Q3 2020 Lundin Mining Corp Earnings Call
Ladies and gentlemen, thank you for standing by and welcome to the Lundeen mining third quarter results Conference call.
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I would now like to hand, the conference over to your Speaker today Ray Inkster, President and CEO Yu. Thank you. Please go ahead.
Thank you operator, and thank you everyone for joining lundin mining third quarter 2020 results call.
I would like to draw your attention to the cautionary statements on the second slide we will be making several forward looking statements throughout the course of this presentation and then the gionee to follow.
On the call today, she was just with the presentation and answering questions. Our Ginnie Magee, our senior Vice President and Chief Financial Officer, and Peter look at home, our senior Vice President and Chief operating Officer.
As you are all aware, we had a futility at our underground operations that never Scavo in late September.
The picture you see on the slide of them some of the safety stand down that we held that every operation and our head office to reflect on that loss to remind ourselves that the measures. We can take to protect ourselves and one another from injury and to reconfirm, our shared commitment to zero harm.
On slide four I highlight safety as a key aspect of money mining commitment and responsible mining.
If you use the foremost of our company's values, along with respect integrity and excellence.
I believe that all occupational injuries and work related illnesses opposite interval. This.
This is why our goal is zero harm.
We will continue to pursue this school and what motivates us that when we succeed we spend every person home safe and free from injury every shift every day.
Following a fatal accident, we immediately initiated our own internal as well as a third party root cause investigation, which is expected to be completed in the coming weeks.
Safety lessons learned will be shared across our workforce to try to prevent such an accidents from occurring again.
It is also important to recognize the achievement dedication and commitment of all of our employees and contractors throughout Monday mining.
As a company we are on track for our lowest ever injury rates on almost all leading and lagging indicators traffic, including the total recordable injury frequency rate presented in the chart on this page.
In the third quarter and they all couples the mine a candle area and evil mine were both recognized by national governing bodies for their outstanding Safety Records in 2019.
I'll capitals. He was recognized as the safest category a large underground mine bicentenario men competing against the largest operations in Chile.
Eagle was awarded the Sentinels of safety as the safest small sector underground metal mining U.S. by the National Mining Association. The Eagle is continuing on an impressive record approaching one year without a recordable injury.
Lastly, I wanted to highlight the national level in Japan to emergency response team for both having provided critical all site firefighting support this past quarter. These efforts typically go on the court it in under the radar the financial community, but they are certainly valued and recognized in our communities and buy those assisted.
I encourage everyone to visit our web site for additional information on our approach to health and safety and responsible mining or reach out to us with any questions.
I will now turn the call over to Ginny to run through the summary recalled results of the quarter.
Thank you Marie.
Third quarter, our operations produced over 105000 tons of base metals, and approximately 45000 ounces of gold.
We sold nearly 99000 tons of Paypal base metals, and approximately 39000 ounces of payable gold generating revenue of over $600 million.
As the market price of the core metals, we produce continued to recover there was an aggregate positive pricing adjustment this quarter.
The positive impact on revenue from prior period sales was nearly $40 million.
We continue to be predominantly leverage to copper, which generated 66% of the quarter's revenue. This is down from 71% of the second quarter on a relative basis as a contribution of nickel zinc revenue both increased to 9% each on increasing volumes and prices.
Despite the increased.
Price gold contributed 11% to revenues in Q3 down slightly from the 13% in the second quarter as nickel and thinking.
Slide six presents a summary of the quarter's financial results.
Realized copper price of $3.24 per pound in the quarter I thought the average market price largely reflecting 25 cents per pound a prior period adjustment.
Third quarter revenue was 12% above that of the same quarter last year, while gross profit increased 54%.
Attributable net earnings from operations were 17 cents per share and adjusted earnings were 14 cents per share for the quarter well about the same quarter last year.
Details of the adjustments, including the deferred tax expenses in Brazil are rising for foreign exchange translation tax asset revaluations in Chile, and prior period tax refunds and Portugal are broken down in our DNA.
With their operations are performing well, we generated adjusted EBITDA of over $300 million up 34% in the same quarter last year.
Cash flow from operations was over $270 million and adjusted operating cash flow before changes in noncash working capital items with over $260 million or 30 cents to 36 cents per share.
Third quarter capital expenditures on a cash basis were approximately $90 million, bringing the total year to date spend to approximately $330 million.
Our board of Directors has again declared a regular quarterly dividend of four cents Canadian per share was 16 cents Canadian per share on an annualized basis, maintaining the increasing earlier this year.
Lending money in a strong financial position with a net debt position at quarter end up $124 million, including cash and equivalents of approximately $222 million and available credit of approximately $580 million under the company's credit facility, excluding the $200 million accordion.
The net debt position has improved further since the end of the third quarter and is now approximately $65 million.
I will now turn the call back to Maria to discuss our operations.
Thanks Janine.
On slide seven we'll start with candle area, most throughput significantly improved during the quarter over that achieved in the first half of the year.
Our mills increased nearly 20% in the third quarter 2020 over the first half average.
Measures to address variability in or how news and also think availability as well as the natural progression of mining in phase kind of the open pit all began to take hold.
The chart in the Middle of this slide highlights this improvement on a monthly basis.
Planwell maintenance was performed in early August impacting throughput that month.
Throughput increase to average over 80000 tonnes per day in September as mining Rigless deeper and they can have the open pit and operational hours and the Mel improved we will continue to work on increasing the productivity of the public circuit.
Installation, the fourth and final ball mill Motor Undersea Mop main scheduled for installation in early 2021, all equipment necessary to complete the project is on site and available for installation.
Also important to note as I realize it was a focal point for some in the second quarter results that mining is advancing without any issues through the areas of phase 10, which are in proximity to where pit wall displacement issues previously occurred.
Copper production for the quarter was just under.
36000 tons, a small improvement over the second quarter as grade was slightly below plan.
The third quarter cash cost of $1.37 per pound of copper remained consistent with prior quarters and year to date.
$1.34 per pound was directly in line with previous guidance before it was withdrawn.
Focusing on current activities subsequent to the quarter on two unions, representing approximately 900 numbers candidly is workforce come on like option.
Despite mediation the mineworkers Union, representing approximately 350 workers began labor auction on October eight we.
The candle area AOL Union, representing approximately 550 workers began LIBOR option on October Twentyth.
Both unions currently remain on strike.
Contact candle area has the total workforce of approximately 5000 full time equivalents, including approximately 1400 own employee full time equivalent.
Operation continue safely with the Mineworkers Union on strike, despite illegal violent and intimidating options by some of its numbers.
Operations were systematically wound down for temporary suspension on October twentyth. Following the initiation of the strike action by the candle area West Union.
Nicole was continues to protect required on site personnel the operation and the environment.
While the pack plant all copper OSA and Santos mines are separate from the main candle area operation and are not a part of the LIBOR auction, where operation is being impacted at times by numbers is a striking.
We are committed to responsible respectful and fair negotiations with the best interests of our workers and the sustainability of our business in mind.
We cannot however, except demands that jeopardize the sustainability of our business.
I will be happy to take any questions during the couponing and answer them to the extent that I can unfortunately, my answers maybe constrained to respect the Chilean labor laws.
On Friday Shibata had an excellent quarter prior to the interruption of processing activities in the last week of September.
Production of nearly 13000 tons of copper and 24000 ounces of gold was in line with plan at higher metal recoveries, largely offset the lower throughput.
Third quarter cash costs of 21 cents per pound of copper were better than expected benefiting from favorable foreign exchange and higher gold byproduct prices.
All gold production continues to be unencumbered and currency is unhedged year to date. The average cash cost is an impressive first quartile 44 cents per pound of copper.
As previously disclosed processing activities were interrupted by an unplanned power outage on September 27, when power was restored the protection system of the main electrical subset substation failed, resulting in damage to for more motors.
To spare motors were installed on Sag in early October. This has allowed the resumption of milling at approximately 30% while repairs of the other motors our actions.
We continue to expect a return to full production in December.
That change increase to full production will occur once two of the four outstanding motors that are under repair become available and our installed.
To make the most of this time and improve the position of the operation Crusher and conveyor maintenance is planned and mining activities are focusing on building run of mine ore stocks and waste removal.
Full year production guidance has been reinstated reflecting a return to full processing in December copper production is expected to be 45 to 50000 tons and gold production is expected to be 80 to 85000 boxes.
Despite the interruption annual cash cost guidance has been reduced from the previous forecast of 55 cents per pound of copper.
2020, sustaining capital expenditure guidance remains at 40 million 20 million, having been capitalized year to date.
Exploration drilling is on track to complete the 40000 meters targeted there are now seven drill rigs on site and we had a strong quarter of drilling more than doubling the meters drilled in the first half of the year with 22500 meters completed and two and a half million spent year to date.
Well advance this as aggressively as we can while maintaining health and safety protocols.
Planning for our 2021 campaign, including 60000 meters of drilling is well underway.
Never score, though on slide nine third quarter production of six to 500 tonnes of copper was below plan on the shortfall of available mine copper or as well as below plan grade.
Well in theory, five day suspension of operation following the fatal accident on September 25th impacted our production further.
The availability of bench Bill Stopes was less than planned primarily due to lower development and paste fill volumes.
Action plans have been initiated to address the backfill shortfall.
Third quarter think production of 15500 tonnes was less than the first two quarters of the year unplanned plant maintenance in July and September as well as the voluntary suspension later in the quarter never square those copper production guidance has been reduced to 32 to 34000 tons zinc production.
<unk> has been tightened 70 to 72000 tons.
Aggregate operating costs were better than planned in Q3 and were significantly lower year on year. This helped to offset the impact of lower production on the C. One cash cost.
Cash cost guidance has been reaffirmed a $2 10 per pound of copper for the year, having achieved $1.25 per pound year to date.
The official restart of the zinc expansion project is planned for January 2021 during.
During the quarter work with ongoing to prepare for the restart preparation work plan for the fourth quarter includes further progress on ventilation raises activities on the Sag mill, including commissioning with waste and work on the surface conveying systems.
The 2020 capital expenditure guidance for that 65 million is unchanged with approximately 8 million remaining to be capitalized in the fourth quarter.
The projects preproduction capital expenditure estimate of 360 million euros is also unchanged.
If the current safety requirements for social distancing and other personnel limitations remain in place in 2021, we expect that the project would mobilize a smaller number of contractors than originally planned with an extended schedule in order to take the project forward.
We are working towards reinstating 2021, and 2022 zinc production guidance for Natus corvo, including contribution from the zinc expansion in our annual guidance update.
Moving to the agreement on Slide 10, the operation had a good quarter.
Zinc production increased nearly 40% over the second quarter production to over 17000 tonne on improved grade and throughput.
Globally led production increased over 45% compared to the second quarter.
The operation is positioned for a strong finish to 2020 and a good start to 2021 of mine sequencing calls for a return to higher grades and stoves.
The full year 2020, zinc production guidance range has been tightened to 72 to 74000 tons.
Copper production guidance remains unchanged.
Cash costs have remained stable and favorable at 55 cents per pound of zinc in the third quarter.
54 cents per pound year to date cash.
Cash cost guidance has been reaffirmed at 60 cents per pound for the year.
Underground exploration efforts continued on existing ore bodies as well as targeting Dolby.
Full year exploration guidance to 6 million with planned drilling of 17000 meters approximately 5 million hasn't spent year to date and nearly 12000 meters of drilling completed.
Lastly, on slide 11 Eagle had an excellent quarter its record for consecutive days without a recordable injury was extended again and is approaching the one year milestone next week.
Third quarter nickel production increased nearly 45% and copper over 25% compared to the second quarter grade and recovery rates of both metals rose as mining progressed into the higher grade regions within the Eagle East ore body.
On the strong operational performance and increasing metal prices Eagles already first quarter child cash cost improve further achieving a C of negative 63 cents per pound of nickel.
Eagle is positioned for a strong finish to 2020.
Full year copper production guidance has been reiterated at 17 to 19000 tons and nickel production guidance at 15 to 18000 tons.
Cash cost guidance has been improved once again to 50 cents per pound of nickel from 85 cents.
Given the 51 cents per pound achieved in the first three quarters and expectations for continuation of this performance in the fourth.
Eagle has generated approximately 81 million of free cash flow in the first three quarters and is well positioned to continue to generate meaningful free cash flow in the fourth quarter and the next several years ahead.
Slide 12 provides a summary of current guidance, which was discussed in the operational functions candle area is 2020 guidance has been withdrawn reflecting the temporary suspension of operations due to the current label option.
Guidance for Chicago has been reinstated on the assumption that we produce at approximately 30% capacity until early December and then returned to full production.
Never squirrels, copper and zinc production guidance has been updated and tightened to reflect the impact of lower grades and ore availability to date as well as our expectations for the fourth quarter.
Cash costs etch, Fatah and Eagle had been reduced given the excellent cost achieved to date and expectations for the fourth quarter cash costs at numbers cargo and think through than had been reiterated.
Except for candle area the capital expenditure for each operation remains unchanged as does our exploration guidance.
During the third quarter, our operations did not experienced significant disruption to production shipment of concentrate or supply chain as a result of COVID-19.
However, as we are all well aware the global effects of probably 19 are continuing to evolve and our guidance does not reflect the potential for additional suspensions or other significant disruption to operations due to COVID-19.
The number of new cases in Brazil, and Chile are declining while the U.S. day, Portugal in Sweden are reporting increases.
Moving to slide 13, though.
Though we have had challenges over the past month each has been met with immediate action plans, we expect to finish the year in an even stronger financial position.
We continue with our objective to create value by investing in low risk high return opportunities in our own assets.
We have stated often that capital return and disciplined growth are not mutually exclusive, particularly given our financial strength. Our corporate development team continues to actively pursue M&A opportunities within the same criteria rigor and discipline that we have demonstrated in the past and the current market, we see few actionable opportunities.
Yes that would improve or maintain the quality of the mining assets in our portfolio and we are not interested in just collecting assets.
The core aspect of our capital return strategy is our regular dividend.
When excluding the Super majors, there are few base metal mining companies that offer a similar yield.
Our policy aims to ensure that the regular dividend is sustainable throughout the cycle and can be progressively increased as the asset base improves and grows.
Our current and the IB structure approved with the TSX is a discretionary program on.
On renewal of BNP IB last year, we continued with the structure to retain flexibility in terms of execution.
We will look to update our plans for shareholder returns with the issuance of our operational outlook and guidance. We expect to release this update the week commencing November 29.
I'll conclude on slide 14, and summarize our current position financially and operationally we are favorably positioned to address our short term challenges and continue to execute our strategy.
Notable progress has been made a candle area to improve mill throughput. The operation is well positioned for returned to full production rates. Once they are unsustainable labor agreements are reached.
The team at Chipotle has done an excellent job to minimize the expected impact and take advantage of downtime caused by the power failure.
A return to full production is expected later this quarter.
Restart of this expansion project and never disclose on track for early 2021 with planned fourth quarter 2020 activities to prepare for commissioning of the Sag mill.
And lastly, Eagle in think driven continued to perform well taking advantage of the improving nickel copper and zinc prices.
We look forward to updating you on our continuing efforts in coming weeks and months.
Thank you operator, and with that I would like to open the lines for questions.
Thank you as a reminder to ask a question you will need to press star one on your telephone to try your question. Please press the pound or Harris Teeter. Please limit your question to one with one follow up.
Please standby, while we compile the Q and a roster.
Your first question comes from the line of Orest, well Kodak from Scotia Bank. Your line is open.
Challenging year operationally across the portfolio.
I mean, you've had to cut guidance that candle area, Chicago and have it on the copper side and I guess my question is.
Should we anticipate any impact.
The lower 20 guided.
You have a knock on impact on 21.
Is there going to be some kind of effect of knock on impact in terms of catching up from lower levels. This year or do you still feel confident with the 21 guidance that sits out there you know for example, candle area at 185 to 195000 codes or.
Or does should we anticipate that there could be more of a ramp towards those numbers.
Yeah. Good morning, worst I think it's been a challenging year for everyone and you know we just happen to have had a month, where we've had a number of challenges and you know we withdrew the guidance for.
This year, only and we're updating our guidance right now with our life of mine and planning for next year. So you know we'll update.
The total guidance.
For the three year outlook as we do every year.
The week commencing the Thirtyth of November so well update that I knew we have not withdrawn the the future year guidance. So at this point, we don't believe there's going to be a material impact, but we will reaffirm the guidance in November.
Or early December.
Okay. Thank you and just not really.
Understanding kind of what happened there with respect to the grades and the guidance cut can you give us a bit more color there.
Yeah, sure and Peter do you want to take that one.
Yeah, I can take that one so.
Maria said during.
Presentation.
Copper shortfall was due to lower available or tongue and lower grades.
Core or Tom we have fallen behind on development rate that.
That was primarily.
Primarily due to coal with corrective measures the token in Q2, where we curtailed someone were only workforce and contractors.
That was prolonged longer than planned.
So we did fall behind on capital development, there as well and the same time when you have less available ore tons. You also skews left waste. So you have a a double effect there.
Those are things that we are working on we're improving of course, we have gotten people back now for a couple of months. So the production development crews I back we're working on productivity improvements with them. They were also.
We have action plans to improve.
Which I then.
Good last couple of weeks.
So those are some actions have been taken.
And then the copper grade.
They came back and from some of the areas lower than expected. So we got action plans going on going to review and study and understand why that happened.
Okay.
Thank you very much.
Your next question comes from the line of Ionis Mask Lewis from Morgan Stanley. Your line is open.
Good morning, Thanks, very much working my questions. The first one is around Candelaria, we've seen really good progress on throughput rates and you.
You seem to be towards the top end of your guidance range for September at least but.
The degree the grid was fairly low 0.55%.
He's got is that something that could persist in the next few quarters lets you go deeper into phase Stan.
Is it.
Temporary.
And then the second question just in terms of working.
Good work you got the development phase.
I think we are going to spread some some release in the second half, but we saw a small.
Incremental.
Q3 can.
Can you give some indications on how that plays out into Q4, especially given the disruption so other than delighted with me, but the.
Inventories thank you.
Okay, great. So in terms of the agreed that candle area, where we're tracking pretty well to plan. If you look at the year to date I think it's tracking exactly where it was in the original technical report that we had filed in November 2018, but Peter do you want to give some general guidance on on where.
We're going we don't forecast grades but.
If you want to comment on the progression yeah.
Cameron.
He said that the cost of good.
Our our are falling pretty well what we what we are we anticipated we were expecting an increase over all the grades and the poor quarter, especially as we mined lower and pays 10, where we know that the grades will improve.
The lower parts of okay.
So that wasn't Oh, no plan to do.
But otherwise, we're falling pretty well the forecast.
On our latest technical report.
And Jim He did you want to comment on the working capital development.
I know we have that we have a much better position now than we did end of quarter. We saw some additional cash flow coming in in the month of October but did you want to comment on the working capital flows.
[noise] summary, so you know for the balance of the year, we do expect.
They will be good and consistent cash flow.
We had an increase in Anbar passion the last three weeks since quarter end as well I was taking the disruptions that we are having in the in the fourth quarter, we won't actually see the the cash impact of that until Q1 of 2021. So I think you know Kurt.
Now it could be a we are expected to be in a in a strong working capital position.
Got sick care, thanks, very much thank you.
Your next question comes from the line of Jackie Presby Lasky from BMO capital market. Your line is open.
Thank you very much I guess to follow up on the last question about working capital.
Can we talk a little bit about your dividend policy or your capital return policy and all your net debt is down to a.
I'll update as to what we plan to do with the dividend M. A N T I be at the end of the month when we do our through your outlook.
So then the next month, yes that sounds great and just I guess I'll switching gears Fisher Potter I was just curious if the operational issues that you encountered there was the electrical failures does that change the way that you guys look at things like spare parts going forward or was there.
This truly just a really improbable kind of freak accident, and and you know, it's not likely to happen again like how you guys think about mitigating that was Clifford.
Yeah. So we have done some immediate things obviously, we did a root cause analysis uhm and we took some steps Peter if you can maybe go a little further into detail about the steps that we've taken but we've also you know put in our capital budget for next year that we will order to additional spare motors.
Just.
Recognizing that you know we we have had damage to these ones and it may impair somewhat in future if they're damaged again, the ability to repair them over and over again, but Peter did you want to elaborate on the the motor.
Failure, the root cause analysis and don't we're doing about it.
Okay. So a number of things have been taken care of but I forget the root cause of the failure Oh forget protection thing and also to ensure that we have a dictionary redone. So if you could prevent that from happening happening again.
One part of the investigation or are we simulated the conditions cause of the battery Bank pack. Her battery pack that was the power the circuit breaker and in the event of a failure and we also brought in a specialized technician to help on this investigation.
So we have the root cause we have taken action. So up this time, we have replaced the vampire battery bank of the substation. We have we're also in the final stages of issuing a detailed substation re-energized re energize you guys Nathan procedure and for the training all over.
Electricians, we've also installed abdominal protection system for the mail circuit Breakers, we have two systems now independent of each other and also beyond that worry about waiting further updates to the substation protection system going forward. So well with these measures were confident that you know.
Weird, we have additional redundant <unk> system can place and that this will not happen again.
And that will be shared all these findings with our with our other sites to make sure that we don't have any other potential flaws in the system.
So we're confident that this was at one time.
That sounds great. Thanks, very much Peter and thanks Marie.
Your next question comes from the line of Daniel Major from UBS. Your line is open.
Hi that uhm. Thanks, So questions Uhm first question is this on the tax, particularly the cash tax outlook I think you've received a rebate after 720 something million dollars disc.
This quarter in terms of cash tax can you give us any guidance on where you expect that to come in the next couple of quarters, plus where you expect to cash tax rate to be 2021 2022.
Jimmy I'm Gonna ask you if you can handle that one.
Sure I think on the cash on the tax rebate are you you're free to the the refund that we received in Portugal.
Yeah, <unk> I believe you've received a tax rebate last quarter, including the tax where you back from Portugal.
Yeah. So so the rebate that the reason that we received in Portugal is related to you a text to speech some back in 2008 and that was finally settled in so we received $40 million in taxes in about $5 million of related interest to that as far as timing talk.
Payment.
I mean that is has fairly I guess difficult to to predict and and in the sense that it does really are lined with a taxable earnings.
And so I think you know our best guidance that would be too say that you know going forward to use our.
Statutory pox ray and in the various countries and that's probably the the best benchmark that to to use for forecasting.
Yeah can I get Daniel that it might suggest is that if you get in touch with Mark and Brandon and our.
Who handle our a I R Department and all of our corporate models them. They can help you with somebody that modeling for for future years.
Okay, Great. Thanks, and then second question <unk> <unk>.
<unk> two parts of the what is the estimated cost of the mill repairs and would you <unk> one of that in the fourth quarter and there's still seems to be quite a lot of capex to spend to get to your guidance are you still confident you'll spend the full 40 million this year.
Yeah. So in terms of the cost of the repair it's it's not a large amount it's more of the the Miss production that's gonna be what we.
It is the wheel to cost to us, but the repair will be for all four of motors less than a million dollars. All told so that's not a huge amount to us in terms of the repair.
And then in terms of the Capex you know.
Much of that will be capital stripping, we are continuing to work on the mobile crashing unit and so that's also going to be something that we have capex coming in Peter I don't know if you've had any additional comments on the cutbacks, but we maintain the guidance. So you know we're fairly fairly confident that.
There's there's much to be done there, particularly on the the capital stripping.
The capital Tripping cause you said the mobile question unit also evaporators. So we have a number of deliveries. Thank you for.
Project.
Okay. Thanks, a lot.
Yeah.
Your next question comes from the line of Lawson Winder from be of a securities. Your line is open.
Hi, Marie Peter at team Yeah. Just first question for me on <unk> I was just looking at the throughput rate and I know there was some impact at the end of the quarter from the from the interruption in the in the damage to the motors, but the the the daily throughput.
The last came down quite quite substantially versus private quarters and versus probably probably the prior.
Eight eight or more quarters I was just hoping you could help me understand how much of that was due to or hardness versus how much of that might've been.
Due to other factors and then what what the outlook for for Q4 would then be around.
That daily through but thanks very much.
Yeah, no problem in in Japan was tracking quite loud to plan. So Peter can you expand on that I know, there's a lot of variability depending on what can't we're pulling for him in terms of the or quality and.
If you if you'd like to expand on that a little bit yeah. So we we were seeing a little going to three harder little harder than expected or.
During the quarter, we took some actions we had a male male maintenance down where we made some changes to the there'll be lining system, which improve throughput.
As expected so we've got a positive effect with that of course after our our mail interruption at the end of September or two pets are a lot lower about 30% compared to full production due to the fact that we're only running one male we're only running beside male with a no ball mill at the moment.
And we expect that.
You mentioned previously that to be the case to.
Stober November and then we will restart the ball mail December when we get the the two remaining motors that are needed for that so what you will see lower than.
Than normal production rates during in Q4 O until weird, we got all the mall all the no motors back.
Okay.
Okay, and then I guess for my follow up I'd like to maybe ask about the pack.
Millet candle area are you.
It would be really helpful for us if you could give us an idea of you know first of all with the strike happening is that.
Mil and mining operation able to effectively operate.
As it normally would and then you know is it operating it through full throughput and then finally can you give us any idea of.
Gray, Okay. I know you don't provide great guidance, but have you can just arrange would be helpful. Thanks, so much.
Yeah. So the the past mail is continuing to operate.
We have some time to time, some disruption oh in and around the gate so with the shipping with win at times day Gates are blocked but it generally has been operating according to normal operating procedures. It does about 4000 tonnes per day and you know it would be typically.
Higher than the the.
You know open pet orange, so because the or sore. Some underground he would have you know kind of that.
That higher 1% above.
Typically so.
That's what we're running there and continue to do so the Oh host operations, which the pipeline as part of a house and legally not candle area are not part of the the strike and shouldn't be affected by the strike, but we we do know that being associated with candle area. It is subject.
<unk> from time to time Lucky.
Great. Thank you so much that's.
Okay. Thanks.
Your next question comes from the line of Dalton Burrito from Canaccord. Your line is open.
Good morning, Maroon team I'm actually surprised nobody's asked about the strike situation in particular.
Me too [laughter].
[laughter] and I appreciate you can't comment much but.
Can you give us a sense for.
What the ask is from the unions relative to some of these C. B a is that a settled in Chile recently Ah the egregious on the on line.
[laughter] well I do have to respect the negotiation processes and the labor laws. So I am limited in what I can say by as you pointed out there are several operations in Chile that recently successfully concluded their collective agreements in there now public record.
We've been encouraging the union leaders to look at those recent agreements and come to the table with a willingness to reach agreement on a reasonable basis.
And you know in general.
Most mining labor negotiations and Kelly will focus around base salary increase and the return to work or a signing bonus so they they talk about other issue soft issues, but realistically, it's all about the money.
So to bring considerations that affect us on the on the salaries is one and I think that many of you may know if we agree to percentage increases to be embedded in this contract. It becomes the floor for a position in any future bargaining. According to the law. So short term agreements have longterm and.
Occasions for us.
So and then secondly, the salaries are already adjusted for CPI inflation and that's by legislation. All salaries are just a quarterly so requests for solid base salary increases over and above the C. P. I you know they will significantly impact are operating cost structure.
So we can't accept demands that will jeopardize the sustainability by creating you know I am an unsustainable increases year over year.
And so that is something that we have in mind and you know we are encouraging the union to to come with realistic demands and you know we there are some things that we just won't be able to give on so that is the situation.
And you know in this situation No-one's waning, it's a lose lose right now and it's just something that we're trying to impress upon them that nobody's winning right now and and that there are some things that we won't get so you know we're hopeful that we can come to an agreement and pointing to those other agreements I had been reached at.
As a reasonable basis that of which we could uhm do something but.
We need to have a median of mine and we're working very hard towards that we do have a mediator in place and we've had numerous meetings, including I believe one can be held later today and what are we continue to hope that we can have a reasonable discussion and and come to an end with this.
So we're working hard to come to the conclusion and we will continue to you know make sure that we.
And do it in a reasonable way that maintains the business sustainability.
So sorry lesson or Delton long winded answer there to a short question no that's great, but I. That's actually very helpful. Are you are you surprised yeah.
I presume your discussions or only with a union leaders right, but but you should price at all.
With some of these actions that the union members are taking outside your date.
Perhaps surprised isn't the correct word I think disappointed because the actions or against their coworkers and so I guess, that's that's quite sad to see them and you know what we really don't like is if there's action that's taken that would.
For example.
Hypothetically create an environmental damage or a longterm damage. Those are the things that were you know very cautious about.
But again, we are pursuing different actions on though so I won't comment too much on the on that aspect.
Okay, and then you you you mentioned ongoing meetings with Union leaders.
Are the frequency and nature of those meetings.
At a level that.
Makes you constructive I guess that you can come to an agreement too.
Fairly far far apart.
I can't comment at them at the moment and Doctor isn't that will continue to reach out and try to reach agreement.
Okay, and then one last one for me and somewhat related but not really with constitutional reform on the horizon here in Chile.
Does that raise any red flag for you at all.
Any concern yeah. So we have been following that in the background as well so as as everyone probably knows the type of site that was held last Sunday was.
A landslide in favor of uhm drafting a new constitution. So next April there will be a constitutional assembly elected and you know and then that will work towards drafting a new constitution to be voted on in the middle of 2022, So the public.
Mood is one of you know excitement and people are happy that it's going forward I think in the near term.
We're hoping what this will mean is that it will be a period of relative calm and we'll see you know cause.
Going down of some of the unrest that's mark this movement and that people will will be yeah.
Yeah, I'm satisfied that things are moving forward and that there will be a period of time, they're there.
You know times when when things are changing there's always unrest. So you shouldn't be surprised if there are for further incident I would say, but we we do believe that it may lead to a period of calm here is we need up to the next boat and.
And we do note that in the attic hammer and the percentage of voting for a new constitution was even higher than than chili and total result, it was 80 585 plus percent in the out of Canada. So there is a very strong well for this to happen now.
What this means it is pretty much the same thing that we've been thinking about throughout this is that too and bed health care education and other social programs. You know there has to be a structure and in a way to pay for that that doesn't.
<unk>.
Stifle, the economy and and hurt the economy of the country. So.
We'll watch that very carefully but you know it is going to be a lengthy process.
We hope for some relative calm although there may be some.
People, who are not happy that it's not happening faster and.
Some bumps along the way as we get there.
Okay, great, but you know if if tax code revision as a major piece of this.
Do your stability agreements protect you from.
We do have some stability room is it depends on what to put in place.
So it depends on what the structures are I think this is something that's been talked about even before they started talking about new constitution, and they were talking about social programs and different things to.
A different means of raising money to pay for those things. So you know, it's it's something we're watching and right now we're not sure what the impact will be but we are monitoring it along with the industry associations and other business groups.
That's great. Thank you Mary.
Yeah.
Your next question comes from the line of Stefan I knew from Carmack security.
Your line is open up.
Yeah, Thanks, very much for the the.
To help on that strikes us very helpful. Just just wondering you'll get kind of did a good alluded to earlier you know that day. It it's great to see that the mining's going great or a much better now and at Kendall area in that Phase 10 area can you just remind us how long are you going to how about in terms of the mine plan. How long are you in that sort of <unk>.
Quote unquote sensitive area. The you know where you had the phase nine failure, Alright, I've got a few years back like a <unk> is it something that's gonna be in the mine plan for the next year or two or just remind us what the schedule is there.
Newly we move away from that area. Peter I don't know if you have these details that you can give there I don't have the exact details, but we're mine through the the the sensitive area.
<unk> you spoke to during the call an amount will getting paper deeper down right <unk>.
Okay <unk> yep.
Yep.
Okay I just just it was also good to see how it it sounds like you've sort of got though the hardness issues there under control as it is that something that you think you have under you know a much better handle on now going forward or did you think it's still gonna be variable for the next few quarters.
Well as we get deeper they are a softer and so part of that issue goes away and I think we're you know and again, Peter maybe I'll pass it off to you were doing some additional work on the on the puddle of crushing and in order to you know.
Prepare for our times in the future when we do encounter those harder or areas.
Yeah, Yeah exactly I married the the main thing at the moment is that where the deep, but we get on faith times, the the soft or the or get so and that's something that we we knew we knew about but in the meantime, we're also.
Visiting the pebble crushing so good and grinding so good be.
Better prepared for the coming so.
Pages.
But we've got a lot a lot of improvements both in the mine in the mail with the focus to to increase the amount of time for the grinding circuit. So that's something that we have done them. That's been successful let me see positive results of that during the quarter, but also a lot better operational stability during two three.
But with grinding and and pebble crushing.
Okay. Okay, great. Thanks, very much guys.
Your next question is a follow up from I N S mass foolish for Morgan Stanley. Your line is again open.
Yes, Thanks again for taking the follow up just going back to come Velarium Uhm, you have withdrawn the Catholics guidance for the year.
Which I guess is students phones through to the operational suspension right now, but can you talk about the potential to bring forward the stripping or mine development activities, which could lead to some capex. So we're supposed to spend the next couple of years <unk> in the next couple of months.
Thank you.
Yeah. So the stripping is actually why we look through the capex items.
Because with the with the mine shut down we're unable to do the waste removal that we we.
We're hoping to do during this quarter. So I think it's it's not a matter of Ah, bringing it forward, we'll have some catch up to do once we're able to restart.
And so the Capex guidance, it's it's really a matter of understanding you know how long will be with the trucks parked and not able to do some of that overburden removal.
That's good particular, thanks very much.
Yep.
Again, if you would like to ask a question. Please press star one on your telephone.
Your next question is a follow up from dry heat.
<unk> from BMO capital market. Your line is gonna open.
Thank you very much for taking my question I'll I'll be quick, but I just I guess I was also been surprised that nobody had asked about the cavalerria strikes a follow up with with Dalton's question I would just last one maybe for me on on the other unions that haven't yet announced a strike there's two supervisors unions from what I understand that.
<unk> coming to the end of their contract around around this time around the end of the month can you give us an update on if you're negotiating with those supervisors unions or if they could be in a striped position over the next little while as well. Thanks.
Yeah, No problem, we do have five unions I candle area. There's one union we reached agreement with.
This past may so two other unions, we still have and their their contracts are expiring. The two remaining unions represent approximately 230 supervisors and we started negotiation with one union as per formal negotiation post us and we expect to commence with the other one.
Shortly.
And one of those contracts expire I know, it's it's around now is that coming up on the next bill awhile.
Yes by the end of the year.
And if you're okay. Okay I thought it was earlier than that okay. That's that's it for me. Thank you very much.
And we have no further questions at this time I will turn the call back to our presenters.
Okay. Thank you very much operator, and thank you everyone for attending the call and we'll have.
Have our annual guidance released out at the end of November and look forward to announcing our production results in January so thank you all and we'll.
Be speaking again soon.
Bye bye.
Ladies and gentlemen, this concludes today's conference call. Thank you for participating you may now disconnect.
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