Lundin Mining Q3 2023 Earnings Call Transcript

Quartr
Provided by Quartr
November 2, 2023

There are 10 speakers on the call.

Operator

Ladies and gentlemen, and welcome to the London Mining Third Quarter 2023 Results Call. At this time, all lines are in listen only mode. Following the presentation, we will conduct a question and answer session. This call is being recorded on today, November 2, 2023. I would now like to turn the conference over to President and CEO, Peter Rockendale.

Operator

Please go ahead.

Speaker 1

Thank you, operator, and thank you, everyone, for joining today. I'll draw your attention to the cautionary statements on Slide 2 as we will be making several forward looking statements During the prepared remarks and likely during the Q and A as well. On the call to assist with the presentation and answer questions Jack Lundin, current President and Incoming CEO, Ted Olson, SVP and CFO and Juan Andreas Morell, SVP and COO. As we announced in October, I will be stepping down at the end of the year, so this will be my last conference call. On a personal note, I I'd like to thank the Board of Directors for the opportunity to lead Lundin Mining, our employees and partners for their dedication and hard work And the analyst community for their engagement and support.

Speaker 1

I very much enjoyed the journey and I'm extremely proud of what the team has been able to accomplish during my tenure. And I believe the company is well positioned for continued success as we transition to Jack's leadership. With respect to our office relocation, the move to Vancouver has been completed. This transition began at the start of the year and all senior leadership positions are now in place. We're very fortunate to have Peter Brady join us as our new General Counsel.

Speaker 1

Peter was previously the General Counsel for Valley Base Metals. We have also added Ricardo Chiquura as Vice President of Health and Safety and Nathan Vonage as Vice President Sustainability. Throughout the year, Jack and I have been working closely and more recently we spent considerable time at our assets and with our major shareholders. While we will continue working together for the balance of the year, our joint efforts to date will ensure a smooth and successful transition. Moving to our quarterly highlights.

Speaker 1

Beginning with the key highlights for the Q3, we delivered record quarterly production for the company, Producing nearly 206,000 tonnes of copper equivalent metal in the Q3, which includes Casa Roni's. This is A major milestone for the company and it is in line with our growth strategy. Production for the year continues to track at or above the midpoint of our guidance for copper, Gold and nickel. Castrone's has been operating very well and produced 34,000 tonnes of copper during the full quarter And 30,000 tonnes since the close of the acquisition, which puts us on track to exceed guidance. Exploration drilling will kick off Shortly and focus on some of the high priority exploration targets within this newly acquired land package.

Speaker 1

With the 3rd quarter results, we are in a position to tighten our production guidance While increasing our guidance at Caserone's and Eagle, we're also lowering our cash cost guidance for Caserone's and Eagle from higher metal volumes and byproduct credits. We generated revenue of over $990,000,000 and adjusted EBITDA of $415,000,000 with adjusted operating cash flow of 316,000,000 Our balance sheet remains very strong with approximately $1,400,000,000 of liquidity today. With yesterday's financial results, our Board of Directors maintained our peer leading regular dividend of CAD 0.09 per share for the quarter We're $0.36 on an annualized basis, which is roughly a 4.2% yield. We closed the Casterone's acquisition early in the Q3 And the integration has gone very well. The team has outlined initial synergies that have the potential to contribute annual savings of $20,000,000 to $30,000,000 per year.

Speaker 1

Candelaria also received their EIA for the extension of operations. The Candelaria EIA considers several enhancements to the current operation That will enable the extension of the mine life from 2,030 to 2,040. The approval represents a key milestone towards successfully extending the operational life, including the development of the last Pinola open pit. Together with our strong production results, we are having a strong year with respect to safety. We have been progressing our fatal risk management program and to date over 10,000 employees have been trained or 75% of our workforce.

Speaker 1

Our measurements for safety, which include LTIF, TRIF and AF are the lowest levels we've experienced in the last 10 years. We attribute these results to the implementation of FRM, having more leaders in the field and also better operational discipline in general. And on that positive note, I would like

Speaker 2

to pass it over

Speaker 1

to Juan Andreas to speak more specifically about our operations.

Speaker 3

Thank you, Peter. As planned, our production continues to be slightly weighted to the second half of the year. Overall, we produced approximately 206,000 tonnes of copper equivalent in the Q3, which represents a record production for the company. Copper production of 89,942 tons has grown almost 50% from the previous quarter with the inclusion of Caserones. Candelaria had a good quarter, processing 7,200,000 tonnes of ore.

Speaker 3

Copper production was in line with The Q4 should see high grades from underground and The Phase 11, which will increase production quarter over quarter. Caserones has performed extremely well and is tracking to the upper end of the guidance. During the Q4, the mine produced 34,000 tons of copper and 1400 tons of molybdenum. We're pleased with how operations are going and have revised guidance upward to reflect the performance of the asset to 69000 to 69000 tons for the full second half of the year. Molybdenum will be on the upper End of the guidance at 2,000 tonnes for the full half.

Speaker 3

I would also like to highlight that Caseronez has achieved the copper mark, A designation that highlights our commitment with sustainable mining practices. As mentioned earlier, production at Chapada is second half weighted. During this quarter, we saw an increase in grades and ore mill that resulted in higher copper production. During the quarter, 5,800,000 tons of ore were processed for 12,300 tons of copper. No material and scheduled downtime were experienced.

Speaker 3

Copper production is tracking well to the annual guidance. We have tightened the range of copper production to 305,000 to 325,000 tons. This is including Casa Dones production. In gold, production totaled 35,000 ounces for the 3rd quarter. As mentioned earlier, throughput at Chapada was strong, which contributed to the overall gold production.

Speaker 3

We have Titan guidance and continue to track to the midpoint of annual coal guidance of $142,000 to $152,000 We move to the next slide. Zinc production was higher quarter over quarter At 49,774 tons, the highest level of production in the last several quarters. The sequential flotation at Zyngruvan is processing higher grades for the quarter, with average grades at 8 Expected recovers in the mid to low 90s by the end of Q4. Production at Neves Corvo has increased from Q2, but it We're still impacted by unplanned downtimes at the SAG mill and equipment availability in the mine together with higher grade variabilities. Ramp up at the Zinc Expansion Project, also known as SEP, is continuing and progressing in line with plans.

Speaker 3

Zinc production is tracking to the midpoint of the revised annual guidance of 181,000 to 192,000 tons. Finally, nickel production was 4,290 tonnes, which was in line with the previous quarter. Eagle experienced slightly lower grades and recoveries offset by higher throughput. With a slower than planned Starting Q1, by the strong second and third quarter, nickel production is tracking to the upper end of the annual guidance of 13,000 to 16,000 tons. We have moved our guidance up to 15,000 to 17,000 tons of nickel for the year.

Speaker 3

We are in a good position for the remaining of the year. The efforts that we have been putting into operations are paying off and we will look at continue this momentum in 2024. As Peter mentioned, we are tracking well to meet guidance at all metals. I will now turn the call to Teitur to provide summary in our financial results.

Speaker 4

Okay. Thank you, Andreas, and good morning, everybody. So before going into the numbers, please note that our Q3 consolidated income statement and cash flows are reflecting Casa Ronis being 100% consolidated From 13th July. So moving to Slide 8, starting with the top line, we generated over $990,000,000 in revenue with Candelaria and Casa Rona contributing around 30% each. Our sales remain leveraged to copper, generating 65% of The quarter's revenue.

Speaker 4

Nickel and gold contributed 7% 5%, respectively, while zinc contribution has increased to 9%. Melipton from Casa Grande has become a meaningful contributor to the revenue mix, and that's why we have seen other revenue increase from approximately 5% to 14%. During the quarter, we realized prices of $3.71 per pound of copper, $1.19 per pound of zinc, dollars 9.25 per pound of nickel and $18.62 per ounce of gold for the 3rd quarter, including adjustments. As most metal prices have been relatively range bound during the quarter, there is a minimal impact on realized Pricing from prior period adjustments. At the end of the 3rd quarter, approximately 120,000 tonnes Copper were provisionally priced at $3.75 per pound and remained open for final pricing adjustments, As did 31,000 tons of zinc at $1.20 per pound and 14 100 tonne of nickel at $8.40 per pound.

Speaker 4

You may also have noticed that the company has introduced a process of preannouncing certain items impacting the company's quarterly financial results, With the first such announcement issued on the 17th October. The goal of this pre announcement is to provide better transparency and Allow analyst consensus numbers to better reflect the company's underlying operational performance, something that we hope to continue in the future. Turning to Slide 9. Production costs totaled SEK615,000,000 in the 3rd quarter, which is 52% higher than 2nd quarter mainly due to the inclusion of Casa Rones. Cadillaria's production costs were lower than the previous quarter due to lower sales volumes and a favorable foreign exchange rate, while production costs were nevertheless negatively impacted by higher maintenance and contracting costs during the quarter.

Speaker 4

And we have consequently raised our full year cash cost guidance to $2.20 per pound. Cash costs and costs are only have been revised downwards on higher second half production guidance to $2.2 per pound. At Chapada, production costs were in line with forecast and are tracking to the lower end of guidance for the year. Nevis' core production costs increased during the quarter primarily due to higher consumable costs and higher sales volumes and somewhat offset by lower salary costs. Cash cost guidance at Nevis remained unchanged for the year at $2.10 to $2.30 per pound of copper, with the expectation that Nevis will be in the upper end of this range.

Speaker 4

Eagle production costs were better than expected, but are nevertheless higher than the previous quarter with the continued impact from inflation. The full year cash cost guidance has improved as a result of the increase in full year production guidance, With cash cost guidance now being $2 to $2.20 per pound of nickel. Zincroven's production costs were higher than the previous quarter, primarily due to higher sales volumes and somewhat offset by a favorable foreign exchange rate. Cash cost guidance for the full year remains at $0.45 to $0.50 per zinc, although we expect to achieve the lower end of this cost guidance range. The capital expenditure guidance for the year has been reduced by another $30,000,000 on a like for like basis With $25,000,000 relating to the lower sustaining CapEx spend at Nevis and $5,000,000 lower spend relating to Syncroben.

Speaker 4

Total reduction for the year compared to the original guidance is now standing at $105,000,000 The capital spend during the Q3 amounted to approximately $233,000,000 of which $180,000,000 was related to sustaining capital, Whilst $53,000,000 was related to the Jose Maria project. Lastly, we continue to realize the benefits of our foreign exchange hedging program intended to provide better visibility on our U. S. Dollar requirements of future operating costs and CapEx. In the Q3, we realized a gain of $14,000,000 from our hedging contracts.

Speaker 4

Our key financial metrics are presented on Slide 10. As already highlighted during the Q3, revenue amounted to $992,000,000 We generated adjusted EBITDA of $415,000,000 and adjusted operating cash flow of $316,000,000 along with free cash flow from operations of 137,000,000 Adjusted earnings came in at $86,000,000 which yields an EPS of $0.11 Turning to Slide 11, which presents greater detail on the sources and uses of cash in the 3rd quarter. Before changes in working capital, cash provided by operating activities was $316,000,000 net of 21,000,000 of cash taxes paid during the quarter. After working capital adjustments and the sustaining Total expenditure, the operations generated $137,000,000 of free cash flow during the 3rd quarter. A quarterly dividend payment of $0.09 per share was made during the 3rd quarter amounting to $51,000,000 Excluding dividend payments and the Chapada contingent payment and the Casa Romeo acquisition cost, the company generated positive free cash flow of 71,000,000 in the Q3.

Speaker 4

As previously mentioned, the Catalonia transaction closed on the 13th July And the company received an $800,000,000 3 year term loan from 9 international banks to fund this acquisition And leaving the company with a consolidated cash position at the end of the Q3 of $356,000,000 And on the next slide to follow-up on the closing of the Casa Rones transaction. This slide outlines the net Cash impact on closing and also the anticipated near term cash conversion from the working capital that was in the acquired company on closing as of 13th July. The net cash consideration for 51 percent of the company amounts to SEK 721 €1,000,000 as of 13th July. And once the working capital position, which consists of receivables, concentrate and cathode inventory and payables has unwound, the net cash impact is reduced to around $600,000,000 With the recent closing of Casa Ronne transaction, the company continued to have significant liquidity headroom of approximately $1,400,000,000 The strength of our balance sheet with a low leverage ratio will allow us to continue with our growth plans. And following the closing of Casa Roni acquisition, our net debt to last 12 months adjusted EBITDA ratio remains very solid at 0.9 times.

Speaker 4

That concludes the financial section, and I'll now hand the call over to Jack.

Speaker 2

Thank you, Tyler, and good day, everyone. Slide 14 highlights the expected savings we are targeting to realize over the next 12 months. We were in Chile with the Board of Directors in September. 6 out of 8 of the Directors on our Board are independent, which includes 3 new directors that joined in the last 18 months. We visit both our newly acquired Casarones mine and our largest operation Candelaria, both in the Atacama region.

Speaker 2

This was a very productive trip as Taseronis complements our existing portfolio with large scale and long life copper and molybdenum Production in a jurisdiction which we already operate. Since the announcement of the acquisition on March 27, Planning of the integration process kicked off and after the closing of the acquisition on July 13, we were able to start on a number of cost reduction and operational efficiency measures. Over the next 6 to 8 months, we will look to realize additional near term synergies that we have identified. As mentioned by Peter, Based on our initial assessment, we estimate the annual savings driven by synergies between Casa Ronis and Candelaria to be in the range of $20,000,000 to $30,000,000 per year. These savings were mainly driven by supply chain and logistics and represent the 1st wave of synergies between the assets.

Speaker 2

We are in the process of establishing a regional support function unit that will centralize some of the key support functions. This unit will be responsible for leveraging the synergies and economies of scale going forward and strengthening our position in the region of Atacama. This will allow us to realize additional synergies beyond the initial first wave of the CAD 20,000,000 to CAD 30,000,000 outlined above. If we go to the next slide, we have kicked off the largest exploration program at Casa Ronis since the mine began operations Back in 2013, where we will be targeting over 10,000 meters of drilling over the next 6 months. This slide illustrates the extensive land package of more than 58,000 hectares In Chile that we obtained as part of the Casaronis transaction, we have identified multiple priority exploration targets, which we will be pursuing this fall This spring in the Southern Hemisphere.

Speaker 2

These include higher grade breccia targets near and below the existing pit And the Angelica oxide deposit, both to grow it and test the potential for the underlying sulfide potential, which has never been drilled before. On the Argentinian side of the district, drilling at Jose Maria will kick off shortly at Cumbre Verde. In April, to the north of Jose Maria, another company reported some of the highest grades in the district. Our plan is In 2023 2024 is to drill 1 or 2 initial holes at the Cumbre Verde target going after the same structures that Potentially run onto the Jose Maria property. We expect results in the Q1 of next year.

Speaker 2

Additionally, we are pleased to announce 2 drills turning at the Portonis target. We will also target deeper holes beneath the Jose Maria ore body. This program offers clear additions to the district level resource potential. Poconos is off to the right corner, Southwest in orientation in the picture and is a copper porphyry target that is 4 kilometers from the Jose Maria deposit. Geochemical sampling and geophysics have highlighted this as a high potential discovery opportunity.

Speaker 2

In total at Jose Maria, We have approximately 3,200 meters of drilling planned for this year and over 5,000 meters in 2024, which could grow with positive results. Lastly, on exploration, we have finished up the borehole electromagnetic survey at Eagle and we'll be drilling at depth below Eagle East targeting additional ore bodies. There is a conductive layer in the sediments that interferes with the geophysics at surface. An underground loop was therefore established in the Eagle East deposit and this was completed and highlights potential targets at depth below the existing ore body. This could have significant impact on the mine life at Eagle if a discovery is made.

Speaker 2

In fact, at Eagle, we expect to extend the mine life To 2029 by switching to an underground bulk mining method. So the drilling we are doing now would be in addition To the mine life that we've extended through bulk mining and we expect these initial results in Q1 2024. Switching to the next slide. I look forward to continuing to drive the strategy that has been developed under the leadership of Peter In conjunction with the Board and the newly established senior leadership team at Lundin Mining, we have a truly unique opportunity in our company With our current portfolio of mining operations and the remarkable Jose Maria development project. With a strong toehold in the emerging Vicuna district, We look to remain disciplined and focused on growing our production over time in this region, while continuing to maximize the profitability At all of our global operations, which I will touch on shortly, this represents an exciting opportunity for the company.

Speaker 2

We hope to be in a position to announce a plan for development of the Jose Maria project, which includes fiscal stability agreements, a financing strategy, Updated cost and schedule for the project sometime in 2024. We will continue to monitor the climate of our sector and the host nation in which the project is located. At our existing operations, we are undertaking operational asset reviews at Casaronis and Candelaria with the goal to improve and lower We want to implement and capture the synergies we have identified at both assets to improve financial performance and move towards the lowest possible cash cost for these assets. As Teitur mentioned, we pay an annualized dividend of 0.36 cents per share or 4.2 percent yield, which is one of the highest paying dividends among our peers. Our Board of Directors and management continues to support commitment to providing a dividend to our shareholders.

Speaker 2

Since we instated our dividend policy in late 2016, We have returned over $1,000,000,000 to shareholders, including share buybacks. The company is on track for a strong year operationally. We tightened the range of our guidance for several of our assets and increased production guidance at Eagle and Casaronis, while lowering cash costs at Eagle and Casaronis Going into the Q4, I am humbled and honored to lead Lundin Mining on the next phase of growth for the company. We will continue to remain disciplined and Always work to maximize value for all of our stakeholders. With that, operator, I would like to open the lines for questions.

Operator

Thank you. Ladies and gentlemen, we will now begin the question and answer session. You will hear a 3 tone prop acknowledging your request and your questions will be pulled in the order they are received. Your first question comes from Ralph Profiti with 8 Capital. Please go ahead.

Speaker 5

Hi there. Good morning. Just before I start my question, Peter, I just want to thank you for your dedication, hard work and capital stewardship, and I wish you the very best going forward.

Speaker 2

Thanks, Ralph. Appreciate that.

Speaker 5

Thank you. In terms of the additional synergies that you're working on and you talked about First, Wade, I'm just wondering what could you potentially quantify what you may be able to get further out of the operating assets? I just want to try and sort of separate the successive waves of synergies that are going to come that are more reflective of the Kuna district

Speaker 3

Good morning, Raul. This is Juan Andres. Thanks for the question. As Jack mentioned, we have established this regional support function unit that will be in charge of Evaluating and assessing the potential going forward, these $20,000,000 to $30,000,000 of synergies that we have Identify now are the low hanging fruits, the opportunities that we were able to find in this first wave. So At this point, I'm not in a position to give you an estimate of those savings, but as soon as we have that assessment, we'll share it with Mark.

Speaker 1

Okay. Yes, fair enough. Thank you. And maybe if

Speaker 5

I could just delve into the Caserones exploration. Do we have a targeted amount of meters or 1,000,000 of dollars per year in this specific program?

Speaker 2

Ralph, yes, this is Jacqueline Dean on the call. Yes, we're targeting, I believe it's about 7,000 meters of drilling in the Casaronis area Between this year and into next year, we'll basically be drilling until the winter season commences and we've got a number of targets that we're going after.

Speaker 1

Great. Perfect. I see. Thanks very much.

Operator

Your next question comes from Orest Wabakaddar with Scotiabank, please go ahead.

Speaker 6

Hi, good morning. A couple of questions about the cost Profile moving forward, you increased production actually guidance for Candelaria, both copper and gold, but The cash cost guidance went up about 12%. Can you give us some color of what's going on there and whether any of that You see a structural in terms of cost elevated cost going into next year?

Speaker 4

Yes. Good morning, Orest. It's Teitur here. I mean, if you look at the performance year to date, our cash cost so far is sitting at around about $2.20 for the 9 months C1 costs. And we've had a certain headwind, big backlog on the maintenance of Fleets in particular and we were getting some new trucks coming in.

Speaker 4

They were slightly late in delivery, which meant that contracting costs went off because we had to Rent in additional equipment for a limited period of time. So I would say all of those items are sort of one off Cost items that we do not expect to reoccur. And I would also say that for the 4th Our full year guidance, which we have increased, as you said, we are still remaining relatively conservative on, for example, diesel cost assumptions in the 4th quarter and also We're having a weaker pesos at the moment than what we are basing our guidance on. So I would say there is some conservatism built into To our full year guidance on Candelaria.

Speaker 6

Thank you. And if I could just shift to Casa Ronis, I mean the cash costs reported In the Q3, dollars 1.60 way below the guidance you had given for H2.

Speaker 4

Is that Can you give us a bit

Speaker 6

of color there? Is that just related to some kind of acquisition accounting in the quarter? Because certainly even the updated guidance would suggest Costs are going materially higher in Q4?

Speaker 4

Yes. I mean, we have more activity in Q4 than So that's naturally going to drive both similar story if you look at CapEx actually because we only posted $30,000,000 in CapEx in Q3 3 words we guide to 110 for the full year. So this is very back sort of end loaded cost profile On both fronts. And in addition to that, we also had in relation to the closing of the acquisition, we had the fair market value of the inventory On Casa Roni, which led to I think it was a $32,000,000 charge to production cost In Q3, which is not fitting in the C1 cost, but nevertheless is reported as a production cost. So we stick with the overall guidance of $2,000,000 2 point 20 for the full year.

Speaker 4

But again, similar story to Candelaria, we are being relatively conservative both on FX and diesel costs On Catalonia as well. So I will see you there's some upside there.

Speaker 1

Thank you.

Operator

Your next question comes from Greg Barnes with TD Securities. Please go ahead.

Speaker 7

Yes, thank you. Just a couple of questions on the $20,000,000 to $30,000,000 in synergies between Candelaria and Casa Ronis. Can you give us some idea of some Point to somewhere that where those savings are coming from, pretty substantial even in the first wave.

Speaker 3

Yes, this is Juan Andres again. Most of them are coming from renegotiations of contracts. For example, concentrate logistics, grinding media, we're working now on renegotiation of the diesel and lubricant contract. So there were all opportunities that we saw As we gain access to the information that CasaRones had in terms of those contracts and we looked at the Rates and fees that we had in Candelaria, and by doing that, we were able to sit down with the different vendors and renegotiate some contracts.

Speaker 7

Okay. And just on Candelaria, in the presentation, you mentioned you're doing mine optimization for The underground project, QJEP. What does that mean? Are you moving ahead with QJEP? Or what is the plan going forward for that underground expansion?

Speaker 2

Hi, Greg. This is Jack. I can start with the answer and Juan Andres wants to chime in, no problem there. But Right now, we're looking at our underground mining method and as the 2,040 EIA was approved, that gives us the ability to advance with QJEP. There are a number of initiatives that we're taking to just look at optimizing that underground mine plan.

Speaker 2

So the intention is very much to go forward with the project. But in the Q1 of next year, we'll have an internal review with our technical team, on the underground QJET mine plan. Of course, we need to update the design and the numbers around that, now that we've got the green light to advance with it.

Speaker 7

Okay. So sometime in 2024, you do expect to move forward with that project?

Speaker 2

Yes. In the first half of next year, we'll be able to come up with come out with an update on the plan to advance. And with that would be a CapEx update as well. Right.

Speaker 7

Okay. Okay, good enough. Thank you.

Operator

Your next question comes from Stefan Lanoue with Cormark Securities. Please go ahead.

Speaker 8

Yes. Thanks very much. And Peter, again, wishing you all the best for the future. Just I guess just on Josemaria, I think Jack you mentioned sort of looking towards next year is having sort of some fiscal Stability and sight line to an updated mine plan and CapEx and all that sort of stuff. Should we still be anticipating Seeing an update on Jose Maria in sort of a standalone form?

Speaker 8

Or as you're going through this process, are we seeing more and more consideration for Regional synergies, I know obviously, Castoroni's is getting a lot more airtime now. But when we think about what we're going to see out of Jose Maria next year, is it still very much going to be in

Speaker 3

Yes, that's a good question.

Speaker 2

I think when we look at the Vicuna district, we very much Kind of separate between Chile and Argentina. Casa Ronis, of course, is part of this Vicuna district and it's the only operating mine in that area. And eventually, we would like to kind of see synergies that could be utilized across border. That looks like it would take quite a bit of time. And therefore, in order To kind of advance with Jose Maria, we very much look at Jose Maria as being on the Argentinian side and keep it as a standalone There, but we are doing various trade off studies.

Speaker 2

We are looking at what it would look like to transport concentrate or to bring water. I mean, these are Big picture kind of big vision ideas for the district, but Jose Maria right now is looked at as a standalone on the Argentinian side.

Speaker 8

Okay, great. That's very helpful. Thanks very much guys.

Speaker 1

Thank you.

Operator

Your next question comes from Dalton Baretto with Canaccord. Please go ahead.

Speaker 9

Thanks. Good morning and good luck, Peter. Good luck, Jack. Jack, I want to start with you just very high level. As you take over over the next several years, What can we expect to change at Lundin Mining going forward?

Speaker 2

Hey, Dalton. Thank you for the question. And as Peter mentioned in the presentation, we've been working very closely. I was a former Director of Lundin Mining for a couple of years before joining the management team in December, we've been working on the strategy for Lundin Mining together with the Board. We've got a relatively new management team in place, but the strategy is to deliver on making sure that we're maximizing profitability at all of our assets.

Speaker 2

I think when you look at the future growth of Lundin Mining, it's very focused in this new emerging district. We now have a very strong cohort In the district, but also in the Atacama region in Chile, Juan Andres is based in Santiago, our Chief Operating Officer, And we're building a bit of a regional presence in that area. So I think there's a lot to get from our existing operations. We want to maximize the value Those bring costs down and maximize profitability there and then fuel the growth in this region in between Chile and Argentina. So I mean, I don't think that that changes.

Speaker 2

The strategy has kind of been set and matured over the last 18 months Peter and I have been working closely again with the Board and the management team. We're very aligned on what we believe the direction of the company needs to be. It's just continuing what we've been working on, Dalton.

Speaker 9

Great. Thanks for that, Jack. And maybe if I can ask a couple of questions Jose Maria. Well, first, can you talk a little bit about more specifically about some of these trade off You're doing and what you're looking at specifically, and then maybe give us some broad strokes in terms of what the project looks like right now?

Speaker 2

Sure. So at this point in time, basic engineering is kind of around 40% Complete our overall project engineering. And right now, we are looking at infrastructure locations. I mean, we've identified Where tailings needs to be, we've identified where the concentrator is going to be located. We've optimized and upgraded our construction camp.

Speaker 2

That's all completed. We've even ordered some of our long lead item equipment. So our mills and our motors, our gearless motor drives, Those are all making their way into country. So we are quite advanced on many fronts. However, given the climate, we also want to make sure that we are looking at Various trade off studies, which include kind of placement of infrastructure.

Speaker 2

So in the future, if we did want to expand, right now, we're considering 3 lines, About 150,000 tonne per day concentrator, if we did want to expand and grow that concentrator to produce more, we would add a 4th line and therefore you need to make Sure, you're situating the processing complex in a right way. It's all about building in that optionality while Reducing that upfront capital cost. And then as I mentioned, we've got kind of bigger picture ideas that would likely be implemented more in kind of a Phase 2 Of this overall development and that includes kind of looking at how we're transporting ore, where we're sourcing our water from. We're drilling a lot of wells right now to identify additional water sources on the Argentinian side. So with a mega project, there There's always trade off studies that you can be doing to really look to maximize the value of the project and eventually you do have to draw a line in the sand and then get ready to move forward.

Speaker 2

But while we're doing this engineering work, we're obviously looking at what's going on with the elections in Argentina and just wanting to stay close to what's going on and how that's Evolving in the country.

Speaker 9

That's great. And then just speaking of the elections, How close are you to getting a JV deal done? And how much of a role the election is going to play?

Speaker 2

Right now, when it comes to announcing a JV, we're very much In early stages, there's not much material to update on that. A project of this size, as I have mentioned before, it makes sense to look at bringing in a partner. We are in discussions with multiple prospective partners. There is nothing material to update on that. Of course, Anybody that would want to make an investment in a country would have to understand what's going on politically and economically in the region.

Speaker 2

And so by November 19, we'll have the runoff election between Millet and Sergio Massa. So the Pyrenees existing Party that's in power today and then the opposition party. So we'll be monitoring that closely early in the year. Next year, we'll be coming to the newly formed or existing government and look to kind of continue advancing on our fiscal stability discussions. We've had a number of positive progresses that have been made prior to the elections.

Speaker 2

So we just want to continue that momentum there. But right now, again, in terms of partnerships, there's nothing material to update. Perfect. That's all for me. Thanks, Jack.

Speaker 2

Thank you.

Operator

There are no further questions at this time. Please proceed.

Speaker 1

Thank you, operator, and thank you everyone for participating in today's call. I'd also really like to thank the team at Lundin Mining. It's the team that's put us in a great position to close out 2023. I think 2024 has been an extremely exciting year on the production front, exploration front and development front. The team is in place and I look forward to monitoring the success next year.

Speaker 1

So thanks again everyone for participating.

Operator

Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines.

Powered by Quartr

Key Takeaways

  • Leadership Transition: CEO Peter Rockendale will step down at year‐end, handing over to Jack Lundin after completing the move of senior leadership to Vancouver and adding key hires in legal, health & safety, and sustainability.
  • Record Q3 Production: The company achieved a record 206,000 tonnes of copper equivalent in Q3 (including Casterones), tracking at or above guidance midpoints for copper, gold, and nickel, and prompting tighter production ranges for Q4 and full‐year 2023.
  • Guidance and Costs: Production guidance was raised for Casterones and Eagle while cash cost guidance was lowered due to higher metal volumes and byproduct credits, with full‐year C1 costs now expected at US$2.20/lb Cu and US$2.00–2.20/lb Ni.
  • Financial Strength: Q3 revenue was nearly US$990 million, with adjusted EBITDA of US$415 million and operating cash flow of US$316 million, maintaining ~US$1.4 billion in liquidity and a CAD 0.09/share quarterly dividend (4.2% yield).
  • Casterones Integration & Exploration: Following the July acquisition of Casterones, initial synergies of US$20–30 million per year have been identified, and a 10,000+ m drilling program is underway to test priority targets on the 58,000 ha land package.
AI Generated. May Contain Errors.
Earnings Conference Call
Lundin Mining Q3 2023
00:00 / 00:00