Q2 2025 Capstone Copper Corp Earnings Call
Good afternoon and welcome to Capstone. Coppers second quarter, 2025 results conference call.
Thank you, operator. I'd like to welcome everyone to Capstone Copper's Q2 2025 conference call. Thank you for joining us today.
please note that the news release and Regulatory filings, announcing Capstone Copper's, 2025 second, quarter financial and operational results are available on our website and on Cedar Plus
If you are logged into the webcast, we will advance the slide of today's presentation which are also available in the investor section of our website. I am joined today by our president and CEO cash Lamar, our SVP and Chief Operating Officer, Jim Whitaker and our SVP and Chief Financial Officer Robin randhawa during the Q&A session. At the end of the call, we will also be joined by our SBP risk, ESG and general counsel Wendy King, and our head of Technical Services. Peter Molson for available for questions.
Please note that the comments made on the call. Today will contain forward-looking information within the meaning of a 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 at www.capone.com and on Cedar plus. And finally, I'll just note that all amounts. We will discuss today are in US Dollars unless otherwise specified, it is. Now my pleasure to turn the call over to cash Lamar joining us for the first time in his new role at CEO. Thank you Daniel, and hello to all of you dialing in from the Americas Europe, Australia, and around the globe.
Today, we are pleased to present our second quarter 2025 results and achievements.
As I conclude my first couple of months, as CEO, I'm proud of how we have transitioned as a company for the last few years.
From a period of building and ramping up Minds to a period of execution with the focus on safety and operational excellence.
We are positioned extremely well. Our ramp ups are complete. Our production is increasing and our costs are coming down.
We have a very strong financial position.
We remain committed to protecting the resiliency of our business through safety operational execution and maintaining our strong balance sheet.
And of course, we are focused on copper which makes up over 90% of our revenues.
Copper is in the spotlight with government, signaling is strategic importance and strong lme prices.
We continue to see robust demand and believe the medium and long-term fundamentals, remain attractive.
Turning to slide 5.
In Q2 our operations delivered Consolidated copper production of 57.4 thousand, tons at a Consolidated, C1 cash cost of $2.45 per pound, which represents record copper production and the lowest cash costs. We've achieved
This was driven by record sulfide production at both Men to Birdie and Mantos Blancos.
We are very proud to report that both sites achieved average throughputs above their design rates in Q2 a significant, accomplishment by our teams in Chile.
It has been a remarkable turnaround at mantis blanos where our team has done a tremendous job implementing our asset management framework.
And we are pleased to see another strong quarter at our new mental birthday. Sulfide concentrator.
Earlier this month, we announced another significant Milestone with receipt of the M birthday optimized permit, which will allow us to increase throughput from 32 to 45,000 tons per day.
We are eager to execute on this project, eminently subject to all joint venture board approvals.
While we have been disappointed by lower throughputs at Pinto Valley over the past 12 months, it is important to consider this in the context of pinto Valley's long history. The mind is produced over 4 billion pounds of copper in 1 of the oldest and most prolific mining districts in the United States.
With a long mind life, and over a billion, tons of resource, there is significant value that remains to be unlocked here.
As the only operating mine in the district, we are extremely well positioned to take advantage of the current environment in the United States. That is placing a greater emphasis on growing domestic, copper production.
we are focused on the implementation of our asset management framework to achieve stable operations and design throughput at PB
modeled after the success, we recently achieved at Mentos blanos
At cosmin, we saw another steady quarter with strong production and low unit costs.
On the corporate side. We completed our debt. Refinancing plan by repaying our portion of the Mentos verdict project. Finance facility further, improving our balance sheet, strength and flexibility.
Our balance sheet is in excellent shape, and we are committed to deleveraging further through internally generated cash flow.
in line with our sustainable development strategy, during the quarter, we launched a companywide, biodiversity standard
This establishes a common framework and minimum site requirements for applying the prevention and mitigation hierarchy for nature related. Impacts and risks.
Turning to slide 6.
Our operations were off to a solid start in the first half and we have reaffirmed our Consolidated 2025 guidance.
We are particularly pleased about the performance that mental splann cos and cosmin which are both tracking towards the upper ends of their site level production, guidance. Ranges
Offsetting Pinto Valley tracking towards the lower end.
Compared to the first half of last year production has increased 34%. While costs have decreased 12%.
Primarily driven by the ramp ups at our Chilean assets.
as we look to balance to the balance of the year, we are expecting even stronger production in
In H2 and we are reaffirming all of our production costs and capital expenditure guidance provided earlier this year.
With that I'll pass over to Ramen for our financial results.
Thank you, Cashel. We are now on Slide 7 in Q2. We achieved record copper production of 57.4 thousand tons, reflecting higher sulfide production from the new Mantle Verde sulfide concentrator.
Strong copper production, drove record quarterly, revenue of 543 million.
We note that copper sales were around 1,800 tons below payable production levels, primarily due to timing of sales and rentals blanks.
Lme copper prices, averaged 432 per pound in the quarter up 2% compared to 424 per pound in q1.
And we realized a slightly higher copper price of 439 per pound.
Lme copper prices remained strong today at around. 4:35 per pound.
C1 cash cost of 245 per pound, decreased by 5% from last quarter, and by 13% compared to Q2 last year.
over the same period sulfi cash cost have decreased from 250 $258 cents per pound last year to to to Dollars and 2020 cents per pound acute to 2025
Overall in Q2, we realize strong gross margins of 1.94 per pound or 44%.
Record adjusted ibida in Q2 of 250 million dollars increased 75%. Year-over-year driven by higher, copper production and lower cost.
We reported adjusted, net income attributable, to shareholders of 27.5 million, or 4 cents per share in Q2.
This also represents a 32% Improvement year-over-year.
But putting this all together, we generated significant free cash flow in the quarter of approximately 95 million dollars taking into account, our operating cash flows, Capital expenditures and lease payments.
Moving on to slide 8.
On the bottom left hand side, we summarize our available liquidity, which as that June 30th, 2025 was greater than 1 billion dollars, including 312 million dollars of cash and short-term Investments, and 795 million of and drawn amounts on our corporate revolving credit facility.
We finished a quarter with net debt of 692 million which decreased from 788 million at q1.
Driven by our strong cash generation and a quarter.
In Q2 we have continued to see our net leverage decline with our net debt. To ebit our ratio of 1 at 1 timeslot.
During the quarter, we completed the refinancing of our balance sheet by repaying. The mental verie project financing facility, our partner, MMC refinanced, their portion of the facility with a new term loan at the asset level, that is guaranteed and attributable to them.
Overall this refinancing has lowered our cost of debt capital and trimmed out our debt maturities while also creating a simplified structure.
The chart on the right hand, side of the page illustrates your ibida sensitivity at various copper prices.
Based on the midpoint of our 2025 guidance, as well as our upside related to mvl and Sano Domingo at 4 run rates.
For the balance of this year, a 10% change in copper price. Impacts are aided by a hundred million dollars.
This level of Eva generation shown on the right will enable us to continue generate cash to deliberate our balance sheet, which will further enhance our financial position and provide a strong platform to deliver on our growth.
Now hand it over to Jim Whittaker. For the operations review, who is joining us in his new role as Chief Operating Officer.
Thanks, Robyn. We are now on slide 9.
Where we will first run through the chili operations.
These mines are very familiar to me, as I spent the last couple of years in my previous role as head of Chile.
Now, as coo, I'm very happy to be expanding my scope to include our other top tier mining jurisdictions in Arizona and Mexico.
Overall, in the second quarter, we were excited to see our recently ramped up projects continuing to exceed our expectations.
Both Mount of, were they and mount Blancos achieved above design, throughput levels for Q2.
This is a significant accomplishment by our teams in Chile and we look forward to seeing what these Minds can accomplish in the second half of the fiscal year.
Starting with Mount Verde, we achieve continued improvements in production and cost driven by our amounts of early sulfide concentrator.
Including the lower 151 cents per pound from the sulfides.
In Q2 plant, throughput average above, 32,000 tons per day. Exceeding the name plate capacity after only 4 quarters in operation.
Copper grades averaged 72% in the quarter, with the highest grades of 76% occurring in June.
We are expecting higher grades in the second half of 2025.
During Q2, we saw recovery pulled back slightly to an average of 77.6% for the quarter.
For the first 2 months of the quarter, we were mining through transition zones which had higher levels of alteration in oxide content in the upper benches model.
This was partially offset in June and July, where mining progressed to the next bench with sulfide zones consistent with our long-term model, and recoveries consistent with the orb blend. This is in line with our 2025 guidance.
while we are disappointed that the upward trend for recoveries did not continue this quarter. We are reassured by metallurgical. Recoveries that aligned with our expectations once adjusted for the or types processed.
As a mind continues to mature, we will have increased flexibility of available, or sources for optimizing Mill. Feed for recovery and throughput.
We expect the recovery rates achieved in June to be a better barometer for the go forward rates in H2.
We expect copper production and pass cost to improve through the course of the Year primarily on those higher grades and recoveries and amount of Worthy is currently trending towards the midpoint of its production and cost guidance for 2025.
Now, moving to slide 10. We wanted to take a quick step back and highlight the significant accomplishment of our amount of worthy development project.
we started the project in 2022 during the global KHOU, pandemic and finished construction around the end of 2023, within 5% of our original budget for Capital intensity of approximately 12,000 per annualized, ton of copper production,
We then commissioned the mine and produced our first saleable copper concentrate in June 2024, which was quickly followed by the achievement of commercial production in September 2024.
And this quarter in our fourth quarter, running the plant. We exceeded our design capacity
This benchmarks extremely well, compared to the industry average, which usually takes around 13 years.
The success of cheese with the amount over the development project is a testament to the capabilities of our experienced team throughout the organization.
Both on the ground in Chile, and that the cedar senior leadership and board levels.
We'd like to thank our team for their commitment dedication and hard work. And we look forward to continuing to leverage. Our operating talents to execute on Mount Verde optimized and Santo, Domingo projects,
In terms of the amount of the optimized earlier this month, we received the permanent approval from the Chilean authorities.
This is another significant milestone, and we were very pleased with the level of engagement evident through the process by Chilean authorities and local communities.
With this in hand, we are no longer permit constrained on the project development. And we expect to imminently sanction, the project for development in Q3 subject to all joint venture board approvals.
Prior to receiving the permanent Q2, the amount of early board has already approved. 20 million in Long lead items to begin placing orders and preserve the project schedule showing the song confidence in the project.
We had been encouraged so far by the capabilities of the plant to achieve Peak daily throughputs in excess of 45,000 tons per day.
We are looking forward to executing on the project in order to sustain these rates.
so now, on to mental Blancos,
The site continued to deliver in Q2 as highlighted on slide 11.
Total sulfide and cathode production, reached 15,796, tons of copper at a C1 task cost of 29 cents per payable pound.
Production and cash costs. Both improved significantly quarter over quarter driven by the continued success of the concentrator, post ramp up.
We have now sustained, an average throughput above 20,000 tons per day for an entire quarter.
The ability to reach design, throughputs at the line that has been in operation. Since the 1960s is a testament to the capabilities of our asset management framework. Currently being implemented companywide
We will continue to monitor second half, plant performance to identify opportunities for further enhancement to the overall plant design, that could be integrated with a proposed mentals, Blancos phase to expand.
As a result of the strong throughputs and recoveries of the first half, we are expecting to continue in H2.
Mto's blanos is trending to the higher end of its production, guidance range, and at the lower end of its cost guidance range.
Turning to Pinto Valley. Now in slide 12,
We produce 10,125 tons of copper at elevated C1 cash cost of $3.89 per payable found during Q2.
Pinto Valley experienced setbacks in Q2 which resulted in lower production and higher cost.
Throughput average, 38,000 tons per day, in Q2 attributable to unplanned. Downtime driven by water constraints due to the extreme drought conditions in central Arizona, as well as some mechanical and electrical issues.
As a result of the water, constraints, throughput was restricted to approximately 2/3. Availability with only 4 of the 6 mils, operational since May
The lower throughput was partially offset by stronger grades and recoveries compared to q1.
We continue to expect copper production to be weighted towards the second half of the Year, driven by grades and throughput contingent on the approved water availability and plant performance.
Grades in H1 average 0 29% and we are expecting this to increase to average close to 0.34% and H2 due to the mine sequencing.
In the second half, we are expecting recovery of around. 87% similar to those achieved in Q2.
Throughput average around 44,000 tons, per day in H1.
Process availability is expected to improve sequentially through Q3, as we bring all 6 mils back online, with an increase, from 4 mils to 5 mils, expected in August and that all Mills will be expected to be turning in September.
As such we are expecting throughput to average around 43 to 43,000 tons per day in Q3 consistent with H1 and increase to an average of around 52,000, tons per day in Q4.
Putting all these pieces together, Pinto Valley is trending towards the lower end of its production guidance, and at the higher end of its cost guidance range.
We have a tremendous resource at Pinto Valley, in a prolifically endowed copper jurisdiction and US Administration that is focused on growing domestic, copper production.
We will continue to evaluate the upside opportunities, our land package, and our broader district.
Meanwhile we are committed to the implementation of our asset management framework looking to replicate the success. We have seen at masses Blancos with the goal of improving, the reliability of the plant to drive higher production and lower costs in the near term.
Moving to slide 13, Cosmin delivered another solid quarter, producing 6,599 tons of copper at C1 cash costs of $149 per payable pound.
Based on the first half of the year cosmin is tracking very well relative to guidance. We continue to conduct expiration at cosmin in order to maintain consistent levels of production, through the end of the life of the Mind.
And with that, I'd like to pass it back to Casual.
Thanks Jim turning. Slide 14.
We've outlined our sector leading growth plans and some of the additional upside within our portfolio.
Our strategy for the rest of 2025 remains consistent.
Continue to realize the benefits associated with the projects completed in 2024. While focusing on operational execution, strengthening our balance sheet, and prudently advancing our next phases of organic growth.
With with receipt of the mentality optimized permit earlier this month. We are looking forward to executing on this project upon formal sanctioning, financed through internally generated cash flows.
With high returns, a quick payback and low Capital. Intensity. Mvo is a good representation of the executable growth. We pursue at Capstone.
At Santa Domingo. We continue to make progress towards our next major phase of transformative transformational growth.
which has the potential to take our production up to approximately 400,000 tons of copper per UNAM
Our expectations are unchanged regarding timing with a potential sanctioning window expected to open around the middle of 2020.
Of our partnership process and we expect to provide an update to the market on this during the third quarter as expected. We have received a strong amount of interest from a broad group of potential partners.
That emphasizes the role Santa Domingo will play as an important pillar of long-term copper growth for Capstone.
Once the partnership is finalized, we would then move to securing optimal financing for the project in parallel, we continue to advance the remaining work streams to optimize the scope of the project and the advancement of several upside opportunities while continuing to monitor the macroeconomic environment.
Beyond these projects, we have a robust pipeline of low-risk high return projects in top tier jurisdictions. This includes another brownfields expansion at Mentos blankos. Flexibility in the Mentos bird. They sent to Domingo, District, to unlock production, and create synergies.
And the potential development of another major copper District around our Pinto Valley. Mine in Arizona,
Our priority is to remain agile so that we can execute on growth responsibly.
While maintaining optionality and continuing to increase the value of our projects.
This growth pipeline is what differentiates Capstone in an industry where growth often must be pursued, inorganically. And at a premium,
Considering the enormous amounts of copper that the world will demand going forward. We are extremely well positioned benefit.
With that, I'll turn to slide 15 to conclude today's presentation.
This quarter, we have continued to realize the benefits from the first phase of transformation. I Capstone Copper with tangible delivery on our peer-leading growth.
we made a number of strides during Q2 including achieving record, copper production maintaining name plate through throughput
At our recently ramped-up assets in Chile and completing our balance sheet refinancing strategy.
We are well positioned to become a leading long-life, low-cost producer, playing an important role in supporting the world's decarbonization.
Electrification efforts.
And with that, we are now ready to take questions.
Thank you.
Ladies and gentlemen, we will now begin the question and answer session.
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Your first question comes from the line of Dalton Barretto from Mechanical, and please go ahead.
Thanks, operator. Um, congrats, guys, on a pretty solid quarter.
A couple of questions on PTO Valley. If I met, um, I guess, first Jim, I think you mentioned that by Q4 you'd be at 53,000 tons per day, 87% recoveries. And I'm just wondering, is that sort of the ceiling for this male base and everything you've seen in your asset reliability program?
Yeah. Hi Dalton. How's it going? Thanks for the question. Thanks for calling in. Um, yeah. Actually, there's probably an instantaneous level that's just over 60,000, uh, tons per day at Pinto Valley. That's if you, you know, push all the metrics, uh, to their full extent on availabilities and utilizations. Um, so where we're pointing now, obviously we've had a tough quarter, uh, with the water. Um, and so we're trying to plan our way out of that. Uh, we're obviously taking advantage.
Manage of a little bit of Maintenance, where you have some time around the circuits, which is also good. But, uh, we're very, very confident uh, by the end of the year, we'll be able to hit those run rates and uh, and still kind of Hit the bottom of the guidance with pinto Valley but obviously uh pretty tough quarter in in Arizona right now.
but then, just looking at 2026 and Beyond is that sort of the, um, the steady state rate we should be thinking about for Pento Valley
Plan that we review uh, annually.
Great, thanks. And then maybe just staying with Mentos Valley. Uh, thank you guys mentioned a couple of times the, uh, the Strategic value of the male and the uh, the views of the current Administration. And I'm just wondering if we can get an update on on copper cities, but just also are you looking at other opportunities in the region?
Thanks, Dalton. Um, look, we're focused, as Jim sort of pointed out in his review of the assets and their performance over the quarter, on operational excellence.
Asset Management framework and we believe that those will deliver that capacity capable at sort of 90% utilization around 56,000 tons a day.
With that being said, we do have an option agreement, uh, with copper cities. That's progressing really well through the technical, evaluation of the amalgamation of the 2 assets. We anticipate sometime by the end of this year, sort of having worked through that.
At that sort of technical evaluation level. And then, I think at that time, if there's more to be said, then we'll have more to say about it. Um, but really, our business in the region right now is focused on enhancing and improving Pinto Valley directly. And that's where we're concentrated on. And obviously, because Copper Cities is an adjacent property, that sort of the scope and where we're looking at. Uh, we're not really,
Really looking further afield than that.
Okay. Thanks Cash. And then maybe just 1 last very quick, 1 also on PTO Valley, in the executive order yesterday, there was some language around restricting, concentrate exports going forward. I'm just wondering if, uh, if that's going to impact Dental Valley at all. Thank you.
Oh okay, thanks for the question and certainly this very topical. Um you know, I think what you're referring to is the sort of vague reference to 25% restrictions starting in 2027 and there may be escalating from them.
I think, you know, we always take these sort of um, um, proposals as such um, as more numbers roll in and more uh knowledge of the industry is acquired by the administration, they seem to modify what their expectations are. But I will say, is that there are 2 operating smelters. They do not procure, all their feed in advance, there's always opportunities.
To, uh, put our production in the U.S. And we would actually prefer to do that. That's something where you're reducing your greenhouse gases, you're reducing your impact on the environment, and it's staying within the local market. So we'll always—and we do always—sort of pursue those types of opportunities.
Um, with that being said, you know, it's uh, there's a, there's a lot to go under the bridge between now and 2027. Uh, but we certainly look at it to guide our strategy going forward. Look, it's a, it's a privilege to have an operating mind in the US now, they're coveting copper. Uh, Pinto Valley has been around since 1975. It has an operating plant.
And uh, we're we're happy to keep uh, producing there and to enhance our production there and we think that's really what the administration's after.
Thanks Cashel. That's all for me.
Your next question comes from the line of Augusta from social Bank. Please go ahead and
Hi. Good afternoon. Um, nice to see the improvement on the Chilean asset side. Uh, just a question around Mentos Verde. Um, your recoveries were obviously impacted in April and May from this transition zone with high oxide content. Um, and then we saw improvement in June. Is that now fully behind you, or are you expecting more of this high oxide content to show up either in H2 at some point or in the next year?
And they will Levar whatever they can to to produce that. Um, but when we're through these transitions, that did complicate us on the recovery side in the plant, um, on an ongoing basis. First of all, we don't expect to go through that again. This year. Um, we're already mined through that we're expected to actually to see that clearing up. Now, in July and through August, which is good, um, it will be something that will have to look at in our detailed, uh, annual budget and and planning um, to see when it comes back because these are going to be a repetitive process. But overall, when you look at a long-term view on the resource and reserved um this isn't very uh this doesn't amount to a whole lot. It's just something uh that we're going to have to take into account for and our cash flow planning from the production on an annualized basis.
okay um thank you for that and then so if you're not
If you're not going to expected the experience that H2, should we anticipate the operation? Getting to that design recovery level, then of 87 and 91 during the second half,
Yeah, that that's our Target. I mean, really what we're seeing in the mind now we're into large areas of pure sulfide. Um, we expect that we'll be able to get back on track and, and hit those targets towards H1. So, yeah, we're definitely looking at a strong, uh, second half of the year.
Thank you very much.
Your next question is from the line of AHA. Tariq from Jefferies. Please go ahead.
Hi, thanks for taking my question for MV optimize. Uh, can you just remind us if, if there's an uh, update to the capex number that's expected relative to the 146 million and also what the Cadence of that capex. May look like between the second half of this year and 2026.
Yeah. Hi Fahad. Thanks for the question. Um, yeah. And so part of the process is, is we did, um, start with an early procurement process, a couple months ago
Trying to retain some schedule. Um, what I would say is what how were you looking at the detailed engineering? That's been conducted to date. Uh, there have been some um, modest scope changes that were required. Um to sustain the production at the levels. We wanted what we did is we conducted some surveys on site uh, using our own technical team and validated by a third-party engineer. Uh, to be sure that what we do. This upgrade, we can indeed average the 45,000 times uh, per day. So we do see a modest increase from that. 146, what I will say is is that detail of breakdown of what was inflationary pressure versus scope change? Uh, will be coming with the announcement after we worked through with
Are uh are a joint venture partner and we introduced to them that um a sort of minor change. Uh and then we look to sort of letting or publishing that sort of guidance in a news release and announcing the timing around MBO what the schedule is and the detail around that cap.
Okay, thank you.
Your next question is from the line of Ralph. Graffiti from Stifel, please, go ahead.
Uh, thanks operator. Uh, Jim, you give a very detailed answer into the previous question on. Uh, MTO Veria. And I was just wondering specifically what is the, the long-term oxide contribution that comes from these, uh, you know, transitional mix zones. Uh, and and, and concurrently as you work through new benches, uh, our improvements going to be need to be made on on, uh, reconciliation model and great control and the degree to which that was a contributing factor.
Hey Ralph, hi. Um I I think the way we look at it is obviously transition zones exist in the so the periphery of the sulphide deposit um in the uh, near surface portion.
I think um, you know what we see is you mine through this transition zone once and you come to
Um just more pure sulfide, there are vertical structures. So I think you can anticipate uh the introduction of up to uh uh occasionally 5% sort of oxide material. Jim you have anything to add there.
Curious sulfide ore body. So like I said it's not something that will really to worry about over the long term uh view on the reserve and resource. Uh it's mainly just a short-term problem that we're mining through right now and uh, but like I said, we'll be updating on that as we provide guidance on annual basis.
Okay, thank you. That's a helpful answer. Thank you.
Your next question is from the line of Adam Baker from a Corey. Please go ahead.
Morning, casual and team. Um, just 1 on fantasy Mingo fantasy, reaching pointing, it ends of The Parting process here. Um, with a announcement expected during 32. Just wondering, if you'd be able to give us some color about how the partnering ship process has been going and and and just maybe an update since uh since the last quarterly earnings call. Thank you.
Yeah. Hi Adam. Um, you know what? It's it's gone really well. And so um what we did is we went through that second phase where we we we had sort of uh brought it down to just over a handful
Of groups. And that those groups, I think we would have characterized of passive participants for those that bring sort of financing strength and a few strategic, um, to evaluate some of the opportunities within the district that might offer some offsetting Synergy. Uh, what I can say is is we've arrived at a partner. Um, and we also believe that
Some of those strategies, uh, remain. Uh,
Available to us in in the future uh with these negotiations underway. Um I I think where we are in the detailed process of negotiation with that sort of final stage is I wouldn't be surprised if we come out with an announcement, you know, uh, within Q3 now. And, um, we'll be very happy to announce that and it'll be a major Milestone on the way, uh, to bring forward a project that will really, um, grow Capstone copper in a, in a district where we've been very successful building before where we have a project team already doing detailed engineering with the aim to finish the 40% and then with that uh partner will be able to pursue a project financing strategy and um our aim is to have the project sanction ready uh by this time next year
Okay, thanks for that. And, and just, secondly, on on Pinto Valley, uh, just just wondering if you could give an update more broadly on the on the drought conditions, in Arizona, you know, have we broken the drought yet. Um, how things looking from that perspective and, um, you know, what's what's really driving that increase in, uh, you know, going from 4 to 5 mils in August this year is that, um, you know, just getting more water availability or, or is it other optimization?
Thank you.
Sure, sure, sure, Adam, what I'll do is I'll I'll pass it over to the gym. Um, I I I passed him, uh, the accountability of pinto Valley so he can
Uh, get the answer here. Yeah, so yeah, great question. It's really obviously, it's hard to predict, but it is very seasonal. We're in the middle of summer. It is very hot. Um, and, uh, so we're into a bit of a hot dry stretch in Arizona, um,
These things do occur. I mean, obviously it's not every year, but um, and speaking to some of our colleagues, uh, even before the merger of, you know, Capstone, Mining and amount. Those copper there was discussions of time loss for drought and you can find it in the records of pinto Valley. So it's something that's happened before. Um, what we're doing about it obviously. Uh we have to maximize our pumping capacity that we have on site anyway and that includes, you know, pump Wells, or tailing systems, you know, our job is to make sure that all of that infrastructure is ready to go when we need it. Um, you know, the availability water is obviously a different issue, but we need to make sure that our, uh, our assets are, in in good uh, and sound condition to be able to operate. And the other thing that we've been doing, we've been talking to some other parties close by about ways that we can get into the water business. There is some mining around us. We've got several neighbors and we've been reaching out to them to see if there's any ways that uh, we can look at, you know, purchase of water or some other comp.
Nation of uh of deals that we can set up there to try to protect the things for the future. But those like I said, we're obviously focused on the internal things to the site. Um but also trying to explore some other options uh that we could offsite.
Thank you.
Your next question is from the line of Marshall fine, from Goldman Sachs, please go ahead.
Everyone, uh, just a quick 1 on the balance sheet. Uh, obviously we've done a good work liquid. It seems quite High. I've already billion dollars sometimes not better without, which is kind of below the target. So, and and, and you did mention that the plane is too, um, to further work on the balance sheet as well. So, just trying to understand what, what what else um, do you see or do you need to do, uh, on the balance sheet side? Is it just to be careful the next uh capex phase or is it more? Um, liability Management on the 2029? Um,
Revolving credits. Thank you.
Yeah, Marissa, thanks for the question. I mean on the balance sheet as, you know, first 6 months have been busy kind of simple find the structure and trimming out our debt. Uh, I think we've now, as you can see, with mental, burden, mental is blank was producing, you know, add and above name plate, capacity sir to, you know, turn that corner in infliction point on free cash flow generation. So really, the company is now positioned to generate cash continue to de-lever as you see in our in our net leverage ratio and then obviously MBO will be self-funded through MBO when we sanction that in terms of the cash that comes out of manto Verde and basically, you know, continue to de-lever ahead of a Sano Domingo, sanctioning decision, you know, mid 2026.
Thank you. That's it.
Ladies and gentlemen, as a reminder, if you'd like to ask a question please press star, followed by the number 1 and a touchdown phone. If you are using a speaker phone, please make sure to lift your handset before pressing any case.
The next question comes from the line of Stefan Yanni from Core Mark Securities. Please go ahead.
Yeah. Thanks very much. Not to put the car ahead of the horse at manto vary, but just with regards to the phase 2 thinking there, just kind of curious, what do you have a sort of a, a conceptual time of like, sort of how much exploration will be needed there, to to develop a kind of a minable inventory to support that expansion?
Hi Stephanie. Yeah. Um, um, great question. Um, certainly, you know that's our Flagship operation has a tremendous resources, you know, your sort of alluding to is a 1 and a half billion tons. And so it does have uh, the mineral required for us to move ahead, um, with a uh, Mentor birdie
2 which would be sort of the twinning, the line and bringing the capacity of the uh that particular mind, 90,000 tons a day of pro or a process.
um, so we're
Been drilling, and we're embarking on drilling now. Um, so, um, we are busy procuring drills. Uh, this very time, and uh, we'll be putting in place, sort of over the next year to year and a half, in the order of about $15 to $20 million extra over what we already committed to this year.
So we could see that being approved in the following year and continuing with that drilling. What I will say is that the drilling that has been conducted is meeting its expectations. I think later this year, we'll be able to compile that and explain what that does for MBO a bit. And then also what that means in direction to MV2.
Okay, okay. Great.
Great. Thanks very much, that was helpful.
There are no further questions at this time. I'd like to turn the call over to Cashel tomorrow for closing comments, sir. Please go ahead.
Thank you operator. We look forward to updating you in late October with our Q3 results until then stay safe and feel free to reach out to Daniel. Michael are if you have further questions, thank you for your continued support. Have a good day.
Ladies and gentlemen, this concludes today's conference call. Thank you very much for your participation. You may now disconnect