Q4 2021 First Quantum Minerals Ltd Earnings Call
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[music].
This conference is being recorded so it goes to the homes that don't go as you see.
All participants please standby your conference is now ready to begin.
Good morning, ladies and gentlemen, and welcome to the first quantum minerals quarterly results conference call.
I would like to turn the meeting over to Bury their toe director Investor Relations. Please go ahead Mr. <unk>.
Thank you operator.
Hello, and thank you everybody for joining first quantum's fourth quarter and 2021 year end conference call.
On our call today will be Crystal Pascal, our Chief operating officer, who will provide an overview of the operations and performance during the quarter.
He will be followed by Hana Mayer, our Chief Financial Officer, who will review the results of the financial results.
We'll wrap things up with an overview of our strategic priorities and after that we'll open up lines to take questions.
Before I hand, it over to Triptans are a few items to mention a copy of today's presentation can be found on our website.
It's also being recorded and a replay will be available.
Well all dollar amounts mentioned today are in U S dollars unless otherwise noted.
And finally today's presentation may contain forward looking statements. So I encourage you to review slide two of our presentation and with that I will hand, it over to Tristan.
Yeah.
Thank you Vanessa hi, everyone. Thank you for joining us today on our call to discuss the fourth quarter and year end results.
Despite the ongoing challenges of the global pandemic.
Quantum was able to deliver another year of solid copper production growth with a record amount of copper produced for the 2021 year.
We ended the year in a strong position as fourth quarter results benefited from continued strong copper prices the rolling off of our hedge book and continued strong operational performance.
This enabled us to continue to deliver on our ongoing commitment of reducing debt with tennis will speak to you more in his presentation today.
Yeah.
Before going into the operational performance during the quarter I would like to begin with updates to other commitments. We made last quarter and also to provide some commentary on discussions with our host governments in the countries we operate.
I'm pleased that since our last quarterly call first quantum was able to deliver on two significant commitments.
Firstly on January 17, we announced that we have set targets to reduce scope, one and scope two greenhouse gas emissions by 30% by 2025 and by 50% by 2030.
And we have provided more information on these targets in the T. C. F D along to climate change report available on our website.
It was important to us to set targets based on real tangible solutions.
And we are pleased that the solutions identified are not expected to result in significant incremental capital or operating costs and do not rely on the use of all set to achieve these targets.
First quantum is now well positioned to deliver the copper that is essential to meet the global challenges posed by climate change with a significantly lower carbon footprint.
Another announcement made the same day was that of a cautious but more meaningful dividend framework for our shareholders.
This policy, which hennis will also discuss in more detail highlights our confidence in the strong outlook for the business.
Moving onto discussions in our host countries.
In Zambia discussions with the government of Zambia are focused on ensuring that the appropriate and enduring investment conditions exist for first quantum to advance the concern. She has three expansion and the enterprise nickel project.
The removal of the non deductibility of royalties for textbook offices, which became effective at the start of this year was an important step towards the approval of these projects.
Also the discussions are seeking an agreed mechanisms for repayment of debt owed to the company and for predictable returns in the future.
These discussions continue to be constructive such that we are hopeful that we can advance both of these projects this year as reflected in our guidance.
In Panama discussions with the government are ongoing.
During January 2022, the government of Panama tabled, a new proposal, namely that the government of Panama should receive 375 million U S dollars and benefits per year from Cobre, Panama and the existing revenue royalty would be replaced by gross profit royalty.
The parties continue to finalize the details behind these principles, including the appropriate mechanics that would achieve the desired outcome the necessary protections to the company's business for downside copper price and production scenarios and to ensure that the new contract in legislation in both durable and sustainable.
We continue to welcome the transparency of the robust ministerial commission process and we are hopeful that we can conclude this matter shortly.
Once an agreement is in is concluded and the full contract is documented it is expected that the newly drafted legislation would be put to the national Assembly.
Turning to operations for the full year 2021 first.
First quantum achieved its highest ever annual copper production of 816435 tons attributable to record breaking production at Cobre, Panama and the resilience of our other operations in dealing with the ongoing challenges brought about by COVID-19.
For the fourth quarter total copper production was 201823 tons down 4% quarter over quarter on lower production at Cobre Panama.
Else consents and Sentinel continues at consistent production levels.
The difficult shipping environment on containerized shipping capacity that we experienced in Q3 continued into the fourth quarter.
This had an impact on our sales and shipments out of Zambia in particular and I expect it to continue throughout the first quarter of 2022.
The majority of the company's products are transported in bulk and this sector has been less affected bullshitting constraints.
I'm sorry to interrupt.
We cannot hear a conference call anymore.
Hi, operator.
What does that have to happen yeah, Tristan is that dialing in from overseas Ryan.
Can you take over.
It kept tristan alignment to dial back in.
Right.
Should I call it back again.
Yes, please that would be helpful.
Perfect on it right now.
Operator.
Okay.
Yeah.
Okay.
How about you jumping on the finance section.
Alright, thank you.
Whilst we're waiting for trusted to join I'll go through the.
Financial ever view slides and then them extra enjoying you can just conclude Tony's remarks, so I'd like to thank you joined.
Right Chris.
Got it.
Yes.
Hi, I honestly would you like me to continue from where it was.
Sure.
Thank you apologies for that.
Cobre, Panama performance of 331000 tons over the year with strong exceeding initial 2021 guidance and achieving the top end of our revised guidance in Q4 production was down 8% quarter over quarter to 80000 tons unexpected lower ore grades and an unplanned seven day shutdown of unit two of the power plant.
Which impacted mill tonnage.
It was also planned maintenance on unit one at the power plant during the quarter, which was completed at the end of January .
Year to date production is also being affected by two major mill relaunch in January at Cobre, Panama.
Looking ahead mill throughput is expected to ramp up over the course of 2022 to achieve between 95 and 19 million tons for the year grades.
Grades and recoveries are expected to be consistent with 2021 levels, but will flow act fluctuate from quarter to quarter.
With the recent escalation in global energy prices. It is worth noting that we had increased exposure to spot prices for electricity in Panama during the fourth quarter, while we had the planned maintenance to unit. One however, with the maintenance complete costs are already moving back in line with the color on coal prices for the mine. This prevents further exposure to increase.
In the coal price until December 'twenty 'twenty three.
Consents, you cheat copper production of 202000 tons in 2021, reflecting the reduction in oxide ore and the ongoing challenge of the selective high ore grade methodology. It concerned she in advance of the approval of the S. Three project.
Q4 was another consistent quarter delivering copper production of 52000 tons a day.
Slot decline in throughput was offset by the improved grades.
Looking ahead for 2022 protests or concerned she is expected to be slightly higher compared to 2021, how the grades are expected to decline over the course of the year from Q4 2021 levels.
Sentinel achieved copper production of 233000 tons for the full year.
The spot ball mill trunnion failure in Q1 last year, and a lower grade profile relative to 2020.
Q4 Sentinel produced over 60000 tons of copper as record quarterly throughput rates equivalent to 60 million tons per annum offset lower grades in the quarter.
The installation of the fourth in pit Crusher at Sentinel has been completed which is expected to enable the process plant to achieve throughput rates equivalent to 62 million tonnes per annum.
Yeah.
On slides nine and 10, we provide information on that three year guidance.
For 2022 we are guarding for 810 to 890000 tons of copper production.
22, however has so far got off to a slow start at Cobre, Panama as I noted earlier the quarter was impacted by a seven day unplanned shutdown.
They can use the power plant as well as two mill relaunch in January .
Type containerized shipping environment continues to be felt in the first quarter, which impacts I know that shipments out of Zambia.
Sense in all the first quarter will be a ramp up period towards 62 million tonnes per annum and was impacted by lower grades.
Well 2022 is expected to have a slightly high grade profile overall.
You will not see this improvement until after the first quarter.
A three year production guidance includes completion of the C. P 100 expansion in 2023, and Cobra, Panama operating at a 100 million tonnes per annum from 'twenty to 'twenty four onwards.
Well, it's three remained subject to board approval. We have included limited production from May three in 'twenty 'twenty four.
Likewise enterprises also subject to board approval.
So I didn't see includes first nickel production from enterprise in 2020 three.
We also show you Ravenswood ramping up to 25 to 30000 tonnes of nickel production supported by the completion of the Shoemaker Levy project in Q4 of last year.
With regards Capex approximately 2.2 billion will be spent over the three year period of which 1 billion relates to consent. She the S. Three project.
830 million to Cobre, Panama, and 60 million to enterprise and $15 million to our grilled Mcgrane project in Mauritania.
Okay.
The ongoing challenges presented by the global pandemic have continued throughout the first quarter with the omicron variant prison on several songs Fortunately our employees and communities are not experiencing a severe symptoms from this wave as with previous variance.
The company continues to employ measures to ensure minimal spread and the health and wellbeing of our workforce continues to be a priority, including maximizing vaccination rates and boost booster vaccination campaigns for 2022.
After the huge F. It's bought personnel across 'twenty, 'twenty and 2021 and dealing with the impact of the pandemic to operations. We are investing in our people to support them and ensure a retention of staff at cobre, Panama or Capex guidance includes new expenditure to upgrade kit.
I think Tristan is being cut off against all continue and then hand over to Dennis.
We also remained focused on the ongoing importance of our community support during the ongoing pandemic not test in order to mitigate the impacts of COVID-19, but also in greater community outreach.
In the fourth quarter, we were delighted to launch I'll BBN commute community health program in the North Western Province of Zambia.
This initiative will support the Zambian government and providing essential health services to the communities around our Sentinel and consultancy mines through 182 schools and health facilities as we seek to improve the health of our host communities.
Staying in Zambia, I'm pleased to highlight the fantastic collaboration between the team at Sentinel and the local communities and the construction of new infrastructure to serve local villages.
After the previous Woodbridge bridges collapsed, we worked with the chip Paolo village to build two new bridges said that the community will not need to wait replying rivers to access a farmland.
Our school and sports programs in Zambia, a very popular I'd like to take this opportunity to congratulate the 24 students who were awarded full scholarships at Sentinel as well as the contention netball team, who try them to the northwestern Cup about regional tournament.
Moving to Panama I commend the team at all Cobra, Panama online for their support for the Golub Club a U N founded movement that provides training and support to empower young women and surrounding communities and provide them with the skills and opportunities to become future leaders.
And with that I'll turn it over to harness and the interest and we back in a few minutes to wrap things up.
Thanks, Ryan I'd.
I'd like to direct you to slide <unk> titled Financial overview Slide 12.
The financial performance in the quarter was driven by higher metal prices together with strong operational performance.
That resulted in significant increase in net earnings and EBITDA as well as a notable further reduction in net debt.
Gross profit of $2 $6 billion and EBITDA of $3 $7 billion for the full year was substantially higher than 'twenty 'twenty attributable to an increased sales volumes at cobre, Panama as well as at the 33% increase in realized copper price.
Net earnings attributable to shareholders of the company of $832 million and adjusted earnings of 826 million represented a significant improvement from last year.
Net earnings included $159 million of foreign exchange gains.
<unk> unrealized.
Primarily due to the appreciation of the Zambia kwacha against the U S dollar in the third quarter.
Net earnings also include a charge.
It'll impairment charge of $44 million.
Cash flow from operating activities of $2 $9 billion represent a $1 3 billion or 79% increase from the prior year.
Copper C. One cash cost of $1 30 per pound was nine cents per pound higher than 'twenty 'twenty impac.
Impacted by higher fuel costs and freight charges together with the cessation of the open pit mining at less cruises.
Net debt decreased $1 $4 billion over the last 12 months and by $1 6 billion since June 2000.
Sorry for the inconvenience.
Kristin Pascal has joined has rejoined the call.
Okay.
Christine can you go into a closing remark that we bought a lot of tennis.
Unfortunately, yes.
It was long ago.
Christian.
Hi, Nate I think Ron which is going to cover the part two of my script and then ill come back for questions at the end.
Christine I think we've lost a whole London office so.
Yes.
I can get up to where we are.
She will have to harvest affection, yeah. Thank you yeah.
Sorry about that everyone were having some challenges with fine lines.
Hey.
Thank you Johannes from those comments well it was pleasing to announce how emissions targets, a new dividend framework and your debt reduction targets at our capital markets day.
Delivering on growth also continues to be a priority and reinvestment in the business remains central to our business strategy.
Panama P 100 expansion is now well underway with construction already at around 35%.
Q4, a letter of intent, we signed for our new power being hydro electricity source from the Panama and grid for the CP 100 expansion.
Process plant expansion includes a new screening facility processed water upgrades and the addition of a six school milk.
2022, the company expects to expand the fleet by adding a few drugs shovel and eight additional ultra class trucks.
The plan also includes developing the colina pit and its associated overland conveyor and in pit crushing facility.
Completion of construction works and the commencement of commissioning is targeted for the first quarter of 2023 to allow for a ramp up production over the course of the year and achieve a throughput rate of 100 million tons per annum by the end of 2023 and.
And we will add an additional 50 to 60000 tons of copper to our production profile.
We also plan to provide a 43 101 reserve and resource update for Cobre, Panama later in this year.
An S. Three as noted earlier the expansion is awaiting board approval and discussions with the government remain constructive.
Three involved the 25 million tonne per annum expansion of the sulphide ore processing facility, increasing annual throughput to 53 million tons per annum.
Three expansion would also involve a new larger mining fleet and combined with Standalone 25 million come from processing plant is expected to create efficiencies and economies of scale.
With much of initial foundation in steelworks Iridium place from trial activity. The majority of remaining construction of the St clumps and pre stripping activities of the southeast time.
Makes it to take place in 2023 and 2024.
Once built history will increase consensus annual throughput to well over 50 million tons per annum and ensure production levels remained strong more than 20 years.
At the Enterprise project, we are also awaiting board approval.
For the most part the enterprise project, that's already being built as part of the original Sentinel construction of the process plant and the remaining capital spending is modest at $60 million and mostly comprised of pre screen pre stripping work.
Which is expected to take approximately 12 months to complete the.
The project has the potential to add 30000 tonnes per annum of nickel production per year and our current guidance assumes first production in 2023.
There is also flexibility to target higher grade portions of the ore body that allows for a substantial increase in production should the nickel price spike during the last of mine.
We are very pleased to provide a 43 101 resource update for the Las Cruces Underground project in January .
And we expect to provide a reserve update later this year, which should also provide more detailed capex and opex estimates.
The resources contained copper equivalent to approximately 900000 tonnes similar in scale to the original open pit ore body.
The project also had benefits from an established relationship with local communities and experienced workforce.
<unk> infrastructure and.
Environmental permitting.
Morning, permitting in place the key pending water authorization is expected to be granted in 2022.
This project has the potential at approximately 45000 tonnes of copper equivalent annually to our production profile.
These full brownfield projects have us on track to produce around a million tons of copper per annum. While at the same time same time, allowing us to continue our financial discipline, and reducing debt and returning capital to our shareholders.
Our portfolio of growth options include major greenfield opportunities as well, notably tech attack and the cure.
Continues on both of these projects and we are excited about the long term optionality, but these projects also.
We are proud of the project pipeline ahead of us at first.
Three months, we look forward to sharing with you more detail on Tech Tucker.
Virtual thought tool and hopefully in person towards Cobre, Panama later in the year. So that you can see the progress firsthand.
Finally, I would like to thank all that once again I'm proud of our workforce in executing in a safe and sustainable manner in the face ongoing challenges that continue from the COVID-19 pandemic.
As well as the generous efforts and commitment to ensure extremely important lobby with programs to support the local communities.
I'll try that we would now be happy to take questions.
Thank you.
We will now take questions from the telephone lines. If you have a question and you are using a speaker phone. Please lift your handset before making your selection if you have a question.
Please press star one on your devices Keypad you may cancel your question at any time by pressing star two.
So please press star one at this time if you have a question. We please ask that you limit yourselves to one question and one follow up.
It will be a brief pause while the participants register and dressed in Bonita, we all back online again.
Okay.
Thank you. So the first question is from Greg Barnes from TD Securities.
Please go ahead your line is open.
Thank you.
Justin obviously with the pilot plant totally down during Q4, you saw your costs go up of Cobre Panama.
Over the coming years as you shift off away from the power plant that onto the grid do you expect to see an increase in your power rates that Cobra.
Obviously that would push up the cost as well of the longer term.
Thanks, Greg.
And it's a good question. So yes, you saw in Q1.
In Q4 see one costs that rise and we indicated around 10 cents a pound although that was from exposure to the national grid. There are a number of positives around that first of all that we were able to drill a well over 150 megawatts for the first time are down.
Down.
Down the transmission line.
Which provided adequate for us to run more than half of the process plant.
But yes, we did see exposure.
Generally October November December had been good months for hydro electricity production in renewable energy in Panama.
Year was somewhat different and somewhat of a surprise.
It was some other power plants that were.
We're also undergoing maintenance at the same time.
All of that combined did push up power prices in the country. So I think we reached a peak at the city's first of January at around 190 to 193 thereabouts per megawatt.
The megawatt acetal in Panama.
Yeah.
The thrust of your question as to whether when we contract how would we be.
Similar to that.
To spot and I think the answer to that this was a peak condition and we would be looking to take renewable power on a long term contract basis.
In seeking to ensure that the rights were enshrined in that contract and as we said before we had indications sometimes pricing levels and trying to expect them to be significantly different.
You know from the levels that we were able to generate at using call. Once we add in the financing costs and depreciation cost outflow okay.
Just thanks, Thanks, Tristan just shifting to Zambia.
The MD&A you highlight the government has suggested they could incrementally you look overtime, but changing the royalty rates there wasn't much detail around that can you provide some commentary about what what that shift is or what they are thinking about it.
Yes, so Greg we had some very good conversations.
The government of Zambia.
In the last month or sorry in the full team from Chris going to Miss being out and speaking to the president and his Excellency Heck in Lima, and then the team that's been appointed to to go through these topics.
At the moment, we're not too focused on the royalty, it's really around ensuring a durable and lasting environment in Zambia that we could you could investing $1 billion in history.
And that's the key consideration, but looking forward as we night the countries.
Our targets are and they stated intent to triple copper production up to around 3 million tons. The government itself has said that they might need to look at the enabling environment.
And that would include royalties in terms of attracting that level of investment into the country and the good news is that has been done before it was done in Chile between 1991 in 2001 with a triple production from one 5 million tonnes per annum to four and a half million tons per annum and that was off the basis of the.
The Chilean changes too.
The legislation in Chile, which we have provided for that level of investment in the country and so I think that's the nature of the comment but really that's a decision from the government of Zambia.
And certainly we would be supportive and be looking to invest three once we get the rock conditions on the promote for a June computer day.
Okay. Thanks, that's it for me.
Thank you.
The next question is from Auris walk at all from Scotiabank. Please go ahead. Your line is open.
Hi, Good morning, just following up on Greg's question on Cobre, Panama can you walk us through kind of what happened with the power plant. It sounded like there was both plan and then unplanned outages at the plant I'm wondering also if there are any scheduled power plant outages moving forward for this year.
Yes sure.
So the answer is yes, the major shut with the scheduled shut it happens every two years on each of the path.
And so we would be doing similar shot.
On the unit two this year around November December .
That shot related to major inspection across the province, and normally would take around 30 days.
And then was we.
Some regular checking off the Reuter Ted Baun.
And using the in camera system, we found some foreign objects in the roadshow.
And went to investigate it further.
We also had done some work looking at as we did in the detailed inspection across the boiler. We also found an area, where we had some erosion from the flows on the power on the boiler and so it was appropriate and we made the decision to go and also check that at unit.
And that was the reason for the unplanned seven day shut at unit. Two was we went and checked the suits blowers on unit two to ensure that.
That if there was erosion that it was well in hand, and the answer to that was it was fine we made some changes and we we sorted that situation out on unit two during that seven day unplanned shut tight with the lessons from unit one that we took across all of that work was completed and the foreign particles.
In unit, one head with fine we'd been running locked at under conditions. Since March this year, we noticed a drop off with an efficiency.
And it was really the establishment of what caused that drop off so she inefficiency what that deep maintenance. It took an extra period of time into January of this year to bring in the.
The people from Sky to Tucson can I mean, with the Covid protocols and so on to come into the country took some time, but then to go through a very measured.
Process too.
Do the maintenance and repair that that situation, which was done very well in fact the team on site established a new protocol for <unk> that had not been done before and that will be taking the standard frisco to two cents.
So a very good step for them and well done by the first quantum team there cobre, Panama, but the power plant was re energized and re synchronized to the grid on the 31st of January and has been and is now running at full full production level and we no longer have that efficiency that we saw come through in March.
This year.
Okay.
Does that mean, we should anticipate sort of elevated unit cost than in Q1 and Q4 of this year.
Youre drawing grid power.
So, yes, there'll be an impact to Q1 this year, because we had that period.
We continued with you know one down and we've had we were drawing from the great Alpha would be October November this year, when we do take off units to them.
For scheduled maintenance period that the.
You know that there'll be adequate rainfall in the country and to be adequate.
Had a culmination of all of our affected this year.
Low wind.
And low ranked coal jewelry, which is usually the sort of take rainfall period and that was the reason for the heart hospital prices at that time so.
So we would anticipate October November that if the renewables are strong then we shouldn't see an elevated prices.
And then just finally, your and the MD&A talks about variable grades quarter to quarter at Cobre Panama.
Can you give us a sense of like does the mine plan to start off with lower grades and then they improve during the year or are they truly sort of all over the place on a quarterly basis.
Yeah, it's really large volumes that are being.
My suit the movement of shovels and the movement of the pit.
The longer time period longer time horizons.
So we do see the fluctuations but.
So that it's all going down.
But as it is in.
Indian Eni.
Over the over the year, we should be.
You have a consistent level towards Martin Cheung Gregory I'm not sure what you want to comment any further on grade profile Cobre Panama.
Alright.
Well the overall plan for the year.
Very comprehensive I talked about a couple of them you will produce on a month by month.
Quarter by quarter, there are fluctuations that do.
Do come into the mining practice due to equipment deployment.
And rock conditions blasting availability and blasted stocks. So we do expect to see a degree of fluctuation, but over the year, we will achieve the goals and the guidance that we've put forward.
Thank you.
Next question is.
He is from Jackie <unk>.
Lasky from BMO capital markets. Please go ahead your line is open.
Thanks, very much and thanks for the call I just wanted to ask a question about the tax guidance that you gave.
In the MD&A.
You're saying that the tax rate for 2022.
Expected to be between 20, and 25%, which is significantly lower than the 31% for 2021.
I know that doesn't include any of the law changes that have been talked about.
Is it possible for you to give us some kind of sensitivity with the.
Proposal, but no. It is not set in stone, yet, but what the proposals that have been.
Got so far do you expect the tax rate effective tax rate would be closer to that 31% that.
But you I think you saw in 2021.
Hi, Jackie Thank you for the question.
The change in tax rate and the reason for that comment.
Really the biggest change over the last year was the impact of the non deductibility of the Zambian royalty regime, but then also hedge losses as well on our books.
The lower effective tax rate in 2020 twos is related to those physical changes.
Took effect on one January this year.
And as you say, we haven't put through anything on either at this stage, it's really too early to say and a few moving parts there.
If we get to conclusion of that agreement.
We'll be able to provide.
Guidance on what the effective tax rate will be in Panama, Juliet I don't know, whether you had any comments on.
The Zambian tax rate and the impact on.
I'm wrong a tax rate.
No I think he summed it up very nicely.
It is it is really why we're having that step down to 20% to 25%.
Yeah that non deductible.
Royalty the impact that but I will say you know we don't have that.
So the hedge Paypal.
That's all that we had before and so it comes out of it that much lower rate.
Thanks Juliet.
And maybe just following up on Greg Brian Good question from earlier about.
Zandy I know you mentioned.
That you would be looking to sanction.
Three once you had some stability or or understanding what the royalties you Didnt mentioned enterprise.
One what's the trigger.
Today, what would be the trigger for sanctioning enterprise.
Thanks, Jackie and it's a good question enterprise.
Idiot season for us it really $60 million capital outlay exposure there.
Much less capital intensive obviously.
The originally cries process plant has already been built and that's largely a sunk cost.
And the thought.
The decision there.
And linking to broader conversations with government and I think it's important we at least see a path forward in most discussions tend to trigger point, we would like to get to that as soon as we can but we would like to make sure that you know, there's a clearer indication as to the direction of travel and I think we've seen that in the narrative.
From government and also in terms of the non deductibility, which kicked in on one January .
But you know the border issues remain and we'd really like to get some direction on that before we make a commitment I would hope that we're able to get them relatively soon and as I said, it's been a lot of conversation and a large team from first quantum.
In country with Zambian government and the designated group to discuss the those point.
Alright, thanks, very much I think that's my allocated two questions. So I will leave it to somebody else. Thank you.
Thank you.
Next question is from Abby <unk> from Deutsche Bank. Please go ahead. Your line is open.
Okay. Thank you thanks, Tim for that.
While the details and the thought I had a couple of questions. So I'll take them one by one the.
First question is a follow up to the cold breakup. So even if you adjust for these one off Tencent.
Bottleneck.
Bob did at coffee costs must be had.
The fever gas cost still went up by around 16% Q on Q, but any any other transitory factors you expect to roll off as you move further into 2022, that's my first question.
Thanks Eddie.
First thing Tonight, we also had slightly lower copper production, but also on a unit cost basis that certainly had an impact the other changes that marine they're really related to fuel cost consumables.
And so on.
It was some inflationary impact of that and also when shipping.
Yeah.
Major factors, there isn't anything else that I'm aware of Juliet.
I'm missing something there.
The major ones.
Yes.
That's great.
Okay.
Got it thank you.
Second question I had is on there.
There was a recent article which suggested that the Panamanian government is looking to propose the transformation of the Pablo.
As soon as by 'twenty two 'twenty three.
Please comment on that answer can you remind us of your current Lambda and what Capex have you earmarked for the transition of a long term transition off the block. Thank you.
Sure.
Yeah. The current plan is that we would.
So the first stages.
60 megawatts, which is required for the 100 million tonne per annum increments.
So the C. P 100 expansion and that are we have a letter of intent signed for that component will be 100% renewable and.
Purchase from.
Most capital.
Cost there and the prices that we believe is in line with the way we own will be falling in spices for the.
Past I should cost.
Second phases one.
Our 2025, we would look to reduced our overall emissions.
By 50% and that's around one of the units offline and replacing that with renewables and we have solid indication that's available from hydroelectric sources.
On an average across the year, but with some months of a use it or lower.
Hum unless availability in some months of the year and the food fight them by 2030 that would take off the second unit again with those limitations are that.
But that would need to be replaced by a combination of both.
Gas and other renewables amongst like Audrey.
Right.
Okay.
Some base level and for that reason, we say.
The colourful patch that she is probably needed.
On line, a baseload capacity in Panama to a longer term solution is in place and Tyndall.
The first part of your question and that's.
Related to the Ministry of energy.
The look we're happy to work with the government and them on their plans to reduce greenhouse gas emissions and we think those are important.
And the vision for reduction trajectories.
<unk> is around 60% renewable at the mine.
Good months, when the water and when the plentiful and we saw in December and January are the case.
Smoke headwind does struggle for renewable capacity is drawing mumps and when there's less we'd be conditions.
During instruments I said.
We'll need to continue to have some base level.
Liberal Alex you Tracy.
Coal fired.
Past session and that sit memoranda of conversations with the minister of energy.
We recognize the importance.
Their trajectory.
I'll sit around working with agreed and as we saw a shift away, but we also have an impact on power pricing in the country. Those are the factors that need to be balanced top and bottom of the actions that we're happy.
With government around the type of ongoing on.
We get to the right outcome, maybe bucket in terms of the trajectory to.
To meet the greenhouse gas emissions topics of the country.
Also the only grid stability and empower pricing on the grid.
Thank you.
The next question is from Jonathan <unk> from Morgan Stanley . Please go ahead. Your line is open.
Thanks, very much good morning, and good afternoon. This is my first question is on the corporate finance. So you highlighted some operational disruptions during Q4, but how should we think about the sequential production development into Q1 of this year should we expect throughput rates to hit the target that 85 to 90 million ton level and a lot about copper grade.
So which were relatively weak in Q4. Thank.
Thank you.
Yeah, Yeah. So, let's say, we haven't had a slower start to the year in January because of two memory lines of Cobre, Panama and also the impact of them.
All of that all the work on the past action the drawing for all across the year, we remain confident in the guidance we provided.
So I look at that the 330000 tons.
The boardroom and forgotten.
Produced last year and that was really on the basis of.
One five behind that back.
Harlan protocols will kind of annoying thing across three quarters of the year and so we feel confident in that lower level limits.
That production level will coincide with the Rems.
5 million tons per annum, but we feel confident that the upper end of that okay.
Hello.
Operator.
And again.
Yeah, Yeah, no it doesn't seem so no it's not.
Still there.
Can you hear me okay.
Yeah, we can hear you now thanks, Tristan just thank you all.
Okay.
To finish that off per se.
Ran that at 90 million tons would be significant temple.
Temple.
What we've seen from the process plant and call it production months.
Imminently achievable.
It's really you know stringing together.
A good period of performance that we have maturity that again. So how do you think that gives you an idea of the bounds that'd be put into the guidance.
We are confident in achieving that level this year.
Great. That's very helpful. Thank you.
Second question just to go to trial and Jason Giambi. That's your that's up to you.
Highlight that that's going to persist in Q1, but if I look at your four you're minus two to deliver sales of both production. So how should we think about Q1 do you think that saves kind of keep up with production or are we going to see a shortfall like we spoke to you free.
Thanks Janice.
So it's definitely the worst period was in Q3, and we seem to be past that but it is it ease up and down we do see some uncertainty and some volatility so it.
It was.
I think we improved in Q4.
We still at elevated levels, we would like to be a little bit longer in terms of the inventory levels that we have for example, nano.
We just should think containers so.
Okay.
One.
And we have seen so far this year has been up and down its been periods, where it ran well and in other periods, where this thing.
Some imbalance in.
No it's normal it's not the normal efficiencies in place so.
That's the reason for the statement that we see continuing.
But not at the sort of the worst on the peak.
Period, which was in Q3.
Thank you.
The next question.
It is from Lawson Winder from Bank of America. Please go ahead. Your line is open.
Yeah.
Hello can you guys hear me.
Yeah, Hi, lots, who can be clearly okay. Okay, great. Yeah, yeah. Good morning, Thanks, so much for the.
The interest in and everybody.
I just wanted to touch on the Panama again so.
Several members of Congress proposed a new mining royalty bill.
Which which would alter the current sort of existing one and then it includes.
The class II minerals, which include copper of course.
Having a royalty that goes up to 30% after 10 years.
And I guess, what I wanted to ask you about it I mean, clearly I mean lot of ironwood exempt.
Korea, Panama from that at least for some period of time.
But uh huh.
Yeah.
How long could you guys potentially achieve in terms of an exemption from whatever new mining code might come in and is there.
Belief on your end that you can get some sort of assurance is that you know once once the next.
Exploration of the mining license that comes along with that deadline law nine will remain in effect.
Yeah, Hi loss, so our understanding of message we have a 20 year plus 20 year arrangement from lost revenue to 28 from a renewal and then a 20 year option beyond that and at the al understanding.
The government that.
As you say cobre Panama.
Would be exempted this new bill if it's progressed since any further would not relate to existing mines and you know at discussions around with governments on on the resolution of all non contain a number of protections are.
That would be put into that new legislation.
That would seek protection against for example, there's talk of proposed legislation.
This the Bill you could progresses, we don't think would have any effect on cobre, Panama, given the degree of conversation and discussion around.
Resolution of that with the current government.
Yeah.
Okay. Yeah that was my hunch do thanks for confirming that and then I also wanted to ask about.
The carbon price.
You're now using in assessing project and how that relates to the development of <unk>.
Hakan talked that I was just curious I mean.
I mean theoretically it would increase the cost of developing <unk> and <unk>.
Essentially lower than asset value, but are there assumptions in the current feasibility study that it can be sufficiently adopted to offset that.
That carbon price.
Show in Boston, It's a good question and I think that's one.
As we report particular.
The longer dated projects that Martin.
You know five or seven or eight years.
That project.
The way we look at it is the carbon price.
Must form part of the scenario as we look at those those projects, particularly those that are further out, but we see that the carbon price in our view is it's a pretty direct link to come across.
That is the world that we live in where there's higher carbon prices will drive.
Demand for copper and and so it is a direct link that can be made.
And that's backed up if we look at them.
The IEA and their estimates and so on around where they see copper production coming through them for different scenarios.
But in terms of.
Climate trajectories, but also in terms of carbon price itself. So that's the way we look at it and so we do look at a number of scenarios around that and as we push in the evaluation as carbon price moves.
These appropriate you also look at them at different copper price scenario.
Effective August <unk>.
In process.
Thank you.
The next question is from Jonathan <unk> from BNP Paribas. Please go ahead. Your line is open.
Thanks, operator, good afternoon, and good morning, two questions. The first one on cobre, Panama It looks like the government is expecting a proposal from your side by June on switched.
Switch to natural gas and alternative fuels, you indicated $250 million capex.
So two thoughts into this question when do you think you can start spending on this transition.
Transition and secondly is it part of the negotiations that you're currently engaged with government does this need to be resolved as well because for this the timely news June but it looks like.
The royalty in tax agreement looks more imminent.
Yes.
Yeah, Hi, Jackson.
Okay.
So.
Well good question and we understand you know given the minister of energy his comments.
Let's see it before we are very happy to work with the government of Panama on their plans are and their trajectories.
Greenhouse gas emissions in the country and we would know it Panama is one of the three carbon negative economies of the world.
Three megabits carbon countries of the world and that's because the service that the pep knocking out voids and reducing the trend.
The logistics contract shifts because ships going through the Panama Canal side, a lot of Oh fuel burn.
Before setting greenhouse gas emission.
But in terms of the energy policy, what we what we are what.
What we would point out is the.
Impact of that.
That oh.
An abrupt change would have on both the stability of the grid and offset pricing of electricity in the country and we saw that in December .
When we saw peak prices in Panama, a rise to around 190 to $193 per megawatt hour.
Because the the hydroelectric dams weren't running as well do it with less rightful water and also the wins I'm the head of lower wind during the month and so.
That is the impact of renewable energy that it's known as reliable.
And so having the coal fired power station available as base load, we think will continue to be important.
At least in the interim until longer term solutions are in place that underlie the stability of the grid.
Also the pricing power in the Green and that's the basis of our conversation with the Ministry.
To answer your question, yes, it's part of the conversation that we're having on Beaumont.
Just to go to one of the details there and you pointed out are the.
The capital expenditure, we provided of around 250 million.
For gas fired power.
Pass station, but that we were not envisaging to invest in the next five years.
Because.
The immediate action.
And when you when she was available and that is we had fairly strong indications that we could take around 150 megawatts on a long term contracted basis as renewable power in the country and so we're going to be after that time that we would do.
Examine know understand whether to proceed with the gas falling solution that would probably back.
Colombia is existing gas storage.
And alongside that dealing with the complex logistics of course transports.
Transports to Panama, and I guess I got the gas weighting COBOL. We would also be building our Paolo on the cross from Cologne to to Cobre, Panama, which is good for grid stability in itself, but it was the combined capital it.
It would be around 250 million, but as we said that's on me an estimated number and we don't see that happening before around 2025.
Yeah.
Thanks, Jason for the detailed explanation just one more on strategy you've mentioned about adding a third Cynthia would you first go into them. In addition to Zambia in Panama.
Looks like Las Cruces, Nordea as big to do because it takes one to two.
So is it going to be Taco Taco or.
Do you think that barbell suffocation head to the case itself or a geopolitical element I am looking into it seems like Canada U S. Australia are considered super juice fiction.
It is also part of the thinking here.
Yeah, Hi, Jackson, so definitely and the reason to point that out.
Third leg in the long term Greenfield lag as we think it adds to the yeah exactly the diversification of the portfolio and that would start.
Starts to reduce the level of volatility and use in the volatility for example, Michelle Cross and first quantum so longer term, we see the benefits of that strategy.
And we think that we have an enviable Greenfield project pipeline attack attack and also I had a cure, but it'll be see.
Some work can be done in terms of building the KC Argentina.
Doing that over the course of 2022 and also next year 2023.
In order to get to a point where they're at.
Whether we can make the decision to proceed or not protect attack and also the keira and working very closely with the communities there.
To see whether that project could reach.
A decision point.
More broadly, yes, I mean, we're happy to look at other areas.
When asked where are we.
We look at different jurisdictions the answer is yes.
We from time to time and it's really.
The basis of how well, we can apply our skills and obviously in the jurisdictions that you're speaking about their pricing would also come aboard into those kind of decisions, but for the time being we're very focused on our own greenfield portfolio. Because we believe there's significant value that we can add to them on those projects.
Thank you.
The next question is from Karl Blunden from Goldman Sachs. Please go ahead. Your line is open.
Hi, good afternoon. Thanks for the time just wanted to focus in on capital allocation, you've got pretty strong cash flow outlook coming into 2022, and you've outlined your debt reduction goals.
With regard to your preferences for the capital structure between secured and unsecured debt our fixed versus floating rate debt I'd be interested to hear your thoughts at this point with rate volatility increasing and also as you roll off the hedge is perhaps some some visibility into cash flow declining right a high cash flow outflow.
But declining visibility into.
Interested in the balance of the debt you'd have a place.
Uh huh.
Do you want to take that question sure Hi call.
Okay at the moment, we've got about three quarters in fixed rates in the quarter in EM floating rates without bank debt.
I guess.
The bank debt is the secure element and will retain the banks as part of the setup in the longer run will you would see our overall debt, reducing as we pay down some of the data and in these bonds as they become callable in stepping down to fall, we will we'll be reducing those levels. So I think yeah.
You would see.
On a relative basis.
A larger percentage of the SKU data not saying the secured April an absolute amount will go up.
So it's just more as effect of effect of reduction of the the bonds and that makes I.
I think we are comfortable with the mix of the data we have of course, we can.
We can issue new notes at lower rates, but with the cash we generate we definitely the focus is on actually just reducing in and paying back some of the state.
That's very helpful. And then just as you think about a couple of different growth options that you might have.
Is it helpful to you to have a more extended debt maturity runway. If you were to engage in more expensive growth options. So shall we think of you as running a relatively short dated capital structure going forward.
Then I guess the one add on there was you know what would you intend to rely on our revolver drawings from time to time, we noticed summit and the slide 17 any update on that would be helpful.
Yeah, I guess the previous notes, we sure it's always been sort of six and ATR nuts, and sometimes saving you nuts.
Uh huh.
I guess, that's probably be the sweet spot for us in that regard so.
As some of the state matures we.
We'll repay this and address it.
You know with the cash flows and other cash resources.
We do on occasion to use the revolver as as we've currently got drawn but.
I mean, it is there its available but its not intended to be used.
Permanent.
And they permanently in the capital structure.
Thank you. The next question is from Matthew Fields Bank of America. This will be our last question. Please go ahead. Your line is open.
Oh, Hey, honest and.
Everyone I.
Congratulations on a great year.
Just wanted to follow up on one of Carl's question, and just sort of flesh out a comment I think our hottest you made which was is it your intent to.
Repay the notes as they come due for instance, your.
Kevin in the quarters do twenty-three become callable at par on April 1st is the preference of the company to simply just repay those out of cash and cash flow and not you know it's.
Pardon me it out with longer.
No longer dated on some more unsecured bonds.
Matt, Yes, I mean, we in the past we've always address these notes. So we doesn't become current on the balance sheet. So that's our intention is to continue addressing date maturities before it becomes current.
Oh.
We've got the option now that we've got cash generation that we can use that.
Of course, the bond market is important to US said, we've only got one bond outstanding that's not callable at the moment so that sets the pricing. So it is important to get it.
The pricing point in future, but it's not that I need liquidity.
All the big projects are behind Us. So we are generating cash now so it's.
It's going to be entirely opportunistic for the company in a if it suits us well, we'll issue a new node.
But there's no need to issue new notes to term out some of this date.
Okay. Okay, great. Thank you and then a longer term question, you're you're set to achieve your 2 billion debt reduction in the first half of this year and you said another 1 billion of debt reduction is the goal and the I guess the short to medium term.
Maybe you could put a.
A little bit of a goalposts around what short to medium term means does that mean kind of pre tokotoko development.
That means you know several years like what what what do you think about when you mean sort of short to medium term.
I guess short and accounting definition would probably be a current kit. So they would look at 12 months.
And our medium would be slightly longer than that so 18 months to two years as a Max you know so I guess.
It gives you some sort of handle on that and it is highly dependent on the of course continued strong operational performance that we have that also the copper prices.
So that's staying strong so.
We have strong copper prices I mean, I think that gives you a sort of it.
And a good guide as to what our expectation is.
Great well, thank you very much congratulations.
And 'twenty two.
Yeah.
Thank you there are no further questions registered at this time I'll turn the call back to Mr. Pascal.
Thanks, operator, thank you everyone.
Continued support and for joining today's call apologies again for the technical issues I Hope you enjoy the rest of your day and we look forward to speaking to you again.
The next quarterly update thank you.
Thank you the conference has now ended.
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