Q4 2020 Ero Copper Corp Earnings Call
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For the Fox from ship.
Okay.
Thank you for standing by this is the conference operator, welcome to the Arrow Copper Corp for 'twenty 'twenty year end financial and operating results Conference call. As a reminder, all participants are in listen only mode and the conference is being recorded after the presentation, there will be an opportunity to ask.
Questions to join the question queue. You May Press Star then one on your telephone keypad.
Should you need assistance during the conference call you may signal, an operator by pressing star and zero.
I would now like to turn the conference over to Noel Dunn Executive Chairman of ERO copper for opening remarks. Please go ahead.
Thank you operator, thank you for you and good morning, everyone.
And yes release announcing our fourth quarter 2020 year end financial results is available on our website and on SEDAR.
That was our off financial statements and MD&A for the year in December 31st 2020.
We will of course be making forward looking statements on this call and involve risks and uncertainties concerning the businesses operations and financial performance of the company.
We would refer you to our most recent Aif also available on SEDAR for a discussion of the risk factors of our business and then potentially impact on future performance.
Unless otherwise noted all amounts mentioned on this call are in U S dollars.
Joining me today.
Well, David strong interest co founder and Chief Executive Officer.
Wayne drier <unk>, Chief financial officer market to fill up our ERO as president of our newest member of the ERO team Courtney Lynn Vice President corporate development and Investor Relations.
Before discussing the financial performance and overall strength of the company I think it's worth reflecting that our 2019 year results results coal, maybe 12 months ago to the day.
We're embarking on a highly uncertain path you being able to effectively manage COVID-19 across all our operations.
Looking back on 2020, I'd like to congratulate our entire team for what has been a tremendous assets.
Our operations continue to perform well and that all our key projects remained on track.
We continue to remain vigilant as an organization with respect to COVID-19 for 2021, we have increased commitments to the communities in which we operate two eight and local management efforts.
Our operations, we continue to implement the same successful mitigation practices.
Commenced in early 2020 to ensure the continuity of operations and the health and wellbeing of our in country colleagues.
Our business is running extremely well.
And we continue to have no material disruption to our operations supply chains all sales channels.
The hard work and commitment of our team in these assets.
Yeah.
2020 was an excellent year for the company with adjusted EBITDA of $207 million rising 54% on the year before.
Adjusted earnings of $121.27 per share rising 35 per cent.
As importantly, we ended the year with a record cash balance of 62, and a half million dollars, putting us in a strong position going into 2021.
Yesterday, we finalized the amendment to our credit facilities of BMO in Scotia.
World and the outstanding principal of our senior secured debt into a single $150 million revolver now Dew and March 31st 2025.
This amendment eliminates principal repayments previously due in 'twenty, two 'twenty, three and 'twenty for leaving us well positioned to execute on our growth objectives over the near to medium term.
Our strategy for the company is simple it can be broadly summarized in three key areas.
Number one continue to advance all available levers within our low capital intensity like high margin growth pipeline.
To remain focused on innovation and operational excellence.
Mm three align our organizational objectives are for national outputs, such as generating high returns on invested capital.
With input from all key stakeholders in order to Foster trust and enable sustainable growth for years to come.
By all metrics 2020 was a remarkable year for the company.
And our underlying business is extremely well positioned.
As the world shifts towards Decarbonization fundamentals for copper are frankly never looked with promising and it's an exciting time to be a low cost.
High margin producer.
I'm also delighted that over the years, we have now built a world class team or excuse me on a number of high quality growth projects within our portfolio that is not enough started the year with the strongest balance sheet, we've ever had as a company.
With that I will now pass the call over to David to provide a brief review and update of our operations.
Wayne will provide a review of the company's financial performance.
Yeah.
Thank you.
Our fourth quarter and full year operating results were pre released along with 2021 guidance in early January.
So I will just touch on a few highlights from the 2020.
As well as some of the programs under way this year, so as to leave sufficient time for questions. Following the call.
Focusing on operational highlights and outlook for our Mcse operations in the criticize valley closed.
Operations continue to perform well throughout the fourth quarter.
We produced 10018 tons of copper in concentrate resulting in full year production of 42814 tons of copper.
Achieving the high end of our guidance range.
During the fourth quarter, we moved 483447 tonnes of ore grading, 2.26% copper and achieved metallurgical recoveries of 91, 7%.
Noteworthy improvements in metallurgical recoveries during the second half of 2020, including the fourth quarter are largely attributable to the commissioning of the Hague mill in late 2020.
We continued to see improvements in metallurgical recovery, thus far in 2021, and while process optimization work around the unit is ongoing we are very pleased with its performance so far.
Resulting in full year seaborne cash costs of 67 cents per pound for.
<unk> well below the low end around 2020 guidance range of 70 to 85 cents per pound.
Operating cost performance throughout 2020 was underpinned by operational execution as well as currency and byproduct precious metal price tailwind all of which have continued into 2021.
Our reaffirmed guidance for 2021 continues to reflect this operational excellence we.
We are guiding for a total of $2 7 million tonnes grading, 175% copper to be processed during the year.
Producing between 42, and 45000 tonnes of copper in concentrate after improved metallurgical recoveries.
93%.
At the Nx Gold mine, we achieved record quarterly production since commissioning the center Antonio vein.
World Class operating costs.
During the quarter, we produced 10789 ounces of gold at all in sustaining costs of $608 per ounce.
<unk> full year production of 36830 ounces of gold at all in sustaining costs of $628 per ounce, a 21% year on year improvement in production and a 29% reduction in all in sustaining costs when compared to our 2019.
Our results.
We are guiding for between 34500.
37500 ounces of gold production from Nx gold.
In 2021.
Our capital expenditure and exploration excuse me and exploration guidance for 2021 reflects our commitment to a high return organic growth with total consolidated capital expenditures, including growth projects expected to be between $95, five and $109 $5 million.
In total consolidated exploration expenditures of between $38 million and $45 million, both between Mcse and Nx gold.
Throughout our portfolio as Noel mentioned, we remain committed to advancing all of the assets.
Firstly at the Mcse mining complex, we hit the ground running on our exploration campaign in January and currently have 22 drill rigs operating with a focus on discovery.
Throughout the course of this year, we expect that we will continue to demonstrate down plunge high grade continuity within the deepening extension zone of the pillar mine and demonstrate the potential for mine life extensions of the <unk> mine through.
Drill results within the southern familiar as Cardinal.
With those near mine programs well in hand.
Our objective for this year on the exploration side is to demonstrate what we see is completely untapped potential of the cortisol Valley. We're excited as we've ever been in this endeavor.
At the Nx Gold mine, we have nine drill rigs currently operating on the largest exploration program in the history of the mine.
As a brief anecdote is worth mentioning that after this year's program approximately 85% of all exploration drilling conducted in exco would have been under euros.
Stewardship.
The program of Nx is focusing on extending mine life through extension and upgrade programs within the incentive Antonio vein and advancing the first regional campaign ever conducted on the wider Nx gold land package as we look to increase production by utilizing our spirit mill capacity.
We expect more results from this in the coming months.
Lastly at the BOE Esperanza project, we are progressing our optimization study and are confident that the new project. When it emerges from this work later in the year should speak for itself and demonstrate that deserves a place in our operating portfolio.
Yeah.
Our ultimate goal for 2021.
To end the year with a robust pathway in place to significantly increase our production profile in the near to medium term I first quartile operating costs.
Consistent with our scheduled quarterly updates results from our ongoing exploration programs at both M. CSA and ethics code will be further detailed in our upcoming exploration update which we typically released four to six weeks following our financial results.
I will now pass over to Wayne, who will provide an overview of our financial performance.
Thank you and good morning, everyone. Following on from Nolan David's comments, the fourth quarter was an outstanding one for the company.
While quarter on quarter copper sales volumes were lighter relative to third quarter increased contributions from gold sales from Nx Gold mine and favorable commodity prices contributed to topline quarterly revenue of $91 $2 million in line with the prior period.
Total revenue for the company in 2020 was $324 $1 billion, a 14% improvement over 2019.
As mentioned, we achieved another great quarter with respect to operating and financial performance metrics across our operations.
Strong revenues paired with low operating costs throughout 2020.
In the fourth quarter contributed to another record quarter of adjusted earnings before interest tax depreciation and amortization totaling $67 $2 million.
Full year, adjusted EBITDA totaled $207 $1 million, a significant 54% improvement over 2019, and reflective of the strength and profitability of our business in 2020.
Cash flow from operations remained strong at $38 6 million during the fourth quarter total.
$162 $8 million in 2020.
Relative to the end of the third quarter, a strengthening of the Brazilian real against the U S dollar and a reduction in underlying foreign exchange volatility through the end of 2020 resulted in a significant unrealized gain of $27 $7 million on our foreign exchange derivative contracts and additional $7 $7 million gain related to.
For the translation of our U S dollar denominated debt held in Brazil.
During the period, we recognized approximately $7 $8 million in cash settlement of maturing foreign exchange contracts, including an opportunistic settlement of a portion of our contracts maturing in 2021.
In the near term, we anticipate approximately $4 million to $6 million in cash settlements of maturing foreign exchange contracts per quarter, depending on the prevailing exchange rate.
On the flip side, however, the benefits of sustained weakness of the Brazilian real relative to U S. Dollar disproportionately benefit our business as evidenced in our area in 2020 results.
We expect this trend to continue through 2021.
Our headline net income for the fourth quarter was $65 $8 million for 71 cents per share and after adjusting for the non cash components of the foreign exchange gain our adjusted net income for the quarter was a record $37 4 million or 40 <unk> per share fully diluted.
Adjusted net income for the year totaled $117 $3 million or $1 27 per share.
The underlying growth in net profitability of our business over the past several years is evidenced across all of our financial metrics, but I would like to highlight that our 2020. Adjusted net income reflects a 33 cents per share improvement over our 2019 full year results and a staggering $1 15.
<unk> per share improvement when compared against our consolidated 2018 performance.
I'm pleased to say that the company's balance sheet and overall financial position has never been stronger and we expect this trend to continue.
Our balance sheet at year end reflect continues to reflect consistent quarter on quarter improvement in financial performance and strong cash flow generation.
Total cash position at year end was $62 5 million compared to $54 3 million at the end of the third quarter.
In addition, as Noel mentioned, we successfully amended our existing credit facilities with BMO Ensco share to rollover the outstanding principal amounts into a single $150 million senior secured revolver payable in a bullet debt maturity approximately four years from closing, which will be March 31 2025.
The company's net debt improved by $12 8 million quarter on quarter as a result of both increased cash position and repayment of some of our BRL denominated short term lines of credit debt withdrawn during the first quarter of this year.
Last year I beg your pardon.
In summary, our business continues to run exceptionally well and generate significant cash flow, particularly at today's metal prices and foreign exchange rates on that note I'll hand, the call back over to you know.
Thank you and I'd like to reiterate the key themes for this call.
One exceptional operating and financial performance metrics across our core businesses through the end of 2020.
Continued operational net anything into 2021 Pat.
With a strong balance sheet leaves the company extremely well position to execute on our growth strategy.
We're focused on advancing several high value projects and objectives within our portfolio.
On the exploration and the project optimization fronts.
As many of you heard me say before the combination of first quartile operating costs low capital intensity on top for growth potential and a proven team of dedicated people driving organization Port has and continues to be the foundation of our business strategy.
And it's clear from all our prospectus that the best is yet to come for this company.
Thank you for joining the call we will turn it back to the operator, who will open the line for questions.
Thank you we will now begin the question and answer session.
Joining the question queue you May Press Star then one on your telephone keypad, you will share our atone acknowledging your request.
You are using a speakerphone please pick up your handset before pressing on it Keith.
To withdraw your question. Please press Star then two.
Well pause for a moment as callers join the queue.
The first question comes from Oreste <unk> with Scotiabank. Please go ahead.
Hi, good morning.
I wanted to touch base about strategy for this year.
The last time, we had a call a copper was nowhere near $4.
And I'm curious with the excess mill capacity that you have and your cost guidance for this year being.
So low even below a dollar a pound do you have any flexibility to perhaps put some lower grade material through the infrastructure to to increase copper production.
Even if it increase your cost base a little bit.
Just given the margin in the current environment.
It's David.
We do.
Have some some flexibility in MTS.
As you know our Ceos and their team are looking at opportunities with regards to that as you do know we are in the process of reopening the soybean.
Open pit mine, which I think is quite timely considering.
Considering the move in the metal price.
The opportunities that we will have over the course of not only later this year, but the next couple of years to mine more material from it.
But we do have some flexibility within the system and <unk> is looking at that.
Now, but nothing that we can commit to in the near term.
Okay.
And just again focusing on growth.
The higher price environment does it does it do anything with respect to strategic thinking around Oh Esperanza zone.
And I'm just wondering if you're if this may open the opportunity.
Bring that forward and you're getting you're planning a sequencing of growth.
Absolutely.
As a lot of people know.
Last year, we did guide and we did discuss that we were looking at updating the.
<unk> Esperanza feasibility study as part of that review and looking at the update.
We saw opportunities to optimize the feasibility study that has been initiated and that work is going is ongoing and we hope to have something announced ideally sometime in the third quarter.
I think by the body language by the statements that we've made we are free.
Early.
Excited about some of the prospects that we're seeing with regards to Beaumont.
Irrespective of what the metal price for US I think as we said and I said on the call.
<unk>.
We will speak for itself with regards to the.
The robustness of that project.
When all is said and done so I think be on the lookout for something in the third quarter, but certainly we are internally starting to feel a lot more bullish with regards to the prospects for Boeing.
That's great I appreciate the color. Thank you.
Sure.
The next question comes from Stephen Iona.
With Cormack Securities. Please go ahead.
Okay. Thanks, very much guys great to see another strong quarter I'm just.
Not to harp on any issues, but just on Nx gold. They know late last year, you started started running into some geotechnical issues.
The paste fill plant installation are those sort of manageable for the for the time being or have you had this sort of change the mine plan, how did that paste fill plant.
With the Geo Tech issues, we did we did change mine plan last year.
In order to mine different area of the mine the Geo tech issues with respect to require the pace for our in a very specific area of the mine it's not throughout.
The mining sequence.
What we have done Stefan is we've taken a reasonably conservative approaches share towards production.
Even though we know.
The timing of the installation of the pace for plant by our expectation is once the peso plant is up and running that will see some significant.
Improvement in production.
From that particularly area, but we're going to take a cautious approach with regards to guidance okay.
Okay, Okay, great and then.
I know there was some talk to last year just on the regional exploration around EM CSA that just sort of given COVID-19 logistical challenges that are there.
Regional front, the things that sort of maybe slowed down or were slightly curtailed is that still the case or or sort of things back up to sort of full steam ahead on the on the regional effort.
I'd love to be able to say, we're 100% full steam.
I think we're probably 85 are in.
In that we have had people.
N able to go to site, but we are still not able to do that on a regular basis from North America. However, we have mitigated that.
Somewhat with the hiring of some additional support in Brazil for the ERO team there.
And we're very very happy as we said we've hit the ground running in January with the regional exploration program the program overall.
And I think it's very much watch this space.
As we continue to move forward in the first half of the year.
We're doing.
Doing some interesting stuff, let's just leave it at that okay, great well look forward to updating you in sort of four to six weeks. Thanks very much guys.
Okay.
The next question comes from Jackie <unk> with BMO capital markets. Please go ahead.
Thank you very much I guess I'm, just maybe to start off maybe just following up on <unk> question on boiler <unk>.
Oh God.
I think some color it sounds like on this optimization that you're planning to put out maybe in Q3.
Is that is it a feasibility study that youre planning to put out or is it discussion about what the optimization process is like can you maybe tell us exactly what where we're going to see later this year.
Jackie.
We have already.
Inherited a feasibility study and a 43 101, you cant revert to a lower.
Study so what we will be doing is putting out a full feasibility study that has been optimized.
I just wasn't sure if it was commentary about the feasibility study process off at least for study itself, but youre absolutely.
That's where we're putting out we're putting out this study and as you know you and I chatted debt the BMO conference.
Obviously, we don't want to get ahead of ourselves and get too far over our skis, but certainly the initial parts of this the study suggests that once we complete that feasibility study.
We'd like to start considering moving quite aggressively forward with potentially developing the mine.
That sounds terrific. Thank you mentioned essentially doubling your copper production at some point, but it should be Oh.
I really think most for you guys for that that sounds great.
If I kind of need to jump to another question on <unk>. Similarly, you mentioned Serbian.
Restarting.
I know in the press releases or later 2021.
Can you talk about the grade profile should we expect to see sort of higher grade first half and then the lower grade serbin affecting the grade in the second half is it is it sort of evenly split half and half or its urban coming in a bit later than what.
So for beam itself in 2021 production will be.
Much later in the year, we're doing some pre stripping right now.
In terms of getting that project going so it will be additive in the second half.
Towards the end of the third quarter going into the fourth quarter and when we anticipate first production there.
Okay. That's perfect. Thank you and.
Sorry, if I can just ask one more you mentioned in the in the release that you've got 5000 samples.
Prepared for PGM testing and then you have 3000 of them.
Thank to assay labs.
The only thing how many of them have actually been assayed. Then I think you did mention at the BMO Conference a couple weeks ago, there's still quite a backlog.
In the South Africa.
Can you give us a status update on how those are going versus your own assay lab, how that's starting up and like what it makes sense to bring some of those back and ask for them in house or once they're gone is it just easier to wait them out.
Yes, great questions.
So we had sent 10000 assay samples to sell Africa, all of which we received about 5000 back and we included that in our December exploration update on this.
The preliminary review of PGM potential and the Curacao Valley.
The remaining 5000 or so assays, we day on trickling slowly.
But I wouldn't say, it's a river.
Assay results coming in.
Are slowly coming in but are still in <unk> Africa at the lab there.
With respect to our own lab as we said to the market last year, and we announced we've put our own.
Our ability to do this test work that was hampered in terms of its startup from Pjm's. Firstly by the fact that we have to wait for standards to get.
Put together in South Africa.
Those standards were eventually sent to us.
Then unfortunately required for the calibration from a technician that then had to come out from <unk> to do that as well. So we're pleased to say finally, we're over that hurdle I think it was just merely a few days ago debt.
Mike and the team told me that they had been done so I anticipate.
And future that our PGM analysis.
Will speed up.
Do not have guidance for you, whether we're going to take a turnaround to get the samples sent back from South Africa to process through our lab I think what we'll do is probably leave them there and just continue to sample our own material in our own lab as we go forward now.
That makes sense, okay. That's it for me thanks, so much David.
Thanks Jackie.
The next question comes from Dalton Barreto with Canaccord. Please go ahead.
Thanks, Hey, guys hope, you're all doing well, it's been a while I wanted to pick up on what force.
He was asking about just given the run up in copper prices.
Youre associated thinking.
Just first of all given where copper is today have you guys made any adjustments at all in terms of your.
For your internal ROIC hurdle rate.
Youre looking at project.
No as we've always said Dalton.
Regards to ROIC.
It's trying to maintain first quartile operating costs.
I'm trying to generate as high return as possible with regards to.
The return based upon debt.
But certainly as we are moving into a higher metal price environment.
We are as a team constantly looking at the opportunities we have throughout the quarter some value with.
Our existing.
Projects and evaluating them against that ROIC, but let's let's be Frank.
One two and a half months three months into this.
Market, we're not going to jump.
And within the two to three months period and start saying, we're going to do X y Z as we go continue to work through this year.
Focus is still to fill the mill.
At EM CSA as quickly as we can in terms of generating the highest return we can whether that comes from some of our existing projects that are not in our mine plan right now.
It remains to be seen as we progress through the year.
But that is the first and foremost priority is to fill the mill.
And that is the intent and that's the guidance at northern I've given to the team.
For their work this year work towards doing that and whether that's from the regional exploration program.
Whether that's from some existing projects.
Or a couple of things are healthier and her team are working on in terms of optimization within our existing operations remains to be seen.
But we have significant amount of levers to pull I feel this year to be.
Looking at at year end, a very strong growth path going forward with regards to.
Yeah, ideally from my perspective getting too.
Potentially a doubling of production, but that remains to be seen that's the target we will work towards it and we'll see what we get at the end of the year.
Perfect that makes a lot of sense and then just maybe switching gears to <unk>.
Sure.
It sounds from you guys here.
Really excited about what's coming out mid year.
Is it your intention to try and build this thing yourselves or are you considering bringing in a partner.
That's far too early to even think about Dalton.
So we.
Cant, even look down that road right now.
But I think.
As you've seen our balance sheet continues to get stronger and stronger.
Every month that we continue in this we are one of the lowest cost copper producers in the world.
Margins on some of the highest in the industry.
So that just goes to the bottom line in terms of our profitability continuing to grow and strengthen our balance sheet.
But in terms of how we build power fund Boa.
We're not ready to have those conversations or to provide any guidance yet.
Okay, and then just maybe a related question on that.
Once you get past feasibility and Youre looking at progressing.
Is it going to compete for capital with the rest of your portfolio or whether you view that as kind of a standalone project.
Well, we'll be looking at as a Standalone project.
We have a number of levers that we as I said that we can pull within our organization.
Yeah.
I think its watch this space with regards to work, what we would intend to be doing.
But I think as a team we're feeling fairly comfortable and confident that the projects that we intend to advance whether the deepening project where the regional.
All sorting or even whether it's Poland, we feel comfortable and confident right now in the prevailing metal price environment that we're in.
Debt to our balance sheet has the strength to take those projects forward.
<unk> background as a strength to finance those.
Effective and.
Effective manner.
Yeah look if I could add I think the one thing that's important to understand both falls in this box as well. These are low capital intensity project. So that's one of the key aspects.
Zero.
Don't have multibillion dollar holes in the ground to build all of these projects, including Butler for extra.
Extremely low capital intensity.
And one of the reasons, we're excited about borrowers day.
Turns against that capital.
Okay.
Okay.
That's great. Thanks Nolan day.
Once again, if you have a question. Please press Star then one.
The next question comes from Craig Hutchison with TD Securities. Please go ahead.
Hi, guys. Thanks for taking my question.
And just one more follow up on Baas bronze is net project fully permitted at this point.
I know that one of the optimization efforts was to look at increasing the overall size targeting increased mineral reserves.
Guys go that route.
And then any permanent.
In terms of where the permitting is right now with regards to there is a construction permit has been sitting on the government's.
Governments desk in powder state.
For the last four to five years.
And as you may or may not know under construction permit we have not pulled the trigger in the past and the reason it has been pulled in the past is as soon as you pull that permit.
You have to begin construction within two years of receiving the permit and frankly, we were not in a position to do so.
With respect to the project as it stands today, our current guidance that we're receiving as we can move forward on that construction permit as is and and make adjustments going down the road.
But I don't want to get drawn into that as part of the whole process that we're doing right now in terms of looking at the opportunity and the mine and the potential.
I think yes.
Don't get drawn down different roads with regards to.
Okay.
Different ideas that were having with it without our guidance.
When it comes in the third quarter.
We see significant opportunity with regards to value enhancement with that project, but it doesn't necessarily mean the pits getting bigger.
Okay understood. Thank you.
The next question comes from Aurist, well Codell with Scotiabank. Please go ahead.
Hi, Thanks for taking the follow up question.
Hope everybody there is doing well.
It has been a long time I can't believe it now but.
My question relates to follow up just has to do with the balance sheet and whether you plan to continue adding on hedges on the on the BRL.
That's just a matter of fact going forward or is that something that's sort of debated on a quarterly basis.
No you want to pick that one up.
Sure.
I can for you.
All restaurants for the right, it's something we debate on a quarterly basis I mean fundamentally.
As you know we are.
Exposed to obviously to the BRL.
When we bought the company every banker in Brazil was telling us the BRL was going to $2 90.
We didn't take that view, but at the same time across our minds that we should have some degree of insurance.
For to protect our operations you can't really hedge for more than a year anyway. As you know maybe 18 months.
And.
It's in fact, it's an insurance policy gives you a chance to reorganize your business. So that's why we.
Part of the color program oversee the pandemic.
Kick volatility up and moved our weekend fundamentals of Brazil and moved the exchange rate significantly.
Firstly in the context of the hedges because it's about the color, but positively in the context of our business. Since you can make a dramatically more money. So what how do we think about it today, we think about it pragmatically.
So we have existing hedges and what we've been doing is working on the assumption that volatility will ultimately die down.
The world emerges from the pandemic in Brazil, as an export driven economy oil and gas flow soya beans, or iron ore will benefit from a recovering world you should all other things being equal expect the Brazilian currency to strengthen to a degree although fundamentally given it's a domestic issues are saved.
As rates and government debt.
For the limit to that expectation so.
We are therefore pragmatic we're not actively writing U.
Carlos we do roll some of the existing colors, we also opportunistically.
<unk> profit so when we kind of rather reduce the hedge where we can sell in the Brazilian reais strengthened.
Back towards five.
The fourth quarter, we are.
Optimistically, we Opportunistically went and took a took out a bunch of hedges I took a small cash loss, but that was a smart thing to do because fundamentally we thought that was that relative to short term rally in that thing would probably weaken again. So that gives you. Some insight we manage it for proactively we're not seeking to hedge our operations fully where copper.
First just let things roll at this point, given where the exchange rate is we don't anticipate.
The Brazilian currency just strength in a lot we expect to be in the five to $5 50 territory for most of this year and then we'll see where we go to.
But this is a yes.
When you say hedging people always think five years or something like that but really this is just a 12 to 18 months insurance policy.
So we manage it without kind of mindset.
Does that help.
It does thank you and just on sort of hedging strategy any thoughts about adding some downside protection on the copper price itself, obviously, you've got massive margins here, but is there any thoughts.
Just to maybe give yourself from put protection on the downside.
Well I think you answered it in that statement, we have massive margin, we've always said to our shelves when they've asked us this question.
The best hedge of a volatile commodity price has to be a low cost producer.
And.
If you're a high cost producer in Europe, and you're having to spend $500 million above the new plant or $1 billion to build a new project debt.
For sure you cannot think about copper hedging because you've got a bridge your way to the revenues of that new project.
But if you are in all case, when you've got low cost low capital intensity projects and you've got extremely low cash costs and we are tracking in the first two months of this year well through our guidance in terms of cash cost.
But who knows how it's going to turn out but if you have those characteristics to your business.
It's really tough speech to be saying to you our shareholders well, let me take away the copper price upside by hedging for buying puts here.
Uh huh.
It's not a space that people will receive I think we're just so well just so we all know tactically for it if we were to get into a position, where we got to spend 500 million Bucks lumpy shouldnt be thinking about in this environment, but that's the only time that we were really.
Spent for that and we've been very consistent shell does that if we were to change that mindset I think we'd have to sigma.
For clarity to our shareholders.
Okay. Thanks for that color and I I would agree I would not like to for you hedge the upside.
Just more protection on the downside. Thank you.
Okay.
Okay.
This concludes the question and answer session I would like to turn the conference back over to management for any closing remarks.
Okay.
Again, thanks again to everybody for attending and thank you for the.
For questions if.
If you have any other questions or comments that you would like to receive from US. Please don't hesitate to contact us and we look forward to talking to you after our first quarter results when they come out.
In may thanks for.
So much operator.
This concludes today's conference call you may disconnect. Your lines. Thank you for participating and have a pleasant day.
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Yes.
Okay.
Okay.
Yeah.
Yeah.