Q1 2024 Capstone Copper Corp Earnings Call
Good afternoon, ladies and gentlemen, and welcome to the Capstone copper first quarter 2024 results conference call. At this time all lines are in listen only mode. Following the presentation. We will conduct a question and answer session. If at any time during this call you with.
Quite immediate assistance, please press star zero for the operator.
Call is being recorded on Thursday may two 2024, I would now like to turn the conference over to Mr. Gerald.
Gerald: Please go ahead.
Gerald: Hello, I would like to welcome everyone to Capstone Koppers Q1, 'twenty 'twenty four conference call. Please note that the news release and regulatory filings announcing capstone copper is 2024 first quarter financial and operational results are available on our website and on SEDAR plus.
Gerald: If you are logged into the webcast, we will advance the slides up today's presentation, which are also available in the investors section of our website.
Gerald: I'm joined today by our CEO, John Mckenzie, our President and C. O O Castle Maher, our Chief Financial Officer, Rodney render our and our senior Vice President risks ESG in General Counsel Wendy King.
Following our brief remarks, there will be an opportunity for questions. Please note that comments made on the call today will contain forward looking information within the meaning of applicable securities laws. This information by its nature is subject to risks and uncertainties and actual results may differ materially from the views.
Gerald: <unk> today.
Gerald: For further information on the risks and uncertainties pertaining to our business. Please see capstone <unk>. Most recent filings which are available on our website and on SEDAR plus and finally I will just note that all amounts we will discuss today are in U S dollars unless otherwise specified now I'll turn the call over to John Mckenzie.
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John F. MacKenzie: Thanks Gerald.
John F. MacKenzie: Good afternoon, everyone in North America, and Europe, and good morning to those dialing in from Australia.
John F. MacKenzie: We're pleased to present, our first quarter 2020 full results and achievements.
John F. MacKenzie: Starting with slide five.
John F. MacKenzie: We produced just over 42000 tonnes of copper at consolidated cone cash costs of $2 88 per pound in Q1, and we are reiterating our 2020 full guidance.
John F. MacKenzie: We started off the year strongly with production closer to the mid points of our first half guidance range.
John F. MacKenzie: Sulfide cash costs of $2 55 per pound were also at the mid points of our guidance, while costs and a smaller catheter business were higher than planned.
John F. MacKenzie: As a reminder.
John F. MacKenzie: Transformational months have added development project ramping up this year.
John F. MacKenzie: Sulfites will make up a significantly larger proportion of our production base contributing to a reduction in our consolidated cash costs.
John F. MacKenzie: The MVP remains on track and on budget, we're on the cusp of producing first saleable concentrate.
John F. MacKenzie: Our team is focused on ramping up production to the design run rate levels.
I was in Chile, a couple of weeks ago, and I'll spend some time at sites reviewing our progress and meeting with our team.
John F. MacKenzie: I'm very pleased with the work done to date and leave the future months of Ed It looks extremely positive.
John F. MacKenzie: As part of my meetings in Chile, I attended a Cisco dinner.
John F. MacKenzie: Gabrielle barrage reiterated the government's desire to continue to develop an investor friendly environment for copper miners with the objective of increasing foreign private investments in copper mining.
John F. MacKenzie: This bodes well for capstone Capa as we progress our feasibility studies for MVP optimized and our sensor Domingo projects in the asset Carbo region, which we plan to release by the middle of the year.
John F. MacKenzie: On the corporate side, our net debt decreased substantially from $927 million at year end 2000, $23 million to $740 million at the conclusion of the first quarter.
John F. MacKenzie: Our balance sheet is in excellent shape as we ramp up <unk> ahead of our next leg of growth.
John F. MacKenzie: Also of note in the quarter Orion mine finance.
John F. MacKenzie: Which was previously our largest shareholder reduce their ownership positions from 24% to 12% following two secondary placements of shares.
John F. MacKenzie: <unk> taken sell out of the quarter was placed directly into Australia.
John F. MacKenzie: Secondary listing which trades on the Australian Securities exchange under the ticker symbol CSC.
John F. MacKenzie: We are encouraged by the success of our <unk> to date and we believe we are on track to be considered for the Asics 300 index rebalance in September.
John F. MacKenzie: The ASX is a premium markets with a long track record as a platform for mining companies and we're excited to continue growing our investor base in the Asia Pacific region.
John F. MacKenzie: And with that I'll pass over to Robin for our financial results.
Robin: Thank you John we are now on slide six in Q1, we recorded copper production of 42 1000 tons and copper sales just shy of 41000 tons.
Robin: Now, let me copper prices during the quarter averaged 383 per pound up close to 4% compared to $3 70 per pound in Q4 2023.
Robin: Our realized copper price of $3 85 per pound was largely in line with the average price.
Robin: Today's copper prices are closer to $4 50 per pound every 10% increase in the copper price in 2024 impacts our EBITDA by around $125 million.
Robin: And next year with MVP at full rates, a 10% move in copper prices would increase our EBITDA by just over $200 million.
Robin: We recorded a consolidated C. One cash cost of $2 88 per pound per payable pound in Q1, which were <unk> <unk> above our first half guidance range.
John F. MacKenzie: We expect a large step change.
John F. MacKenzie: Solid unit cost in the second half driven by our mental Verde development project down to $2 10 to $2 30 per pound.
John F. MacKenzie: Adjusted EBITDA in Q1 of $80 $1 million increased by 21% year over year compared to first quarter of 2023, largely due to higher copper sales and lower cost.
John F. MacKenzie: Moving on now to slide seven.
John F. MacKenzie: Our liquidity position increased substantially from year end driven by net proceeds of $253 million from our primary equity raise in February.
John F. MacKenzie: As a result, we finished Q1 with a net debt position of seven $740 million and then attributable net debt balance of $591 million.
John F. MacKenzie: Our.
John F. MacKenzie: Sheet is in very strong shape during the ramp up MVP ahead of our next phase of growth.
John F. MacKenzie: Chart on the right hand side of the page illustrates our EBITDA sensitivity at various copper prices.
John F. MacKenzie: In the first two bars, you can see that we expect significant near term EBITDA growth with mental Verde sulfides at full run rate production.
John F. MacKenzie: In 2024, EBITDA will more than double from 2023 levels with MVP ramping up.
John F. MacKenzie: With MVP a full capacity in 2025, we expect to generate between one two to $1 $3 billion of EBITDA at copper prices of $4 50 per pound equivalent to today's pricing levels.
John F. MacKenzie: The EBITDA generation associated with mental Verde will enable us to focus on generating free cash flow to delever, our balance sheet and be quickly below one times net leverage at spot copper prices, which provides additional financing capacity in advance of our future growth pipeline in terms of mental Verde optimized XP.
John F. MacKenzie: Exploration at <unk>.
John F. MacKenzie: Santo Domingo, depending on market conditions.
Speaker Change: Now I'll hand, it over to cash flow for the operations review.
Cashel Aran Meagher: Thanks, Ron are now on slide eight.
Cashel Aran Meagher: The valley produced 15672 tons of copper at a C.
Cashel Aran Meagher: <unk> cash cost of $2 53 per payable pound during Q1.
Cashel Aran Meagher: Your competitive compared to similar grade copper mines in the USA.
Cashel Aran Meagher: The production performance was above the high end of our first half guidance range, while our cash costs were below the guidance range driven by stronger than expected grades.
Cashel Aran Meagher: Moving to slide nine.
Cashel Aran Meagher: Cosmos mine delivered a solid first quarter, producing 6006 tonnes of copper.
Cashel Aran Meagher: <unk> cash costs of $1 93 per pound.
Cashel Aran Meagher: The mine demonstrated another quarter of nameplate mining rates after transitioning to the new cut and fill mining method earlier last year.
Cashel Aran Meagher: Costs have increased 12% year over year due to a stronger Mexican peso and additional contractor costs with more cut and fill as part of the mining sequence in 2024.
John F. MacKenzie: Our Mentos Blancos asset is highlighted on slide 10 total.
John F. MacKenzie: Total sulfide and cathode production yielded 10000 967000 tons of copper.
John F. MacKenzie: Which is below the nameplate capacity of 20000 tonnes of ore per day, largely driven by Bob bottlenecks in the tailings dewatering area of the plant.
John F. MacKenzie: During the first quarter, we continued to execute on our plan to address plant stability that includes improved maintenance and optimization of the concentrator and the retrofitting of the tailing systems.
John F. MacKenzie: During the second quarter of 2024, we expect to install the final pieces of equipment, notably a surge tank and pumps that will allow us to ramp up the plant to its nameplate capacity in the second half of this year, which will also drive a commensurate decrease in costs.
John F. MacKenzie: We are confident that we have both the team in place and the asset that will support full run rates. Our efforts are focused on achieving this and after that we will recommence our studies related to demand <unk> Blancos phase II as we believe the ore body can support a further expansion.
John F. MacKenzie: We will also looking to increase our exploration efforts at Mantas Blancos.
John F. MacKenzie: As we believe we have highly prospective near mine targets that could allow us to improve our grade profile and increase our tonnages overtime.
John F. MacKenzie: Now onto Manto Verde on slide 11.
John F. MacKenzie: Q4, 2023 oxide production was 9476 tonnes of copper in cathode at <unk> cash cost of $3 82 per payable pound.
John F. MacKenzie: While costs were above our guidance range for the cathode business in Q1, we anticipate a step change in the cost profile for mental Verde.
John F. MacKenzie: Following the ramp up of the MVP sulfides.
John F. MacKenzie: During the quarter important commissioning progress was achieved notably we have now fed award to the grinding circuit.
John F. MacKenzie: Excuse me, principally the Sag and ball Mills, and we remain on track for our remaining key commissioning milestones.
John F. MacKenzie: First saleable concentrate during the second quarter.
John F. MacKenzie: And the achievement of nameplate operating rates in the third quarter.
John F. MacKenzie: Once the operation is fully ramped up mento Verde will produce approximately 120000 ton ease of combined cathode and copper in concentrate.
John F. MacKenzie: With over 30000 ounces of gold per year.
John F. MacKenzie: Okay.
John F. MacKenzie: We advanced the feasibility study for our mental Verde optimized project during the quarter and we plan to release it by mid year.
John F. MacKenzie: MVP optimized it's a brownfield expansion to increase ore throughput at mental Verde development project by about 40%.
John F. MacKenzie: And we expect this project to be very capital efficient.
John F. MacKenzie: Slides 12 through 15 show, our construction and commissioning progress at several key areas of the MVP.
John F. MacKenzie: And we are approaching a 30 day running test.
Speaker Change: Just make a couple of comments and then pass across to cash flow, but yes.
Speaker Change: But minor operational issues, but it's nothing that we see ourselves not catching up on and correcting that in the second half of the year.