Q4 2022 Nexa Resources SA Earnings Call
[music].
Okay.
Good morning, everyone and welcome to next the resources fourth quarter and full year 2022 conference call. All participants will be in a listen only mode should you need assistance. Please signal a conference specialist by pressing the star key followed by zero.
This event is being recorded and also being broadcast via webcast and may be accessed through Nexus Investor Relations Web site, where the presentation is also available.
After todays presentation, there will be an opportunity to ask questions.
To ask a question you May press Star and then one on your telephone keypad to.
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Remember that the participants of the webcast will be able to register via web website questions simply type. Your question in the box quicksand and that will be answered soon.
I would now like to turn the floor over to Mr. Roberto Perella head of Investor Relations for opening remarks.
Please go ahead.
Good day, and good afternoon, everyone and welcome to natural resources fourth quarter and full year 2022 earnings conference call.
Thanks for joining us today.
During the call you'll be discussing the company's performance ASP again, he's relieved that she yesterday.
I encourage you to follow along with these on screen presentation to the website.
Before we begin I'd like to draw your attention to slide number two as we will be making forward looking statements about our business and we just ask that you refer to the disclaimer and the conditions surrounding those statements.
It is now my pleasure to introduce our speakers joining us today easy NASA horizontal our CEO Jose Carlos that finally, our CFO .
And Leonardo Quealy, our senior Vice President of mining.
So now I'll turn the call over to Ignacio for his comments. He NASA. Please go ahead.
Yeah.
And thanks to everyone for joining us this morning.
Please let's move now to slide number three where we will begin our presentation. Let me begin by saying that despite a very challenging environment with significant volatility in commodity prices and ongoing inflationary cost pressures. We are pleased with our fourth quarter and full year operational performance.
I am closing my first year as CEO of Nick's, though and I am very proud of the important work we have done throughout 2022.
I would like to reflect on some of the key accomplishments of the year.
We deployed a sale.
Of initiatives, our new ways of working that is streamline our corporate structure and supported our strategic priorities.
We achieved our operational guidance in all matrix mining production was close to the upper range.
Metal sales were at the high end exceeding the guidance range.
Mining cash cost was in line with the guidance on the smelting cash cost was slightly below guidance.
How do you put in a rump up has continued to progress on the fourth quarter marked a would you point us first revenue.
We are also pleased to inform.
That we process zinc in concentrate from my viewpoint on at our user Florida smelter in Brazil.
The average capacity of the plant at the beginning of February is above 60% and our exploratory drilling activities. In these mine also indicated a potential increase in mineral reserves and resources.
Another important milestone here is the adjusted EBITDA achieved by our operations.
Which was $120 million in the fourth quarter and a record high of $760 million for the year cash flow generated from operations in 2022 before expansion was 285 million.
And I will also like to emphasize our strong balance sheet with a solid transportation almost $820 million on a net debt to EBITDA ratio of 1.5 types fold.
All these achievements reaffirm our commitment to disciplined capital allocation I'm positive cash flow generation.
Now moving to slide number four.
In the slide number four regarding the operating performance of the mining segment, you can see that zinc production in the fourth quarter decreased to 75000 tonnes down 8% year over year and 2% quarter over quarter.
This decrease was mainly explained by the consolidated lowered sink head grade in our minds.
In 2022.
Production totaled 296000 tons.
7% lower that in 2021 due to lower ore throughput in Cerro Lindo that it was impacted by Covid at the beginning of the year and also lower throughput in our by Sunday mine impacted by heavy rainfall levels also at the beginning of the year.
In relation to cash cost mining cash cost in the fourth quarter of 'twenty to decrease to 20 cents per pound compared to 25 cents per pound in the fourth quarter of 'twenty one.
<unk> 57 cents per pound in the third quarter of 'twenty two.
In both cases, the decrease is mainly explained by higher byproduct contribution.
For 2022 cash cost achieved guidance, but increased to 28 cents per pound compared to the 21 cents per pound in 2021 and this was mainly driven by lower zinc volumes on higher disease.
Which were partially offset by higher byproduct grades.
Now moving to slide number five.
In slide number five regarding the operating performance of the smelting segment metal sales totaled 167000 tons in the fourth quarter.
2022 up 6% from the fourth quarter of 'twenty, one and up 3% from the third quarter of 'twenty two.
This increase was mainly driven by higher production volumes and solid demand in our markets.
In 2022 metal sales totaled 616000 tons down 4% compared to 2021.
With respect to cash costs in the fourth quarter of 'twenty, two smelting cash cost decreased to $1.20 per pound compared to the $1.28 per pound in the fourth quarter of 'twenty one.
This decrease was mainly driven by <unk>.
Lower Ele me prices higher Tcs and higher byproduct contribution.
When we compare the fourth quarter of 'twenty, two with a third quarter of 'twenty two gotcha.
Cash cost decreased by 16 cents per pound due to lower prices.
The full year cash cost in 2022 was $1.34 per pound compared to the $1 13 censored bound in 2020 one.
This increase was due to higher alumina prices, which affected our raw material costs.
Higher operating costs explained by inflation and negative FX in Brazil.
I know on these two factors were partially offset by higher byproduct contribution.
For 2022 cash cost was below our annual guidance.
One point to $37 per pound.
Now please let's move to slide number six ramp.
The ramp up activities are there, yeah, but I mean I probably seen on we have continued to focus on increasing the plant throughput rates, increasing asset reliability and improving concentrate grades.
The meeting capacity utilization reached 53% in December .
Of 2022 compared to 32% at the end of the third quarter of the same year.
At the end of December there were approximately 600000 tonnes of ore available in stockpiles, which will help with the ramp up activities.
Underground activities continue to focus on developing and preparing new areas for mining operations.
In March 2023 you should see an increase in reserves and resources, where we will publish our new inventory.
In relation to Capex during the last quarter of 2022 we invested $6 million in any point out totaling $66 million in capex in 2022 for a cumulative capex of $632 million since the beginning of the project.
It is worth mentioning that in 2022, FX had a negative impact of $5 $5 million.
Now moving to the Nexus light.
In the slide number seven we are pleased to inform you that at a deep water. We have started to sell concentrates within market. The specifications and we achieved our first revenue at the end of the fourth quarter of 'twenty two.
With an increase in sales plan for the first quarter of 'twenty three.
In addition, sinking concentrates from my viewpoint I has been processed at our user Ford I smelter in Brazil.
The capacity utilization rate at the beginning of February you saw about 60% and we expect to achieve full capacity in the second half of 2023.
Now moving to slide number eight.
In 2022, we executed over 115000 meters of exploratory drilling in all of our minds.
Projects and over 140000 meters in operational infill drilling.
At Cerro Lindo, Puka sire mineralized body continued to be extended to the south east with good results.
But Sunday the brownfield exploration focus on expanding existing mineralized zones in the northern extension of the mine.
Ah the reporter we achieve outstanding results in our brownfield program with infill drilling confirming seek on high grade mineralization, which is supporting the increase in mineral reserves and resources.
Regarding the Pasco complex that is foods are the pour we needed mine and that's okay out of the pit mine confirmed that continuity of mineralization, which has a potential to extend the life of both mines.
The drilling campaigns in our Greenfield projects, Eli duo and Namibia also presented solid results.
Now I would like to turn over the call to Jose Carlos they'll buy our CFO , who will present, our financial results Jose. Please go ahead.
Thank you Ignacio good morning, and good afternoon to everyone. I will continue on slide nine I am pleased to report solid financial results for the full year 2022.
As you can see beginning with the chart on your upper left total consolidated net revenue for the fourth quarter increased by 15% year over year due mainly to higher metal sales compared to the third quarter of 2022 net revenues increased by 11%, mainly driven by the mining sector.
Looking at the full year in 2022 consolidated net revenues reached $3 billion versus $2.6 billion in the same period last year, an increase of 16% primarily due to higher prices.
In terms of adjusted EBITDA consolidated adjusted EBITDA in the fourth quarter of 2022 was $120 million compared to 153 million in the fourth quarter of 2021, and 121 million in the third quarter of 2022.
For the full year consolidated adjusted EBITDA increased by 2% to $760 million the highest annual adjusted EBITDA ever achieved by next.
In relation to these figures it is important to mention that in December 2022 next our revised adjusted EBITDA definition aiming to provide a better understanding of its operational and financial performance.
Prior period Comparatives have also been adjusted based on the updated definition, we now move to slide 10, where I will explain our results in further detail.
In the mining segment net revenues for the fourth quarter of 2022 totaled 315 million down 3% versus the same period of last year.
This is explained mainly by higher D CS and lower Ele me base metal prices.
These negative effects were partially offset by higher copper lead and silver volumes for.
For 2022 us a whole net revenue for the mining segment totaled 1.25 billion compared to 1.16 billion a year ago, mainly due to higher sync a lemme prices and the increase in copper lead and theater at Williams.
Adjusted EBITDA in your upper right fourth quarter adjusted EBITDA for the mining segment was 78 million a reduction of 36% year over year, mainly driven by lower prices and higher D. CS.
We also started recording the sales of <unk> in our results, we still have a higher unit cost. This resulted in a negative impact of $14 million.
Compared to the third quarter of 2022, adjusted EBITDA increased by 22%, mainly driven by higher prices and higher byproduct contributions.
Switching over to the smelting segment net revenues in the fourth quarter totaled $606 million, an increase of 19% versus the fourth quarter of 2021.
This improvement is due mainly to higher sales volumes compared to third quarter of 2022 net revenues decreased 1%, mainly due to lower metal prices now.
Now for the full year 2022, net revenue for the smelting segment totaled $2 5 billion compared to $2 billion in the same period of last year, mainly due to the increase in zinc metal prices.
But we'll look at the adjusted EBITDA for the fourth quarter of 2022, we see that the smelting segment reported $46 million up 44% from the fourth quarter of 2021.
This is explained mainly by higher D CS and an increase in bipolar contribution of $19 million.
Compared to the third quarter adjusted EBITDA for the smelting segment decreased by 21% mainly explained by a noncash impact of 40 million related to the update of environmental liabilities and the related provisions in Brazil.
Finally, the smelting segment adjusted EBITDA for the full year 2022 totaled 326 media compared to $271 million a year ago. This is an increase of 20%.
Now, let's move onto slide number 11.
For 2022, starting from our $760 million of adjusted EBITDA without that equal and I expenses and investments we can see that the cash flow provided by operations before working capital changes was $806 million.
We then paid $229 million related to interest and taxes and $234 million in sustaining capex for our current operations. We also paid dividends of 75 million, including the amount distributed by our subsidiary Polaris.
Additionally, we invested $41 million in non sustaining capex in relation to a deep whatnot, we invested approximately 226 media, including Capex pre operating expenses and working capital.
It is important to mention that in 2022 we had a negative net effect of $70 million due to the early redemption of our 2023 notes, which was partially offset by a new export create facility.
Foreign exchange effects on cash and cash equivalents was a positive $16 million.
Finally, there was a working capital variation of $136 million, mainly due to higher Ele me prices on inventories and lower outstanding amounts of accounts payable.
With all the effects presented in this light 2022 free cash flow was negative in $246 million.
Now for 2023, we're confident that with the completion of a reply nice ramp up in a number of cash optimization initiatives, we will make a strong contribution to our company's free cash flow generation.
Now, let's move to slide 12.
In this slide you can see that our liquidity remains strong and that we continue to report a healthy balance sheet with an extended debt profile by the end of 2022, our current available liquidity was approximately $816 million, including our undrawn revolving credit facility of 300 meters.
It's important to mention that as of December 31, the average maturity of our total debt was 4.6 years with a 5.3% average cost of debt finally, our leverage measured by the net debt to adjusted EBITDA ratio was 1.5 times compared to 1.4 times at the end of the third quarter.
<unk> and two 1.3 times a year ago.
Now moving to slide 13 to discuss market fundamentals.
As you all know we had high volatility in base metal prices during the year due to a number of macroeconomic factors. Despite.
Despite these during 2020 to sink was one of the most resilient metals registering a price increase of 16% compared to 2021.
Although we expect the zinc prices to remain relatively high in 'twenty to 'twenty. Three we expect that prices will be lower compared to 2022 seem demand should continue to be driven by investments in the infrastructure and construction sectors.
You're already copper prices in 2022 decreased by 6% compared to 2021, partly affected by the expectation of a potential slowdown in global economy grows and of a higher supply in the short term.
Going forward electric vehicle production and renewable energy projects are the main drivers for corporate them at.
Overall, the outlook for zinc and copper in the mid to long term remains positive and is supported by solid market fundamentals.
Now moving to slide 15.
We're going to talk about the mining segment.
As we show here for 2023 zinc production at the mid range of that guidance is estimated to increase by 11% from 2022.
Mainly driven by additional production from any partner.
In general zinc production is expected to increase in all of our minds, except for Cerro Lindo due to lower head grades.
For 2024 zinc production is estimated to increase 6% with a further 2% in 2025 or 2024 in.
In 2023 copper production at the midpoint of the guidance range is forecasted to increase by 1% on average compared to 2022 also mostly driven by Eddie partner before decreasing in 2024, as we expect to access lower grade copper areas. This is in line with the mine plan.
Lead production follows assembler outward trend and is expected to increase by 10% in 2023 versus 2022 with further increases of 10% and 8% in 2024 and 2025, respectively.
Consolidated 2023 run of mine mining costs at the mid range of the guidance are estimated to increase 2% year over year, primarily driven by Basanti due to a scheduled trulia and maintenance. In addition to expected higher energy prices and inflationary pressures on cost.
In terms of cash cost, which does not include Eddie pointed out we estimate mining cash cost between 49 cents per pound at 54 cents per pound in 2023.
Compared to 28 cents per pound in 2022.
The main reasons for these are on one hand ongoing inflationary cost pressures.
And on the other other factors like higher D. Six lower byproduct credits as we assume lower base metal prices compared to 22.
Also a decreasing sync volumes from our current operations without Eddie plan.
Turning now to slide 16 to discuss three year guidance for our smelting segment.
For 2023, it is important to mention that met those sales at the midpoint of the guidance range are estimated to decrease by 4% compared to 2022.
These estimates do not assume the resale of material from third parties for.
For the forecasted periods. The smelters are expected to operate at normal levels and sales are expected to be similar to production levels.
In terms of conversion costs, we estimate smelting consolidated conversion costs to increase slightly mainly due to inflationary cost pressures and higher energy costs in Brazil.
On the other hand consolidated smelting cash costs in 2023 are expected to decrease year over year, primarily due to an estimated decrease in zinc prices and higher disease, we should be partially offset by lower byproduct credit mix.
Next before moving forward I would like to discuss in some more detail as most of you are aware, we consolidate our Polaris subsidiary in our results.
Polaris is responsible to supply energy for our operations and it has an equity interest in several power plants in Brazil, one of them being in ERCOT.
In November Entercom capital structure changed and as a result, we lost a joint control we had in the past.
Consequently, we have stopped recognizing enter counts proportional results in our numbers, we will still receive David. So this will have no impact on our final result that it will have that impact on our mining and smelting costs, which will increase in comparison to 2022.
Finally, turning over to my last slide on investing guidance for 2023 we expect capex of $310 million sustaining investments are expected to total $268 million with mining accounting for 194 meetings, including 52 million from my viewpoint and smelting accounting for <unk>.
$64 million.
In the mining segment the majority of sustaining capital expenditures are on 17 9 million or four underground mine development and 54 million for tailings storage facility.
In terms of mineral exploration in 2023, we estimate that total investment of 55 million also down compared to 2022.
Finally project evaluation investments are estimated at $55 million, mainly driven by that but if my D. S facility project of 20 million and 28 million related to corporate <unk> potential growth projects and various other projects across our business units I will now hand, the call back to Ignacio for his.
Final remarks Ignacio please.
Thank you Jose Carlos.
I would like to close this presentation by briefly reinforcing our priorities.
This year, we have been able to consistently perform and deliver strong results with operational flexibility and a rigorous discipline in costs and investments.
Nonetheless, we are aware that uncertainty of today's economic landscape is likely to extend into the entire of 2023.
Affecting the other month for our products as well as putting pressure on our costs.
And next up we will remain focused on optimizing costs opex and capex to properly navigate in the current environment.
With respect to Peru. Despite the current political instability, we believe we have strong relationships with our host communities, which will continue to support our operational objectives.
We also go into 2023 with a strong balance sheet.
We will keep delivering based on our purpose executing on our ESG a study.
And advancing the many initiatives we have underway throughout 'twenty to 'twenty three.
Finally, I would like to emphasize that we remain confident that the long term dynamics of our industry are promising as a fundamental value for zinc, although their base metals is robust.
Thank you all for attending the presentation with that we will be happy to take your questions.
Ladies and gentlemen at this time well begin the question and answer session.
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Okay.
So we have one question here from the web.
One is the commercial production of 94 and I expect it to begin.
Okay. Thank you and this is ignacio.
No.
As we said is we have a presentation at <unk>.
Nah reach out 53% capacity in December 60% capacity.
In January and more than 60% in February .
We start a transporting.
Commercial concentrate per month from my viewpoint not in January so officially a deep one is in commercial production in January .
We are expecting as we said in the call that in the second half of this year, we will be at full capacity.
Capacity.
Hum.
We can command more a dewy.
In the coming months.
Yeah.
So then the next question from the lab is from Hernan cause Lewke from Metlife.
The cost guidance for 2023 includes a 2% increase in brown, but 85% increase in cash costs is the differentiator to lower byproduct prices or are there other factors.
Yeah.
Thank you ROE out of them.
In relation to this question I would first say that obviously our focus is to you.
Control costs in all the aspects that are under our control and that is reflected in the 2% increase in the mining cost of a room, that's what we what we can control.
In terms of the mining cash cost, it's mainly related to act or our assumptions related to byproduct contributions the grades and slightly lowers a reelection zinc is not including any financial support from the from the existing mines with a focus continues to be on a controlling our costs.
The the ones that we can control the yellow ones are based on assumptions.
Yes.
Continue on from day, one what is the expected contribution through the Bath Arnie I did point out in 2023 and 124.
Yeah. So again a report as is the ramp up is going really well.
As you may know in the ramp up period.
Things move forward.
And is difficult for us to predict what's going to be the EBITDA for the rest of the year in the 'twenty to 'twenty four.
As I said as you point out will be at full capacity in the second half of this year. So one in the coming months, we can give you more guidance on that when the when the broadest of as you point out.
But today I would say, it's early to predict on EBIT for this year and the following one.
Yeah.
And everyone. We do have a question from the audio side from Jens Spiess from Morgan Stanley . Please go ahead with your question.
Hello, Thanks for taking my question.
Along those lines I just want to ask them. Why did you include <unk> in your cash cost guidance in and run of mine.
<unk> guidance for 2023, considering that you will have considerable volumes coming from that mine.
And secondly, I'm looking at your cash flow statement, yet around $18 million of accruals and impairment add backs could you maybe elaborate on what those are related.
Two and how much are curious to know how much our impairments. Thank you.
So Eddie Buena deep water is not included in the cash gross guidance because as I was saying.
The ramp up period, we are adjusting our.
Our it goes into rates or plans.
And this is a process I'll say was saying we are at 60% weight.
In the coming months is where you're going to go up. So it is very difficult to predict what's going to be the cash goes to <unk> or not.
And because he is in the ramp up in the coming months, when we stabilize the plants and.
And we reduce all the costs that were included in right now because of the ramp up we can give you more flavor on it or not and that's why we put and include that in the in the guidance.
Regarding the second question.
I'm Gonna Attorney answer Carlos to answer that question, yes.
Yes, I do.
I didn't hear you very well could you. Please repeat repeat I know you were you were referring to the cash flow rate.
Exactly to the cash flow from operations, where you reported.
Cash at back due to accruals and.
Impairments of I think it was 82 million.
Dollars just wanted to understand what that's related to and how much is actually a curls that how much is imperative.
Yeah.
From what I can.
From what I can remember that and in terms of impediments. There are a number of things mainly to two factors, there's an impairment reversal related to Cerro de Pasco based on the new scenario aid that we that we used to evaluate.
Evaluate the assets and this has to do with something that we have mentioned before related to the future on separate paths one the potential integration of what we need.
Gotcha.
And in terms of.
E impairments, a we did a write down of a highly beichuan puka E. At the end of this year, which had a net effect combined combined with the <unk> with a <unk> impairment reversal.
Related to separately.
I'm not sure if that answers your question.
Yes, I mean, you you have two lives one Seth impairments of impairment loss of long lived assets at 32.5 million I guess at least make the what you're saying.
And then there's the second line that says changes in accruals and other asset impairments, it's $84 million. So just wanted to understand.
The difference right.
Yes, et cetera, it's an impairment reversal of about 80 of about 82 million if I remember correctly.
Okay Yep.
Alright.
Thank you.
Thank you.
And once again, if you would like to ask a question you May Press Star and then one using a touch tone telephone.
Please note that you may also submit your questions via the chat on the webcast platform.
Yes.
Yeah.
Okay.
And once again, if you would like to ask a question. Please press star and one.
Okay.
Thank you so much for taking my question just a quick one from me.
Would you be interested at all in looking at M&A possibilities in Peru Dream Crazier your sink production there.
There's obviously been headlines of the new asset that will be for sale. So just curious to see where you think there. Thanks.
Thank you at 808.
Actually we are a very active.
Looking for opportunities in Zynga poker in all jurisdictions in many countries bedroom.
It always going through a difficult situation today as <unk>.
No we have a very good project all my salary for example.
So we assess the forex on the operate in mindset, there and Bud in Peru to a as you know we have to be cautious about the country.
And given that our concentration we haven't spent a lot of capex.
Capex in Ghana, and Oracle's integration today to make sure that that.
<unk> ramp up continues to progress very well.
We are concentrating our efforts today in <unk>.
And making sure that this happens and also making sure that we can increase the the production, especially in our basketball business.
So today, even if we are active looking for opportunities today, we are cautious about.
Alright, thank you.
Well continue the questions from the web we had he had one victim he now hi.
Hi, Nashville, Thanks, Daniel Burke anytime congratulations on good results I have two questions. The first one would be that 20 point inviting the guidance for 2022 we're not at EBITDA and compared to the technical report had been impression that metal volumes in the new guidance for 2022.
995 below their potential and also below the last guidance are you being more conservative people aren't there was something significant changing in mine exploration Bryan if you are being more conservative wattenberg.
If there are changes in the mine exploration brand.
Nathan will ramp up with landfill are being treated are related to lower grades.
Yeah.
Yeah, No I would say that.
You know that we win the appeal of ramp up.
We always.
We are always facing with some broad islands. So far we don't have any but I'll close and I'll say it was a nice progress in it.
OSB gaining full production towards the annual.
During the second half of this year, however, we have to be concerned about it.
In our projections for this year, we're being conservative but again.
<unk> is advancing in a in a solid way as we informed in our earnings release, and whatnot is increasing and stifled mine.
The yandex.
Bobby.
So that we can increase our reserves.
More or less 35%, so we'd be on the potential that we see balanced one.
<unk> deposits.
We believe that in 2024.
Weekend, a potentially increase the capacity of our ore or the pro actual why now. However, this is early days on where either comply with what we see today and that's why we are trying to be conservative, but again. The point is is a going through a period that is very strong.
All it needs advancing towards a full product.
Yeah.
If I may also ask about the capex needs without 20 point M. I'd like to understand better your sustaining capex needs I noticed that the expected increase in sustaining capex in 2023.
Related to this mine could you provide marty payers on this matter and Gary.
On this line going forward.
Yeah, we.
We publish a number of $54 million in 90 point on <unk>.
Part of it is sustaining today's almost 40 and $14 million was related to some issues around the cadence. Okay. However, it's early again to say, what's going to be the sustaining capex with <unk> because today given that we are in the ramp up period, we have.
Lot of contractors were trying to make sure that the plant and the mine is ready for full production. So we have some additional costs and at each one on capex that the way our inquiry to make sure that as you point out is in full production during the second half of the year, having said that these 54 is a <unk>.
That is going up is going to be optimized in 'twenty four and I believe that during the second half of the year. We can give you more flavor around what is going to be the sustaining capex.
Or are they on a on a yearly basis going forward.
Yeah.
Next question comes from Isabella Vasconcelos from Bradesco Bank.
Thank you for all the detail questions.
Could you remind us please the PC level expected for 2023.
How has the ramp up of fatty plan have been versus initial expectations.
Has there been Margaret challenges often surprises.
And regarding capital allocation is ending copper production still with fatigue focus.
I will start with the last one.
The copper production is still a strategically important for us we said that we want to diversify more probes, Inc. We think is growing and it's growing in a solid way going forward, but we believe that our mix of copper production in our.
Total production is very important and for that we're looking for many many opportunities in different countries.
Regarding that Pcs, we normally it'll bullish disease.
What we can say is that it.
The end of last year and the beginning of this year.
The Dcs were going up before.
Because of these say bought it and they can grow actually in Europe because of the energy crisis in Europe . So mostly smelters is somewhat languirand zone of drop you would've we're not producing today energy prices are going down and today, China is sort of a.
Hey.
Open opening right now no to the wall, so that PC layers, we all know what will happen with them. So I would say that it was there were a little bit higher towards the end of the year and this year in May go down we don't know at which level do in the rest of 2023 rigor.
In the third question we repeat.
Okay.
It was up on the capital allocation.
Yes. It is.
Very close to what we expected.
I guess, some some factor that is important to Missouri and I as the rainy season.
January and February and parts of March in any point out the rainy season is very strong so sometimes it's difficult for us to to project.
Broadest Corp that is a similar to what we shop or a cheap.
We had in our plans to reach 70% in February we're close to that where more than 60%.
As I was saying, we don't see any vital flow going forward. So we are very confident that during the second half of this year, we will be at full capacity.
Okay.
Next question comes from is that from Scotiabank.
Please update us on the situation.
And if you are seeing any backed off road blockades and profit.
Yeah, Bill Peters going through a very difficult situation in the in the last two or three months. These political situation has created a lot of noise and a lot of brought this in the country.
What I can say is that a four hour operations on our with our relationships that we have with our communities.
We don't see any a broadens in production interruption in the coming months how.
Having said that a blockages in the in the main a highways in the country, who would affect production of some of the bolt on miners in Peru in our case this hasn't been the case, a only I would say.
It could be that gauge, but <unk>.
Given the context, where Doug over him and he's managing all these conflicts in given the context of what has happened in the country.
There are some blockages I would say that they shouldn't be material in the projection of our production for the 2023.
So we don't expect any material changes in that.
And as I was saying we are very close to our communities and we are trying to make sure that that is the case in the rest of 2023.
And our next question is a follow up question from Jen Spiess from Morgan Stanley . Please go ahead with your follow up.
A J. This is it possible your phone is on mute.
Oh correct, yes. Thank you.
That's just on that upon that considering that you already are our reached commercial production should we still expect.
Ramp up and non operating expenses in the first quarter or or will that drop to zero.
And be fully.
Reflected in the cost because you're already will have sales there.
And secondly.
Do you foresee any impact on your tax rate due to the provisional measure a transfer price in Brazil.
Yes, hi on the San Jose Carlos here. The first part of your question going forward. Obviously, we will monitor how the ramp up continues to continues to grow we will continue to monitor the cost.
Of the of the concentrates as we have done in the past a and we will be adjusting.
Net realizable value if needed, but we expect that the cost the unit cost will continue to go down as capacity utilization increases over time. So we will we will keep it there.
We will keep track of that.
In terms of the in terms of the mining tax.
We have no additional news we know that.
There is an impact or our operations in 2023, but that's based on the current information is not so material.
But we don't have any information on anything additional on that.
Okay. Thank you.
Okay.
We have another question from the line.
Since that Mickey Mickey hit backlog, where the morning, how you're selling the operation has been impacted by ongoing buckets in some locations.
In Peru can you. Please explain how logistics work around the area, how many hours transported and how Christina <unk>.
And how come she never enter and exit the area.
Yeah.
Hi, Jose Carlos here again no.
Luckily we have not been affected directly.
Our Cerro Lindo location.
Has not been impacted there have been some blockades in the in the highway south of where Cerro Lindo dislocated.
Transportation is takes place basically buy buy trucks that usually go go on come back by eight from the north.
So a no no impact whatsoever to Cerro Lindo right now and we continue to that that we expect that to continue we have good relationship with the communities around the operation as well.
Yes.
Another question on the land.
At Eagle.
Thank you Pat Graham what mine life do you feel comfortable with in Sakhalin.
Hey.
The life of mine of Cerro Lindo delay as you can see in the British invasion is seven years, we have been replacing a year over year Cerro Lindo in terms of reserves and as I was saying we are exploring a book a higher north Bay and whatnot in Cerro Lindo story E on.
We are having good results. So so far with this life of mine on the on the let's say the findings that we are hiring because iron ore we are.
Gulfport double with what we have however in the the plan for all of our minds.
Is that a.
Put some priorities in more infill drilling in most minds. So we can extend the life of our mines in all of them. On this is something that is reflected in the capex that we're investing almost $11 million in it related to this.
And ladies and gentlemen, with that we'll be closing today's question and answer session I would like to turn the floor back over to Ignacio for final remarks. Please go ahead.
Thank you. Thank you everyone for attending.
We look forward to release or a quarterly results in April .
We are very confident that all of our mines and smelters are running in the right direction.
And we hopefully achieve the guidance through 2023. Thank you again for participating and you need to contact US later on with some questions you can do so by a.
Reaching rollout powerful Chicago, Thank you again and have a good day.
Ladies and gentlemen that will conclude today's conference call. We thank you for attending today's presentation. You may now disconnect your lines.