Q1 2022 Hudbay Minerals Inc Earnings Call
Good morning, ladies and gentlemen, thank you for standing by.
Welcome to the Heartbeat Minerals, Inc. First quarter 2022 results conference call.
At this time all participants are in listen only mode. Following the presentation. We will conduct a question and answer session to join the question queue. You May Press Star then one on your telephone keypad should you need assistance during the conference call you May signal, an operator by pressing Star then zero.
I would like to remind everyone that this conference call is being recorded today may 10th 2022 at 830, a M eastern time.
I would now turn the conference over to Candace Brule, Vice President Investor Relations. Please go ahead.
Thank you operator, good morning, and welcome to HUD Bay's 2022 first quarter results conference call.
<unk> financial results were issued yesterday and are available on our website at www Dot <unk> dot com a corresponding Powerpoint presentation is available and we encourage you to refer to it during this call.
Our presenter today is Peter can kill ski had based 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.
Andre lows on our senior Vice President and Chief operating Officer, and Eugene Lee, Our senior Vice President corporate development and strategy.
Please note that comments made on today's call may contain forward looking information and this information by its nature is subject to risks and uncertainties and as such actual results may differ materially 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 could kill ski Peter.
Thank you Candice good morning, everyone and perhaps good afternoon, and even good evening to some of you. Thank you very much for joining us I wanted to begin by acknowledging the conflict in Ukraine.
Why did it has exacerbated global inflationary pressures and supply chain disruptions. These impacts are inconsequential compared to the hardships and losses experienced by the many innocent civilians, whose lives have been impacted by this very unfortunate situation.
Hearts go out to all of those affected.
In this presentation today.
A brief overview of our first quarter financial and operating results discuss highlights from our recent annual reserves and resources announcement and provide an update on the ongoing progress at copperweld and our other growth initiatives.
Before we dive into quarterly results I wanted to congratulate a key member of our technical team Matthew Taylor, our executive director of Metallurgy Technical services.
Last week mattress Ive, the 2022 mineral processes or of the year award at the CIA and CMP Society ceremony. He was recognized for a significant mineral processing achievements relating to his work in the snow Lake and new Britannia processing strategy with the implementation of a novel copper flotation circuit.
We look forward to his continued contributions at our many growth initiatives, including copperweld.
Beginning on slide three we maintained steady operations during the first quarter, despite being faced with a number of external challenges, including Covid related absenteeism extreme weather conditions and inflationary cost pressures.
This was a testament to our effective risk management systems and focus on operating efficiencies and as a result, we have reaffirmed our full year production and cost guidance for 2022.
Our consolidated copper production in the quarter was $24 7000 tons in line with our expected quarterly cadence for the year as we anticipate significantly higher copper grades in Peru later this year.
Consolidated gold production decreased by 16% compared to the fourth quarter, primarily due to lower gold production in Peru, as COVID-19 related absenteeism and high Rainfalls limited production from the pump of cancer pits.
Consolidated zinc production in the first quarter was 4% lower than the fourth quarter, primarily due to lower zinc grades at lalor and triple seven.
Consolidated cash costs increased to $1.11 per pound of copper from 51 cents in the fourth quarter. This increase was a result of higher milling costs and lower copper production in Peru, as well as higher general and administrative cost in Manitoba.
Consolidated sustaining cash cost increased to $2 29 per pound in the first quarter compared to $1 95 in the fourth quarter due to the same reasons that fixing cash costs, but partially offset by lower sustaining capital expenditures and capitalized exploration.
Both measures were slightly above our 2022 guidance ranges, primarily due to lower byproduct credits as a result of lower sales in Manitoba, which I'll provide more details on shortly.
Consolidated cash costs and sustaining cash costs are expected to improve in future quarters to be within the 2022 guidance ranges with higher expected copper production and contributions from precious metals byproduct credits throughout the year.
First quarter unit operating costs were in line with 2022 guidance ranges at $12 37 per ton in Peru, and 176 Canadian dollars per ton in Manitoba.
This strong cost performance was achieved despite continuing to experience broad based inflationary pressures caused by higher input prices for many services and consumables such as power fuel grinding media freight and insurance.
Operating cash flow before change in noncash working capital was $77 million during the first quarter, reflecting a decrease from the fourth quarter, primarily as the result of lower copper gold and zinc sales volumes in Manitoba, partially offset by higher silver sales volumes and higher base metal re.
<unk> prices.
At the end of March we announced that first quarter, Manitoba sales were impacted by limited railcar availability.
This resulted in excess inventory of about 7000 tons of copper concentrate which contains high amounts of gold and 6 million pounds of refined zinc at the end of the first quarter.
Had the excess inventory being sold during the quarter, we would have realized approximately $45 million of incremental revenue assuming end of quarter commodity prices.
Our inventories are expected to be recognized as revenue and converted to cash as levels of drawn down over the next several months with increased railcar access as weather conditions improve.
First quarter adjusted net earnings per share was <unk> <unk> after adjusting for a noncash gain related to the quarterly revaluation of deferred and flown environmental provision, which decreased as a result of higher long term risk free discount rates.
First quarter, adjusted EBITDA was $110 million lower than the previous quarter, primarily as a result of the lower sales volumes.
We exited the quarter with $213 million in cash as well as undrawn availability of nearly $357 million under our revolving credit facilities.
Given the elevated inventory levels in Manitoba at the end of the first quarter and the positive expected quarterly production cadence our cash balance is forecast to grow throughout the remainder of the year based on current commodity prices.
On slide four we summarize our Peru operating results.
During the quarter, our Peru business produced over 19000 tons of copper.
<unk> 8000 ounces of gold over 500000 ounces of silver and 207 tons of molybdenum production.
Production of all metals was lower than the fourth quarter, primarily due to a planned semi annual mill maintenance shutdown in January and lower grades.
As previously disclosed full year production in Peru is expected to benefit from significantly higher grades in the fourth quarter of 2022.
And we have affirmed reaffirmed our 2022 production guidance for Peru.
Total ore mined declined during the first quarter due to high rainfalls and Covid related labor shortages, which resulted in delays affecting the water management system and lower production from <unk>.
Ore milled was lower than the fourth quarter due to the planned mill maintenance shutdown in January .
Milled copper grades and recoveries were lower than the previous quarter, but were consistent with the mine plan.
Milled gold grades and recoveries were lower than the previous quarter due to less ore from Pampa countries this quarter with.
With the rainy season now behind Us in Peru, we expect pump potential oil production to return to higher levels in the second quarter.
Peru combined unit operating costs in the first quarter were within the guidance range, but higher than the fourth quarter due to continued inflationary pressures on consumables and energy costs and fewer tonnes of ore milled due to the planned mill maintenance shutdown.
Despite these cost pressures full year unit operating costs in Peru are expected to remain within the annual guidance range.
Peru's cash cost in the first quarter were $1.54 per pound of copper higher than the fourth quarter, primarily due to higher milling cost and lower copper production.
This was above the upper end of our 2020 guidance range in part due to lower production and higher costs related to the planned maintenance in the quarter.
Cash costs are expected to decline and full year cash costs are expected to remain within the 2022 guidance range with higher expected copper production and contributions from precious metal byproduct credits later this year.
Peru, sustaining cash cost decreased compared to last quarter due to lower sustaining capital expenditures and lower capitalized exploration.
Moving to the next slide on Manitoba during the first quarter. The Manitoba operations produced 43, 2000 ounces of gold 22, 3000 tonnes of zinc five 5000 tonnes of copper and 279000 ounces of silver.
Copper production increased by approximately 4% quarter over quarter, whereas gold zinc and silver production decreased by 7%, 4% and 13% respectively due to expected grade variability and lower ore milled.
Full year production of all metals in Manitoba is expected to be within guidance ranges for 2022.
Ore mined at the Manitoba operations in the quarter was lower than the fourth quarter due to employee absenteeism caused by COVID-19, unplanned maintenance requirements of the ore handling system that temporarily affected hoisting ability at lalor and planned lower production the triple seven as the main approaches closure in June.
The production ramp up strategy at Lalor to achieve 5300 tons per day by the end of 2022 is underway.
It includes advancing development for new mining fronts additions to the mine equipment fleet transition of workforce from the Triple seven mine upon closure and expansion of change house and office facilities.
Our planned Lalor maintenance period has been advanced to the second quarter of 2022 to allow for increased availability during the third quarter. After a triple seven has closed and the additional workforce and equipment have transitioned to lower the.
The triple seven equipment relocation strategy will commence in the second quarter ahead of expected Timeframes to advance the production ramp up to 5300 tons per day.
The Triple seven mine is within one month of closure and the focus continues to be on safely mining out the remaining reserves by completing the necessary ground rehabilitation to access remnant and pillar stoping blocks.
Challenging ground conditions continue to cause delays in the production sequence and resulted higher dilution than planned.
These challenges are expected to continue until the end of the mine life in June .
Pre closure activities are well underway and mined out areas to decommission stationary equipment a value for redeployment at Lalor.
The new Britannia mill averaged approximately 4500 tonnes per day in the first quarter slightly below the targeted 500 tonnes per day as a result of completing scheduled rod mill liner maintenance during the quarter.
Since completing the mill maintenance, new Britannia has consistently achieved greater than 500 tonnes per day in April .
With the inclusion of Dore gold and silver recoveries at the New Britannia Mill have also improved significantly with metallurgical recoveries in March higher in relation to previous months additional.
The initiatives are planned in the second quarter to further improve recoveries to be in line with targeted levels.
Manitoba combined unit operating costs in the first quarter were within the guidance range, but 5% higher than the fourth quarter, primarily due to higher propane usage during the colder winter coupled with continued inflationary cost pressures for bulk commodities and fuel and lower tonnes processed food.
Full year combined unit costs are expected to remain within 2022 guidance ranges.
With Manitoba has transitioned to a primary gold producing business, we introduced gold cash cost guidance and disclosure in 2022.
Gold cash cost in the first quarter were $416 per ounce in line with our annual guidance range.
Late in March we provided our annual mineral reserve and resource update.
In Peru mine planning gains in economic revaluations resulted in additional mineral reserves at Constancia with largely offset 2021 mining depletion.
Current mineral reserve estimates at Constancia totaled 521 million tonnes at three 1% copper with over $1 6 million tonnes of contained copper.
As a result, Constancia is expected mine life has been extended by one year to 2038.
In addition, the Constancia Naughty underground mineral resource estimates were added to Constancia as mineral resources of positive Scoping study was completed in 2021, which resulted in an inferred mineral resource estimate of $6 5 million tonnes at one 2% copper as shown on slide six.
Yes.
This resource estimate is in two high grade Scone lenses.
<unk> below the open pit in the Constancia noted area.
Study concluded these two lenses could be mined by underground methods, starting in 2029% to supplement the open pit production.
Tend to conduct infill drilling and an internal pre feasibility study in hopes of converting the underground mineral resources to mineral reserves for inclusion in the mine plan for the Constancia operations.
As a result of exploration success in Manitoba additional mineral reserves were identified at Lalor and the $19 one deposit in our 2022 reserve update.
This extended the mine life of the Snow Lake operations by one year to 2038, maintaining the 17 year mine life.
Resource to reserve conversion has more than offset 2021 mining depletion with a net gain for all metals, including an additional 218000 ounces of gold contained in reserves after adjusting for mining depletion.
This is a continuation of our successful year over year resource to reserve conversion in Snow Lake, where we have achieved a more than 350% increase in reserves identified to date as shown on slide seven.
Inferred mineral resources at Lalor, and 19, one increased by $1 1 million tonnes, bringing the total inferred mineral resources to $8 1 million tons.
These inferred mineral resources have the potential to maintain the 5300 tons per day production level in snow Lake beyond 2028, and further extend the mine life.
Yes.
Slide eight highlights the progress we've made on several of our development and exploration growth initiatives.
Key focus for <unk> is our copperweld project in Arizona.
After the initial discovery in early 2021, we completed an aggressive drilling program, which led to an initial resource estimate in December 2021 that is larger and at higher level of geological confidence than we expected at this stage. We also successfully expanded our private land package after the copperweld discovery.
And now hold over 4500 acres to support an operation entirely on private land.
The initial technical studies for Copperweld have been completed and the results are being incorporated into a P. A contemplating the development of copperweld deposits in conjunction with an alternative plan for the Rosemont deposit to capitalize on regional synergies.
The PEO is expected to incorporate a two phased mine plan with the first phase, reflecting a standalone operation utilizing our private land for processing infrastructure and contemplating mining portions of Copperweld and Rosemont located on patented mining claims.
The first phase is designed as an economically viable standalone plan, requiring only state and local permits and is expected to reflect an approximate 15 year mine life the same.
<unk> phase of the mine plan is expected to extend the mine life and incorporates an expansion onto federal lands to mind, the entire Rosemont and copperweld deposits. The second phase would be subject to the federal permitting process.
We expect the pega to demonstrate positive economics for this low cost long life copper project and we look forward to publishing the results in a technical report in the second quarter of this year.
In April we commenced early site works at Copperweld with initial grading and clearing activities taking place on our private land. We have also increased the number of drill rigs at site to seven to conduct infill drilling and to support future feasibility studies.
In addition to infill drilling we continue to test regional exploration targets at Copperweld.
There remain several opportunities to further extend economic mineralization within the private land limited copperweld, and rosemont, including to the north and south of balsa through drilling to bridge the gaps.
In Peru drilling continues at the AGA and copper porphyry target with over 9000 meters drilled to date.
Based on the positive results from the initial drilling a second phase of drilling has been initiated aimed at defining an initial inferred mineral resource estimate in the third quarter of 2022.
And the Snow Lake region, we had a busy winter exploration program actively conducting surface and underground drilling activities.
The program, primarily focused on the copper gold rich feeder zone at the $19 one deposit.
Drilling gap between $19, one and lens 17 at Lalor and a high priority geophysical target located immediately north of Lalor.
We also commenced the confirmatory drill program on the <unk> tailings facility earlier this year to support the evaluation of the tailings reprocessing opportunity.
Slide nine summarizes our upcoming catalysts.
In Manitoba, we are advancing our snow Lake gold strategy with plans underway to achieve 5300 tonnes per day at Lalor by the end of the year as I touched on earlier we are.
We're also implementing a recovery improvement program at the stall mill this year to increase copper and gold recoveries as part of our snow Lake Gold strategy.
We will continue regional drilling in the snow Lake area to explore for base metals and gold upside and we will continue to put pilot results from ongoing infill drilling programs at Lalor and $19 one.
In Peru, we will continue to move discussions forward with the community to the north of Constancia working towards mutually beneficial exploration agreements on the highly prospective regional brands.
In the United States, we expect to be submitting state level permit applications for copperweld. This year and we continue to await the outcome of the Rosemont appeal decision from the ninth Circuit Court.
Following the publication of a positive we expect to advance a copperweld pre feasibility study in the second half of 2022.
And on our Mason property, we intend to launch an exploration program to test <unk> targets later this year.
Concluding our presentation on slide 10.
<unk> offers leading near term free cash flow growth and significant copper resource optionality through our high quality organic pipeline.
We believe that copper has the best long term supply and demand fundamentals in the industry as global copper mine supply will be unable to meet demand from global decarbonization initiatives.
We have the highest near term free cash flow growth and the highest leverage to copper among mid tier base metal peers, and we have successfully increased our copper equivalent resources per share by more than 180% over the past decade.
For these reasons, we believe <unk> is uniquely positioned to offer attractive copper production growth and long term optionality for investors and with that we're happy to take your questions.
Thank you, ladies and gentlemen, we will begin the question and answer session.
And the question queue you May Press Star then one on your telephone keypad.
You will hear a tone acknowledging your request.
If you are using a speakerphone. Please pick up your handset before pressing any teeth to withdraw. Your question. Please press Star then two we will pause for a moment as callers join the queue.
Our first question comes from Fahad Tariq of Credit Suisse. Please go ahead.
Hi, Good morning, Thanks for taking my questions just first on the Manitoba railcar issues I believe this isn't the first time that.
<unk> run into railcar issue can you talk a little bit about.
Like are there ways to mitigate this going forward is this something that will happen seasonally kind of every year.
Comment there would be helpful. Thanks.
Thank you very much for the question look yes, it is a seasonal phenomenon.
But given the intensity of the phenomenon. This year, we have looked at mitigating that.
The addition of additional railcars in the coming year.
So we do expect to be able to mitigate this going forward.
Okay.
Okay, and then maybe just switching gears on <unk>.
Copper world the Pega.
In your news release, you talked about litigation that's been brought forward related to water on the private land it sounds like it doesn't really apply but I'm just curious.
That changed the way Youre thinking about the PEO that youre thinking about the phased approach in any way.
No no and that's certainly a good question look.
Two groups of opponents have provided notices of their intent to Sue high Bay, arguing that.
Copperweld contains waters of the United States and Rosemont requires a 404 water permit to advance the project.
The federal permitting agency Army Corps of engineers in charge of water permits is never determined that there are waters of the United States on high based private land and we performed our own analysis that shows there are none. So the work. We are currently doing aside as grading and land clearing activities on our wholly owned private land and no federal permit.
Our required for these activities.
Does that answer your question.
Yes. It does okay. So there's no change in the plan based on this okay and then noticed.
Matt.
And my last question.
Been waiting for some time now on the Rosemont.
Ruling it was post the end of 2021, we're now almost halfway through 2022 can you just give any insights. If you. If you know what's kind of holding up the decision. Thanks.
That's an interesting question.
And in fact, we have no insights whatsoever into what is holding up a judgment by the ninth Circuit Court, we have for a long time now expected.
Now imminent.
We continue to expect that outcome imminently, but we have no insight into when that might be.
Okay, and then can you just remind us.
If you were to get a favorable ruling does that change your approach in any way is it still would it be the same approach prioritizing copper world in conjunction with Rosemont, and then more rosemont in phase II or what any of that change if you got a favorable decision.
No none of that would change in the event of a favorable favorable decision, but maybe perhaps I could sort of just expand on that a little bit judged.
<unk> decision in 2019 resolved only one key issue from the two related lawsuits, namely the plaintiff's arguments about the mining law. So a reversal by the ninth Circuit Court would result in the case being remanded back to judge Soto to resolve the remaining claims and those lawsuits and although we do.
Don't feel that they would justify a full injunction on the merits. They do remain a source of potential other delays and we would also need to still obtain a revised biological opinion from the fish and wildlife service and a new record of decision from the Forest service before restarting construction on Rosemont.
So there'll be a number of factors that you would have to reevaluate and review that will be required for the project to restart so bearing all that in mind, there's quite a bit of work to be done potentially and by far the most.
Sensible approach is to proceed as planned with copperweld.
That's helpful. Okay. Thank you.
Our next question comes from Rs <unk> of Scotiabank. Please go ahead.
Hi, good morning.
Wanted to ask about Peru, and Tampa conscious specifically it seemed like you were delayed accessing over there in the first quarter and given that you're already expecting sort of Q4 to be.
The highlight of the great profile.
In terms of that feeding through the plant.
Can you talk about if you're seeing any risks to that high grade ore slipping out of this year and perhaps early next year like can you catch up so what I'm trying to get at.
Good morning, Roger and thank you for that question look.
As we indicated we were impacted by the rainy season.
That rainy season is over.
And you also the other impact was based on Covid absenteeism in the first quarter, which sort of reached a very very high level in January and February but that is now completely gone away. So things are progressing very very well, whether the improved we expect to be back to full mining rates in the pump in the pit by June .
And we do believe that we are on track to achieve the expected higher grades in the fourth quarter of course, there is always some risk.
But we are pretty confident that we will be able to.
To meet the.
The mining requirements to do that Andre would you.
Any additional comment to that.
No I think you covered it up here.
Alright good.
Yes.
You have the ability I mean, given the most of the tonnage is still coming from the main pit do you have the ability just to put more equipment at Papa Contra to catch up if you if you need to.
Yes.
Yes, we do in general I mean also remember that because of.
Staffing issues related to Covid earlier in the year.
Not able to deploy all the equipment, we had but yes, we are able to deploy more equipment.
Okay. Thank.
Thank you very much.
Thank you.
Our next question comes from Greg Barnes of TD Securities. Please go ahead.
Thanks. Thank you can you talk a little bit about the underground potential at Constancia.
Got.
What kind of Capex were looking at production rates any kind of.
We could get there and with that extend the mine life of Constancia by another several years.
Yes, I would say good morning, Greg and thanks for that I would say that clearly as we've indicated that the underground would be.
Subsequent to mining out the open pit portion of Constancia, Naughty and we still have to complete a PFS as you said, we've completed a pega.
Andre would you like to comment any at all on the.
The additional parts of Greg's question.
Sure sure so constancia arty.
It's meant to be supplemental feed.
The current design has it with ramps right from surface, so that it could potentially be mined concurrent with mining in the pit.
It's probably cheaper to be mined from with access and portals from the pit and so there is a number of tradeoff scenarios that that need to be done.
On the underground portion at this point in time, and those tradeoffs will determine what year.
So as you can imagine yet your question was around capital cost and the Lake and so so right now the base case that we've done is ramp from surface, which is the most expensive.
Option as opposed to very short drifts cutting across from the edge of the pit, but but it is it is in the range probably is 50 to 75.
In that range for a deposit of that size, but.
But we have a lot more study to do to optimize that at this point.
Okay.
So it would be mind after the pit the maintenance mined out or could there be another area of the maintenance of your mining while you go under the underground area.
So there's options to do either or so so if you choose if you choose to mine. It concurrently that means you have to start your portals from surface. So that they are not affected by expanding the pit.
If you go with the cheaper option then you have to wait to the phase of the pit that's closest extension in order to reach its final resting its final completed spite before accessing the portals lose access so theres two different options.
We just have to look at that.
The life of mine in its entirety and win whereas the optimal time.
To bring it into our production profile.
Okay. Okay.
Thanks for that Peter I, just wanted to switch back to a couple of world.
Environmental groups.
Trying to cut some roadblocks in front of you with the broadest thing.
There are other avenues that we believe they couldnt take two.
Causes some issues on copperweld or is it really very very difficult. Given you are a private cloud just trying to get a sense of what.
Blocks, you could face potential.
Yes.
Greg My sense is the only roadblocks that we could face others, we're facing right now.
The groups, who are opposing ASO trying to impose roadblocks at the same groups, who did who attempted to do that with Rosemont and we think that this is this is pretty well the only avenue that.
But we don't know what they think obviously, but we think that no. Other avenues. They can pursue remember.
I mean this is coupled is entirely on our private land.
And private land use in the United States and the state of Arizona is regarded as sacrosanct. So the only avenue that they really have to.
Two approaches one is that through this what are the United States.
Avenue and as I think all of you know there was a jurisdictional determination in 2001 by the Army Corps of engineers, stating to start 2021.
Stating that there are no waters of the United States.
In the area of the project certainly on Rosemont.
Yes, we think this is the only avenue, we don't know, we certainly are not aware of any other avenues.
And as the army call looks at that on Copperweld ground specifically Peter.
Andre would you like to respond to that.
Sure sure. So so the Army Corps is is looked at.
The rosemont footprint per se and Thats, where the jurisdictional determination was completed.
The Army Corps has looked at our entire site for a number of years probably for four to six years. So the Army Corps is very very familiar with our with our footprint.
The current rule of the waters of the U S. Right now is what they call the re panels.
<unk> decision.
And the Army Corps has ruled on a number of jurisdictional determinations all around us as close as Quail Creek to mission mine, even some of the tribes who are suing us and so all around as the quarter has ruled that there are no jurisdictional waters and so it gives us great confidence.
With knowing that not only with the studies that we've done but the Army Corps. Their silence is in our in our view any lease is theyre very confident there are no waters as well too so they've known that we've been doing these activities now for close to two months.
And so they are very knowledgeable about the work that we're doing in the wash is that the opponents claimed to be waters of the U S and they haven't done anything. So we are quite confident that they agree with us that there are no waters here under the current rule.
Okay, and you don't have a jurisdictional ruling from them on that.
No.
Ground not yet.
There is no requirement for jurisdictional ruling jurisdictional ruling all that is is that it's call. It a complementary service that the core does to tell you whether you need a permit or not and so there is no requirement for that you just need to know that youre not breaking the law.
And we've done exhaustive surveys throughout our property. In addition to we've done a jurisdictional determination on the other side.
And with some of the locations, but without that jurisdictional determination. There's been numerous all around us that had been completed on watches that are downstream of us, let's say, they're not jurisdictional. So we're very very confident that our earn any near us.
Okay, great. Thank you.
Our next question comes from Dalton Barreto of Canaccord. Please go ahead.
Thanks, Good morning all.
Peter at the risk of stating the obvious you you guys have been surprised by court in Arizona.
And I'm just wondering what do you guys think the odds are that these groups to get injunctions theyre looking for.
Morning.
And thanks for the question.
No idea what the odds are I have no idea is really is.
A decision that will be made by judge Solta and <unk>.
No what what the odds are what I do know is that no matter. What happens. We will proceed with the completion of the PPA and the feasibility.
Ability work.
That we need to do in order to move the project forward, regardless of any outcome of.
Judge Stark, who may decide but we are hopeful that.
John Soto will understand the simplicity of what's in front of them and make the right decision.
And so just so it was really on this one as well just to confirm.
Yes, that's correct.
Okay, and then how do you.
The court ruling.
Losses aside how do you think about copper rod from a broader social license, which is the only opposition youre seeing from the.
The environmental groups.
What's the what's the feeling from the local population.
So I will let Andre answer that in general though.
The opposition that we are receiving is from exactly the same environmental groups, who opposed Roes.
Rosemont is suddenly.
There is no surprise there.
Beyond that I think.
Let me ask Andre to respond to the rest of the day.
Sure sure I would just add that there is a lot of support locally, but andre can elaborate on that.
Yes agreed to so the reality is is it only takes one person to file a lawsuit and so as Peter mentioned.
The group of people that appose is relatively small compared to the group of people that support the project.
In terms of what's changed though is is this this year as it comes out really touches on a lot of key aspects that the opponents were complaining about and the key aspect.
In this case here, it's a very environmentally well thought through plan, we're really excited to share that when it comes out a key component of that is being able to produce copper in the U S finished copper and the unique characteristics of the deposit allow us to do that and.
We think that a lot of the talking points.
Our opponents have with regards to the previous view of what the project was we think disappear and so we're very excited for for the <unk>. When it comes out for people to be able to review it and Youll see that this is will be a world class cover deposit that meets all stakeholders needs.
Okay, great and maybe I can use that to switch gears, a little bit you guys have given us some sense of what baseline looks like in terms of that.
Yes.
Mine life.
And I understand the PX coming out in a couple of weeks, but can you tell us anything else.
Thanks, Jeff.
How big do you think it's going to be are you going to be reaching the sulfides as well as the oxide.
And copper pricing, you're using to determine that it's economically viable.
Dalton I think it's slide it's a little bit early to sort of provide much of those answers because we haven't completed the work yet what I can say is that we do anticipate that it'll be a combination of sulphide and oxide processing.
The scale right now is subject to completion of the.
The technical and financial analysis, So I don't really know scale of output scale of throughput.
Anything like that right now all I can really offer definitively it will be a combination of oxide and sulphide processing.
Okay. Thanks for that and maybe if I can squeeze one last.
Last one.
Yes.
You're going to have.
Correct.
In Q3 of this year.
And I understand this projects.
The infrastructure is there a chance that this thing could get accelerated.
Even ahead of copper Rod just given some of the <unk>.
A local opposition that copper world.
No I don't think so.
<unk>.
We will complete the first phase of drilling is still waiting for some final assays will launch the second.
The second campaign.
It is way too early because once once we complete the drilling campaign.
We would have to proceed with the normal.
<unk> regime in Peru, the only difference between this and other areas.
<unk> in this population involved and so there is no requirement for Consulta previa, but otherwise it's all the same.
So yoga and is very very early stage, we think.
To your point about copperweld, we actually are very confident that we will be able to push ahead with copperweld. According to the timeline that we've provided to you previously which is completion of a PFS. This year completion of a feasibility study next year with potentially.
Sanctioned by the end of next year.
Perfect. Thanks, guys. That's all for me.
Welcome. Thank you.
Once again, if you have a question. Please press Star then one.
Our next question comes from Stefan <unk> of <unk> Securities. Please go ahead.
Okay. Thanks, very much guys I'm just curious can you maybe just remind us flipping a switch.
Switching gears to Manitoba, just how are you.
You mentioned, you're doing some additional infill drilling on the tailings strategy there it <unk>, just remind us where that needed the rough timeline.
Once we get that into production.
Alright.
Stefan Thanks for that I think it's too early.
To tell what the timeline timeline might be right now there's quite a lot of work to do that remains to be done and we need to look at it in the context of the broader camp as well. So there is so much opportunity in Manitoba right now with the tailings at plant floor and there is also potential tailings reprocessing at Anderson is also.
Coupled with additional phases at stall.
So right now to see how that fits into the suite of.
Or I guess high turn high return initiatives ahead of us.
It's a little bit early to say, so I would say that we need to complete some work on all of those initiatives in the remainder of the yen will have a much better idea as we progress through the year, how it might look but it is too early to provide any feedback with with respect to timing.
Okay now that's helpful. Thanks, very much guys.
Our next question is a follow up from RF walked out with Scotiabank. Please go ahead.
Thank you.
A follow up around copper world and your development plans there.
When I think about your balance sheet and your cash flow profile.
Phil I guess, we're still waiting to see that inflection point on your free cash flow generation.
Are you going to set some firm I guess targets in terms of where you would like to see the net debt get to before.
<unk> ahead, with sanctioning something like copper world or.
How should we think about your balance sheet in the context of funding something like copper World. If you plan to make it a sanctioning decision by the end of next year.
Yes, it's Steve here I think it's a little premature until such time as we're through the PFS in to the Optionality as it relates to.
What potential financing strategies can apply because it does to a degree and then we've talked at length I won't go over that again, but we've talked at length that depending on the outcome.
Inform some of our financing strategy is clearly pro form potentially.
What if any pursuit we might.
Do as it relates to a partner.
So theres a lot of a lot of.
Stage gates that we got to go through at this point before we start figuring out how it is we're going to.
Finance it.
An inflection point is a little different in the sense that.
We talked at length in our press release regarding a little bit here regarding the timing in terms of concentrate sales owing to some of the logistics issues, we have experienced on R. R.
Primarily in our Manitoba operations.
What we need to see again I've said this before I'm not a fan of debt at the.
The REIT structure matters.
So I mean, all of those things are going to be put into the great.
And our calculation thats going to be how it is we will pursue this.
But we remain.
We remain convinced that we are going to see that inflection point as it relates to positive cash flow generation, we see it just in our working capital today with that excess inventory sitting there ready to be sold that we can generate cash. So we're still while backend loaded this year for a variety of reasons, we're going we are.
Going to be generating in our view significant free cash flow this year.
Provided prices hang in.
At current levels, we see they will.
But I think a lot of that I know, it's a long winded way of saying stay tuned.
But I can assure you at such time, we are going to take all of our.
Capital requirements, including looking at the debt maturities that come in 2026 and 2029 before we proceed with sanction it.
Thanks, Steve.
I realize you haven't released the study yet on copper world.
Should we be anticipating a project capex.
Somewhat similar to Rosemont.
In terms of potential capex or is it something that could be a lot smaller.
No I think.
I think you should think.
That region somewhere you know, it's a little bit premature to say, so, but I think you should be.
<unk> something in that region.
Okay.
Peter.
Youre welcome.
This concludes the question and answer session I would like to turn the conference back over to Candace Brule for any closing remark.
Thank you operator, and thank you everyone for participating today do you have any further questions feel free to reach out to our Investor Relations team you may disconnect. Your lines at this time.
Okay.
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Okay.
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Yeah.