Amerigo Resources Ltd
TSX:ARG
| US |
|
Johnson & Johnson
NYSE:JNJ
|
Pharmaceuticals
|
| US |
|
Berkshire Hathaway Inc
NYSE:BRK.A
|
Financial Services
|
| US |
|
Bank of America Corp
NYSE:BAC
|
Banking
|
| US |
|
Mastercard Inc
NYSE:MA
|
Technology
|
| US |
|
UnitedHealth Group Inc
NYSE:UNH
|
Health Care
|
| US |
|
Exxon Mobil Corp
NYSE:XOM
|
Energy
|
| US |
|
Pfizer Inc
NYSE:PFE
|
Pharmaceuticals
|
| US |
|
Palantir Technologies Inc
NYSE:PLTR
|
Technology
|
| US |
|
Nike Inc
NYSE:NKE
|
Textiles, Apparel & Luxury Goods
|
| US |
|
Visa Inc
NYSE:V
|
Technology
|
| CN |
|
Alibaba Group Holding Ltd
NYSE:BABA
|
Retail
|
| US |
|
JPMorgan Chase & Co
NYSE:JPM
|
Banking
|
| US |
|
Coca-Cola Co
NYSE:KO
|
Beverages
|
| US |
|
Walmart Inc
NYSE:WMT
|
Retail
|
| US |
|
Verizon Communications Inc
NYSE:VZ
|
Telecommunication
|
| US |
|
Chevron Corp
NYSE:CVX
|
Energy
|
If you don’t study any companies, you have the same success buying stocks as you do in a poker game if you bet without looking at your cards.
Utilize notes to systematically review your investment decisions. By reflecting on past outcomes, you can discern effective strategies and identify those that underperformed. This continuous feedback loop enables you to adapt and refine your approach, optimizing for future success.
Each note serves as a learning point, offering insights into your decision-making processes. Over time, you'll accumulate a personalized database of knowledge, enhancing your ability to make informed decisions quickly and effectively.
With a comprehensive record of your investment history at your fingertips, you can compare current opportunities against past experiences. This not only bolsters your confidence but also ensures that each decision is grounded in a well-documented rationale.
Do you really want to delete this note?
This action cannot be undone.
| 52 Week Range |
1.56
4.35
|
| Price Target |
|
We'll email you a reminder when the closing price reaches CAD.
Choose the stock you wish to monitor with a price alert.
|
|
Johnson & Johnson
NYSE:JNJ
|
US |
|
|
Berkshire Hathaway Inc
NYSE:BRK.A
|
US |
|
|
Bank of America Corp
NYSE:BAC
|
US |
|
|
Mastercard Inc
NYSE:MA
|
US |
|
|
UnitedHealth Group Inc
NYSE:UNH
|
US |
|
|
Exxon Mobil Corp
NYSE:XOM
|
US |
|
|
Pfizer Inc
NYSE:PFE
|
US |
|
|
Palantir Technologies Inc
NYSE:PLTR
|
US |
|
|
Nike Inc
NYSE:NKE
|
US |
|
|
Visa Inc
NYSE:V
|
US |
|
|
Alibaba Group Holding Ltd
NYSE:BABA
|
CN |
|
|
JPMorgan Chase & Co
NYSE:JPM
|
US |
|
|
Coca-Cola Co
NYSE:KO
|
US |
|
|
Walmart Inc
NYSE:WMT
|
US |
|
|
Verizon Communications Inc
NYSE:VZ
|
US |
|
|
Chevron Corp
NYSE:CVX
|
US |
This alert will be permanently deleted.
Good day, ladies and gentlemen. Welcome to the Q2 2020 investor call. I would like to introduce Ms. Aurora Davidson, President and Chief Executive Officer of Amerigo Resources Ltd. Please go ahead, Ms. Davidson.
Thank you. Welcome to the Second Quarter 2020 Investor Conference Call of Amerigo Resources. I am Aurora Davidson, President and Chief Executive Officer.Before we begin the presentation, let me caution you that our comments and discussions will include forward-looking information within the meaning of applicable securities legislation. Forward-looking information will include, among other things, forecasts and projections about our copper production for the year, which involves known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements to be materially different from such forecasts and projections. Therefore, although we believe that anticipated future results, performance or achievements expressed or implied by the forward-looking information are based on reasonable assumptions and expectations, you should not place undue reliance on such forward-looking information. We direct you to our press release issued on August 12, 2020, and our other documents filed with the securities authorities in Canada, including our annual information form under the heading Description of the Business Risk Factors.These documents describe the material factors and assumptions that were applied in drawing the conclusions and making the forecast and projections as reflected in the forward-looking information and the material factors that could cause actual results, performance or achievements to differ materially. Except as required by law, we undertake no obligation to update or revise any forward-looking information made in this presentation.Okay. After the formalities of our forward-looking statements, I thank you for taking the time to join us today to report our Q2 2020 financial results. With me today is Amerigo's new Chief Financial Officer, Carmen Amezquita. Carmen is a Certified Public Accountant, Chartered Accountant, and has worked in the mining industry for more than 10 years, both in the industry as CFO and Controller and in the Audit and Assurance Group of PricewaterhouseCoopers. Carmen is a very welcome addition to the company's management team.I will provide the quarterly headlines, a more detailed update on operations and on how we see the rest of the year shaping up, and Carmen will report financial results for the quarter.As to the headlines, in Q2, MVC's copper production from fresh and Cauquenes tailings increased 20% compared to Q1 and was in line with guidance. Our Q2 cash cost was $1.72 per pound and came in $0.13 per pound below our Q2 guidance and $0.22 per pound below the cash cost in Q1. We continue to operate in the red with a financial net loss of $3.6 million or $0.02 per share, but returned to the operation to cash-generating mode, generating cash flow from operations of $2.8 million in the quarter. This was done at a quarterly copper price of $2.61 per pound. Today's price is $2.89 per pound.We operated continually with no COVID interruptions, continued to advance on plant optimization and maintained our trade accounts and the MVC loans in good standing. While we continue to have a working capital efficiency, our current cash flow projections for the next 18 months show us being able to meet obligations, including debt obligation as they can do. Weather was on our side this time in the form of strong rankling at MVC. These conditions reduced uncertainty and are sound building blocks to stronger results in the second half of the year.Moving on to a more detailed report to investors on our operations, I think it is fair to start with the obvious. While global metal production has been negatively impacted by COVID-19, this is not the case with Amerigo's MVC operation. If you were with us at the Q1 investor call, we discussed the COVID-19 impact at our operations in Chile had been 0. No effect on copper production, costs, disruption to the supply chain and no disruption to the concentrate shipments from MVCs.This continued in Q2 and continues to date. While there are some intrinsic benefits provided by the nature of our operations, such as how we operate remotely the hydraulic monitors at Cauquenes and how we are able to social distance in open spaces at the plant, MVC had a phenomenal COVID-19 response and was, in fact, publicly praised for this excellent job by Chile's Mining Minister. Some of the response actions that were implemented, such as changes in shift work will remain in place going forward, which will have a positive impact on reduction of costs and improved productivity.The region where MVC operates came out of the government-mandated strict quarantine this week and ordinary life activities are returning to the new normal. COVID-19 is not something that Amerigo's investors should fear.On July 23, 2020, we issued our production results for the second quarter. MVC's copper production from fresh and Cauquenes sailings increased 20% compared to Q1 and was in line with guidance issued early in the year when we announced a reduction in Cauquenes tonnage processing to 40,000 tonnes per day through the first semester in response to drought conditions than present in Central Chile.With respect to production results in the quarter, as I mentioned earlier in the call, we met our targets. Throughout Q2, we operated with known reduced processing capacity at Cauquenes due to reduced water supply. These adjustments were put in place in January of this year. On average, the processing rate of Cauquenes in Q2 was 36,000 tonnes per day. For comparison purposes, in 2019, Cauquenes processing rates were around 58,000 tonnes per day with no restrictions from reduced water. The reason why we reduced processing for Cauquenes when we faced water supply constraints was because a lot of batteries used in this process to break down the dry tailings with hydraulic monitors and then to pump the sludge to the MVC plant for grinding application.For fresh tailings, processing rates averaged 119,000 tonnes per day, which was within the norm. Copper grade and fresh tailings was slightly higher than expected, and copper grade for Cauquenes was right on budget. Recoveries from fresh and Cauquenes tailings were 20% and 35% and exceeded our expectations in response to MVC's initial plant debottlenecking initiatives. Operating days in Q2 were 91 out of 91 for fresh tailings and 89 out of 91 for Cauquenes. We lost 2 days of operations in Cauquenes in late June due to strong rainfall. And that was one big piece of good news, strong rainfall. Rainfall is very important at MVC because it is a cost free way of securing material amounts of water that can be used and safely stored in Colihues, which is essentially our water reserve dam. Water reserves at Colihues are currently over 10 million cubic meters, up from a low point of 200,000 cubic meters at the end of 2019. We have not had this much water stored in Colihues since December 2017. To provide some context on rainfall in the region, let's look at the last 5 years. 2016 and 2017 were normal rainfall years, so let's say it rained 100% in each of those years. In 2018, our drought started and annual rainfall was down to 70% of normal. Then in 2019, there was a severe drought and rainfall was 30% of normal. In 2020, as of today, we are at 85% of annual rainfall. It has not rained since August 5, but August and September are still months when rain can be expected. What the rain data to date tells us is that, while we are not back to full normality, we are definitely not in the dire situation we faced in 2019 and are already doing better mid-August in terms of rainfall than for the full year 2018. Now as the saying goes, when it rains, it pours. There were days of extremely heavy rain at the end of June and early July, and we had to stop operations in Cauquenes for a total of 11 days in July on account of safety and because of some flooding. Despite this loss days, we continue to expect to meet 2020 production guidance. The rainfall from June and July allowed us to take full normal processing rate in Cauquenes past mid-July, and since Cauquenes processing rates have been higher-than-average processing rates in 2019. I think it is also important to point out that even if there were to be no further rainfall this year, we can continue operating at normal rates for the rest of 2020 and until the start of the 2021 rain season in June 2021.At this point, again, should no further rain occur, water research in Colihues would be down to 5 million cubic meters, which is still a safe level, but one in which ideally we would like to see rain starting to occur again.Of course, the effect of normalized rain has an overall positive effect on the whole region. Water bodies are returning to normal shape, which is important because we have water rights. The heal for greener, the snow cup on the mountain range is at its best in the last 10 years. The positive effect of rainfall in fresh tailings is not yet seen as El Teniente is located at a higher altitude at MVC and will benefit from the 2020 rain season in full as snow starts to melt in the fourth of the year, when Chile enters into spring and then summer. During Q2, the plant optimization work we started earlier this year continued at a steady space -- at a steady pace. Year-to-date, 6 debottlenecking projects have been completed, 3 are work in progress and will be completed in Q3, and 2 are in the final evaluation phase. The implemented projects have provided good but not dramatic results. Quite importantly, however, they have contributed to a smoother, more predictable and less disruptive plant process. They include loss controls for the course fraction, meal discharge controls, additional controls in the rapid circuit and changes in foaming agents and collector agents.The projects that are going to be finalized in Q3 are the core projects of the debottlenecking initiatives. They include the metallurgical lab work that will allow us to further refine optimal metallurgical parameters and production potential at the plant, the modification of the patient circuit to reduce circulating loads and what we call a hydrocyclone pilot test. The hydrocyclone pilot test includes using existing smaller hydrocyclones that were already available to MVC to field test their effect on the reduction of copper losses, before embarking on a potential full hydrocyclone reconversion. They completed an under-execution project on a low cost of approximately $400,000, of which $250,000 are CapEx and $150,000 are OpEx through lab work and consulting.The 2 projects which are still in the evaluation phase are the full change to the smaller hydrocyclones and improvements to optimize the operation of the MVC water recirculation thickeners. We have completed simulation data for the full hydrocyclone project, but decided to further test this alternative with the ongoing pilot test. In July, we received a comprehensive audit report from world-renowned geology experts, [ Patterson Cook ], with their recommendations on how to optimize the operation of the water thickeners, which is the means by which water reticulation takes place with MVC. What we're looking for us is to have a more stable thickener operation in the future. MVC is reviewing this recommendations with the current objectives with current objectives of implementing them during the February 2021 El Teniente and MVC plant maintenance stoppage, as they would require for us to stop the [indiscernible] to do the necessary retrofits.The products to be completed in Q3, the optimization of thickener's performance and the potential hydrocyclone reconversion, are all important projects to further improve plant recoveries, which is key to achieving higher production levels. However, our guidance for the rest of the year is based on known production levels that we are already achieving and assume increased processing rates from Cauquenes, which have already been achieved in July and continue to date, plus the known impact of the debottlenecking initiatives implemented to date. Under these assumptions, MVC estimates that it will produce 56 million pounds of copper in 2020 at a cash cost of $1.67 per pound. Cash costs will step down progressively in Q3 2020 and Q4, primarily due to increased production at Cauquenes.Cost reductions at MVC have yielded initial results and costs are trending in the right direction. Continued work is required for us to continue to identify other OpEx reduction initiatives and to maintain cost discipline to reduce total cost and to improve production levels to reach sustainable unit costs. MVC's approved 2020 CapEx of $3.7 million was reshuffled to eliminate nonessential projects and to prioritize water circulation projects and plant optimization. The revised CapEx will be $3 million, of which $2.3 million are water-related projects, including a project to purchase and install additional metal pricing to increase water recirculation capacity from the water thickeners, which will provide an additional 130 liters per second of water at the plant and which will be completed this quarter, and the purchase of parts for the thickeners that will allow them to work properly at higher loads. Again to be completed in Q3. The low sustaining CapEx requirements at MVC are one of the investment differentiators at Amerigo. Moving away from the operational realm, we had a busy quarter managing working capital. As of today, we are current with all of our trade debt, including with critical suppliers like our power supplier. We have maintained a productive and supportive dialogue with the MVC lenders, who waived MVC's June 30 covenant compliance as none of the 4 covenants under the finance agreement were met. As mentioned earlier, we will be able to meet our September 26 debt payment of approximately $6 million of principal and interest. And our current cash flow projections show us replenishing the MVC debt service reserve accounts by the year-end 2020. We reached an agreement earlier this month with Codelco to repay $7.3 million due to them in respect of negative trade settlement adjustments, which were caused by the sharp drop in copper price in Q1. The $7.3 million will be repaid in monthly installments in 2021.We are now almost mid through another productive quarter. We need to deliver on the ongoing optimization projects, meet production and cost guidance and continue to reduce liquidity risk. In Q3, we will start negotiations with MVC Supervisors' Union as their 3-year union contract expires on January 1, 2021.As usual, I will conclude my update by stating Amerigo's value proposition. Amerigo owns a solid asset in MVC. MVC has been operating for 27 years through the highs and lows of copper cycles. We have a long-term contract and a solid relationship with Codelco, the world's biggest copper producer. We are a low CapEx operation. We have manageable debt and a good relationship with our lenders. Our operational resiliency has seen us navigate through low copper prices, low price cycles where we adjust, innovate and keep going. Our objective is to return to a sustainable dividend payment capacity on the back of a solid operation and strong copper prices. I will now turn the call to Carmen for a financial update. After Carmen's presentation, we will take questions.
Thank you, Aurora. We are pleased to present the second quarterly report of 2020 from MVC in Chile. The second quarter marked improvements in production and financial results when compared to the first quarter of the year. Aurora has already provided highlights for production results.In terms of financial results, Amerigo posted a net loss of $3.6 million in the quarter, down from a net loss of $4 million in the preceding quarter. Loss per share in the quarter was $0.02.Price continued to be a challenge affecting the company's financial performance. Amerigo's copper price in Q2 was $2.61 per pound, an increase from Q1's price of $2.35, but a lower quarterly price than the 2019 comparative period. Today, the copper price has increased to $2.89 per pound. The Q2 averaged realized copper price resulted in gross copper sales for the quarter of $33.3 million and positive settlement adjustments of $1.4 million. As items deducted from revenue, we had $6.2 million in royalties to DET, smelting and refinery costs of $4.3 million and transportation costs of $444,000, resulting in net copper revenue of $23.9 million. The company also had molybdenum revenue of $2.1 million for total revenue in Q2 of $26 million. Total production and tolling costs, including depreciation, were $26.4 million. The company's cash cost was down to $1.72 in Q2 compared to $1.94 in Q1 of this year and $1.97 in Q2 2019. Derivative to related parties was $2.1 million, including a royalty to related parties of $274,000 and a fair value adjustment to the royalty derivatives of $1.8 million.There were lower general and administrative costs of $434,000 compared to Q2 2019, which had $1.2 million. Finance expense in the quarter decreased to $904,000 compared to $1.5 million in Q2 2019. Included in finance expense were interest charges of $792,000 and a mark-to-market adjustment to the interest rate swap in the amount of $112,000. The company posted an income tax recovery of $613,000 and a net loss of $3.6 million.In respect of cash flow in the quarter, cash generated from operations was $2.8 million and after changes in working capital, cash -- net cash flow from operations was $1.1 million. Uses of cash in the quarter included $810,000 used in investing activities related to the purchase of plant and equipment and lease repayments of $403,000. Ending cash at June 30 was $489,000.Note that due to a Chilean holiday on June 29, there was a delay in payment of $4.6 million in receivables that was received July 1. If payment had been received on time, the closing cash balance in June would have been $5.1 million. Subsequent to quarter end, MVC reached an agreement with DET to defer payment of $7.3 million in copper settlement. The deferred payments, which were immediately due to DET, was meant to be paid in January 2021 in 12 equal installments and will bear interest at the rate of the 12-month LIBOR plus 300 basis points. This will reduce the company's working capital deficiency by $3.7 million.Production results in Q2 continue in line with expectations and guidance. However, the company has been impacted by lower copper prices. Today, the price of copper has increased to $2.89 per pound. We will report the Q3 financial results mid-November in 2020, and want to thank you for your continued interest in the company during the year. We will now take questions from call participants.
[Operator Instructions] The first question is from [ Kevin Fisher ] of [indiscernible].
Aurora, thanks for taking the call and also for the update you gave earlier on the rainfall in that release. That was quite helpful to have at that time. I just want, on that topic, first of all, to ask about the pipeline that you were twinning, I believe, down to Colihues, is -- I remember that project was supposed to be completed sometime during the quarter. And I assume it got done and is working properly?
No. That project was initially going to be completed in April, but we ran into some problems with our thickeners because we overloaded them in Q1. And we had to order some spares for the thickeners. So we postponed that installation of the pipeline because it would have been premature if you have it. It wouldn't have served the purpose. We have to do both of those projects concurrently for them to work properly. So we're working on that now. The pipe is on-site being installed. We're getting the parts in, and the project will be completed at the end of this quarter.
Okay. So that will help. But -- so let me ask you a leading question without any promises or guarantees from management. But if we just simply assume, as you've indicated, that production gets back up in Colihues to where it was last year, which would be another 2 million pounds versus what happened in the second quarter compared to the second quarter of 2019. And if you assume -- I see stock copper today at around $2.92, if we were to assume another $0.30 for the realized copper price, I would assume those -- all other things being equal, if you get another 2 million pounds and another $0.30 in, say, the current quarter, that should have a fairly significant impact on profitability, I would assume?
Yes. Of course.
But you don't want to quantify it, I guess?
No. No. We have provided our production guidance. We have provided guidance in respect of cash costs. We will not provide a guidance in respect of copper prices, but we have provided additional information for all of you to understand how leveraged we are to copper prices. And the effect that a recovery in copper prices had when it occurs as has already occurred in July in respect of that -- of those additional uptakes on the 3 months of, let's call it, forward pricing that we have. That is why we've also said, we see under current scenarios, full capacity of meeting financial obligations that they can do, which is critical to us. But we are not going to narrow it down further because we shouldn't.
Okay. Let me ask you just 2 quick final questions. The first one is, you mentioned $1.67 in cash cost per pound. But I didn't quite catch whether that was for just the second half? Or what period is that for?
For our projection of cash cost is $1.67 for the full year. So we already know what we have in Q1 and Q2, which was $1.94 and $1.72. In our press release, production press release, we provided a breakdown of what we expect in Q3 and Q4, which is $1.56 and $1.46.
That's right. I do remember seeing that. Yes.
So that is -- to the annual. Yes.
Okay. There was some talk, and I was not on the call for the previous quarter, but you and I talked after -- and I've read all of the notes about the call and actually talk to some other people on it. There seemed to be a discussion -- tell me if this is incorrect, that there were negotiations going on with Codelco about maybe making some changes to the long-term contract that you have with them in respect of how the royalty is calculated to maybe give you some better predictability of what happens under highly volatile copper prices. Is that correct or not?
Yes, that is correct. And that -- those discussions took place, and we didn't reach any changes to the contract. But having said that, we reached the deferral of an important amount of money that was immediately due to them. So we have structured that into a very payable schedule of repayment for 2021.And the most important thing to bear in mind here is that as Codelco provides those -- that support to MVC, which has occurred in the past as well. It just confirms that we have a supportive relationship. It may not lead to a contractual change, but it is an ongoing supportive and beneficial relationship that has never worked against the company. So the relationship is there. Changing a contract and changing a long-term contract is a complicated matter. And at the end of the day, the results are that we have continued support from them, and we expect to continue to have continued support from them as we go through several other challenges because this is not the first time that it has happened and cycles to repeat themselves, and we will continue to rely on our strong strategic support from Codelco.
I think the length of the contract itself or both contract -- there's more than one contract. The length of these contracts testify to how strong the relationship is.
Absolutely.
Final question -- yes. If you have -- do you have any insight from outside consultants or from others in the industry, including those who've had production constraints from the virus or otherwise in Chile, but what the supply demand picture looks like where we could have some confidence that we might see even higher prices for the commodity? Do you have any feel at all for the outlook for the commodity price?
Well we remain very bullish on the short and medium term and long-term prospects of copper prices. I think that for us, it's more important to look at what has happened with -- in Chile in terms of Chile hasn't been as disrupted in its copper supply production as other regions. Peru has been substantially affected by COVID-19. Peru is the second world's largest copper producer. But for us, it has been more focused of what has happened at Codelco. And Codelco, despite COVID-19 being rampant in Chile in Q1 and part of -- essentially through Q2, increased its production in the first half of the year compared to 2019. So Codelco produced 5% more copper than in the first half of 2019, had stronger earnings despite lower copper prices. So what happens in terms of global supply, it's important because there could be and there are indications and there is sufficient to a disruption in supply capacity at other regions. But a more immediate taken us is, yes, well that is happening. It isn't happening around us. It isn't happening with Codelco, it isn't happening with Chile. So let's benefit from both aspects of the equation. Disruption somewhere else, but not disruption in Chile.
The next questions if from [ Steven Aldridge ] of Vancouver.
Looking at the estimates for Q3 and Q4, there's a significant production increase in Q4 from Cauquenes over Q3. And then -- and looking on, it says that there will be 40% more copper. So how are you being so successful? Or how will you be so successful?
So thank you, I need a little bit -- oops, I hear myself with a lot of echo there.Steven, do you have a speaker phone?
No, I'm not on the speaker. I'm on my -- on a regular phone.
Oh, okay. Well I'll challenge to ignore myself as I do that. The key line for you to look at in our estimations for the rest of the year, in particular, Q4, are tonnes per day for Cauquenes. You can see that in Q2, we were processing Cauquenes at a rate of about 36,000 tonnes per day.In Q3, we're showing an increase to 50,000 tonnes per day, and we're actually doing better than that. And in Q4, we are showing an increase to 62,500 tonnes per day, which is very close to where we're at as of today. So this is all driven by our ability to process higher rates from Cauquenes because we have the water to do that.
Sort of looking at that number, that Q4 number, the tonnes processed 5,750,000. So the tonnes processed is in fact 33% more than Q3. And yet, the daily production or tonnes per day is only 25% increase. So I'm not quite sure how you've got more tonnes into there?
Because we have higher processing on a daily basis, we have higher days of operation in Q4 than in Q3.
Yes. Okay. Anyway, if looking -- if you get to those Q4 numbers, as you've got, that's 40% more copper, that will be a tremendous boost to you for Q4. So keep it up.
That's why we're working hard, [ Steven ].
The next question is from Nick Toor of [ Las Vegas ].
Congratulations on a good quarter and looks like, finally, we have some good luck on the rainfall front. I'm just looking at sort of your projections for Q4, and it looks like you're going to be roughly around 70 million pounds run rate by Q4 based on what you are already able to accomplish on your production efficiencies. And I know that originally, you had targeted 80 million to 85 million pounds with the Cauquenes expansion, are we sort of looking -- is there any sort of seasonality in Q4? Or are we looking at this as a steady increase towards our design production capacity?
No. I think that we're looking at is, as I mentioned in the call, what we know now and the information that we have in front of us now on a completed basis is allowing us to make this projection, but we have 2 significant projects that are still under completion in Q3 that should boost this up. But I don't have the data in front of me there yet to provide some -- the same granularity of information as to where that information is going to take us. So this is with -- what we have in front of us, with what we know we can achieve right now, we are getting to that, as you say, quarterly 70 million pounds of copper that 68 million, 69 million pounds per year. But there is still work to do, and there is still a gap for us to close in Q3 in terms of just getting the final piece of data through the met analysis and through the answers that are coming from our a pilot test of the smaller hydrocyclones and MVC to see where do those other 2 projects take us to. Because, yes, the intention is to close that gap, but to close it with known -- with a known path forward that we can really sign our name around.
Got it. Got it. Okay. That's very helpful. And now as I looked at your Q4 projections and your cost projections, it looks like you'll get a $45 million plus or minus run rate of EBITDA, and that's your enterprise value right now is under -- that implies under 3x EBITDA. But you'll also should be generating a fair amount of free cash flow. Are you expecting to sort of -- if copper prices stay around this $2.80, $2.90 level, are you expecting to use that excess cash flow for further debt reduction or working capital reduction? Or are you looking at other alternatives?
Well it's either going to be debt reduction or distribution to shareholders. We don't have any further major expansion plans ahead of us. We don't have any major capital requirements. So it's a or b.
[Operator Instructions] The next question is from [ John Polcari ] of New York.
First, Carmen, say, welcome, and look forward to having you on Board. Aurora, a couple of quick questions. Am I correct in assuming that there were no COVID-19 issues in terms of illness in the workforce?
We had 8 cases within our workforce and within all of our subcontractors. None of them occurred while they were doing a shift work at MVC, and all of them have recovered. So they were mild cases with full recoveries.
Wow, excellent. And regarding transportation and shipping, where there were no backups at port facilities in the country, at the export facilities or transportation hubs?
I think there were some at the beginning of the COVID crisis. Our freight ends at MVC. El Teniente picks up their -- sends their trucks and picks up our concentrate at MVC. So what occurs after that is not part of MVC's operations.
Regarding the liquidity risk, in the past, there's been some talk perhaps of establishing some sort of line as well as the term loan that you service, instead of having to seek waivers and renegotiations during periods of downturn or unexpected events like the COVID-19. Is that something that's just not as feasible at this point based on the finances? Or you'd prefer not to establish a line as a backup?
No. No. No. I think we would like to have a line, but I also think that we have to have 2 good quarters of results in front of us before we initiate those discussions.
Okay. On the water issue, and this might be a little difficult to answer. But at the current trend, and I know it hasn't rained, you said since August 5, and it's very variable versus a particular average rainfall, say, for the last 2 decades. How far below the average rainfall this year are we? Are we a number of inches below typical rainfall? 10% below? 15% below? So far I know there's been substantial additional rainfall and a large catch up. But could you put some context on...
Yes. Yes. For sure. We currently are at, as of today, at 85% of expected rainfall on an annual basis in the regions.
Based on, say, what, the last 10 years? Or 20 years?
Correct. But no, based on the last 5 years. 2016, 2017 were normal rainfall years. There wasn't anything unusual with them. In general terms, if you really want to dig into this topic a little bit more, there has been a tendency toward drier conditions in Chile as time has passed. But 2016, 2017 were absolutely normal rainfall years. Those -- that is kind of the basis of rain expected on an ongoing basis. And we're at 85% of that right now.
Okay. Does that include the downturn of '18 and '19, which would tend to pull down the average? Or is it -- are we at 85% of what had been better years?
Yes. Well I'll give you some numbers if you're asking for them. 2016, 2017, which again, I'd categorize them as base years for purposes of this discussion. The average rain in the year was 410 millimeters. 2018 was 291 millimeters. 2019 was 124 millimeters. Right now, we are at essentially 85% of the 410. So we are seeing 350 millimeters.
That was very helpful. The labor contract, I believe you said it comes up January of '21?
For the supervisors. We have 56 supervisors. So they have their own union, and their contract is -- terminates on January 1, 2021. It is not as critical a discussion as with our regular plant operators because it's -- we have 25% supervisors compared to the number of plant workers. 56 supervisors versus 206 plant workers.
And are the supervisors under a 3-year contract renewal, also, typically?
Yes. All of the contracts in Chile on passing of Chilean Labor Law reform in 2016 are 3-year contracts.
Okay. And this is a bit of a one-off, but I seem to recall the company was -- had ordered and was receiving some technical equipment from Italy to augment some of the water issues? Is that correct?
It was basically -- yes, it was basically to fix a load problem that we have in the thickener as we turned into normal processing capacity. Those parts are scheduled to be on-site at the end of this month and will be installed in September, along with -- that's part of our CapEx for the year. Water recirculation has been a priority, and those 2 projects will be completed in Q3.
Great. And my last question was simply the fully loaded projected breakeven, including the royalty, D&A, depreciation, the whole 9 yards, if you will, for -- by year-end, would -- what are you projecting for a breakeven fully loaded, including all noncash cost breakeven?
It's about $2.50 cost at a $2.90 copper price because that includes a royalty of $0.60 per pound.
Right. $2.90. What was $2.60? $2.60 was without the royalty? Did you just mention...
No. I was saying it would be an all-in cost of $2.50, including -- sorry, $0.60 for the royalty, $0.60 per pound for the royalty at today's copper price.
Okay. So $2.50 plus $0.60, that would bring us up to about $3.10?
No. No. No. $2.50 including the $0.60. So let's assume a cash cost just to assume $1.60, $0.60 royalty, $0.07 CapEx, $0.22 at service. $2.50.
Okay. And all-in cash -- all-in fully -- okay. $2.50 pound.
All-in. All-in.
And the current price is approximately $2.88, $2.92, somewhere in that range, every -- fluctuating every day?
Correct.
There are no further questions registered at this time. I would now like return the meeting back over to Ms. Davidson. Please proceed.
Thank you very much. We appreciate your interest in joining us for this Q2 call. We look forward to chatting with you again in approximately 3 months' time to discuss our Q3 results, which we expect will be positive results. Until then, continue to enjoy your summer.
Thank you. The conference has now ended. Please disconnect your lines at this time. We thank you for your participation.