Q3 2024 Capstone Copper Corp Earnings Call
[inaudible]
Good afternoon, ladies and gentlemen, and welcome to Capstone Copper's Q3 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 require immediate assistance, please press star zero for the operator. This call is being recorded on Thursday, October 31, 2024. I would now like to turn the conference over to Mr. Daniel Zampieri. Thank you. Please go ahead.
Daniel Zampieri: Thank you, Operator. I'd like to welcome everyone to Capstone Copper's Q3 2024 conference call. Please note that the news release and regulatory filings announcing Capstone Copper's 2024 third quarter financial and operational results are available on our website and on CDAR Plus.
If you are logged into the webcast, we will advance the slides of today's presentation, which are also available in the Investors section of our website.
Daniel Zampieri: I am joined today by our CEO, John MacKenzie.
our President and Chief Operating Officer, Cashel Meagher, our SVP and Chief Financial Officer, Raman Randhawa,
Daniel Zampieri: our SVP Risk, ESG, and General Counsel, Wendy King, and our SVP Technical Services, Peter M. Olungson, is also available at the end of the call.
Following our brief remarks, there will be an opportunity for questions.
Daniel Zampieri: 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 expressed today.
For further information on the risks and uncertainties pertaining to our business, please see Capstone's most recent filings, which are available on our website and on CDAR Plus.
Daniel Zampieri: And finally, I'll 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 MacKenzie.
John MacKenzie: Thank you, Daniel. Good afternoon, everyone in North America and Europe, and good morning to those dialing in from Australia.
We're pleased to present our third quarter 2024 results and achievements.
John MacKenzie: Starting with slide 5.
In Q3, our operations delivered consolidated copper production of 47,500 tonnes at consolidated C1 cash costs of $2.83 per pound.
Very importantly, during the quarter we had several major achievements at our mines in Chile.
At our flagship Montevideo development project, we achieved commercial production levels in September.
John MacKenzie: This is a tremendous accomplishment within three months of producing first concentrate from the plants.
John MacKenzie: We also completed our first two concentrate shipments, with the copper concentrate meeting all required specifications.
John MacKenzie: At Montes Blancos we undertook a two-week shutdown to install the new equipments that will allow us to unlock the design capacity of the plant.
John MacKenzie: Following these milestones and the Q3 results, we've noted that we expect it to finish at the low end of our 2024 production guidance.
We revised our C1 Cash Cost Guidance to $2.60 to $2.80 per pound, mainly as a consequence of the ramp-ups at Monteverde and Montes Blancos commencing later in the year than we had expected.
On the corporate side, our net debt was largely unchanged at $751 million as at September 30th.
Our balance sheet is in excellent shape as we ramp up Monteverde ahead of our next phase of growth.
And many more. Thank you. Thank you.
John MacKenzie: During the quarter we also provided our leadership succession plan that will take effect at our AGM in May next year.
The announcement followed a thorough and orderly succession process to ensure continuity of leadership and continued success of the company.
Speaker Change: It has been a privilege to serve as the Chief Executive Officer of Capstone Copper since March 2022, and I'm thrilled to be nominated to the role of Board Chair at our next AGM.
I was also very pleased to announce that Cashel will be appointed as our next CEO.
I have every confidence in Cashel to lead the execution of our next stage of growth at Capstone.
Speaker Change: including our Monteverde Optimised and Santo Domingo projects.
Jim Whittaker will succeed Cashel as COO, and this will also allow us to flatten our organisational structure with all mine general managers reporting directly to the COO.
Speaker Change: We also announce today that Jerrold Annett has retired after five years with Capstone to spend more time with his family.
Jerrold has been an important contributor to Capstone's success over the past five years and we thank him for all of his contributions and wish him all the best in retirement.
Thank you for watching. We appreciate it.
Speaker Change: Turning to slide six.
Earlier in October, we released a feasibility study for our Mantavere Optimise project.
MV Optimized is a capital-efficient, brownfield de-bottlenecking project that will expand the existing sulphide concentrator at Monteverde from 32,000 to 45,000 tonnes per day.
leveraging the excess capacity in existing infrastructure.
Speaker Change: This project will bring on an additional 20,000 tons of copper per year for an initial capital of just below 150 million dollars, implying a super low capital intensity of $7,500 per ton of copper equivalent production.
Speaker Change: This positions us to produce over 120,000 tons of copper per year at Monteverde for the next 10 years with cash costs of $1.80 per pound.
Importantly, when combined with the release of our updated Santo Domingo feasibility study earlier in July, we have now defined the next transformational phase of growth for Capstone and our world-class Monteverde-Santo Domingo district in the Atacama region of Chile.
We see ourselves producing copper via these two processing sensors in this well-endowed district for many decades to come.
Monteverde and Santo Domingo are separated by only 35 kilometres.
and we have identified multiple options to serve a significant further value in the coming years.
And with that, I'll pass over to Raman for our financial results.
Raman: Thank you, John. We are now on slide 7.
Raman: In Q3, we recorded copper production of 47.5 thousand tons, reflecting growth of 16%, quarter over quarter, driven by the initial production from the ramp-up of MVDP.
As a result of the ramp-up, as expected, we have started to build up some concentrated inventory and some accounts receivable, which resulted in copper sales being below payable production levels by 1,500 tonnes this quarter. That difference between payable production and sales equates to approximately $5-6 million of EBITDA.
LME copper prices during the quarter averaged $4.18 per pound, down 8% compared to $4.42 per pound in Q2.
Speaker Change: Our realized copper price of $4.24 per pound was slightly above the LME average as a result of our QP hedging program.
Speaker Change: We rely strong gross margins of $1.41 per pound or 33%.
C1 cash cost of $2.83 per pound included made-in-unit cost of $2.52 per pound from Mantoverde Development Project.
In September, the NBD's sulfide posted cash costs were $1.83 per pound.
When combined with the larger production volumes from MBDP, this will drive a significant reduction in our consolidated unit cost in Q4 and beyond.
Speaker Change: As John mentioned, we have increased our consolidated C1 cash cost guidance for 2024 to 260 to 280 per payable pound of copper produced.
The cost increase is largely driven by production volume impact by the start of the MBDP and Mantles Blankles ramp-ups occurring later in the year than originally expected and the corresponding knock-on effect to our unit cost.
At Mantles Blankos, we have also experienced a higher year-to-date spend than expected driven by additional maintenance, plus extra materials and labour to complete the de-bottlenecking work to unlock the plant's nameplate capacity.
Across the rest of the portfolio, our
Speaker Change: Turning to EBITDA, adjusted EBITDA in Q3 of $120.8 million nearly doubled year-over-year and was down only 2% quarter-over-quarter despite the 8% decline in copper prices.
Going forward, our financial results will be impacted by the achievement of commercial production at MVDP in September.
Speaker Change: The achievement of commercial production triggers a few items for Q4 financials, which include additional finance charges being expensed versus capitalized, and the commencement of depreciation and depletion on the NBDP capitalized cost.
Speaker Change: We expect our finance expenses to increase by $25 million per quarter, which includes interest on shareholder loans.
Speaker Change: This includes both cash finance expenses like the interest on our debt facilities and other non-cash finance charges.
Similarly, we expect our annualized depreciation to increase by approximately $80 million, which is mainly calculated on a units of production basis and some straight line amortization.
Moving on to slide eight.
On the left-hand side, we summarize our available liquidity, which as at September 30, 2024 was $516 million, which includes $139 million of cash and short-term investments and $377 million of undrawn amounts on our $700 million corporate revolving credit facility.
Speaker Change: Of note, in the quarter, we commence repayments on our project finance and cost overrun facilities at Mantoverde in conjunction with the ramp-up of operations.
Our net debt of $751 million is largely unchanged from the prior quarter, and we are now entering the next phase of deleveraging with a ramp-up of MVDP to full production rates.
The chart on the right-hand side illustrates our EBITDA sensitivity at various copper prices. We are now on the cusp of the light blue bar, which represents EBITDA of close to $1 to $1.3 billion at copper prices between $4 to $4.50 per pound, with NBDP at four run rates.
The EBITDA generation associated with Mantra Verde will enable us to focus on generating free cash flow to de-lever our balance sheet with a pathway to below 1x net leverage at spot copper prices.
This provides a strong platform from which to advance our future growth pipeline in terms of Manitoba already optimized and Santo Domingo.
Now I'll hand it over to Cashel for the operations review.
Cashel: Thanks, Ron. We're on slide nine.
Pinto Valley produced 13,980 tonnes of copper at a C1 cash cost of $2.92 per payable pound during Q3.
Speaker Change: throughput average 45,000 tonnies per day in the quarter which was below our expectations.
Speaker Change: Driven by unplanned maintenance.
For the last few quarters we had seen positive progress and higher throughput after kicking off an asset integrity program. The third quarter showed that this initiative is required to improve the reliability of the plant and it continues to be implemented.
Despite these unplanned interruptions, Pinto Valley is on track with respect to the guidance we provided at the beginning of the year.
Speaker Change: and many more. Thank you. Thank you.
Moving to slide 10.
Cozumin Mine delivered another solid quarter, producing 6,025 tonnes of copper at C1 cash costs of $1.82 per payable pound.
Cozumel has remained very consistent despite rolling out a higher volume of cut-and-fill mining methods this year, in addition to the operation of the Pace backfill plant.
Our Mantos Blancos asset is highlighted on slide 11.
Speaker Change: Total sulfide and cathode production yielded 9,974 tonnes of copper at a C1 cash cost of $3.41 per payable pound.
While production and costs were similar to what we've seen in the last couple quarters, they do not tell the whole story.
of what was a very significant quarter at Mantos Blancos.
In July, we concluded a two-week shutdown to tie in key pieces of equipment that we identified were required to ensure more consistent throughput at the back-end tailings handling area of the plant.
Speaker Change: On the right-hand side of the slide, you'll see the new surge tank and fourth positive displacement pump.
Speaker Change: In August, the plant ramped back up, and starting from the middle of that month, we averaged over 18,000 tonnes per day, which is a significant improvement over the past few quarters.
These modifications, now completed, are allowing increased plant utilization as designed. We expect to continue with higher output in Q4, which will increase copper production and significantly lower our unit costs.
Also of note in Q3, recovery's improved to a more normal 82% from a low of 73% in Q2.
After a short-term localized geotechnical issue in Q2, impacting mine planned sequencing of grades and recoveries.
Speaker Change: Copper grades are also expected to improve in the fourth quarter back into the 0.8 to 0.9.
Speaker Change: range from sub point eight in the last two quarters.
Thank you for watching. Bye.
Overall for the year, production and costs at Mentos Blancos are trending
Speaker Change: unfavorably.
relative to the guidance ranges we provided in January. However, our confidence levels at Mantos Blancos today are much higher than they have been at any point over the last two years and will continue to increase daily production rates through to the end of the year.
Now on to Mantle Verde on slide 12.
where it was a transformational quarter.
Total sulfide plus cathode production yielded 17,481 tonnes of copper, a significant increase driven by a meaningful 8,139 tonnes from the Mento Verde development project.
After producing first concentrate near the end of Q2 in June, we ramped up quickly and efficiently in July and achieved facility practical completion with our construction partner Elsenco.
Speaker Change: This followed the achievement of seven days operating near nameplate capacity of 32,000 tons per day. This prompted a two-week shutdown at the beginning of August.
During that time, we took over operation of the plant, and all of the OEMs were on-site to provide their final sign-off on warranties for all the equipment.
Post the shutdown starting in the middle of August, we again ramped up efficiently and achieved commercial production in September.
Our quarterly average throughput, of course, includes the downtime and ramp-up periods, but in September we averaged 26,200 tonnies per day.
Speaker Change: Grades reconciled well with the mine plan and block model, posting 0.71% copper in the quarter.
Speaker Change: We are excited by the recoveries we have seen so far as well. After normalizing for work-in-process inventory builds, we have implied metallurgical recoveries of around 78.2% in the quarter and above 80% in August and September.
Additionally, we delivered our first two concentrate shipments, which met all required saleable specifications.
This was a significant milestone. We are very proud of the accomplishments to date by the project and operating teams.
Mantle Birdie is poised to produce more consistently and reliably through the fourth quarter.
Thank you for watching. Bye. Bye.
Speaker Change: Turning to slide 13.
Speaker Change: But a month ago, we released the results of a feasibility study for our Mental Virity Optimized Project.
Speaker Change: Check.
This is a capital efficient.
and near-term brownfield growth opportunity at Capstone.
Speaker Change: that leverages available excess capacity in our crushing and grinding circuits at our Monteverde Concentrator plant, providing the option to increase throughput from 32,000 to 45,000 tonnes per day plant feed.
Speaker Change: at a capital-efficient cost of $146 million.
Speaker Change: On slide 14.
The plan presented for MV Optimize represents the next major growth in the evolution of our world-class Manta Verde Santo Domingo District.
MV Optimize will increase production to an average of over 120,000 tonnes of copper and 40,000 ounces of gold per year over its first 10 years.
Speaker Change: On the bottom right of the page.
You can see that the study outlines
and NPV at 8% discount of anywhere from $2.9 billion at $4.10 per pound copper to close to $4.5 billion on a 100% basis at just over $5 per pound copper.
Speaker Change: Turning to slide 15.
We've highlighted some of the key differences from the new NV-Optimized study relative to the last technical report release for Mental Virility Development Project.
First, the mine life has been extended to 25 years, and it's important to note this has also been done without any additional drilling, as Mantoverde hasn't seen a comprehensive exploration program since before 2019.
This additional mine life and throughput is enabled by an increase in the total sulfide reserve by 67%.
with now 394 million tonnies classified as reserve.
The resulting life of mine yields a slight decrease of head grade and an increase in stripping requirements.
Speaker Change: Opportunity remains, though.
Opportunity remains through exploration drilling in what we at Capstone view as an excellent exploration prospectivity along the Akatatikama Fault for higher grades and potential mineral that can be accessed with less stripping.
And as previously mentioned, the plant throughput is to be increased from 32,000 to 45,000 honeys of ore per day.
On the bottom of the slide, we've profiled the larger production profile.
Speaker Change: both over the first 10 years.
and over the extended life of mine.
In the middle, we highlight the attractive cash costs with first 10 years at $1.82 per pound of copper, and life of mine cash costs around $2 per pound.
The increases in sustaining and deferred stripping CapEx relative to the old plan incorporate the larger operation with more tonnies moved and higher throughput, while also being refreshed for the inflation that we have seen since the 2021 technical report was released.
Speaker Change: I'm not sure. I'm not sure. I'm not sure. I'm not sure.
Turning to slide 16, the MVO study outlines an initial expansory cost of $146 million. This implies a very low capital intensity of $7,500 per tonne of annual copper equivalent production, and of course compares very favorably
to other projects profiled.
Santa Domingo, which is also shown on the slide, also compares very favorably. There is no better place for us to build another mine than 35 kilometers down the road from where we just successfully completed construction at the Manfiberti Development Project.
Turning to slide 17.
We show the combined MVSD district production potential on the left-hand side, with the first three years of combined production averaging around 250,000 tonnes of copper, at a very attractive cash cost.
Over time, we plan to further augment these base case numbers with additional opportunities, including processing San Domingo oxides at Mento Verde.
continuing to explore the district to improve our understanding of the long-term potential and assessing the viability of byproduct cobalt production.
Speaker Change: On the right, you can see the various copper occurrences identified to date in the district.
We are very excited by the potential for future exploration on our own properties, as well as the opportunity for other sterilized deposits to eventually become future feeds for our processing centers in the district.
Now over to Wendy King for the sustainability review.
Wendy King: Thank You Cashel. We're now on slide 18 with a review of our sustainability highlights for Q3.
At Santo Domingo, we opened a Community Engagement Office to keep the community informed and engaged on developments as the project ramps up.
Speaker Change: At Mantos Blancos, we celebrated the 20th anniversary of our partnership with the Delta UCN program.
Speaker Change: Annually the education program is offered to nearly 500 elementary and high school students in the Anifagasta region.
Speaker Change: This year the program was expanded to provide mental health support to more than 100 university students.
We're very proud of the positive impact this collaboration has had over the years on the education of young people in the region.
Also in Chile, Capstone Copper received the 2024 Best Mid-sized Company of the Year Award from Tsunami, the Chile Mining Association.
A key aspect of the award is the recognition for Capstone's ESG practices and community engagement.
At Cozumel in Mexico, we published a biodiversity handbook.
This was based on a site monitoring program where we worked with six biologists to gather and classify the data over two years.
Speaker Change: During the quarter, Cozumel also partnered with his contractors to replant two hectares of land with native species.
Speaker Change: And at Pinto Valley in Arizona, we replaced three diesel-fired engines with electric units, with further plans to replace two more units in Q4 as part of our PV electrification project.
This program will provide scope 1 reductions for carbon emissions.
And with that, I'd like to pass it back to John.
Thanks, Wendy.
Turning to slide 19.
John MacKenzie: We've outlined our sector-leading growth plans and some of the additional upside within our portfolio.
As can be seen, we expect MVDP at its full run rate to bring us to a consolidated annual production level above 250,000 tonnes of copper, at costs in the low $2 per pound range.
From there, the Monteverde Optimized plus Santo Domingo projects would take us to around 400,000 tons of copper production per annum at even lower cash costs.
We intend to proceed with Monteverde Optimised following the receipt of a DIA permit amendment.
We filed for the DIA permit earlier this year and expect receipts in the first half of 2025.
Speaker Change: We plan to finance this project through internally generated cash flows.
At Sunset Domingo, we're progressing with the assessments of the optimal financing structure for the project.
We are looking at this in a very similar manner to what we were able to achieve at Monteverde.
Speaker Change: Included in this, we've recently commenced a process to bring in a partner at the minority level.
We're also advancing discussions with respect to a project finance facility, which we see forming a part of the financing package for Sunset Domingo.
Before a potential sanctioning decision at Santo Domingo, we also want to see all of our assets operating at or near full production levels and our consolidated net debt to EBITDA at below one times.
And, of course, we will also be mindful of the overall macroeconomic environments.
As such, we believe we will enter a sanctioning window for Sons of Domingo later in the second half of 2025.
Speaker Change: Beyond these projects, we further upside across our portfolio with another low-risk brownfield expansion opportunity at Montesblancos, additional flexibility in the MVSD district to unlock more copper and potentially by-product cobalt production.
and the potential developments of another major copper district around our Pinto Valley mine in Arizona.
Speaker Change: Turning to slide 20
We highlight the timelines for some of the studies that I've mentioned, and for other milestones as we execute on our growth plans.
This is a significant year for Capstone, and the third quarter marks an important step in the transformation of our business, with tangible delivery on our peer-leading growth.
Over the past few months, our operations in Chile exhibited meaningful milestones at both our flagship Monteverde development project, where we achieved commercial production, and at Montes Blancos, which is now enabled to deliver its nameplate capacity.
Speaker Change: We expect the fourth quarter to be our strongest of the year, providing a glimpse of the future capstone with a larger production base and lower unit operating costs.
At Capstone, we're now extremely well positioned to become a leading, long-life and low-cost copper producer, playing an important role in supporting the world's decarbonisation efforts.
Speaker Change: With that, we're now ready to take questions.
Speaker Change: Thank you. Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press star, followed by the 1 on your telephone keypad. You will hear a prompt that your hand has been raised. And should you wish to cancel your request, please press star, followed by the 2. If you are using a speakerphone, please lift the handset before pressing any keys.
One moment, please, for your first question.
Your first question comes from the line of Oreswell Caddell from Scotiabank. Please go ahead.
Thanks and good evening. And maybe I could start just by congratulating both John.
Oreswell Caddell: and Jerrold on their retirements, and congratulations to Cashel on the new role.
Oreswell Caddell: I wanted to focus on the Mano Verde Sulphide Project. You've been operating now for a couple of months. Are you seeing any area of the operation, whether it's mining, crushing, grinding, flotation, etc.,
You are seeing any concerns that could limit your ability to ramp up or achieve a consistent Call it 32,000 times a day by by the end of the fourth quarter. Just wondering if there's any area Where you see some risks right now
Hi Ernest and thanks for that question and thanks for the congratulations although I would say my retirement is intended to remain pretty closely involved in the business.
So, you're going to be hearing more and more.
So, you know, I'll be passing this across to Cashel for a more granular response on that, but just from my perspective, you know, I've been involved in quite a number of mine ramp ups.
I've been extremely pleased with what I've seen at Montevideo to date. You know, the equipment has been, I'd say, over-designed in pretty much every area.
we've been able to run the plants at.
Speaker Change: many continuous days.
Speaker Change: and without any bottlenecks appearing.
Speaker Change: So, you know, obviously there's work to be done on, you know, making sure we get ultimate sort of operational continuity and getting our operators trained up to operate the equipment, you know, well.
You know, when we look at it from the mine, the mine is operating really well, it's the reconciliation between the block model and what we're actually mining is spot on.
Speaker Change: Thank you.
The performance of each piece of equipment, whether it's sort of crushers or mulls or flotation, I was just talking to Peter on Luxon earlier today.
He was just amazed at how we haven't had...
Any issues you know down downstream with you know things like filtration and
Pickening, etc.
Speaker Change: tailings dams in place.
Speaker Change: the
Speaker Change: The diesel plant is ramped up really nicely.
So, you know, at this point, certainly from my perspective, I'm really pleased with what I see. And, you know, I'm looking at this through two lenses, one of which is our current ramp-up and the other of which is, you know, the subsequent Montevideo Optimise project.
and looking to further wind this equipment up to actually do 45,000 tonnes a day rather than 32,000 tonnes a day. And I've got to say, I'm really encouraged there as well. We're not seeing anything that makes us...
Speaker Change: pause in terms of the capability of the plant to ultimately get to that level. But Cashel, can I ask you just to sort of add to that?
Cashel: Yeah sure, so you know obviously everything John said is correct and it's it's very encouraging.
You know, no ramp up goes without interruptions, and we've had interruptions, but fortunately, they've been ones we've been able to mitigate. You know, early on, we had a failure in a motor, but we had a spare motor. That motor is eminently the spare repaired to be delivered back.
Cashel: soon. We did have some constraints in our cleaner circuits and we took a minor downtime to be able to address that by increasing pumping capacity and pipe diameters.
It was actually restricting some of the grade we could put through, so now, fortunately, we can put through the higher grade that Manitoba already has to offer. So, I'd say they're normal issues, and then now we're dealing with minor issues. It's optimization of reagents. It's setting control parameters for operators.
You know things like the desal plant has now been stress tested and can supply the total amount of water we require. All of the sand production is going quite well at the tailings dam.
Speaker Change: So, knock on wood, it's been going really well, and we think that we've been driving out the variability in the process, and then this brief modification I said to the cleaners.
We see ourselves well capable of achieving that full nameplate production before the end of the year, consistently.
Speaker Change: Cashel, do you want to talk to us?
Yeah, I'm not going to give perfect numbers. There's still today to be complete. So but it's going really well. We're in the high 20s. Yeah.
and Emma coverage, so it's going really well.
Speaker Change: Yeah, so recoveries are going well too.
Speaker Change: We had what we called a build-up. We had to build the inventory within the bedding of the thickener and the cracks and crevices.
We also had those issues, I said, with the cleaners, so we actually have a storage pond on site that we've got to reprocess some concentrate. So our metallurgical recovery has been in the low 80s right now, this month, and prior to that we were just near 80.
So it's going really well. And like I said, there's some optimization on the cleaner, rougher circuits, some reagent optimization, and all those things are being done now. So it's nice to be able to not have to focus on throughput and to be able to focus on metallurgical
characterizations, so to speak, and optimize that now going forward in the Q4.
Speaker Change: Perfect. And just another quick one if I could. I didn't see anything in the release on CapEx guidance for this year. Is the previous number, the $470 million, is that still valid at this point or has that changed?
Speaker Change: Yes, sorry John, or it says largely unchanged. We had authorized a bit of expiration that we had kind of noted earlier in the year.
Speaker Change: Thank you.
Thank you, and your next question comes from the line of Frault. Proceedee from 8 Capital, please go ahead.
Thanks, operator. Thanks, Steve, for taking my questions. I just want to get a little bit more specific on recoveries, Cashel at Mantel Verity. Are you now through the in-process inventories and into the run-of-mine ore and just thinking about how we get from sort of 80% to the 88% design rate and would that 88% be sort of like a year-end 24 target? Is that conceivable?
Yeah, I think it is conceivable. In my experience, we have Peter on the line here, but I would say in my experience, you know, there's always a sequence to ramp up.
Speaker Change: You know, there's mechanical, there's warranty, then there's throughput, then there's optimization on recovery. And we're really near the end of the throughput. Obviously, we had the facility practical completion where we had consecutive days at nameplate throughput.
Speaker Change: Now we're working on operational controls, but you know, wait, we have Peter on the line. So maybe Peter can talk to the process of getting to the desired recovery.
I'd like to echo John and Cashel's comments that I'm very happy with what I'm seeing on the performance of the plant to date, both in terms of tonnage and recovery.
The recoveries of about 80% to 82% right now are a combination of losses in the roughing circuit and then the cleaning circuit. The cleaning circuit should be running...
for a well-designed, well-operating plant should be somewhere around 98%, and most of the losses should be in the roughing circuit.
Speaker Change: In our case, however, because of the constraints that we had in the cleaning circuit,
The operators have had to slow down the cleaning circuit, producing higher-grade concentrates and sending more copper out to the cleaner tails, and as a result, the recoveries in the cleaning circuit have generally been around about 90%, 88-92% in that range, much lower than what we would expect after we de-bottlenecked that.
The changes were made roughly late last week, earlier this week we put in the new pump, so we still haven't seen the final results.
The operators are going to require some time as well to learn how to operate the circuit at the higher throughput rates, but...
in general with what I'm trying to say is that...
If we were to have a recovery issue around the design, we would generally see symptoms of that in the roughing stage, and we're not seeing any of that. So the rougher recoveries are above.
Speaker Change: 90% and we have lots of residence time. We have about 34 minutes in the roughers and about 35 minutes in the cleaner scavenger. So overall, I'm very very encouraged by what I'm seeing from the metallurgical data on a day-to-day basis.
Thank you very much.
Speaker Change: Yeah, great. Thanks for that commentary, Peter. And, you know, Pinto Valley, a bit of a step back in Q3, and I see in the presentation we're now into its 50th year. You know, if Raman wants to chime in here, how are you thinking about sort of sustaining CapEx going forward? Historically, I see a run rate sort of $50, $60 million per year. Just wondering, as that operation ages, how we should be thinking about, you know, that part of the equation.
Speaker Change: Yeah, well if you have a question, I mean...
Speaker Change: Well, I think, I think.
So yeah, what I'd suggest is maybe,
Speaker Change: Cashel, if you want to just...
Speaker Change: start off just by introducing what we're doing in terms of, you know, the asset management framework, because I think, Raman, after that, I'd ask just to speak to the actual kind of, you know, sustaining CapEx, but
You know, to me, it's more about actually having the right preventative maintenance program and the right asset management framework in place.
to make sure that that equipment, you know, operates sort of at or above design. So maybe if I can just ask Cashel to comment briefly on that and then skip across to Raman.
Jerrold, what we're implementing is an asset management framework, and the reason is two of our mines have elderly infrastructure, we'll call it, whether it's sort of outdated electrical components, conduits.
Speaker Change: Tiring, steel, fatigue, even down to where you sort of have pipes and pipe brackets require replacement.
is at Pinto Valley, we were getting unplanned events of breakdowns of some of these structural, electrical, mechanical components that are critical to the throughput.
consistency. And so when you take these unplanned events, they're really the ones that are conspiring
to Pinto Valley, missing targets.
Speaker Change: periodically. So we started last year, we brought in a team that's implementing at all our mine sites an asset management framework. It's got 15 components in it that address all the different components of asset integrity, asset management and maintenance.
everything sort of from the procurement chain right through to inspection, repair, time to repair, all those types of systems and processes. And we've started implementing it and we got some really quick wins which was great.
at the start of the year out of Pinto Valley, and we were achieving much higher production with less unplanned. But we had a couple events in the last quarter that were, we would call them one-off events. We had a principal
conveyor that moves the ore from our primary crusher to our tertiary crusher system and that conveyor failed.
Speaker Change: the belt split and it turns out that it was a splice that was done a year before and the vulcanization was found to be of poor quality.
Speaker Change: So it's about, we want to have a system set up that we have good evaluation on these systems and processes. That was quite a...
It wasn't that it was catastrophic that it broke anything, it took a long time to bring that back online over a week and we lost those production days. So those are the things we're trying to drive out of the system now are those unique events.
by having regular, proper inspections, more modern techniques and systems brought to bear on assets that ostensibly are 50 years old, as you mentioned. So, those are the things we're doing to improve it. And so, with that, I'll hand it off to Raman for your original question around the CapEx.
The CapEx number you mentioned, Ralph, is kind of that range. We're in that 70 to 80 for the next few years as we continuously reinvest in the place and upgrade different components of the place over time.
Speaker Change: Okay, great. I appreciate that. Thanks to the team for their answers and let me also echo the congratulations on the leadership transition. Very encouraging to see the continuity of the strategy. Thanks very much all.
Speaker Change: Thanks, Ralph.
Speaker Change: Thank you. And your next question comes from the line of Craig Hutchinson from TD Cowen. Please go ahead.
Craig Hutchinson: All right, good afternoon, guys.
I wonder if I could ask a similar question that Oris asked from Monteverde, but ask it at Montes Blancos. How are things kind of progressing here in October with respect to throughputs and the pickup in grades that we were expecting? Thanks.
Thanks, Craig, and I'll pass that straight across to Cashel just to talk about.
Speaker Change: Yeah, it's a similar story, Craig, to Pinto Valley in that some of the components are aging and we are also implementing an asset management framework and we've already been seeing the benefits of that. I mentioned in my script that
Speaker Change: that we just reviewed that, you know, we were over 18,000 tons a day for August, September, and I would echo we're doing better in October than we had in August and September. So that's very encouraging.
Speaker Change: Another very encouraging thing is obviously, you know, recoveries are improving. So that's very encouraging. And then the other one is, is we had a sort of, in the start of the year, we had a small geotechnical issue in the mine that forced us to re-sequence the mine and
had us going to slightly lower grades and and that's solved also. So the work we did with the shutdown of the two weeks to be able to
Speaker Change: remedied the back end by putting in an extra positive displacement pump because really the three pumps were required to be online 100% of the time so we needed one in rotation to maintain
Speaker Change: What we see is, of course, is when you remedy one bottleneck, something else becomes the next bottleneck. And so we do have some improvements in our hydroscreens and cyclones on the coarse fraction of the tailings.
Speaker Change: But we do see where we are now, that we will hit several days in a row at the nameplate capacity that we speak about for that particular
Speaker Change: Bye.
Speaker Change: And so, what we see is incremental improvement week over week, month over month, where we're approaching now in the high teens, like I said, we're sort of steady at 18,000, so we believe we've got a very robust plan to get us to that nameplate capacity to the start of the year, the new year.
So we're pretty pleased with the progress we've made. I think some of the modifications we've done have been impactful and transformational there and now the team can concentrate on some of the smaller items, things like recovery, to be able to bring that up and improve on that end of it.
Speaker Change: Thank you for watching. Bye.
and many more. Thank you for watching. I hope you enjoyed this video. If you did, please like and subscribe. I'll see you in the next video.
Okay, great. Maybe just a follow-up question for me. Raman mentioned about a target to get below one times leverage before, I guess, you guys make a decision on Incentive Domingo. Do those leverage targets also apply to the Monteverde optimization project?
Speaker Change: Home.
Yeah, I'll let Raman sort of comment in more detail about that, but you know overall I think, Craig, we have a relatively sort of conservative approach to how we manage our balance sheet, how we finance.
and you know we're not
inclined to, you know, put the company at risk by, you know, rushing forward with any capital projects that are
Speaker Change: You know that are
Speaker Change: sort of potentially going to stress our balance sheet in any way. Monteverde Optimized is a fairly specific situation because to an extent that operation is a little bit ring-fenced by the project financing facility that we have in place.
Now what I can say is in the discussions we've had with our project financing banks, they're actually tremendously enthusiastic about us going ahead with Monteverde Optimized
and so some of the things that are in our current covenants like cash sweeps
Speaker Change: review those with a view to, instead of cash sweeps, reinvesting sort of some of that cash flow into Montevideo, optimised instead.
Speaker Change: But overall, when we look at our leverage levels, I think we're pretty quickly going to be coming to that one-time net debt to EBITDA during the course of next year.
Speaker Change: Regardless, we should be in a position by the time we move forward with months of aid optimised that we're
Speaker Change: sort of
Speaker Change: certainly on a leading basis we're at that at that ratio whether where it sits on a lagging basis Raman's probably got a better insight into
Speaker Change: Raman
Raman: Yeah, I mean...
Speaker Change: I agree with everything John said, Craig, and I mean, when you look at MB optimizers, we'll work through with the banks in terms of amendments on the PF and ability to reinvest,
Raman: When you look at Manta Verde in 2025 on a full run rate basis, I mean you're talking operating cash flow $450-500 million less than stripping, so you can tell just based on the cash flows at the site level, it'll be sufficient to kind of spend that $146 million.
over a 12-month period and obviously it's got a very quick payback. So, and look, doing that in step while we're doing the financing for San Domingo obviously just improves our EBITDA and helps actually get lower, get to that one times even faster if you think about it that way.
Speaker Change: Okay, great. Thanks, guys.
Thank you. And your next question comes from the line of Adam Beaker from Macquarie. Please go ahead.
Adam Beaker: Hi John and Sam, thanks for the call. Just wondering if we could get an update on how the Santo Domingo minority sell-down process is going and when we should receive an update on this and maybe if you could give us a feel for the type of parties who are in the data room there. Thanks.
Speaker Change: Yeah certainly so you know we've
Speaker Change: It's relatively recently that we have released the actual technical report, the full technical report for Sunset Domingo. So obviously we couldn't really progress the process until that was available for parties to look at. So that's been done.
I've been very pleased with the sort of interest and enthusiasm that's that's been shown of we've got now many parties in the in the data room you know I
Speaker Change: I was across in Japan last week together with our Head of Corporate Development. We met with quite a number of Japanese parties that are currently in the data room. I think those were very constructive discussions.
Speaker Change: something which is also interesting is just the sort of emergence of interest of a lot of the sovereign wealth funds in the Middle East again we've got quite a number of parties from
Speaker Change: from there, who are in the data room.
and then a bunch of others, I would say, so there's been a wide-ranging interest.
Speaker Change: At the end of the day, we need to look at all these parties, we need to sort of consider what gets put on the table, but we also need to consider that...
Speaker Change: that we need to make sure that there is good strategic alignment between ourselves and whichever party is finally selected to move forward with us. So, you know, I think...
Speaker Change: There's good progress, but I think it's probably going to be a couple of rounds. I think we're probably looking towards sometime in the first half of next year to be able to provide you with any sort of meaningful update.
That's cool, thanks for that. And maybe just one on the BHP Copper Cities project. From memory, the last update was the exploration agreement had been to September 2024. Could you maybe remind us what the next steps are there?
Speaker Change: Yeah, certainly. I think we've extended that, as far as I recall, to July 2025, so that carries on. We're currently jointly doing some studies in terms of what the optimal district looks like.
Speaker Change: and you know those studies need to be be concluded before we can then kind of move from there into the the commercial conversations but I think you know proceeding very well at this point.
Speaker Change: Thanks, Jerrold. I'll hand it over. Cheers.
Adam Beaker: Thanks, Adam.
Speaker Change: Thank you, and your next question comes from the line of Dalton Barreto from Canaccord Genuity. Please go ahead.
Dalton Barreto: Thanks, operator. Good evening, everybody. And Jerrold Cashel, sorry, John Cashel, congratulations. And also to Dan for stepping into Jerrold's very big shoes. Most of my questions have been answered. Just one for me, maybe for Cashel.
Dalton Barreto: There used to be some talk some time ago about the new tailings facility at Pinto Valley and how the water reclaim system there would unlock a deep bottlenecking up to 70,000 tons per day. I'm just wondering where that stands right now. Thanks.
Speaker Change: Cashel, I'll give it to you. Yeah, sure, John.
Yeah, we're working through designs there.
Speaker Change: I would say that it's probably something early
Speaker Change: first half of next year where we'll be in a position where we can disclose our new life of mine plans at Pinto Valley for a base case. And then that too, we'd be able to align some of the optionality that's available to us at Pinto Valley.
Speaker Change: So, you're quite correct that a new tailings dam could offer the opportunity for reclaimed water. It could also give us the opportunity to upgrade the horsepower in the current milling system.
Speaker Change: By doing that, then the circuit would be capable of more throughput. We know we have the capacity in the crushers as installed already. So there is all of that opportunity. And those are the things we're sort of working with. It's actually connected with the work that's being done.
Speaker Change: for the Copper Cities opportunity also, because really, to unlock the greater district, what you need is more capacity, because most of the ore in the region is of the same grade, you know, between 0.3 and 0.35.
Speaker Change: There's available in resource.
Close to maybe 2 or 3 billion tons available in the district. And so there are many different iterations between ourselves and BHP we're looking at. And our base case is to optimize Pinto Valley itself.
Speaker Change: Thank you.
Speaker Change: Thanks, Cashel. That's actually a good segue into my follow-up question. So as you do think about the broader district and as you go to the asset reliability program,
Speaker Change: Are you comfortable with the old Pinto Valley mill eventually being sort of the base case or at some point in time do you think you'll need a new mill?
Speaker Change: Thank you.
Speaker Change: It's a great question. It's one we discuss a lot. Having a mill is the best asset and fixing that mill is the best asset. So I suspect in all the cases that that mill in one form or fashion will be utilized.
Speaker Change: There's all sorts of permutations. I don't know which one is going to win in the race.
Speaker Change: But you could see yourself if you wanted to increase capacity to over a hundred thousand tons. You could simply put a sag mill in front
Speaker Change: and then utilize these ball mills and maybe then use some of that
Speaker Change: excess crushing you have to be able to perpetuate some of our sulfide leaching, for example. So there are a number, I think the guys had between 10 and 15 different options that they were sorting through. The other one is building a completely new complex.
Speaker Change: using several criteria, like, you know, execution, risk is very important also, permitting risk is very important, water is very important.
Speaker Change: Like you said, new tailings facilities is very important. So all these things are being considered in there But we're evaluating all those options
Speaker Change: Cashew MacKenzie, Jerrold Annett, Wendy King, Ramanpreet Randhawa, Cashel Meagher, Cashel
Speaker Change: Got it. Thanks, Cashel. That's all for me.
Speaker Change: Thank you for tuning in.
Speaker Change: Thank you, and you're next.
Speaker Change: Thank you. And your last question comes from the line of David Radcliffe from Global Mining Research. Please go ahead.
David Radcliffe: Hi, good morning, good afternoon, everyone. So my question is a follow-up on Mentos Blancos.
David Radcliffe: I'm wondering if the delays you've experienced and the learnings from those impact on the thoughts for a Phase 2 at the project and the current study? So, I mean at this stage it sounds like you're still confident you can get to capacity with the recent works, but do you think that Phase 2 needs any additional works to the original scope to improve performance redundancies going forward?
Speaker Change: Yeah, David, I'll give a brief comment and then just pass it across to Cashel.
Speaker Change: You know to ultimately to get from 20 up to somewhere between 27 and 30,000 tons a day
Cashel: We've got an existing plant, so we need to understand exactly where the bottlenecks lie. Now what we do know is that we've got significant surplus crushing capacity.
Cashel: We've certainly got adequate milling capacity to get us to between 27,000 and 30,000.
Cashel: So it's really sort of downstream from there that we need to properly identify where the the bottlenecks lie and So until we've actually got the operation running at its sort of steady state current sort of nameplate capacity it's
Cashel: It's not optimal to be trying to define exactly
Cashel: what the best engineering is to move it to that next stage.
Cashel: So, we know we have the sort of resource base to support this growth, that's in fact the optimal throughput rate today is probably somewhere between 27 and 30,000 tonnes a day.
Speaker Change: But, you know, I think at this stage we really just want to be running steady state at design and from that we can then, you know, we can push the various parts of the system.
Cashel: to be able to see, you know, where exactly do the bottlenecks lie and what is the most efficient way of spending capital to get us to that next
Cashel: sort of step upwards and whether you know that's best done in
Speaker Change: one step or in multiple steps. Cashel have you got anything you'd like to say to that? No I think I think you covered it John, thanks.
Speaker Change: All right. Brilliant. Thank you. I'll pass it on.
David Radcliffe: Thanks David.
Speaker Change: Thank you and there are no further questions at this time. I will now hand the call back to Mr. Chad MacKenzie for any closing remarks.
Chad MacKenzie: Thanks operator. So we look forward to welcoming some of you to our operations in Chile in a few weeks time for our analyst and investor site tour. After that we'll update you again in February with our Q4 results.
John MacKenzie: Until then, stay safe and feel free to reach out to Daniel or Michael if you have any further questions.
Speaker Change: Thank you for your continued support, and have a good day.
Speaker Change: Thank you, and this concludes today's call. Thank you for participating, and we all disconnect.