Q2 2022 Hudbay Minerals Inc Earnings Call
Good morning, ladies and gentlemen, thank you for standing by.
Welcome to the HUD Bay Minerals, Inc. Second 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 August nine 2022 at 830, a M eastern time.
I'll now turn the conference over to Candace Brule, Vice President Investor Relations. Please go ahead.
Thank you operator, good morning, and welcome to HUD base 2022 second quarter results Conference call.
Hi, based financial results were issued yesterday and are available on our website at www Dot Hebei dotcom, a corresponding Powerpoint presentation is available and we encourage you to refer to it during this call. Our presenter today is Peter guilty HUD based president and Chief Executive Officer accompanied.
And Peter for the Q&A portion of the call will be Steve Douglas, Our senior Vice President and Chief Financial Officer, Andre loads on our senior Vice President and Chief operating Officer, and Eugene Lee, Our senior Vice President corporate 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 tell ski Peter.
Thank you Candice good morning, everyone and thanks for joining us.
Over the quarter, we've seen a volatile commodity market and continued inflationary pressures that have affected industries across the globe.
Hebei, we continue to focus on operating efficiencies and effective risk management systems in order to mitigate these forces.
As you'll see in today's presentation, we had a strong operating quarter with units operating costs within guidance expectations and our consolidated cash cost benefited from a commodity diversification with higher gold byproduct credits.
As a result, we have reaffirmed our 2022 production and cost guidance.
Beginning on slide three we achieved a solid operational quarter setting us up for a strong second half of the year.
Our consolidated copper production in the quarter was $25 7000 tons in line with our expected quarterly cadence and 4% higher than in the first quarter.
Consolidated gold production increased 9% another record for Hebei due to higher gold grades in Peru, and higher output at new Britannia.
Consolidated zinc production in the second quarter was 23% lower than the first quarter, primarily due to lower tonnes and grades at triple seven as the mine approached the end of its life and the continued transition towards mining the gold lenses at Lalor with a corresponding decrease of production from the base metal zones.
Consolidated cash cost decreased to 65 cents per pound of copper from one dollar in 11 states in the first quarter.
This improvement was a result of higher zinc and gold byproduct credits and higher copper production.
Consolidated sustaining cash cost decreased to $1.87 per pound in the second quarter compared to $2.29 in the prior quarter due to the same reasons affecting cash costs. Both measures were within the 2022 guidance ranges.
Consolidated all in sustaining cash cost decreased to $1.93 in the second quarter from $2.54 in the first quarter due to the same reasons I've already mentioned, along with lower corporate selling and administrative expenses.
Operating cash flow before change in noncash working capital was $124 million during the second quarter, reflecting a marked increase from the first quarter, primarily as a result of an increase in noncash working capital higher realized zinc metal prices and higher copper gold and zinc sales volumes.
Yes.
Second quarter adjusted net earnings per share was <unk> 12, since after adjusting for a noncash gain related to the revaluation of the environmental provision and the specific asset impairment loss among other items.
This compares to an adjusted net earnings per share of two cents in the first quarter.
Second quarter, adjusted EBITDA was up $141 million, 28% higher than the previous quarter, primarily as a result of the same factors affecting operating cash flow.
Yeah.
We exited the quarter with $259 million in cash as well as undrawn availability of nearly $365 million under our revolving credit facilities.
We believe that our current liquidity combined with future cash flow from operations positions us well to weather the volatility in commodity prices experienced during the second quarter.
I think it is important to note that as part of our risk management efforts, we entered into short term quotation period hedges to manage provisional pricing adjustments on our concentrate sales. This resulted in a realized prices closely matching the spot prices in any given period and eliminates the risk of pricing adjustments post quarter.
Turning to slide four.
Peru operations benefited from higher mill throughput and slightly higher grades compared to the first quarter.
We produced approximately 21000 tons of copper.
14000 ounces of gold over 584000 ounces of silver and 319 tons of molybdenum production.
Production of all metals was higher than the first quarter.
As previously disclosed full year production in Peru is expected to benefit from higher grades in the fourth quarter of 2022 as.
As such full year production of all metals remains on track to achieve guidance ranges for 2022.
Total ore mined declined slightly quarter over quarter due to higher amounts of waste being mined.
All mine from pump a country increased in the second quarter as mining rates in the pit returned to normal productivity levels. Following heavy rains and delays in the water management system earlier in the.
All mills during the second quarter was higher compared to the previous quarter and copper gold and silver grades also increased.
Second quarter combined unit operating costs in Peru were within the guidance range of $12 <unk> per ton lower than the first quarter due to lower milling costs and higher throughput.
Produce cash cost in the second quarter were $1.82 per pound of copper higher than the previous quarter, primarily due to higher mining and general and administrative costs and lower byproduct credits, partially offset by lower milling costs.
Cash costs are expected to decline with higher expected copper production and contributions from precious metal byproduct credits in the fourth quarter.
However, our full year cash costs are expected to trend towards the upper end of the 2022 guidance range, reflecting the current inflationary cost environment.
Peru, sustaining cash cost increased compared to the first quarter, mainly due to the same factors affecting cash costs and slightly higher sustaining capital expenditures.
Moving on to Manitoba on slide five, but before getting into the quarterly results I'd like to acknowledge the team in Flint flown and the efforts over the 18 years of steady operations at the Triple seven mine.
Many of our workers come from multi generational families of Hebei employees over our 90 years of continuous operations in Flimflam.
Since our discovery and $19 15, Hebei has developed and operated 29 mines in the film fluid Snow Lake Greenstone belt, and we will continue to evaluate future exploration programs in the area, while we ramp up production at our operations in Snow Lake.
The last war was hoisted up the triple seven shaft in June 17th and closure activities to safely decommission the mine and place the Flint flung concentrated on care and maintenance are well underway.
HUD by employees and equipments have been transitioned from triple seven too low to support all of those ramp up to 5300 tons per day by the end of the year.
Our sincere thanks go to everyone influent flowing for their hard work over the life of the Triple seven mine and for contributing to the success of the entire fleet and flowing operation.
During the second quarter, the Manitoba operations produced nearly 45000 ounces of gold over 17000 tonnes of zinc 5000 tonnes of copper and 281000 ounces of silver.
And silver production increased by 4% and 1%, respectively, while copper and zinc production decreased by approximately 14% and 23% respectively compared to the first quarter.
Precious metals production increased due to higher throughput recoveries at the new Britannia mill, while copper and zinc production declined due to lower grades at Lalor and triple seven.
Full year production of all metals in Manitoba are on track to achieve guidance ranges for 2022.
All mines at <unk> increased by 7% in the second quarter, while production at Triple seven decreased as the mine approached closure in June resulting in an overall, 1% decline in total ore mined in Manitoba compared to the first quarter.
Mined zinc and copper grades were lower compared to the first quarter, but in line with the mine plan, while precious metal grades remained relatively constant.
The combined snow Lake Mills proceeds, 2% more or in second quarter compared to the previous quarter tracking the increase in loss production over the same period.
The new Britannia mill achieved higher than targeted throughput in the second quarter, averaging approximately 1590 tons per day due to a number of improvement initiatives aimed at increasing throughput and further improving recoveries.
With the inclusion of Dore to gold and silver recoveries at the New Britannia Mill have also improved significantly in relation to previous quarters stall mill recoveries were consistent with the metallurgical model for the head grades delivered.
Manitoba combined unit operating cost decreased 5% compared to the previous quarter, mainly due to lower costs at triple seven as the mine approached closure, partially offset by higher inflationary cost pressures for bulk commodities fuel and lower contractor costs.
Looking ahead to the second half of 2022, we expect combined unit operating cost to increase due to ongoing inflationary cost pressures and the removal of the lower cost Flimflam operations.
As such we expect a full year combined unit cost to trend towards the upper end of the 2022 guidance range.
Gold cash cost net of byproduct credits in the second quarter was negative $207 per ounce, which was lower than the first quarter and well below the 2022 guidance range as the operation benefited from higher zinc byproduct credits lower operating costs and higher gold production.
On slide seven we begin our discussion of the progress we've made on our organic growth pipeline.
The most advanced and exciting growth projects that are coupled with complex in Arizona.
In June we released the results of the preliminary economic assessment for the Copperweld complex, which incorporates the recently discovered copperweld deposits along with the Rosemont deposit that has been renamed to the east deposit.
The pega outlined a two phased mine plan phase.
Phase one reflects a standalone operation on private land and patented mining claims over a 16 year mine life with average annual copper production of approximately 86000 tons from mine resources.
Phase, one cash cost and sustaining cash costs of $1 15.
And $1 44 per pound of copper respectively.
Phase one generates robust economics with an after tax net present value of $741 million at a 10% discount rate and an internal rate of return of 17% using a copper price of $3 50.
Phase two expands mining activities on federal land and extend the mine life to 44 years with average annual copper production of approximately 100000 tons from mine resources cash costs and sustaining cash cost for phase III, a $1 11.
And $1 42 per pound of copper respectively.
The second phase at $555 million to the after tax NPV and generates an IRR of 49%.
The projected after tax NPV at at the time with sanction would be $2 8 billion.
Which demonstrates a significant upside opportunity. This second phase brings to the project.
From an ESG perspective, there are many benefits of copperweld. It will support you as copper supply through onshore production of copper cathode expected to be sold entirely to domestic customers.
The production of an onsite copper cathode reduces total energy consumption and eliminates greenhouse gas and sulfur emissions associated with overseas shipping and processing.
We are also targeting further greenhouse gas reductions as part of our corporate reduction targets to align with a global 2030 climate change goals.
We are advancing a pre feasibility study for phase one of copper will during the second half of 2022, which will focus on converting the remaining inferred mineral resources to measured and indicated and evaluating many of the project optimization and upside opportunities.
The projects and capital optimization opportunities will examine the modular nature of the processing complex at copperweld, which can be flexed based on market conditions and funding strategy specifically the pre feasibility study will contemplate multiple options for developing the concentrate leach facility and upfront capital.
The permitting process for the couple of complex is expected to require state and local permits for phase one and federal permits for phase II.
We recently received approval from the Arizona State mining Inspector for our amended mine land reclamation plan for the Copperweld complex.
<unk> was initially approved in October 2021, and was subsequently amended to reflect a larger private land project footprint.
We expect to submit applications for the other key state level permits for phase one of the copperweld complex in the second half of 2022.
In June we released our 19th annual sustainability report, which.
With highlights shown on slide eight.
We are truly proud of this report, which provides transparency and progress on key accomplishments and initiatives in 2021, along with goals for the upcoming year and the long term, we believe global demand for the metals that we mine will continue to rise alongside the need for Green technology that will play an essential role in meeting the challenge of arrest and climate change.
<unk>.
We're committed to reduce greenhouse gas emissions future and we are currently working towards specific emissions reduction targets to align with the global 2030, and 2050 climate change goals.
Last year to better understand the nature of our greenhouse gas footprint and the best options for approaching and achieving sustainable emissions reductions. We began working on the 10 year greenhouse gas reduction roadmap.
This roadmap will identify key sources of emissions, including scope three emissions and the nature of the changes operational technical that will be required to make full or significant impacts in each source area.
We are also a proud member of the mining Association of Canada, and implement the towards sustainable mining or TSM protocols. These protocols are increasingly being recognized globally and adopted as best in class. Our goal is to maintain a score of <unk> or higher for all protocols and in 2021, we achieved a <unk>.
Rating of double a across all TSM tailings management protocol indicators in both Manitoba and Peru.
We also saw a 7% decrease in energy intensity per tonne of ore processed and over 50% of our indirect energy consumption is from renewable sources.
Slide nine highlights the progress we've made on several of our exploration and growth initiatives.
In Peru, we control a large <unk>.
Contiguous block of mineral rights with the potential to host mineral deposits within trucking distance of the Constancia processing facility.
These mineral rights include the past producing Cabo, Utah property and the highly prospective Murray array in the property.
Discussions with the community of which a cargo related to a surface rights exploration agreement on the Maria Reyna <unk> properties are progressing well we.
We expect to finalize an agreement in the coming weeks before commencing field exploration activities.
We are also continuing to compile results from our recent drilling at the AGA and copper porphyry targets in northern Peru and remain on track to complete an initial inferred mineral resource estimate in the third quarter of 2022.
In Snow Lake, we have been actively conducting drilling activities in the snow Lake area with success in identifying the extensions of the copper gold rich feeder zone at the 19, one deposit and compiling results from ongoing infill drilling at Lalor.
In Nevada, and IP ground survey will be conducted in the second half of 2022 on the Mason Valley properties, which are located on private land claims near the Mason project.
This work in combination with the reinterpretation of geological data from past operating mines in previous exploration data will be used to finalize the drill plan to test high grade colon targets in the future.
I'd like to conclude here on slide 10.
We have delivered many of the catalysts, which we laid out at the beginning of the year and we are on track to continue to accomplish our corporate objectives throughout the balance of 2022 in.
In Manitoba, we are advancing our snow Lake gold strategy with plans to achieve 5300 tonnes per day at Lalor as I touched on earlier.
We are also implementing a recovery improvement program at the stall mill this year to increase copper and gold recoveries.
We will continue regional drilling in Manitoba to explore for base metal and gold upside and continue to compile results from ongoing infill drilling programs at Lalor and $19 one.
In Peru, we already touched on our exploration initiatives and we are also continuing to advance our recovery uplift in all sourcing programs at Constancia.
In the United States. In addition to advancing the pre feasibility study and state level permit applications at Copperweld, we are continuing our infill drilling program with three drill rigs turning at site.
In summary, we are proud of our operating performance to date, which positions us well to reaffirm our full year production and cost guidance for 2022, and we will continue to focus on generating free cash flow, while prudently advancing our high quality pipeline of organic growth opportunities to deliver value for all of our stakeholders and with that we're happy to take.
Questions.
Thank you ladies and gentlemen, we will now begin the question and answer session to join the question queue. You May Press Star then one on your telephone keypad.
Your tone acknowledging your request.
If you are using a speakerphone. Please pick up your handset before pressing net's 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 Jackie <unk> of BMO capital markets. Please go ahead.
Thanks and never first.
This is exciting I guess congrats on the quarter.
Maybe I'll ask Pierre if you can give us some additional color on why your cost.
Unit basis were so so.
So good in the Manitoba Division is that related to the closure of triple seven or can we expect to see.
Strong cost performance going forward in the rest of the year as well.
Jackie Thanks, very much for that.
When we issued our Manitoba unit cost guidance for 2022, we assumed an approximately 5% increase in consumables, which is why we are tracking in line with our projections, albeit at the low end. So triple seven was a lower cost mine. So the combined unit operating costs will increase in the second half as a result of removing triple seven from the.
Calculation also were seeing continued increases in the prices of materials and consumables such as fuel reagents grinding media and contractor costs. So that's why we say that we will sort of we expect to be at the higher end of the year of guidance at the in the second half.
And.
Should we expect I know I know youre expecting to see the full closure.
Yes.
Ali.
Portfolio.
Putting on hold the triple seven in September should we expect any cost associated with that on a onetime basis.
Yes, so Jackie we disclosed an additional $25 million of costs expected. This year, starting in the second quarter relating to one time cost for closure of the Triple seven mine and the zinc plant as well as to transition at the <unk> mill and tailings facility to care and maintenance. We expect the majority of these costs will be incurred in the second half of the year.
Okay.
And most of that I guess would be in the third quarter or is it sort of evenly split.
Most of it will be in the third quarter.
Okay.
In terms of.
Arizona, if I could just maybe ask some permitting I know earlier this year.
Okay.
<unk>.
The Appeals court made a decision which didn't necessarily go in your favor on Rosemont.
Is there a strategy to two.
<unk> attempt to re permit rosemont at this point or how does that fit in with the.
The plans for copper world.
There is rosemont sort of on hold until copper world.
Is that okay.
Yes.
I guess I agree that you can give you a very long answer a fairly short answer im going to give you a very short answer and then I'm going to ask Andre.
Andre could provide a little bit of color.
But in essence, what we've done is <unk>.
Rosemont as it was previously configured has now been included into copper world.
And we've renamed it the east the east pit.
What we've done is the private land portion of Rosemont is included in phase one of Copperweld and the federal land portion of Rosemont is included in phase two.
So we will not be looking to re permit rosemont as such but we'll be.
Looking to sort of re permit phase II of the.
Copperweld complex.
Andre any fertilize that you might have.
Ofer.
Thank you Kevin.
Okay.
Okay.
Okay.
The.
The original goal.
Applications are not going to be resubmitted youre just.
Going ahead, but with the.
Copper world.
Okay No that's helpful.
That's it for me thank you.
Thanks Jackie.
Our next question comes from Ralph <unk> of eight capital. Please go ahead.
Good morning, Thanks for taking my questions Peter I wanted to get a little bit more color on the path forward at <unk>.
Marie Arena in Copa lethal.
Once the community engagement agreements are in place the drill permits happen commensurately.
And just in the context of the $25 million, that's being spent in 2022.
You have sort of early indications on how much you'll be spending on exploration in Peru in terms of.
Perhaps meters drilled or what the drill program may look like once those permitting and engagement agreements are in place.
Yeah. Thanks, Thanks, Ralph.
It's really hard to say exactly how things will.
We'll turn out so we expect to conclude an agreement with the community with Chicago very very shortly.
And once we have concluded that agreement with Parker of course, we will start surface investigations immediately.
The question, specifically with respect to drilling is one that needs we need to contemplate a little bit further and we will have much more detail available from that once we've completed the agreements but at this point, it's very difficult for me to provide you with any specific guidance.
Okay, that's fair.
Let me switch to $19, one and we're still quite a ways from the March 2023 reserve and resource update but just wondering if the copper gold feeder zones are you going to be able to get that into say an inferred are measured and indicated category by the time. The next reserve update comes.
Andre.
Ill ask Andre to respond to that but I.
I don't think so Ralph I don't think Thats.
901 still is in the mine plan for 2026.
But more than that I don't have much more information at this point.
Understood. Thank you.
Our next question comes from Rs <unk> with Scotiabank. Please go ahead.
Yeah.
Hi, good morning nice.
Nice to see the positive free cash flow generation here in Q2.
Wondering given the lower commodity price environment.
You're at all tempted to bring down your expected Capex investments this year and next year and whether it is some flexibility there to try to improve free cash flow generation.
Good morning, and thanks for that.
Extremely conscious of.
The current macro environment and the evolution of profit price. So we've looked really really hard.
At all of our spending and basically we are truncating discretionary spend base. So yes. We will we will decrease was fairly significantly our cash spend over the course of the remaining close to the year. We think it's a good thing to do in any case in this uncertain environment.
But we're not going to do so in a manner that compromise the future ahead of us, but we will be reducing our stake.
Discretionary cost for sure.
Okay.
It's early in the year, but any idea how to ballpark, what you're targeting for capex spend in 2023.
So early in the year, we're going actually spent yesterday with <unk>.
Contemplating next year's plan. So it's early in the yet for that already.
Okay.
Shifting gears to Manitoba.
Alright, Steve I don't know if you had a comment.
I would say, we're not going to frighten you don't worry.
Okay.
Just.
Also curious about Manitoba, so with triple seven closing now and kind of off the blocks like when I look at Manitoba operating costs. They have been running in the order of about $115 million to $120 million a quarter.
Where do you see that going with triple seven frontline and smelter all close like Im just wondering what kind of a rough ballpark run rate might be for operating costs now on <unk>.
Call it millions of dollar basis in Manitoba.
Sure so as Andre.
So we'll update that with the with <unk>.
Coming here with the annual reserves, we're really fine tuning the cost right now.
We're just finalizing the transition of our people and talent.
Getting getting a firm handle on all of our operating and holding costs.
Like Peter mentioned on the previous call.
<unk> question was.
While there is a little bit higher plus the triple seven and we expect to see a bit higher but we'll update that later on when we updated our reserve statement.
Next year.
So we're starting to also see a little bit of an increase it a little bit of a sort of a bump initially as we go through transfer activities in which would stabilize next year as well.
Okay. Thanks for the color.
Our next question comes from Lawson Winder of Bank of America Securities. Please go ahead.
Hi, Peter Good morning, and thank you for the update.
I wanted to ask about the copper world got Capex and.
Within the context of the.
Sulfide leaching approach that you selected which is basically.
The lowest capex option, which would be.
No no pressure.
And.
And then when I look around the industry I mean that seems to be more the exception than the rule.
And I'd like to maybe get kind of your thoughts on the sensitivity around capex, yes.
If you do end up doing one of the.
More expensive options like perhaps like.
High pressure low temperature high temperature low pressure or.
High pressure work.
And high temperature and then what the tradeoffs are there around recoveries, thanks very much.
Sure morning listening in thanks for that look.
I guess, the first comment I'd make is.
You Shouldnt get stuck on the sulfide leaching, because it's simply a plug and play option module that's available to us.
That was included in the PEO, because it's very very significant ESG potential.
It is it.
It is something that we contemplated it.
Certainly does help.
The IRR of the project.
But it also it certainly it does not support Capex. In fact, if you were to unplug. It you will reduce the capex by let's say, 4% to $500 million.
So it's something that can be added initially occurred concurrently with everything else or it could be deferred to later on.
Now to your point about whether it's atmospheric leaching, which medium of pressure leaching with something like that.
We have we included atmospheric leaching and that Pega, which remember is a very early stage scoping study.
But during the PFS, we will more closely examine the alternatives that are available to us.
I would also offer that.
That.
Sulfide leaching is not new to us we would be doing it in flint plant for a very very long time.
And many of the minds of youth sulfide leaching processes.
I would agree our medium pressure either side, Mr. Eric, but we have plenty of time ahead of us in which to study the options and to ops.
Two two.
Optimize the associates, so I, just I wouldn't get too stuck on the concept of sulfide leaching at this point as I said it is a.
Our plug and play module that we can include or not.
Okay no. Thanks for that color and just one sort of concept introduced there that I hadn't really thought it was the potential to just.
Silicon contract for the time being and how do you think about the timing of that.
I'd like selling a concentrate versus doing the concentrate leaching approach, especially vis vis a year.
ESG goals.
We could very easily do that.
It's a question of just balancing trading off the various options I think on the one hand, we can produce concentrate no problem, because we will have a traditional sulfide concentrator.
If we sell concentrate we incur the costs associated with shipping that concentrate to smelters.
We also incur or cause.
Some of the emissions associated with the transportation.
But it is certainly an option that's available to us so as I said, we could initially start producing concentrate and deferred sulfide leaching to a number of years later, if that's what we chose to do.
Okay. Thank you very much for your color on that Peter.
Yes.
You too.
Our next question comes from Greg Barnes of TD Securities. Please go ahead.
Thank you Peter I, just wanted to touch on the political situation in Peru.
It's pretty volatile.
From what Youre seeing is it having any impact on the mining industry is there any suggestions.
From the current government adapt changing royalties of mining taxes, I said nothing.
Obviously, you're back close to what's going on on the ground in Peru, maybe you have some color.
Yes, we have it's.
All quiet on the political front for us and.
I was actually in Peru up at Constancia.
In the last.
Just over a month ago.
I would say as I spent time with the workforce at the Constancia and the team in Lima politics in Peru actually didn't come up once.
So what we read a lot about it from the outside on the inside I'm sure people worry about it because there's a lot of uncertainty, but there has been no mention of changes to the fiscal regime I think that the president Castillo did.
Did not accept the resignation of his first minister last week.
This week last.
Last week.
So he is busy dealing with this is.
His own constituencies one cabinet in Congress.
I think that we will continue to see this type of volatility.
Before behavior in the political spectrum for a while but it's not affecting it is not impacting our.
Operations at all.
And I assume Castillo has other issues to worry about than raising taxes and royalties and impact in the mining industry. He has got the survival to concern yourself with I suppose I think you're probably right about that Craig.
Okay. Thank you.
Welcome.
Once again, if you have a question. Please press Star then one.
Our next question comes from Karl Blunden of Goldman Sachs. Please go ahead.
Hi, Good morning, Congrats on you reaffirm cost guidance, just given the inflation that we're seeing in the industry.
I wanted to ask a little bit more about that when you look at.
Current prices for consumables and energy those would come down a little bit or are they still running towards the high end of your range of assumptions are now at the midpoint can you just mark playing catch up with what's transpired through August of this year.
Good morning, Thanks for that.
Think that we anticipated.
Some increases earlier on in the year and we incorporated some of those increases into our guidance.
We have seen movement of fuel for example ahead of what we included in guidance and energy in Peru.
Grinding media, which is very close deal allied with the cost of.
Both steel and molybdenum.
So in Peru of course, there is the stabilization mechanism for fuel prices. So what that tends to do is it tends to delay the effect of fuel price. So as fuel prices go up they are not felt so markedly by the population, but as they come down you still start seeing the sort of the year.
The delayed effect of those increases.
I think that we still expect to see some increases of fuel cost in Peru.
While those.
Obviously less fuel dependent in Manitoba, but we have seen energy prices increase so yes in general we have seen some of those costs increase above what we allowed for in our guidance.
Very helpful.
Just looking further out.
And the growth options you have.
The volatility that we've experienced recently and pricing both on the copper side and then the energy costs is this influencing how you think about potentially hedging costs are copper prices going forward as you get into.
Our growth phase here.
Nicole.
As I mentioned in my.
In the discussion earlier on we do quotation period hedging and that is all the hedging we do we believe that our investors.
I would like full exposure to commodity prices and we offer that so that we don't hedge.
Thank you very much.
Welcome.
This concludes our question and answer session I would like to turn the conference back over to Candace Brule for any closing remarks.
Thank you operator, and thank you everyone for participating if you have any further questions. Please feel free to reach out to our Investor Relations team. Thank you you may disconnect your lines.
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Okay.
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