Q3 2021 Hudbay Minerals Inc Earnings 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 zero I would like to.
Mind, everyone that this conference call is being recorded today November 4th 2021 at 830, 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> 2021 third quarter results Conference call.
These financial results were issued yesterday and are available on our website at www Dot Dot com.
Responding Powerpoint presentation is available and we encourage you to refer to it during this call.
Our presenter today is Peter could guilty I'd be president and Chief Executive Executive Officer accompanying Peter for the Q&A portion of the call will be Steve Douglas, Our senior Vice President and Chief Financial Officer cash Omar Our senior Vice President and Chief operating Officer, and Eugene Lee, Our senior Vice President corporate development.
<unk>.
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 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 in U S dollars unless otherwise noted.
And now I'll pass the call over to Peter Peter could Kelsey Peter.
Thanks, very much Candice and good morning, everyone and thanks very much for joining us today.
Our performance in the third quarter demonstrates our continued focus on execution and delivery in 2021.
We had the first full quarter of production at the pump a conscious satellite pitch in Peru, and we started to see the benefits of a higher gold from the newly refurbished new Britannia mill in Manitoba.
This led to record gold production for <unk> this quarter.
We also successfully commissioned the new copper flotation circuit at new Britannia in October marking the completion of our recent investment program into two high return growth projects.
With pump a culture in new Britannia now in operation. We are on the cusp of achieving significantly increased cash flows for many years to come and this is at a time when the commodity markets remained strong, including a robust outlook for copper due to a lack of long term copper mine supply coupled with the growing demand for copper to support global <unk>.
Carbonization efforts.
In the presentation today I'll speak to the highlights from our third quarter results discuss the progress we've made at our growth projects in more detail, including exploration success at our Copperweld discovery in Arizona, and I will recap the many near term catalysts at HUD base.
Third quarter consolidated copper production was 23 2000 tons generally in line with the second quarter of 2021. This.
This was because of slightly lower copper production in Peru was offset by higher copper production in Manitoba.
Consolidated gold production in the quarter was 53 9000 ounces a record for <unk> and a 35% increase from the second quarter due to higher gold grades from pump a culture record gold recoveries in Peru, and significantly higher gold grades at Lalor.
Zinc production in the quarter decreased by 3%, while silver production increased by 11% versus the second quarter.
2021 production guidance for key metals contained in concentrate in Dore has been reaffirmed.
Consolidated cash cost per pound of copper produced was 62 cents in the third quarter of.
26% decrease from the second quarter as operating costs were generally lower.
Sustaining cash cost decreased by 12% to $1 97 in the third quarter, primarily due to the same factors affecting cash costs as well as slightly lower sustaining capital expenditures.
We continue to expect consolidated cash costs and sustaining cash costs to be within our annual guidance ranges for 2021.
Cash generated from operating activities increased to approximately $140 million in the third quarter compared to $96 million in the second quarter.
Operating cash flows before change in noncash working capital declined to $104 million during the third quarter, primarily because of lower base metal sales volumes and lower realized copper and precious metals prices, partially offset by higher precious metal sales volumes.
Third quarter, adjusted net earnings were $38 million or <unk> 15 per share after normalizing for an impairment due to an updated flimflam closure plan and flimflam restructuring charges.
Adjusted EBITA was $119 million lower than the second quarter of 2021, primarily due to the same factors affecting operating cash flow.
As at September 30 of 2021, our available liquidity, including $297 million in cash and equivalents, a slight increase compared to the second quarter.
This was because cash generated from operations was offset by $89 million in sustaining capital and investments in the new Britannia projects as well as $34 million of interest paid on our bonds.
In October our liquidity position was further enhanced through the successful renegotiation of our credit facilities to increase available borrowings borrowings from $400 million to $450 million, while extending the maturity to October 2025.
We eliminated certain financial covenants, while amending others to increase our financial flexibility and we reduced the effective interest rate.
Moving to slide four you will find a summary of the quarterly operating results from our Peru business units.
Yes.
Constancia produced 18000 tonnes of copper 17, and a half thousand ounces of gold.
521000 ounces of silver and 282 tons of molybdenum, while copper production was 5% lower than the second quarter due to a planned semi annual mill maintenance shutdown in July.
<unk> and silver production increased by 72% and 11% respectively.
This was due to significantly higher gold and silver head grades from Pampa, Concha and significantly higher gold recoveries, which led to record quarterly gold production in Peru.
As noted last quarter molybdenum production is a smaller part of our business and we expect it to fall slightly below the 2021 guidance range, but in line with the recently published mine plan for Constancia.
We expect the production of all key metals in Peru to be in line with the 2021 full year guidance ranges.
Ore mined during the third quarter decreased by 8% from the second quarter of 2021 as mining levels were optimized for mill throughput.
Amp up of mining activity that pump Concho has increased steadily since first production in April 2021.
Ore milled during the second quarter was 6% lower than the previous quarter due to the scheduled mill maintenance shutdown.
Milled grades for copper was slightly lower than the second quarter, but were in line with the mine plan.
Milled grades for gold and silver were 57% and 36% higher respectively than the second quarter due to a significantly higher precious metal head grades from pump a culture.
As mentioned, Peru achieved record gold recoveries in the third quarter significantly above the second quarter, mainly due to higher ore grades from Pampa Concho.
Meanwhile, copper recoveries increased due to lower levels of contaminants.
Silver recoveries decreased as a result of lower than expected recoverable silver values in the earlier more oxidized ores from pump contract.
Recent metallurgical test work indicates a pump conscious silver recoveries are expected to increase to targeted levels in 2022.
Combined unit operating costs in the third quarter were higher than the second quarter, primarily due to higher milling costs and fewer tons milled due to the scheduled mill maintenance program during the quarter.
Cost have been generally higher in 2021 as a result of the higher ore hardness higher steel prices affecting grinding media costs higher fuel prices impacting holding costs and COVID-19 related expenditures.
Covid related costs in Peru were approximately $5 million in the third quarter and are expected to continue at a similar run rate into the fourth quarter exclude.
Excluding these COVID-19 related costs unit operating cost in the third quarter were $10 93 per ton.
We expect Peru units operating costs to be near the top end of the guidance range. This year after adjusting for and budgeted COVID-19 related costs.
<unk> cash costs in the third quarter were $1.26 per pound with 32% improvement over the prior quarter the significant.
<unk> reduction was due to higher byproduct credits and lower operating costs, partially offset by lower copper production.
Similarly, Peru sustaining cash costs decreased to $2 31 per pound, a 14% reduction from the second quarter due to the same factors affecting cash costs offset by higher sustaining capital expenditures.
Turning to slide five on pump culture.
As mentioned first production that pump Concho was achieved in early April 2021.
Ramp up of mining activities has progressed well and in line with the recently published mine plan for Constancia operations.
Compared to the last quarter total <unk> increased by 109% to $2 1 million tons this quarter.
As you saw on the previous slide to higher gold grades pump <unk> have led to higher gold recoveries.
Activities continue to advance as planned with grades and tonnes reconciling well against the mine plan achieving the expected increased gold grades in 2021 and on track for achieving higher copper grades in 2022 in line with recent company guidance.
<unk> is expected to contribute to an overall increase in constancia copper production to above 100000 tons per year.
This together with an increase in annual gold production is expected to significantly reduce consensus average cash costs to approximately $1 15 per pound over the next several years.
Now moving to the next slide on Manitoba, we started to see the benefits from the commencement of gold production at the new Britannia mill during the third quarter.
Production of copper gold and silver increased during the quarter compared to the last quarter, but production of zinc decreased.
The operations produced approximately 5200 tons of copper 36, $36 7000 ounces of gold 242000 ounces of silver and 28000 tons of zinc.
We continue to expect the production of all metals contained in concentrate in Dore and Manitoba to be in line with the 2021 full year guidance ranges.
Mining operations at Lalor has started to consistently produce and separate the gold and copper gold ores as feed for the new Britannia mill.
At the end of the third quarter, approximately 35000 tons of gold was ore was stockpiled as feed for the new Britannia Mill, a decrease of approximately 12000 tons from the end of the second quarter.
The Triple seven mine is now within nine months of closure and the focus continues to be on mining out the remaining reserves by completing the necessary ground rehabilitation in order to access old workings and remnants stopes.
Total ore mined at the Manitoba operations was higher this quarter than the second quarter due to higher production rates at Lalor.
And gold grades were higher compared to the previous quarter, mainly due to the increased mining of gold and copper gold stopes at lower in line with the mine plan.
<unk> zinc grades were lower than the previous quarter as mining of the gold zones at Lalor were prioritized during the quarter.
Yes.
During the third quarter, New Britannia mill processed 41, 8000 tons of high gold content ore and produced 404 ounces of gold in Dore mill.
The mill poured its first Dore bar on August 11th.
The gold and silver recoveries are expected to increase in the fourth quarter. After a ramp up of the mill during the third quarter.
Yes.
Ore processed at the stall concentrator in new Britannia mill during the quarter was 29% higher than the second quarter.
Combined stall and new Britannia recoveries during the third quarter were higher for zinc and lower for copper gold and silver versus the previous quarter, but were consistent with expectations as the third quarter was a partial ramp up period for the new Britannia mill.
Operations at the Flimflam concentrated during the third quarter were constrained by all feed availability from triple seven and as such all process decreased by 22% compared to the second quarter.
Recoveries of copper gold and silver at the Flimflam concentrated during the third quarter were higher than the previous quarter, mainly due to higher copper head grades from the Triple seven mine consistent with the metallurgical model.
Manitoba combined unit operating costs slightly declined in the quarter compared to the second quarter, We expect Manitoba unit operating costs in 2021 to be in line with the annual guidance range.
Manitoba cash cost per pound of copper produced was negative $1 64.
Higher than the second quarter, primarily due to lower byproduct credits, partially offset by lower onsite costs sustained.
Sustaining cash cost was <unk> 70, <unk> compared to 36% in the second quarter.
Primarily due to the same reasons affecting cash costs offset by lower sustaining capital expenditures.
On August 11th 2021 gold production commenced at the new Britannia mill after refurbishment commissioning and startup activities were completed earlier in the summer.
First gold production was achieved in line with the timelines assumed in recent guidance and ahead of the original schedule to produce first gold before the end of 2021.
The construction of a new copper flotation facility was completed in October followed by a brief commissioning period completed ahead of schedule.
A copper facility consists of an innovative and first of its client flotation circuit based entirely on Jameson cells and modern pneumatic flotation design that offers a compact layout low cost process and flexible flow sheet.
First production of copper concentrate was achieved in October and ramp up of the copper circuit is now underway, we expect to achieve the targeted 500 tonnes per day design capacity at new Britannia in the fourth quarter of 2021.
We've been very pleased with the construction of the new copper flotation facility. This is yet. Another example of our core expertise and successful project development and delivery.
We completed construction of this new copper flotation project ahead of schedule with what we believe to be a record setting commissioning and ramp up period.
Annual gold production from Lalor and the Snow Lake operations is expected to increase to over 180000 ounces at an average cash cost and sustaining cash cost net of byproduct credits of 412 and $788 per ounce of gold respectively. During the first six full years of new Britannia operation.
<unk>.
As part of the ongoing efforts to update offline fund closure plans a comprehensive update completed in the third quarter of 2021 resulted in a $144 million increase to the decommissioning and restoration provision.
This increase is largely attributable to longer data water treatment and monitoring obligations along with cost inflation for other remediation activities.
The higher water management costs are primarily a result of the addition of 22 years to the post closure of water management period, which after applying a very low discount rate represents a significant portion of the increase the.
The total estimated <unk> environmental obligations are $322 million.
On an undiscovered basis of which approximately 25% is expected to occur in the next 15 years in connection with the closure of the <unk> operations, while approximately 75% related to longer dated closure and environmental costs around the time of snow Lake closure in 2037 based on.
Current reserves.
As part of the engineering work done to update the <unk> closure plan, we've identified the opportunity to reprocess tailings at <unk> tailings impoundment system.
Tailings from processing activities influence <unk> have been deposited in this area for over 90 years and through several commodity price cycles technology has come a long way over these 90 years and we are in the early stages of technical evaluation and confirmatory drilling to support the completion of a scoping study in 2022.
But we're excited about this opportunity as it could utilize the slimfast concentrated with modifications after closure of the Triple seven mine, creating operating and economic benefits to the <unk> community.
It could also provide the opportunity to redesign the closure plans increased metal production.
First certain closure costs and reduce the environmental footprint of the tailings area.
On slide nine we discuss the continued exploration success at our Copperweld project in Arizona.
In September we released the results from drilling completed of Copperweld between January and June of 2021.
The drill program totaled over 91000 feet and intersected additional high grade copper sulfide and oxide mineralization on our wholly owned private land.
Mineralization is within seven kilometers of the Rosemont copper project and is located closer to surface then Rosemont <unk>.
Recently, we increased our private land package, which together with patented mining claims now totals approximately 4500 acres to support an operation entirely on private land.
<unk> 2021 drilling program identified three new deposits for a total of seven deposits at copperweld, covering a combined seven kilometers with mineralized occurrences to.
The three new deposits are called Bolsa, south limb and North Lim.
The program also confirmed and increase the confidence in the size and quality of the existing copperweld brought up Butte Peach and Elgin deposits.
<unk>.
There remains the potential for continuity between the bulk of discovery and the Rosemont deposit as highlighted by three new holes drilled on the western edge of Rosemont, which intersected high grade copper mineralization similar to the mineralization intersected at Bolsa.
There remains a 500 foot gap in drilling coverage between these three holes and the Basel discovery and we are developing plans to test this unexplored area.
We expect to complete an initial mineral resource estimate for the seven deposits at copperweld before the end of 2021.
These mineral resource estimates will form the basis for our pega expected to be released in the first half of 2022.
Mineralogical studies and metallurgical testing programs are underway and the preliminary results are expected to be incorporated into the pega.
Lastly on Copperweld in October we received approval from the Arizona State mine Inspector for our mined land reclamation plan.
This approval represents the first step in the state level permitting process for a private land operation.
Slide 10 provides highlights of the exciting exploration initiatives underway in each of our regions.
In Peru ongoing evaluation of the underground potential at Constancia Naughty support plans for additional drilling activities in the fourth quarter of 2021.
The drilling is expected to confirm continuity and test extensions, which together with the results from an underground scoping study are expected to be incorporated into the annual mineral reserve and resource update for Constancia in March 2022.
We continue to progress discussions with the community of which a cargo on the Maria Arena and cover Utah properties, both of which are located within 10 kilometers of Constancia.
Drilling continues at the AGA and copper porphyry target located in northern Peru, near the city of to here and in close proximity to existing infrastructure.
The initial confirmatory phase of the drill program is expected to total 6000 meters in 14 holes with two drill rigs presently training site.
Five holes totaling 2795 meters have been completed with all holds intersecting mineralization.
Pending positive results from this initial drilling phase the second phase aimed at defining an initial inferred mineral resource for yoga and would follow in the second quarter of 2022 after the rainy season.
In Manitoba are regional exploration efforts in the Snow Lake area continue following on the success from the 2021 winter drill program in the Chisel basin, where the copper gold rich feeder of the $19. One deposit was discovered and high grade zinc and gold mineralization was confirmed through infill and extension drill.
<unk>.
The 2022 drill program is planned for 901 to test the down plunge extensions of the copper gold rich feeder zone.
Our 2021 summer program included regional surface mapping and ground geophysical surveys to delineate our higher priority drill targets for 2022.
One of our most promising targets was identified from our Bohol survey immediately north of La <unk> and is expected to be drill tested in early 2022, both from surface and from underground.
Ongoing infill drilling continues at Lalor, where we've had a strong track record of converting inferred resources to reserves in the past. The results are expected to be incorporated into the annual mineral reserve and resource estimates to be published at the end of March 2022.
Okay.
On slide 11, I wanted to reiterate the point that with our major brownfield investment programs now behind US we are entering a period of significant production and cash flow growth at high Bay.
Higher copper grades at <unk> are expected to contribute to a 46% increase in our copper production by 2024. Similarly, the higher gold grades from new Britannia and pumper culture are expected to increase our consolidated gold production by over 150% by 2024.
This translates to a three fold increase in our annual EBITDA.
And we believe our attractive portfolio of development and exploration opportunities will further add to this growth.
I'll conclude the presentation on slide 12, summarizing the many catalysts that we have coming up in the near term.
In Manitoba, we are on track for commercial production at the new copper flotation circuit before the end of the year.
We will also continue our work on preparing for the ramp up to 5300 tonnes per day at Lalor and advancing the recovery improvement program at the stall mill.
As I mentioned previously we will incorporate the results from drilling in the Snow Lake region into our and our annual mineral reserve and resource update next year.
And we will advance our plans towards completing a scoping study on the <unk> tailings reprocessing opportunity in 2022.
In Peru drilling continues at yogurt with a potential to initiate a second phase aimed at defining an initial mineral resource estimate in 2022.
We are hopeful that we will achieve an exploration agreement with the community of which akaka unexciting Greenfield properties to the north of Constancia.
In Arizona, we are advancing our wholly owned copperweld discovery and plans for an operation entirely on private land. We're also awaiting a decision at the U S. Ninth Circuit court of appeals relating to the Rosemont federal permits before the end of 2021.
We are disciplined copper focused growth company and we look forward to delivering on these catalysts in the near and long term, while remaining vigilant for other opportunities that match, our strategic criteria to create value for all of our stakeholders and with that we're pleased to take your questions.
Thank you we will now begin the question and answer session to join the question queue. You May Press Star then one on your telephone keypad.
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Our first question comes from Rs <unk> of Scotiabank. Please go ahead.
Hi, Good morning, Peter I'm intrigued by the potential of reprocessing tailings opportunities in Manitoba can you share maybe a bit more detail.
What youre thinking there and sort of what kind of scale that could be I mean, obviously, you've got 100 years of tailings sitting around Manitoba I'm, assuming there's a lot of metal in that tailings.
<unk> to try to fill up.
That's the point of our concentrate or effectively the capacity and I'm just curious.
Theres much capex associated with this kind of project.
Good morning, and yes. Thank you very much for that question look I think as.
In fact, if we think of it as a fairly significant opportunity because not only does it address potentially our asset retirement obligations in the longer term by reducing the amount of water that we have to treat but it also has the potential to drive production of additional metal and as you say, we've been depositing metal into as tailings for the.
The last 90 years with technology, that's not as good as today. So there's a significant amount of metal in those tailings and we have to complete the work that lies ahead of us. So number one we have to actually draw those tailing during when they are frozen so that we can before we can do some analysis as well as to figure out the flow sheet for the concentrate or specific.
<unk>.
Size or the size requirements in the concert concentrated would be actually don't really know.
I'll turn it to cash flow to provide some additional color around that sure. Thanks, Peter Yeah, or if there are a number of things consider we're early days, we're working through our scoping studies on this as Peter mentioned one of the critical aspects just understand what the mineral inventory as you sort of.
No that we've been putting tailings into that lakes for 90 years, some are well above the lake and Thats one of the reasons that we have.
Our long term liabilities with the closure and so it got US thinking there are a lot of tailings re process for <unk>.
Precious metals, but also technology has changed.
Mineral processing and there is high intensity grinding Isa mills in these various things that we can add to that and modify our flint foreign concentrate or.
So when we speak about throughput and the possibility it's different than what would be a normal run of mine because obviously the introduced material would be of a different size and so the combination circuit would be somewhat different so two would be the treatment for the flotation and maybe any sort of bleach.
<unk> that's required for the goal. So we're working through all of those things, but we do believe that we will get payable metals set of copper zinc and gold and silver.
We're very excited about that because of the prospects at <unk>.
Presenting to us for re consolidating.
Tailings liability itself.
Whether we get.
Options to put the sulfide portion back into subaqueous or we can.
Isolate them into separate cells to really reduce or limit the amount of acid.
Run off in the future I think it's.
Good very good ESG project its one of those things I'm very proud to talk to my daughter about we're working on that we're going to leave the place better than we found it and we're very excited about it.
It's just one of those things stay tuned stay patient, but we're very positive that this will be a.
A great project and there will be an asset to add back.
I would also add that this is sort of.
Jim.
Coming of age of our technical bench strength that we really are starting to utilize the bench strength that we have in the team and I have always said that we have we sort of punch above our weight for a company of our size. So we're really pleased about that.
Thanks for that color is it fair to say that this is fairly low capital intensity.
Yes, there is a number of things to figure out as you can well imagine working on tailings you've got to think about the stability and so we have to understand the sequencing. We have to understand what is available to us because some of those tailings are built out detailing some of the dams and those types of things.
So.
Yes. The idea that this is a brownfield environment. The idea that much of this doesn't require obviously crushing units just comminution circuit. The idea that we have installed capacity that said on a conventional mine of run it's six to 7000 tonne a day mill.
Minor modifications I would say for what the mineral inventory would be it would be less capital required than what a normal mine would take because it would be essentially.
Opencast mining, we have to think about that mining method, all those sorts of things, but definitely cheaper sent underground mining yet so in general the answer to your question is yes, we think so but there's some work to be done.
Okay. Thank you and just a quick follow up on Manitoba, I know you reaffirmed your 'twenty, one guidance, but zinc really seems like it's tracking.
Fairly below the guidance I'm, just wondering if you're anticipating some kind of really strong fourth quarter to perhaps make the low end of guidance for <unk>.
Just wondering why that guidance hasnt changed.
Sure Stan.
What it is as you can well imagine you're limited in the type of sequencing you can do when you're mining out the final throes of a mine like Triple seven and as Peter said, we have sort of nine months of production and it's very well planned out.
We don't have the flexibility we have at all are we used to have a triple seven where we could jump the sequencing get other stopes. So theres a couple of stopes that are high grade zinc.
And they were scheduled to come out in the third quarter, but they've got delayed by a month to month and a half so theyre going to come out in the fourth quarter and they will be impactful to get us back on range for the low end of guidance on zinc.
Thank you.
Our next question comes from Jackie <unk> of BMO capital markets. Please go ahead.
Thank you very much.
Have a list of questions, but I'll try and.
Narrow it down to a couple.
Robbie.
Peter if we could get an update from you.
About what's happening in Arizona, specifically.
I know you guys had said.
The last year and a half or so.
You're expecting a decision from the ninth circuit Court of Appeals sorry.
This year by year end given we're in November is that still the case.
Hi, Jackie Thanks for that I think that is that is actually the case, we don't know definitively, but when we look at the number of cases that remained with decisions pending that list has reduced down to I think some five cases.
And we anticipate that they will probably get through them by the end of the year. That's why we expect this to be done in 2021, but we have no real visibility into that.
Okay.
We will wait and see.
Obviously youre working in the meantime on Copperweld and I noticed there's a comment about.
I think as the permit.
Sorry reclamation plan. That's been accepted can you talk about how the permitting process for copper world is going and what.
What is still outstanding.
Sure. So so there are effectively three permits required at the state level for copper world the first permit.
Is the mines land.
Reclamation plan.
Which is effectively the preliminary.
Designed for the mine, which is provided in order to determine what the bonding requirements are for reclamation. So we submitted that that plan to the state of Arizona. It was approved in in October.
So that basically set the bonding requirements to further.
State level permits that are required one is the aquifer protection plan and the other one is the air.
Air quality plan.
So those remain to be submitted to the state but of course, we would complete.
Technical work ahead of submitting those but the first one was required in order to kick things off.
Great.
And maybe one just really quick one.
Building on <unk> question about tailings.
I know you guys have a long history of mining.
Is there other opportunities outside of <unk> one.
To do the same this snow lake like I'm thinking of the old channel.
All lines is there a similar opportunity maybe theyre in the future as well.
Hi, Jackie casual here.
Absolutely.
One of the unique things about the chisel camp is when you look at the tenor of gold and silver in it.
Against BMS camps around the world, it's well known to have the highest amount of gold and silver.
So certainly if we're successful at utilizing the <unk>.
On care and maintenance went one mill that we have the opportunity to use adverse it'll be.
Applicable to.
Snow Lake and we will also in parallel we'll be looking at those opportunities over the next couple of years.
No.
If we look at the tails grade two we assume that the gold grade is probably higher I would say in the snow Lake region than it was.
In the tails and the snow Lake region than it is in the <unk>, so that would add more economic.
Economic value for us and more impetus for us to look at that very closely.
Yes.
Thanks, that's great I mean, obviously you need the mill capacity, there, but thats great to hear.
I apologize for the noise. Thanks, very much that's all my questions.
Thanks Jackie.
Our next question comes from Bryce Adams of CIBC capital markets. Please go ahead.
Yes. Good morning, Thanks for taking my questions.
First step.
Question on the exploration agreements preliminary arena and catheter that is still in the presentation is 2021 events.
Is that realistic at this time or is it more of a 2022 event and possibly even at 23 deliverable.
Hi, Brian.
So we have a very good relationship with the community of which we are actively in discussions with that community, but as you can imagine based on our experience at.
At Pampa country with a cheer loyal community these things take time.
We are.
Driving towards securing an agreement with the community of which cargo by the end of this year, but we can by no means say definitively that that will occur so you're quite right that could be a 2023.
Milestone I'm, sorry of 2022 milestone, but we are pretty confident that it will not drag beyond that in fact, our anticipation is that it will be earlier in 2022 and later.
And we're driving towards this year, but as you suggest this year is driving towards close.
Okay. Thanks Thats helpful.
Second question for me is on the sand plant closure reassessment. The first part of it. The question is on the timing of the tiara is that something that could have been held back and included in Q4 year end financials.
And then regarding the central on tailings reprocessing.
You indicated the scoping study is coming next year. When that's delivered to you then revalue the closure liabilities or that reevaluation is is done every five years and every five years only.
So the first part of your question Bryce is could we have sort of held us back until later I think our obligations with respect to disclosure would prevent us from doing that.
We always intend to be transparent with the market in any case.
So even if we could have we probably would not have in.
In fact, I would say, we would definitively would not have.
With respect to the changing of the longer term.
Our retirement obligations, resulting out of studies related to tailings reprocessing.
We would certainly make the mark you and the market aware of the opportunity, but we are only required every five years to update our obligations. So I think it'll be a combination of the two we would disclose what it looks like but we would ultimately update the plan after five years.
Yes, maybe I can just add to that well that is certainly what the.
Regulatory authorities out of Saskatchewan would require us to five year. We would also be under the obligation at submitting a new mine plan and when you submit a new mine plan you submit a new closure plan. So we would get the opportunity also to recast the closure plan, which we believe we.
We'll be much more optimal and much more beneficial to hot day.
With the recast closure closure plan and so that will just be.
With the timing of whenever we get to sort of a feasibility level on this reprocessing of <unk>, which could be as latest five years, which is 2000 22025 or could be earlier. Its just the progress we make on the project.
Peter if I could add maybe from the finance perspective.
I think it's important to remember that it is our always our obligations and it's always frankly, what we do is.
Distantly Accordingly, and look at these obligations and reassess them.
The context of everything we know good and bad.
I think the first question Peter you answered.
Answered it correctly. The answer was we had our best estimate at the point in time and regardless of when that was.
Accreted Accordingly, so I think.
Bigger question.
You guys are absolutely right, but obviously our job is to deal with firmly in the actual things that we know and once we get a better perspective on the potential for this tailings reprocessing, we can reevaluate the context of the overall project, but for the time being.
We normally occurs section.
The chips fall where they are.
Okay perfect. Thanks, that's it for me keep well everyone cheers. Thank you Brian.
Our next question comes from Lawson Winder of Bank of America. Please go ahead.
Hi, Thank you for the I think the morning.
I wanted to start off by just asking about.
<unk>, so just to get an idea of how youre thinking about the case now so regardless of outcome, whether they wins are.
And then it's successfully appealed to the Supreme court or they lose it.
Curious.
What is the benefit to.
We continue fighting the case when.
Private land solution seems to be.
And appearing option at this point are very appealing option.
Morning, Los <unk> looked at that as a very good question and it's more of a.
Industry question.
We believe that.
It is if there was to be a negative decision on rosemont that it would be worth appealing because that negative decision has a very very significant impact on copper mine in the United States in general.
And so so from an industry perspective, we believe that we would be supported by many many other players in pursuing an appeal.
That's pursuing an appeal does not prevent us as you suggest from continuing with couple of wells and our own private land options. So we would likely move.
Move forward with both in parallel.
Yeah, that's great. Thanks for clarifying that.
And then just to I guess.
Touch back on some.
Topics that have already been Scott so on copperweld very nice to see the mandolin reclamation plan approach.
Color on the next two permits required a great.
Maybe just a little bit of detail, though on the timing around those next to permit so what level of study do you need before you can submit for the.
The Aqua for air quality.
Approvals and what do you suspect the timeline would be on submitting for those and then actually getting them. Thanks.
Allison Castle here.
Look.
We rented new territory on a private land sort of West Ridge, we can utilize some of the baseline work that was done previously obviously at Rosemont, but we're adding to that and we're doing that in parallel with our are our normal geological and engineering work that we require to be able to submit a mine plan, but be able to calculate the impact.
<unk> on an <unk> or to be able to app.
Calculate the impact on an air quality permit.
What is required as a mine plan at sort of a feasibility level that youre sort of convinced you are bringing that forward. So it's going to be.
A couple of years, yet before we have definitively advance those things and having those things in advance of the feasibility study there is not a huge benefit because of their feasibility study is contrary to what those two permits might.
Might allow you to do.
It's sort of you need one with the other and so I think what it would be safe to say is over the next couple of years. This story will mature and so too will be advancement seeking these permits with the additional base lining in studies that we're doing now.
I think I'd also add to that loss and that as once we've completed the sort of the.
Our feasibility work.
And submitted those permits we would proceed in any case with the engineering because it will be based on our level of confidence that we have and that would allow us sort of timing of parallel.
Execution of permitting activities and engineering work Preconstruction.
Okay. That's great and then just finally on Marina Grand Yes, Kevin E tail.
I'm not sure if you're comfortable doing this but I think it might be helpful. Just to have a little detail on kind of what the issues are that are that are being discussed down that sort of thing.
Any sort of final stages of discussion you know for example, with.
Upon the contra when it came down to it there is sort of like.
Just a handful of holdouts that we're using in Atlanta, and it just came down to.
Getting their sign off is it similar to that.
I would say, it's much simpler than that because remember that at pump a country, we were talking to a community about.
And exploitation of extraction agreement.
And.
These guys have very very solid advice they know that.
Where the revenues derived from in the case of an exploration agreement.
Revenue derived from that Theres only opportunity.
And these guys are fully aware of that so what the discussion is now is.
It just relates to reaching agreement on numbers and.
As always we start far apart and we eventually move closer and closer and closer and that occurs over a number of iterations and so the question really is how long will those iterations take.
That remains to be seen but we are fully engaged with them and there are no issues outstanding other than really aligning around what the number is.
Okay. That's fantastic and then escalate patients permit is it the case that once you have the exploration permit I mean could you theoretically move directly into the discussions and exploitation or is there some sort of like cooling off period Thats required.
No. Because then we would need to drill in resorts and understand what.
What the.
What the results might look like.
And that will.
Would need to follow all the traditional methodologies associated with buying planning and full feasibility etc.
B.
Significant pause.
Understood. That's very helpful. Thanks, so much guys.
Okay.
Our next question comes from Stephen Nemo of Cormack Securities. Please go ahead.
Okay. Thanks, very much guys. Just curious I mean, if you're going down the path of at least thinking about tailings reprocessing.
Flynn, Florida does that potentially open the door to also maybe think about bringing in additional ore feed from the district that may bolster the greater the tailings focused operation.
Estevan high.
High cash flow here.
It's what we will put through the mill as whatever has the highest MSR to HUD Bay and the highest margin to high Bay.
I suspect knowing the satellite deposits that are within the vicinity of Hebei.
The reason, we're shutting down our mill now is because there is no anchor feed for the Pinnacle fund.
Would the tailings presents an opportunity for for that absolutely and then we would have to evaluate the incremental value of any satellite deposits over just digging up more tailings and we'd have to be presented with those opportunities or options at the time.
Got it got it that's helpful. And then maybe just for my own clarification or just a little bit of housekeeping you just mentioned that constancia during the quarter that the mining.
Mining levels were optimized for.
The mill throughput just just to be just I want to make sure I'm clear on that was that when you talk about optimizing for the mill throughput was that a reflection of the downtime this quarter for the preventive maintenance or are you starting to maybe see some potential bottlenecks and then they'll know that type of cash is flowing through the system.
No actually what it was is.
Under the pandemic, we're sort of on a restrictive work schedule and also restrictive on the number of people will bring to cite just two limits are.
All in our ability to Covid and what it's done is it's we've had to sort of modify some of our deferred stripping and so when we say we're optimizing the mine feed to the mill.
What we're doing is sometimes we have to sacrifice some of our previously opt.
Optimized stockpiling strategies and or our deferred stripping strategies on the fly to be able to keep the mill full.
With the complement of the workforce should we be short for a week here or a week there and what it's done is it's just minorly modified what that sequencing is and thats what that optimization reversed.
Okay. Okay got it that's great. Thanks, very much guys.
Once again, if you have a question. Please press Star then one.
Our next question comes from Dalton Barreto of Canaccord. Please go ahead.
Thanks, operator, good morning, Peter and team.
I wanted to start by asking you about copper world, we've talked a lot about the permitting process from a regulatory perspective.
And how simple the state level processes relative to federal and so on but process aside rosemont attracted a fair bit of NGO and other attention.
Just wondering how do we how are you thinking about copper rough Ms social license perspective.
Good morning Dalton.
Yes.
That's a great question I think that it's fair to say that.
We have the benefit of hindsight here and so we know what the key issues are with respect to.
The approaches that have been taken on Rosemont.
I mean, the overwriting simplification of course is that this is on private land.
And if you take a look at the press.
Copperweld has received to date you will see in general that it is.
It's a reasonable price there is both the pros and cons, but what is absolutely sticks out is our right to mine on a private land and that right has held us pretty sacrosanct.
We have every intention of engaging with any and all stakeholders who.
Who interested in discussions.
It would help us to move this forward positively and I think we know we have a much better sense of how to do that.
Might've been the case.
With the predecessor company when we purchased Rosemont.
So.
I think Andre and his team are following a sort of a very very fulsome engagement process.
Theyre talking openly with whoever wants to talk to us.
But I think the big differentiating factor here is that we will be mining on our private land, but we will be absolutely respecting the needs to ensure that we did.
This mine is built to the highest standards of environmental and social integrity.
Okay, that's great Peter maybe switching gears a little bit.
Wanted to ask about capital allocation, but theres really two parts to this question.
The first part is on new Brad and kind of the gold mine Theyre up in Manitoba, you had mentioned in the past that you.
Would really look at how that fits in the portfolio. Once the mill is ramped up and we're almost there now just wondering if I can get your updated thoughts on that.
Sure.
Again, a great question, because we are now sort of moving towards the tail end of what I always refer to as daylighting value.
In Manitoba.
And as you know I've said it in the past that once we have daylight that value. We of course would be open to entertaining.
Options around it however.
Turns out is that Manitoba appears to be the gift that keeps on giving and what's really happening is that as we execute against our strategy. We keep on uncovering new opportunities and so now with the new opportunities ahead of us related to improvement of recoveries that store.
<unk> expansion of production through new Brit.
Expansion of production at Lalor itself and the additional assets that are satellites complemented or supplemented by now what is a very potentially very attractive tailings reprocessing program.
We are reluctant to just give that away without any value.
But on the other hand, if somebody wanted to come and pay us full value for the <unk>, we would absolutely be prepared to consider it noting as I've always said that we don't really want to be a single operator single mine operating company. So there are all of these things that we need to consider but we think we are on the cusp of sort of the second.
While the third innings with respect to value creation that ethylene plant and we're going to pursue that until an alternative.
Manifests itself.
Okay, Great and then just maybe part B of that question. Your your balance sheet in really great shape, now youre generating tons of cash.
Any meaningful capital in copper road at least a few years away.
How are you thinking about M&A and then given what your shares how your shares have performed this year are you considering any form of a buyback at all.
Look I think.
I'll, let Steve comment in more detail, but I think that it certainly is part of our ambition and long term goal to sustainably returned capital to our shareholders over the course of the cycle, but in the Meanwhile, and there are a lot of competing investment priorities.
But at the same time returning value to our shareholders is always top of mind. So.
You say there is couple of is a little bit data at least there's a little bit further out although there will be expenditures in the interim that need to be addressed.
We've got the stall mill recovery program, we potentially have some other.
Project work in Manitoba, So I think we would we would contemplate share buybacks or.
<unk>.
Other forms of capital returns in the interim if it makes sense.
But it needs to of course compete against the opportunities at hand, Steve would you add anything to that.
I think youre right, Peter we had seen.
It's easy to be tempted by short term disconnects between our perception of our own value and obviously the market, but I think youre right. When you plan to kind of.
The runway ahead of US does have a lot of significant capital opportunities.
And which have very long term promising return levels. So.
For me I think of course remains similar.
Somewhat unchanged.
The inflection point, where we've completed two major brands still are brownfield projects in the form of pharmacogenomics in bread.
Starting both of which are starting to bear fruit.
We will start to generate additional capital in recognizing in this business.
Year to two years is that think of and I really when we start contemplating kind of dollars will be spending and the optionality that we have so I think it's always incumbent on us to balances and this is something that is a.
Clients that tension between whether or not in fact.
<unk> invest for the longer term or perhaps potentially take advantage of those disconnects demonstrated their belief in our business and I think for US right now it remains focused on.
Conversion of those opportunities into cash and then.
Growing opportunities thereafter.
Okay, and just Peter your thoughts on acquisitions now.
Oh of course.
We have been always been pretty clear about that that we've always said that we would like to add a third operating assets to the portfolio.
<unk> risk production.
Perspective, but also from a diversification.
Aspect to it so we do continue to look for another operating asset to add to the portfolio, but I think you know as well as most that those are few and far between but we will continue to be creative in how we think about this but at the same time, we will continue to be very disciplined, but we will have to add another operating asset.
To the portfolio and shape, but we will exercise discipline.
That's great. That's all from me guys. Thank you.
Thanks Dalton.
Our next question comes from Pierre Vaillancourt of Haywood. Please go ahead.
Hi, Peter.
Could you comment on the <unk>.
Mark Tucker and more generally just.
How these communities.
Our acting now or are they being more empowered as a result of the.
The new government and what.
Our.
Can we expect.
Come out of this and just how gear.
Discussions with the government and progressing and what in what impact on a broader sense that that might have on that.
On operations.
Good morning, again, and thank you for that look there is no doubt that theres been a period of heightened social tension in Peru as the country continues to experience the impacts of the pandemic and some communities may feel empowered by the radical speeches from different actors and this has not been limited by any stretch the imagination to Constancia and we've heard of recent.
<unk> and Mackay.
From Io goldmine.
And of course at loss numbers.
Look I do think that the key here is engagement with.
With our communities as well as educational contact with government entities.
Either a cabinet level or at.
Congress level to make sure that people are educated with respect to what we are doing for our communities. So that's sort of.
Tones down.
The level of <unk>.
Protest, but maybe before we rapidly ramp up on the question I'll ask cashless to provide a little bit of historical perspective from his time in Peru, how that how.