Q3 2023 Hudbay Minerals Inc Earnings Call
During the presentation, we will conduct a question and answer session to join the question queue. You May Press Star then one on your telephone keypad should you need assistance during the conference call you May signal, an operator by pressing Star then zero I would like to remind everyone that this conference call is being recorded today November 9th at nine a M E.
Stern 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 HUD May 2023 third quarter results Conference call HUD based financial results were issued yesterday and are available on our website at www Dot Hebei dotcom.
Corresponding Powerpoint presentation is available on the Investor event section of our website and we encourage you to refer to it during this call.
Our presenter today is Peter could kill ski HUD based 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 Luzon or 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 plastic Edgar. These documents are also available on our website.
As a reminder, all amounts discussed on today's call are in U S dollars, unless otherwise noted and now I'll pass the call over to Peter could kill ski.
Thank you Candice good morning, everyone and thanks for joining us in today's presentation.
We'll be taking you through many record achievements in the third quarter touching on the operating and financial performance of the business and providing insight into recent strategic initiatives.
In the third quarter, we delivered on our plan for significantly higher production revenue and cash flow balking at an inflection point as we generate strong returns from our recent brownfield and growth investments across the business.
In Peru operations delivered on plan with anticipated higher copper production and gold production driven by the higher grades at public contract. Following a period of highest stripping activities completed in the second quarter.
This resulted in the mine's lowest quarterly cash costs on record in.
In Manitoba mill recoveries increased meaningfully compared to the prior period as we optimize the circuits at the stall mill and the new Britannia Mill we.
We saw higher gold and copper grades at the Lalor mine, which led to strong gold production and lower cash costs. During the quarter. We also successfully completed the Rockwood acquisition in September which together with the acquisition of the Cook like claims significantly expands our land holding in the snow Lake area to provide potential future feed sources for the store.
And new Britannia Mills.
And in British Columbia, Our copper Mountain mine had its first full quarter of operations under the Hebei umbrella.
Over the past few months, we've been focused on completing integration activities advancing our plans for ramping up the mining fleet and planning for mills stability and reliability improvements initiatives.
With the strong operating performance in the third quarter, we have reaffirmed our 2023 full year production and cost guidance for our Peru, and Manitoba operations. We have also updated our consolidated 2023 guidance to incorporate copper mountain's contributions since the acquisition.
As we entered this period of meaningful cash flow generation, we remained disciplined with capital spending and focused on advancing our deleveraging efforts.
We have a resilient operating platform that will allow us to prudently advance and unlock value from our leading organic pipeline of brownfield expansion in greenfield exploration and development opportunities.
The third quarter was an important milestone as it represents a step change in the diversified cash flows of the business, we nearly doubled our copper equivalent production in the third quarter compared to the second quarter as shown on slide for.
Copper represented 65% of our consolidated revenues in the quarter with a total of approximately 42000 tonnes of copper produced at 93% increase from last quarter.
Consolidated gold production was a record 101000 ounces in the quarter, representing a 107% increase from the prior quarter.
Similarly, silver and zinc production increased by 74% and 18% respectively compared to the prior quarter.
The significant increase in production of all metals was driven by meaningfully higher recoveries in Peru, and Manitoba mining of the higher copper and gold grade zones at the public Hunter deposit.
Higher gold and copper grades zones at Lalor and incremental production from copper Mountain mine.
The significant increase in production of all metals resulted in strong financial performance in the third quarter as summarized on slide five.
Consolidated cash cost for the quarter were $1.10 per pound a meaningful improvement from the second quarter. This was a result of the strong copper and gold production in Peru, and Manitoba, which more than offset the higher operating costs associated with now having three operations.
Similarly, sustaining cash cost decreased to $1.89 per pound in the quarter as the lower cash costs were only partially offset by higher levels of sustaining capital during the quarter.
Both cash cost measures are expected to continue to be strong in the fourth quarter with higher expected copper production and continued strong contributions from precious metal byproduct credits.
Consolidated all in sustaining cash costs with $2.04 per pound in the third quarter significantly lower than the second quarter.
Third quarter operating cash flow before change in noncash working capital was $182 million and after deducting sustaining capital expenditures and cash lease and community payments, we generated over $110 million in free cash flow this quarter.
The increase in cash flow was primarily the result of higher copper sales volumes in line with the higher production levels seen this quarter.
Revenue earnings and operating cash flow would have further benefited from the sale of approximately 20000 ounces of consolidated gold production that was unsold at the end of the third quarter and is expected to be sold in the fourth quarter.
Our available liquidity increased to $540 million this quarter as our cash position increased to $245 billion and we now have $294 million available under our revolving credit facilities.
Moving to slide six as I mentioned earlier, our Peru operation saw a meaningful increase in production from the first half of 2023 as we had planned.
During the third quarter, the higher grades at Pampa country resulted in 29000 tonnes of copper produced and 41000 ounces of gold produced.
In addition to the higher grades this quarter, we also benefited from higher recoveries and higher throughput at our Constancia mill.
Production levels in the fourth quarter are expected to continue to benefit from higher grades remaining on track to achieve our full year production guidance range.
Total ore mined increased by 18% in the third quarter compared to the second quarter in line with the mine plan.
Ore mined from pump a contra increased to about 6 million tonnes at an average grade of 0.53% copper and 0.3 grams per tonne of gold.
Ore milled was 9% higher this quarter because of a scheduled plant maintenance shutdown that occurred last quarter.
Milled ore grades increased 2.43% copper and points to one grams per tonne of gold as expected. These higher recoveries were in line with our metallurgical models as recoveries benefited from the completion of the recovery uplift program in the second quarter as well as higher head grades and lower contaminants.
Combined unit operating costs for the quarter were 13% lower than the second quarter due to lower milling costs and higher throughput.
Peru's cash costs, whereas a record low of 83 cents compared to $2.14 per pound in the second quarter with 61% improvement was a result of higher gold byproduct credits high copper production and lower milling costs.
This solid performance and meaningful decline in cash costs is expected to continue to benefit from strong production in the fourth quarter and we continue to expect our Peru operations to achieve the cash cost guidance range for 2023.
Sustaining cash cost in Peru were a dollar in 51 cents per pound in the third quarter, a 51% improvement from the prior quarter.
Total annual sustaining capital expenditures in Peru are expected to be $10 million lower than the original 2023 guidance levels, primarily the result of lower capitalized stripping costs.
Our Manitoba operations also saw strong production performance in the third quarter as summarized on slide seven.
Manitoba produced 56000 ounces of gold three.
<unk> 6000 tonnes of copper 10000 tons of zinc and 265000 ounces of silver.
Gold production was 59% higher than the prior quarter as a result of mining higher grade gold zones higher recoveries at the new Britannia install mills and the recovery of secondary gold product set new brittania improvements.
Improvements completed at new Britannia late in the quarter were able to recover secondary gold products and ensure a gold is reporting to dore as designed.
With the recent recovery improvements at the new Britannia install mills and higher grades from Lalor in the third quarter. The company expects to achieve full year production guidance for all metals as disclosed in our second quarter results gold production is expected to trend towards the lower end of the guidance ranges, while copper and zinc production are expected to trend to the upper <unk>.
End of the guidance ranges.
We continue to advance several key initiatives to support higher production levels reduced dilution during the mining cycle and continue to improved metal recoveries at the snow Lake operations.
At Lalor, we are enhancing the quality of oil production at minimizing dilution through improved blas designs loading procedures and effects of grade control practices.
At the Snow Lake Mills, we completed changes to optimize the circuits, resulting in increased gold copper and silver recoveries.
We are also exploring the potential to enhance the tailings deposition method at the Anderson facility with the transition from subaqueous two sub aerial tailing storage. This could provide a more efficient use of impoundment space address seasonal operational challenges and deferred capital expenditures for dam raise construction to future years.
Lola production averaged 4000 tonnes per day during the third quarter slightly lower than the prior quarter. However, we mined higher grades this quarter in all metals with gold and copper grades roughly 25% higher than the second quarter.
Stall mill processed 7% more ore in the third quarter as we drew down base metal ore stockpiles that had built up in the second quarter.
After commissioning the first phase of the stall mill recovery improvement project in the second quarter.
Third quarter was focused on optimizing circuits to achieve targeted recoveries by reducing primary grind size refining the flotation circuit balance in mass pool and reagent selection.
These proved highly effective resulting in notably higher recoveries for copper gold and silver with the stall mill achieving its targeted gold recovery levels of approximately 68% in the third quarter compared to 60% gold recovery in the second quarter.
The new Britannia mill consistently achieved elevated production, averaging 6800 tonnes per day, despite processing significantly higher copper head grades that can impact throughput due to copper flotation limitation.
We continue to advance the process debottlenecking initiatives at new Britannia as we pursue higher throughput targets to align with the increased gold production from Lalor.
Combined unit operating costs slightly decreased in the third quarter compared to the prior quarter, reflecting the higher mill throughput.
Manitoba gold cash cost was $670 per ounce, 39% lower than the second quarter due to higher gold production driven by improved grades and recoveries cashcall.
Cash costs are expected to continue to benefit from increasing gold production from higher grade stopes and throughput increases at lalor as well as continued strong recoveries as a result, we expect to achieve the 2023 guidance range for cash costs in Manitoba.
Gold sustaining cash costs were $939 per ounce a decrease from the second quarter based on the same reasons affecting cash costs.
Total annual sustaining capital expenditures in Manitoba are expected to be $15 million lower than the original 2023 guidance levels, primarily a result of lower capital development costs realized at Lalor as the team focuses on cost efficiencies.
Slide eight highlights the results from our first full quarter of owning the copper Mountain mine. We produced nine 3000 tons of copper for 6000 ounces of gold and 101000 ounces of silver during the third quarter, our efforts to stabilize the operation are underway.
Total ore mined during the third quarter was $3 8 million tons, which was in line with our expectations. We commenced a fleet production ramp up plan to capture the full value of existing idle capital equipment at the copper Mountain site. Additionally, a new electric shovel was commissioned in September which will reduce carbon intensity by displacing some of the existing.
<unk> diesel shoveled production.
The mill processed a total of $3 2 million tonnes of ore during the quarter with the mill availability, averaging 83, 5% the milled copper grades were three 6% in line with our expectations for the quarter.
Copper recoveries were 81% in the third quarter, an increase compared to 17, 9% that was previously reported by copper mountain for the full year 2022.
Mill throughput was impacted by excess of cost material, bypassing the comminution circuit and restricting flow through the tailings discharge line, causing high levels of unplanned downtime.
This issue was rectified in August and we continue to focus on increasing mill availability.
Combined unit operating operating cost in BC.
With 24, Canadian dollars and 80 cents per ton milled.
Combined unit operating cost per ton milled are expected to decrease over time as we execute the stabilization and optimization initiatives at copper mountain.
<unk> cash costs with $2 67 per pound and sustaining cash costs were $3.39 per pound in the third quarter. These cash costs have improved compared to the full year 2022 cash costs previously reported by copper mountain.
We have issued copper mountain 2023 production and cost guidance for the period since June the 20th we.
We expect to produce approximately $19 5000 tonnes of copper at average cash cost of approximately $2 65 per pound based on the midpoint of the guidance range.
The new copper mountain guidance has also been incorporated into our consolidated 2023 guidance ranges.
The production and cash cost guidance ranges for our other business units has otherwise been reaffirmed and remains unchanged.
We also expect capital expenditures of copper mountain to total approximately $35 million in 2023, including sustaining capital and capitalized stripping costs.
Since the acquisition in June we've been focused on advancing our plans to stabilize operations at copper mountain as.
As seen on slide nine we have been able to realize annual corporate synergies of $9 million and we're on track to exceed the $10 million target for corporate synergies.
We're also on track to achieve the $20 million in targeted annual operational efficiencies to be achieved over the course of three years as stated at the time of announcement.
As I mentioned, we've commenced the fleet ramp up plan and the mine, which entailed the ramp up from 14 trucks to 'twenty six trucks by the end of the year. Once complete we expect to see a more than 30% increase in tons moved in 2023 compared to 2022. We're also planning a campaign of accelerated stripping over the next.
Two to three years to enable access to higher grade ore and to mitigate the substantially reduced stripping undertaken by copper mountain over the four years prior to acquisition.
Additionally, as part of our near term stabilization plans, we will be applying mill efficiency initiatives from the Constancia mill to the copper mountain mill in an effort to continue to improve concentrate quality and copper recoveries are.
A key focus area for US is the implementation of improved maintenance management systems as part of our focus on increasing mill availability.
Further details on our stabilization plans will be provided in a new technical report, which is expected to be released in the fourth quarter, which will include an updated mine plan annual production and cost estimates that reflect our stabilization and optimization initiatives as well as updated mineral reserve and resource estimates.
As we delivered on our plan for strong production growth and free cash flow generation in the third quarter, we remained disciplined with capital allocation and deleveraging activities.
We achieved adjusted EBITDA of $191 million in the quarter, the highest quarterly level over the last five years and 135% increase from the second quarter.
As mentioned earlier, we generated over $110 million of free cash flow in the quarter a significant driver of this increase was a solid revenue generation from our diversified production base.
While copper revenues increased by 62% quarter over quarter, our gold revenue Similarly increased by 69% as a result of producing over 100000 ounces this quarter.
Copper remains our core metal of focus, but we enjoyed the diversified revenue and cash flows our gold exposure office with gold prices typically having counter cyclical benefits to copper.
This diversification is an important aspect of a prudent financial strategy that helps to ensure consistent cash flow generation and uniquely positions us versus our peers.
During the quarter, we reduced net debt to $1.13 billion.
$58 million decline in net debt together with higher levels of adjusted EBITA in the quarter improved our net debt to EBITA ratio compared to the second quarter, thereby improving our credit facility availability.
Subsequent to quarter end, we continued our deleveraging efforts with an additional $40 million repayments on our credit facilities as well as a $5 million principal repayment on the copper mountain bonds. We also recommenced the deliveries under our gold Pape prepay agreements to reduce the repayments liability.
<unk>, we've been working towards delivering annual discretionary spending reductions with lower growth capital and exploration expenditures, which were on track to achieve in 2023.
Total capital expenditures for 2023 are now expected to be approximately $30 million lower than previous guidance levels. A further reduction from the $15 million of savings announced in the second quarter.
This represents a 10% reduction in total capital expenditures.
From today's comments Hebei is well positioned at an inflection point for continued cash flow generation and we expect to continue to take prudent pages to position us to deliver our deleveraging targets.
During the third quarter, we published the results from a pre feasibility study on phase one at Copperweld, which is summarized on slide 11.
Phase one is a standalone operation requiring state and local permits only over the past 12 months. The team completed extensive technical work on phase one to produce this enhanced and Derisked phase one plan for Copperweld phase.
Phase one has a mine life of 20 years, which is four years longer than the phase one mine life that was presented in the preliminary economic assessment published in June of 2022.
The phase one pre feasibility study demonstrates attractive economics with a $1.1 billion net present value and a 19% internal rate of return using a $3 and 75% copper price.
Phase one has a simplified project design as a traditional open pit truck and shovel operation with conventional flotation to produce copper concentrate and molybdenum concentrate.
In this study the processing facilities are expanded to include a concentrate leach facility in year, five producing copper cathode and silver gold Dore.
Phase one contemplates average annual copper production of 85000 tons over the 20 year mine life at average cash costs of $1 47.
And sustaining cash costs of $1 81 per pound of copper.
Variable cutoff grade strategy allows for higher mill head grades in the first 10 years, which increases annual production to approximately 92000 tonnes of copper at average cash costs and sustaining cash costs of $1 53.
And $1 95 per pound of copper respectively.
Phase one has an anticipated initial growth cap capital expenditure of $1 $3 billion the.
The project contributes meaningful annual EBITDA with $372 million on average over the mine life and more than $400 million on average over the first 10 years at a copper price of $3.75.
With the pre feasibility study, we update to the mineral resource estimates for the project, increasing the global measured and indicated mineral resources to one 2 billion tonnes at four 2% copper grades confirming the significant upside of copperweld with an intended phase two expansion of mining activities onto federal land.
To further enhance the project economics and extend the mine life well beyond 20 years.
We expect to receive our two outstanding state permits in mid 2024.
The opportunity to sanction copperweld is not expected until 2025 based on current estimated timelines.
Moving to slide 12, we entered into a framework for a potential exploration partnership in Flint flood with Marubeni in July.
This exploration partnership would allow us to couple of our operational and exploration expertise with marubeni as balance sheet strength to test a large plane flying land package and potentially revive our dormant flimflam processing facilities.
We've discovered and operated 29 mines in high base, nearly 100 year history in Manitoba, and we have the potential to continue that success with this renewed focus on exploration and thin float.
We're also examining the potential to reprocess Flynn fund tailings were in excess of 100 million tonnes of tailings have been deposited for over 90 years, we completed confirmatory drilling in 2022, which covered about two thirds of the facility and indicated higher zinc copper and silver grades than predicted from historical mill a record.
While confirming the historical gold grade.
We are advancing metallurgical test work and evaluating metallurgical technologies.
This included the recent signing of a test working agreement with Cobalt Blue Holdings limited to assess the preset processing viability of the phone from tailings using cobalt <unk> proprietary processing technology that for Cabo copper zinc gold and silver, while converting sulphides into stable and benign sulfur.
In the Snow Lake region, we continue to compile results from ongoing infill drilling at Lalor that will be incorporated in our next annual mineral resource and reserve estimates update in March 2024.
Looking at Slide 13, we also 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 extend the life of HUD based snow Lake operations beyond 2038, one.
One of these transactions was the completion of the rock Cliff acquisition during the quarter.
This not only expands our landholdings in the snow Lake area, but it also consolidates HUD bay's ownership of the Talbot copper gold deposit this.
This transaction has the potential to further extend mine life at our snow Lake operations as well as office as additional exploration properties to provide further optionality for future feed sources for our stall and new Britannia Mills.
We completed the acquisition of the Cook Lake properties from Glencore in late June.
<unk> properties are located within 10 kilometers of the Lalor mine and have the potential to host a new discovery at depth.
We received data regarding approximately 60000 meters of historical drilling that was completed over 10 years ago at a fraction of <unk> current known depth.
The mineralization indicates that there is the potential for new deposits on the same favorable mineralized horizons as many known deposits in the area, including the Lalor 19, O one and chisel deposits.
The Coke Lake properties are untested by modern deep geophysics, which was the discovery method for the Lalor mine.
Yes.
Concluding on slide 14, we believe that copper has the best long term supply demand fundamentals in the sector as global copper mine supply will be unable to meet demand from global decarbonization initiatives.
<unk> is uniquely positioned to benefit from the strong outlook for copper with attractive copper production growth and significant long term optionality for investors through our leading organic growth pipeline.
Hebei offers meaningful copper production at first quartile cash costs, we delivered on our plan for higher copper production and lower cash cost in the third quarter and we provide the highest near term free cash flow yields versus peers.
Go diversification is part of this unique positioning while also offering contra cyclical benefits and lastly, we have significant long term upside through our leading copper growth pipeline offering the highest net asset value sensitivity to copper prices in our peer group.
And with that we are pleased 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 will hear a tone acknowledging a request to withdraw your question again prestige Star then one.
Pause for a moment as callers join the queue.
And our first question today comes from the line of Rob.
<unk> from eight capital your line is open.
Thanks, and good morning, everyone.
Peter.
Perhaps Andre I just had a question on.
Copper recoveries at copper Malkin heating, 81% in Q3, and it's been intimated that those design rates are hovering around sort of 80, 485% that is the goal.
I'm just wondering how much of that is a function of.
Expected higher copper grades or are there adjustments will still to come in the processing circuit and when perhaps we can see that 80, 485% is that sort of a first half 'twenty four phenomenon or more more allocated towards the second half.
Good morning, Ralph and thanks, very much the question I'm actually going to ask Andre to address the question for you if youll do much fuller than I will be able to share it.
Thanks for the question, it's a good one.
The recoveries have improved significantly since we've been able to integrate with the operation there is still more to go.
Most of that most of the challenges to date arent Rmi challenges the greater improvements are.
Are tied to technical and grain size issues and so.
Great now at the current throughput.
We've had to balance.
We call it green size to liberate the recoveries over the next year so into 2024, we plan on optimizing.
The higher throughput in terms of a stable throughput saw stability of the plant is key for us to achieve.
Really good recoveries up in the 85 range, that's going to happen over.
18 months or so in that range as we put in new maintenance practices, we're looking at optimizing.
Some of the reagents and and balancing feeds between the Sag mill and the ball Mills that are currently are a bit of a bottleneck.
Can hit as high as 45000 tonnes per day.
But until we get those technical solutions in place what happens is that we send to course of our feed through in our psyche loans can't keep up when we plug lines and the lake and so.
So your question if I go back to it it was around is it related to great. It I'd say that the answer is no.
So it's a combination of technical solutions that we're working on.
In the short term.
Into next year, and then the maintenance reliability initiatives that Peter mentioned in the earlier in the call.
Those will stabilize the plant and those will over the next 18 months or so and those will will get us to that level and that 85 range.
Okay.
Thanks, Andre very helpful.
Peter and perhaps Eugene or top $45 million and lower Capex guidance over the course of 2023.
How much of this is sort of deferrals and re phasing into 2024 or should we considered the bulk of these reductions through or.
Greater efficiencies optimization synergies.
I think both BTG yeah. The answer is both and it's a $30 million in.
Capital savings from the original guidance.
They are across the board actually so and some of the capital savings are in Manitoba and those are from sustaining capital and that is actually from more efficient mining and left less development. It's about a combination of both and in Peru in terms of a bit more efficiency and some deferrals and then there's the $5 million in Arizona.
That is deferral to do work that we don't need until we have the permits and the partner enhance so.
It's a combination of.
Focusing on deleveraging to allow us to invest.
In the pipeline in the most prudent way and enhance our operating cash flow platform.
Yeah very helpful. Thanks very much.
Your next question comes from the line of Jackie Principal Alaska from.
BMO capital markets. Your line is open.
Thank you very much and congratulations on a great quarter.
Let me if I can ask.
Maybe a quick one first since some headlines that one of your former employees have you moved over Soliris I was wondering if you could talk a little bit about any impact that might have on your operations.
Jackie Thanks, very much for the kind comment.
I think our industry is characterized by mobility of a high quality people and Javier.
<unk> has been with us for a long time. He is he worked on the original Constancia project. He's been instrumental in advancing our copperweld with us, but its timeframe to take on a new challenge.
You know one of the good things that happens when you get mobility of people as it creates opportunity for others in the organization to move on up and so we've got a very very strong bench strength behind Javier in the company that enables us to move other people up and along so you know, while we started to see a <unk> ago, and we expect them.
Two probably returned one of these days are in.
In the Meanwhile, we got to give some of our other younger folks some real opportunities to move on up so we don't anticipate that there'll be any impact on on the company at all.
Okay.
Thanks Peter.
Maybe another question.
Thank you Andre.
It looks like you had.
Really terrific success with the.
The recovery improvement project with Dol.
Wondering if you could talk a little bit about your thinking for any future optimization, Jeremy Friedman from snow Lake or what your plans are maybe going forward there.
Yes sure.
Thanks for that Jack here, so as Peter mentioned.
The exploration story is something that is probably one of the most exciting things I think that we're going to see in the coming years. It's really it's the first time around Lawler, where we've consolidated the land package and and so we have a unique opportunity to explore it to its full potential and so so we're really excited about that.
Possibility to either find new satellites or potentially an anchor deposit. So so that's that.
That's probably number one number number two we've really made some strong headway on the 19 O. One deposit so we put that on pause a little bit about it a year ago, the financials and the design. The plan just wasn't strong enough for us to allocate capital to it and the teams have done just an amazing job of of <unk>.
Thinking it to where we were looking at advancing some some exploration drifting into next year in drilling.
To better optimize the project and the returns on that look much stronger now that I think it will definitely come into our plan and that that will fully optimize.
Feed to stall mill at at New Brit. So new Brittania is achieving will we always hope that did and now its exceeding the throughput on a on a daily basis, we're seeing periods of upwards of 2000 tonnes per day, we're in the process of permitting at up to 2500.
But right now Rob and team are really focusing on some minor bottlenecks around around some of the pumps that are a little bit high maintenance that feed the tailing system that seem to constrain us a little bit and some other maintenance activities.
The opportunity there is for US is is to really increase the throughput at new Britannia, which makes we have a surplus of gold resource in the snow Lake area and getting the very high 90% recoveries through new bridges.
It is really really exciting and so as well if I could just a little bit what we're talking about Manitoba.
The team there in Flint flood areas had done some really good good work around Derisking that and this is our first full year, where we've we've since triple seven and the zinc plant is closed and they've come up with some really innovative ways to reduce the cost of treatment of waters in lake and we've had significant savings and.
We are working.
Well and Peter mentioned around the tailings opportunity and our plan is to turn that potential was perceived by some as a liability in the past to an asset and we're really excited about that in combination with the mayor of any exploration. So theres a lot of exciting things going on right across the board in Manitoba.
That's fantastic that's great guys. Thanks, Andre and then if I if you don't mind, if I can ask one last question.
No.
And understanding.
Copper world.
Rich.
Makes a lot of sense for the near term can you give us a bit of an update on.
Any of the project work that you might be starting.
Next year or what.
Yes.
Ben could look like next year, assuming you get your permits.
Thank you.
Yes sure sure.
Good question and so so there's some further optimization around the plans that.
Pending getting appropriate permits as Eugene mentioned previously is will be it really accelerating getting a partner and moving into feasibility so heavier and team pending the timing of those permits will be looking at building our team and in Arizona to support that those feasibility studies and advancing it to the to the <unk>.
Stages pre pre construction. So we'll be the first steps will be ramping up the team getting the right people in place to deliver those feasibility studies and that will probably be later in the year.
But the work is very much.
The work really right now is focused on supporting the permitting application process and readiness for the JV process correct.
Got it.
And your next question sorry.
If you'd like to ask a question. Please press star one on your telephone keypad and your next question comes from the line of Stefan Yano from Cormack Securities. Your line is open.
Okay, great. Thanks, very much and again, congratulations on a great quarter.
Promised just maybe a sort of a general question that might not have a simple answer, but just kind of curious obviously a lot of focus on still done deleveraging in the balance sheet health and stuff. Just wondering if you could maybe comment on sort of just your strategic sort of.
Hi, Oracle thinking.
Various opportunities, mainly how does exploration stack up against some other things like copper world and deleveraging itself in the Grand scheme of how are you.
And to spend money over the foreseeable future.
Hi, Stephen morning, and thanks for your kind words.
I think if I step back.
Right now what we're doing is all about delivery.
Exploration of course is a key component of our.
Planning for the future and like Ondrej said, we are super excited by.
Both the scale and intensity and potential of the exploration efforts.
In Manitoba.
We will continue to do some exploratory work.
Associated with the Mason project are through the rest of this year and into next year in order to bring that along but those are not big dollar numbers.
Outside of that we are razor focused on getting access to the Maria Reyna, <unk> and cover Utah properties to start exploring as soon as possible and so that's a key initiative to advance that but the spending there is more in the context of.
Associated with the regulatory regime of getting literally whats in hand, but strategically once we have those we are going to go flat out.
So exploration does.
Comprised a big part of our strategy going forward.
But as I say as I say delivery is key so it's a delivery in the context of our copper mountain stabilizing and optimizing that is a key strategic initiative for us and advancing copper world.
Two towards a sanctioning decision.
I would also say that I mean, I've always said that we have a very skilled team when it comes to efficient operations and development projects.
And I do continue to feel that we can create value both from operating and at least from a both.
Improving what we have developing our project pipeline, but also adding another operating assets to our portfolio. If indeed, we could find one and and if it's going to be accretive to our shareholders. So we continue to look for those assets.
That's all very very focused on delivery at that point, because we think that that is that's that's.
<unk> will provide us with a license for the other stuff that we want to do.
Great. That's helpful. Thanks very much.
Your next question comes from the line of gelatin Barreto from Canaccord Genuity. Your line is open.
Thanks, Good morning, Peter and team.
I wanted to start by asking about copper mountain.
There's some language in your disclosure that suggests that your estimates around reserves will be closure to the old job Jan 2019 estimate versus the September 'twenty two.
Considerably lower number.
Just wondering whats driving that is it just the removal of the expansion or is there something else that's driving that.
I'll start with a sort of a broader comment Dalton <unk> morning, and thank you for that.
The 2022 technical report that cough mountain issued was based on very optimistic assumptions on all aspects of the 2020 to life of mine plan and that's the reason why we never endorsed it.
Our acquisition process was based on an internal mine developed by mine plan that was developed by US from the information made to us available to us by copper Mountain and was more in line with the reserves and mill throughput assumptions in technical reports published by those by couple of months of prior to 2020.
So so we never absolutely never endorsed the 2022 plan and as I say with the work that we did was more aligned with their prior plans with Andrea do you want to expand on that.
I think he covered off quite well.
The teams have but.
You have used the same approach and resource modeling that we do it at all of our operations, whether it's in Peru at Constancia, where where we are we've been mining for a number of years in our models as you know reconcile very very well to our forecast and what we produce we use the same methodology at copper world in and so the team.
As a work rigorously on database validation generating models and we actually we have a model now that reconciles very very well to the mill.
The last couple of months, our new model is recognized reconciled very very close and that gives us a lot of confidence.
In terms of building, our technical report and plans and forecast going forward I think that's something that that copper mountain has struggled within the past was the reconciliation of their their block models to the mill.
So so so I would say that.
We've applied our technologies, we haven't tried to justify the 2022 resorts I think in terms of the overall, but our.
We feel very strongly on the ones that we have.
Yes today. So there is in terms of the overall.
We're not planning as in Peter talked mentioned, a little bit about the endorsement of their 2020 to plan our intention is.
Why do we say back to the 2019 as it is.
45000 tonne a day.
Technical report and we're leaning to sub towards something like that.
With some potential expansion potential, but not the 65000 ton a day plan. That's a that's currently.
And that was posted in their 2022 model.
Got it. Thank you for that and then I know the reports coming out in the next couple of weeks, but can you give us some sort of a sense on the accelerated stripping campaign just intended scope in what the what the capital implications are for next year for that mine.
We're still working on it were still working on it but with the ramp up that we're planning to get to like Peter said to the 26 trucks.
By December that throughput will be very very close to the stripping rate that's required on an annual basis.
So so we're still doing a little bit of fine tuning. So it's a little bit premature to say exactly.
Exactly the amount but.
But it's in that range and so.
By by December we should be in the 200 to 250000 tons a day of total material movement in that range.
Great. Thanks, Andrzej and then maybe if I can squeeze last one in for you Peter or Eugene.
The copper world JV process, where are you in that process right now and do you anticipate the project design changing at all in the feasibility study once you have a partner in place.
Thanks, a lot it no not really.
Remember that the the pre fees was it was a good pre feasibility study based on in many cases sort of a definitive feasibility level engineering.
So I don't anticipate changes during the feasibility study process, but at the same time, we would like to afford a partner the ability to tweak elements of the design if needed or if appropriate or if it creates value.
Where we are right now is is that we feel that the process is best left to kick off around about the time that we have certainty with respect to the issue of our payments.
Because once we have the permits in hand of course, the project becomes very very significantly de risked and offers us the opportunity to probably get more value out of a a potential partner.
That said, we are moving towards we sort of doing quite a lot of work with potential partners to get people up to speed. So that when we kick a process off as we get the the permits it becomes a much more efficient process.
That's great. Thank you Peter that's all for me.
Okay.
Thanks Dalton.
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 us today. If you have any further questions. Please reach out to our Investor Relations team. Thank you and have a great day.
Ladies and gentlemen, this concludes the conference call for today you can now disconnect your lines.
Yes.
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