Q3 2024 Hudbay Minerals Inc Earnings Call

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Speaker Change: Good morning ladies and gentlemen and thank you for standing by. Welcome to the Hudbay Minerals Inc. third quarter 2024 results conference call.

Speaker Change: At this time, all participants are in listen-only mode. Following the presentation, we will conduct a question and answer session.

Speaker Change: I would like to remind everyone that this conference call is being recorded today, November 13, 2024, at 11 a.m. Eastern Time. I would now like to turn the conference over to Candace Brule, Vice President, Investor Relations. Please go ahead.

Candace Brule: Thank you, Operator. Good morning and welcome to HUD Bay's 2024 3rd Quarter Results Conference Call.

Candace Brule: HUD Bay's financial results were issued this morning and are available on our website at www.hudbay.com. A corresponding PowerPoint presentation is available in the Investor Events section of our website and we encourage you to refer to it during this call.

Candace Brule: Our presenter today is Peter Kukielski, HUD-based President and Chief Executive Officer. Accompanying Peter for the Q&A portion of the call will be Eugene Lee, our Chief Financial Officer, and André Lauzon, our Chief Operating Officer.

Candace Brule: Please note that comments made on today's call may contain forward-looking information and this information by its nature is subject to risks and uncertainties and as such actual results may differ materially from the views expressed today.

Candace Brule: For further information on these risks and uncertainties, please consult the company's relevant filings on CDAR Plus and EDGAR.

Speaker Change: These documents are also available on our website. As a reminder, all amounts discussed on today's call are in U.S. dollars unless otherwise noted. And now I'll pass the call over to Peter Kukielski.

Peter Kukielski: Thank you, Candace. Good morning, everyone, and thank you for joining us for today's call.

Peter Kukielski: In the third quarter, we delivered another quarter of strong operational and financial performance with steady free cash flow generation and continued debt reduction.

Peter Kukielski: We saw record gold production in Manitoba driven by new quarterly record throughput levels at the new Britannia Mill.

Peter Kukielski: The Constantia Mill performance was also very strong, with higher levels of throughput achieved this quarter, and Copper Mountain achieved the highest copper recovery levels at the operation since inception.

Peter Kukielski: Our enhanced operating platform continues to deliver solid production and better-than-expected cost performance, enabling us to reaffirm our 2024 Consolidated Production Guidance and announce yet another improvement in our Consolidated Cash Cost Guidance for the second quarter in a row.

Peter Kukielski: Slide 3 summarizes the impressive operating performance in the third quarter.

Peter Kukielski: Consolidated copper production was 31,000 tons in the quarter in line with our mine plan expectations.

Peter Kukielski: Stronger gold production was driven by higher gold grades and mill throughput in all operations, but most notably at the New Britannia Mill in Manitoba.

Peter Kukielski: Consolidated sustaining cash costs for $1.71 per pound and all-in sustaining cash costs for $1.95 per pound, representing a similar meaningful improvement from the prior quarter.

Peter Kukielski: The lower cash costs reflect higher by-product credits, higher copper production and lower mining, milling, treatment and refining costs as a result of strong cost control.

Peter Kukielski: With the production performance to date and the continued expectations of higher copper production in the fourth quarter of 2024, we are reaffirming 2024 Consolidated Production Guidance for all metals.

Peter Kukielski: Consolidated copper production is expected to trend towards the lower end of the guidance range, while consolidated gold production is expected to trend towards the top end of the guidance range.

Peter Kukielski: Adjusted earnings attributable to owners was $0.13 per share in the third quarter.

Peter Kukielski: Turning to slide 4, our strong free cash flow generation has enabled us to make additional progress against our deleveraging targets with more than $65 million of debt and gold prepay liabilities paid back in the quarter, resulting in nearly $300 million in gross debt reduction over the past 12 months.

Peter Kukielski: This included $49 million of additional open market purchases of our senior unsecured notes during the quarter, bringing our long-term debts to $1.1 billion as of September 30.

Peter Kukielski: While a majority of our revenues continue to be from copper, our unique copper and gold diversification adds further cash flow resiliency and strong leverage to higher metal prices.

Peter Kukielski: This is seen through the increasing portion of our revenues from gold, representing 36% of total revenues in the third quarter compared to 27% a year ago, further diversifying our revenue streams and enhancing our overall financial performance.

Peter Kukielski: This brings our net debt-to-adjusted EBITDA ratio to 0.7 times compared to 1.6 times at the end of 2023.

Peter Kukielski: The improved balance sheet flexibility and accelerated debt reduction significantly advances our progress as part of our 3P plan for sanctioning Copper World and results in the successful achievement of the targeted 1.2 times net debt to EBITDA ratio well ahead of schedule.

Peter Kukielski: Subsequent to the quarter end, we took further action to improve long-term balance sheet resilience with a proactive three-year extension of our evolving credit facilities from October 2025 to November 2028.

Peter Kukielski: This provides increased financial flexibility to accretively maintain our 4.5% coupon bonds until maturity in 2026 and advance Copperworld towards a sanctioned decision in accordance with a 3P plan.

Peter Kukielski: The newly extended $450 million revolving credit facility includes an improved pricing grid reflecting the enhanced financial position of HUD-BAE and features an opportunity to increase the facility by an additional $150 million at our discretion, providing additional financial flexibility.

Peter Kukielski: Looking at our Peru operations on slide 5, we produced 21,000 tons of copper, 20,000 ounces of gold, roughly 650,000 ounces of silver, and 362 tons of molybdenum.

Peter Kukielski: Copper, gold and silver production was higher than the second quarter as the operations continued to benefit from strong mill throughput, achieving 88,000 tons per day in the third quarter.

Peter Kukielski: With the completion of the planned stripping program in Peru at the end of the third quarter, post-quarter production results have already delivered higher copper and gold grades as the mining of the high-grade zones at Pampacancha is underway, in line with the mine plan.

Peter Kukielski: We expect to achieve 2024 production guidance for all metals in Peru, with the fourth quarter expected to be the strongest quarter in Peru this year.

Peter Kukielski: Peru full-year copper production is expected to trend towards the lower end of the guidance range due to lower than expected grades.

Peter Kukielski: While gold production is expected to trend towards a higher end of the guidance range, primarily due to a larger portion of the ore feed coming from Pampacancha stockpiles containing higher gold grades.

Peter Kukielski: Similar to the second quarter, total ore milled includes supplemental ore feed from stockpiles as the team completed the pit stripping activities.

Peter Kukielski: Milled copper and gold grades increased by 7% and 57% respectively, compared to the second quarter as higher grades were mined in both the Constanza and Pampacancha pits, and there was an increase in ore mined from Pampacancha.

Peter Kukielski: Peru's cash costs were $1.80, relatively unchanged from the second quarter, as higher copper production offset higher mining and freight costs and lower by-product credits.

Peter Kukielski: Full-year cash costs are expected to be favorably positioned at the lower end of the cost guidance range, primarily due to higher gold by-product credits.

Peter Kukielski: Slide 6 highlights the operational excellence achieved at our Constantia Mill as a result of the team's commitment to continuous improvement and leading cost performance.

Peter Kukielski: When Hudbay commissioned the Constancia mill in 2014, it was designed with a throughput capacity of 76,000 tons per day. Within five months, the team had the operations fully ramped up to targeted levels, and we have consistently operated the mill above the designed throughput level since 2017.

Peter Kukielski: The strong mill performance and focus on cost efficiencies has proudly positioned Constantia as the lowest cost open-pit copper mine in South America.

Peter Kukielski: This opportunity has the potential to increase production volumes to partially offset grade declines following the depletion of pumper concha later next year.

Peter Kukielski: Moving on to our Manitoba business on slide 7. The operations delivered record results in the third quarter and continued to exceed expectations in performance and efficiency.

Peter Kukielski: Manitoba achieved a new quarterly record for gold production at 62,000 ounces, representing a 44% increase from the second quarter.

Peter Kukielski: We now expect to exceed the top end of our 2024 gold production guidance range in Manitoba. This is driven by continued outperformance at New Britannia, with throughput achieving new record levels, along with Lalo delivering better than expected gold grades by focusing on all quality improvements.

Peter Kukielski: Manitoba copper production is also expected to trend towards the higher end of the 2024 guidance range.

Peter Kukielski: and we are well on track to achieve zinc and silver production guidance.

Peter Kukielski: Total ore mined at Laula in the third quarter was 7% higher than the second quarter, with higher gold, copper, and silver grades mined. The strong mine performance benefited from improved long-haul muck fragmentation and a consistent higher-grade mining sequence that surpassed our forecasted metal grades.

Peter Kukielski: We also completed plant maintenance to enhance the efficiency and reliability of the key mine infrastructure and performed ongoing modifications to stope design to further enhance mucking efficiency throughout the life cycle of stopes.

Peter Kukielski: As mentioned, the New Britannia gold mill had another quarter of exceptional performance with throughput hitting new quarterly records of 2,080 tonnes per day, and recoveries remained strong at 90% for gold and 93% for copper in the third quarter.

Peter Kukielski: At the stall base metal mill, the third quarter had slightly reduced throughput levels as more ore was diverted to New Britannia.

Peter Kukielski: Benefits from recent recovery improvement programs continue to be realized with gold recoveries of 71 percent achieved during the third quarter. We continue to optimize recoveries at stall with the installation of new elongated cyclones in one of the two milling circuits late in the third quarter.

Peter Kukielski: These cyclones are designed to improve grain size and, pending positive performance, would be implemented across other circuits.

Peter Kukielski: This improvement was due to significantly higher gold production and higher by-product credits, partially offset by higher milling, G&A, and freight costs.

Peter Kukielski: We expect 2024 gold cash costs to be favorably positioned at the lower end of the cost guidance range, reflecting the strong cost control and gold production achieved to date.

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Peter Kukielski: We are extremely proud of the success we've had at our New Britannia mill, as summarized on slide 8. In 2021, we completed the high return brownfield investment in New Britannia and refurbished the mill with a nominal capacity of 1,500 tons per day to provide additional processing capacity at the Snow Lake operations.

Peter Kukielski: This also allowed us to achieve higher gold recoveries of approximately 90% as Lauro transitioned to the higher gold and copper areas of the mine plan.

Peter Kukielski: The mill has consistently exceeded performance expectations, achieving throughput levels of 1,650 tons per day in 2023, more than 1,850 tons per day in the first half of 2024, and reaching a new quarterly record of 2,080 tons per day in the third quarter.

Peter Kukielski: Part availability continues to improve, supported by low capital projects aimed at further increasing throughput while continuing to achieve targeted gold recoveries of 90%.

Peter Kukielski: Notably, enhancements made in the elution and stripping cycles contributed to increased gold dore production in the quarter.

Peter Kukielski: As I mentioned in August, we completed the final payment under the New Britannia Gold Prepay Facility, which further enhances our exposure to higher gold production in Snow Lake and leverage to higher gold prices.

Peter Kukielski: With approximately 2 million ounces of contained gold in current reserves and another 1.4 million ounces of contained gold in inferred resources, the New Britannia investment has unlocked significant value in Snow Lake.

Peter Kukielski: This could be further enhanced by regional exploration upside and the current strong gold price environment.

Peter Kukielski: Earlier this year, we received a permit to increase the production rate of New Britannia to 2,500 tonnes per day, which will provide the opportunity to process more alalo ore at the New Britannia mill and create additional processing capacity at store for potential new regional discoveries in Snow Lake.

Peter Kukielski: Slide 9 discusses the benefits from our stabilization plans at the British Columbia operations since our acquisition in June 2023.

Peter Kukielski: In the third quarter, British Columbia produced 6.7 thousand tons of copper, 6.3 thousand ounces of gold, and 56 thousand ounces of silver.

Peter Kukielski: This was a result of the head grades in the stockpiled ore that was used to feed the mill.

Peter Kukielski: Due to lower grades in stockpiled ore and the ramp-up of stabilization efforts throughout the year, we expect to be slightly below the low end of the 2024 guidance range for copper production in British Columbia. Gold and silver are expected to be within the 2024 production guidance ranges.

Peter Kukielski: Mill processed a total of 3.4 million tons of ore during the quarter, a 4% increase compared to the prior quarter. Mill availability averaged 95% while maintaining a stable throughput rate.

Peter Kukielski: A number of initiatives were advanced in the quarter to address identified milling constraints and improve throughput to targeted levels, with the benefits expected to be realized in the fourth quarter of 2024.

Peter Kukielski: Proper recoveries of 84% were higher than the second quarter, exceeding management's expectations despite processing lower grades.

Peter Kukielski: Cash costs were $1.81 per pound in the third quarter, 32% lower than the prior quarter.

Peter Kukielski: This was driven by lower mining and milling costs, higher production, and the benefits from the various stabilization initiatives implemented over the course of this year.

Peter Kukielski: We have successfully achieved sequential quarterly improvements in units operating costs and cash costs this year, with the third quarter of 2024 being the lowest cost quarter at Copper Mountain since HUD Bay's acquisition.

Peter Kukielski: While year-to-date cash costs are above the higher end of the 2024 guidance range in British Columbia, we expect fourth quarter costs to continue to improve and result in full year costs to be near the upper end of the cost guidance range.

Peter Kukielski: Slide 10 highlights some of the successes from the completion of our stabilization phase and the focus areas for our optimization phase.

Peter Kukielski: Mine ramp-up activities have been completed by successfully re-mobilizing all 28 haul trucks and adding five additional haul trucks this year to execute the planned accelerated stripping campaign at a lower cost and avoid contractor mining costs.

Peter Kukielski: This has successfully increased the total tons moved to 23 million tons in the quarter compared to 16 million tons in the same period last year.

Peter Kukielski: As a result, year-to-date mill performance has resulted in the highest mill availability and highest copper recoveries achieved at the Coffin Mountain mine in the last decade.

Peter Kukielski: Our stabilization efforts have successfully reduced combined unit operating costs to $19.56 Canadian per tonne year-to-date, significantly lower than $21.38 per tonne milled in the second half of 2023.

Peter Kukielski: And the third quarter represented the lowest cost quarter at Coffin Mountain since our acquisition at $15.58 per ton.

Peter Kukielski: As part of our optimization efforts to increase copper production and operating cash flow, mining activities will continue to execute the three-year accelerated stripping program to mitigate the reduced stripping that occurred over the four years prior to HUD Bay's acquisition.

Peter Kukielski: The stripping program is intended to bring higher grade ore into the mine plan and further benefit operating costs.

Peter Kukielski: These capital growth projects include the potential conversion of the third ball mill to a SAG mill to alleviate capacity limitations.

Peter Kukielski: With efforts now focused on optimizing the operations throughout the balance of 2024 and into 2025, we are well on track to realize a three-year annual operating efficiencies target of $20 million.

Peter Kukielski: Our enhanced operating platform continues to deliver meaningful cash flow generation, and together with a significantly improved balance sheet and financial flexibility, we are well positioned to advance our many growth initiatives and unlock significant value in our copper pipeline.

Peter Kukielski: Slide 11 discusses CopperWorld, the next greenfield copper development project in our pipeline, which offers significant copper exposure and highly attractive project economics.

Peter Kukielski: Copper World is one of the highest grade open pit copper projects in the Americas with mineral reserves of 385 million tons at 0.54% copper in phase 1.

Peter Kukielski: The project generates an NPV of $1.1 billion and an after-tax internal rate of return of 19% at a copper price of $3.75 per pound.

Peter Kukielski: We remain committed to prudently advancing Copper World in accordance with our 3P plan as shown on slide 12.

Peter Kukielski: In August, we achieved a significant milestone with the receipt of the Aquifer Protection Permit from the Arizona Department of Environmental Quality.

Peter Kukielski: We work closely with the ADEQ throughout the process, ensuring transparency and providing comprehensive and detailed information.

Peter Kukielski: With the receipt of the Aquifer Protection Permit, we have commenced activities related to the preparation of feasibility studies.

Peter Kukielski: As previously announced, we increased growth capital spending in Arizona by an additional $25 million to account for this early feasibility work.

Peter Kukielski: The final required permit is the Air Quality Permit, which was submitted to the ADEQ in late 2022 and has followed a similar robust process, including a public comment period that concluded in September 2024.

Peter Kukielski: Upon receipt of the final permit, we intend to commence the Minority Joint Venture Partnership process.

Peter Kukielski: The potential partner is anticipated to participate in the funding of Definitive Feasibility Study activities in 2025, as well as in the final project design and construction of COFWRLD.

Peter Kukielski: We look forward to prudently advancing Copperwell to a sanctioned decision, which is not expected until 2026 based on current estimated timelines.

Peter Kukielski: Once in production, Copper World is expected to be a meaningful copper producer in the United States domestic supply chain.

Peter Kukielski: The made-in-America copper cathode anticipated to be produced is expected to be sold entirely to domestic US customers and would make Copperwell the third largest cathode copper producer in the United States.

Peter Kukielski: We have several exploration opportunities as part of our long-term growth pipeline, and we remain focused on advancing many of the high-priority initiatives as noted on slide 13.

Peter Kukielski: In Peru, our exploration activities surrounding the Maria Reina and Caballito properties near Constancia continue to focus on permitting and drill preparation.

Peter Kukielski: As part of the drill permitting process, environmental impact assessment applications were submitted for Maria Rainer in November 2023 and for Caballito in April 2024.

Peter Kukielski: The Environmental Impact Assessment for Maria Reina was approved by the government in June 2024 and more recently, in September, the Environmental Impact Assessment for Caballito was approved.

Peter Kukielski: This represents one of the several steps required as part of the drill permitting process, which we anticipate will be completed in 2025.

Peter Kukielski: In Manitoba, we continue to execute our large 2024 exploration program focused on extending known mineralization near Lalor to further extend mine life, as well as find a new anchor deposit within trucking distance of the Snow Lake processing infrastructure.

Peter Kukielski: The 2024 program included the largest geophysical program in the company's history in the region, completing surface electromagnetic surveys over a 25-square-kilometer area, detecting targets at depths of more than 1,000 meters.

Peter Kukielski: The company had eight drill rigs turning in snow length during the quarter, including two drills completing follow-up drilling at Laloor North West, located within 400 metres of the existing Laloor underground infrastructure.

Peter Kukielski: The other six drill rigs were testing new geophysical targets and completing follow-up drilling at potential regional satellite deposits.

Peter Kukielski: One of the geophysical targets is a very strong deep anomaly located at Cook Lake North, approximately six kilometers from Lalor. Drilling activities are expected to continue throughout the winter season and assay results are pending.

Peter Kukielski: At the 1901 deposit we continue to advance the exploration drift from the existing Larlor ramp and the drift is expected to reach mineralization in early 2025.

Peter Kukielski: We plan to conduct definition drilling next year to confirm the optimal mining method, evaluate the ore body geometry and continuity, and convert inferred mineral resources in the gold lenses to mineral reserves.

Peter Kukielski: Additionally, in Flin Flon, we continue to advance tailings reprocessing studies to evaluate the potential to repurpose the existing Flin Flon concentrator, which is currently on care and maintenance, to reprocess tailings.

Peter Kukielski: The tailings reprocessing opportunity is expected to recover critical minerals and precious metals while creating environmental and social benefits for the region.

Peter Kukielski: An early economic study to evaluate the opportunity has confirmed the potential for a technically viable reprocessing alternative, so we have further engineering work underway.

Peter Kukielski: Including on slide 14, HUD Bay's leading copper development and exploration pipeline and low-cost stable operating platform in Tier 1 jurisdictions offers investors meaningful copper exposure, complementary gold exposure, and strong near-term cash flow generation.

Peter Kukielski: We produce approximately 150,000 tons of coffer per year, which is further augmented by our complementary gold exposure that offers cash flow resiliency in volatile pricing environments.

Peter Kukielski: We believe that copper has the best long-term supply and demand fundamentals in the sector as global copper mine supply will be unable to meet demand from global decarbonization initiatives and growing copper demands.

Peter Kukielski: HUD Bay's strong operating platform and resilient balance sheet offers significant upside potential for further value creation at higher copper and gold prices.

And with that, we are pleased to take your questions.

Thank you. We'll now begin the question and answer session.

Speaker Change: To join the question queue, you may press star then 1 on your telephone keypad. You'll hear a tone acknowledging your request. If you are using a speakerphone, please pick up your handset before pressing any keys. To withdraw your question, please press star then 2.

Speaker Change: The first question is from Oris Wachedel with Scotiabank. Please go ahead.

Oris Wachedel: Good morning. My question is around the cold in Manitoba. Obviously a very strong Q3.

Speaker Change: I'm just curious, is this, are you, with the gold price environment the way it is, are you...

Speaker Change: pre-prioritizing the mining plan here to focus on the gold zone versus the base metal zone and I guess I'm trying to figure out if you're seeing better than expected grades or if you're just focusing on the gold zone versus base to drive the better grades.

Speaker Change: Good morning. Our host is Peter. Thanks very much for the question. And the answer to your question is no, not at all.

What's your feedback on these gold mines?

Sure, sure. Yeah, Orris, like Peter said, we're not...

Speaker Change: We're just following the mine sequence. Lawlor is just naturally becoming more gold rich over time as it transitions. The upper part of the mine was more base metal rich.

Speaker Change: that within the, and I think we mentioned on the last.

quarterly calls.

The teams that really put in place...

significant effort on dilution.

Speaker Change: and we sample all of our blast holes and something that was new for us in the last year or so and we're really seeing a lot better benefits on our dilution control and we're seeing better grades than we were projecting in some of the block models.

Speaker Change: Can you give us any kind of insight in terms of what gold grade you're anticipating for next year in Manitoba?

Speaker Change: We're still right in the middle of, you know, wrapping up the final stages of our budgets for next year.

Speaker Change: But it's very, very similar to the course of this year. We're expecting that same sort of range. We'll get some clarity on that as we get forward.

in the future.

Speaker Change: Okay, and just separately if I could, you're languaging around the potential throughput expansion at Constantia. I feel like it's changed a bit from last quarter where it sounded last quarter it sounded like it was more imminent potentially as early as 26.

Speaker Change: Your languaging in the release today talks more about medium to long-term opportunity. Am I reading anything into that or has something changed?

Speaker Change: I'm not sure what you're eating, Stuart, but what I would say is with the increased throughput of the government's...

Speaker Change: have allowed us to do is, you know, immediately, actually this month, we're doing trials on pebble rejection at Costantia, looking for additional throughput and enhancing the grades.

Speaker Change: with the capital raise that we did last year right in the middle of engineering. Right now, pebble crushers for Cassantia to, again, increase throughput, balancing off some harder ores post-Pampa concha.

Speaker Change: The teams are actively looking at ways to hit that targeted throughput. It used to be a barrier for us. It's no longer a barrier.

Speaker Change: We're working on it as we speak, so it's not something that's as long-dated as what you said.

Okay, perfect. Thank you.

Speaker Change: The next question is from Ralph Profitti with AID Capital. Please go ahead.

Ralph Profitti: Thanks, operator. Good morning, everyone. I just want to piggyback off the last question and ask you, Peter, you know, given the performance of Constancia, both from a throughput perspective and a cost perspective, if

Ralph Profitti: scaling up the operation beyond the 10% regulatory allowance is kind of something that's entering your mind, you know, sort of the planning stage or the pre-planning stage.

Ralph Profitti: Good morning, Ralph. I think, I mean, Andrew answered most of that, but I think that...

You know, we've always looked at the idea of

Ralph Profitti: being ready with Constancia for such time as we bring some of the satellites into operation down the road.

Ralph Profitti: So, you know, having constancy ready to operate at higher levels is a key component of that.

Speaker Change: If Andre has any more details, why don't you go ahead? Sure. So in addition to what I just mentioned to Orest, the teams are in the middle of a permit application renewal. It's just a normal course of business for us to do that.

Speaker Change: We're looking at things like expansion of our flotation to match the increased throughput that we're looking at.

Speaker Change: potential increases in grinding capacity and in longer term we have a modification 4 that's coming up that we're contemplating.

have those potential great discoveries at Marine Oriented Caballito.

Speaker Change: Okay, okay, and just to follow up on what you mentioned, when is the team going to be in a position to...

Speaker Change: Can you give us a picture on what an expanded drill program for Marirena and Caballito look like? It sounds like something like towards the end of 2025, once those drill programs or permits are in place. Is that kind of how we were thinking about sort of how many meters and potentially the cost of that expanded drill program?

Speaker Change: Well, we do expect to be drilling it in 2025, like you mentioned.

Speaker Change: There's a range of, depending, it could be upwards of up to 300 drill platforms at its peak, and so it'll be quite an exciting

a drill program for us.

Speaker Change: It's something we've been talking about for a little bit, and we're really looking forward to seeing that as the future. The cost in terms of that program, I think we'll give guidance on that into the new year on our forecast for exploration. We're just finalizing the budgets, and we'll have some better clarity by that time.

Speaker Change: We expect the government to go through the consulta previa process early in the new year.

Speaker Change: Thanks for your answers. Well, to add to that, you know, we are in the final stages of permitting at this point and we're permitting both Maria Rainer and Caballito at the same time, so in parallel right now to make it more efficient and to provide us with a little bit more optionality.

Speaker Change: The next question is from John Tomasos. Is John Tomasos very independent research? Please go ahead.

Thank you. Thank you.

Thank you.

Speaker Change: Congratulations on the half billion dollar debt repayment and all the great progress.

Speaker Change: including cutting the project finance debt target for Copper World to US$350.

If you just had half of the free cash flow

in the future quarters.

Speaker Change: As you just had 86 million in the third quarter, you generate another almost 400 million U.S. of free cash by the time copper world construction might start at the beginning of 27.

Why sell 30% of it?

Speaker Change: Why not sell only 20% of it or keep it all?

Speaker Change: It might be better than the next project at Mason in Nevada, or it's hard to find a substantially better project.

Speaker Change: John and Peter, thank you. First, thank you for your kind words.

Speaker Change: Yes, Copper World is certainly a high-quality project, and yes, we don't need a partner.

Speaker Change: But for a variety of reasons, we likely will want one. Now, we're not wedded to a number of 30%, for example.

Speaker Change: But there are several reasons why we might want one. I think it all comes down to value and maximizing returns and creating optionality around our broader pipeline of opportunities across the portfolio. But perhaps to give you a little bit more granular detail, I'll ask Eugene to address some of your questions.

Eugene Lee: Thanks Peter and thanks for your question John. As Peter mentioned, I think what we're looking to do is maximize the risk-adjusted

Eugene Lee: value creation for shareholders and given the current market for minority pieces of scarce copper mines

We've already seen robust interest in Copper World

Eugene Lee: to receive a strong valuation for that minority piece given its grade and capital intensity.

Eugene Lee: Bringing in a partner provides us the opportunity to prudently build copper world with lower leverage and with much lower leverage than we had to do with Constancia over a decade ago.

Furthermore, the recent preemptive extension of our revolver

allows us increased financial flexibility through the end of 2025.

to determine the most attractive debt-equity mix.

as we go forward.

Eugene Lee: and part of that consideration in 2025 will be some of the other projects.

within the pipeline, these high-return brownfield projects.

Speaker Change: in Peru and in Manitoba to allocate capital to, again, create value for shareholders on a balanced basis. But as Peter mentioned, you know, this...

The extension of the revolver gives us that

Speaker Change: optionality to make those decisions on what is exactly the right mix and in terms of the partner and the value and the value proposal that will be on the table for us to consider.

Speaker Change: So there's more good news that's going to come from Peru and Manitoba that's going to take some capital.

We hope so. Agreed. Very good.

Thank you.

Thank you, Joe.

Speaker Change: Our next question is from Dalton Baretto with Canaccord Genuity. Please go ahead.

Speaker Change: Thanks, operator. Good morning, Peter and team, and congratulations on a great quarter. A couple of questions for me on Copper World, just given the incoming Trump administration. I guess first I want to ask,

Speaker Change: Do you think that you can accelerate any of the permitting process for phase two over the next couple years or the next four years? I guess

Speaker Change: It's premature to say what might be possible with Phase 2. I think the first thing we'd look at to see is whether the Mining Clarity Act actually passes through the Senate.

Speaker Change: If it does, then that probably makes Phase II, it simplifies Phase II and it also simplifies Mason.

I think you know that.

Speaker Change: The NPV of Phase 2 is such that it's so enormous that the extent whereby we can bring it forward creates massive value for the company and our shareholders, and we'll do everything that we can to do that.

Speaker Change: But also remember that we've got the concentrate leaching facility to put in place. But I have no doubt that once we're in operation, once we've stabilized, once we've ramped up, we'll turn our minds to getting Phase 2 underway, getting Phase 2 permitted as quickly as possible.

Speaker Change: I got it. Thank you, Peter. And then my second question was, does CompoRoad qualify for the Section 45X Advanced Manufacturing Credit? And is that baked into your estimates right now?

Speaker Change: concentrate leaching facility would apply for it. And in fact, we did make a provisional application to the government. It was favorably received, but it's too early to actually get it in the queue.

Speaker Change: If President-elect Trump should cut the corporate tax rate to 15%, is there anything you can do to sort of lock it anywhere around that rate over the life of the mine?

Speaker Change: I don't think so. I don't think so, Dawson, but we'd certainly take a look at it.

Great. Thanks very much, Peter. That's all for me.

Thank you.

Speaker Change: The next question is from Craig Hutchinson with TD Collins. Please go ahead.

in the copper world.

Yes.

Speaker Change: Oh, the air quality? Sorry, sorry. So, it is going well.

Speaker Change: I would say, you know, we have confidence in the state's permitting process because as we've told you several times, I believe that it's a scientific-based process, and we've been working very closely with the Arizona Department of Environmental Quality to ensure that they've got all the data they need.

Speaker Change: It follows a similar process to that of the Aquifer Protection Permit, and it's been progressing very well. As you know, the Aquifer Protection Permit was received in August, in line with our timing expectations.

Speaker Change: Now, the public comment period for the air quality permit was completed in September, and we were very, very pleased with the level of local support that was received during that comment period.

Speaker Change: So, the permit's on track to be received in late 2024. The ADEQ assures us that it's on track.

Speaker Change: So we expect it to be delivered in late 2024, but honestly, with Thanksgiving and Christmas coming up, it would not surprise us if it slipped into early 2025, which would be no big deal, but we are assured by the ADEQ that it's on track.

Okay, great. And just on the joint venture partnering,

Speaker Change: Is there an expectation that you guys will be looking for some kind of upfront payment relative to the sunk cost to date, or is the expectation just sort of a go-forward basis? You mentioned the feasibility study and obviously anything going forward. Thanks.

Speaker Change: Yeah, I think that we would expect to receive an equity contribution for the value.

Speaker Change: that the project represents. So for sure there'd be there'd be an equity contribution and then we would look and then plus whatever the required capital contribution for the project is.

Okay, great, thanks.

Speaker Change: Once again, if you have a question, please press star then 1.

Speaker Change: The next question is from Pierre Rellencourt with Haywood Security. Please go ahead.

Speaker Change: Thanks. Peter or Andre, I'm wondering if you can give me a little more insight on Copper Mountain and specifically the timeline to steady-state. I mean I recognize that

Mill availability's improved, the throughput is...

Speaker Change: Is there any kind of ability to accelerate that, you know, given your success here?

Speaker Change: Okay so I'll start off by saying that the team and I are sitting here at Copper Mountain right now so we're actually doing this conference call from the Copper Mountain office.

Speaker Change: and we're really, really pleased with what we're seeing over here. So, you know, John Ritter and the team are doing an extraordinary job of bringing things along. We always said this wasn't going to be easy, but they're hitting it out of the park. Things are going pretty well.

Speaker Change: But for a little bit of granular detail on where things are and what's required, I'll let Andre respond to that.

So thanks for the question and

It's an interesting one.

Speaker Change: What I'd say, and I echo what Peter says, is we're quite pleased with the progress. So it's on a number of fronts, whether it's increasing the mine throughput, whether it's record mill recoveries, the mill availability, you know, like we said on the other...

The stabilization is is it's almost complete so we're

Speaker Change: you know, there's some puts and takes. There's a little bit, you know, although the stripping is

Speaker Change: is definitely increasing and we're very pleased with it. We still would like a little bit more, and the teams are working on with some additional trucks and ramping up people a little bit slower, but overall, I'd say it's going as planned.

Speaker Change: It's a three-year project. So it's it's so when you say that is it going slow. It's something it's what it is is we

Speaker Change: You know, we're in the middle of a construction project, the technical report...

Speaker Change: showed us getting to 50,000 tons per day by 2027. And with a capital raise that we just did last year, the board just approved us to do some early works in preparing for what we call SAG-2, which is a conversion of ball mill three.

Speaker Change: And that is the next sort of stage of mill throughput to get to that 50,000 tons a day. So we're in the process right now of ordering longlead items.

Hello.

Speaker Change: Commissioning of that, you know, we hope to have it done by the end of next year and commissioned into the mid-26, which is ahead of that, you know, ahead of the schedule that in the technical report of into 2027.

So, I'd say when you look at a three-year window...

Well, we're...

Speaker Change: We're on track. In fact, we're probably a little bit ahead.

Speaker Change: and there's just like any, call it construction project, which is the way that we look at this.

Speaker Change: you know, there's ups and downs and the team is working really hard and there's initiatives everywhere that you look in terms of the operation. I would say the real focus right now is getting that mine throughput up over the next year because that unlocks

the high-grade material in Pit 3.

Speaker Change: is that capital project. One thing I didn't mention is like we...

Speaker Change: We just recently put in place as well a new set of liners, it was engineered and designed and we expect higher throughput. Those were just installed I think about a week ago and we're in the middle of ramping up that as well too. So we're expecting some subtle ramp ups in mill throughput towards the end of this year but the big jump will be into next year and towards the end of the year with the commissioning of.

and conversion of ball mill 3 to a SAG mill.

Speaker Change: Okay, thanks. And so, this year, are you going to reach 40,000 tons per day? Are you going to exit?

Speaker Change: I think we expect by the end of the year to be finishing out the year averaging about 40,000 times per day.

Thank you.

Speaker Change: and Peter in terms of I mean I realize it's it's a bit of a moving target but when you talk about securing a partner for for Copper World what what's your

Speaker Change: What's your target? Is that kind of second half of 25s?

Speaker Change: I would say as soon as we have the air quality permit in hand, we'll launch a formal process and I expect that process will take on the order of four months or so. So we would have the partner on board I expect in the first half of the year.

Speaker Change: The next question is from a follow-up from Oris Wachedau with Scotiabank. Please go ahead.

Oris Wachedau: Hi, thanks for taking the follow-up. More of a housekeeping question on my end.

Oris Wachedau: Can you remind me on slide 7, your Manitoba operations review, where you show the combined statistics here?

Oris Wachedau: Can you just remind me why the gold recovery is at 63.6%? Why is it so much lower than the 2 mils reporting at 90 at New Brit and 70 at Stahl?

Eugene Lee: Hi, this is Eugene here. On slide 7, that gold recovery is only the gold recovery from concentrate. So that's the 60-odd percent. At Newbridge, it's the combined gold cost from recovery from concentrate, and Dory is 90%. You'll see that in the MD&A that we actually, there's a more specific line. This is only the recovery from concentrate.

Speaker Change: This concludes the question and answer session. I'd like to turn the conference back over to Candace Brule for any closing remarks.

Candace Brule: Thank you, operator, and thank you everyone for joining us today. If you have any further questions, please feel free to reach out to our investor relations team. Thank you.

Speaker Change: This brings to a close today's conference call. You may disconnect your lines. Thank you for participating and have a pleasant day.

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