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Good morning. My name is Jessa, and I will be your conference operator today. At this time, I would like to welcome everyone to the Copper Mountain Mining Corporation First Quarter 2018 Earnings Conference Call. [Operator Instructions]Mr. Rod Shier, Chief Financial Officer of Copper Mountain Mining Corporation, you may begin your conference.
Thank you, Jessa. After opening remarks by management in which we will review the business and operational results for the 2018 first quarter, we'll open the lines to participants for questions as noted by Jessa.Please note that comments made today that are not of a historical factual nature may contain forward-looking statements. This information, by its nature, is subject to risks and uncertainties that may cause the stated outcome to differ materially from actual outcomes.Please refer to the bottom of our latest news release for more information. For those of you following along on the webcast, we'll be referring to the page number of the supporting slides.I'll now turn the call over to our CEO, Jim O'Rourke, for his remarks.
Thank you, Rod. Good morning, everyone, and thank you for joining us today.Today, we'll discuss the 2018 first quarter results for the operations at the Copper Mountain Mine and our corporate financials. I'll briefly summarize the financial results and provide an update on various operational activities, including the Altona acquisition and the planned personnel change. Rod will provide financial details for the 2018 first quarter.For the 3 months ended March 31, Copper Mountain continued to focus on further strengthening the mine operation. The company has enjoyed improved metal prices and continues to focus on cost containment and productivity efficiencies.I'll now refer you to Slide 2. During the quarter ended March 31, 2018, the company completed a total of 4 shipments of copper concentrate, containing approximately 21.7 million pounds of copper plus precious metals. These sales generated $77.9 million in revenue, net of treatment and refining charges and pricing adjustments and based on an average realized copper price of USD 3.17 per pound. This compared to the revenues of $74.1 million net of pricing adjustments and an average copper price of USD 2.65 per pound for the same period ending March 31, 2017.The increased revenue compared to the same period last year was reduced by $9.9 million to reflect the market-to-market adjustments, which offset the 14.3% increase in sales and the 19.7% increase in copper price for the quarter.The company's cash and cash equivalent position at the end of the first quarter 2019 (sic) [ 2018 ] was $42.6 million, which does not include an additional $22 million that was received in the first week of April for the shipment near the end of March.Production for the 2018 first quarter was 23.2 million pounds of copper equivalent, which included 19.9 million pounds of copper plus 6,070 ounces of gold and 77,900 ounces of silver.Copper production during the first quarter was 10% higher as compared to the 18.1 million pounds of copper produced in the first quarter of 2017. Copper production remains on track to meet our annual guidance.Now I'll refer you to Slide 3. Mining activities continued in the Pit 2, Saddle and Oriole areas during the quarter. A total of 16.6 million tonnes of material was mined, including 6.5 million tonnes of ore and 10.1 million tonnes of waste, resulting in a strip ratio of 1.54:1.Pit 2 has been expanded to the west with the incorporation of the additional resources discovered with the 2016, 2017 drill programs. During the quarter, the mine experienced abnormally high snowfall, causing some challenges in the pit and a minor disruption in the power supply. During the quarter, the mine averaged 184,300 tonnes per day mined.Our mining fleet continues to enjoy a favorable mechanical availability, but timing of some of the planned major mobile equipment repairs did reduce mechanical availability during this first quarter.Total unit open pit mining costs were $1.98 per tonne mined during the period. Mine pit operations are on track and cost reductions are continuing to be our focus.Now I'll refer you to the slide on #4. During the quarter, the mill processed a total of 3.5 million tonnes of ore, grading 0.33% copper. The mill achieved an average throughput rate of 38,800 tonnes per day during this period. The slightly lower throughput rate was a result of the power supply disruption and the increased plant maintenance, which was scheduled for the quarter.Copper recovery averaged 78.7%, while gold recovery averaged 65.3% for the period. Mill operating time during the quarter averaged 92.5%, which was virtually on plan.Now I'll refer you to Page 5. Total unit costs for the 3 months ending March 31, 2018, were USD 1.90 per pound of copper sold, net of precious metal credits, while site cash costs were USD 1.46 per pound of copper produced, net of precious metal credits. This represents a slight increase from the quarter -- first quarter of 2017, where costs were a total of USD 1.86 per pound of copper and site costs of USD 1.36 per pound of copper produced, net of precious metal credits.Most of the increased site unit cost is attributable to the planned major mobile equipment repair jobs on engines and a shovel bucket rebuild as well as increased power and diesel.Now I'll refer you to Slide 6. Copper production during the 2018 is forecast to be 80 million pounds of copper plus or minus 5% and is based on 40,000 tonne per day throughput and a mill feed grade of 0.31% copper. The operation is on target to meet this guidance.Now I'll refer you to Slide 7. The 2017 drilling in the New Ingerbelle area confirmed historical data, and a program of about 10,000 meters of diamond drilling is planned for this summer to further expand the resource and reserves identified in the last year's program.A number of drill holes ended in mineralization last year, which has provided targets both at depth and laterally. Geological modeling has provided encouragement for a target deposit size that could provide additional 10 years of mine life.Now I'll refer you to Slide 8. Since the start of the company in 2007, we had a business strategy to establish a strong operating base, pursuing organic growth and adding an accretive M&A opportunity. I'm pleased to report that our Altona acquisition was successfully completed on April 18, and this adds the third part of our business strategy.We reviewed over 125 potential opportunities over the last 2 years, and Altona continued to rise to the top of the pile. With this acquisition, we obtained $30 million in cash, the permitted Eva Open Pit Copper Project and an exploration land package and a prolific mineralized belt in the Mount Isa area of Queensland, Australia.We have initiated a bankable feasibility study for the Eva Copper Project and this is expected to be completed later this summer.The Altona management have done an exceptional job in assembling a world-class land package in an area of many world-class mines. It will take time to fully evaluate the magnitude of this extensive land package that spans over 250 kilometers along the Rose Bee fault structure.Now I'll refer you to Slide 9. We plan on immediately following up on some of the significant results obtained from the Companion and Quamby area, located South of the Eva Copper Project. These encouraging copper-gold drilling [ events ] that were a result of last year's program provide an area of focus for this season. The drill program will include RC drilling and geotechnical work to further explore this new area.As shown on Slide 9, company has numerous gold, copper, gold anomalous targets along the highlighted 50-kilometer Rose Bee fault trend that warrants further follow-up. We are very encouraged with the mineral potential of this land package, and we'll be evaluating methods to maximize its value.The acquisition of Altona is a transformational move for the company, and we believe the company is positioned well going forward. An increased copper pricing, continuing weak Canadian, U.S. and Australian dollar provide favorable outlook.The Copper Mountain Mine is performing well, and we're confident that company will meet our production guidance targets.Today, we announced that Mr. Gil Clausen will join the company as President and CEO, effective June 1 of this year. I will retire, but continue with the company as an nonexecutive Chairman. Gil is well known in the industry, and I'm sure most of you on this call know him well. Gil's brief bio is included in the press release. We're extremely pleased to have a new leader of Gil's caliber join us to drive the company forward in a fiscally prudent manner.I'll answer any specific questions at the end of the program, but now I would like to ask Rod to review the Q1 2018 financials.
Thank you, Jim. As noted on Slide 10, the company recognized revenue of $77.9 million for the first quarter ended March 31, 2018, after pricing adjustments and treatment charges. And this was based on sales of 21.7 million pounds of copper, 6,500 ounces of gold and 80,600 ounces of silver. The average realized copper price for the first quarter of 2018 was USD 3.17 per pound as compared to USD 2.65 per pound for the quarter ended March 31, 2017.Comparative revenues for Q1 2017 were $74.1 million after pricing adjustments and smelter charges. While average realized copper prices increased by 20% year-over-year, net revenues increased by only 5% for the first quarter of 2018 as compared to the same period last year. This is attributed to a negative mark-to-market at pricing adjustment of $9.8 million during the quarter as noted by Jim.As noted on Slide 11, cost of sales for the first quarter ended March 31, 2018, were $71.6 million, which resulted in a gross profit of 60 -- $6.3 million as compared to cost of sales of $62.8 million, which resulted in a gross profit of $11.2 million for the first quarter ended March 31, 2017.The increase in cost of sales is a direct result of selling more copper during the quarter and the timing of planned major mobile equipment repair jobs on engine struts and a bucket rebuild as well as increased power and diesel fuel costs, as noted by Jim.General and administrative expenses, which include some mine site administrative expenses were $2.5 million for the first quarter ended March 31, 2018, compared to the $2.7 million for the first quarter ended March 31, 2017.Noncash share-based compensation reflected an expense of $0.5 million for the first quarter ended March 31, 2018, compared to an expense of $0.5 million for the quarter ended March 31, 2017.For the quarter ended March 31, 2018, the company recorded finance income of $0.1 million and finance expense of $3.5 million as compared with finance income of $0.1 million and finance expense of $3.4 million for the first quarter ended March 31, 2017. Finance expense primarily consists of interest on loans and the amortization of financing fees.For the first quarter ended March 31, 2018, the company recognized a noncash unrealized foreign exchange loss of $8.1 million. And this compares with a noncash unrealized foreign exchange gain of $3.2 million for the first quarter ended March 31, 2017, which primarily relates to the company's debt that is denominated in U.S. dollars.During the first quarter of 2018, the company recognized a noncash unrealized gain on the interest rate swap of $0.8 million as compared with the noncash unrealized loss on the interest rate swap of $0.4 million for the first quarter ended March 31, 2017, which is related to the revaluation of the interest rate swap liability required under the company's loan agreements.It should be both noted that these adjustments to income are required under IFRS and are noncash in nature, as outlined in the company's MD&A and statement of cash flows.For the first quarter ended March 31, 2018, the company recorded a current resource tax expense of $0.3 million as compared with a current resource tax expense of $0.3 million for the first quarter of March 31, 2017. This all resulted in a net loss attributable to shareholders of the company for the first quarter ended March 31, 2018, of $6.5 million or $0.04 per share as compared to net income of $7.1 million or $0.04 per share for the first quarter ended March 31, 2017.As you can see on our income statement, foreign exchange gains and losses can swing quarterly and yearly and result -- results significantly change. Therefore, we really need to look at adjusted earnings and adjusted EBITDA to read through this.So if we take on all the accounting noncash items, the company reported adjusted EBITDA of $28.5 million and an adjusted earnings of $10.1 million or about $0.08 per share for the first quarter ended March 31, 2018. This compares with adjusted EBITDA of $16 million and adjusted earnings of $0.3 million or 0 per share for the prior period.And as noted on Slide 12, the company had cash flow from operations before working capital changes of $18.1 million during the first quarter of 2018. This compares to $20.8 million for this -- first quarter ended March 31, 2017. At the end of the quarter, the company had cash on hand of $42.6 million plus an additional $22 million that was received 4 days after the end of the quarter, as noted by Jim. In conclusion, we delivered a strong quarter with the prevailing commodity price environment. As noted on Slide 13, our priorities remain focused on continuing to maximize cash flow and minimize cost, commence our exploration both at Copper Mountain Mine and the newly acquired large land package down under and continue to finalize the bankable feasibility study. We look forward to a strong second quarter and remain confident our 2018 production targets will be met.I'd now like to open the lines up for any questions that people may have.
[Operator Instructions] Your first question comes from the line of Stefan Ioannou from Cormark Securities.
And thank you, Jim, for all your hard work over the years at Copper Mountain. I'm just wondering, could you give us an idea of where the -- how the throughput and mining rates are looking, sort of, Q2 to date so far. Are they coming back up towards higher 30,000-tonnish level? or they -- are they still sort of around the 38,000 tonne number?
You're talking about the mill throughput?
Yes, the throughput, yes, sorry.
Yes. No, the mill throughput's back up. We did have some planned maintenance during the first quarter. But we do see a throughput. Even though the operating time was listed as good, it's the operating time in the SAG mill not taken into account, some shutdowns we had with regard to the bow mills. So with the new -- well, not new now, but with our secondary crusher, we have a fair amount of flexibility on mill throughput. And the higher tonnage only reflects slight decrease in our recovery. So we've got a lot of flexibility there, Stefan, and we will be up in the plus 40,000 tonne a day range for the second quarter.
Okay. Got it. Great. And then just maybe shifting over to Australia, can you just maybe give us a little bit more color, sort of, with the feasibility study that's underway sort of what may be the budgeting is for that and the timing to get it complete? And then, also just the exploration this year to the south of Eva deposit. Is there a sort of a budget that's been set so far? Can you give us a little bit more detail on that?
Sure. With regard to the feasibility study, we initiated that. We -- after we did our initial due diligence, we then initiated another study with a couple of outside consultants helping us. But then, we moved into the full bankable feasibility study, probably about 2 months ago. And that will probably be done about -- in July of this year.
Okay. And you know roughly how much that might cost you guys?
Well, it'll be in the millions, $1.5 million.
Okay. That's good. And then, on the exploration, I guess, how's that working?
With regard to exploration, as you know, we've got an extremely large land package, and we're currently evaluating how to maximize the value of that, looking at potential joint ventures and also our own program. So we have about a $3 million program for this summer. And costs down there are very, very good in terms of, particularly the geo-chem. So we believe we'll get a fair amount done, and definitely want to do more drilling in that area that we've had the good shallow copper, gold results.
[Operator Instructions] There are no further questions at this time. I'll turn the call back over to the presenters.
Okay, we'd just like to thank everybody for dialing in. And as usual, Jim and I are open for any questions should you want to call us directly. Thanks, again, and have a good day.
This concludes today's conference call. You may now disconnect.