Q1 2023 First Quantum Minerals Ltd Earnings Call
[music].
Thank you for standing by this is the conference operator, welcome to the first quantum minerals.
First quarter 'twenty.
2022 'twenty three results conference call as a reminder, all participants are in listen only mode and the conference is being recorded after the presentation there'll be an opportunity to ask questions to join the question queue. You May Press Star then one on your telephone keypad.
Thank you operator, and thank you everyone for joining us today.
First quarter results.
During the call we will be making forward looking statements as such I encourage you to read the cautionary note that accompany this presentation, our MD&A and the related news release.
As a reminder, the presentation is available on our website and that all dollar amounts are U S dollars unless otherwise noted.
On today's call will be impact from our Chief Executive Officer with opening remarks, followed by really bad horse, our Chief operating officer, who will provide an overview of our operations.
Brian Mcwilliam, our Chief Financial Officer will review, our financial and bulk interest in all things I think that after which we will open up the line to Q&A and with that I will now turn it over to Kristin.
Yeah.
Thank you Vanessa and thank you everybody for joining us on our conference call today.
On our call today, we will discuss our first quarter results and provide an update on the business.
In terms of production 2023 did get off to a relatively slow start and was certainly lower than normal.
Rudi will provide more details on the challenges we faced during the quarter. However, thus far in April whilst it's still early days, we are back on track the temporary shutdown of Cobre, Panama was a one off event and the operation was able to reach full capacity within two days of restarting.
The rainy season in Zambia is substantially behind us.
With the pumping capacity that was increased at Sentinel across the rainy season, we already accessing high grade ore in stage, one and by mid May we expect there will be water R&M assumptions at the bottom of the pit.
Overall, despite the lower first quarter production numbers across the three main operating saw its production will improve in the second quarter and over the course of the year, particularly in the second half and we remain comfortable with the guidance provided in January .
Before we go on to the operations there were several important achievements in the quarter that I don't want to be overlooked.
I am pleased to update the market the commissioning work for the C. P 100 expansion was completed.
Seven weeks ahead of schedule.
We achieved first ore through the new facilities during the quarter and throughput benefits from ball mill six will realize within that week.
Similarly, the screening plant is achieving results ahead of plan.
Although the optimization to integrate this system into the overall plant will be ongoing over the year I'm very confident we remain on track to achieve 100 million tonnes per annum run rate by the end of this year.
In Zambia, we fed first ore through the enterprise nickel plant and we are on track for first nickel production in the second quarter of this year.
This operation along without writing Salt mine in Australia will place first quantum is one of the top nickel producers in the world.
Which complements our position as a leading copper producer and further increases our exposure to energy transition metals.
Yeah.
I'm also pleased that during the quarter, we signed a new partnership with Rio Tinto to move forward. The Mcgraw a project one of the world's largest undeveloped copper ore bodies.
Adding this major project to our portfolio as the operator will give first quantum one of the leading copper growth profiles in the industry.
We look forward to working with Rio Tinto on this exciting development and also potentially on future base metal opportunities and sharing them Knowhow and technical knowledge.
Yeah.
We also formed a technology partnership with Hitachi construction machinery for the development of attaches first battery mining trucks, which we expect to be deployed at the Constancia mine by December this year.
As many of you are aware, we have made a commitment to significantly expand the trolley assist networks at our mines over the coming years.
We're now trucks are connected to trolley assistant powered by electricity, our diesel consumption has reduced by up to 90%.
Reduces costs and emissions and at the same time delivers operational efficiency benefits.
This initiative with the test she represents an important milestone towards the future commercialization of battery technology and the ongoing decarbonization of our mining operations.
We look forward to sharing similar initiatives with you at our virtual ESG diet on the 13th of June .
Last but not least the cobre Panama after many years of negotiations and agreement with the government of Panama was reached in March in my meeting with the president while acknowledging that the negotiations with both rigorous and 10 intense we both agreed that the outcome in terms are mutually beneficial to both parties.
And provide clarity and stability to cobre, Panama, all stakeholders and the people of Panama for the next 20 to 40 years.
It has been pleasing to see the collaborative efforts of the Cobre, Panama team and the government's team working together since that announcement.
And with that I will hand, it over to Rudy to review the operations.
Yeah.
Yeah.
Thank you Justin.
Total copper production for first quarter was approximately 339000 tons.
As each of our three largest operations had negative production impact during the period.
Copper production totaled 65000 tons in the first quarter at Cobre Panama.
A decrease of 24000 tons from quarter four last year as production was interrupted for 15 days as a result of the export restrictions imposed by the Mexican poultry Turkey.
During this temporary suspension maintenance work that was planned for later in the year.
Well, it's moved to this period and following the resumption of exports production at Cobre, Panama returned to normal and achieved full throughput rates with them Dave.
That's just highlighted we were also able to restart with much of the CP one under the expansion project coming online and already vulnerable six enterprises were upgrades all being felt in terms of added production capacity.
A couple of C. One cash costs at Cobre Panama.
I think the other 65, a pound Tuesday and tie it to the previous quarter, mainly attributable to lower production levels.
Atkins Hanchey production continued to be impacted by mining from narrow vein areas.
Secondly in your mind in the 911 area.
This area is at low elevation with bank debt.
And as such provides limited flexibility for adjusting our selective high grade mine methodology when loan in their lives planes aren't counted.
This means that during the call we did have a higher than expected the reliance on using stockpiles to augment plant feed.
Compared to the fourth quarter. It was also the seasonal impact of the rainy season.
All such consensus copper production in the first quarter.
It was 29000 tonnes, approximately 9000 tons lower than the fourth quarter, while Q1 cash cost of $2 88 per pound.
Trading trends higher than quarter four.
Due to the lower production.
The impact of rainy season was more intense at Sentinel.
The area around the operation receiving the highest rainfall in 25 years.
This resulted in a wheelchair accumulation that parts of the book.
And challenging road conditions, both of which restricted access to sit in mining area isn't it.
And I am grateful.
As a result, the main tangibles re sequenced in first quarter a couple of production at Sentinel totaled only 36000 tons.
Low grade parts of the pet to a month.
The lower volumes impacted she wanted cash costs.
When she goes to $2 70 for the quarter.
Despite the challenges encountered for the start of the year.
We are maintaining our production guidance for each of the operations to which Justin will provide more detail at the end of the call.
With that I will hand, the call over to Ryan.
He is the financials.
Thank you Rudy.
Starting with the market copper price rise, 11% for the first quarter and a lot of data out of China continues to create volatility.
Global inventories remained very light.
Despite the near term uncertainty the impending medium term structural deficits in the copper market continues to be a focus as evidenced by recent M&A activity in the sector.
Quantum remains very well positioned.
Yes.
That's one of the few large copper focused mining companies.
During the first quarter total revenue decreased 15% driven by a reduction in copper sales of 49000 tons.
This decline was a direct result of the lower production levels, which really described.
As can be seen on the waterfall on slide 16, copper cone cash costs of $2.24 per pound were 20% higher than the previous quarter.
This increase in costs on a unit basis was driven by the lower production in the quarter.
The slide also highlight that there was relief from inflationary pressures as market prices for fuel sulfur and freight continue to ease.
As such we remain confident in our cost guidance for the year.
Slide 18 shows that as a result of the lower revenues Q1, EBITDA decreased to $518 million net earnings decreased to $75 million and adjusted earnings per share reduced to 11.
Moving onto slide 19 in our balance sheet.
Debt reduction continues to be a priority.
Let's keep that in the second quarter of 2020, the company had decreased net debt by $2 billion and we continue to target an additional $1 billion in debt reduction in the medium term.
We've also been clear that in order to reduce financial risk in the future, we'll be open to partnerships in large projects in order to share the capital burden.
Our new 55%, 45% partnership with Rio Tinto Laconia is an example of this approach and we will continue to explore similar structures going forward.
Through the quarter, we redeemed $850 million of senior notes due in 2020 full which now means we have no bonds due until 2025.
Net debt marginally increased from the previous quarter to $5 $8 billion due to the timing of working capital cash flows and higher capital expenditure in CAD during the shutdown at Cobre Panama.
This capex was related to the reprise authorization of waste stripping in major maintenance, which Rudy mentioned.
Net debt has benefited from the agreement we reached with the government of Zambia last year for repayment of the outstanding B a T based on offsets against income tax receivables and royalties.
This agreement continues to operate effectively and as a result, we have seen a steady decrease in the overall VA T receivable position over the last few quarters.
During the first quarter, we will launch in all states in refunds of $66 million.
And that brings the finance section two and then I'll hand, the call back to Kristen.
Thank you Ron.
Before I move on to the progress of a brownfield projects I would like to take this opportunity to discuss our guidance for the year.
Despite the slow start we remain comfortable with the guidance range as provided in January to provide the backdrop 2022 was a difficult year and when we approach to our guidance for 2023. It was through that lens that difficult is the new normal.
Seeing the start of this year. It was prudent that we took this approach.
Cobre, Panama, while we had the 15 day stoppage. We also budgeted for six months ramp up of the C. P 100 expansion facilities, particularly the screening plant.
The expansion facilities are operating at or above expectations and have been handed over from the in house projects team to the Cobre Panama operations team.
And I would like to thank both those teams for the seamless transition.
The expansion is ramping up well and we remain on schedule to exit the year at the targeted 100 million tonnes per annum.
At Consensually, we've made additional steps to address narrowed by and areas such as those as we encountered in the main living area in the first quarter.
This includes drilling delineation beyond just a normal grade control holes with an extensive step hole drilling.
Areas associated with find mineralization.
Over the last five months, we have built up capacity to now update our mine planning on a weekly basis, which we expect will allow for better planning going forward based on the most up to date information.
Additionally, if it's if they made on opening up mining areas at high elevations, such as mine 15 and mine 17.
Which has historically provided high grades.
Although they will continue to be some risk associated with consent cheese production. The adjusted mine plan will reduce reliance on find areas and lower grade stockpiles and so at this stage, we remain comfortable with the guidance for the year.
Moving on to Trident and as noted by Rudy rainfall was unusually high over the rainy season.
With Sentinel experiencing high rainfall and consumption some of its other neighboring minds.
Well if the original mine plan called for more balanced production throughout the year water in the bottom of the pit restricted access to hard ride signs, particularly at particularly in phase one of the pit throughout the first quarter.
As a consequence the mine plan, that's been rescheduled and even if total volumes remain substantially the same we will now dispatch.
This high grade zone in the areas across the remaining three quarters of the year.
While still early in the quarter I pulled the already seen an improvement in this regard and production is expected to continue to improve over the course of the year, albeit mostly weighted to the second half.
Onto our brownfield projects at Cobre, Panama during the quarter. We started construction of the molybdenum plant. This project is progressing well with completion of construction and startup commissioning expected by the end of the year first molybdenum production is expected in early 2024.
It is three long lead items remain on track for delivery commencing in the second half of this year.
Overall project procurement is approximately 25% committed and we continue to expect first production in 2025.
At enterprise, despite a challenging rainy season as I noted earlier, we achieve first ore through the plant in the first quarter and expect first nickel production in the second quarter and a ramp up towards full production next year 2024.
At Las Cruces, the remaining water concession license was granted in March and all licenses impairments and now in place for the approval of the project. However approval will be dependent on market conditions and our debt reduction objectives.
In the meantime, we will continue to upgrade the resources to reserves. There is an investor tour to Las Cruces in my and we look forward to highlighting the potential of this asset.
As we approach the month of May I will be coming up to one of my first year tenure see Europe first quantum when I started this role I had full primary strategic objectives.
Firstly to work with the government of Zambia for solutions that would be conducive to further investment in the country.
This was achieved last year with the change in the royalty regime and agreements in respect of the I T refunds and the ease of doing business in the country.
This has allowed us to have comfort in sanctioning yesterday and enterprise projects.
Secondly to reach a new agreement with the government of Panama, which was achieved in early March.
We expect that the refresh contract will be presented before the National Assembly and the legislators to Tim that commences on the first of July .
Thirdly to deliver on brownfield projects and in this regard it's been pleasing to see C. P 100 cross the finish line with enterprise not far behind.
And lastly to improve the balance sheet and despite the macro challenges in inflation environment over the past year. We have made progress in debt reduction will remain a focus.
Before I open up the lines for Q&A I also wanted to mention that we have a video of the C. P 100 expansion facilities on our website and I encourage everybody to watch it certainly demonstrates the in house capabilities of first quantum and the remarkable accomplishments of our teams.
The market frequently discusses the need for more copper to achieve the global transition goals to cleaner energy as well as the challenges of bringing on new supply due to a lack of shovel ready projects and new discoveries.
However, it is often overlooked at the human capabilities to build new projects will also be a challenge to bringing on new supply.
For this reason and with our confidence in the strengthening long term prospects for copper I'm excited about first quantum future as I firmly believe that we are uniquely positioned as a copper focused producer.
Finally, with the Optionality now Greenfield projects, but also in the in house capabilities of our teams to deliver these projects.
I do hope you enjoy the video.
Thank you and we will now be happy to take questions.
Yeah.
Yeah.
We will now begin the question and answer session.
Analysts are permitted to ask one question and one follow up question and you're welcome to rejoin the question queue. If they have more to join the question queue. You May Press Star then one on your telephone keypad, you'll hear a tone acknowledging your request if youre using a speakerphone. Please pick up your handset before pressing.
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To withdraw your question. Please press Star then two.
The first question comes from Emily Yang from Goldman Sachs. Please go ahead.
Okay.
Yeah.
My first is around the greenfield growth that you've outlined them you know you've got Taco Taco like you're now logrono and in the portfolio. How do we how should we think about the sequencing of those greenfield projects and how should they sit among sequencing as a brownfield expansions you've got currently.
And how does that compare to the comment that you make around the focus on inorganic growth and potentially pushing out of the JV structures as well similar to the crop like Ron Your acquisition.
Hi, Amit Thanks for the question Yeah. So we're very excited to have la growing onboard we as I said, it's one of the largest undeveloped copper deposits in the world, but and sent me will require a lot of effort and so on to get up to speed Rio Tinto has done a fantastic job there in terms of preparing a.
Platform and we believe we have the capabilities to now take it forward, but in terms of sequencing.
In terms of the Greenfield projects at this stage, Argentina and the Tech attack a project would be ahead of that just in terms of the knowledge that we already have around it and the processes for for permitting and then the main question now which is on the investment climate in Argentina. So at this stage, we have bet head the groundhog.
It will take some time in terms of at least a couple of years of studies into the right approach to tackle the project and then would be sequenced.
In that order after Tucker Tucker and here at this stage, although we are making progress with the community we would hold that after the gras in front of that yes. We do continue to work on these brownfield developments certainly S. Three fits neatly in in terms of delivery by 2025 and our own.
Going work on some of the other opportunities that we have in the business.
For example, last Crucis, we will schedule accordingly, and to see whether it can fit in and whether it fits.
With the balance sheet and the debt reduction profile of the business.
Maybe just to answer than the build interest in his comments on the second half of your question around focus on inorganic right have to clarify that the allusion to further joint venture projects such as the ground. You may also be within our portfolio. So as we look at those Greenfield projects. It's Tristan as mentioned I think given the focus on the balance sheet, we're very happy to work with.
Going forward either outside of our portfolio like we've now done with lasagna or within our portfolio.
Okay that makes sense. Thanks, Ryan My second question just around Sentinel won wanting to follow up on the comments around the de watering there at the stage one pit.
It seems like you've made some access to those high grades just yet but should we expect that to come more meaningfully in the latter part of the second quarter or how should we think about that access to the higher grades.
Thanks, Emily Yes, a nice surprises the highest grades in the mine or at the bottom of the pit that's why we mind that area first.
When we do get these excessive rainy periods. Those are the areas that are challenged the most and so we didn't have access you know we had a blended approach obviously went in the mine plan, we try and smooth that across the year and so we've had restricted access and so in the first quarter, we've been taking the lower grades that otherwise would've been.
Blended across the year, so now as we empty water and we as I said, we expect to have.
All the water out down to some small I mean, my that high grades will come through and be sequenced across the three remaining quarters. So I think it will be more weighted to the second half of the year.
Sort of trending up.
70000 tons or so per quarter and trending up and and certainly the initial in April we've already been able to access some of those high grade slowed down and that should continue to improve.
Okay.
The next question comes from Jackie Lasky from BMO capital markets. Please go ahead.
Thanks, very much and I did enjoyed that video on C. P 100, or so thanks very much for sharing that.
I, just I guess I wanted to follow up on the call I'm interested in that you made in the opening remarks, you said that you've got an investor tour going too much cruises in may which.
Instead of a surprise because we haven't been hearing much from let's Christmas and I'm, assuming that's just.
Sure.
Convenient timing with with an upcoming conference, but can you maybe talk about what you're planning to show showcased their I know you've recently received the licenses and permits you need but it sounds like there's still a ways away from making that decision. So can you talk a little bit about what your plan.
I know you showcased so I'm not sure.
Yeah. Thanks Jackie.
Las Cruces, Yeah, we are not planning to sanction that decision and certainly the opportunity to provide a tool there was I coinciding with the conference in Barcelona, and that works very well, but we will be showcasing in particular, the technology development there that the in house team of first quantum is re.
Really to leave it on which is the poly metallic refinery technology, and we think can unlock a lot in the future in the pyrite belt of Portugal, and Spain are but all of that is conditional on on the project on a standalone basis, making good sense and that's what we continue to work through and we will be.
Explaining the underground mining methodology, our approach to the watering man.
And the good relationship that we have with regulatory authorities and the government there and the need that Europe continues to express intent of increasing its own domestic production of our renewable energy metals such as copper.
So we will be showcasing that but and it's really to take the opportunity around the Barcelona conference.
Perfect. Thank you very much and then maybe following up on me.
Assessing theme.
He talks about look around you and just to follow up on Emily's question maybe.
We've heard in the past this is a high arsenic ore body and and it's maybe been a bit of a challenge from that perspective to date can you talk about how you see.
Are there opportunities to process that ore body and his technology evolved in a way that this makes more sense now or will make more sense in the next few years to process the ore or is there more work that needs to be done on that.
Yeah.
Thanks, Jackie Yeah, we think Rio have done a fantastic job there in terms of understanding that but there's some more work to be done in terms of delineation and in particular on the zones, where I'll sneak them comes into play and John Gregory you might just come in a little bit further on how we see the mine planning evolving.
Over time, but we at this stage, we wouldn't be deploying any nonconventional processing technology. We just we but we do believe that there's an approach we can take on the mining side.
To be able to overcome that we've had that before at Goldman crane and being able to cope with that high arsenic, but John you might explain to move it for them.
Oh, yeah. Thanks, Tristan, yes, Jackie we've had the opportunity to look at the geological database and some preliminary aspects of the geology and we are now embarking on a for the.
Campaign to understand the domain name, but one of the things that is clear is Austin, Texas, clearly constrained in a structural manner. So therefore Tuesday at my age and that's why we want to model it going forward.
And in doing so we will be able to optimize.
The initial mining process through conventional open pit operations with a degree of selectivity, which will not inhibit production.
And just to confirm that we are looking at conventional.
Sulphide floatation as a means of processing this material.
Oh.
The next question comes from RSV Codell from Scotiabank. Please go ahead.
I wanted to come back to the guidance for the year I mean based on what you did in Q1, you know by mind that you'd have to produce an average of 210000 tonnes of copper in every quarter for the rest of the year just to make the low end of your copper production guidance.
That seems like a stretch to me can you walk us through why.
Why do you think that's a reasonable assumption at that at this point.
Thanks, Yeah.
Yeah.
That's reasonable to say that but looking at what we have so just walking through the three main thoughts at Cobre Panama.
Bringing on the.
Ball mill, six and the process water plant upgrades have already been put in place.
We believe we can be north of 90000 tons, a quarter and that certainly the ore body and so on supports that that doesn't result in any sort of change in sequencing or reschedule link of the mine plan. We did have some lower grades in Q1 as we went into the closure and that was really just around managing.
How much concentrate we had in the shade it that Tom we didn't want to push too much true. So we actually reserve some some high grade areas over that over that period.
But no major rescheduling is required there and we're very confident in the ramp up of the C. P 100 expansion its going very well. So far there is some work to be done in terms of the screening plant and its optimization and the wider plant, but ball mill six and the process water upgrades are going very well.
So thats cobre, Panama at Sentinel.
It's really that the all the grade that we had across the years remains available to us. If it was always there. It was just at the high grades were under that water. So that just simply a rescheduling because we didnt have access it would've otherwise been blended across the year and now you know we took lower grade areas.
Necessity in the first quarter and over the next three quarters those high grades come through so the total for the year is the same and it's just that the high grades come over the next three quarters, rather than in the first quarter and concern Che.
We were conservative on the assumptions around consent. She the there is some work the challenge has really been on geology, and greater dilution and as Rudy mentioned, we were focused in the mine 11 area.
And now moving across into areas that have less of those finest structures.
And we had a high level of stockpile processing in the first quarter and we now expect to be taking more directly from plant mine feed, particularly from mine 15 and mine seven team.
And it's the proportion of those we think consents you will be at or above through around 40000 tons of copper production for the quarter.
Okay. Thank you and just as a quick follow up can you maybe give us some color on the grade at Cobre, Panama at Q1, I mean, the 0.4% is it pretty low grade that was that specific to just the operating challenges you're having with storage of concentrate are or is there something else going on.
No that was very much related to that we did take the opportunity to go and make sure that we were finishing off on final walls.
As the guys say eating out vegetables, and that sets up the mine really well for the rest of the year because we were in lower grades for the reason you mentioned because we will stop it finished.
Essentially concentrate constrained we couldnt store it anywhere.
So we went to did that did all of that background work brought forward maintenance over that period of time and now we have the opportunity to go and.
Take those some of the high grades that.
We'll put aside and so on over.
Over the course of the year remaining.
Yeah.
The next question comes from Shane Nagle from National Bank Financial. Please go ahead.
Thanks, operator, Justin.
I'm just wondering.
Outline them.
And as you can see for Tuesday at Constancia and dealing with some of that grade variability for 2023.
As you've done some of the work is there anything from the mine plan that May give you some hope or some potential upside over the next couple of years in terms of that variability or relying less on that Delaware stockpiles or is it going to just kind of be a Q1 issue going forward is where we're in the rainy season.
Yeah, Shane I think that's a reality you know its tough with consensus at the moment you know the reality is it minor living we went through the bottom of the pit with things start to pinch out and you know.
So we limited and flexibility because we at the bottom of the pit and you know the mining minute methodology. They remain selective you know that's what we'd been at consensus for 20 years, and we need to move across to the bulk mining methodology, but that relies on these three so you know next couple of years, we will be had these constrained.
So I'll have Russ on geology, and the challenge on dilution.
We've been conservative and now our estimates and guidance for that and.
And as we go back.
In the ore body to higher positions and that's minus 15 in mind 17.
The impact to be less but nonetheless, we will have that challenge once we get to a three and have that running we can very much take an average approach on large block size, putting large volume through the mill and.
And that that takes away all of this sort of selective mining that we've been doing for 20 years and moves us to a different basis, but until then we will have these challenges.
And then just on the maybe going into the cockpit Cobre, Panama can you remind us again, I mean, I believe the higher coal prices as the hedges roll off next year or in the guidance, but you can just remind me what.
What assumptions went into that in terms of the coal price and then has there been any work.
On increasing potentially the amount of power that you draw from renewable sources in country to maybe help offset some of that increase next year.
Sure Shane Ron do you want to take that question, yes, Shane solid guidance for next year and the following year assumes $150 coal price based on consensus pricing you've seen coal prices come below 200, but if we see $200 a ton coal prices at cobre, Panama that makes about a 5% increase and I'll see you.
On costs.
We would note if you see spot prices in general continue what you'll also see as a high a multi price you know, which is now spreading setting around $30 per pound more than double what we assumed in all byproducts for next year. So if we assume the same and that also has around five cents per pound benefit so call would be called stays where it is today.
You'll see our costs go up by five cents per pound relative to the guidance if Marty stays where it is today you'd see our cost go down by around five cents per pound relative to our guidance.
Yeah.
The next question comes from Lawson Winder from Bank of America Securities.
Please go ahead.
Hi, Good morning, everybody. Thank you for the update today and taking the question.
I wanted to ask about the guidance as well so I mean, it makes sense, what you're saying about the production it does look.
Like you've set out a clear plan to achieve that and I just wanted to ask kind of a similar question about the cash cost that you have now guided to I mean for example, like moving the ramps and change in the mine plan is centered adult might add some additional costs that would be curious if maybe the cash cost guidance is where there's maybe a little bit more risk I'd love your thoughts on that thank you.
Yeah.
Hi, Lawson Yeah, Brian do you want to take that question. So yeah listen if you look at slide 16 of the presentation. What it shows that versus Q4 last year. Our costs went up by 61 cents due to production <unk> production, which Tristan I really talked about.
But if you look at what the impacts of costs.
Due to changes in input cost it was actually at 23.
The lower per pound impact so while overall cost so quite up quite substantially that really was exclusively driven by the impact on production and what that's some to some extent hides is that on things like fuel things like grinding me. They are freights are diesel prices, we have seen some tailwind through this quarter as an example.
Our guidance is based on $100 per barrel oil and you've seen the oil price be it say circa $80 for most of the quarter.
Certainly.
Some benefits there that we will expect to see through the balance of the year together with the improving production that's expected.
Yeah.
Okay Fantastic and then just as sort of a second follow up question I wanted to kind of get your thoughts on the Mou with Rio Tinto and development opportunity. So you specifically mentioned assets, but I'd be curious to get your thoughts on.
Whether or not those assets could be.
Assets that you jointly acquire and then develop.
Thanks very much.
Yeah.
Yeah, Hi, Lawson so yeah, we're very excited about legal hot and the opportunity that that large project presenting our portfolio in terms of optionality and an ability to really bring on law on something.
A major mining jurisdiction really would make a significant difference to our corporate profile, but also in terms of delivery of copper that's very much needed in the market that structurally at the moment really looks like.
No big gaps opening up between supply and demand. So we as Ron mentioned you.
We were happy to take that model elsewhere, but depending on the asset and the location. So.
You know, whether that's with Rio with all those what we do see is a you know there are opportunities out there and we probably won't see us in a big a bidding war or so on but you know where we can bring our capabilities to bear will certainly look at our challenge will be to schedule those.
And to make sure that we don't overextend and don't over exert ourselves in terms of the human side of things and that is that you know.
More and more of the industry has limited ability in terms of engineering firms in terms of the supply China and so on in order to develop these assets and so getting that that ROI in terms of sequencing is is a key consideration.
Yes.
Yeah.
The next question comes from Bryce Adams from CIBC capital markets. Please go ahead.
Yeah, Hi, Thanks for taking my questions on on dewatering capacity in Zambia is that something that needs to increase every couple of years.
Larger operations.
Yeah.
Thanks, Bryce look it's a very relevant question and certainly through the rainy season.
Dramatically increased increase their pumping capacity at Sentinel, but Rudy could you just comment more of their own pumping volumes and where we're going to we certainly been upgrading those assets as we've gone along.
Yeah.
Yeah sure it's interesting on price.
In preparation for this year's with cheese, and we already introduced something capacity has it changed at all.
Compared to the previous years, but shouldn't you shouldn't expect double the mindful.
But definitely cortisol.
Oh God.
<unk> increased.
The increase of funding capacity from the beginning of this year from 65.
Maybe it will negatively cubes to a day to 82 and there's some additional pumping pipelines of funding going and again to take it up to about 85 and that should suffice.
We also had in the recent months.
Night provision to pump back contact water to the plant rather than spending a lot of cost on.
Utilization of lines, so that they can safely and within the limits of the regulations. This jumps that water.
That will just now getting back to the plant, which means that we can put.
You know we were not just thinking about pumping water from you.
From it but to our and bought a NATO green bonds full for this job. So we've created more space now as well.
So as far as the wet season is concerned.
I'm quite confident that people aren't extends assimilated.
In the upcoming winter season, the end of this year.
Okay suddenly sounds challenging.
My second question might be for you as well ready, but at a enterprise first ore to the plant in February but first production isn't expected until Q2 does that mean, the first ore in February was just to crushing and grinding.
Or have I got that wrong.
No it's pretty much written but I see opportunity we wanted the conditional.
Our crushing facility.
So those things are the modal kidney.
Long time, because they were both a digitally with Sentinel.
It was really just commissioning those things to make sure all of it outside of Hawaii.
Wait season, obviously impacted enterprise as well and wait we didn't mind as much as we wanted it to.
We deliberately took a decision to open up the ore body a lot more so that when they do get going on on the enterprise flotation circuit.
We've got the required volume more or behind it so that we can.
Get the Oh.
As quickly as possible.
Lots of additional opportunity for stripping.
Above all block.
The recently started.
Ducking T cells at the time of day.
To do the enterprise because they need it so that's going quite well not all of it behind us.
Yeah.
Yeah.
The next question comes from illness, Ms. Lewis from Morgan Stanley . Please go ahead.
Hello, Tristan and team. Thanks for taking the questions. My first question is on the corporate bond about fiscal agreement US we're still getting questions from our investors Sunday. So can you give us a bit of color on how long was the Panamanian cabinets debate it.
Can they propose any any further changes or what are the terms finalized and and indication on whether there are any residual risks or you're confident that as things stand there.
Proposed agreement goes through thank you.
Thanks goodness, yeah, certainly we were very happy through the quota to.
Resolved that in terms of contractual terms with the government of Panama room on meeting with the President was a great.
Point in time too.
About the future and going on with Cobre, Panama not only for the for the mine them for first quantum but for the community around us and for the country as a whole with with a lot more clarity.
So the process now is very clear we've been going through this public consultation period and the last public hearing was on the 24th of April Asa.
That's behind Us and we expect that to close yet very imminently.
And then yes, it will go into a cabinet.
Decision and really that surround.
The need for within the government to sign.
A very straightforward process as far as we understand and then from there. It would go into the National Assembly and as we as we sit in the in the MD&A, that's likely to be in the legislative to them in July .
And that would then be the final approval and then we go forward from that point in time in terms of any changes in the interim whether that comes back from public consultation will just have to see we wouldn't expect on S. Odds any major changes are of major consequence, but we'll see how that goes.
That's part of our consultation with the government.
Perfect. Thank you so much for that and.
The second question I mean, we do cover the major copper assets in detail, but if we can talk about array of in store for a moment I was looking at nickel Playability and continues to come down its a 73% I think in Oh.
Okay Q1, it's probably the lowest in the Asa history and since you just started to mine profitability and cash generation has been.
Probably worse than you had anticipated can you talk about any potential additional turnarounds are initiatives your considering.
Considering the odds of the mine and how youre thinking about potential downstream investment or integration to swing through the economics of the assets. Thank you.
Thanks, Jonas Yeah, certainly the nickel market as being challenging since the disruptions to the LMA in March last year, and certainly what we have seen is.
In recent times, the LMA coming back as a benchmark we are happy with the level of of nickel prices are currently stands on man, let me, but it is a combination.
Combination of the nickel price and the pie abilities.
The impact on our revenues. So boy you know pay abilities have been moving more than the nickel price I would say and certainly volatile it requires a lot of customer to customer conversation.
The LMA was less of a benchmark, but starting to improve and it has been going up and down in terms of improving that situation going forward. You know we're doing a lot of work in terms of the supply chain and will continue to do that through the course of the year, but in terms of what we can do and what we can control in the operations.
Solid work plan ahead of us and that is we'd really like to get.
The full ravensthorpe plant up and running per design and you know there's a couple of areas that we've been working on that in regards that beneficiary I shouldn't circuit, particularly from the Penny ponds and then the rejects area.
And then also in terms of bringing material in from Shoemaker Levy we've had some.
Be mining ore stockpiles and so on and that has meant that a times. We didn't have full picture on the feed and hammock how much magnesium how much are you.
The continental that that always going to the plant. So those changes to both mining but also in in the plant itself will have a big impact in terms of the cost that we're able to deliver at and that then.
The pricing in the market really impacts our profitability.
At right is full.
Yeah.
This concludes the question and answer session I would like to turn the conference back over to Justin Pascal for any closing remarks.
Thanks.
Thank you everybody for joining us today, we look forward to seeing you at our upcoming investor events in Toronto and London.
And we do hope you will join our virtual ESG event on June 13, Thank you again and have a good day.
Okay.
This concludes today's conference call you may disconnect. Your lines. Thank you for participating and have a pleasant day.
Okay.
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