Q4 2020 Hudbay Minerals Inc Earnings Call
Okay.
[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.
I would like to remind everyone that this.
To spend for this call is being recorded today February 19th 2021 at nine a M eastern 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 <unk> 'twenty 'twenty fourth quarter results conference.
Carl Hi, based financial results were issued yesterday and are available on our website at www Dot HUD day dotcom, a corresponding Powerpoint presentation is available and we encourage you to refer to it during this call on.
Our presenter today is Peter can kill ski had faith, President and Chief Executive Officer.
Accompanying Peter for the Q&A.
This content of the call will be Steve Douglas, Our senior Vice President President and Chief Financial Officer cash 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.
Its nature is subject to risks and uncertainties and as such actual results may differ materially from the views expressed today.
For 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.
Hey, Porsche dollars, unless otherwise noted and now I'll pass the call over to Peter could tell ski Peter.
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 HUD day are especially appreciated you joining us for this call I.
I hope that.
And do you ever you're staying safe and healthy as we approach the anniversary of the pandemic.
<unk> 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.
Everybody measures to conform to the regional health authorities latest guidelines.
In this presentation today I'll touch on 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.
Specific he was an extraordinary year, while it brought many unforeseen challenges we face. These we persevered and we achieve production and unit cost guidance, while advancing our growth initiatives.
March we announced the second phase of our Snow Lake Gold strategy, which saw a 35% increase in our snow Lake Gold reserves.
<unk> thousand 241% 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 time legal.
The 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.
E source 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 team quickly remedied.
One real bloom 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.
The pro you were extremely pleased with the productivity of our snow Lake operations as the Lalor mine install concentrated 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.
Associated the Consulta previa process and discussions with individual land 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 concept processes until later in the year once meetings, we're able to be held virtually or in person.
We had net adhering to social distancing protocols.
We were pleased to finally complete the 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.
While 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.
Remaining to ramp up to full production, while operating under increased COVID-19 measures of extensive 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.
Deficient midst COVID-19 surveillance plan after an exhaustive audits of the minds policies and procedures.
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.
The encouraging results will be incorporated into our annual reserve and resource update for 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.
All required permits to begin drilling this year.
We also advanced 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 process 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.
In the second half of the year, we commenced an exploration drill program on <unk>.
Our wholly owned land near Rosemont, and historic copper mining District Court Helvetia.
We also continued to consolidate lands near our Mason project in Nevada, and advanced work in preparation for a preliminary economic study for Mason.
We solidified our management team with my confirmation as CEO.
C O 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.
We maintained ongoing dialogue with our surrounding communities in Peru, and Manitoba 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.
At least of higher mill throughput and recoveries at Constancia and higher copper grades and 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.
Inc. Production contained in concentrate declined quarter.
Quarter over quarter as a result of the reduced output from the Triple seven mine, however, refined zinc metal production increased from the third quarter as we continued to process available zinc concentrate inventories at the zinc plants, while the triple seven shaft was being repaired.
The strong copper gold and silver production.
Our 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 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 EBITA results in the fourth quarter.
Adjusted net loss was <unk> <unk> per share and adjusted EBITA was $107 million.
For the full year 2020, we met the guidance.
The ranges for all of our metals copper production was lower year over year as a result of 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.
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.
We're higher than the third quarter of 2020 as a result of the ramp up to full production after the 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 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 <unk>.
Were all higher than the third quarter due to ongoing recovery optimization efforts and actively managing the characteristics of the ore feed.
Unit operating cost in the fourth quarter were higher than the third quarter, primarily as a result of higher mining costs, but full year combined unit operating cost were in line with 2019 levels.
Silver <unk> 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 properties surrounding constancia in the fourth quarter.
Year over year cash cost and sustaining.
Sustaining cash cost increased as a result of lower production due to the temporary mine 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, the 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.
<unk> achieved record quarterly production, averaging over 5000 tonnes per day on 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.
Allow the production of copper and gold production was higher than the previous quarter.
We continue 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 process.
Average debt stall increased by 9% as a result of ongoing continuous improvement initiatives and higher ore availability from the Lalor mine.
Unit operating cost 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.
Process in October cash cost and sustaining cash cost per pound of copper produced continued 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.
Okay.
Turning to slide seven while 2021 continues to be a year of 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 commence mining activities at the high grade Pampa conscious satellite deposit further enhancing constancia production and cost profile.
To deliver the refurbished.
Furbished meant to the new Britannia Gold mill to significantly increase gold production 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.
Conversion and exploration.
To advance the appeals process on 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 Peru, and debt 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.
Alrighty and providing ongoing COVID-19 support in line 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 sustained.
Prior value for the company and our stakeholders.
Moving to the subject of guidance in 2021, we forecast consolidated copper production to increase by 7% compared to 2020 production, primarily as a result of higher expected copper production in Peru.
We expect.
Expect consolidated gold production in 2021 to increased by 62% 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.
Peru, we expect gold production to be more than triple that in 2020, as we begin 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 zone at <unk> in connection with the early startup of the new Britannia Mill.
Which will result in mining less of the zinc risk base metal zones at Lalor.
<unk> 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.
Cost to enter the mine plan in 2022.
Manitoba 2021 production guidance contemplates an increase in law lowers volume 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 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.
A four and plan to reflect an increase in copper and gold production from 2022 to 2025 as the higher grades from the pump a conscious deposit into the mine plan.
This is expected to offset the lost profit production from the Triple seven closure in mid 2022 and enable a steady state in our consolidated copper production.
It will all.
Also incorporate new reserves from the Constancia, north property, which will extend the constancia pit.
We expect the new Snow Lake mine plan to reflected increase in Lalor mine production rate beyond 4600, 50 tonnes per day and incorporate the results of the 19 <unk> pre feasibility study and the stall mill recovery improvement study.
Now turning to annual cost guidance on slide nine 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.
Civil works and capitalized stripping expenditures in Peru from 2020 into 2021.
A tailings dam raises underway at Constancia and the 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.
Heavy growth growth to sustaining capital expenditures in 2021.
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 five.
<unk> dollars for the construction of a new long term care 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 cost as a result of the.
Completion of the definitive estimate that incorporates project scope additions and COVID-19 related costs.
Peru growth capital spending of $5 million includes a portion of the <unk> project development expenditures that was deferred from 2020, but excludes the cost associated with completing the remaining individuals.
$5 million land user agreements due to the ongoing nature of the negotiations.
A significant portion of the total land user agreements cost 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.
Dividual.
In Peru, we are drilling the convention Northstar on 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 true here in Northern Peru. After the rainy season is complete.
In Manitoba, we are conducting a winter.
Arizona program focused on expanding the 19, one deposit and testing drill targets identified between 19 O. 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.
<unk> drilled we expect unit operating cost in 2021 to be modestly higher than in 2020 with the inclusion of the new Britannia mill and higher input cost in Peru.
<unk> introduced consolidated cash cost and sustaining cash cost guidance in 2021.
We expect consolidated cash cost per pound of copper.
Used net of byproduct credits to slightly increase from 2020 levels due to the expected increase in unit cost, partially offset by expected higher copper production and higher byproduct credits.
We expect consolidated sustaining cash cost to be consistent with 2020 as lower sustaining.
<unk> expenditures are expected to offset the 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 continues to track ahead.
Catherine original schedule with overall project 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 refurbished.
Head of the project is forecast to be approximately $13 million higher than budget as I mentioned earlier is.
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.
Airbus Durations. In addition to the implemented 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 cost associated with remote project management and.
Consider safety protocols.
Refurbishment activities at the gold plant continued to remain ahead of the original schedule with commissioning expected to be completed in mid 2021 ramp.
Ramp up and first production at the gold plant is expected early in the third quarter of 2021.
Copper flotation building.
Pandemic activities are on track for commissioning and ramp up 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.
Construction to delivering on the new Britannia mill refurbishment project and the development and mining of Pampa Concha. There are other strategic growth initiatives, we expect to execute this year.
No Lake we continued to advance phase III of our growth strategy as I mentioned, we will update on mine plan at the end of March and we believe this new mine plan with.
Optimize our snow Lake milling capacity with an expected higher production rates at Lalor improved recoveries at the stall mill and the incorporation of the 19 O on 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 in the future.
We have various exploration programs underway, including our drilling activities improve in Arizona that I mentioned earlier and we continue to advance exploration agreement discussions with the community of Chicago on the Maria Reyna and Cabo <unk> properties.
North of Constancia.
Maria Reyna as a 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.
<unk> 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 on investment opportunities as we increased.
<unk> cash flows and create value for all of our shareholders 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.
<unk> atone acknowledging.
On your request.
If you are using a speakerphone please pick up your handset before pressing any keys.
Your question. Please press Star then two.
We will pause for a moment of callers join the queue.
Our first question comes from Rs <unk> of Scotiabank. Please go ahead.
Hi, good morning.
You're obviously, you've got a lot of growth initiatives ahead of you here can you give us a bit of color on on what this constancia on north deposit could do to the mine plan is it substantially higher grade and I'm also curious if you're if this new mine plan that'll come out will include a mill expansion.
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 north, 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.
Annual reserves and 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 flow any additional color you'd like to provide to that.
It always.
Leaner and it always remains a future option to us and it's.
<unk> work, we're working on but this current mine plan was developed.
Update what's happening at Constancia and to incorporate the Constancia and <unk> discovery over the last couple of years.
Does that answer it correctly.
Well just curious.
If you can give us a sense of how much better grade is that north deposit versus demand 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 the public contract.
Okay and is the idea to sequence that.
Concurrently with pump a contra.
Cash flow yeah. The idea 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.
The net for later.
Okay, and then just finally.
I mean to me it would seem like.
On the 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 it a permitting issue.
Hold on or just curious why that's not being cost track.
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.
So the latest one is is with.
The agreement on Consulta Previa, we're able to close the permits and all the permits required to mine it up I gotcha and so the next permit iteration, we would work on would be including.
Something like a expansion at Constancia.
Okay. Okay. Thank you very much.
Our next question comes from Greg Barnes of TD Securities. Please go ahead.
Thank you.
MD&A are on the press release last night, there was a comment about steady state production, particularly with copper on the 22% to 2025.
Range.
Peter is that something plus 100000 per 115000 tons, a year of copper ex or even before COVID-19.
These new on 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 on pump a gunshot.
Okay, and then $2025 26.
Yes, roughly debt and then you get some additional kick from Constancia north potentially as Kessel mentioned.
Okay.
Now on cost pressures.
Have some upward cost.
Some upward revisions to cost for this year, but we're getting mixed messages from the various companies about whether they're getting cost pressures on not getting cost price. So I just wanted to nail down on debt. Some commentary from you on what Youre seeing on what you are experiencing on the cost side in this environment.
Yes, I think Greg casualty here.
Question I think there is there is definitely on our base cost there is and there are some pressures and.
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 on what we foresee them to be.
With.
These two mine plans coming out of debt 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.
Kaplan.
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 on them until a capital allocation, it's something that we think about all of the time and.
And we are singularly focused on delivering what we have to so that 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 I look we.
We appreciate the.
The the.
Need frankly.
<unk> always been schools.
And our cost of capital and there should be set such that theyre 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 now.
Probably the better use of our capital is is ensuring that we've got.
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 standard time once we get ourselves.
Now 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 on something as Peter pointed out.
We discuss actively every day.
Okay. So do you think youre about a year away from that.
Chris I wouldn't look at.
Again.
<unk>.
I look at all I think we look at all competing needs for capital.
And depending on.
On the outcome on the Rosemont process, depending on the outcome of our.
Extensive exploration.
Moving on to evaluate at any given time the opportunity set versus.
Expanding those returns, but it's definitely.
And I know this is this is perhaps core comfort, but 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 on fashion that will support them.
Okay.
Thank you.
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 2000.
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 you know.
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.
And so in Peru, we deferred approximately $20 million of capitalized stripping from 'twenty 'twenty into 'twenty and 'twenty, one because of the poison mining activity during the pandemic.
We also of course.
Some capital associated with country 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.
This 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 have telegraphed. The tailings work that is being done in Manitoba, but those are the key elements of what is being deferred.
Okay and just that's helpful. Thank you and then 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 user agreements is that a fair assumption.
Is that a fair assumption.
Okay and then just lastly on that on you mentioned there is obviously a few line user agreements locked for 2021, but most were completed in 2020.
20th 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.
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 debt 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 on that it's 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 for me. Thank you.
Okay.
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.
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 are out lollar I see that you've range.
The guidance for 'twenty 'twenty, one to to mine on 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 a idea so big picture on what the opportunities are and maybe what your strategy might look like 234 years down the road. Thanks.
Yes, sure happy to do that Jackie Thanks for the question.
Seen outstanding.
<unk> productivity at the law on ore 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 operation 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.
On to la or during the day.
Shaft outage at triples.
And we were able to test.
Entitlement at La <unk>, 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 debt.
In Snow Lake itself, we don't need to keep obviously the funds on.
Mill open stall itself last year as Peter said in his text was over 3800 tons.
Semi 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, it's in the design.
We did at Constancia, so with that were over 6000 tons a day capacity and.
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'll 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 on.
Last night for 2020.
When you wanted Manitoba.
Pairing that with the guidance that you gave around this time last year. It looks like your zinc production for this share 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.
Share.
Maybe just changing the line plan are you are you accessing a different part of the lalor ore body.
In 2021 on one you had previously planned or what's driving those changes.
Yes, I think what it is it's a preparation the Manitoba team is actually stockpiling some of our pre test or out of zone 25 and 27.
Gold zone in our copper gold zone.
Also theres been a focus to prepare those zones in mind those orders 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 of or rather than the metal itself and 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 mine zinc.
But obviously the Waller zinc grade is declining as the mine ages and we took advantage obviously, if 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 rate. 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. That's it for me thanks very much.
Gotcha and Peter.
Okay.
Our next question comes from Duncan Brown of Canaccord. Please go ahead.
Thanks, Good morning, Peter and team Peter.
Peter sticking with Manitoba on probably a bigger picture question for you. While you were speaking copper went up to four Bucks a pound.
And goals on the <unk> hundreds now and you are just a few months away from a new mine plan as well as the completion of new Brett how are you thinking about that business now just in the context of your portfolio.
Yes.
And we were loving it.
It doesn't change our view.
With respect to how we're focusing on the assets. So as I've said consistently over the last few quarters. We're.
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. Then I think we can pause and we can think of what it might mean, but.
To some of the questions that you've prepared before we really really want to accelerate cash flows in this company and take.
<unk> on each of the current environment. So that we can actually start pursuing other initiatives and returning cash to our shareholders.
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.
Take it optimization efforts and performance improvement efforts in Manitoba, and some time, we will pause and we'll figure on what that all means to us, but we are on a rip right not to try to deliver and we're not getting.
Day focused by what the world might be or what it might mean later on.
Okay great.
And then just maybe speaking on some of these other initiatives. So on Rosemont <unk> got a decision now coming some time on H two.
Fingers cost me you guys, but what happens if it's not successful.
What do you do that on 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 will continue to look at expanding our resource base, but I think let's wait for that decision and then we will 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 would be.
Regards to the expired CBA and particularly in per range, yes.
The run on the copper price and on election coming on April 11.
And just given what happened with Candelaria last year are you at all concerned.
Doesn't no we're not concerned.
In short the Ted the reason why I say so is that.
In Manitoba, we haven't had a strike in 20 years.
Have a good relationship with our employees and we continue to or we've had minutes trying 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.
In dialogue 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 on.
We have dialogue with our employees is incredibly important we are not concerned about interruptions.
That's great. Thank you Peter.
Okay.
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 in particular, north 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 drill program is there to start with and is it can you remind me is it sort of a.
Near surface target or is.
It something that maybe a bit deeper.
Yes, so I'll give you a few comments and 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.
On with respect.
Spectrum Maria Reyna and cover Utah, we are negotiating with the community of our 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 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.
Drill at we are drilling at convention, 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 on propaganda, it's all shallow.
Hello targets generated from Vietnam Geological mapping and ground geophysics <unk>.
<unk>, although it is not our.
Number one target as we speak about kind of heat over Mary 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.
The rainy.
<unk> season here now.
With that too we do have a permit to drill on another prospect in northern Peru that we're quite excited about its near the community of the city of a million people about three hours away on.
On the mid coast of Peru Trujillo.
The property is called you again, so we're quite excited at the end of this rainy season to get started there with some follow up advanced exploration. There is quite a number of drill holes already there indicating.
Mineral endowment.
And then I would also mentioned our other exploration efforts in Manitoba to follow up on.
Despite targets like the 19 O one between Lawlor and.
19 on 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.
On some.
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.
When we get fulsome.
Report on all of our assets 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 on Wahler.
Okay, Okay, great and maybe just just net.
All that is is all.
All of the exploration there then COVID-19 right now around the epicentre of sort of.
Hunter and 19 in line or is there any sort of broader regional staff looking maybe under that.
He is on the cover and whatnot.
Yes, 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.
Truckle distance to snow Lake So that's the principal focus right now in <unk>.
Manitoba and as I said, the other focus on 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.
Leila 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.
What's the.
Thanks for copper price.
Are there any more.
Mitigation you might too.
Given the historic volatility is a copper price or the company.
Such as buying puts.
Or.
Raising equity to repay debt.
Good.
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.
On medium sized copper projects that look a lot more robust with 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 I think your first question is do we have.
We intend to perhaps hedge too.
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.
The.
Copper price.
So I think that policy remains in place we may strategically look at it now on again on a short term basis to try to than we typically do get.
Additional 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 on asset.
Like our rosemont or something that had financing conditions.
To 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.
<unk>.
But we as I've said on many occasions.
<unk>, we're in the process the day of transforming.
Two assets through the acquisition of <unk>.
And obviously through the refocusing of the Waller instant 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.
Wood.
While it may be advantageous in terms of paying down debt I am 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 as a consequence on the pricing and the and the changes we're making to the portfolio.
So there are there arent any terms in the new is there any thoughts on the near term where we'd issue equity.
And John I, Shouldnt minimum size threshold.
On the projects.
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.
On it.
All 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.
And bigger picture when we think in terms of our production profile.
Then I think the minimum threshold, you're 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.
To develop much larger assets.
Look what's the optimal in.
And text of.
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.
On 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. This concludes our call.
Your line is now.
[music].
Yes.
Yeah.