Q4 2020 Lundin Mining Corp Earnings Call

Ladies and gentlemen, thank you for standing by and welcome to today's Lundin mining first quarter Vishal.

All participants at this time are in a listen only mode. After the speaker's presentation. There will be a question and answer session to ask a question. During this time simply press.

And then number one on your telephone keypad. If you require any further assistance. Please press star zero and please be advised that today's conference is being recorded I would now like to hand, the conference over to your speaker today Marie Inkster, President and CEO. Please go ahead.

Thank you operator, and thank you everyone for joining lundin mining's fourth quarter and full year 2020 results call.

I would like to draw your attention to the cautionary statements on slide two as we will be making several forward looking statements throughout the course of this presentation.

On the call to assist me with the presentation.

Star and answering questions and then he Mcgee, our senior Vice President and Chief Financial Officer, and Peter Richardson, Our senior Vice President and Chief operating Officer.

On slide four I wanted to take some time to touch on several of Lundin mining's achievements in 2020, and they place us in an excellent position to perform well and 'twenty 'twenty.

Patients in years ahead.

While responding to COVID-19 required that we adjust some of our plans earlier in the year.

And we had our share of challenges and the fourth quarter, we acted quickly and decisively to overcome these.

The loss of our colleague and never Chicago, and the third quarter remains top of mine within our organization.

A fatality.

And one he is a rare event within lundin mining because of the dedication and focus of our work force and when it comes to safety and.

And in 'twenty and 'twenty, we achieved our best ever safety performance as measured by the total injury frequency rate and several other indicators. This achievement is particularly notable and a year filled with a distraction both personally and professionally.

On the global pandemic.

We achieved our most recent production guidance for all metals with cash costs in line or better than our guidance, including notably low first quartile cash costs at Chipotle and Eagle.

This led to the generation of nearly 860 million of adjusted EBITDA and a volatile metal price environment.

Environment over the course of the year.

We were able to complete a candle area and mill optimization project and the fourth quarter and make progress on growth initiatives.

And we're achieving excellent progress advancing the zinc expansion project debt and Hamish corvo prior to our proactive decision to temporarily suspend the project to protect the operation and.

And the local communities from the onset of COVID-19.

Minor works continued throughout the year and the project officially restarted in January of this year.

And chip had a following a brief suspension and the exploration program in March we were able to ramp back up quickly and safely and completed nearly 42000 meters of drilling that.

That will help them from our expansion studies.

And that candle area, we progressed, our internal studies evaluating medium term opportunities to expand the underground mines lack.

Lastly, we remain focused on value creation through disciplined allocation of our shareholders' capital.

And late November, we announced and and.

Anticipated, 50% increase to our regular dividend this increase to an annualized 24 cents per share. It was approved by the board yesterday.

We continued to pursue actionable M&A, while remaining disciplined and to our strategy and our criteria.

In short, we are very well positioned to deliver on our strategy and drive.

Total returns with that I will turn the call over to Jim <unk> to highlight the full year 2020 financial results Janine.

Thank you Marie.

Looking at Assembly of our results on slide five our operations and aggregate produced nearly 420000 tonnes of base metals and 2020, including over 96.

<unk> share of think tank and the fourth quarter.

In addition, we produced 163000 ounces of gold and 2020 and increase of 15% year over year with a full year's contribution from Japan.

For the year, we sold over 380000 tonnes of payable base metal and generated revenue of over $2 billion.

Fourth quarter revenue total staffing and a $30 million, including positive price adjustment for prior period sales.

Prior period price adjustments had a negative $50 million impact on revenue or eight cents per share for the year, However, with strength and metal price is a fourth quarter impact was a positive $48 million or six and a half.

Six that share.

Detailed breakdown is available and our DNA.

Consistent with the prior year, 65% of our revenue was generated from copper sales and 2020.

Gold contributed 12% to revenue up from 9% and the prior year with the full year contribution from Japan, and the increase and the gold price.

Zinc nickel and that contributed a combined and 19% and total revenue in 'twenty and 'twenty down from 23%. The prior year largely a dilution effect with the first full year of copper and gold sales from Jakarta.

We remain predominantly leveraged to copper and well diversified geographically.

Slide six presents a summary of our full year financial results I will also touch on our fourth quarter results.

2020 revenue was 8% greater than last year, mainly attributable to the first full year contribution of each pad and my following acquisition as well as higher realized copper and gold prices.

Paul that was 13% higher reflecting the Japan acquisition and offset by higher depreciation.

Attributable net earnings from operations or <unk> 23 per share for the year in mine with the prior year and 16% 16 cents per share for the fourth quarter.

Fourth quarter earnings were higher than the comparable period.

Gross plenty and 19, primarily due to higher realized metal prices, partially offset by lower copper sales volume.

Adjusted earnings were 31 cents per share for the year and 15 cents per share for the fourth quarter.

Fourth quarter adjustments include $5 million of costs associated with the labor action that candle area.

And nearly $4 million for project standby and suspension costs.

Details of the adjustments are broken down our MD&A issued last night.

We generated adjusted EBITDA of $857 million, and 2020, or 21% increase over 2019, including $235 million.

Generated and the fourth quarter.

2020 cash flow from operations were $566 million in line with that of 2019.

When adjusting for non cash working capital changes operating cash flow was $645 million or 88 cents per share 70, 17% greater than last.

Last year.

Fourth quarter capital expenditures on a cash basis were $100 million, bringing the total spend for 2000 $20 million to $431 million margin and lower than the most recent guidance of $445 million.

We ended the year with $141 million and cash and equivalents.

And net debt of $63 million and.

As of February 18th these numbers has further improved to $165 million and cash equivalents and $50 million of net debt.

Lastly, our board of directors declared regular quarterly dividends of four cents Canadian per share totaling six and 16 cents Canadian per share.

Share in 2020 and yesterday, our board approved an increase and the next quarterly dividend to six <unk>.

Canadian per share or 24 cents Canadian per share on an annualized basis and increase of 50%.

And we'll now turn the call back to Marie to discuss our operations and projects.

Thank you Jenny.

Moving to candle area on slide seven and December after reaching new collective agreements with all unions representing employees the operation safely ramped back up to full production and exceeded our most recent guidance producing nearly 127000 tonnes of copper and 76000 ounces of gold.

Our cash costs of $1 45 per pound of copper for the year.

The fourth quarter cash costs includes the expense of approximately $13 million associated with the new collective agreement, though it excludes $5 million of costs directly associated with the labor action. This is detailed in the MD&A.

The candle area.

The mill optimization project is now complete with the installation of the final ballroom motor completed in December.

Full year capital expenditure of $216 million is modestly below guidance of $225 million.

2021 capital expenditures are forecast to total $345 million, including 100.

Third and $60 million on waste stripping.

Kendall area is positioned to deliver 40% production growth this year on improving copper head grades and achievement of planned processing rates.

Our 'twenty and 'twenty, one guidance reflects our expectation that copper head grades will be similar to those and the second half of 'twenty and 'twenty as we start the gear and increase as mining progresses.

As to lower higher grade benches, and the open pit.

'twenty and 'twenty, one copper steel and cash costs are expected to decline to $1 35 per pound on this increased production.

Moving to Jakarta on slide eight the Japan team responded quickly to the motor mill damage event late in third quarter with effective action plans to minimize.

The production impact to spare motors were installed on the Sag mill and early October and enabled resumption of knowing at approximately 35% of the nameplate capacity throughput was further improved with the installation of a motor loans from some Marco on the ball mill in mid November.

And I returned to full processing capacity was achieved in late December.

With two repaired motors received at site and installed the remaining two motors that were were successfully repaired and are being maintained as spares.

The operation exceeded our most recent guidance producing over 50000 tons of copper and 87000 ounces of gold for the year in fact, the 50000 tons.

On the copper produced was within a 1000 tons of the original guidance provided for the year and December of 2019 with our operations outlook at that time.

Tobacco was also able to achieve better results on cash cost on our guidance and the fourth quarter. The mine achieved an impressive negative 18 cents per pound of copper despite the constrained mill throughput and for.

For the year achieved a first quartile 29 cents per pound. This positions. The operation is one of the lowest cost open pit copper mines in South America.

Crusher and conveyor maintenance was undertaken during the fourth quarter and excess mining capacity was focused on waste removal activities full year capital expenditure.

$39 million is directly in line with guidance.

The mine and mill continues to operate as expected and they are well positioned to achieve our 2021 guidance of 48000 to 53000 tons of copper and 75% to 80000 ounces of gold 2021 capital expenditure guidance of $65 million.

Worth, noting we do not expect a significant year over year change and the underlying operating costs on a per ton basis.

And our $1 10 per pound of copper cash cost guidance assumes a gold price of 17, <unk> hundred dollars per ounce and a U S dollar to Brazilian real exchange rate of 475 amongst other various.

Assumptions.

Chipotle exploration program had a strong second half to the year drilling a greater than planned 42000 meters. The primary focus remains on near mine targets to better understand and mineral resource potential and inform our expansion studies study work progress during the year and is being advanced in parallel with the exploration efforts.

And so 2021 campaign of 60000 meters of drilling is underway. There are currently four exploration range on site at the moment with plans for six for the majority of the year.

Moving to never Scarborough on slide nine the operation produced over 32000 tonnes of copper and over 69000 tons of zinc.

Copper production achieved most recent guidance and zinc was with within 1000 times the full year cash cost of $2.09 per pound of copper was in line with guidance at 210.

And the fourth quarter, while the zinc plant achieved greater than planned throughput zinc metal production was impacted primarily by below planned ore grades.

Inc.

The mine is continuing to focus on several action plans to improve productivity of horizontal and vertical development in order to optimize the blend to the mills.

<unk>, 'twenty and 'twenty and full year capital expenditures of $128 million, including expenditures on the zinc expansion project were modestly greater than our guidance of $120 million.

And that's additional mobile mine equipment was purchased and the fourth quarter.

Fourth quarter SAP preparation work included progress on the vent raises activities on the Sag mill, including commissioning with waste and work on surface conveying system. The.

And the project was officially restarted in January of this year.

Progress.

Towards completion and will continue to be dependent on the future effects of COVID-19, with government and public health requirements and internal measures taken to protect our employees and contractors.

We have mobilized a smaller number of contractors on and extended schedule given the current safety requirements for social distancing and other personnel limitations.

Consistent with our previous guidance and timeline construction has to be completed in stages over the course of 'twenty 'twenty, one with production and ramp up plan to commence later in Q4 'twenty one.

Following final commissioning of the underground materials handling system.

The 2021 capital expenditure guidance of $70 million on the project.

<unk> is unchanged.

Ultimately 30 million and will be spent and early 'twenty and 'twenty, two primarily reflecting the timing of payments.

'twenty 'twenty, one and total capital expenditure guidance for an average corvo is 135 million and including this up expansionary expenditure.

On slide 10, and Syncrude and finish 'twenty and 'twenty on a strong.

And it's 164th year of continuous production the operations set several records, including ore hoisted total material hoisted and mill throughput all while achieving its lowest ever recordable and all injury frequency rates.

Zinc and copper production, both achieved annual production guidance would think approaching the upper.

Note the guidance range zinc.

Zinc production finished strong with a grade driven significant increase in production during the fourth quarter.

The guidance for 'twenty and 'twenty. One is 71000 to 76000 tons on a cash cost of six five cents per pound and zinc.

The full year capital expenditures of $37 million for.

<unk> 'twenty and 'twenty were modestly less and guidance of $45 million.

Sustaining capital expenditure for 'twenty and 'twenty, one is estimated to total $50 million.

Around half of this is for underground development with the remaining amounts including production improvement initiatives underground control systems and infill drilling.

Bound duration efforts continue on existing ore bodies, as well as targeting dalby and bore tobacco and deposits, which remain high priorities.

Only 18000 meters of exploration drilling was completed in 2020, and we have an active program plan for 'twenty and 'twenty, one with 27000 meters of drilling planned as part of a 6 million dollar program.

Lastly, on slide 11, and Eagle performed extremely well again in 'twenty and 'twenty the eagle team's record for consecutive days without a recordable injury continued into the fourth quarter, passing one year and achieving 412 days as.

As mining progressed and to the higher grid regions of the Eagle East ore body nickel production increased nearly 25.

And 5% and copper over 30% compared to 2019 full.

Full year production guidance was achieved with average grades and recoveries at both models and improving year on year.

On the strong operational performance and increasing metal prices Eagles already first quartile cash cost improved further achieving an average of 10.

10 cents per pound of nickel for the year and an impressive 89 cents negative in the fourth quarter.

With minimal capital expenditures of just over 11 million Eagle generated nearly $140 million of free cash flow for the year, including nearly $60 million and the fourth quarter.

<unk> remains well positioned to generate significant.

Free cash flow and the coming years, 'twenty and 'twenty, one nickel production guidance is 15000 to 18000 tons and copper production guidance of 17000 and to 20000 tonnes.

Underlying costs are very stable here and our 50 cents per pound of nickel cash cost guidance assumes a conservative byproduct copper price of 295 per.

Amongst other assumptions.

'twenty and 'twenty, one capital expenditures are estimated to total $15 million.

Slide 12 provides a summary of current guidance as discussed and the operational section. This production guidance along with our capital expenditure guidance of $610 million is unchanged from when.

Pound provided in late November.

Also as previously outlined exploration expenditures are expected to be $40 million in 'twenty and 'twenty, one with over 140000 meters planned.

As we are all well aware the global effects of COVID-19 are continuing to evolve while we continue to proactively manage under our readiness and response plans.

Originally in our guidance does not reflect the potential for significant disruption to operations due to COVID-19.

Turning to slide 13, we have and excellent growing production profile from our current assets. We are guiding for copper production to increase roughly 25% this year and a total of 30% by next year compared to 2020.

And early on increasing grades I candle area and full year uninterrupted cash contributions from both candle area and Chicago.

Zinc production is forecast to modestly increase in 'twenty and 'twenty, one and as the zinc expansion project is completed and fully ramped up as such and increased 65% and 2023 compared to 2020.

Primary roughly 230000 tons per annum.

Gold production is forecast to be 175000 ounces at the midpoint of guidance for this year and increase of 7% over 'twenty and 'twenty.

Of this nearly 110000 ounces are unencumbered overseas full market pricing.

In conclusion.

And I'd like to reiterate that the investments we have made over the past several years have positioned lundin mining well to benefit from the current from commodity price environment with multiple years of production growth decreasing cash costs and free cash flow generation ahead.

And with that operator, I would like to open the lines for questions.

Okay. Thank you.

And if anybody would like to ask a question. Please press star one on your telephone keypad again that is star one on your telephone keypad.

Your first question comes from arrest, while Coca from Scotiabank. Your line is open.

Hi, Good morning, I was wondering if I could ask a couple of questions about candle area.

Typically.

Did I hear you correctly that you said great profile, there and the first half of 'twenty, one will be similar to the back half of 'twenty was.

Was that correct.

I'm not not exactly the first half orders, but we will start the year and those levels are.

We expect that to improve.

Throughout the year.

Okay, so you're going to start off around kind of.

Five five level, what can you give us some insight in terms of what should we assume for the average grade for the year or if it's going to start out got low.

Well I mean, you can probably back into it from the guidance but.

And when you look at last year.

The golar directly in line with our technical report issued in 2018, when you look at the grades and.

So there shouldn't be any great surprise us we know that it gets better as we got deeper and the pet and so we'll have and improving profile.

Peter I don't know if you want to comment on that we don't typically guide.

Or are we worried but just in general and general guidance there and.

And but it's as you said, we know that pace and.

And crews and.

With that and we're getting deeper and deeper down and facetime.

And that's that's all according to the technical report from 2019.

On <unk>.

Now that you've completed the mill the mill optimization can you give us a sense of what kind of throughput levels are you achieving and ore hardness issue gone away.

Yeah.

And I'm sure Peter did you want and take that one.

Yeah, so well first of all female for them and the mill optimization project.

The aim was to increase throughput by 4000 tons, a day and also improve metal recovery and copper by one 7% that was and where they go on to that.

We are seeing better throughput.

Also get.

Lower down on page 10, and as we've said.

And then the low when we get down and I'll take time to talk to the ore and we know that.

The ultimate throughput rate also depends on the ore blend at the time and on the same time, we're feeding more and more.

Ore from the underground, which is harder so it's going to be a combination of the blend.

<unk>.

It's laid out what we're seeing better throughput.

And as we get deeper down and faced and also see we have more power and all the secondary mills.

Are you getting close to that kind of 80000 tons. A day level is that kind of what we should be thinking about.

Well, we don't disclose.

The info on it this quarter.

But the throughput on improving.

Okay, but is that ultimately where youre going for working on malaria is going with the improvements 80000 tonnes a day.

Yeah.

Been there we've been there aurist, yes at those levels and so.

We just.

But just with the last installation and the ball non motor we're working on new liners. So we'll probably have a couple of months, where we work out the kinks and the new with everything and place them, but yeah. I'd say that were looking at that is as a typical level that we would into.

<unk> financing.

On a consistent basis.

Thank you very much.

And your next question will come from Jackie <unk> from BMO capital markets. Your line is open.

Hello, and thanks very much just a couple of other project update questions, maybe first of all on.

And to achieve the debt EEP.

Can you maybe talk a little bit about re mobilizing the contractors there I know that and you mentioned that in the <unk>.

Early part of the call. It was it difficult to keep the contractors on site to the Covid and how is that situation in.

And Portugal, right now and is re mobilization.

On going well or is that at all and risk as you ramp that project back up.

Yeah, we don't see it as a risk we had built into our timeline that we would be mobilizing with less people on site and smaller numbers and and standard schedule. So that's built into our base case and Peter do you want to talk about the project.

And what we've been doing and the remodel.

Yeah, Yeah no share.

And so we have been removing people both on the ground on the surface.

At the moment.

Working with piping and mechanical.

Work on the ground of displacing.

And then on surface piping.

And mechanical work and from work and the grinding section.

And as Mary said, we have built that in and our and our time schedule.

And also working on the strict COVID-19.

Rules and restrictions on procedures. So we test everyone that comes back quite a people that outside of that area and to quarantine and angle.

And they could come on site.

We're making sure that everyone that is on site, it's fit for duty on them.

And does not have any COVID-19 symptoms on them.

Excellent.

That's great. Thanks, and and then maybe shifting gears just to Chicago.

It's hard to tell from from the release that came out yesterday.

And before I mean, it sounds like you're still kind of reviewing the options in terms of the size and scope of the potential <unk> expansion.

Are you able to give us maybe a bit of updated color in terms of where you're at on the drill program and on the studies and when we may expect to see.

A result or.

But to see sort of the study results and meet the options you're looking at is is there any color on on the timeline at this point to getting that completed.

Yeah. So for the low study and any released to the to the market as to where we're going with this study is that going to take awhile Jackie and.

Elisa looking at midyear internal review with our board of the various scenarios and we do continue to study the scenarios and you know and everything from the modest expansion work and up to and doubling so there's three primary scenarios that we're looking at but as you mentioned the exploration program will really.

Feed into that and it's been going very well and we did curtail the program early in the year and 2020, and but we ramped up quite quickly and we're able to complete more than the 40000 meters that we had originally targeted and then another 60000 meters. This year is what from the plan. So and we don't think we'll have any issue.

<unk> meeting that target and that will be important to and from the studies as well. So I would say that the next update that we would provide would be on and exploration update probably midyear. If we can.

And have a reasonable update at that time and we're working on some.

Different land acquisitions and other things.

And we hope to have those wrapped up within the first two quarters that we can provide and update.

And mid year, and then probably the studies will be a bit longer.

Before we come day ground on which which avenue might be approach.

Opiate for the expansion scenario.

Is this on.

This schedule it seems like it's a little different from what you had.

First thought when you acquired the property is is it.

Because of Covid and and the delays that you experienced and drilling related to Covid is it or is it a and issue that the.

The opportunities are just maybe there's more opportunities than you expected and your and your own you you just wanted to sort of investigate all of them are or what exactly is is the causes of the slowdown.

And exploration kind of taking longer than you initially thought.

Yeah I think.

Theres a lot of opportunity and it's really if you're talking about building a new plan and are moving significant infrastructure you want to make sure that you have the drilling done to support where you're going to put those things where the future center of gravity is going to be.

And make sure youre not repeating that what what's happened already which is infrastructure on and ore body. So.

There's.

And a lot of information coming from their drilling programs and a lot of good work ongoing on the various scenarios. So you know we don't want to it you take forever, but we do want to make sure that we have.

The best information that we can before we go forward with a major investment.

Sounds great.

Let me hop back in the queue, but I'll, let somebody else jump on and congrats on a great quarter and cash.

Okay.

And your next question comes from I I on this massive Lewis from Morgan Stanley. Your line is open.

Hello and good.

Good morning, and thanks for the presentation.

I've got a question from from my side the first one on.

Sure Bob again, just a follow up Jack its a question.

And.

Should we be thinking about.

We'll update on the expansion option.

And the 20% to now instead of.

And spark and proposed here.

And then the second question around and never score and seem to be putting on a local player focused on optimizing.

Or mix and development rates, but.

And you start going to benefit the Q1 production or shall we expect.

A slow start to the year for Ford and others.

And the third question from me Cisco and our capital allocation, we're seeing the step up and production rates this year and stronger metal prices, suggesting a nice step up and and free cash flow, but at the.

On the dividend.

Below 2%, so I'm just trying to figure out in terms of timing and they need additional cash returns and would you wait until.

And their degrees.

The risks before making any decision around that or.

Same type of wood, you have confidence that caught on.

And commodity price environment persist two.

And increase the dividend without necessarily waiting for Q4 once.

And it is fully <unk>.

Commission. Thank you.

Okay sure and.

So we got three debt.

Back to the first question on the timing and follow up to Jackie's question, which was around the timing of Jakarta, and we'll we'll obviously want to bring that forward as fast as we can we would like to have something in the back end of the year, but.

And I don't want to make any promises that we can't.

And although keep if we're not ready then and so you know.

And we will bring the information as soon as its realistically available and reliable to the market.

But yes, it could be it could be early next year, it could be and of this year.

We're working on that and we will.

Expedite that is and <unk>.

As well as we can.

And on average corvo for the oral Max see the Q1 production I would say you know rely on the guidance I'm, we did have a backlog of development activities, but.

I'll try and we are improving there Peter I don't know if you want to comment on the ore mix and the availability of stopes as being the key for a day for the production there.

No not more than you said I think it's really good day and rely on Q1.

Production forecast.

Continuously working on improving.

Mine productivity and.

Primarily focus on.

You said previously horizontal and vertical and drift drill.

Drilling development.

To be able to build inventory. So we can optimize both production and on the mix.

Yep.

Thanks, Peter and then on the third question on capital allocation.

<unk> and the the free cash flow and yes, we're quite happy and excited to see that we're in a great metal price environment and and have been investing over the last couple of years. So we're positioned well to take advantage of that we did increase the dividend by 50% and just.

Just recently so.

24 cents per share per annum is the current rate and we've.

Committed to our board to come back mid year with a review of where we are so we'll have an update on that mid year and honest and we're not going to wait until our Zap is finished or anything else will have to look.

At that midyear.

That's great. Thanks, Thanks, so much.

And your next question will come from Jack O'brien from Goldman Sachs. Your line is open.

Hi, Good morning, Maria Good morning, everyone.

Thank you for the presentation just wanted to clarify.

Firstly on.

The unit cost guidance, you've given and I think you mentioned for Chipotle that day.

There is no significant sort of change and operating costs year on year 'twenty. One on 'twenty is mainly a function of of.

Some of your assumptions on.

I noticed there's also.

The increase is that.

And <unk> and <unk>.

Zinc Rubin.

And we'll be at lower can.

Can you just confirm for those three mining areas as well, it's really just a function of assumptions or are there any sort of underlying considerations.

We should also factor that's my first question.

Yeah, it's a combination.

Nation of debt the output and and.

And the unit costs on a cost per ton milled and each of those places is very stable. So we don't expect any step change and costs and our budget assumptions are in the table, where we put our cash cost sources.

Pretty small so you.

You need and magnifying glass to see them, but we.

We do use say for example, a 475 real with our assumption for our 2021 budget.

And we know that that is in our favor.

As well as the copper price, which.

We budgeted at $2 95, so that's just an example.

The Euro U S at $1 20.

And the Swedish.

Swedish krona $8 50.

So depending on where that goes it will affect the cost profile because the costs are and those local currencies.

But underlying costs.

And there is nothing.

Fundamental that's changing and the business and that would affect those costs.

Got it thank you and just a couple of <unk>.

And we'll follow ups.

Are there any can you remind us just if there's any other sort of union negotiations due in 2021 across.

Your portfolio.

And typically with Brazil, it's an annual negotiation and day pass quite conley and with that would've event and our.

Our Chile and mines, which are the ones of course that people will be most concerned about and typically is a more prolonged.

Costs from day and difficult process of negotiation, we don't have any expiring contracts until 2023, and we just agreed a new contract and Portugal, Peter I'm not sure of the duration of that I know theres, an annual salary adjustment but.

I think the Union agreement itself hasn't changed and many many years.

Ours.

Correct.

Yeah and then.

Annual Yep, and we just closed the ones and Sweden as well.

Yes, Yep and Eagle mine, it's not unionized.

Okay. That's incredibly helpful. Thank you very much.

And then just a final one.

And you've touched quite a lot on on some of your <unk>.

<unk> and and sort of income expansion opportunities first I was just wondering and obviously I noticed your guided exploration spend.

And so as you sort it down fairly meaningfully.

'twenty one on <unk>, so just interested and thoughts there and then.

I guess the follow up.

And given that there is so much and sort.

<unk>.

Your existing footprint.

Or near it.

Should we assume that kind of internal opportunities on your first priority over M&A.

And I would say that they're not mutually.

Mutually exclusive and if we found it and projects, we would definitely take advantage of that and and invest and drill and we continue to look for prop.

Properties that we can and.

And develop and drill and we have a team and Toronto and in South America looking at opportunities on the early stage exploration.

And so you.

We don't have any.

You know we have a lot of opportunity around our sites, which is why you see the big budget around our sites and it is very perspective, but I wouldn't take that us and indication that we don't have interest and other opportunities.

And I'd say the opposite that we would like to have additional opportunities, but we do have very good opportunities in and around our site I think one of the big differences is the zinc.

Anchors and program is a lot less in terms of spending this year, but that's because we've moved a lot of the drilling from surface and underground.

So even though we still have a lot of meters planned.

I think it's 27000 meters Peter correct me if I'm wrong.

We still have a lot of meters claim, but they're they're drilling from underground.

Underground base, so it's a lot cheaper than the surface drilling and so that brings.

Ground down quite a bit so.

But no we have okay, and a lot of prospects IV lot ongoing and we will continue to be active on the exploration from.

Great. Thank you Mary.

And your next question will come from Daniel Major from UBS. Your line is.

The budget and.

Hi.

Thanks for the presentation.

Couple of questions slightly follow up questions.

And anyway.

On the Covid.

Cash per tons and on the balance sheet.

If we look at the cash generation this year and so it left a superstar.

Oh Palace out there right.

And there's going to be a large net cash position at the end of the year.

Can you give a.

Preference at this stage.

Special dividend.

For buybacks and do you intend to be exercising anything on the NCI B at this point on at this share price level first.

The site.

Yeah, So I would say that given where we are on the cycle and where high above our long term pricing and you know we're not at all on all time high for our stock price, but we have a very good healthy stock price, it's probably less likely that we would undertake a buyback at this point and.

And question go.

And more likely to get returns and other ways.

Okay very clear thanks, and then second question.

And then from what it sounds like on your.

Comments around the two potter expansion.

And I would not like to have much till the end of the year.

Early next year.

Is it fair to assume them and it's unlikely that you would be able to deploy meaningful amounts of capital in that project until 2023. If that is the case should we be assuming cap.

Capex somewhere ever on a 450 460 million Mark and 2022.

And I'm sure what.

You'd probably be able to get the number from our technical reports because they're pretty fresh.

And I I.

And I'd say, you're probably and in and around the right ballpark I mean, it all between call. It 500.

On a million and.

375, depending on where we are with cash push backs and the various pits.

And so there there is a bit of a range there and I would say.

Averaging a.

400, plus or minus 100, depending on what we're doing.

And where we are.

But I wouldn't say your numbers off of based on.

And without all that information right in front of me for for that year, I wouldn't say that you're.

And then materially off base.

And is it is it correct.

Wing and it's unlikely that there's a huge amount of upside risk from that.

Driven by Ciabatta.

No and I would say that if we are going to invest and on project that would be one and with a good return and so where you have cash flow.

Reducing in the near term you should have a naphtha and the long.

Term.

I think 20, I'm, just trying to remember from them from a budget and he 'twenty 'twenty, two our capex and similar levels, but slightly lower than 'twenty, one I think and then and a little bit of a drop off 'twenty three 'twenty four do you recall.

Yes that is correct Mike.

Okay.

Great. Thanks.

And your next question will come from.

And I'll be alcohol from Deutsche Bank. Your line is open.

Good morning, Congrats on a strong set of results and makes such a challenging year.

Thanks for taking my questions I have.

And please so the first one is on the balance sheet. When you think about balance sheet is in a net cash level. You think about in case you have to execute on a transaction and my second question is a generic question on inflationary pressures a lot of your peers, who have reported have highlighted inflationary pressures coming through are you also seeing debt.

Two questions on your operations.

I'm sure I mean, and ask Jen he too feel that because I know that she has been working with the sites on our minimum cash balances and also has been and.

And monitoring the inflation and other cost pressures, so ginnie and do you want to take those two.

Can.

And maybe on mute.

I was on mute sorry.

I'm, sorry, I didn't catch all the first question can you just repeat the first question.

Yes sure.

Oh I'm sorry go ahead.

Sorry. My question was when you think about the balance sheet is there a net cash level do you think about and case you have.

If you would on a transaction.

Yes.

Yes, sorry.

No we will maybe think about executing on a transaction.

You know we look to.

We can always on boral, alright, two to execute on transactions. So we don't manage our net cash for park.

To transacting.

So when you look at shareholder returns from our operations and then we can look at.

Borrowing if needed to to it.

Just on transactions.

And then I think your second question was on the inflation.

And.

Perfect.

Well, we're not actually in any significant and general cost inflation and our operations at this time.

And where we are seeing some inflation is or expecting some would be and some specific consumables like for example on the grinding media we are expecting some increase there.

And some of the current steel prices and.

And again another one like the diesel again, it's another area where.

You know the price will be impacted by broader market, but generally I would say our operations and not seeing significant general inflation and I think when we looked at some of our.

Service contracts some of those on many of our operations that long term service contracts. So again, not seeing a short term inflation impact.

On a country by country basis, I think Brazil is one that's experience a little higher inflation and and the recent here and I think that there though.

And that's what we have going for US is that the exchange rate there is a quite favorable and so its offsetting any of the inflation that are that we might see so again I guess overall really not expecting you.

And you know we're experiencing cost in line with our expectations and more of an impact I would say on.

Chip and times and prices at this point.

Got it thank you.

And your next question will come from I on this Master list from Morgan Stanley. Your line is open.

Hum.

Couple of follow ups if that's.

Okay. The first one on Chicago and.

In terms of the expansion and my understanding was that if you were to go down to the problem and for significant expansion that same deal to a 50 or 100% of existing and through.

Throughput trades that would require them expense.

Expense permitting process could.

And could be at a time.

Could you just remind us how low could go to.

First production if you were to announce a plan, let's say first agenda 22 on loans.

Good day to actually get the approval and.

And hypothetical construction timeline.

And then secondly in terms of.

Working capital and was just wondering because you have had the disruptions around kind of the launch of hub and Q4.

Is there any excess inventory.

But you may have to work through or do you feel that.

Overall inventory balances and awards.

General and use it.

Normal level also at the end of Q4. Thank you.

Okay, Yes sure on the.

<unk> expansion and permitting timelines.

On the permitting process and Brazil has changed recently it used to be based on.

Throughput levels, and tonnages and things, but now.

It's to our footprint based type of scenario and Pete.

I know you've been looking into this and I have been talking about the permitting timelines and potential timelines can you give a little more color on that.

Well it's a.

A little bit early to say on on the.

The timelines for the project.

They are and will depends on on.

And what alternative is chosen at the end of the day.

Permitting timeline.

And they have been increasing so it's also difficult to say and it's going to also reflect.

Finally on what the alternative is chosen.

So I don't know if we can say much more now on that.

Yeah, I think and if you look at them.

And you EIA and Chile takes it used to be 24 months and now it's probably closer to 36 months, but it.

It would probably be.

Something less than that and theres, probably it probably would be less than half.

And a lot, but there might be preparatory works that you could do in the meantime, and other things that you could do to advance that project, while you're waiting for certain permits so.

Again, and you know.

Peter's credits, it's difficult to say exactly but we would anticipate that we could.

Could start.

Have a dark and do different things within the existing footprint and.

And as we wait for any.

Any major permits that are required.

On the working capital excess inventory Ginger did you want to address that one I don't I'm not aware of anything that you maybe.

Yes sure.

Have a little bit more and the inventory than we did at the end of the third quarter and that's because we did have a shipment that delayed a candle area, but I would say it is in line with what it was at the end of last year. So I wouldn't say it's debt excessively.

Too much inventory at the end of the year.

But it is a little bit higher debt was that Q3.

Okay, great. Thank you and thanks again.

And your next question will come from John Tumazos from.

Your line is open.

Thank you very much.

Uh huh.

Could you review what your size.

Thresholds are for new projects in terms of mine life total tonnes copper equivalents.

N P V or I R. R.

There.

Our few big pore free.

He's available, but there's a lot of little projects dancing around.

Yeah, typically we went and we'll get something under 50000, and southern copper equivalent and unless we felt there was a prospect to get it above that.

And the reason for that is that you know.

And.

Operation takes an equal amount of management time and effort if its 20000 tons or if it's a 200000 tons. If it's if it's got challenges. So you know we don't want to be in a position where we have you know 15.

15 mines and.

10 of them offer you, 5% of your NAV and you know that's a that sounds like a big managerial and administrative nightmare.

Not a lot of or a return free offered so we'd rather focus on things that are going to be meaningful and if we're going to acquire something too to make sure that we're spending our efforts on things that are going.

And then make a difference for the company.

And.

And then in terms of mine life I think Eagle was a very special one for us and it remains very special in terms of being and exceptional ore body and you'll see from the free cash flow is that its an excellent operation.

And we wish that it had a longer mine life and.

And so typically with mine life, we're looking at things of a greater than 15 year mine life and and recognizing that you know where we're lucky with Eagle that we are we were able to find Eagle east and that we're benefiting right now for us from some very good pricing and but.

In this business you know we've been below our long term copper price for almost the last 10 years and.

So if you have a short mine life and you invested a longterm pricing you may not make your money back if you if you don't have.

If you can't write at least one or two of the cycles then you.

And you you risk not making your money back and this business so.

So we do look at that from time to time, but we really have been sticking to our criteria in terms of what we're looking for.

Does this mean only porphyry and <unk>.

And you can save time by just skipping Vms deposits.

Okay.

No the none of our Alaska acquisitions were poor freeze them you know Japan.

Japan is not a and <unk>.

Depending on who you ask.

Kendall areas and I O C G and Eagle with a sulfide so it doesn't necessarily mean that we won't look.

And those types of ore bodies, and we do have a very good underground expertise within the company and we have you know that's one of our core skills and so you know a large block caves and and.

And I'd add candle area. For example, we're doing 14000 tonnes per.

A day, which is.

One of the larger non block cave underground mining operation. So I think you know our our minds are open and we will look at.

We will look at various options for things.

Thank you.

Yeah.

We have no further questions. Thank you Oh wait a moment.

[laughter].

We have a jackie.

Chris closely John Kim answer are you finished checking your question on this thank you.

Okay.

We can maybe I'm sorry is it my.

Okay.

Sorry about that I, just talked on and again at the last second and I just wanted to circle back on your dividend.

And I realize that day.

And it just came out today for the the sixth sense dividend per quarter, and and I know and you know the day and a dividend announced he's probably not the right time to ask about the next dividend announcement, but.

I turned to just kind of curious if you could talk through sort of the.

The expectations, you're using when you set the dividend and and I realize you've already gone through the commodity prices, but I'm thinking more in terms of like.

You know how much how much.

Spending do you do you think that you would serve become.

And bolt on.

With I know you've kind of talked about this already on net cash, but like what kind of net cash and net debt level would you be comfortable with going forward and and incorporating that into that so the ship had expansion or any kind of new future projects can you give us just a little bit more color in terms of like where you might see the dividend.

Dividend from here you mentioned earlier that.

You you might.

Prefer not to do a buyback at this point, but maybe some other options is there is there a possibility that you would incorporate a special into the into the mix at some point is can you just give us a little bit of color on on what your thinking is there and all that.

Yeah. So that's that's what we.

Comfortable discussing with the board midyear and so we'd like to you know, we've just come off a fairly rough quarter and and we'd like to see you know a good chunk of time with some steady production and to see the continuation of the metal prices. We also know that the market has been heating.

Hang up and in terms of M&A, we want to look at the opportunity set and what options there are for investing and some accretive transactions and so we'll look at that and connection with our cash balances and the expectations going forward mid year, and and I I'd say, our general view is.

As you know you don't borrow to pay a dividend you borrow to invest and you pay your dividend from cash flows. So that's the mentality that we use and we look at the dividend and I think Jan he talked about the net cash and we have no intention of hoarding cash on the balance sheet.

You know for a rainy day or anything like that.

That's not what we want to do we want to you know on.

Our our assets, including cash to give us returns. So we'll look at that mid year.

Got it thanks very much free.

Okay. Thank you everyone for participating in the conference call.

And I'm looking forward to reporting a good strong Q1 results to you in April.

Take care, everyone and this will conclude today's conference call you may now disconnect.

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And all.

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