Q2 2024 First Quantum Minerals Ltd Earnings Call
Speaker Change: [music].
Thank you for standby.
Quanta Limited: It isn't the conference operator, welcome to the Quanta Limited's second quarter 'twenty 'twenty four results conference call.
A reminder, all participants are in listen only mode and the conference is being recorded.
After the presentation, there will be an opportunity to ask questions. Just joined the question you May Press Star then one on your telephone keypad. She didn't need assistance during the conference call you may signal, an operator by pressing star zero.
I would now like to turn the conference over to when he Chi Chow Director Investor Relations. Please go ahead.
Yeah.
Thank you operator, and thank you everyone for joining us today to discuss our second quarter results.
Speaker Change: During the call we will be making forward looking statements as such I encourage you to read the cautionary notes that accompany this presentation, our MD&A and the related news release.
As a reminder, the presentation is available on our website and that all dollar references are in U S dollars unless otherwise noted.
On today's call, we will we have Tristan Pascal, our Chief Executive Officer, Brian Luke Williams, our Chief Financial Officer, and really bad and horse, our Chief operating officer, and with that I will turn the call over to Tristan for opening remarks.
Thank you Vanessa.
Thank you everybody for joining us today for our second quarter update.
Operationally, we had another solid quarter in Zambia, which Rudy will cover in his remarks.
Both Constancia and Sentinel are set up well for the second half of the year.
We remain on track to deliver on our copper production guidance, which we provided earlier in the year.
We were pleased to announce the commission commercial production in enterprise on June 1st.
In April we made the difficult decision to place Ravensthorpe on care and maintenance due to the high cost structure of the operation.
Despite this with enterprise performing better than expected, we have maintained a nickel production guidance, albeit at the bottom of the range.
Speaker Change: Whilst we are not natural hedges the copper price and my reached levels that provided assurance on maintaining balance sheet strength. During this time elevated debt and while we look for a resolution in Panama.
Speaker Change: As such in our continued efforts to prudently manage the balance sheet, we initiated a copper hedging program to which Ron will provide more details in his financial overview.
It was pleasing to reach a shareholder rights agreement with Shaanxi corporate during the quarter, which formalizes our relationship and removes uncertainty for all of first quantum stakeholders by establishing guard rails with respect to three key areas.
Firstly with a few exceptions Shaanxi copper will not votes against board recommended matters, Secondly, Shaanxi copper remains understand stool for the term of the agreements.
Speaker Change: And thirdly any material block of shares Shaanxi copper wishes to sell we will have the OIBDA sorts of first quantum.
Speaker Change: As part of the agreement Shaanxi copper will have the right to nominate rather than appoint one director to first quantum sport.
With the nominated being subject to the recommendation of the nominating and governance Committee or first Quantum's Board.
The nominee must be at the skills matrix as required by the board as well as discharging all of the GTS regularly expenses of directors sitting on the board of a Canadian company.
Over the years since its initial investment in 2019, the relationship between jumpsuit copper and first quantum has strengthened.
Speaker Change: Junk see as supportive of the strategic direction of the company and both parties expressed the willingness to formalize the bandwidth of this relationship.
This agreement has been many years in the works and we are pleased to have reached this outcome.
Speaker Change: In Panama, President Milena was inaugurated on July one.
He has authorized discussions between the company and the serious ministers and officials initial meetings have taken place and there should be further dialogue in the coming weeks once he's government is ready.
Speaker Change: In the meantime, there continues to be 121000 dry metric tonnes of concentrate on site.
Shipment of this concentrate as part of the preservation and Safe management program and therefore sales. This concentrate will not take place until the program is approved.
We continue to work with the new officials for the approval of the preservation and Safe management program, which involves getting the new administration up to speed on the current situation at the mine.
Speaker Change: And as you'll know Gration speech, President Malino announced that a strict environment order would be conducted on cobre, Panama. Our understanding is that the government is currently assembling a list of independent international expert who could conduct disorder.
Speaker Change: We understand and welcome. This move is a necessary step for the new administration and dependent on any public.
To learn more about cobre, Panama is exceptional environmental practices and standards and we are prepared to cooperate fully.
The company has always operated its operations with transparency and in full compliance with international Environmental standards. We are confident the results of this environmental audit in line with all previous audits at the mine will demonstrate the world class nature of their operations.
Speaker Change: Moving onto arbitration the company has taken steps towards to arbitrations proceedings, one under the international Chamber of Commerce and the other under the Canada, Panama Free trade agreement.
She sees the most advance of these two proceedings with the arbitration initiatives initiated in November of last year with a final hearing scheduled for September 2025.
Under the S. T. A arbitration an updated notice of intent was filed on February seven.
The company has three years from Panama breaches of the FTAA within which to fall its arbitration claim.
I would once again reiterate that arbitration is not our preferred outcome and we remain committed to dialogue with the new government and to being part of the solution for the country and the people of Panama.
Speaker Change: Over to Zambia, the severe drought continues to impact the country I'm proud that first quantum is supporting zombies food security efforts by contributing to transportation costs to import grain into Zambia from Tanzania.
The severe drought conditions also continued to impact power availability in June Cisco imposed a further 20% empower restrictions across the mining sector.
For a total of 40% reduction overall.
As such the company made the decision to source power beyond the formal restrictions imposed.
The Tesco contract and we will be sourcing 193 megawatts of power or 52% of its needs from imports.
It will be an impact on costs, which Ron will review however, the company anticipates it will be able to sufficiently substitute power with imports and avoid operational interruptions.
Speaker Change: In addition, the company's proactively securing sufficient power for the commissioning and ramp up of these three expansion at Constancia with three independent power producers.
Speaker Change: The situation in Zambia serious and we will continue to work constructively with government and civil Society to achieve the best possible outcomes that ensure employment and income to the country remained stable and Zambia state restructuring efforts remain intact.
With that said we are pleased in support of the commitments made by the country for additional and reliable power generation capacity, including wind solar and hydro projects as well as infrastructure investments, including interconnections with other countries across the southern African power pool to address the country's power needs for the future.
With that I will conclude the opening remarks and pass the call to Rudy to review our operational results.
Rudy: Thank you Justin and thank you everybody for joining our call today.
Total copper production for the second quarter of 2024.
103000 tons, a 2% increase from quarter one.
Rudy: This was another solid quarter operationally and with the work accomplished during the quarter. We are now well set up for the remainder of the year and on track to achieve our copper production guidance as just to just a noticed earlier.
Copper sales volumes did lagged during the quarter by approximately 8000 tonnes lower.
Due to the timing of shipments.
They saw delays at Wolf as Bland, Dallas alone ports related to weather.
Rudy: Port congestion and scheduled disruptions.
Yeah.
Copper cone cash cost declined by 29 seems to average $1 73 per pound benefiting from higher gold production that can send sheet and record gold prices.
Rudy: That concern she copper production totaled 42000 tons in the second quarter.
An improvement of 10000 from quarter, one driven by higher feed grades.
During the quarter, we gained access to higher grade material at the mine 15 cutback.
Rudy: This along with access to my 17 would allow for grades to remain at elevated levels for the remainder of the year.
Rudy: In addition, we will be swapping the mixed and sulfide, mostly hitting in the third quarter.
Rudy: In order to maximize mixed ore and grade through the mills.
Rudy: This will allow us to comfortably achieve our production guidance of 130 to 150000 tonnes of copper at Kentucky.
Copper production at Sentinel totaled 54000 tons in the second quarter a decline.
Line of approximately 9000 tons from the previous quarter.
The decline in production was expected as the mine experience.
Higher grades during the first quarter and a sensitive turned into normalized levels.
The ongoing stage III development progressed, well during the quarter.
Rudy: With the input crushing successfully commissioned well ahead of schedule.
Rudy: Enabled access to softer ore.
The access to the western cutback in stage three will.
Increase the availability of softer ore and allow for improved mining performance and throughput over the remainder of the year.
Rudy: As such a couple.
Copper production guidance at Centinela has been maintained at 220 to 250000 tons.
At enterprise over.
Rudy: Over 6000 tonnes of nickel was produced during the second quarter, an increase of over 2000 tons from the first quarter.
Mining volumes have been steadily improving and plant performance has been strong allow.
Allowing for the deceleration of Commission did.
The curation of commercial production.
Due to the stronger than expected performance at the enterprise.
Nickel production is expected to be at the upper end of guidance at 17% to 20000 tonnes.
As Christian noted earlier we.
Speaker Change: We made the difficult decision to place the Ravens stope in the care and maintenance.
This work commenced in May and should be completed during the third quarter.
Care and maintenance costs are estimated to be approximately $5 million per month.
During the third quarter, and we'll reduce it $2 million a month thereafter.
Production guidance has been lowered to 5000 contained tonnes of nickel in reflection of this.
We continue to support our personnel.
Particularly those living here.
And the locally right installed region and we are thankful for support from the community and local and state governments to the mine during this challenging place.
Speaker Change: Cobre, Panama remains in a phase of preservation and safe management.
During the quarter the process plant reservation that maintenance cycle was changed from 14 days to 28 days.
The new maintenance cycle will allow for the execution of corrective maintenance activities to maintain optimal conditions.
Speaker Change: The focus continues to be on environmental.
Care and maintenance activities for all areas.
Including cleaning and maintenance work at citizens ponds and pumps managing surface water, the waste dump and low grade stockpiles.
Speaker Change: These are eating rainwater the treatment of water.
To manage the ph levels.
These expenses are expected to range from 15 million to 17 million per month for the remainder of the year.
Depending on the level of environmental stability and asset integrity programs.
Speaker Change: I wish to thank all our employees at Cobre, Panama for the ongoing commitment to safe and responsible environmental management of the mine area and.
And its surrounding communities.
Thank you and I will now hand, the call over to Brian to review the financials.
Thank you Rudy.
During the quarter copper prices reached a peak of $4.92 per pound following the collapse of copper treatment charges, resulting consider smelter production cuts combined with lower mine supply forecast.
The copper prices since pulled back to around $4.20 per pound on the back of expectations of slower growth in China.
Speaker Change: During the quarter, we took advantage of the stronger pricing environment and entered into a copper hedging program made up of unimagined zero cost collars to the end of 2025 and roughly 40% of our production.
The hedge program is the next step in protecting the balance sheet. Following the successful completion of the financing activities in Q1.
We've been consistent that while our goal as a company is generally to be unhedged.
Consider the use of hedging as an insurance policy to protect our balance sheet and more capital intensive phases.
This hedging strategy shows a minimum price on a portion of our production while cover Panama is offline and until the <unk> expansion is fully commissioned at the end of 2025.
Speaker Change: The hedges are front end weighted as this is when the <unk> expansion project as most capital intensive.
Once fully operational is three is expected to return first quantum to a positive to strong positive free cash flow generation.
Speaker Change: Revenue and EBITDA increased from the first quarter by 19% and 86% respectively.
On the back of higher realized copper prices and improved operational performance, particularly at convention.
Our Q2 net loss attributable to shareholders also improved to $46 million.
Although it was impacted by a further impairment at Ravensthorpe, we wrote off the majority of the remaining inventories following the decision to place the operation into care and maintenance during the quarter.
Speaker Change: As Rudy noted second quarter C. One cash cost averaged $1 73 per pound.
14% improvement over the previous quarter.
In general costs have largely stabilized.
However, as guided in our Q1 results electricity costs increased as of May 1st conceptually and trade ins as a result of the power shortages, Zambia and the need to import power at higher rates.
As Justin noted Cisco has increased has requested further restrictions so it will be more than doubling our important imported power from July one onwards.
With these additional imports the impact our cash cost increased to approximately $55 million or six cents per pound for the full year.
In other areas input costs and prices are tracking favorably to the assumptions used in our C. One cash cost guidance.
Oil prices have averaged in the mid 18th year to date, while we continue to use $90 per barrel and our assumptions.
The quarter has been weaker than the 21 assumed in our guidance.
And lastly, gold prices have been a significant tailwind for us more than offsetting the impact of the higher power prices as the gold prices averaged well over $2000 per ounce through the first part of this year.
Considering all these factors we remain comfortable with our C. One cash cost guidance range for the year of $1 80 to $2.05 per pound.
With respect to our balance sheet initiatives. The sales process of our lost Creek mine in Spain remains ongoing.
As well as the potential minority investments in the company's Zambian business, we will bring in a partner create strategic value proposition Zambia.
Net debt increased this quarter by $160 million to $5 4 billion.
The strong progress on <unk>, III and the resulting increase in capital expenditure was the main driver of this cash outflow.
Liquidity remains strong at $1 6 billion at the end of the quarter.
Uprising of approximately $876 million in cash and $740 million of Undrawn revolver.
And that concludes the finance section.
I'll now hand, the call back to Justin.
Thank you Ryan.
Two years ago first quantum approved the enterprise and the S. Three expansion projects pulling a commitment made by zombies Nutone administration to reform the mining sector and establish a platform for more stable durable and responsible mining and Zambia.
It was very pleasing to share with you the sandy it was recognized in the latest annual mining survey by the Fraser Institute for its improved investment climate.
Six countries, Zambia is ranking improved from 58 to 34 34.
The country achieved the third highest ranking in Africa, and now ranks ahead of traditional mining jurisdictions, including Chile and Peru.
The current administration has made great efforts to improve the investment climate for the mining sector within the country and its very pleasing to see this bear fruit.
At enterprise. It is pleasing that the mine was completed commissions and delivered into commercial operation ahead of schedule I.
I wish to acknowledge.
In House project teams for another project success successfully executed that distinguishes first quantum's approach to delivering growth.
At the <unk> expansion project, we continue to receive long late deliveries with the last major delivery of flotation cells completed early in the third quarter.
Construction continues to focus on the assembly and installation of major components, mainly the mills and the primary crusher.
And we are pleased to show you the progress of our Street project in the presentation on our website.
Work has also begun on configuration of the plant control system.
Yes, three expansion is key to restoring first quantum strong cash flow generation and we remain on track for first production mid next year.
We have also published our 43 101 technical report for <unk>.
Speaker Change: Our production profile at concerned she has smoothed over the life of the mine while unit cost and capital spending has increased reflecting inflation since the last report in 2020.
Speaker Change: Also reflected in the higher capital spending a fleet replacements related to these three expansion.
As part of the report we were pleased to see an increase in mineral reserves that has extended the operating loss of consent by five years to 2049.
This brings our prepared remarks to an end there was a lot of information with our second quarter results and I would be pleased to take any questions.
Operator, we can open the call for Q&A.
Certainly.
We will now begin.
Oh gosh.
A question and answer session.
Hello.
To ask one question and one follow up and I'll welcome to rejoin the queue.
They have more.
Jim joined the question you May press Star.
Speaker Change: And then one on your telephone.
Tal: Tal and knowledge in Uruguay.
Speaker Change: He is on a speakerphone please pick up your handset.
That's helpful.
So we'll tell you a question. Please press Star then two.
Speaker Change: Well pause for a moment eschar in Charlottesville.
The first question comes from.
Alright, well I'll come out so far.
Please go ahead.
Hi, good morning.
You hear that the presence of any precedent of Panama authorized I guess from discussions to restart with the company.
The President has made some public comments about potentially.
Restarting the mines to close it and.
And I'm wondering if you can provide any color on what you think that means from.
From a restart perspective, and whether you think that could be a partial restart of full restart.
What sort of timeline potentially.
Hi Forest Shaw.
Thanks very much for the question yeah, So the president.
He needs inauguration speech and since that time has made a number of comments around the mine and we know it's his comments around <unk>.
And to close.
I think what's been very pleasing to see the dialogue around the mine, which is a very important issue for the country.
In terms of.
The need to deal with in particularly the environmental issues and how those need to be managed through an operating asset it's very hard to manage.
And immediate closure such as happened at the end of last year and so it's very necessary that there is a level of activity that can ensure.
Environmental security. So that's the first point initially we see that progressing through the preservation and safe management plan that we have submitted.
That's very important to underline the costs and the ability to keep ensuring assets and environmental security in the interim but we are very open to and committed to dialogue with the new administration to put in place a framework around which we can have those conversations that we'll see.
A stable level of operation to ensure the long term environmental security of the asset.
The timing of that forest is difficult.
You know, there's a number of complexities to work through we don't see that happening this year.
And certainly.
<unk> made comments around that we.
We're committed to engage in the dialogue in order to get to that that position.
Oh, thanks, what's the timing for the environmental audit.
Yes, thanks tourist so firstly to say, we're absolutely open to the audit and we see it as a necessary step for the government of Panama, We're waiting for the instructions from government. We understand that currently putting to get together a short list of international experts that could take a few weeks and <unk>.
We waiting to hear back on the government or the exact timing, but the indications were that it would come this year and the cost will be.
Pepsi.
Is to be discussed and agreed with the government the consequences I think of doing nothing at the mine will be very.
Challenging for the environment and so we welcome this order.
Which we expect would understand that doing nothing right now is not a good outcome for the country.
Thank you.
Yeah.
The next question comes from Jackie.
From BMO capital. Please go ahead.
Alright, thanks, very much for taking my questions I guess, maybe.
Maybe my first question would be for Ryan on the hedge program, it seems very well timed and opportunistic and totally understand.
The rationale behind US can you talk a little bit about what you might look at in terms of adding hedges, what you may need to see in the market too.
To add further hedges going forward.
Sure Jackie our intent would be to replace hedges as they roll off and to stay broadly 40% to 50% hedged through to the end of 2025 and that really ties in with the delivery and ramp up of the <unk> III project and then from there we moved to a stronger phase of cash flow generation and therefore, we don't need that hedging and sharing hedged.
<unk> insurance policy from then on.
Okay, Thanks, Brian and as my follow up question, maybe I'll just ask have you.
Look at that in terms of the scenarios for restarting cobre, Panama in 2020 five or not does that affect your hedge program. I mean, obviously, what in terms of that 40%, 50% calculation, but would you be more comfortable being hedged or not hedged.
And in a different scenario would that restart.
Jackie we've made that decision and approach independent of Cobre, Panama timings that really focuses on what the <unk> III ramp up looks like and then matching a program that ties in with that.
Okay. Thank you very much.
The next question comes from.
Oh.
Hello, Dan Farrell.
Speaker Change: Go ahead.
Hello. Thank you very much for the presentation. My first question questions around asset sales or stakes since actually you mentioned that you will only bring a partner in Zambia, if this would present strategic value.
With this preclude discussions with certain types of potential bidders stuck may offer an attractive economic value instead.
Hi, yes to be honest, Ron do you want to take that question.
Sure Yes, the comment was really focused on the fact that.
Ron: We don't have to do a transaction in Zambia, but we think the improved investment climate, there, which Tristan referenced in his script gives us an opportunity to engage with parties who are now looking at Zambia fresh following the positive business performance in the last few years and if there's a partner that has the capability to experience in the mining sector.
A desire to work with us in the Zambian government and moving those assets forward.
We'll really take that very seriously, but the comment really was focused on we'll consider it holistically rather than just the dollar value of any transaction.
Very clear thank you very much and just a follow up.
Back to Cobre, Panama, certainly lots of uncertainties on are on the path forward, but.
Speaker Change: Assuming the environmental audits concludes successfully what would be the next milestones towards a possible restart and within that.
How should we think about the new contract agreement between you and the government given recent common space. It made by the president. Thank you.
Sure Yes. Thank you.
So the milestones as we see them.
We committed to dialogue around that with the government really initially to address.
The immediate.
Activities required under the preservation and safe management plan to ensure environmental security currently recovering all of that cost and we outlined that in.
In the second quarter results as to where that cost is now $708 million a month approximately the ranging from <unk> to 'twenty and that's important that we cover that cost.
The initially.
Initially the concentrate sale would go a long way to to.
To support that and that's part of the preservation and Safe management plan that we would hope.
Route.
Going forward from that I think it's important that we provide space for dialogue.
And that would really be a conversation around a framework.
As to how that could work to really understand the full <unk>.
Solutions required for Panama, and its people, but to work in order to ensure the ongoing environmental security asset security of the mine and the conditions at the mine exists and it needs to be dealt with.
In a respectful way.
And in an Ah patient manner. So those are the milestones. We think this year. The president has my comments are on that timetable I think he said you know not before.
Months, which run through sort of from December but.
It really for us the importance is not win the importance is getting to a proper agreement that benefits both.
Both parties that ensures a stable operation forward and must make sense for our shareholders.
Speaker Change: Thanks very much.
The next question comes from Gautam Khanna.
Kennecott Jimmy Please go ahead.
Hi, Thank you good morning, trusting that team maybe I can start by following in that same vein. There just a point of clarification Trust and does the approval of the AR.
Preservation and safe maintenance plan depend on the outcome of the audit or are they completely separate.
Yeah.
Adults.
We will go through that process, a lot of that conversation needs to happen with government from our perspective, though the preservation safe management plan was really needed just to deal with.
The immediate environmental requirements and with or without an order with or without the future framework. There are a number of environmental matters that need to be needs to be the right framework by which those those could be.
B B cover then be dealt with and that's what the preservation Safe management plan really was set as we submitted that in January and it's really about dealing with those upfront key environmental metals, well before we get to the sort of long term.
Items that we we would envisage come into a more holistic framework discussion.
Got it so but for millennia, especially back then from the government's perspective. The two are completely separate or are they waiting to see what what the audit looks like for us.
Look we see the order does it is a key step.
There's been a number of environmental audits of Cobre, Panama. The last one at the end of last year from August to October while the mine was operating the oldest demonstrated that we were 100% compliant with the environmental and by diversity requirements of the 371 obligations under the ESI I They were five health and safety areas.
The address which we would look at we were addressing at that time and that demonstrates the very strong.
Environmental standards, the operation to international standards at the highest level. So we would welcome the audit we think it's an important part for Panama to understand the situation on the ground at the mine.
To provide transparency to provides a meaningful context around what needs to happen that the mine just can't stop it.
To me there that needs to be.
To ensure integrity of the environment there.
The next question comes from last year I'm sorry.
And then Sac.
Speaker Change: Go ahead.
Hey, good morning.
Those are all the operations in Colombia, obviously console ships have performed quite well in the Florida.
Speaker Change: Both in terms of cost, but also greatly improved.
As well, we talk about potential further efficiency gains.
So just trying to understand what are you thinking about the magnitude of potential policy.
It's the grades that we reported in the quarter can be sustained into the next quarter and it's no surprise that you published a highlight any potential upsides.
Cost some grades.
Exploration as well thank you.
Sure. Thanks for the question Marci I'll, let Brian answer the first part of that question and then just looking ahead I can give you some context as well.
So on costs, we did see very strong cost performance through the quarter that was largely driven by the low unit cost of consent sheet, which in turn was driven by the strong gold production that which tightened with the strong gold price environment. We do expect through the second half of the Sentinel to represent the largest share of the production central it doesn't come with that byproduct credits.
So we would expect higher costs through the second half of the year than what we had in Q2, but still well within our guidance.
And then looking forwards Marcio you we were very happy to release. The updated 43 101 Technical report concerning <unk> I think that gives a very fulsome picture and the team has done an excellent job in presenting the.
Overall look forward as we get into SaaS that he's doing.
As if the <unk> III project comes online in terms of cost you will note in that.
And our assumptions around inflation and as we bring new mining fleets and shift from the traditional.
The methodology, we had which was a selective mining methodology at consent Chi and as we shipped across to a bulk mining methodology.
That's the major impact on costs at Constancia looking forwards.
And you know.
We are pleased being on site very recent in the last few weeks to see those large trucks operating on petroleum ceased.
Techy.
250 tonnes, including the first battery truck, which we saw running under its own power.
Please be carbon neutral.
In terms of emissions from that truck. So it's an exciting time for concern as we deliver the <unk> III expansion and as we bring on that bulk mining methodology, we expect to see cost reduce in the future.
Great. Thank you and a quick follow up on the energy side, the other let's call it reduced.
While our supply.
Per se, which is probably not.
The 40% to help construct.
Corporate sources right I'm, just trying to understand what is the you said you see that.
Yes.
And what are the actions mistaken.
To avoid any production.
Thank you.
Very much.
Thanks, Marci. So yeah look the situation is serious with regards to the drought.
It appears.
To be in effect from El Nino in.
In terms of.
Dry conditions in Zambia, Similarly, dry conditions in Australia, and wet conditions in Brazil and in Latin America.
A lot of the outlook is for it flipped to neutral conditions through by the Middle of this year August September is what the metallurgical forecast seem to be pointing to and potentially afflicted law anemia around a 40% likelihood which would reverse things the other way and we would see higher rainfall in Zambia seemingly hiring.
In Australia and lower in Latin America. So we are preparing for a heavy wet season, but also planning that if there are limitations to pound the trapped dust.
Continue through the dry season as to how to go about that in particular with relation to the <unk> expansion.
Marcio, we've put in place the flexibility in the contract with Cisco with very pleased with that long term relationship. We have been working very proactively around that in terms of headlining the challenges looking forward in the country for power delivery, but then we were able to secure power.
Imports with independent power providers and we.
We feel confident at the moment in those agreements that we'll be able to cover our operational requirements. Although the situation is serious in the country. That's coming from sources that from gas and very interesting on the east Coast of Africa, they've had good rainfall.
You know places like Mozambique, Malawi, and so on.
Speaker Change: And so we're not impacted to the same degree so as I said strong sources of supply in the current market environment, and we're able to import that power.
Speaker Change: And believe that we will be able to say no impact on operations.
Okay.
The next question comes from Bryce Adams from CIBC.
Please go ahead.
Hi, everyone. Thanks for the presentation. There was a note about government officials visiting sought in the report for the immediate explore the concentrate and the power plant restart I wanted to clarify is that a couple of months style. When when was the report was it earlier in the year or was it more recent what's the latest on the concentrate and <expletive>.
Thanks, Brian Yeah that was officials from the previous administration a visit to the site in the run up.
In June.
In the run up to the inauguration on July one so it was up to date at the end of the quarter.
Feedback from that site visit as far as I understand was positive in terms of all of the.
The the structure and the way in which we presented the preservation and safe management plan, including the export of concentrate although we still waiting for that approval. We are in dialogue with the government around that approval and the need to ensure that the provisions that are in that preservation site management plan, we can enact in order to it.
Sure Environmental Securities as the first priority both for the country and in order to assure that the mine is in a good stable position. So.
The answer is waiting for that approval.
It's always a technical official visits went well.
Okay.
What are the key drivers for the shareholder agreement, it's a more formalized relationship, but what practically changes and then I can see the reason they affirm would enter into the agreement, but what do you think the key benefit for J&J.
Yes. Thanks, Brian look we were happy to enter into that agreement. It's been a long time coming we have been working with our partners Shaanxi for some time.
And really it does now provide formalization of that of the relationship between us the key provisions.
Number one ensure the guardrails around our relationship and the ongoing relationship with GE in the form of a standstill restrictions on.
Dispositions of shares and ensuring both support not for all matches, but encompassing majority of matches that the board will come through those guardrails. We think are very important they really the benefit for first quantum I think and for our shareholders remove uncertainty.
For all of our stakeholders regarding the nature of our relationship with junk C and their intentions into the future.
In terms of junk see they've been very clear that backing the strategic direction of the company backing the strategic direction in which we're heading and to your question around motivations for them.
To ensure our customer and supplier relationship.
Time, where copper is scarce, we saw that in the prepay agreement that they were seeking to ensure security of supply into what is the number one or number two largest copper smelting business in the world.
Speaker Change: A lot of strength and capability and downstream processing, all the way from smelting through to Rod and bar and into copper foils for battery technologies, a huge capability in those downstream areas. So <unk> I think it.
It provides them access to the front end in terms of.
<unk> copper.
Supply and it shows the relationship.
Going into the future with any certainty for both parties.
The next question comes from Myles Allsop from UBS.
Go ahead.
Great. Thanks, so much could you give us a sense.
On the timing of the sale at Las Cruces.
Speaker Change: The stake in Zambia as it kind of is a hopeful over the next six months or.
Could it take longer.
Thanks small Ryan do you want to take that one yes, we expect both of those to play out through the second half of this year.
Okay.
And then maybe just going back to the <unk>.
Environmental audits would you expect it to take three months like last year.
What are the key sensitive areas do you expect to come out of this order that we should be.
Speaker Change: I'm focused on.
Sure Myles.
Yes challenging to give a time frame for that although these things we would expect that a detailed all it would take a few months to get resolved.
But in terms of where the asset stands.
And the capability of us to respond to those orders requirements. We can do so very quickly.
The president in his comments noted that he wanted it done.
You wanted it done quickly in order to prepare the ground and to the government and the people of Panama had a good understanding of the conditions.
And more transparency.
Understanding of conditions that thought in terms of the main focus areas for the orders.
Look the key always at Cobre, Panama has been handling of water in particular through the tailings dam and.
Our objectives and our continued <unk>.
Strong management of the environmental.
Conditions that saw it really relates around water and in particular, the tailings dam to ensure the integrity of those assets that's challenging while the asset is not operating because of the buffering because of the.
In addition, the process plant provides to managing that water.
As we.
We see now and bringing technical people to start bringing order to saw it in the past we continue with a strong track record in terms of the downstream water.
Key indicators.
So you know fish in the stream microphone is all in a very strong.
Strong and healthy from the discharge, but the water is really the key issue always have Spain, and our continued management of that requires the approval of preservation stack management plan in the interim and long term our ability to operate the plants in order to ensure that that asset integrity continues.
The next question comes from Linda from Bank of America.
Uh huh.
Thank you operator, and good morning, Tricia Ryan and team.
Rudy.
Wanted to ask you about the.
The report that the Panama Canal Authority now has some level of jurisdiction over the watershed in which corporate.
Cobra Panama is contained does that.
Change, how the environmental audit might be done or how anything might be considered in any sort of negotiations or arbitration.
Hi, Lawson not sure on that one.
Sort of three or four watershed so over from the Panama Canal.
You don't need to follow up on the detail and perhaps you can reference where you're looking at there.
Not something.
Particularly aware of we are a long way from the canal the sort of previous.
Yeah.
Miscommunicate since a fake news around that we were taking water from the canals completely misplaced I think very positive for Panama rainfall in the last few months has meant that the canals and improved its operating capacities, it's getting back towards normal.
Normal provision of draft and the ability to serve as ships coming through the canal.
I'm aware of the canal authorities worried in the long term about ongoing effects of climate change on the canal and how they'll deal with that in the future certainly we would be willing to be part of it solutions for the country.
And part of solutions for the Panama Canal.
Okay Fantastic and then just my follow up would be on the cash cost guidance.
Would you guide us to or suggest that we model on the higher end of the range just given the power cost impact or are.
Can we still think of it as being in the middle of the range.
Sure Ron will take that one.
Since I no change to the commentary on our cash cost. So I would still use the same range as we provided before and we wouldn't point you to the top or bottom end of that cash costs a function of in some areas. We've seen tailwind such as gold prices such as kwacha, such as diesel prices and in some areas, we've seen headwinds such as electricity prices in Zambia.
The next question comes from Gautam Khanna.
Canaccord Genuity.
Please go ahead.
Thanks for taking my follow up guys.
Wanted to ask about the.
Partnering process in Zambia.
My understanding is that the data is also looking for a partner and I am just wondering.
Given what you said about the improved business climate in fact, the geographies also looking to secure supply is there an opportunity for you guys to do something together.
Okay.
Thanks, Dalton I'll, let Brian take that one.
Sure.
Yeah.
Brian: I think we monitor developments in Zambia, but I'll focus of Zambia really at the moment is on the ramp up of Ace III and really pleased to see the delivery of enterprise.
Yeah adult and we follow the progress of mopane and but to answer we think those operations are very important for the ongoing.
Brian: Capacity of Zambia, the big employers they are important.
So the copper belt as being a traditional sort of source of of mining in the country and so theyre very important providers. We previously had our ownership in mopane, we know that asset very well.
We understand the characteristics of underground mining at Mopani and potentially what that would look pockets with Santa.
No interest directly in that at the moment and our focus is wrong.
It's on developing as three and ensuring that comes in on track on schedule.
Alongside that we're very excited this quarter to deliver commercial production from enterprise. That's a huge step for the team there both on the project side to execute that successfully ahead of schedule and then on the operating side, we're seeing really strong progress and huge.
Yeah.
Better than expected performance on the flotation in particular dealing with Tau.
In dealing with what we've typically nickel mines can be very difficult to bring into commercial production. So it's been very pleasing to see that happen and really.
And that's what's taking a focus.
Right.
Brian: Right now and into the future.
Thanks for that attrition or if I can squeeze in a follow up I wanted to ask also about a comment you made on the ICC arbitration.
Yeah.
Yeah.
Hi, Dalton just.
There are you still there.
Sorry, he's lying job I'll move to the next question and ask him to rejoin.
Once you finish this question again.
Brian: Yeah.
The next question comes from.
Cities from eight cockpit LLC go ahead.
Thanks, operator.
Tristan when you look at the the power supply demand situation.
Speaker Change: Across Zambia, and you look at sort of excess power from countries and sort of competing industrial demand outlook and you think about this 193 megawatts that are that is currently source.
Speaker Change: Some of that address the increased power draw potentially required at S. Three and I'm just kind of wondering trying to reconcile the 40%.
Requirement versus the 52% actually sourced and then maybe my second question is what is the step up in Max power requirements. Once as three comes on my apologies I Couldnt find it at the concentric technical report.
Yes, Thanks, Chris.
Yes.
Great question. Thank you.
Yes, I'll just jump in on the first question.
First what portion of your question.
The reason for us to come.
Commit to slack the larger proportion of imported dollar right now than <unk> because he's.
Asking for is because we are in a position to secure.
Birla from third party providers.
Fixed and firm palace, so that'd be a 100% certain of what are we going to get hour by hour.
With the emergency power imports.
That Cisco is doing is not orphan power at the moment.
Because it provides.
Speaker Change: These and less uncertainty however.
From August which is next month, a few weeks from now.
As an additional 800 megawatts of power available coming out of South Africa is a new turbines that have been brought in line and synchronized in the South African English from Sealy.
That power is available or some of that power is available.
For the southern African powerful either directly.
Speaker Change: To be procured by ourselves on imports or throughs through Cisco and that powers that are substantial.
Essentially cheaper than than the existing emergency power.
Imports that are taking place similarly.
<unk> has entered into an agreement with.
Mozambique.
Additional poly imports.
On the new gas fired power station that becomes available from January.
250 megawatts from that area.
And then we have also gone into various agreements it systems highlighted earlier, including an additional 150 megawatts that we might need voice three going forward. So we are very comfortable that the commissioning of phase III.
We will not.
Be dependent on Palo issues.
Great. Thank you that's the answer I was looking for thank you.
The next question comes from Gautam.
From Canaccord Genuity.
Thank you my last question.
Thanks, guys I'm, sorry, I'm not sure what happened there interest and just a question a point of clarification, if you will.
I think you said the ICC arbitration is scheduled for a final hearing just over a year from now in September of 'twenty, five and I'm. Just wondering will that result in a binding decision.
Yeah.
Yeah, Hi, thanks for the follow up yes, thats here understanding that that's the final hearing on the RCC.
Arbitration.
This concludes the question and answer session I would like to turn the conference back over to Pascal for any closing remarks.
Thanks, operator.
Thanks, everyone I want to thank you all for your interest and time today and I wish everyone an enjoyable summer in the northern hemisphere. Thank you.
This concludes today's conference call you may disconnect your lines.
Perfect.
Paul.
Yeah.
[music].
Yeah.
Speaker Change: Okay.
[music].
Yeah.
[music].