Q2 2023 Hudbay Minerals Inc Earnings Call
Good morning, ladies and gentlemen, thank you for standing by.
Welcome to the Hudson Bay Minerals, Inc. Second quarter 2023 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.
This conference call is being recorded today August nine 2023 at 830, a M eastern time.
I will now turn the conference over to Candace Brule, Vice President Investor Relations. Please go ahead.
Thank you operator, good morning, and welcome to <unk> 2023 second quarter results Conference call <unk> financial results were issued yesterday and are available on our website at www Dot Hardbake dotcom, a corresponding Powerpoint presentation is available on the investor events section of our website and we incur.
Carriage you to refer to it during this call are.
Our presenter today is Peter could kill ski Hardbake, President and Chief Executive Officer accompanying Peter for the Q&A portion of the call will be Eugene Lee, Our Chief Financial Officer, and Andre <unk>, Our Chief operating officer.
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.
Now I'll pass the call over to Peter Cook healthy.
Oh.
Thank you Candice.
Excuse me and good morning, everyone.
Thank you for joining us.
In today's presentation I'll discuss our second quarter results touch.
Touch on the operating and financial performance of the business and provide insight into recent strategic initiatives and corporate achievements.
Second quarter was one of transition and expansion for might be we took many meaningful steps across the business to enhance our operating platform deliver production and cash flow growth and create opportunities for potential mine life extension.
The integration of our newly acquired Cough Mountain mine in British Columbia has transformed our organization into a premier Americas focused copper mining company with three long life mines in tier one jurisdictions steady 150000 tons per year copper production levels and a world class pipeline of organic growth.
Both projects.
The combined company makes high Bay, the third largest copper producer in Canada.
In Peru operations performed in line with our expectations as we completed the planned highest stripping period at some potential to allow us to access higher grades starting in the third quarter of 2023 and.
And we have achieved those higher grades in July with one 6 million tonnes of ore mined from pump a gunshot and impressive grades of six 3% copper and 0.31 grams per tonne of gold.
In Manitoba, we completed the implementation of the first phase of the stall recovery improvement program to deliver higher copper and gold recoveries at stall in the second half of this year.
We discovered new mineralized zones near La La and expanded our long term growth opportunities through the consolidation of highly prospective land in the snow Lake region.
We also entered into a framework for a potential exploration partnership flimflam with marubeni to explore priority targets on our mineral properties within close proximity to our idled Flynn flowing processing infrastructure.
We remain on track to meet our 2023 guidance tables as we competed many transitional activities in the second quarter that position us for strong production improved costs and higher free cash flow generation in the second half of 2023.
With our now larger and more resilient operating platform, we are well positioned to deliver diversified cash flows to prudently advance our leading organic pipeline of brownfield expansion and greenfield exploration and development opportunities across our portfolio.
Oh jumping into our second quarter results on slide four.
Solid data copper production was 22000 tons, a slight decrease compared to the first quarter as we completed the planned high stripping program at pump a country and the scheduled mill maintenance program at Constancia.
This was partially offset by a 10 day stub period of production from the newly acquired copper Mountain mines.
Consolidated gold production was 49000 ounces.
4% increase due to slightly higher gold grades and higher gold recoveries in Peru.
Holiday to zinc production was 9000 tonnes and an 11% decline due to lower throughput and zinc head grades at stall.
Consolidated copper cash costs were $1.60 per pound compared to 85 cents in the prior quarter.
This increase was mainly the result of higher mining milling and treatment and refining costs and lower copper production.
Cash costs for the first six months of the year came in above 2023 guidance ranges, but remained in line with quarterly cadence expectations.
We reaffirm our consolidated cash cost guidance as we expect cash costs to significantly decline in the second half of 2023.
Similarly, copper sustaining cash costs increased to $2.73 per pound, primarily due to the same reasons affecting cash costs.
Second quarter operating cash flow before changes in noncash working capital was $56 million and adjusted EBITDA was $81 million, both impacted by higher operating costs in Peru associated with the scheduled mill maintenance program and higher planned stripping activities at pump, a country, which offset higher revenue from.
An increase in sales volumes.
At the end of the second quarter, our liquidity included $180 million in cash and $184 million in undrawn availability under our revolving credit facilities.
Following quarter end, we drew $90 million from our credit facilities to finance the redemption of a portion of coffee mountains, Nordic bonds, which reduced the aggregate amount of the bonds outstanding to $60 million.
This also improves our ability to deleverage and repaid debt sooner than the 2026 bond maturity.
Based on the expected free cash flow generation in the second half of this year, we continue to expect to make progress on our deleveraging targets as outlined in our three P plan for sanctioning copperweld.
We are on track to deliver annual discretionary spending reduction targets for 2023 with lower growth capital and exploration expenditures compared to 2022.
As a result of our continued focus on discretionary spending reductions total capital expenditures for 2023 are expected to be approximately $15 million lower than guidance levels, representing approximately 5% of our total capex guidance for 2023.
There are no major capital expenditures expected in the second half of 2023, which together with the expected increase in production across the business will significantly improve our free cash flow generation in the second half.
With the completion of the copper Mountain acquisition on June 20th and the first shipments of copper concentrate under our ownership on July 23rd our second quarter results were not materially affected by copper mountain's operations with no revenues all corresponding cost of sales recorded during the 10 day period in the second quarter.
Yeah.
I'm moving to slide five as I mentioned earlier, our Peru operations performed in line with our expectations. This quarter Constancia produced 18000 tonnes of copper 13000 ounces of gold 420000 ounces of silver and 414 tons of molybdenum.
With a period of higher planned stripping activities in the pump a concert pitch completed in June and the achievements of significantly higher grade ore mined from public country. In July the company is on track to achieve the higher expected production in the second half of the year in line with our full year production guidance ranges.
Total ore mined increased by 41% compared to the first quarter as mining activities returned to normal after we reduced mining activities to consider fueled in response to logistical constraints caused by civil unrest in the first quarter.
All mills was 6% lower than the first quarter due to a scheduled plant maintenance shutdown.
Copper grades was slightly lower than last quarter with the continued processing of lower grade ore from stockpiles as we completed the higher planned stripping activities at pump a country in June .
Recoveries of copper in the second quarter remained at low levels as expected due to higher levels of impurities in the stockpiled ore.
Recoveries for gold and silver were higher due to higher gold grades and lower zinc content impurities in oil processed.
Second quarter combined unit operating costs were 23% higher than the first quarter, primarily due to higher costs associated with the scheduled shutdown and lower milled ore throughput.
Peru's cash costs were $2.14 per pound in the second quarter. However, cash costs are expected to decline meaningfully in the second half of 2023 and the full year cash cost is expected to remain within the 2023 guidance range.
Sustaining cash costs were $3.06 per pound higher than in the first quarter due to the same factors affecting cash costs.
Looking at slide six our Manitoba operations produced 35000 ounces of gold roughly 9000 tons of zinc 3000 tonnes of copper and 181000 ounces of silver production.
Production of copper and silver was higher than the first quarter due to higher grades and recoveries production of gold and zinc was lower due to lower recoveries and lower zinc grades partially offset by higher gold grades.
We completed a number of key initiatives aimed to continue to support higher production levels at Lalor improved metal recoveries at the mills and prioritize the mining of higher gold grade zones at Lalor in the second half of 2023 as planned.
As such full year production of all metals in Manitoba remains on track to achieve guidance ranges, however, with a slower ramp up of gold recoveries associated with stall phase one recovery improvement project in the second quarter gold production is trending towards the lower end of 2023 guidance range for Manitoba, while zinc and <unk>.
Copper production is trending towards the higher end of the production guidance ranges.
On the storm recovery improvement program. The first phase of the project was completed during the second quarter.
Commissioning of the circuits quickly achieve targeted copper and zinc concentrate grades while gold recovery improvements progress slower than planned.
Cages to optimize a surfeit are underway and we expect to achieve higher gold recoveries in the second half of 2023.
Significant progress has been made at the Lalor mine and optimizing the development drifts size.
Improving soft availability and implementing changes to achieve better stope block fragmentation, which eliminated inefficient trucking of ore to surface via the ramp later in the second quarter.
We also implemented tailings deposition improvements that all expected to maximize the Anderson facility tailings capacity and defer incremental dam construction activities to future years.
We completed planned maintenance at Lalor during the second quarter despite.
Despite this planned maintenance program all mined from Lalor increased by 11% from the prior quarter, averaging over 4500 tonnes per day.
<unk> continues to implement improvements to reduce costs and target higher production levels with a focus on equipment fleet availability and building of long haul inventory.
Grades in the second quarter were consistent with the mine plan with gold copper and silver grades, increasing by 3%, 42% and 28%, respectively and zinc grades decreasing by 5%.
The stall mill process similar levels of oil compared to the first quarter use downtime to complete the phase one recovery improvement project and the commissioning of new Jameson cells.
As a result, there was a buildup of approximately 30000 tons of stockpiled base metal or above normal levels at the end of the second quarter that will be milled during the second half of 2023.
The new Britannia mill continued to achieve consistent production, averaging approximately 1560 times per day.
There was a buildup of 15000 tons of gold ore stockpiles, which you'll be milled during the second half of 2023.
We continue to advance improvement initiatives at new Britannia, requiring minimal capital outlays with a focus on reducing reagent and grinding media consumption, while further improving overall metal recoveries and copper concentrate grades.
Combined unit operating costs in the second quarter slightly increased reflecting lower mill throughput and the surface ore stockpile buildup.
Manitoba gold cash costs were $1097 per ounce higher than the first quarter, driven by higher mining costs treatment and refining charges and lower gold production.
Gold cash costs are expected to decline in the second half of 2023 and the full year cash cost is expected to remain within the 'twenty two 'twenty three guidance range.
Bold sustaining cash costs were $1521 per ounce in the second quarter.
Now turning to slide seven.
The copper mountain integration activities are progressing in line with our expectations and over 50% of the targeted annualized corporates and tax synergies have already been achieved to date.
Moving forward, we will continue to advance our plans to stabilize the operations, including opening up the mine by adding additional mining faces and re mobilizing idled whole trucks optimizing the oil feed to the plant and implementing plant improvement initiatives will provide further plans in the technical report, including an updated mine plan.
<unk> revised mineral reserve and resource estimates and updated annual production and cost estimates for copper mountain in the fourth quarter.
Turning to slide eight in July we announced positive results from our 2023 winter drill program in Snow Lake Manitoba.
The program included the testing of a geophysical anomaly located northwest of law within 500 meters of our existing underground infrastructure.
All holes intersected an alteration zone that is known to host the lull of mineralization with certain holds intersecting several sulfide horizons with zinc.
And copper gold silver mineralization.
One of the holes intersected a high grade zone with three five meters of 3.81% copper 3.75 grams per tonne of gold and 104.5 grams per ton of silver.
The drilling program also included testing or downplaying copper gold extensions of the Lalor deposit the first drilling in the deeper zones at Lalor since the initial discovery.
This initial campaign consisted of eight widely spaced drill holes over two kilometers and all holes intersected the zone of strong alteration known to host the lull of mineralization and it showed the potential of higher grade copper gold feeders Owens.
These initial results are very encouraging indication that the rocks hosting the rich the rich copper gold mineralization, all consistent with lalor.
This quarter, we entered into agreements to significantly consolidate our land holdings in snow Lake through several transactions, increasing our holdings by more than 250% in the region.
We intend to explore these claims with the aim of finding a new anchor deposit.
To maximize and extend the life of HUD based snow Lake operations beyond 2038.
We completed the acquisition of the Cook Lake properties from Glencore in late June and as shown on slide nine calculate properties are located within 10 kilometers of the Lalor mine and have the potential to host a new discovery at depth.
The properties include the Cook Lake, North and South properties, which all within 30 kilometers of our stall and new Britannia Mills.
We'd receive data regarding approximately 60000 meters of historical drilling that was completed over 10 years ago at a fraction of law lowers current known depth.
The mineralization indicates that there is the potential for new deposits in the same favorable mineralized horizons as many known deposits in the area, including the Lalor 19, O one and chisel deposits.
Coke light properties are untested by modern deep geophysics, which was the discovery method for the Lalor mine.
In June we also announced an agreement to acquire a rock cliffs metals Corp.
Enterprise value to Hardbake NATO rock cliffs' cash is approximately $13 million.
As shown on slide 10, the acquisition would add more than 1800 square kilometers to our landholdings across the snow Lake area.
It will consolidate our ownership of the Talbot deposit and Ed prospective land adjacent to our pin two deposits. In addition to other exploration properties in the vicinity of the stall and new Britannia Mills.
Completion of the rock Cliff transaction is contingent upon court approval and rock cliff shareholder approval.
Action is expected to close in the third quarter.
Moving onto slide 11, we continue to work towards Derisking, The Copperweld project and we expect to receive at two outstanding state permits by early 2020 full in.
In May we received a favorable ruling from the U S Court of Appeals for the ninth circuit that reversed the U S fish and Wildlife Wildlife services designation of the area near Copperweld and the former Rosemont project as Jaguar critical habitat.
While this really doesn't impact the state permitting process for phase one of copperweld. It is expected to simplify the federal permitting process with phase two of the Copperweld project.
Furthermore, we are encouraged by the U S Department of Energy's recent edition of copper to the critical minerals list.
Pre feasibility activities for phase one are well advanced and a pre feasibility study is expected to be released in the third quarter of 2023.
We intend to initiate the process of establishing a minority joint venture partner prior to commencing a definitive feasibility study, which will allow the potential joint venture partner to participate in the funding of the definitive feasibility study activities in 2024 as well as in the final project design for Copperweld.
During the second quarter, we were proud to have launched our company's purpose statement, which is shown on slide 12.
Company enjoys a rich history that grounds us and a purpose that leads to a bright future our purpose.
We care about our people our communities and our planet.
Embodies how we plan to provide the metals the world needs.
Works sustainably transform lives and create better futures for communities, we are committed to finding and producing copper and other critical metals needed to support a more sustainable future, while operating responsibly minimizing the environment environmental footprint, ensuring our activities benefit the communities neuro.
Operations and delivering dependable value for our stakeholders.
I will conclude the conference call presentation on slides 13, and 14, which detail our enhanced copper production platform of three operating mines in tier one jurisdictions, providing near term production growth and free cash flow generation, along with leading organic growth.
After completing a transitional second quarter with a copper mountain mine acquisition, a successful pump a conscious stepping period and completion of the stall recovery improvement project, we are well positioned to deliver strong production growth and significant free cash flow generation in the second half of 2023.
Of note copper mountain integration and mine stabilization are progressing as planned and Constancia has already delivered higher copper and gold grades in July in line with our production and cash flow cadence as projected for 2023.
This medium term production growth and diversified free cash flow generation will enable us to pursue our longer term investment opportunities and our leading organic growth pipeline at copperweld for Constancia satellite properties as well as potential mine life extensions in snow Lake and copper mountain, which provide unparalleled copper and gold optionality for <unk>.
Vestas.
We continue to believe that copper has the best long term supply demand fundamentals with the growing demands from global decarbonization initiatives.
<unk> is uniquely positioned to benefit from the strong outlook for copper with an attractive copper production growth profile.
Hebei offers investors the highest near term free cash flow yields coupled with significant long term upside through our leading copper mineral resource space and with that with piece to take your 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, you'll hear atone acknowledging your request.
If youre using a speakerphone please pick up your handset before pressing any keys 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 Rs walks out of Scotiabank. Please go ahead.
Hi, good morning I.
I wanted to talk about the balance sheet and some of the strategic direction of the company I was surprised to see the net debt increase as much as it did a quarter over quarter about $265 million largely from a copper mountain transaction, but I'm curious given the optionality that you have a copper mountain with I guess for stabilizing that.
And then potentially growing it can you just remind us how the criteria changed at all for the development of copper World and I believe one of the previous criteria was a minimum cash balance of 600 million I'm. Just wondering if any of these metrics have changed given copper mountain is now within the portfolio.
Hi, or I should say Eugene Lee here. Good morning, no. The criteria has not changed in fact as Peter mentioned in his remarks. The addition of copper mountain enhances our ability to unlock the pipeline, including a copper world. So yes, the net debt did increase.
During the quarter, we assumed a $145 million.
The Nordic bonds with with copper mountain.
Short term are increasing and obviously there were some transaction costs related to it. So we are we were on track to meet our deleveraging target progress toward that three P plan. So that's at this this would be the high point and our net debt and our net debt to EBITDA ratio and we expect to actually make meaningful.
Progress toward.
Toward that 1.2 times leverage ratio, even this year so.
And beyond that this year, obviously, our copper mountain, we'll provide a stable platform of copper production and free cash flow through to the end of decade and that would enhance our ability to deliver a copper at world when that time comes.
Okay, but just as a follow up does this push out the potential development timeline for copper world just given it's going to take you longer to reach those debt metrics.
No.
It it does not push out our timelines for for Copperweld it.
It actually enhances our ability to do so so we expect to get to the 1.2 times net debt to EBITDA and the $600 million minimum cash them out in the timeline that we outlined and we think that's a stronger platform during the build period for copper world.
Okay, and then just shifting gears quickly Peter can you remind us when we could start to see them. So.
Some exploration results coming out of the satellite deposits near our new.
Near Constancia.
Yeah, Sidney or it's I think that's a.
I mean, I think the first comment that I would make is the process, even the pruning process in Peru.
It's fairly complex and it's difficult to put a timeline onto it. So we have completed all the technical activities that are required to submit the application.
For the exploration permit.
And we were effectively now in the hands of the government, but it could take it could take up to a year to get those to get the permits it could also take much lease.
Sorry, Peter did you say it could take up to a year to get the permits.
Let's pick up to a year to get permits that's correct.
Okay Wow, Okay. Good luck, thank you very much.
Our next question comes from Ralph proceeds of eight capital. Please go ahead.
Thanks, operator, and good morning, Peter.
I want to come back to this marubeni agreements and just wondering.
You know what allows hebei to execute its strategy with marubeni that you could not have done yourselves right and just sort of you know can you kind of show us and give us a path to kind of the strategic rationale there on why a joint venture as the best way forward for.
For this particular for this particular.
The strategy, if an agreement where they were to come through.
I don't know if you're on thanks for the question. Okay. I think a couple of things one is that I actually I my personal experience with our joint ventures has been very good and I like working with partners, who are motivated to get results. In this specific case marubeni is pretty excited about the float and flung area and memorabilia years prepare.
To fund the activities associated with the initial exploration program, so rather than us.
Dishing out cash during a period when you really are trying to increase.
Our cash balance and move towards the targets that Eugene just outlined and somebody else gets to spend the money at this point and we have very very close to languish with these guys and they would of course be potential partners for us and other initiatives.
Okay, Yeah fair.
The original agreements did outline a $10 million to $15 million investment or are up to that for exploration I'm. Just wondering is that an annual figure and could we infer anything that you know when your proportion of lives that against sort of the Manitoba $15 million of exploration that HUD based spending on a standalone basis, that's something like a 50 50.
Is sort of in the range of what you could possibly see out of this JV.
Yes, I think it's early days so the commitment that our there, indicating as a one time commitment.
And you know I guess, depending on the results, we'll take it from there.
Okay. Thanks.
Thanks, Peter that's it for me.
Welcome. Thank you.
Our next question comes from Lawson Winder of Bank of America. Please go ahead.
Thank you operator, hi, good morning, Peter Eugene.
Great. Thanks to hear from you guys I just wanted to touch base on copper mountain. So you did not mention the guidance from the prior prior owners I didn't mention that.
Before I was wondering if you could give us an.
An early look on what you're thinking around that guidance.
The production is.
Is achievable for 2023, particularly with respect to comment you made Brian .
The owners previously we're high grading.
Thanks.
And look I mean.
We expect copper mountain to perform better in the second half of the year versus the first half.
With stronger expected throughput levels at the mine may not have made the previous guidance issued by a couple of months couple of months and mining company.
I would say that we're still finalizing our detailed plans, which will be in our updated technical report in the fourth quarter of the year and we expect to provide 2023 guidance for the copper mountain mine without third quarter results.
Okay.
That's fine.
And then.
I wanted to ask about.
Balance sheet strength, and whether or not.
You've entered into some some copper.
Hedge is usable.
Additional capex in this quarter in addition to some.
From prior quarters I'm, just curious are there any other things you are sort of considering she's.
Helps conserve cash and accelerate that.
Balanced balance sheet strengthening process.
Hi, Lawson, it's Eugene here again, and the expected free cash flow in the second half of this year is very strong. So if you. If you look at our production profile, we're expecting copper production to be in the second half to be pretty much double what our what our copper production was in the first half in.
Given the margins in Peru, and in particular, the high grade and the free cash flow generation is going to be significantly backend weighted so we as I mentioned it to Aurist, though we expect the second half of this year to be a very strong and in production and free cash flow. We did do some hedges in the first quarter for that.
The second half of this year with that in mind that it was backend weighted and wanted to make sure that we protect it some of that cash flow and and those those had just still exist as a color between $3 95 and 428.
And as well as some some boards that we got that we put in for the copper Mountain mine with our with our JV partner again to ensure that that we realize that strong cash flow. So we expect to be in it.
A very and a stronger cash position by the end of the year and we expect to have meaningfully and made progress on the net debt to EBITDA ratio with the inclusion of copper mountain in the second half of the year.
And and so we're we're pretty pleased with with the sort of this at this point the starting point is as Peter mentioned. This is really didn't there's very significant inflection point in our in our production and free cash flow generation.
Okay, Great and just maybe one final question for me on copper copper World study anticipated quite soon so I mean my sense from your comments is that.
PFS will feature either an elimination of the sulphide leach or consideration for delaying the sulfide niche.
Hum.
I mean, my guess is that safety roughly $400 million to $500 million of the question is I mean is that is that accurate.
Is that kind of the scope of Capex reduction would be talking about if you can eliminate the sulfide leaching and what is your thinking on that person on.
An elimination versus deferral.
Listen I would say.
You're in general you're right.
That's certainly what we are contemplating the question that we really said that the technical work is being completed for the PFS really what be considering at this point is it.
Is oh, what sulfide leaching looks like.
In terms of timeline.
I would say that the copper.
Copies inclusion by the department of energy and their critical minerals also may influence the timing associated with when we would build.
Build a sulphide ore concentrate leaching facility.
But we haven't taken the decision that it's not fully baked yet, but you can expect it to be fully baked by the time, we released the PFS.
Andre would you add anything to that no I think okay.
Our next question comes from Greg Barnes of TD Securities. Please go ahead.
Yeah. Thank you just sticking with a couple of World noted a state permits that slipped into early 'twenty 'twenty four and when do you expect to get them from I think mid 2023, just some background behind what's going on there.
Hi, Greg Thanks for that.
If you could also it's I view a in.
Marginally positive light in a sense so.
As you know the state permits are technically driven permits and we've been working very closely with Arizona Department of environmental quality to ensure the table all the data that they need so based on several productive interactions with the a D cute.
The review process is progressing well both parties are focused on ensuring that the payments are robust and defendable, but in that respect Arizona.
<unk> asked for additional geotechnical data, which actually required us to do some additional drilling.
So the process is expected to stretch out a little bit longer, but it doesn't impact our timelines as we won't be able to be in a position to sanction the project until 2025 at the earliest in any case based on our three P plan for sanctioning copperweld, but I would say it is it's not a negative reflection.
By any stretch the imagination I would say it is more positive because of the continued.
Close collaboration with a D acute.
Thanks Peter.
And Eugene on these Nordic bonds, the copper mountain bonds. It is the plan to pay off the balance the basically 60 million in the second half of deal with the free cash flow that we'll generate 10 men.
The amount that you put onto your own credit facility would you pay that back to in the second half of the year.
Thanks for that question, yes.
We have we took on the bonds.
Part of the transaction and they had a change of control put a that was exercisable sizable within 20 days of the transaction. That's why these were classified as a current liability.
Since since that date, we've taken and $86 million of that redeem that and put that on our on our revolver, which really increases our financial flexibility to pay those off before the 2026 maturities. So this gets to our deleveraging targets and so with the free cash flow generation that we expect.
In the second half of this year, I think where we would be in a position to certainly do that well before 2026 with with respect to the remaining bonds that are that are not on our revolver. The six of the $59 million I will take the time that the call. The call price is 104 starting in October .
We will be patient with that and and redeem those at at the appropriate time, but no decision has been made on those ones. Yet I think we will deal with the the 90, that's that we've taken on the short term to be.
Sort of deleveraging.
Reduce that cash balance or reduce that debt balance.
Certainly sooner than the maturity date.
Thanks, Jim.
Our next question comes from Bryce Adams of CIBC. Please go ahead.
Hey, good morning, all thanks for the call I wanted to go back to a copper mountain Eugene you mentioned the small forward sales are there sorry, if I missed it but why would those added and given that it's only 2000 tons does the volume gun fire in the near term.
Yeah.
Yeah, it's it represents approximately.
10% of the production in the second half of the year is as originally projected.
You may recall, the copper mountain previously had callers.
I think it was 360 floors are in the color and so I'm given the production in the second half of this year with our partner there's joint decision to ensure that there was strong free cash flow generation, while we stabilize the mine so you.
It is 386, which is the average price and it's done at the 2000 tons are in equal amounts from August until the till December on a monthly basis.
Okay. So you don't expect to add any more of that.
Opportunistically, we you know we could we could look at that but you know what the plan at the moment is that you know is it just a bit of insurance again to ensure that we have stable cash flows while we stabilize the money.
Okay, and then maybe for Andre for the expansion potential at copper Mountain. Prior management had looked at 65000 tons per day that looked at other tradeoffs up to 100000 tonnes a day.
How are you guys thinking about the expansion scenarios there.
Good question. So so in the in the short term like Eugene invention will our plan is to stabilize the operation and get it to the established infrastructure I'd say, which is around 45000.
<unk> tons per day.
Well, we'll look at Theres lots of Optionality to increase production in the current permit is up to 50000 tons per day, and so we will look to.
For opportunities with improvements to do increase to that any further expansions, which which are possible.
They would have to compete for capital in our in our pipeline across the the overall business and so we're not ruling it out it at the moment, but we see a stabilizing getting it to the 45.
Potentially getting it to the target of the permit or permit limit.
As the sort of the near mid term focus for us at the time.
Okay. So it sounds like.
You know expansions above the current permit level for copper mountain would be on the other side of copperweld.
Lots of things can happen right and so so with with with the project, but it gives us all kinds of optionality within our portfolio as things change it could be accelerated or or when we.
It could be a after that but right now the main focus is just to make it a strong cash flow generator that could help.
Enhanced the three P pellet plan that Eugene and Peter mentioned in the remarks.
Okay. That's it for me thanks to everyone.
Thank you.
Our next question comes from Alex Toronto of Stifel. Please go ahead.
Hey, good morning, everyone I just my first question just to circle back on the earlier question about drilling.
Drilling exploration drilling in Peru, I, just wanted to clarify I had the permits for drilling.
Drilling at John Murray Arena.
Kevin you'd go ahead and have they been submitted now I just wanted to get some clarity on the two year timeline. So I just.
That's the first question.
Hi, Alex.
So so the short answer is the permit applications have not been submitted yet they are ready to be submitted the technical work underpinning those permit applications have been has been submitted but the.
With the we're working with the community to optimize a the timeline associated with submission of them because we want to make sure.
But that we have full community support as we move into that process and I'm not suggesting we don't have community support, but we recently had a community election and he has got a new leader in the community we want to make sure that everybody's on sides. So I would say that submission is imminent.
But it has not formally been made yet.
Okay.
Hey, great. Thank you and my second question.
On operating costs, both Peru, and Manitoba costs per ton were higher than I expected you guys noted some reasons. There. So just wondering can you just walk us through how you see cost per ton evolving over the rest of 2023, obviously expect them to come down a little bit as you guys had made some comments here, but just.
So a little bit a little bit more color on that would be appreciated. Thank you.
Sure sure it's Andre the.
The big driver in particular, Israel, Israel, Peru.
And as you recall from early on in the year. When we were on a call it a restricted operation and conserving.
Conserving fuel, we we havent, we deferred a little bit of the Papa conscious stripping and to get to the high grade where we are now.
Over the last quarter, we've had to strip very heavily at Papa concha unless at at Constancia and so substantial stripping as is generally capitalize it's much longer term, where Papa culture is not as it.
Short term in nature, and so what youre seeing is less capitalized stripping you know against our our unit cost per ton as we went into this heavy phase of no that'll that'll start winding down a bit as well on a cost per pound basis.
The metal units are going to increase drastically as as Eugene said as we go into the second half of the year, we've already seen it.
In Manitoba.
It's not quite the this the same story as we're ramping up and so we've seen an increase in production quarter over quarter from <unk>.
Waller mine and we expect that to grow the mine's been debottlenecking a number of processes. We've been successful at the operational around the elimination of hoisting Army trucking rock and the ore to surface and so that was around 600 tonnes a day before now.
With the increased tonnage that we've been producing all of that is going up the shaft and so we're seeing better benefits on that to improve over time.
Okay. That's helpful. Thank you.
Once again, if you have a question. Please press Star then one our next question comes from Jackie <unk> of BMO capital markets. Please go ahead.
Thank you very much for taking my questions I just have a few quick ones. If you don't mind. The first one if you can maybe give us some color on where you see a stripping at Papa Cochin going from here I think there's just less stripping that we thought through Q1 and Q2 kind of maybe at least took me off guard caught me.
Craig I are we expecting any more periods of major stripping in the next well I guess over the life of the pump a gotcha.
There there will be continued stripping, but but what you what you saw in the last quarter was with us catching up right. So.
When we were in fuel conservation mode.
We were not stripping at all and we were just heavily focused on using all of our fuel too to defeat the stock.
She grabbed from the stockpile to feed the mill and so this was a bit of an unusual peak.
And so it should it should stabilize.
In the coming quarters Okay.
Okay, that's great and.
And staying in Peru, maybe just another quick question I was just looking through.
I'm old notes of mine that said that the.
Collective bargaining agreement with the Union and in Constancia expires later this year I think I've got November it down is that still the case and have you guys started negotiations with the union.
Yes. So the teams are actively working with our with our employees and negotiating with also the community agreements as well and they're all on track there's there's nothing.
Unusual to note at the moment.
Okay, and maybe just one last one on.
Manitoba.
Peter mentioned at the beginning of the call then there any agreement.
In one end and the rock cliffs transaction at Snow Lake can you guys talk a little bit about where you see a true put through I guess, specifically the snow Lake now are in the future I know your plans now are to use the shaft at lalor and not their ramps but.
Do you see a opportunity for those notes to get pushed a little harder with with external feed whether it's.
Properties that I mentioned or our other properties that you guys have in your portfolio.
Or should we expect that the shaft capacity at Lalor is basically the throughput constraint for for the medium term. Thanks.
That's a good question Jack Yeah, so like the history of of Hebei and Manitoba has been mining a lot of these satellite deposits, which we just recently acquired through our work with I think we've had four very large me you know call them anchor we call the maker deposits well at main mine Triple <unk>.
Even showed in Lawler and and those are the really big ones. It but of the 28 or 29 minds that we mined in our history. The remaining rollover less than 3 million tonnes and so with the with the acquisition of of Raw Cliff quickly properties. It brings you know five or so of these.
And smaller deposits that have the potential to be supplemental feed the stall mill theres about 1000 tonnes a day of capacity at stall today.
The mayor Benny you know before I jump to the mayor of any of those that whole quickly area is really really attractive.
It's an exciting there's there's many more deposits all around the area from from 10 to the bombers onto the Cook Cook like deposit of Rainbow, one Theres mineralization everywhere in this and a range of copper zinc and gold mineralization. So it's perfect for our mills and so there's so much to explore in the snow Lake.
Gary It just makes sense like with the merit of any deal in the Flint floor area. Those properties are more focus too to the potential reactivation of our flip flop. The Flint flood mill, which is on care and maintenance and so so there's 6000 tons a day of capacity there and so so the goal is to try to put together enough in that.
The city for that that mill, that's that's not utilized today. So it remains an opportunity.
Alright, that's super helpful. Thank you very much.
Okay.
This concludes the 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 joining today. If you have any further questions. Please feel free to reach out to our Investor Relations team. Thank you.
This concludes today's conference call you may disconnect. Your lines. Thank you for participating and have a pleasant day.
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