Q2 2021 Nexa Resources SA Earnings Call
Good morning, and welcome to the.
For resources second quarter 2021 conference call all participants will be in listen only mode should you need assistance. Please signal a conference specialist by pressing the star key followed by zero.
After today's presentation there'll be an opportunity to ask questions to ask a question.
Question You May Press Star then 1 on your telephone keypad.
To withdraw your question. Please press Star then 2.
The presenters on this call are Mr. Tito Martins CEO of an extra resources, Mr. Rodrigo <unk> CFO of next of resources and Ms. Roberta <unk> head of industrial.
And next patients.
Please note this event is being recorded.
I would now like to turn the conference over to Mr. Tito Martins. Please go ahead.
Thank you good morning, and good afternoon, everyone. Welcome to next Absorptions conference call and thank you for taking the time.
Good day.
We will be talking about our results for the second quarter of 2021.
Please let's move now to slide 3 where we will begin our presentation.
I will start by briefly commenting on our results.
We delivered another strong quarter, we have safely.
And our adjusted EBITDA stood at $233 million day.
Highest quarterly result, and all of our history.
We benefited from strong pricing and the continuous commitment of our team to operational and financial performance.
We ended the quarter with cash above $1 billion.
And leverage down to 1.2 times, but initial has advanced but we stayed juju and.
In light of the extinction of the pandemic business continued to managers and COVID-19 protocols remain in place in our operations exploration activities and projects we.
And they have been very effective.
Mining and smelting operations are running at the highest utilization rates and we expect to deliver our guidance.
And I'm glad to confirm that our first Greenfield project and <unk> is also on track as forecast our system.
We believe around volume and time to mine should have stopped production normally 2020.2.
Global demand for our products remains strong and it's just a made to continue to grow especially in the green economy.
And who continue to invest and grow adjusting ourselves to the opportunities and challenges.
And symbols by COVID-19, among other factors.
Given some recent events, we are evaluating our capital allocation strategy and vision restrictions, where we auto brewery.
Meantime, we continue to invest and.
Advanced Engineering studies of our growth opportunities such as magistral.
And both successful projects. In addition, we have revised lower capex guidance for 2 and 2.2 into $1 million to $510 million, which we will comment in more detail. During this presentation.
With respect to our ESG initiatives and the fight against COVID-19, we continue to provide support.
For Wawa host communities and to the local walnuts in the regions, where we operate.
In order to reinforce our commitment to plurality and human rights, we joined the LGBT and I plus business and rights for <unk> in Brazil, and the price connection and Bill.
And the second.
Second quarter of 'twenty, 1 we also signed a partnership with our families. Our social enterprise owned and on that collectively of and Mayo enter brokers focused on disruptive change and global economic environmental and social developing mine.
Moving forward, we will maintain.
And our efforts to build a sustainable business model generating value for all of our stakeholders and for that we have also continued to invest and our exploration program in all of our mines and projects and the next slide slide 4 I will comment on the results of facility and a brownfield exploration.
Please go to slide 4.
And settled into exploration drilling has been concentrated on extensions of known ore bodies to the southeast of the mine and new mineralized zones like for Capella.
A solid target is located at a 4.5 kilometers to the north.
Off the mine and drilling results confirmed positive intercepts in the second quarter of 'twenty 1.
We still need to continue to advance but these initial results indicate that we could potentially expand our current mineral resource and reserves extending the life of mine.
We.
We have at the same time also became positive brownfield drilling results at the Pasco complex buzzer and more hardwood and Michaels now please move to the next slide slide 5.
Dear I will make some comments about the developable, followed horseweed fueled mining project and upon them.
When we published our updated Capex last October we were contemplating and estimated impact of the first wave of Covid. However, the extension of the pandemic has demanded additional precautionary measures and some of the costs were not predictable at that time.
Our previous Capex guidance off.
And from $547 million.
And has been now up day to $575 million and it may go up to 595 million loans, depending on some unexpected conditions here.
Here, we want to be cautious about future impacts of dependent and so we are setting up 20 million.
And just kind of provision for the project assuming that same cost incurred up to now would happen to the end of the construction.
Fortunately the current scenario and our reported and I have been much less negative than the 1 scene and the last 9 months.
In addition to COVID-19 costs. This capex.
And also contemplates some nation and a minor scope change.
Is the scope change has to do with housing for our future employees.
As you May know as part of the infrastructure of the project. We are building houses for our operational team.
Surprising during the hiring process.
And growth of their future employees choose to be relocated to other panel instead of working on a fly in fly out the scheme.
So we had to increase the number of houses to be built in the city. Good news in terms of retention and commitment to the project.
In summary, despite the current circumstances with.
Covid and its impact we are on track to deliver our project as planet and start production at the beginning of 2020 true.
And upon non construction works continue to advance and overall physical progress has reached 89% at the end of June compared to 79% in March.
My and the development team is continuing to progress in both Iraq and link mines and in June the vertical development project scope was concluded.
With respect to our exploration program drilling has been focused at the deep northwest extension off Bubba true and laughs results contributed.
For a high grade mineralization area. These results support our belief that our repo and there will be a long life mine.
Moving now to slide 6.
Let's talk about our project by July.
In addition to our reported out and as you know we have a pipe and line of potential growth.
Projects and different stages of maturity with respect to <unk> copper project Engineering studies continue to progress and a peer review for debt fell trees stage will be carried out during the second half of 'twenty 1 visa.
These awards are being developed to mitigate risk of project is a huge.
Brian before any consideration of our approval by our board.
With respect to eat Lady on exploratory drilling results confirm it's true new ore bodies at day letter you won't Sue targets.
Regarding Basel, SaaS, and we continued to execute especially and drilling in the central zone of the site and.
Some of whom debt the bushel staffs mineralized zone extends at depth along parallel Southwester trail.
Now I would like to pass to <unk>, our head of Investor Relations, who will comment on our financial results for the Alpha please.
Thank you Chico.
We have good morning, everyone. Please let's move to slide 8.
Beginning with the chart on your left consolidated net revenue in second quarter of 2021 was $686 million.
104% compared to the same period a year ago.
And ladies.
My Ohio metal price and volume.
And we compare a weak first quarter was 21 net revenue increased by 14%.
Adjusted it would be by stood at $233 million compared to $40 million in the current quarter of 20th rainy and 100.
$118 million in first quarter of 'twenty 'twenty 1.
And as Tito mentioned, we have recorded the highest quarter adjusted it began in our trajectory with delivery and another quarter of solid financial results and operational performance and.
And this performance not only benefited from higher.
And prices and volumes, but also reflects our initiatives for the next highway program.
Of course during the first 6 months of 'twenty, Duane and 1.
So there'll be that total $413 million.
And the next slides, we will discuss in further detail our segment performance.
Air miles lifestyle and <unk>.
Ken maybe just.
Our mining segment results.
And equivalent production reached 136000 tons.
52% year over year, and about 5% trunk first quarter 'twenty, 1 mainly driven by higher treated ore volume.
And second quarter explained by 1 zinc production of 82000 tons increased by 31% compared to a year ago.
Following the recovery of our Peruvian production, which was temporarily suspended due to the measures announced by the pedals and cosmic.
I'll make the first quarter 'twenty, 1 total zinc production increased by 5.5%, primarily driven by sell Lynda, which benefited from increased production in the remaining areas and short term mine design and lower dilution in the quarter for.
Production and prevent it and it backwards from mines also.
The increase it.
With respect to us and he is pretty realistic disclosed is Stefan arch mine production remains temporarily suspended.
During the quarter and.
And in depth analysis of the geotechnical conditions was carryout and no significant progress was detected.
We have already started out.
Compact here of irritation and plan to access the main rent and tenancy and mine development and should start in the third quarter was 20 for anyone.
We expect mine and production to resume in the first quarter of 'twenty 'twenty 2.
In terms of for net revenue, we repaid $311 million in the second.
Our water.
181% year over year, and 22% quarter over quarter.
Explained by higher average Ele me prices and inquiries and sales volumes adjust.
Adjusted EBITDA for the mining segment stood at 141.
Check with builders and strongly recovering trying here, though.
Back to the first quarter adjusted EBITDA also included.
As you can see on slide 10. This performance was mainly explained by <unk>.
The positive price effect of $34 million related to higher LNG prices and.
Millimeters and market prices result, and quotation period adjustments.
Followed by higher byproduct credits due to better price and volume and lower disease, which were partially offset by the increase in operating costs, driven by COVID-19, and maintenance expenses and higher workers.
And change it pay channel.
And inquiries and exploration and project X validation investments.
And the first 6 months of the year, adjusted EBITDA amounted to 200 and and $39 million.
In terms of cash cost and you can see and the Bakken right consolidate and mine cash costs are.
Starting cents per pound in second quarter 'twenty, 1 they created by 60% compared to the second quarter of 2020 and by 40% from the previous quarter.
This decrease was mainly driven by higher byproduct credits and lower G fees.
Now, let's turn.
For total segment results.
On slides 11, and 12, we will discuss other as Malcolm segment results.
And second for 'twenty, 1 metal sales amounted to 157000 tons.
31% year over year, and a 5.5%.
For this novel first quarter 'twenty, 1 driven by a recovery in global demand.
Net revenue and the quarter was $522 million totaling $919 million in the first 6 months of the year.
Positive driven by higher prices and sales volume.
Adjusted EBITDA.
Therefore, it has now been segment in second for 'twenty, 1 is stood at $93 million compared with $39 million a year ago.
Compared to first quarter adjusted EBITDA also went up.
As you can see on slide 12, the 11% increase and EBITDA was mainly.
Mainly explained by <unk>.
Higher sales volume with a positive impact of $4 million Penguin and byproduct contribution due to higher prices and volumes and the positive effect of other income and expenses, which were negatively impacted by an incremental and provision in the first quarter Bcf.
These factors were partially.
Partially offset by the negative price effect of $11 million related to changes in market prices, resulting in quotation period adjustments.
In the first 6 months of the year adjusted EBITDA was $176 million.
In terms of cash cost and.
And here on the bottom right consolidated smelting cash cost of 1 dollar and 80 cents per pound in.
And second quarter increased by 9% compared to the previous quarter.
Mainly driven by market related factors, such as higher zinc price impact and the concentrated.
As your keys and lower treatment charges.
I'll now turn it over to cultural Rodrigo <unk>, our CFO, who will provide more detail information about where our balance sheet mainly please.
Thank you Rebecca good morning, and good afternoon, everyone I am now on slide 13 as.
And as.
Boucher and the upper left graph, our liquidity remains strong and we continue to report a healthy balance sheet with extended debt profile.
By the end of the first quarter. Our current available liquidity was off $1.4 billion, which includes our undrawn revolving credit facility of.
Great and $100 million.
As of June 30th.
Average maturity of our total debt was 5.5 years with a 4.6% average debt cost.
Leverage measured by the net debt to adjusted EBITDA ratio decreased to 119 times from 1.
<unk> thousand 3 times, mainly driven by higher adjusted EBITDA and lower net debt.
The debt breakdown by category and currency and as shown on the right side of the slide and lie.
And of our strong balance sheet and liquidity and July we continued to advance with our liability management program and we have repaid. Additionally.
And our existing financial debt.
And reducing our gross debt by almost $180 million.
On slide 14, you'll see our perform and balance sheet.
Sydney and these prepayments.
And this slide we present and excess free cash flow generation.
During the quarter, our free cash flow.
74, it was $40 million.
Describing its harder and starting from our $233 million adjusted EBITDA, we had a $35 million loss and working capital.
$56 million of sustaining capex and $35 million low interest paid and taxes.
Thank you.
Mexico has generated $107 million of cash before expansion projects during the annualized period after debt, we invested $51 million and non sustaining capex, which includes mainly our reported non development project.
We also had a negative net effect of $63 million and.
And then a Rev prepaid about $94 million of debt during the quarter.
Actually offset by the additional draw down of $51 million related to the MBS Lou and agreement.
Other non operational impact, including foreign exchange effects had a positive impact of 53 million.
As we Ernie now for the next slide Slide 16.
<unk> mentioned, we have revised our 2021 capex guidance.
$510 million versus the previous $450 million. This increase was mainly driven by the updated expenditures for our growth projects.
Mainly driven by a net as explained earlier in our presentation.
Visibility study investments for margins throwing both for sales were also updated.
In addition, we estimate higher sustaining investments and the second half of 'twenty, 1 due to expected increase and mine development and higher.
And maintenance costs also affected by inflation and the.
And second quarter, we have invested $116 million and Capex Eric.
The other point and project amounted to $59 million, 49% of the total investment 40 year, we now estimate to invest 255.
Higher and dollars to continue developing and deploying them.
Spending and investments including HSBC.
Wanted to $56 million and the quarter totaling $87 million and the first half of 'twenty 1.
And that's project advent, we expected this berkman to increase over the second half of 'twenty 1.
Meeting our guidance disclosed and the beginning of the year and.
In terms of mineral exploration and project evaluation, we invested a total of $17 million and the quarter totaling $31 million and the first half of 2020.1 for the <unk>.
All year, we expect to continue our mineral exploration and project evaluation.
5 minutes, and we will maintain our efforts to replace and increase mineral reserves and resources supporting our business growth.
On July 21st we published our second exploration report and we hope it could provide further clarity over our results and exploration program strategy.
I will now handle the call back to.
Chico typically.
Thank you Matt we are now at slide 18.
Here, we will make some comments about the market fundamentals.
Might some downward pressure doing June zinc price maintained its upward trend and increased by 6% compared to the last quarter.
This increase continues to be driven by a global economy that typically grow.
The depreciation of the U S dollar against other major currencies also contribute to higher metal price.
Despite the challenges posed by COVID-19 Global mine production continues to improve as a consequence disease have a range of show some.
Silver recovery compared to the last block is.
Could add some downward pressure and metal price during the second half.
The Big question here is how Chinese and mining production will behave.
With respect to copper price also presents a significant recovery year over year and increased by.
By 14% compared to first quarter of 2 into 1.
Going forward as award using transition to green economy and demand for all products should continue to increase.
Moving out with all of our last 2 slides.
Slide 18.
We remain focused on delivering that upon a broad.
Hi, and strong results benefiting from the favorable commodity prices and the operational improvement and strong and our next away and you should use.
We expect to be able to continue safely operating and delivery and sustainable results.
Although there are some inflationary science at the Horizon, we believe our.
And is meant to cost control and capital discipline will help us to overcome any difficulties our products are essential for a growing economy and we believe we have a unique position to grow and zinc and copper and the long run.
And value for all of our stakeholders.
Thank you all 40 of our bi.
Commits move for the Q&A session.
We will now begin the question and answer session.
To ask a question you May Press Star then 1 on your Touchtone phone.
If you were using a speakerphone please pick up your handset before pressing the keys to withdraw your question. Please press Star then 2.
At this time, we will pause momentarily to assemble our roster.
Our first question comes from Auris work it out with Scotiabank. Please go ahead.
Hi, good morning to you.
Don't think Roberta.
Pedro I.
And I'd love to ask you about the comment in that you made earlier and also in the front page of the press release.
Pertaining to.
This issue of you're evaluating your capital allocation strategy and the jurisdictions, where you operate.
Does.
What does that imply that you're potentially looking at new assets outside of <unk>.
Brazil, and Peru or.
And I, just reading too much into that.
Hi, Thank you for your question.
Let's put this way we are.
And the last call. We had already mentioned that you were looking at new assets outside of the 2 countries.
We have some.
Resources.
Spam and immediate today.
And some exploration.
Railings and we are also.
Also moving to Ecuador, where we have just open up a new subsidiary and we have done.
Moving to potential partners there junior companies. So the idea is that clearly we need extra true to mitigate our.
Our geopolitical.
Risks right so.
For the best way to do it is actually moving to different localities.
And different geographies is exactly what we are doing.
And of course.
We have to be very cautious.
Everybody is asking us what's meant to happen in total we don't know.
We try and be able to stay.
Home country.
But the understanding that things are changed and everywhere and so it makes sense to move to be present and in other words.
Other geographies.
Okay, but it sounds like your pure.
Our presence here and these other jurisdictions it sounds like they are fairly modest sort of at the at the exploration type state and you still yeah yeah.
The idea yes.
And we said that and the pass.
For us we have our greenfield projects.
And they are located basically and.
We have in Brazil, but we kept looking around to see if there are other competitive opportunities and this is 1 of the things that we keep saying all the time.
If I can find a very competitive project.
In other geographies that debt.
For the action can.
Can be it can be.
And bring us a higher <unk>.
Return and value of course, we would look for that.
And may be just regard to what we have and our Portugal already.
Yes.
Okay, and the capital allocation strategy part of that that statement.
Is.
And to be retaining to sort of a new investments or could it could it pertain to higher.
Shareholder returns are what what are you alluding to there.
Still looking at new investments.
We want to grow loans purchase volume.
And we want to grow and copper.
Our resolve and priority clearly.
Is that pretty markedly.
And do not understand completely the zinc market. So we understand that we want to keep.
Our volumes of zinc, but in parallel we want a growing and.
And copper so the capital allocation would be in this direction and I have to look at the opportune.
Opportunities and growth.
Okay. Thank you Tito.
Thank you.
The next question is from Isabella is constantly with Bradesco BBA. Please go ahead.
Hi, good morning, all and thanks for the opportunity I have a couple of questions on my side the first.
Okay.
On dividends and of course, you already have and dividends and debt location going looking into the next couple of years.
You already have a very.
Now comes from what language position, so should we see dividends trending up.
Sure.
Our net thereafter.
Opportunities for liability management.
And the second question.
Looking ahead into the second half in terms of demand.
If you can comment a little bit on on your order book visibility and.
And what Youre seeing in the Latam market that'd be helpful. Thank you.
Hello Isabella.
Good morning. This is what the room and I will answer the first question and then for you regarding this strong cash position and dividends versus liabilities management, we have already paid dividends. This year, although we are let's say coming from us.
A challenging year last year, we wanted to 2.2.
And really be committed to our shareholders and we had debt payment, we don't foresee any additional payments throughout this year.
And the strong cash position that we have we have been also using for liability management. We have a bank loans, mainly that are more flexible to be prepaid debt. We have been preparing as you saw and subsequent events and our.
Our figures and these are.
Released yesterday, so we already paid during the quarter are around $80 billion and an additional 180 ever since the beginning of July so looking forward with a with strong cash generation and.
A proper liability management or.
Liabilities surveillance here that we have been doing as Tito mentioned, our goal is to invest and increase the business.
So.
All of these do governance and looking for these opportunities he just mentioned.
Yes.
Second question and above the market.
Let's let's put this way.
It has been very strong.
Remember in the last call I mentioned and that we're seeing a very strong first half of the year.
And.
And we are still seeing the same the same situation.
Meaning.
And as Europe, Latam and Asia, all all continents.
Everywhere, we are still seeing a very strong demand for base metals in general.
And on the other hand.
And there is a lack of supply mostly in China.
It has to do with the lack of concentrate production that the concentrate production was is lowered them well.
What will was expected to be.
B.
And so we are confident that we should have a second half very similar to through the first half.
Many in terms of the pharmacy of sales.
U S supply and demand profile and pricing.
So we are very optimistic about the second half.
Thank you.
Okay, great. Thanks for Bob.
The next question is from <unk> <unk> with Morgan Stanley. Please go ahead.
<unk>.
Hello, everyone.
So 2 questions I just wanted to ask if you could elaborate and the increase of the sustaining capex guidance and also if you could give us a number of.
What do you see being the long term sustainable capex.
Yes.
And the other capital allocation and I would like to to know if it's fair to assume that you will deep prioritize mark and Scott and me.
And next year, given the heightened political uncertainty.
Keith.
Okay.
And how are.
Are you.
That'd be cover the sustaining capex first.
Actually we have been seen from some events there yes.
First of all I believe we have a choice to certain expense which is not.
Is this a height as other.
Appears market peers are facing but we have inflationary costs to a certain expense. While we are also when you talk about sustaining capex, we are increasing development mine development and investment.
Especially and settling and so then with this you get kind of a rounded up figure is useful.
Looking forward our.
Structure I apologize.
Once you are increasing and mine development and going deeper and and all you have infrastructure and <unk>.
And with that you'll have to cover so this justified quite a bit.
And the larger and amount of these inquiries you observed looking forwards on a long term sustaining capex for every year.
And we had been discussing this ever since the IPO I believe proportionately would have been increasing debt as to the new operations that we have and 90 corner.
Think it's fair that you could think about something around 240.470 for a year and that's what.
So fair referenced.
And this is going to be effectively so we need to forecast every beginning of the year, which is the timing, we reinforce and provide guidance for the market, but as a rush and our brother rationale I think it's fair to assume this type of range.
Regarding the question.
Above.
We're conscious drought.
We are and the process off actually and being.
Due to the ability to study.
We actually.
And almost done with that and we are only de risking the project by the riskier.
Want to be sure that we have everything.
And in place and.
Completely.
Assets in order to develop the project is our priority.
To have it ready for development.
Im assuming debt.
Soon after we finish.
And the construction of <unk>.
We should be able to discuss with our board to move ahead or not with the project next year.
When you think about what's going on and if at all with the new president and and the new debt.
The new political situation.
And I said that before and.
And still believe that.
You should not be.
Very concerned about it because it is our priority for who has a very stable.
And the institutional.
And our situation so.
Sure Shneur and political situations so.
We are not concerned about the change and the policy.
Politics there.
And the.
And the merits of the project would be the ones to justify its development.
God bless.
Political situations so.
We are just <unk>.
<unk>.
Very precise and looking at debt.
The.
Technical aspects of the project and audit tools to decide about statistic fusion I am optimist about debt by the way.
Keeps saying that it's a good project and then and we should pursue it.
Thank you.
Thank you.
The next question is from Jackie.
<unk> with BMO capital. Please go ahead.
Thanks very much.
And maybe I'll ask a question about the.
Projects that you have in your pipeline and I'll start with <unk> and you mentioned that some of this capex increase I think if I understood you correctly. Some of this capex increase is coming from the fact that more.
<unk>.
<unk> are opting to limit site, rather than play and play out does that and.
Affect your your forecast for operating costs going forward should we expect that those might actually be lower than than you'd previously targeted.
Cause of that.
Jack for the question yes.
And it's not material, it's not a significant.
Value amount, but yes, the final impact would be.
Exchange.
And <unk>.
Opex for Capex Youre, correct about that but it's not material.
Yes.
$9 million increase.
Okay. Okay.
Got it.
Thank you and and on that same vein I guess.
I mean, you you continue to list in your MD&A. The are the number of projects that you have in your pipeline can you maybe give us an update in terms of what you're thinking.
And now that we're getting closer to completion of our Ethernet are you for.
And you in 2020 to accelerate your effort on on any of these other projects that have been on the quieter side since COVID-19.
Okay.
That's it I'm going to and taking a picture here.
Okay. The AFC from today.
And it looks natural for us to go for months and strong next year.
Despite not assume that Covid is still a big problem everywhere I think distinguish us going back to a more normal life as its coming back for more to be more normal but.
But COVID-19 is still there and still a matter of concern.
Assuming that the situation.
And turns to be more and more.
Sustainable and and.
And quite we should pursue the next project debt would be margins strong.
Borrowing.
Margins for all.
And our pipeline seems to me that the leidy or should be the next 1 given the good results we are having from the exploration there.
So and the Lady law is an important project for us because at the end of the day.
<unk> adds additional.
Zinc capacity from our minds.
So this to me is exactly what we are seeing for the next years.
Next few years.
What what the development timeline as far as you can tell right now for Magistral is this maybe like 1 would you see it maybe coming into production.
And like 2025 ish.
And in truth and drifting.
Yes should be ready shouldn't be the you know 25 exactly okay.
And then and maybe I'll just ask a on a separate topic Roberta mentioned earlier and the in the call.
Extreme low Norway.
Yeah, I think I think are starting to resume production in Q1.2022 is that correct and can you give us a little bit of update on link zone.
Yeah, we actually are going back to to do development I'll stop.
Starting to go from actually next week, which we are good news, but.
Since we when we stopped production and there we have to rebrand our production.
And <unk> so we.
Considering that the someone watch will produce anything on the second half.
We will.
Just concentrate on development and actual having.
And having it.
And back in production of the beginning of next year.
We will replace what this trend and what you would produce in 'twenty, 1 and buy more production.
And coming from the main mine the punchline.
And is that effect grade like how does how do you see the grades and second half a.
This year and then how does that help.
And does that change once Extremo Norte day comes back and it doesn't it doesn't and we should see okay and the same grades and we had as a percentage doesn't.
And anything.
Okay. That's it for me. Thank you very much for that.
Sure.
The next question is from Alex hacking with Citi. Please go ahead.
Yeah. Good morning, I have a couple of follow up questions.
Just just following up from what RF, Australia I just wanted to clarify around geographic diversification is just so I fully understand it is that something that you think is strategically preferable to diversify outside of Brazil.
Peru or its more a question of just chasing the best projects and and having some optionality and.
Okay for the investment environment and those 2 countries isn't so good.
And and then.
And just talking about just trial.
Is it still going to be.
And for 30000 ton a day project is has anything changed there.
And if I remember correct there was an issue with.
1 of the communities that you had to walk around their land is is that side all resolved all the community relations and everything thank you very much.
Brazil and doing Alex.
Terms of the ore.
Each about jurisdictions.
I would say that the kind of both situations and you know.
We are looking at new geographies in order to work on our risk profile.
No political risk profile.
And of course, we are also looking for.
Good assets right. So I would say of course tumor.
Tomorrow someone comes to US and offers a very interesting project in Brazil of course, we would look at debt.
Okay, but if we have opportunities to be somewhat.
Thank you and what else I would do it.
Italy, we've been we've been kind of punished for being honing in Brazil, and Peru, and so no reviewed makes sense to look at other opportunities and other places.
In terms of months. So yeah, we are keeping the same the same size of the project with 1000.
Tons a day there is no change on that of course, we had a chance to look at different different possibilities. We are still looking at possibly is but seems towards that makes a lot of estrogen to have scale.
<unk>, so economically speaking would be balanced extra produce.
And as you know with large volumes.
Hey.
The issues with the community, we don't have I mean, and we have a good agreement with the community, where we will be operating.
This agreement has been in place.
And not 1 for the last 4 or 5.
<unk> already there is no other communities.
Which was in dispute against this the first 1.
The dispute is among them.
It has to do with the limits of each area belonged to each of the communities, but it doesn't affect our project directly.
Please as always.
And Gerald disputes between Bell and doesn't affect our relationship in general we are doing fine there there are no issues with that.
Okay, Thanks, Great and bank and good luck quickly are appointed.
Thank you.
The next question is from Adrienne <unk>.
So look with Metlife. Please go ahead.
Good morning, and thank you for taking my question and congratulations on the results.
It's a follow up on many of the political issues, but I think I've been discussing so far so we kind of think that Asia is not what else feedstock and a road show how returns are for mining companies.
And so I'm wondering what you are for a school here are you thinking here and maybe here higher taxes higher labor costs.
And I think more effective and environmental regulations.
With all of this mix and if the physician thinks it's there and maybe for the walk with a more aggressive government.
1 other legal it means that next half available to take off and off.
Our higher cost debt to go beyond worry for us.
Well.
Very good very huge very broad question, but thanks.
The following week.
We rely on the institutional simple.
So we trust.
For the bedroom and democracy has been in place for decades is already.
For different governments, along the last 20 years and.
And from the last from the right.
The economy and business.
And a very sustainable way.
The government is saying now that they may go for increasing taxes they want it.
Distribute better.
The income but.
We have to see how the Congress will react to the position of the president.
We got the president doesn't have the majority of the votes. There. So we don't think its going to be a.
There will be a major change.
ZIP change and the way business.
Bye bye.
Central government.
Because.
Difference those though.
The difference between the what the presidency, and once again and what the Congress axes.
And defense supports.
Really there is a there is no match between bell, which actually Kim.
The institutional working as usual so we are not.
Not so concerned about it right now and then of course, we'll have to wait and see how this the politicians will behave along the next few months.
In order to be able to find out there it will be a major change, but we don't think it's going to happen.
Okay and the second.
And as we got these habitats stability agreements in place and EBIT.
And then after that.
Alright, we have just won agreements with several window and this will and until the end of this year. It finalizes in December this year so from next year.
Second question there are no.
Stability agreements in place.
Not beat and it's stable.
Okay.
Net in place.
Thank you very much.
Thank you for your question.
Again, if you have a question. Please press Star then 1 day.
<unk> question is from Lucas Yang with Jpmorgan. Please go ahead.
Hi, everyone. Good morning, and thank you very much for taking my question.
2 brief points off first 1 this debt.
You mentioned that the outlook for price is positive and there should be no changes and grade right.
Mining costs were very low year to date.
And the guidance wasn't changed so my question do you expect a pickup in cost and to the second half and why is that and how that should play out.
And my second question would be.
Like a <unk>.
Congress.
Eric change in Peru would depend on Congress and and like other political scenario play out, but do you think that the with the casino.
Hello pregnancy, there should be more risk on the labor side, maybe strikes and things like that so if you could explain a little bit how the labor contracts for Dirk what are the risks that would be great. Thank you very much.
Okay. Lucas. Thank you for your question and first of all on the on the cash cost.
We know we are conservative.
Expense.
And maintaining what we see as mine cost, but that should be reminded that part of the decrease comes from also from price and byproducts.
And the prices are still showing some volatility and then.
And also we have been as I mentioned and other response here, we haven't seen some.
Some higher investments and and mine development.
We're increasing our scope of work and the mines. So this might impact as well. So the thing is the way we saw the year back in January when we released the guidance had some changes some further for.
For positive impact.
For some of them are other negative impact and we understand the guidance still represents a fair.
For information about what to expect throughout the year.
If I addressed your question.
Yes, very clear thank you.
Okay above the second question.
We haven't had a very.
Stable relationship with the unions and.
All of our operations and Peru from time to time, there is some noise, but this is a theme that we consider very.
And the normal nothing.
Go lower and attention with the new government.
I would.
In fact, I'm not expecting to see a major change and the relationship with the.
The unions.
And it seems to me that the government is more of a focus on on on on promote these social development.
So what we may see and say.
The more.
I'd say that discussions and negotiations with local communities because as you know we've been supportive to them all the time.
As part of our our works.
And.
And our industry is very important to the countries. So.
And part of our lives.
And the baby business.
And actually being closer to the community. So we may see increase and this relationship increasing but.
And in general and I'm confident that the suggest should not change much.
Thank you great. Thank you.
Yeah.
This concludes.
And a question and answer session now I will hand over to Tito for his final remarks, Mr. Martin. Please go ahead.
Very much simple for being here today.
We are still leaving.
Good time, because as I said before Covid has not ended up yet, but seems debt situations imprudent and a little.
And Ian.
We see less people being contaminated and nation use is increasing so we are very optimistic part of the second half of the year as I said before our markets has been very good.
And seems to other operations.
And they reach a very.
And is stable.
Level.
So we are expecting a positive scenario and a positive performance for the rest of the year.
And the case law for Alibaba and now.
We are as I said, we are very optimistic we believe that we are we will be on.
And on schedule.
So we should end up the year ready for our production for 2020 true. So <unk>. Thank you very much we are available and our team and Investor Relations team is available to speak with you at any time and.
And I wish you.
And.
Good weekend, thank you very much.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
Okay.
And on time.
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Yes.
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Net.
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