
Well, we have a number of projects that are quite interesting that have been the subject and ongoing subject of studies and evaluation.
And that's the kind of work or we will do so that.
Just on a couple of time at least we would be in a position if we want to expand or change.
And as.
Other operations, we will be in a position to do so.
And.
Addressing that we're mindful of both of the death that currently exists but also that in a couple of years time, we have a number of the small operations. So.
To the end of their own.
Operating life.
Right, that's very helpful. Thanks, and good luck.
[laughter]. Thanks.
[laughter].
Your next question comes from the line of Ian Robertson with Barclays.
Hi, guys. Thank you I just had a question on the external liability that's it so that cobre, Panama is K.P.M.C.I. it.
It looks like you still accruing interest on the balance sheet for that.
Adam are now likely to be in a strong cash flow generation position going forward. When will you start paying that liability and can we assume can you give some details around that payment I mean can we assume all free cash flow goes to pay down the intercompany and.
That liability first before kind of restart is paying dividends.
I am.
Yeah, I mean, they they use.
So remember we own 50% of that type TMC data swell <unk> little bit more than 50, but let's call it 50%.
That date.
And that interesting.
After cristiano samples while in that regard and.
And in Panama, we could be with shell dillons in and so yes, I mean, we will repay shield the nines, but then.
Yeah. So it's just a fact you know through.
Tom will produce no shareholder loans.
Do you when you pay PMC can we assume half comes immediately back so it doesn't set something that's on the KPN keep energy.
Correct, you can assume that yeah. Okay.
Okay, and then just a couple of follow ups on Zambia just on.
The expansion implied mentioning he I can sachi that you're looking to refine the expansion before making a decision could we expect then decision no earlier than 2022 23.
And then maybe just say I don't how does how does these are all the traction with the government sort of playing to that is is that a prerequisite for that to be resolved before before making that decision.
Do you want to take off so.
Could you just repeat the first part of it.
I just wanted to get an ideal the timeline for the decision for their consent she expansion.
Okay.
In our 43 101, how we address two options one was that it would be running at the end of 2024.
On the other ones that will be running at the end of 2023.
During 2024 and the.
The second scenario that was in the event that.
We had north.
Northern a partner for a proportion of the.
I said and that together.
Together, we were happy to into funded a bit sooner.
But otherwise our program is to meet.
Completion in the 2024 and the rationale for that simply.
But.
Consign cheese production.
Begins to be quite difficult.
Then.
As it moves into more and more sulphide ore and less of the high grade primary.
Primary oxides and the like.
That was the first part of I think your second part was to do with the arbitration and we didn't make any comment about that arbitration tall.
But you do you can you prove that project sort of irrespective of the timelines of arbitration.
The attraction is not relevant to that subject.
Okay. Thank you and then maybe just lastly on Sentinel, you're exporting some of your contracts right for this quarter is this just a one off.
Maybe just comment about this as a third party smelting constraints.
That's a very interesting question.
In that.
There are two components to the answer first of all Sandhills production has been extraordinary.
As a result of that doesn't really generate a lot of concentrate.
And the second part of the.
Smelting capacity within the country.
As being slightly limited as.
As a result of various actions being taken on upon and the like.
And.
The solution to that is one that we've been working on.
Which we'll see the benefit of.
Within the next year or so <unk> and that is really beginning to produce higher grade concentrates.
First of all the essential and do cause a consensual.
And as we.
Make those changes.
That impact is quite dramatic.
So the capacity of our own smelter and the other facilities have you have there like me Oh.
Oh crushing leach.
Increase substantially the amount of material.
That the amount of copper output I put it that way because of the greater the concentrate will be that much higher.
Okay. Thanks, So that's what you would say this is more a one off yeah exporting.
As far as we can see now I mean, we're still producing concentrate at the grades are pretty good and.
This is by next year.
Get those concentrate grades huh.
Okay. Thanks, Thanks, guys.
As a reminder to ask a question you will need to press star one on your telephone to withdraw your question press the pound or hash key.
Your next question comes from the line of Lawson Winder <unk> do you have a securities.
Hi, everyone. Thank you a question on <unk>.
And she on the sulfide grade I just need to be the technical report you published in September would it be fair to say that the grades are performing slightly below expectation and if so.
What would be driving that thanks.
And that's copper I'm afraid.
Yeah.
<unk>.
John have you got a view.
Oh, Okay. You go ahead, yes.
But at the current.
Operations we.
Mining from certain cell slide areas that are more volume controlled.
And we are working on me so the moslem dilution.
As we look forward to the larger disseminated sometimes the impact of.
Thanks, Karl Marx will be minimized and.
We will we will deliver on the the grades that we know we have projected in the 43 one by one.
There's certainly a lot of activity at present to enhance mining efficiency minimize dilution through enhanced blasting techniques.
And well all grade control systems, which we are improving at present.
Okay, great. Okay last national Yeah, No that's perfect just moving to calibrate that and looking just to Q4 <unk>.
I think other than the rainy season is there anything you would highlight.
Such as maintenance shutdowns that that could impact a throughput there.
Chris do you do that.
Thanks.
Thanks losses no. The mine long was this the shutdown on the cross door stop all true. So as you can appreciate that lies underneath the the main feedstock Paul to the Sag Mills, there's quite a big jump to to empty the stockpile ore well to sort of have to run it down over the course of two or three days and then through the.
Okay. So I'd say, so that one has been and gone.
It's finished sort of yeah.
End of last week early this week.
But that's the main impacts so that would be impacted October production, but it hasn't really looking forward I'm. There was some catch up work to be done on maintenance its largely been scheduled in and that's not sort of front lawn Keith operations.
So now we don't see any risks on the operational side. They are due to maintenance are buying.
By and large you know during the preservation and tax might since the guys did a good job of all with very limited personnel on keeping on top of that and then any backlog. Since then has already been completed for example on the trucks or scheduled to be completed as normal course of operations.
Okay, great and if I might just ask one final question on a cost just to just to get a little more granular on your prior comments. The just on the mining cost per tonne I mean, obviously it come down 10 cents to two but it's still running above the very low levels you achieve.
Again.
In Q1 are those Q1 levels in terms of mining cost per tonne at all material still something you see achievable going forward and what sort of the timeline on that that'd be it for me. Thank you.
And most of that specific to cobre Panama.
Yes exactly.
Yes, so look the impact there was why were still coming no undercoat isn't enough to call that there was some.
Catch up on mine planning in terms of the volumes, we were able to move and yes, as we were getting too much steadier regime, particularly on the waste side, our total movement will be much larger.
And therefore, the the denominator in that equation will will be larger room, and we'll see a low unit costs in my mind. So yes, I think we did hit dance those numbers and below.
And so as we move more material, particularly on the weisfeld.
Great. Thank you very much.
Your next question comes from the line of Jed tender go out of Exane BNP Paribas.
Good morning. Thank you a couple of questions. Please just broadly on zombie sounds like you're prepared to invest in concentrator expansion. Even if there is no minority partner introduced to that operation, Yeah, but thinking about countries should we look at what happened to order is in process.
Casey EM or more on the or even Anglo American being dragged into an.
An older.
Kids are those just individual instances happen just happening in one country or does anything to make you worried about developments on ground and related to that just a quick question on Monday, you own just under 17% up yes. It do you have any pets tried to refuse and then do you have any thoughts on.
How you would want to deal with it.
It's Glenn but whats pickup would say rich apparently you just get it all for thank you.
So lets present one for you.
No those two for you.
Oh.
I think the circumstances of.
Okay, I'm, a connie on different and.
They are best able to answer them.
So clearly came with the the first situation and.
Was.
A situation where they.
Political approach taken by the government and in respect of.
Action dates or whatever it is okay Jim.
It was one of the most all of that.
He will not apply to operations.
Allocation of Pony, which is very different but if you recall.
Ben culture, they wanted to put on care and maintenance and stop it.
And the nature of mining the mining licenses on mining law in.
You do have to go through.
Some justification to be able to do that government.
And and explain why the economics don't work.
And clearly that again not really relevant.
To are.
Our operations are concerned in general and so now there is no reason to expect.
That would arrive at all.
That's the answer to the first part of the question.
The parallels on their own.
All all the mining operations and I live area in England, one as different again.
And the second part of your question.
Your thoughts on multi family ownership.
Oh.
Look we we own a share of the parent.
As a whole as a true yeah, I think all that sort of crazy though.
And.
It's a minority.
Share of something around airports really has not changed it but our general view quite simply is that we will reserve of funding.
To do projects.
But we currently have in various places, including what we have in Zambia, but elsewhere.
And that.
The funding requirements from upon any order purchases and so not something we've expressed any interest.
We wouldn't be having any discussion at all on that subject.
Yeah, Thanks, a lot flipped pretty clear.
Your next question comes from the line of Ionis Marvel Laugh more.
Morgan Stanley.
Yes, hi, good morning, and thanks for taking my question. So just stay tuned left from my side. The first just a shorter 10 looking at the copper production guidance for.
For Q4.
It seemed to be good to be quite conservative I guess on Cobra you suggested that November December you shouldn't see much of an impact a amendments was already completed in October I guess here can you give us a bit of an indication on the September run rate to see progress. You said you produced 25000 tons, Yeah, I think having to September.
Our number would give us some visibility on the exit rate and then related to that on something else or how should we think about Q4 relative to Q3, what are the gist of the moving parts when production because you have already made some comments on the same so just to be on the production side. Thank you.
Kristen would you like to take that.
Yes, so the first part of the question the run rates in September cover Panama.
We produced 25100 tons of copper in Sentinel, Oh, sorry couple of Panama.
Oh for September so little bit more than than August and and that's about the level.
We need to run that we expect sort of you know that that consistent level through November and December. So together that was it was impacted you probably have a slightly lower grades to the ended the year, but not that that will impact on.
Anything against that so the guidance.
That's about right.
I am too will be by the end of the year.
And sorry, the second part of the question was relating to Sentinel could you just repeat that yeah. Just in terms of Q4 versus Q3, Egypt City has been very strong any reason to expect Q4 to be to be weaker sequentially.
No nothing that we sit among <unk>.
No not really.
Good job it since no really next year, we're looking forward to putting the fourth crusher in.
And that project remains on track for that on title and that makes a big difference to the fleet to the persist block, but Q4 should be in line with it.
Previous quarters of the year, which is yeah.
Yes, we did just sort of highlight obviously the maintenance shutdown.
In any outlooks I mean, so we have we have estimated about a samsung as well.
Yes for sure, yes, I know that things clearly and maybe just.
And then maybe so so that's a good question in Zambia, you talked about the operating environment being a pretty good right now I was trying to figure out in terms of cost development, how much of the positive effects of a weaker currency you see relative to the rising cost inflation in the country I mean.
Oh, we're going to see a catch up where the inflation rate starts getting through in the coming quarters or do you expect that to be largely offset by a why would you kind of you see.
Honestly, you got a view on that.
Yeah I think.
Means you will see some other cost inflation coming through obviously in terms of leyva is quite a large component.
Now a quick shot denominated cost.
And that sort of subject to any all that.
Agreements.
And you know they might otherwise.
That I don't want to comment on the way, we might end up on that but so that eventually that will catch up to sort of replacement rights or closer to that.
Or some of your other local cost would it wouldn't Tom also catch up to the Chrysler rights, but.
And we were not seeing much at this stage coming it's true I mean, obviously some of it is coming through but there's also been a big drop off in terms of efficiencies and higher throughput also obviously helps the underlying cost but.
Yeah, It's it's way too early to say that there is a high inflation environment and that eventually in time, you you should assume that a lot.
Local costs will increase somewhat.
[noise], if I just comment on that.
Really couldn't give you some yes.
Is it obvious.
Obviously labor has to catch up with inflation regularly because yeah. It would be similar.
I see that we have to try and.
Ensure that the people that we.
Our employees are okay.
But a lot of our cost in Zambia.
Designated in Us dollars.
Including charges from.
I'm going into them and the escos prices in U.S dollars. So.
Much of that and doesn't.
Have a great impact we gauge.
[music].
A few months ago to take a hedge on oil on the oil price is actually.
Heating oil New York heating or index, which is.
Is used as an index in a number of areas that in Panama and elsewhere.
And that was to try and lock in for.
12 month period.
The sort of benefits that were around in the oil price.
Obviously quite significant for us.
And.
But of course those cost was.
Time goes by well move again, if the oil price.
So.
You could probably answer that question bit of a probably looking to what might be changing in the world at large an impact the U.S. dollar cost of a many of the components for us.
Sure and I guess, it's fair to assume that about 30% of Opex is local currency denominated.
No. It's a smaller number that's about one six up the costs about 15 16 for summer sandals that cost us as local currency denominated so.
Yes, Philip say the longest portion of it is actually a dollar denominated.
Understood. Thank you very much.
There are no questions at this time I will now turn the call back over to Clive Newell for closing remarks.
Yeah.
Ladies and gentlemen, this does conclude today's conference call. Thank you for participating you may now disconnect.
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