Q4 2020 Hudbay Minerals Inc Earnings Call

Yeah.

[music].

Good morning, ladies and gentlemen, thank you for standing by welcome to the HUD. They minerals, Inc. Fourth quarter and full year 2020 results and annual guidance conference call. At this time all participants are in listen only mode. Following the presentation, we will conduct a question and answer session.

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.

We'd like to remind everyone that this conference call is being recorded today February 19th 2021 at nine a M.

During the time.

I will now turn the conference over to Candace Brule director of Investor Relations. Please go ahead.

Thank you operator, good morning, and welcome to HUD day, 2024th quarter results Conference call.

<unk> financial results were issued yesterday and are available on our website at Ww.

W. W. Dot dot com, a corresponding Powerpoint presentation is available and we encourage you to refer to it during this call.

Our presenter today is Peter could kill ski had faced President and Chief Executive Officer accompanying Peter for the Q&A portion of the call will be Steve Douglas, Our senior Vice President President and Chief Financial Officer.

M Eastern Omar our senior Vice President and Chief operating Officer, and Eugene Lee, Our senior Vice President corporate development and strategy.

Please note that comments made on today's call may contain forward looking information and this information by its nature is subject to risks and uncertainties and as such actual results may differ materially.

Copies expressed today.

Further information on these risks and uncertainties. Please consult the company's relevant filings on SEDAR and Edgar. These documents are also available on our website. As a reminder, all amounts discussed on today's call are in U S dollars, unless otherwise noted and now I'll pass the call over to Peter could Celski Peter.

From this thank you Candice.

Good morning, everyone and thanks for joining us I know, it's been a long week for you. All so we had high Bay are especially appreciate youre joining us for this call.

That everybody is staying safe and healthy as we approach the anniversary of the pandemic.

We continue to.

Focus on the safety of our employees and stakeholders and we believe that our diligence in screening testing and workplace protocols has been effective in achieving our objective of being a safe employer and neighbor and we will continue to adapt our site specific measures to conform to the regional health authorities latest guidelines.

And.

Today I will.

Touching our corporate achievements and challenges in 2020, followed by an overview of our production and cost outlook as we execute our key strategic objectives for 2021.

'twenty 'twenty was an extraordinary year.

While it brought many unforeseen challenges we face these.

And it's pretty we persevered and we achieve production and unit cost guidance, while advancing our growth initiatives in.

In March we announced the second phase of our Snow Lake Gold strategy, which saw a 35% increase in our snow Lake gold reserves of 41% increase in the life of mine gold production at Lalor and increased.

The annual gold production at Lalor to over 150000 ounces at lowest quartile cash cost and sustaining cash costs.

In May we funded the new Britannia mill refurbishment project with a timely gold prepaid transaction.

We've advanced the project to 73% completion to date.

We also identified the potential to produce gold from the new Britannia mill earlier than expected in 2021 through the installation of modular flotation cells at the gold plant.

We upgraded the Ni 43, 101 resource estimate at the 19, one deposit and increased the size of the base metal resources.

While defining a new goderich inferred resource.

From an operating perspective, we experienced an unfortunate incident in October with the Triple seven mine hoist rope and skip the.

The team quickly remedy the problem and the repair activities were completed well ahead of the estimated schedule and budget.

Despite the triple seven production interruption on Manitoba operations exceeded the top end about 2020 copper production guidance range and refined zinc metal production was higher than it has been in over 10 years.

We were extremely pleased with the productivity of our snow Lake operations as the Lalor mine installed.

<unk> wants to trade of both achieved record quarterly and annual production during the year.

In Peru, we signed the pump a conscious surface rights agreement with the community of <unk> in February of 2020, after which we initiated the consulta previa process and discussions with individual end users.

However, with the onset of the pandemic in March the Peruvian government declared a national state of emergency this hard to the pump a crunch of processes until later in the year once meetings, we're able to be held virtually or in person, while adhering to social distancing protocols.

We were pleased to finally complete.

<unk> Consulta previa process at the end of the year with strong community support which led to the receipt of the final mining permit for pump a country in early 2021.

Limited site pre development activities have commenced discussions with the one remaining land use of family are ongoing and we expect the initial mining of the deposit will commence in.

The second quarter of 2021.

Following the government's declaration of a state of emergency Constancia operations were temporarily suspended for eight weeks from March until May.

The mine completed a quick and efficient ramp up to full production, while operating under increased COVID-19 measures of.

In the set of quarantining and testing of workers prior to coming to site.

In September Constancia became the first mine to obtain the safeguard certification from Bureau, Veritas in Peru for compliance with all of the protocols from its COVID-19 surveillance plan after an exhaustive audits of the minds policies and procedures.

<unk>.

During the third quarter, we announced follow up drilling results on our Constancia, north target, which intersected porphyry and scorn mineralization north of the Constancia pit and the mineralization remains open to the north.

The encouraging results will be incorporated into our annual reserve and resource update.

<unk> Constancia, which will be released at the end of March.

In 2020, we advanced the exploration programs at <unk>, North, where we recently commenced drilling and Thats, the yoga and property in Northern Peru, where we received all required permits to begin drilling this year.

We also.

<unk> for several other strategic initiatives across the organization.

Our teams have done an outstanding job of implementing COVID-19 protocols in all of our operations to focus on achieving strong results. Despite changing the way they work has been quite remarkable.

In Arizona, we advanced the appeals.

Proceeds for Rosemont with the filing of our initial briefs in June followed by final briefs in November in conjunction with the filings of supportive briefs by the federal government.

In the second half of the year, we commenced an exploration drill program on our wholly owned land near Rosemont and historic copper mining district.

Advanced Avitia.

We also continued to consolidate lands near our Mason project in Nevada, and advanced work in preparation for a preliminary economic study from Mason.

We solidified our management team with my confirmation as CEO earlier in the year and the appointment of Steve Douglas Our CFO.

In June.

In September we completed the refinancing of our 2023 senior unsecured notes, which pushed out the maturity to 2029 and lowered the interest rate by over 1%.

And last but not least we maintained ongoing dialogue with our surrounding communities in Peru in.

Cordoba to provide pandemic relief support where we could.

Turning to slide four fourth quarter.

Consolidated copper production increased by 7% from the third quarter of 2020, primarily as a result of higher mill throughput and recoveries at Constancia and higher copper grades.

Minutes recoveries in Manitoba.

Consolidated gold production increased by 14% compared to the third quarter due to higher grades at Lalor and higher recoveries at the stall mill.

Production contained in concentrate declined quarter over quarter as a result of the reduced output from the Triple seven mine.

And however, refined zinc metal production increased from the third quarter as we continued to process available zinc concentrate inventories at the zinc plant, while the triple seven shaft was being repaired.

The strong copper gold and silver production in the quarter offset the lower zinc production, resulting in relatively no change in.

Copper equivalent production compared to last quarter.

Consolidated cash cost declined from third quarter levels due to higher copper production and higher byproduct revenue, partially offset by higher operating costs.

Consolidated all in sustaining cash cost remained relatively unchanged.

Change from the third quarter.

Operating cash flow before change in noncash working capital was $86 million during the fourth quarter, reflecting a slight increase from the third quarter due to higher realized copper and zinc prices and working capital changes.

This also led to significantly.

Improved adjusted net loss and adjusted EBITDA results in the fourth quarter adjusted.

Adjusted net loss was <unk> <unk> per share and adjusted EBITA was $107 million.

For the full year 2020, we met the guidance ranges for all of our metals copper production was lower year over year as a result.

Lower grades at Constancia and the impact of the eight week temporary production interruption.

However, consolidated gold production increased by 9% over 2019 levels are significantly higher gold production from Manitoba more than offset lower production in Peru.

This allowed us to capitalize on higher gold prices this year.

As we saw a 24% increase in Manitoba gold sales volumes in 2020 compared with 2019.

We exited the year with $439 million in cash and equivalents, which positions us well to pursue our strategic growth initiatives investments in 2021.

On slide five you will find a summary of our Peru operating results. Our Constancia team delivered strong performance this year, while operating in a challenging social and political environment.

During the quarter production of copper gold and silver were higher than the third quarter of 2020 as a result of the ramp up to full production after.

Temporary suspension of operations.

Full year 2020 production levels were lower than 2019 due to lower grades in line with mine plan and the production interruption in the second quarter.

The mine achieved excellent operational efficiencies during the quarter with a 10% increase in ore.

Ore mined compared to the third quarter.

Ore milled was also higher than the third quarter as a result of our fourth quarter plant maintenance shutdown that was deferred to January 2021.

Recoveries of copper gold and silver were all higher than the third quarter due to ongoing recovery optimization efforts.

After the effectively managing the characteristics of the ore feed.

Unit operating costs in the fourth quarter were higher than the third quarter, primarily as a result of higher mining costs, but full year combined unit operating costs were in line with 2019 levels.

Peru's cash cost was lower than the previous quarter due to higher byproduct.

Credits and higher copper production sustaining cash cost increased quarter over quarter, primarily due to capitalized exploration related to option payments for property surrounding constancia in the fourth quarter.

Year over year cash cost and sustaining cash cost increased as a result of lower production due to the temporary.

<unk> interruption during the second quarter and lower grades as we progress through the mine plan.

As I mentioned previously we achieved our production and unit cost guidance ranges for per route in 2020.

Now moving to the next slide on Manitoba, We were pleased with the business units response to the Triple seven shaft incident.

Business continuity plan relocated employees and equipment from triples them into law and utilized la rose ramp to truck additional ore to surface from the upper parts of the mine at a rate of approximately 650 tonnes per day.

This allowed <unk> to achieve a record quarterly production averaging over five.

<unk> tons per day in the fourth quarter.

<unk> continued to produce at a higher tonnage rate through the month of December mainly due to ongoing continuous improvement initiatives.

As a result of these efforts together with higher head grades and recoveries production of copper and gold production was higher than the previous quarter.

<unk> continued to see strong performance from the stall concentrator with record throughput of over 4000 tonnes per day achieved in the fourth quarter and approximately 3870 tons per day on an annual basis full year oil processed at stall increased by 9% as a result of ongoing continuous improvement.

Sales and higher ore availability from the Lalor mine.

Unit operating costs in the fourth quarter increased by 11% compared to the third quarter, but remained within the annual guidance range. Despite the triple seven production interruption.

Manitoba cash costs and sustaining cash cost per pound of copper produced.

Initial <unk> to benefit from higher byproduct credits.

As I mentioned previously Manitoba exceeded the top end of our copper production guidance range and met all other production and unit cost guidance for 2020.

Turning to slide seven while 2021 continues to.

Comparable execution and delivery for high Bay, our achievements in 2020 have positioned us well to deliver many key objectives. This year.

Our 2021 objectives are.

To focus on operational efficiencies and maintain our low cost of production to continue to generate.

Positive cash flow and strong returns on invested capital.

To execute development and commenced mining activities at the high grade <unk> satellite deposit further enhancing from stances production and cost profile.

To deliver the refurbishment of the new Britannia gold mill to significantly increase gold production.

Action from Lalor, completing the second phase of our snow Lake Gold strategy.

To continue to progress the third phase of our stellar led growth strategy to further increase annual production scale by advancing studies to optimize recoveries throughput resource conversion and exploration.

To advance the appeals process.

An alternative options to unlock value at Rosemont.

To maintain constancia is industry, leading efficiency metrics by identifying areas of upside through continuous improvement initiatives at the mill and ongoing near mine exploration.

To drill a regional copper exploration targets near Constancia in northern.

<unk> in Peru, and that Rosemont, while continuing to advance exploration programs in the Snow Lake region, Peru and Nevada.

To support our workforce their families and the communities in which we operate through continuing to make health and safety, a priority and providing ongoing COVID-19 support.

And with our ESG principles.

And the last objective is to evaluate exploration organic growth and acquisition opportunities that meet our stringent strategic criteria and allocate capital to pursue those opportunities that create sustainable value for the company and our stakeholders.

Moving to the subject of guidance in 2021, we forecast consolidated copper production increased by 7% compared to 2020 production, primarily as a result of higher expected copper production in Peru.

We expect consolidated gold production in 2021 to increase by 62%.

<unk> year over year due to higher gold production in both Manitoba and Peru.

In Manitoba, we expect gold production to increase by 40% in 2021 due to the planned early startup of the new Britannia mill in Peru, We expect gold production to be more than triple that in 2020 as.

You're going to see the benefits from the higher grades at the pump a conscious satellite deposit.

We expect zinc production to decline year over year as a result of prioritizing the mining of the gold rich zones at Lalor in connection with the early startup of the new Britannia Mill, which will result in mining less of this inc risk base metal zones.

At Lalor.

Peru's 2021 production guidance assumes mining a pumper concho will begin in the second quarter with the initial phase of lower copper grades, but higher gold grades expected to continue for the balance of the year before higher copper grades are forecast to enter the mine plan in 2022.

<unk> 2021 production guidance contemplates an increase in Lalor mine throughput to 4650 tonnes per day from the previous 4500 tonnes per day as we expect the recent trend of stronger production from the mine to continue.

We plan to publish updated mine plans for our Constancia in Snow Lake operations with our.

Our annual mineral reserve and resource update at the end of March 2021.

Given the pending mine plan updates, we will issue our updated three year production outlook in conjunction with the release of the updated mine plans.

We expect the new Constancia mine plan to reflect an increase in copper and gold production from 2022 to.

<unk> 25, as the higher grades from the pump a conscious deposit into the mine plan there.

This is expected to offset the lost copper production from the Triple seven closure in mid 2022 and enable a steady state in our consolidated copper production.

It will also incorporate new reserves from the Constancia, north property, which will extend the <unk>.

Stanza pit.

We expect our new Snow Lake mine plan to reflect an increase in Lalor mine production rate beyond 4600, 50 tonnes per day and incorporate the results of the $19 one pre feasibility study and the stall mill recovery improvement study.

Now turning to annual cost guidance on slide nine.

<unk> 'twenty two we expect total capital expenditures to decline by 11% year over year, primarily due to lower expected growth spending in Peru in 2021.

Total planned sustaining capital expenditures are expected to increase from 2020 levels, primarily due to the deferral of heavy civil works and capitalized stripping expenditures.

<unk> in Peru from 2020 into 2021.

A tailings dam raises underway at Constancia and associated heavy civil works accounts for a significant portion of the 2021 sustaining cost in Peru.

Also a portion of the pump per country heavy civil works has been reclassified from growth growth to sustaining capital expenditures.

'twenty one we.

We expect Peru sustaining capital expenditures to begin to decline in 2022.

And a total growth capital of $75 million includes approximately $70 million for the remaining spend on the new Britannia mill refurbishment project and approximately $5 million for the construction of a new long term.

In 'twenty facility in Snow Lake.

The increase in Manitoba as growth capital spending includes approximately $20 million in new Britannia project expenditures deferred from 2020 into 2021 and approximately $13 million in additional project costs. As a result of the completion of a definitive estimate that incorporates.

Canpotex scope additions and COVID-19 related costs.

Peru growth capital spending of $5 million includes a portion of the pump Clencher project development expenditures that was deferred from 2020, but excludes the costs associated with completing the remaining individual land user agreements due to the ongoing nature.

Of the negotiations.

A significant portion of the total land user agreements costs was completed last year.

We expect total exploration expenditures in 2021 to be higher than in 2020, as we plan to conduct additional drilling in Peru and Arizona.

In Peru, we are drilling the convention.

<unk> <unk> target property located approximately 10 kilometers north of Constancia. We also plan to start drilling the yoga and Greenfield project located near the city of trio in Northern Peru. After the rainy season is complete.

In Manitoba, we are conducting a winter drill program focused on expanding the 19, 1%.

<unk> noted and testing drill targets identified between $19 one in the Lalor mine.

And in Arizona, we continue to drill in the <unk> copper region. Following up on interesting intersections and we will provide further details once we receive all of the assay results.

We expect unit operating costs in 2000.

Deposit wanted to be modestly higher than in 2020 with the inclusion of the new Britannia mill and higher input costs in Peru.

<unk> introduced consolidated cash cost and sustaining cash cost guidance in 2021.

We expect consolidated cash cost per pound of copper produced net of byproduct credits.

<unk> slightly increased from 2020 levels due to the expected increase in unit costs, partially offset by expected higher copper production and higher byproduct credits.

We expect consolidated sustaining cash costs to be consistent with 2020 as lower sustaining capital expenditures are expected to offset.

Increase in cash costs.

The last topic I'll touch on is the execution of our growth initiatives. We continue to make significant progress at the new Britannia refurbishment project as seen on slide 10 the project.

<unk> continues to track ahead of the original schedule with overall.

The progress at approximately 73% complete.

Construction of the new copper flotation building continues to advance as planned construction of the pipeline between the new Britannia install mills has been completed.

Total project spending in the new Britannia refurbishment project is forecast to be approximately.

Project $13 million higher than budget as I mentioned earlier.

As the project nears completion, we have a higher classification of the project capital estimate.

The project scope has been adjusted to incorporate changes to the store tailings pipeline configuration due to processing considerations. In addition to the <unk>.

Limitless scope changes related to the installation of temporary modular copper flotation cells to achieve early production at the gold plant also as you can imagine the COVID-19 pandemic has given rise to some additional costs associated with remote project management and pandemic safety protocols.

Implement refurbishment activities at the gold plant continued to remain ahead of the original schedule with commissioning expected to be completed in mid 2021.

Ramp up and first production at the gold plant is expected early in the third quarter of 2021.

Copper flotation building construction activities are on track for commissioning and.

During the fourth quarter of 2021.

Operational readiness activities in support of the early startup of new Britannia are on track with the underground development rates in gold Rich lens 25, and 27 at Lalor proceeding ahead of plan.

In addition to delivering on the new Britannia mill refurbishment.

And ran project and the development and mining of pump a culture. There are other strategic growth initiatives, we expect to execute this year in.

In Snow Lake, we continued to advanced phase III of our gold strategy as I mentioned, we will update our mine plan at the end of March and we believe this new mine plan will optimize our snow Lake milling capacity with an <unk>.

<unk> higher production rates at Lalor improved recoveries at the stall mill and the incorporation of the 19 <unk> deposit into the operations.

Our focus will be on implementing these mine plan enhancements, while continuing to examine the opportunity to expand the new Britannia mill capacity beyond the currently planned 500 tons.

<unk> in the future.

We have various exploration programs underway, including our drilling activities in Peru in Arizona that I mentioned earlier.

And we continue to advance exploration agreement discussions with the community of what Chicago on the Maria Reyna, and Cabo Vito properties North of Constancia.

Maria Reyna as of <unk>.

Prospective copper gold porphyry targets and kabuto is a past producing copper oxide mine both of which are located within 10 kilometers north of Constancia.

We also expect to be finalizing our work on the Mason project to eliminate economic study, which is expected to be published this year.

We believe we have several.

Exciting optimization expansion and exploration opportunities that will be studied in advanced in 2021, creating many growth catalysts for the company this year.

We look forward to delivering on those growth catalysts, while executing our high return investment opportunities as we increase cash flows and create value for all of our shareholders.

Holders and with that we are pleased to take your questions.

Thank you ladies and gentlemen, we will now begin the question and answer session to join the question queue. You May Press Star then one on your telephone keypad.

Atone acknowledging your request.

If you are using a speaker.

Your phone please pickup your handset before pressing any keys to.

Withdraw your question. Please press Star then two.

We will pause for a moment as callers join the queue.

Our first question comes from Rs <unk> of Scotiabank. Please go ahead.

Hi, good morning.

Youre, obviously, you've got a lot of growth initiatives ahead of you here can you give us a bit of color on what this constancia north deposit could do to the mine plan is it substantially higher grade.

I'm also curious if you're if this new mine plan that will come out will include.

No expansion at Constancia.

Or is that more likely to come later.

Good morning, and thanks very much for the question look.

We are currently completing the work on Constancia notes, but we do expect to incorporate it into our reserves at Constancia, which will extend the pitch as I said, we'll provide more details with the annual reserves in <unk>.

Resource updates at the end of March.

To your question with respect to a mill now we are not currently planning within our mine plan for any expansion to the mill cash.

Any additional color you'd like to provide to that.

Thanks, Peter and it always remains a future option to us and it's work we're working.

Working on but this current mine plan was developed.

Date, what's happening at Constancia and to incorporate the Constancia Nord discovery over the last couple of years.

Does that answer it correctly.

Sure.

Well just curious if you can give us.

The sense of how much better grade is the north deposit versus the main is it just slightly better or materially better.

Or is it slightly better it certainly is better than the main body is not as good as a public contract.

Okay and is the idea to sequence that.

Currently with pump a contra.

Cash flow.

Yes.

Is to incorporate the best way optimally with an NPV optimization process and so we run several iterations of the mine to come up with the optimum value and we expect that some of that material will move earlier into the mine plan versus hold.

For later.

Okay, and then just finally I.

I mean to me it would seem like.

Mill expansion at Constancia would make a ton of sense.

Given the lower grade profile of the main pit whats holding you back there in terms of moving that project forward is that a permitting issue.

Holding or just curious why that is not being contract.

Yes, I think you nailed it it's about the permits and the permitting process. So that's ongoing and we sequence the permit with the.

The process.

To get to different mining sequences.

The latest one is is with the.

The agreement in Consulta Previa, we're able to close the permits and all the permits required to mine at Napa Gotcha and so the next permit iteration, we would work on would be including.

Something like a expansion at Constancia.

And so.

Okay. Thank you very much.

Our next question comes from Greg Barnes from TD Securities. Please go ahead.

Thank you and the MD&A are in the press release last night, there was a comment about <unk>.

Steady state production, particularly with copper in that 'twenty two to 'twenty two.

Range.

Or is that something in the plus 100000 per 115000 tons a year of copper ex even before you could these new mine plans in that profile.

Yes, that's correct Greg.

And how long do you think you can sustain that level of production.

I would say through to the completions.

Depletion growth pump per country.

Okay, and then a $2025 26.

Yeah, roughly that in then you get some additional kick from Constancia north potentially as cash flow mentioned.

Okay.

Now on cost pressures.

Have some upward cost.

Some upward revisions to costs for this year, but we're getting mixed messages from the various companies about whether they are getting cost pressures are not getting cost price. So I just wanted to nail down I'll get some commentary from you on what youre seeing or what you're experiencing on the cost side in this environment.

Yes, I think Greg cash.

Casualty here.

Question I think there is there is definitely on our base cost there is and there are some pressures in.

We've seen them sort of sustainably creeping in and Theyre not in the one or 2%, but theyre not in the 10%. So there is somewhere in between but I think we'll have real clarity on what those are and what we foresee them to be.

With these.

These two mine plans coming out of that near the end of March and that's lawlor and Constancia and so there'll be lots of clarity on it then.

Okay.

And finally Peter.

I appreciate all of the talk about the growth initiatives you have.

Things are doing you've been through a big phase.

Capital.

Investment, but what about shareholder returns and when do you think you'll be in a position to start talking meaningfully about.

The dividend and taking that higher.

Great.

Shareholder returns, obviously is a key element of capital allocation, it's something that we think about all of the time.

And.

We are singularly focused on delivering what we have decided we can enter into that phase, though we actually deliver sustainable shareholder returns, but Steve do you want to comment on that further.

I agree wholeheartedly, Peter and Greg look we.

We appreciate the.

The the need frankly.

We've been schools.

And our cost of capital and there should be set such that they are sustainable growing over the course of in the case of a cyclical over the course of a of a sustained cycle.

I also look at where we're at in terms of our opportunity set and our development potential going forward.

And I think as it stands.

As Ivo probably the better use of our capital is is ensuring that we've got a.

Yeah.

Conservatively finance balance sheet, but also the financial horsepower to pursue our expansion plans to be able to put us in a position to sustain to sustain that growing sustainable dividend over the over the span of time once we get.

Now holds positioned in terms of getting all of our assets working as optimally as we think we can but the.

The question is a perfectly appropriate one and something as Peter pointed out.

We discuss actively every day.

Okay. So do you think youre about a year away from that.

So no I wouldn't.

It ourselves.

I look at all I think we look at all competing needs for capital.

And depending on the.

The outcome of the Rosemont process, depending on the outcome of our.

The extensive exploration.

We're going to have to evaluate at any given time the opportunity set versus.

Expanding those returns, but it's definitely.

Again, and I know this is perhaps cool comfort, but it it's more of an aspirational that we want to return to the world of being a sustainable dividend payer over the cycles, but we also want to make sure we get our.

All of our asset base working in a fashion that will support them.

Okay.

Yes.

Our next question comes from Fahad Tariq of Credit Suisse. Please go ahead.

Hi, Good morning, just following up on the last question, but more related to Capex as you think about the 2021 guidance. Maybe you can give some color on how much of the $340 million is kind of the deferred from two.

<unk> thousand 20.

Versus you know.

Maybe just higher higher pre stripping or stripping cost of Peru like I'm, just trying to get a sense of obviously the overall number was a bit higher than expected I'm just trying to get a sense of how much of that is deferrals versus the actual scope of the activities have increased.

Sure.

And thanks for the question.

In so in Peru, we deferred approximately $20 million of capitalized stripping from 'twenty to 'twenty into 'twenty and 'twenty, one because of the pause in mining activity during a pandemic.

We also of course.

Some capital associated with from potential into.

2021.

And then in.

At new Britannia.

Quite a bit about I think it was approximately $20 million of capital was moved from 2020 into 2021. So those are the primary areas of movement from 2020 into 2021 and the rest.

It was largely consistent with what we had before so we had telegraphed the tailings work that was going to be done in Peru. Previously for example, we had telegraphed to the tailings work that is being done in Manitoba, but those are the key elements of what has been deferred.

Okay and just that's helpful. Thank you and a quick follow up on 2020 that was.

Obviously the capital. The Capex was ahead of guidance now is that most of that is talked up to the land use your agreements is that a fair assumption.

That is a fair assumption.

Okay, and then just lastly on that than you you mentioned Theres, obviously, a few line user agreements locked for 2021 from most were completed in 2020.

<unk>, so should we assume just like a little bit higher versus the Capex guide just to account for that would that be a fair assumption as well.

I would say that you have you know.

It will not be material. So so we have one one remaining negotiation with one family lift to conclude and we remain optimistic that that will be.

Included in time to allow us to start mining activities in the second quarter I would mention that last negotiation. The last negotiation is always lost because it's the most complicated but we are a little bit frustrated as is the community of chia ROI of that its taken so long, but we do believe that we are in the final stretches of concluding it now and we do also.

I think that the amount that it will entail will not be material.

Okay, that's very clear that's it from me. Thank you.

Yeah.

Our next question comes from Jackie <unk> of BMO capital markets. Please go ahead.

Thanks, very much everyone for taking my question.

To switch gears and talk about Manitoba for a minute I know with the.

Our triple seven accident last year, you were you were suri reshuffling things, a little bit and maybe give you an opportunity to test out.

Some of the limits out lollar I see that you've raised.

Or is the guidance for 'twenty 'twenty, one to to mine a 46 50, rather than the 4500 a run rate that you were previously assuming is there room to move that further with triple seven clothing, because the Flynn flan mill become an option that you could factor into the plan.

I wanted to access would that be part of the plan as well I know this is all probably coming out in March.

But can you give us the idea of sort of big picture of what the opportunities are and maybe what your strategy might look like two.

Two three or four years down the road. Thanks.

Yeah sure happy to do that Jackie Thanks for the question.

<unk> seen outstanding.

<unk> productivity at the Lalor mine.

We averaged over 4900 tonnes per day over the last couple of months and that's been the result of several initiatives taken in 2020.

Including a bunch of things that we've talked about before the new law garage, the mobile areas mining intelligence technologies.

<unk> system.

It allows us to get real time look at the operating at the operations and to optimize safety.

But you know more than that with the addition of people or the movement of people and equipment from Triple seven.

To lar or doing the.

The shaft outage at triples.

We were able to test.

Entitlement at Lalor, and we expect that we can probably achieve an additional 650 tonnes per day at the ramp at Lalor, which previously we had not done before so I think that provides you with a sense of what might be possible cash flow would you comment any further on that.

All I'd add is that obviously, we have the installed capacity to treat that material. After it comes up the ramp and the shaft at <unk>.

In Snow Lake itself, we don't need to keep obviously this wind farm.

Mill open stall itself last year as Peter said in his text was over 3800 tons.

And I think recently, we achieved over 4000 tonnes a day there and the designed capacity for new Brit as 500 tonnes, a day and I would remind people that quite often when we refurbished and ore.

We built some of these new processing facilities quite often in the end, we exceed that throughput capacity.

A day and the design.

We did at Constancia, so with that were over 6000 tons a day capacity.

Like Peter said, we're currently hoisting.

Over or close to.

5000 tonnes a day at Waller.

So.

With an extra five or 600 up the ramp and we start getting what is the future of wallet.

We will have some clarity.

For that at the end of March.

That's great. Thank you and maybe just a follow up question on Manitoba the guidance that you gave.

Lastly for 2020.

When you wanted Manitoba if income.

Pairing that with the guidance that you gave around this time last year. It looks like your zinc production for this year is lower than you had previously expected and maybe the precious metals are higher you've broken it out a little differently before but if I use the same conversion ratio it looks like your precious metals or higher is this a function.

Maybe just changing the line plan or are you are you actually seeing a different part of the lalor ore body.

In 2021 than what you had previously planned or what's driving those changes.

Yes, I think what it is it's a preparation.

And until the team has actually stockpiling some of our pre test or Adam zones 25 in 2007.

Gold zone in a copper gold zone.

Also there has been a focus to prepare those zones in mind those horns more intensely to take advantage at the higher grade and in any sort of NPV optimization youre looking for the value of ore in the margin on the value or rather than the metal itself. So with these optimize.

<unk>, what we see is we're seeing that value more than the gold end of it we'll continue to minds Inc.

But obviously the Lawler zinc grade is declining as the mine ages and we took advantage obviously of the zinc upfront because of the zinc was in the shallower part of the mine in the first part we access.

We access.

Even with higher rates. So we're doing the same with the gold now in late 2021, and again with the mine plan that we will publish in.

March it'll give more clarity to that.

But to that.

NPV optimization.

Perfect Thats it from me thanks very much.

Gotcha and Peter.

Okay.

Our next question comes from them.

Of Canaccord. Please go ahead.

Thanks, Good morning, Peter and team Peter.

Peter sticking with Manitoba, and probably a bigger picture question for you. While you were speaking copper went up to four Bucks a talent.

It goes in the 17, hundreds now and you're just a few months away from a new mine plan is from all of this the completion of new Brett how are you thinking about that business now just in the context of your portfolio.

Yes.

[laughter] Dalton, we were loving it.

It doesn't change our view.

With respect to how we're focusing on the assets you know so as I've said consistently over the last few quarters we.

We are in delivery mode right now and we are singularly focused on getting new Brit refurbishment up and running said, we can deliver those gold ounces as well as enhance copper recoveries as well.

With what we're talking about with the stall mill enhancements.

So.

Once you've completed this work and we've done all of this optimization work through the rest of the year and I think we can pause and we can think of what it might mean, but.

To some of the questions that you've heard before we really really want to accelerate cash flows in this company and take.

You want a job of the current environment. So that we can actually start pursuing other initiatives and returning cash to our shareholders.

No.

And as I've said before no apologies for cash flows. We think this business is a great business, we think that theres a lot of potential to be exposed to continuing with our.

<unk> efforts.

Performance improvement efforts in Manitoba, and some time, we will pause and we'll figure out what that all means to us, but we are on a rep right not to try to deliver and we're not getting a.

Defocus by what the world might be or what it might mean later on.

Okay great.

And then just maybe speaking at some of these other initiatives. So on Rosemont, you've got a decision now coming sometime in H two.

Fingers crossed from you guys, but what happens if it's not successful.

What do you do that and how fast can you move on some of these alternative options.

That's a great question so look as.

As I've always said, we have we continue to remain focused on the appeals process as our primary area of focus.

But at the same time, we do continue to pursue alternatives.

What I can say is that I am convinced that we will build rosemont in one way or another so.

So while we wait for the decision to be rendered we continue to investigate other opportunities. We'll continue to look at expanding our resource base, but I think let's wait for that decision and then we'll have a much clearer picture, but we will I believe we will develop rosemont.

Okay, Great and then just maybe one final.

Final one from me.

With regards to the expired CBA from particularly in per range, Yes, just with the.

Running the copper price and an election coming on April 11.

And just given what happened with Candelaria last year are you at all concerned.

No we're not concerned.

But Ted the reason why I say so is that you know in Manitoba, we haven't had a strike in 20 years.

We have a good relationship with our employees and we are we continue to or we've had minutes strike I think we had one small strike in 2020 years, but we have a great relationship with our employees, we understand what the issues are.

Initial dialog with them, we don't believe that it will end up in an interruption and in Peru. The same thing we are in discussion with our employees. There are a couple of elements that remain to be resolved, but at the end of the day I don't think that it will result in an interruption. So short answer to your question is that while we remain focused on it and we are of.

We are along with our employees is incredibly important we are not concerned about interruptions.

That's great. Thank you Peter.

Welcome.

Our next question comes from Steven Yano of Cormack Securities. Please go ahead.

Great. Thanks, guys.

So just was curious shifting.

Shifting gears to the exploration just on the exploration, particularly north our regional exploration North of Constancia right now Thats, what is now underway and if I remember correctly, there was a pretty compelling geophysical anomaly. There can you just maybe comment on how big the the drill program is there to start with and is it can you remind me is it sort of a.

Near surface target or is.

Maybe a bit deeper.

Yes, so I'll give you a few comments and then I'll, let cash will expand a little bit, but so we only have one drilling program underway at present, which is on the convention north property.

With respect to Maria Reyna and cover Utah, we are negotiating with the community of or Chicago in order to.

To get surface rights to allow us to start drilling and then we have to go through the permitting process, including Consulta Previa process.

Which.

Which would deliver the permits required our assessment under current law regime is that it would be unlikely that we will start drilling before the end of this year early next year on those targets, but we are continuing to do.

We are drilling at <unk>, north and we expect to be able to talk to speak to some of those results in the quarters ahead of us now with respect to.

The depth of mineralization cash flow do you want to comment on that yes. All of what we're targeting is similar to Constancia and top accounts, it's all shallow.

Hello targets generated from Tim Geological mapping and ground geophysics.

<unk>, although it's not our number one target as we speak about each of our Marine Arena. It is a very good target and we're drilling there currently so that's a great sign for US. So we got started early despite.

Rainy season here now.

With that too we do have a permit to drill on another prospect in northern Peru is that we're quite excited about its near the community of <unk>.

City of 1 million people about three hours away.

On the Midcoast to Peru, tricky O the prop.

<unk> called you again, so we're quite excited at the end of this rainy season to get started there with some <unk>.

Follow up.

<unk> exploration there is quite a number of drill holes already they're indicating.

Mineral endowment.

And then I would also mentioned our other exploration efforts in Manitoba to follow up on <unk>.

It's like the 19 O one between Lawlor and.

19 O one itself.

And of course, we're drilling currently in the Helvetia historical copper mining district.

That's our mining continuous from the late 2008 hundreds to the mid 19 hunters.

We're following up I think there is some 20 sort of pick and shovel underground operations and currently we have three drills, turning there and I think we're going to go up with a couple more drills and we're excited to talk about.

What we see there geologically and.

When we get Fulsome report on all of our assets.

It's both the total copper and the sequential copper assays were excited to report those along in the timeline with our two mine plans at Constancia and Lalor.

Okay, Okay, great and maybe just just unmet net.

Total that is all the exploration there then COVID-19 right now around the epicentre of sort of Laila and 19 in.

Assets or any sort of broader regional stuff looking maybe under that cover.

Cover and whatnot.

Yeah right now the focus is the chisel basin itself to really understand what is the endowment available to us to optimize now the two plants, we have the base metal on the gold plant that are within trucking distance.

One of his legs. So that's the principal focus right now in Manitoba, and as I said, the other focus or some of the quite compelling targets, we had north of Constancia again and of course.

Adjacent to north to our Rosemont.

Deposit.

On our price.

Okay, great. Thanks, very much guys.

Yes.

Once again, if you have a question. Please press Star then one.

Our next question comes from John Tumazos of John Tumazos Research. Please go ahead.

Thank you very much congratulations on all the progress.

Whats the good copper.

The snow.

Are there any mitigation she might too.

Given the historic volatility is a copper price or the company.

Such as buying puts.

Or.

Raising equity to repay debt.

<unk>.

Secondly.

What is your minimum size threshold.

For pursuing.

New projects, we know, there's rosemont and Mason in the various zones in Manitoba.

There might be some.

Damn size copper projects that look a lot more robust with the copper price rebound.

John Thanks for your question, it's Steve here.

I think your question is two sides of the same one.

And I don't want to if I misread, Please tell me but.

Your first question is do we have any.

Intend to perhaps hedge.

<unk>.

To take advantage of this robust copper environment and our traditional answer has been no we like the exposure to the spot market.

It's been rewarding thus far and I think our shareholders. Appreciate the fact that we have not taken that.

Joy out of the.

Copper price.

So I think that policy remains in place we may strategically look at it now and again on a short term basis to try to than we typically do get a.

Quotation period pricing, but outside of that we're not looking at this point in time of hedging. The long term had we were in the midst of.

Building an asset.

The rosemont or something that had financing conditions that maintain certain cash flow levels, we might entertain that but then again that would be short term and really looked at from the development perspective, and as it relates to raising equity to repay debt.

I think obviously the prices are robust.

But we as I've said on many occasions.

<unk>, we're in the process that day of transforming.

Two assets through the acquisition of contribution obviously through the refocusing of the law or in Snow Lake camp on the gold assets and the new Brit refurbishment both of those are going to generate substantial capital.

And at this point I think raising equity.

Would.

While it may be advantageous in terms of paying down debt. It's I'm not sure are our shareholders see it as a.

The way when we're in a world of returning in a very short order to generating significant free cash flow was a consequence of the pricing.

And the and the changes, we're making to the portfolio.

There are there arent any terms in the new is there any thoughts in the near term where we'd issue equity.

And John I shouldn't minimum size threshold.

On the projects, we are John we don't really consider things in terms of the minimum size because if you look at some of the projects that we are undertaking.

At.

So our brownfield sites, we have no shame in investing $20 million for.

One year payback for example, so we don't think in terms of minimum size thresholds.

A picture when we think in terms of our production profile.

Then I think the minimum thresholds youre, referring to might be more appropriate.

But again, it's a matter of returns.

We could put into production quickly and easily 20000 tons of copper producer we would consider it provided the returns are right.

Obviously, we have the capacity to.

<unk> developed much larger assets.

Look what's the optimal in.

And it takes off.

Good for the organization and what what.

Our technical and execution skills might permit so there's no hard and fast answer.

But over time for sure we would like to be expanding our copper production profile.

Thank you the latter answer.

The Congress most refreshing.

This concludes the question and answer session I would like to turn the conference back over to Candace Brule for any closing remarks.

Thank you operator, operator, and thank you everyone for participating today, please feel free to reach out to our Investor Relations team if you.

Answer further questions that concludes our call.

Your line is now.

[music].

Yeah.