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

Speaker Change: To join the question queue, you may press star then 1 on your telephone keypad. Should you need assistance during the conference call, you may signal an operator by pressing star then 0.

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.

Speaker Change: 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: HudBay'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.

Speaker Change: For further information on these risks and uncertainties, please consult the company's relevant filings on CDAR Plus and EDGAR. These documents are also available on our website. As a reminder, all amounts discussed on today's call are in U.S. dollars unless otherwise noted. And now I'll pass the call over to Peter Kukielski.

Peter Kukielski: Thank you, Candice. 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: This was largely a result of our unique copper and gold production diversification with strong operating cost control that provides attractive free cash flow generation, expanding margins, and strong leverage to higher metal prices.

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: 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: I'll go into more detail on our quarterly achievements throughout today's presentation, along with updates on our exciting growth initiatives that are underway.

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

Peter Kukielski: Consolidated gold production was 89,000 ounces, well exceeding management expectations and representing a 52% increase from the second quarter.

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: Operating cash flow before change in non-cash working capital was $186 million, 53% higher than the second quarter due to higher gold production and sales volumes in Manitoba, strong operational cost performance across the business, and higher realized gold prices.

Peter Kukielski: Similarly, adjusted EBITDA was $206 million, a 42% increase compared to $145 million in the prior quarter.

Peter Kukielski: This has resulted in trailing 12-month adjusted EBITDA of $840 million, substantially higher than the $499 million a year ago.

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

Peter Kukielski: And with $86 million of free cash flow generation in the quarter, we have now delivered five consecutive quarters of meaningful free cash flow generation as a result of recent Brownfields investments in our operations, continuous improvement efforts, and steady cost control across the business.

Peter Kukielski: Turning to slide four, 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: As a result of the impressive cash flow generation and deleveraging efforts, we have reduced net debt by more than $500 million over the past 12 months.

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.

Peter Kukielski: reflecting the enhanced financial position of HUD Bay 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 five, 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, while gold production is expected to trend towards the higher end of the guidance range.

Peter Kukielski: primarily due to a larger portion of the ore feed coming from pumpacantra 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: Copper recoveries were relatively unchanged from the prior quarter, while gold recoveries increased to 68%.

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: All-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, 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 design throughput level since 2017.

Peter Kukielski: We've seen further increases in milk throughput this year, averaging 87,000 tons per day year-to-date, representing a remarkable 15% increase above nameplate capacity. And as mentioned earlier, the milk processed 88,000 tons per day in the third quarter.

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

© transcript Emily Beynon

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 oz, representing a 44% increase from the second quarter.

Peter Kukielski: The operations also produced 3,000 tons of copper, 8,000 tons of zinc, and 281,000 ounces of silver during the quarter.

Peter Kukielski: The increased gold and silver production is due to our strategy of mining and allocating more linoleum gold ore feed to New Britannia to achieve higher recoveries combined with higher precious metal grades mined in the 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 LaLure 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 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.

Peter Kukielski: 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 planned 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 tons 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 oil was diverted to New Britannia.

Peter Kukielski: Benefits from recent recovery improvement programs continue to be realized with gold recoveries of 71% 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.

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

Speaker Change: 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.

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

Speaker Change: 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.

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

Speaker Change: Our stabilization efforts have focused on opening up the mine by reactivating the full mining fleet, adding additional mining phases, optimizing the oil feed to the plant, and implementing plant improvement initiatives that mirror the successful processes at Constantia.

Speaker Change: 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.

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

Speaker Change: 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.

Speaker Change: Gold and silver are expected to be within the 2024 production guidance ranges.

Speaker Change: 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.

Speaker Change: 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.

Speaker Change: Proper recoveries of 84% were higher than the second quarter, exceeding management's expectations despite processing lower grades. This was the result of improvements in the regrind circuit constraint and implementation of flotation operational strategy improvements, including reagent selection and dose modification.

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

Speaker Change: 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.

Speaker Change: 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.

Speaker Change: 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.

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

Speaker Change: 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.

Speaker Change: 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.

Speaker Change: Mill stabilization activities have been completed and have resulted in stronger mill performance as demonstrated by record mill availability of 95% and record copper recoveries of 84% achieved in the third quarter.

Speaker Change: 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.

Speaker Change: Our stabilization efforts have successfully reduced combined units 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.

Speaker Change: And the third quarter represented the lowest cost quarter at Copper Mountain since our acquisition at $15.58 per ton.

Speaker Change: We already achieved and exceeded the targeted $10 million in annualized corporate synergies earlier this year.

Speaker Change: 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.

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

Speaker Change: Mill throughput optimization activities will focus on advancing various engineering studies to increase mill throughput to its permitted levels of 50,000 times per day earlier than was originally contemplated in the technical report.

Speaker Change: These capital growth projects include the potential conversion of a third ball mill to a sag mill to alleviate capacity limitations.

Speaker Change: 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.

Speaker Change: 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.

Speaker Change: Slide 11 discusses Copper World, the next greenfield copper development project in our pipeline, which offers significant copper exposure and highly attractive project economics.

Speaker Change: 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 I.

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

Speaker Change: We remain committed to prudently advancing Copper World in accordance with our three-key plan as shown on slide 12.

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

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

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

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

Speaker Change: 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.

Speaker Change: Upon receipt of the final permit, we intend to commence a Minority Joint Venture Partnership process.

Speaker Change: 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.

Speaker Change: We look forward to prudently advancing Copper World to a sanctioned decision, which is not expected until 2026 based on current estimated timelines.

Speaker Change: Once in production, Coffee World is expected to be a meaningful coffee producer in the United States domestic supply chain.

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

Speaker Change: 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.

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

Speaker Change: 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.

Speaker Change: 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.

Speaker Change: 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.

Speaker Change: 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.

Speaker Change: The company had eight drill rigs turning in Snow Lake during the quarter, including two drills completing follow-up drilling at Lalor Northwest, located within 400 meters of the existing Lalor underground infrastructure.

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

Speaker Change: One of the geophysical targets is a very strong, deep anomaly located at Cook Lake North, approximately 6km from Lalo. Drilling activities are expected to continue throughout the winter season and assay results are pending.

Speaker Change: At the 1901 deposit, we continue to advance the exploration drift from the existing Larlow ramp, and the drift is expected to reach mineralization in early 2025.

Speaker Change: 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.

Speaker Change: 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.

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

Speaker Change: 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.

Speaker Change: 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.

Speaker Change: 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.

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

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're 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 Walkadel with Scotiabank. Please go ahead.

Oris Walkadel: Hi, good morning. My question is around the cold in Manitoba. Obviously a very strong Q3.

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

Oris Walkadel: 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

Peter Kukielski: Good morning, Laura. This is Peter. Thanks very much for the question, and the answer to your question is no, not at all.

Peter Kukielski: We don't focus on those gold zones. New Britannia is performing extremely well at the moment, so we send what we can there. But Storl is performing really well as well. You will have seen that recovery that Storl has reached 70% of gold, whereas a long time ago it was about 50%. But Andre, do you have any further comments for us?

Sure, sure. Yeah, or as Nick Peter said, we're not.

Peter Kukielski: Peter Kukielski, Ph.D.: Prioritizing we're just following the mind sequence smaller is just naturally becoming more gold rich over time as it transitions. The upper part of the mind was more base metal rich

within the, and I think we mentioned on the last.

quarterly calls.

that the teams that really put in place.

significant effort on dilution.

Peter Kukielski: and we sample all of our blast holes. It's 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: 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 potential throughput expansion at Constantia. I feel like it's changed a bit from last quarter.

Speaker Change: where last quarter it sounded like it was more imminent, potentially as early as 26. 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 reading, Stuart, but what I would say is, with the increased throughput that the government's...

at Costantia looking for additional throughput and enhancing the grades.

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 and we're working on it as we speak.

So it's not something that's as long-needed as Fuji said.

Okay, perfect. Thank you.

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

Speaker Change: Thanks, Operator. Good morning, everyone. I just want to piggyback off the last question and ask you, Peter, given the performance of Constancia, both from a throughput perspective and a cost perspective,

Speaker Change: Well Ralph, I think, I mean I'll let Andrea answer most of that, but I think that

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

Speaker Change: being ready with constancy for such time as we bring some of the satellites into operation down the road.

Speaker Change: 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 Horst, was like the teams are in the middle of a permit application renewal. It's just 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: Peter Kukielski, M.D.: Potential increases in grinding capacity and then longer term, we have a modification for that's coming up that we're we're contemplating

Speaker Change: about permitting potentially for a third line, but we wouldn't sanction that until we were at a stage where, you know, success with Marina and Caballito, but we're definitely looking at how to have all of the permits in play and time it right when metal price is right, or we

have those potential great discoveries at Marine Oriented Caballito.

Speaker Change: Okay, okay, and and 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...

Thank you for that 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.

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.

Don and Peter, 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 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

Peter Kukielski, Peter Kukielski.com

Eugene Lee: We've already seen robust interest in the copper world, and we expect that.

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.

allows us increased financial flexibility through the end of 2025.

to determine the most attractive debt-equity mix.

Eugene Lee: As we go forward, and that will be part of that consideration in 2025 will be some of the other projects.

within the pipeline, these high return ground field projects.

Eugene Lee: 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.

Eugene Lee: gives us that optionality to make those decisions on what is exactly the right mix.

Eugene Lee: and in terms of the partner and the value proposal that will be on the table for us to consider.

We hope so. Very good. Very good. Thank you.

Thank you.

Thank you, Joe.

Speaker Change: Our next question is from Dalton Barretto with CanaCore Genuity. Please go ahead.

Dalton Barretto: 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,

Dalton Barretto: 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

Peter Kukielski: for phase two. First of all, thanks for the kind words, Dalton. I think that ...

Peter Kukielski: 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.

Peter Kukielski: If it does, then that probably makes Phase 2, it simplifies Phase 2 and it also simplifies Mason.

I think you know that.

Peter Kukielski: The NPV of phase two 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: I got it. Thank you, Peter. And then my second question was, does ComboRoad qualify for the Section 45X Advanced Manufacturing Credit? And is that baked into your estimates right now?

Speaker Change: No, it doesn't qualify for it. There's a possibility that the 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: 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.

Thank you. Thank you.

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

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

Andrei: for a little bit of granular detail on where things are and what's required, I'll let Andrei respond to that. Sure, I'll give you the granular.

so thanks for the question and

It's an interesting one.

Andrei: What I'd say, and to 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...

Andrei: The stabilization is almost complete, so we're, you know, there's some puts and takes. There's a little bit, you know, although the stripping is...

Andrei: 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.

Andrei: 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

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

Andrei: showed us getting to 50,000 tents per day by 2027 and with a capital raise that we just did last year, you know, the board, you know, just approved us to do some early works in preparing for what we call SAG-2, which is the conversion of Baum-L3.

Andrei: 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.

Andrei: We hope to have it done by the end of next year and commissioned into the mid-26, which is ahead of the schedule in the technical report of into 2027.

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

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

Andrei: And there's just like any, call it construction project, which is the way that we look at this. You know, it's, there's ups and downs and the team is working really hard and there's initiatives everywhere that you look.

Andrei: in terms of the operation. I would say that 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.

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

We just recently...

Andrei: put in place as well. A new set of liners, it was engineered and designed, 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 three 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.

Okay, okay.

Peter Kukielski

Speaker Change: And Peter, in terms of, I mean, I realize it's a bit of a moving target, but

Speaker Change: When you talk about securing a partner for Copper World, 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.

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 65%. At Nubrid, it's the combined gold recovery from concentrate and Dory is 90%. You'll see that in the MD&A that we actually, there's a more specific lineup. This is only the recovery from concentrate.

Okay, perfect. Thank you.

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.

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Greg Barnes, Orest Wowkodaw,