Amerigo Resources Ltd

TSX:ARG

Earnings Call Transcript

[Operator]

Good day, ladies and gentlemen. Welcome to the Q3 2020 Investor Call. I would like to introduce Ms. Aurora Davidson, President and CEO; and Ms. Carmen Amezquita, Chief Financial Officer of Amerigo Resources Ltd. I would now like to turn the meeting over to Ms. Aurora Davidson. Please go ahead, Ms. Davidson.

[Aurora G. Davidson, President, CEO & Director]

Thank you very much. Welcome to the Third Quarter 2020 Investor Conference Call of Amerigo Resources. I'm 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 November 4, 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 forecasts 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. So thank you for taking the time to join us today for our report of Amerigo's Q3 2020 financial results. With me today is Carmen Amezquita, Amerigo's Chief Financial Officer. I will provide the operational and business report, and Carmen will report financial results for the quarter. After Carmen's presentations, we can take questions. Q3 2020 was a strong quarter for Amerigo. Here are the production and financial highlights. In Q3, MVC's copper production increased to 14.7 million pounds, a 13% increase from Q2. I should mention that July was a weak production month as we lost 13 days of operation in Cauquenes due to heavy rain. Monthly production ramped up from 4 million pounds of copper in July to 5.3 million pounds in August and 5.4 million pounds in September. In Q4, we expect to produce 17 million pounds of copper for an annual production of 56.8 million pounds. Amerigo's net income in Q3 was $5.4 million due to stronger revenue from higher copper prices, positive revenue settlement adjustments and reduced tolling and production costs at MVC. Earnings per share in Q3 were $0.03 per share. MVC's copper price in Q3 was $3.04 per pound. This price held during October, and today's copper price is $3.08. In Q3, we generated cash flow from operating activities of $10.7 million, excluding changes in working capital. This is a significant improvement from the $2.8 million in operating cash flow generated in Q2. Net operating cash flow generated in the quarter, that is including changes in working capital, was $15.4 million, up from $1.1 million generated in Q2. September is debt service month at MVC. After a debt service of $6.1 million, our cash at quarter end was $10.5 million. That is $10 million higher than ending cash on June 30. In October, we fully funded the company's debt reserve account with $6.1 million, essentially guaranteeing the next debt service, which is in March 2021. While we continue to have a working capital deficiency, we are closing the gap. Our working capital deficiency on September 30 was $18.2 million, which is $8.5 million lower than on June 30. Under the current variables of production, costs and copper prices, we project to meet debt obligations with banks and with Codelco as they come due. Our business at Amerigo is not only to produce as much copper as we can, we also need to do it at the lowest cost. In Q1 and Q2, in response to low copper prices, we implemented an economy of war approach to cost containment at MVC, with cash cost in Q2 dropping to $1.72 per pound compared to $1.94 per pound in Q1. We were not able to sustain the same trend in Q3 and cash cost increased to $1.80 per pound, which was higher than guidance. Specific factors affecting cash cost trending were a stronger Chilean peso in Q2, the effect of severance payments at MVC, lower byproduct credits and higher operating costs than we had in Q2. While I am the first person to acknowledge that operating with only essential maintenance and reduced services as occurred in Q2 is not sustainable in the long term as copper prices stabilize in the current range over $3 per pound or over that price range, it is imperative that we can control our cost structure and continue to identify cost reduction opportunities, avoid duplications and inefficiencies and that we tirelessly enforce fiscal discipline to prevent cost scale-ups. I have to say, however, that cash cost is a tricky measure of performance as it includes, in our case, the moly byproduct credits. A good moly price, which is something we do not control, can yield a nice-looking cash cost and vice versa. Starting with our next cash cost guidance, we will include information on the moly price assumptions so that we can provide more clarity and color on the metric of cash cost. I also want to provide some more color on how our cash cost is structured. If we look for example at Q3's cash cost of $1.80 per pound, we can see that the most significant costs are power, smelting and refining, lime and grinding media. These 4 items totaled $1.12 per pound or 62% of cash cost and are costs that fall outside of our direct control. We receive power at contractual rates. Grinding cost is mostly driven by steel market prices. The same occurs with lime. And smelting and refining costs are annual industry benchmarks. Our area of control falls essentially in the other costs, which include labor, maintenance, water recovery costs, Cauquenes' operation, environmental compliance, quality control and safety. This is where we need to be laser-focused to continue to improve total and unit cost performance at MVC. You know, of course, that another key component to predict our earnings stream in addition to cash cost is a royalty to El Teniente, which is correlated to the price of copper. In Q3, royalties to El Teniente represented $0.69 per pound. Moving on to the operational update. The first thing I want to mention is MVC's continued excellent response regarding COVID-19. This is easier said than done. Our operation continues to be unaffected by COVID-19, no effect in copper production, costs, disruption to the supply chain or disruption to concentrate shipments from MVC. MVC's COVID-19 safety protocols have received commendation by the Chilean Ministry of Mines and are now an integral part of our operation. Let me provide a quick update regarding water, which is a critical input for MVC. When we talk about water supply at MVC, we necessarily need to talk about grain, which is our cost-free way of securing material amounts of water that can be used and safely store in Colihues, which is essentially MVC's water reserve them. The 2020 rain season at MVC's region is over. This year, we saw a return to almost normal rainfall levels. And as a result, MVC's water reserve at Colihues increased from a low point of 300 cubic meters earlier this year to 10 million cubic meters, a level that has been able to be maintained to date. This existent water reserves are sufficient for MVC to have normal operations at Cauquenes until the start of the 2021 rain season. Of course, normalized rain benefits everyone in the region, MVC, El Teniente, agricultural producers and the communities [ apart ].Notwithstanding the above, maximizing water recycling at MVC and minimizing water loss in the water discharge downstream from MVC are critical for us to maintain a sustainable water matrix. This is achieved by optimizing the performance of the 3 huge water thickeners at MVC. The thickeners currently receive water that has been used at MVC's plant and recirculate this water to Colihues for storage at a rate of 1,400 liters per second. This month, we are completing the installation of a new water pumping line that will allow us to increase recirculation to 1,600 liters per second. We have also received and are installing new reductors for the thickeners to ensure they can mechanically handle this additional load. This was the original project we envisioned late last year to have more water recirculation capacity. However, this year, we went a step further and retained the services of rheology experts, Paterson & Cooke, to find out what else could we do. Paterson & Cooke are concluding their recommendations for a potential increase to 2,100 liters per second, which would be achieved with the installation of variable speed underflow pumps at the thickeners. An engineering study on this potential project is expected in December and would be prioritized as a sustaining CapEx project. During Q3, we continued advancing on the MVC plant optimization program. As our technical expert has indicated, we are surgically optimizing specific areas of the plant, and we're doing that without any interruption to the production process. At the start of this optimization process, the first action item identified was to improved classification of the coarse and fine sections of the material that comes into the plant by improving the performance of classification equipment called hydrocyclones. Poor performance of the hydrocyclones was causing coarse copper to be lost to the overflow of the hydrocyclones and it never made it into the grinding and floatation processes. FLSmith conducted a study to identify how to make a classification more efficient. They recommended that MVC change its existing mix of 15-inch, 20-inch and 30-inch cyclones to FLSmith's 15-inch high-efficiency hydrocyclones. The recommended equipment would have cost $3 million plus installation and had a lead time of 52 weeks. We did not have the time to wait and determined the key recommendation was to change to a smaller hydrocyclone, even if it was not a high-efficiency one. We found an alternative in Chile, which costs 16% of the cost of the FLSmith units and has a lead time of six weeks. In September, we installed the first 6 15-inch hydrocyclones at MVC as a planned trial, a substantial reduction in coarse copper loss to the cyclone overflow was confirmed. With this proven result, we are proceeding to change a further 22 hydrocyclones through Q4. At year-end, we will have changed 28 of the 40 hydrocyclones used to classify the fresh tailings. The remaining 12 units would require a new pumping system, which is a more capital-intensive project. We are currently conducting engineering for that project and expect results in December. Classification of the Cauquenes tailings has been simplified by eliminating a double cycloning process. As of now, half of the Cauquenes cyclones are 15-inch and/or 20-inch. And before year-end, the 42 cycles in Cauquenes will be 15-inch units. We have received lab and grinding studies from which we are fine-tuning the grinding protocols at MVC. This is work in progress that will spill into Q1 2021. In summary, there is a lot of ongoing work at the MVC plant. The improvements we are seeing on production month and month are consistent. We're incorporating this data into our production model for 2021, and we expect to provide additional information on this in January of next year. A brief update on labor matters. As you know, MVC has 2 unions, workers and supervisors. The collective agreement with the supervisors union, which is comprised of 49 members, expires on January 1, 2021. The union is scheduled to present a contract proposal to MVC between now and November 15. We have a good relationship with the supervisors, as we do with our workers, and expect to reach a 3-year agreement with them most likely during December. You may recall that in October last year, Chile faced significant social unrest. The government of Chile listened and responded swiftly, organizing a referendum which was originally scheduled for April, but was delayed to October 25 due to COVID 19. In this referendum, Chileans voted by democratic majority that the country needs a new constitution. The new constitution will be drafted by a convention of 155 elected citizens, which will be voted in on April 11, 2021. The constitutional convention will have up to 1 year to produce a draft text of a new constitution, and the draft text will then be put to another public vote to either approve or reject the new constitution in mid-2022. Chile's current constitution dates to 1980 and was drafted under the Pinochet dictatorship. It is a pro-free market constitution under which Chile has enjoyed significant economic growth. Chile, however, is concerned about aspects that are coming in most countries, demand for better public health, better public education, concerns about income and equality, and how best to fund the pension system, et cetera. Chile's response to last year's social unrest was, in my humble opinion, phenomenal. The referendum presented an orderly, fast and democratic response. However, there are, without questions, risks associated with changing the constitution of the country. There could be changes to loss in mining, business or taxation. But one critical aspect to keep in mind is that mining is a fundamental driver of Chile's economy. We are bullish in copper price, especially if Joe Biden gets his 270 required votes. The Biden administration expects to spend $2 trillion over 4 years to improve infrastructure, create zero emissions, public transport and create clean energy jobs. One Biden proposal is a massive build-out of the U.S. railway system, which would be a significant boon to steel and copper. A Biden victory is a great gain for -- would be a great gain for green investment and copper demand because all the wiring and conducting material needed for green technologies relies heavily on copper. These factors could spark a multiyear boon for copper. As usual, I will finish by stating Amerigo's value proposition. Amerigo owns a solid asset in MVC. MVC is a resilient operation that has operated continually for 28 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 objective -- 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 our financial update. After Carmen's presentations, we can take questions.

[Carmen L. Amezquita Hernandez, Chief Financial Officer]

Thank you, Aurora. We are pleased to present the third quarterly report of 2020 from MVC in Chile. The third quarter marked improvements in production and financial results when compared to the first half of the year. Aurora has provided the highlights of production. In terms of financial results, Amerigo posted a net income of $5.4 million in the quarter, up from a net loss of $3.6 million in the preceding quarter. Both basic and diluted earnings per share in Q3 were $0.03. After dealing with low copper prices in the first half of 2020, copper prices increased. Amerigo's average copper price in Q3 was $3.04 per pound, an increase from the average copper price of $2.61 in Q2 and $2.35 in Q1. As shareholders that have been following us for some time know, Amerigo's financial performance is highly sensitive to copper prices. In Q3, our average copper price was $3.04 per pound and today's LME copper price was $3.08 per pound. Another factor affecting earnings are the changes in copper price from one quarter to the next. This is so because of our M+3 price convention for copper sales, where the final settlement price is the average LME price for the third month following production of copper concentrates. Q3 revenue was booked with a provisional copper price of $3.04 per pound, and final prices will be the average copper prices for October, which remained at $3.04 per pound in November and December. A 10% change on the $3.04 per pound provisional price would translate into higher or lower earnings of close to $4.5 million in Q4. The Q3 average realized copper price resulted in gross copper sales for the quarter of $44.3 million and positive settlement adjustments of $5.9 million. As items deducted from revenue, we had $9.8 million in royalties to DET, smelting and refinery costs of $4.5 million and transportation costs of $478,000, resulting in net copper revenue of $35.4 million. The company also had molybdenum revenue of $2.1 million, for total revenue in Q3 of $37.6 million. Total production and tolling costs, including depreciation, were $28.6 million. The company's cash costs increased in Q3 2020 to $1.80 per pound compared to $1.72 per pound in Q2 2020 and $1.56 per pound in Q3 2019. The cash costs were higher than in the prior year period, mainly due to a decrease of $0.22 per pound in byproduct credits. By-product credits were higher in Q3 2019 due to stronger molybdenum prices and production and from site processing. In Q3 2020, there were lower general and administrative costs of $604,000 compared to $826,000 in Q3 2019. This related mostly to a decrease in share-based payment compensation. Derivative to related parties was $303,000, including a royalty to related parties of $260,000 and a fair value adjustment to the royalty derivative of $43,000.Other losses/gains was a loss of $15,000, consisting of a foreign exchange expense of $86,000, which was partially offset by other gains of $71,000. Finance expense in the quarter decreased to $784,000 compared to $3.6 million in Q3 2019. Finance expense was much higher in the prior year period as it included $1.6 million from the loss on modification of debt and $836,000 fair value adjustment loss on interest rate swaps. The company had an income tax expense of $1.9 million and a net income of $5.4 million. In respect of cash flow in the quarter, cash generated from operations was $10.7 million in Q3 and $15.4 million after working capital changes. Uses in cash in the quarter included $540,000 used in investing activities related to the purchase of property, plant and equipment, repayment of borrowings of $4.7 million and lease repayments of $345,000. Ending cash at September 30 was $10.5 million. The company's outstanding debt with banks is currently $47 million. The scheduled debt payments are $4.7 million plus interest semiannually in March and September, up to March 2023, and a final payment currently scheduled for September 2023 of $23 million plus interest. In 2021, we will also be repaying $7.3 million to Codelco, which is a deferral of revenue settlement adjustments. Payments will start in January at a rate of $600,000 per month plus interest. Under the current variables of production, costs and copper prices, we project to meet debt obligations with banks and with Codelco as they become due. Production results in Q3 continue in line expectations and guidance coming in 9% higher than the Q3 2020 guidance that was provided in the Q2 2020 production results. We will report Q4 financial results mid-February 2021, and we want to thank you for your continued interest in the company during this year. We will now take questions from call participants.

[Operator]

[Operator Instructions] The first question is from Terry Fisher CIBC Private Wealth.

[Terry Fisher]

Well, congratulations, Aurora and Carmen, I think we see a lot of progress in this quarter. The stock doesn't seemed to care very much. It's not doing anything. And I see that December copper is at $3.11, and that's really not helping either. But I think it just takes time for these things to percolate through things, because you're not in the same kind of spotlight as Southern Copper is or even Lundin. But for those of us who've been here a long time, it's certainly a nice quarter to see. Particularly, I'm happy to see while you're controlling operating costs, the G&A is also going down. But related to that, it leads to one of the questions I have, which is as we get to the point now and further as copper prices go higher, where you're going to generate free cash flow, any Board has got 4 ways they can spend the free cash flow. Most people would automatically think about let's reestablish the dividend. But I think in this case, you'd want to probably work the debt down. And I think your -- you have the ability to prepay some of that or even to prepay the amount owing to Codelco. But the third thing after the dividends and repaying debt would be to buy back shares. The fourth thing, of course, would be to invest in some kind of an expansion, not necessarily where you are now because I think you've kind of maxed that out. I'm talking about -- when Rob was still around, he was talking about looking and getting into other types of opportunities similar to what you're doing now, perhaps with some other mines elsewhere. So this is a long rambling question, but it all relates. You've got $2.68 million worth of investments on the books, which have been there a long time, and I believe in small mining companies that the value of that was up this quarter. But what I'm concerned about there is what that implies for where the company is going in the future. So to add all that up, what I just said, where would be the first use of additional funds and then the second use? And is there any plan at this stage to, if we look down the road where things are going really well to expand the way you were talking about before you became CEO? And what about these shares of these small mining companies, why not get rid of that as metals prices are improving, if you're able to unload those things and get the cash out of there and focus on the existing operation? Or are those kept because there is a plan to maybe go in that direction in terms of expansion with your capital? Sorry for the long question. You can see, I think, how it all ties together. Plus -- sorry, buying back shares as use of cash is important to me because I see that there were options issued and some exercise at current market prices, and sensitive to preventing any further dilution through [ guarding ] of auctions at these really low prices because we all think the stock is worth a lot more than where it's trading. Okay. So I'll stop now.

[Aurora G. Davidson, President, CEO & Director]

Sorry, sorry. Thank you for your question. It's useful to have the discussion, and it's a good problem to have to think what are you going to be doing with your surplus cash flow. I think everybody will agree on that. So I'm glad that we're having the discussion. One of the aspects that you mentioned is debt repayment. Debt repayment is important to us and it's also a requirement to us. Under our finance agreement with the banks at MVC, there are avenues for us to make what are called restricted payments or payments up to the parent company, provided there is a cash sweep. And we've spoken about this before. So any -- 2 conditions have to be met for us to have accessibility to -- of cash, surplus cash into either implementing or reimplementing a dividend payment or doing a share buyback, for example. And those are, first of all, we have to meet a debt service coverage ratio of 1.4, which we didn't meet in June, but we could easily need if things continue to trend the way they are doing. So that's one of the requirements. The other one is that we would have to do a cash sweep of 50% of the cash available as a debt repayment into the banks. So that's one of the conditions, right? With that being done, another aspect to consider is any dividend implementation would have to be a sustainable dividend implementation. We don't want to put in a dividend payment that we're not going to be able to maintain the following quarter. So I think that those are some of the variables that we would have to consider: the quantum of available cash; the discussion of at least 50% of that would have to be cash sweep as a debt reduction, which would essentially reduce that big balloon payment that Carmen mentioned we have in September of 2020; and the sustainability. Share buybacks, we've done that in the past as a second mechanism of allocating this existing surplus cash flow. So that would be something to consider, vis-à-vis, how sustainable the dividend restatement looks to the Board at that point in time. You also mentioned the investments that we have in other mining companies. Essentially, it's only one Los Andes Copper, that's all public disclosure in our documentation. It is a passive investment. And yes, it's not a core critical investment that we intend to carry. If the opportunity should arise for us to realize on that investment, that is something that the company would consider.

[Terry Fisher]

Okay. Then I only have 2 other quick ones. One is if -- don't know where I saw this, but I read that the impact of the labor situation as well as maybe uncertainty of COVID has caused Codelco to defer some expansion plans that they had at El Teniente. I don't know whether that affects your operations at all. The other question, I'll just table with you and then I'm done. And that is apparently, there's been La Niña developing, I think, the Pacific water temperature is down by about 1.6 degrees, the last time I saw that. That may have changed since. And that should mean a cold wet winter, which is summer in your area. So maybe that's prospectively good for rainfall. I don't know whether you've seen anything about that. But -- so those are my 2 questions.

[Aurora G. Davidson, President, CEO & Director]

I mean the weather patterns change all the time. We don't have any indication of anything unusual occurring so far weather-wise in Chile. You mentioned the labor situation. Codelco is basically and El Teniente are basically in full resumption of their operational activities. Operations were not significantly affected by COVID, but they have been catching up with -- on the operational ramp to catch up with the annual loss production. They've done a very good quarter in Q3 and expect to continue to do so in Q4. So we're seeing a lot of prioritization to make up for any loss production in the year. And expansion plans are also being reestablished at Teniente. Teniente is the jewel of the crown of Codelco, so they are prioritizing the restatement of their expansion plans. That is not affecting us. So that's all progressing well. And in respect of the labor situation, I mentioned that we have our negotiation with supervisors. One of the aspects that we're seeing are very reasonable approaches between employers and unions in Teniente. El Teniente just had a renewal of one of their union agreements with one of their supervisors unions. It was a favorable agreement in our opinion, and we expect to have the same with our supervisors unit.

[Operator]

The next question is from Nick Toor, BlackRoot Capital.

[Nauman Toor]

Congrats on a good quarter and finally seeing some strength in copper. I have -- I was wondering if you're in a position now to give a bit of color on what you expect to happen in 2021?

[Aurora G. Davidson, President, CEO & Director]

No -- yes, go ahead.

[Nauman Toor]

I know when we started sort of the expansion a few years ago, our goal was roughly $1.15, $1.25 of cash cost and 80 million to 85 million pounds of production. And I think what you're guiding for this quarter, the fourth quarter is $1.65 and roughly around 70 million pounds of production. So you're sort of getting there. I wanted to see if [ this is ] all the initiatives that you've launched? And what is in progress? Do you have any thoughts on whether you see a line of sight to the original numbers?

[Aurora G. Davidson, President, CEO & Director]

Nick, I think this call is still a little bit premature. And I understand that this is a question that's of foremost importance to people that have been following us for some time. We will be releasing a -- our production results and our production and cost guidance for 2021 within the first 2 weeks of January. We're not going to wait until February 15 or so when we release the 2020 financial results. But we're in the middle right now of the planning and the quantification of our goals, both in terms of production, in terms of CapEx prioritization and in terms of costs for next year. So I don't want to put on a number or a series of numbers that are not fully backed up and checked and double-checked and triple-checked. So I understand your interest. Of course, it's -- we're the first ones to have that nailed down, but we don't want to come up with a number that we cannot pull it back up. So just give us until the first 2 weeks of January to have fully structured and finalized a set of data for 2021 that we can solidly put in front of all of you guys.

[Nauman Toor]

Okay. That's fair. I appreciate that color. And then in terms of your current debt, obviously, it's getting whittled down to a pretty fairly manageable level. And I was wondering if you had thought about sort of refinancing it in light of the much lower leverage of the company and to potentially get some more headroom in terms of what you can do with your cash. Because at this level and copper prices are even anywhere near $3 a pound next year, your leverage ratios are very low.

[Aurora G. Davidson, President, CEO & Director]

Correct. Yes -- no, that's a good question and that is certainly something that we're working on. I don't know if our bankers are on the line. So -- but we are interested in having those discussions with them. Our next debt repayment is in March. I think that, that is a very good point of -- in time to initiate those discussions and to see what can be done with our current cash generation profile as it is building up right now with the current production levels, the cost and the copper prices. This debt could be essentially repaid within 2 years, 2.5 years. And that may not be necessarily the best scenario for our bankers. I mean we are a reliable company. We will look at terming this debt into 5 years, 8 years. It's all very manageable, and it's something that we're seriously considering. But it is a discussion that we will be putting up at the end of Q1 of 2021.

[Nauman Toor]

Okay. And last question, it's sort of complexing on why the stock price is not reacting to all these positive developments and the increase in copper of prices. I don't know if you have any feedback which you've heard from investors on that front.

[Aurora G. Davidson, President, CEO & Director]

So, I haven't heard a lot of that. We haven't been doing a lot of investor outreach or we basically haven't been doing a lot of investor outreach this year. There's -- in our Eisenhower Matrix of priorities, the first priority was to get the results and have a solid quarter behind us. And I think we're there now. And I think that a lot of work has happened to get us to the results that we are disclosing for Q3. So that is, for me, a good starting point to revamp and to reignite our communication efforts. But before that, we needed to get this operation solidly on track. And I think we're at that point where we can start allocating some of our man hours into retelling our story and reigniting the interest of the public markets on it.

[Operator]

[Operator Instructions] The next question is from Steven Aldrich.

[Unknown Analyst]

A question for you about the DET royalties. At the end of the quarter, it was $10.2 million you owed. And yet you've deferred $7.3 million. Why did you not defer the whole amount? Or...

[Aurora G. Davidson, President, CEO & Director]

We didn't -- yes, [ Steven ]. We didn't defer royalties, we deferred settlement adjustments, M+3 settlement adjustments that were good to our income revenue stream. We didn't discuss and we didn't defer any royalties. Those are being paid in the ordinary course of business.

[Unknown Analyst]

Okay. That's good. Obviously, I got that wrong. Another question for you is on moly. It's really a small piece of the pie right now and yet you're doing some expansion on the moly facility. That seems a bit odd.

[Aurora G. Davidson, President, CEO & Director]

No, no. We completed a moly plant expansion 2 years ago, basically, to be able to process the additional moly that was contributed by the Cauquenes stream. We haven't been doing any further work on moly to enhance moly production capacity this year, that's all part of the end of the tail of the Cauquenes expansion project.

[Unknown Analyst]

Okay. Okay. And I guess just to follow-up from what you just said. If you do renegotiate the total debt and make it go out of 5 or 8 years or something of that nature, that would assume that the dividends would definitely be installed if that was happening.

[Aurora G. Davidson, President, CEO & Director]

Well, yes, if did you consider the amount of EBITDA that would be generated or -- well, EBITDA is not affected, but the amount of EBITDA room that wouldn't have to be allocated to meet those debt repayments in '21, '22 and '23, yes, you're talking -- your conclusion is the correct one.

[Operator]

[Operator Instructions] The next question is from Terry Fisher, CIBC Private Wealth.

[Terry Fisher]

Yes. I forgot I'd just like to follow-up, if I could, on the idea that down the road, given everything you've been through with the expansion of the existing plant and there's a lot of expertise there. And I think -- and again, I've got to go back to what Rob used to talk about because it was Rob that just -- because I found it intriguing that there were other opportunities at similar mining locales where you could apply this kind of expertise. And you've got a lot of additional technological expertise like -- or I listened to you talking about what's going on in the plant, and it's hard to believe that your background is in finance, you sound more like an engineer. But there ought to be something that could be useful for some other locations. And if there's some -- there's still -- that's still on the agenda to explore down the road.

[Aurora G. Davidson, President, CEO & Director]

Absolutely, Terry. It is -- we are the only company that is treating tailings at this volume and generating an economic activity and an economic return out of that. We continue to have discussions with Codelco, and we continue to have discussions with other companies in Chile. And we do believe that this is a model that can be cut and pasted in a very efficient way provided it yields an economic return. And we think that, that is something achievable. So that's the cherry on top of the pie, that's the growth aspect, the growth factor of the company. If we were to carry out another project. One of the things that we would have to look at is the way in which that project is structured to be self-financeable and not to essentially eat up all the operating cash that MVC could be generating. I think that MVC would serve as the case study of how this can be done successfully from a technical point of view, from a financial point of view, but not necessarily back up with the cash flow from MVC and the realization, the construction, the development as such a project. I think that a model similar to what we did with MVC, where this is financed as -- on its own basis, would be what we would be looking for.

[Operator]

[Operator Instructions] There are no further questions at this time. I would now like to turn the meeting back to you, Ms. Aurora Davidson.

[Aurora G. Davidson, President, CEO & Director]

Thank you. Thank you, operator. Well, before ending the call, I want to thank you for your interest in the company, and let you know that we will be reporting production results and providing 2021 guidance during the first half of January. Needless to say, this has been an unexpected year for all of us, and yet here we are. In British Columbia, our provincial health officers' message through the COVID crisis has been: Be kind, be calm, be safe. So I wish you all a kind, calm and safe closing of the year, and we look forward to continuing to advance together in 2021.

[Operator]

Thank you. The conference has now ended. Please disconnect your lines at this time. And thank you for your participation.