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Good morning. My name is Michelle, 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 2021 Earnings Conference Call. [Operator Instructions] 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 Slide 2 of today's presentation and Copper Mountain's first quarter 2021 management's discussion and analysis for more information. I will now turn the call over to Gil Clausen, President and CEO of Copper Mountain. Please go ahead.
Thanks, operator. Good morning, everyone, and thank you for joining us. Starting on Slide 3. As you can see, I have with me Rod Shier, our Chief Financial Officer; and Don Strickland, Copper Mountain's Chief Operating Officer. I'll begin by providing a brief update and summary of the quarter. Rod will speak to our financial results, followed by Rod who will provide a more -- sorry, Don, rather, who will provide a more detailed discussion on our operation and EHG -- ESG initiatives, pardon me. I will conclude with an exploration update and our outlook, then I'll open the call to questions. Turning to Slide 4. We started the year in a strong position, posting quarterly record production for the second quarter in a row. We also achieved record quarterly C1 cash cost, revenue and gross profit. All of our other financial metrics also increased significantly in the first quarter year-over-year. Grade was the main driver of our production performance as we mined a higher proportion of ore from Phase 3 of the main pit, which has higher grade. We increased ore tonnage from Phase 2 in the second quarter which has lower grade, but it also has a lower cost per tonne as the ore and waste cycle times are much shorter. Don will get into that in more detail, and he'll talk about our development and mine sequencing plan. As a result of our strong production in the first quarter, we expect to achieve the upper half of our production guidance range of 85 million to 95 million pounds of copper this year. Notably, subsequent to the quarter end, we closed a USD 250 million bond financing, which is game-changing for Copper Mountain. Not only does this simplify our debt structure, but this financing eliminates the current debt and its restrictive cash waterfall. It allows us to access 100% of the mine's consolidated net cash flow, giving us the flexibility to invest in our growth projects at the company's discretion. I'll now turn the call over to Rod, who will go over more detail on our financial results.
Thank you, Gil. Turning to Slide 6. As noted by Gil, the mine had an extremely strong first quarter that included record sales of 27.5 million pounds of copper, a little over 8,500 ounces of gold and 162,000 ounces of silver. Revenue for the first quarter was a record $162 million, net of pricing adjustments and treatment charges. This was based on an average copper price of USD 3.90 per pound copper as compared to USD 2.58 per pound copper for Q1 2020. Revenue was up over 300% as compared to Q1 2020, mainly due to the higher sales volume and metal prices realized in Q1 2021. Cost of sales in Q1 2021 was $65.9 million, relatively flat compared to $64.5 million in Q1 2020. Q1 2021 cost of sales was net of $8 million of deferred stripping charges while Q1 2020's deferred stripping was $7.4 million, so very consistent quarters from a total sales cost point of view. But from a unit cost point of view, Q1 2020 was significantly lower because of the additional 10 million pounds of copper sold in Q1 2021 as compared to Q1 2020. With record revenue and consistent sales costs in Q1 2021, we posted record gross profit of $96.3 million as compared to a gross loss of $14.9 million for Q1 2020. Turning to Slide 7. Net income for the quarter was $52.1 million or earnings of $0.18 per share as compared to a net loss of $43.5 million or a loss of $0.17 per share for Q1 2020 during the start of the pandemic. For the non-GAAP performance measures, the company recorded EBITDA of $96 million for Q1 2021 as compared to $39.7 million in Q1 2020. We also generated significant cash flow in Q1 2021 with cash flow from operations of $79.6 million, which bolstered our quarter ending cash position to a record $137 million, almost a fourfold increase from the ending cash position of Q1 2020. Turning to Slide 8. Subsequent to the end of the quarter, we announced a USD 250 million bond financing from which the proceeds will be used to repay all of the company's existing debt. This was very much a strategic financing and the first step in a well-thought-out plan to fund the organic growth projects of the company. This first step allows the company to retire all of the restrictive debt of the Copper Mountain Mine and access 100% of the excess cash flow, as noted by Gil. As part of this financial plan, the company has engaged Endeavor Financial to assist in obtaining traditional project financing for the Eva Copper project. While the company has not made a production decision at this time, we are positioning the company to be in a very strong position by the fall to allow the company's Board to make a potential production decision at that time. Also after the end of the quarter, the company purchased copper puts with a $3.75 floor for approximately 50% of our production for the period May through December 2021. This was done in order to protect our cash flows and maintain a very strong cash position. With the recent upward moves in the copper price, we view this as inexpensive insurance that protects our cash flows and only adds about $0.029 per pound to our forecasted 2021 all-in costs. More importantly, 100% of our production remains open to the upside. In summary, this has been a record-breaking quarter for us, and we are very excited about the future. I will now pass the call over to Don to review our operational results.
Thanks, Rob. Starting on Slide #10. As Gil and Rod have stated, the mine achieved another record quarter. We continue to advance Phase #3 of the mine plan, which provided higher grade mill feed. Approximately 79% of ore supply was from Phase #3 during the quarter, with the remainder from Phase #2. The Phase #3 higher grade is the basis of the higher production and is planned to be the main ore supply for the remainder of the year. Phase #3 will continue to provide supplemental mill feed for the remainder of the year at a slightly higher percentage than Q1 and moderate mill feed grade a little more than Q1. 4.2 million tonnes of waste was moved from Phase #4 during the quarter, accounting for 35% of waste movement. Phase #4 will provide about 10% of the mill feed in 2021, weighted towards the second half of the year and will be the main ore supply in 2022. 2.2 million tonnes of waste was moved as part of the 1-kilometer Trolley ramp construction. This will provide a straight haulage ramp on the bottom of the main pit to the primary crusher for the next 15 to 20 years of the mine life. This Trolley ramp modification will improve mine efficiency and operating costs outside of the Trolley project, which I'll discuss in more detail later. Overall, the mine operation delivered a great quarter, executing the long-term mine plan. Turning to Slide #11. The mill delivered record production during the quarter, producing 25.5 million pounds of copper. This is 10% above the record production achieved in the last quarter, which continues to demonstrate the strength and flexibility in our production plan. We did slow the mill down at times during the quarter while processing very high-grade ore to focus on recovery and balance mill tonnage with copper concentrate filtering capacity. The team pushed the concentrate filtering production to record levels and continue to make minor adjustments in the flotation circuit to achieve the production level. Our longer-term plan, as outlined in our 65,000 tonne per day prefeasibility study, includes installing an upgrade to concentrate thickener and installing an additional concentrate filter press. The concentrate thickener upgrade is planned this year and is well advanced. It will be commissioned in early Q3. We are also advancing engineering design for [ installers ] within the second concentrate filter press. This will allow the mill to run higher mill tonnage rates without overloading the concentrate handling area when processing higher grade ore. Turning to Slide 12. The mill expansion to 45,000 tonnes per day, which includes the installation of a third ball mill, continues on schedule for commissioning in Q3. As previously stated, the installation of ball mill #3 will increase mill tonnage and achieve a finer grind to also improve overall metal recovery. During the quarter, the ball mill foundation area was excavated to bedrock, lean concrete and the mill raft foundation has been poured. One of the middle bearing pedestal has been poured and the second middle bearing pedestal is being prepared for pouring. Construction activities continue to progress well. It is important to note, the mill was already on site and ready for installation. Turning to Slide #13. We continue to pursue technology advancements. We believe we have an advantage with our team's ability to work with suppliers to test and advance new technologies. We continue to work closely with the BC Company, MineSense on both their ShovelSense technology and now, BeltSense technology. These technologies use XRF to measure ore grades in the shovel bucket and on conveyor belts. The picture on this slide is for [ Shovel 3 ], which was the first economic excavator in the world to test ShovelSense. We spent over a year field trialing ShovelSense prior to starting commercial production approximately 1 year ago. Since that time, we've installed ShovelSense on 2 additional loading units and plan to install ShovelSense on the remaining 2 loading units this year. We are using this technology to recover high-grade ore from waste big pockets and reject noneconomic ore from high-grade big pockets. We are presently recovering approximately 4% more high-grade ore from waste and rejecting approximately 1% of noneconomic ore from mill feed. These numbers are expected to increase with installation of ShovelSense on all the loading units. We are now working with MineSense to install our first BeltSense units to measure ore grade discharging the primary crusher and entering the mill. The objective is to achieve proactive mill control based on what is entering the mill rather than react to control based on actual performance. The BeltSense analysis will allow us to -- may allow us to increase mill tonnage and recovery. We look forward to advancing this trial. Turning to Slide #14. Our Trolley Assist trial is another example of our team's ability to partner with suppliers to advance new technology. We have a group of quality suppliers and technology partners that are working together to make Trolley Assist successful. Copper Mountain will continue to partner to develop the next evolution of haul truck GHG reductions, including battery, fuel cell and hydrogen technology to achieve our goal of net 0 emissions by 2035. Our Trolley Assist trial is advancing with ramp construction discussed earlier. This slide provides a couple of screenshots from an animation video we're producing to visualize this project. The bottom picture on this slide show the 1 kilometer street Trolley ramp, running from the bottom of the main pit to the primary crusher, which will support haulage of all the ore from main pit over the next several years, haul old ore from the New Ingerbelle pit. A Trolley system expansion is planned from the New Ingerbelle pit to connect into this Trolley section to complete the ore haul from New Ingerbelle to the primary crusher. The picture on the right of this slide shows a haul truck connected to the Trolley power line while traveling loaded on ramp. Each haul truck operating on Trolley Assist will replace over 400 liters per hour of diesel or greater than 1 tonne of CO2 per hour. We are on schedule to commission this project in late 2021 and look forward to using this knowledge to expand the application of this technology to further reduce our GHG intensity. Turning to Slide #15. We continue to move forward with our GHG reduction objective. We achieved a 23% reduction in GHG intensity in 2020 compared to 2019. We reduced from 3 tonnes to 2.3 tonnes of CO2 equivalent per tonne of copper equivalent produced. We target to continue to reduce our carbon intensity in 2021 as we commission ball mill 3 and Trolley Assist later this year. These projects will provide full year reduction impacts in 2022. We are also quickly advancing studying of further mining electrification, renewable diesel and progressive reclamation offsets as the next GHG intensity reduction steps. We're making significant positive progress towards our goal of 0 GHGs by 2035.I'll now turn the call back to Gil.
Thanks, Don. In addition to the projects we are advancing, we're also investing heavily in the ground.So please turn to Slide 17. We've commenced drill programs both in BC at the Copper Mountain Mine and in the Mount Isa region of Queensland, Australia. In BC, our drill program for the year features approximately 20,000 meters of diamond drilling and are focused mainly on expanding reserves and resources at New Ingerbelle and the Copper Mountain north pit. Both deposits have a significant inferred resource beyond our current pit bottoms, and we intend to drill and upgrade these resource and explore for extensions of our deposits.Turning to Slide 18. In Australia, we have mobilized the exploration team and have commenced a regional exploration program focused on what we've named the Cameron Copper project. The Cameron project is located about 40 kilometers south of our Eva development, and it is -- it has a number of high potential copper gold targets.As you can see on Slide 19, there's 50-kilometer-long copper anomaly all the way down from Eva in the north down to Cameron. We've identified targets based on historic drilling, geochem and soil sampling and geophysical testing. We're cautiously optimistic about Cameron's potential. This drilling program is designed to test our geological models and, if successful, will lead to investment in further drilling. Our strategic goal is to find our next potential mine development project on our existing land position in the Mount Isa region, so stay tuned for results.In Slide 20, we're looking forward into 2021. There are some major milestones ahead, as mentioned, exploration results for both Copper Mountain and Australia throughout the year. As Don mentioned, the ball mill 3 installation continues on track for commissioning in the third quarter. We're also continuing to move our Eva Copper project forward. Our development plan is to complete project financing in early fourth quarter of this year while we advance detailed engineering to complete a final construction estimate.As previously announced, Endeavor Financial has been engaged to assist our project finance team in completing a financing package that we will be taking to our Board for consideration in the fourth quarter. The Board's expected to make a construction decision on Eva by year-end.We're reaffirming our 2021 production and AIC guidance. Although we do expect to be in the upper half of the range for production, we expect grade to moderate for the rest of the year. With the completion of the third ball mill and its associated increase in throughput and recovery, the fourth quarter is forecasted to help us close out the year solidly. AIC in the first quarter was very good, just below the low end of cost guidance. We expect good cost for the balance of the year. However, we're currently comfortable with our AIC guidance range. And as is our normal practice, we'll continue to assess our cost and production guidance range each quarter.This year is an exciting year for Copper Mountain. We are advancing our organic growth plans. We started the year with a quarter that delivered a healthy cash balance and strong financial and operating results. Operations continue to come in on plan. And as we are derisking and advancing our growth objectives, we're well positioned to achieve our vision to triple copper production from 2020 production levels within 5 years, which brings us to conclude on the final slide, Slide 21.And with that, I'd like to open up the call for questions.
[Operator Instructions] Your first question comes from Orest Wowkodaw from Scotiabank.
Gil, I think, previously, you had talked about concluding sort of a strategic review on Eva by the second quarter, i.e., whether you plan to proceed alone or with a partner. Is that -- can you give us an update there? And it sounds like perhaps you're now leaning towards go it alone. Is that the right way to interpret this?
Well, I guess we've been somewhat purposefully vague, but I would suggest that both management and the Board are quite excited about our growth potential within the company. There's -- I think the financing we did in terms of the bond restructuring was a significant one in order to be able to give us the flexibility to be able to execute on our growth initiatives on our own. I wouldn't say we've 100% ruled out other opportunities that may come our way, but this certainly development of Eva is our preferred alternative. And as we mentioned in the call, Orest, we're actively engaged in putting together a project in our traditional nonrecourse-type project financing for Eva. And now with this financing that we concluded in the first quarter, we have the ability to fund the equity with cash from operations.So a construction decision will be made in the fourth quarter and on our base case, and we will be giving more clarity to the market on that at that time. I would say that the capital cost -- the final capital cost estimate and the project financing are going to be important items for the Board to consider. And the detailed engineering that we're engaged in right now is really just tying down that detail on the capital so that we can inform the financing numbers for the project financing and also the timing for cash flows over the next couple of years.
And just as a follow-up, at this -- I realize the work is still ongoing, but are you seeing inflation on the capital estimate for Eva at this point?
We're seeing a little bit but nothing significant. There's -- you're seeing some in concrete and a little bit in steel. Actually, domestically sourced material in Australia, it's typically cheaper to get Asian-sourced steel, for instance, into the Australian market. But domestic steel is actually lower cost. And so although we're seeing some pricing pressures, it's not hugely material. I mean the biggest impact will just be the exchange rate differences that we had from the time we did the feasibility study to date. But we're still looking at a project financing That's in -- I think we've guided somewhere in the $450 million. It might be $420 million to $470 million in terms of what we're thinking about in terms of the project, but we'll know better when we get the detailed estimate done.
And just a quick clarification for Rod. Just on the Copper Mountain Mine, your -- I think you spent $9 million on deferred strip in Q1. I think that was the annual guidance, so -- the previous annual guidance. Does that suggest that you're going to be expensing all stripping for the rest of this year?
No, Orest. Unfortunately, this is a requirement under IFRS. It's not a company choice or option. And as we've mentioned before, our strip ratio in the main pit is 2.25. And if we pop our head above that, we have to normalize that. So we're still guiding -- we're guiding still in that USD 10 million to USD 15 million deferred costs for the year, including Q1.
And your next question will come from Bryce Adams from CIBC.
I have 3 of them. First one is on copper recoveries. On the current mine plan from here through to year-end, what recoveries are you projecting? And are they stable in and around the Q1 level?
Don, do you want to take that one?
Sure. Yes, we're certainly expecting the recoveries to remain for the next couple of quarters until we commission ball mill 3, and then we'll be seeing an improvement in recovery as we commission ball mill 3 at the end of Q3.
Yes. Okay. Second question is on copper puts that were subsequent to Q1, what's the go-forward strategy for that program? And can you comment on the expense to put on the current puts?
I think as Don alluded to -- or Rod alluded to, rather, that we had a cost of about $0.029 per pound impact on putting those puts in place. So we view this thing -- we view putting on the put is equivalent to buying insurance. We're -- we set a floor for the copper price at $3.75 by acquiring these puts. We don't anticipate copper price to drop to this level, but we view it as prudent insurance as we will be generating some significant cash flows, and we want to be able to protect those cash flows to advance our growth plans. I think those costs are quite reasonable, and we would probably consider extending this program as we move through the year. It's a decision that we discuss with our Board when we look at risk mitigation, whether it's on the revenue side or risk mitigation anywhere else in our business.
Okay. And apologies, let me set $0.029 data point. Last question maybe expands on one of ours. Strip ratio of 3.5 in Q1. That's up over the recent periods. Is that opportunistic given the higher grade and then the concentrate production volumes? If yes to opportunistic stripping, do you expect that to reduce through the year as the grades normalize?
A lot of the stripping, as Don was saying, was associated with starting Phase 4 of the next pushback of the main -- Copper Mountain main pit. And we moved -- sometimes we do -- in the past, we've done some great optimization. You'll see some stockpiling of low grade, so we're mining more ore. And we're still advancing our development plans. Our stripping ratios may be a little lower. This quarter with the higher grades, we weren't -- we're basically milling everything that we produced, and we are, in fact, stockpiling some high grades. So we weren't really significantly increasing the low-grade stockpile. So we mine a little less ore than we normally would. That's another reason why the stripping ratio was a little higher, but the tonnes of waste moved in the period was right on plan. So we just -- we mined a little less ore because the grade was high and being milled. We milled more of what we mined. So I guess that's a long answer to a short question, but I would anticipate that our development plans for the Phase 4 pushback and stripping in the rest of the year is going to be on plan, on target.
Your next question will come from George Topping from Industrial Alliance.
Great. So, Gil, on the Cameron Copper historical drilling there, can you give us some more color on what kind of grades were you seeing, thicknesses, depth, that sort of thing? And yes, I'll follow up after that.
Yes. There's actually a slide on our website on Cameron that shows some of the drill results. They're all very shallow, but they're typically -- there have been some 20, 30, 40, 50 meters of 1%, 2.5% copper and in some shallow RC drilling on surface in some areas. Most of the work that we have of any size there, George, in that deposit area is a result of the surface geochem work that we're doing. It's not drilling results, but the surface geochem and the geophysical work that we have there that's provided these outstanding targets.And I think it's important to note that if you looked at our existing exploration -- our existing mine development at Eva and you overlaid the geochem footprint, the geochem surface footprint on the ultimate resource, it's almost 100% match. So these deposits express themselves on surface, and it's easy to pick up the signature of the deposit from the geochem work. And the intensity of the geochem analysis on surfaces is representative of -- typically of the results that we've had in exploration. So we've got these very large geochem signatures and geophysical markers on the Cameron deposit. But the drilling to date has been pretty shallow RC drilling.But if you go to the website, you can see some of the drill intersections there. We're excited about this. We're going to test a few of our concepts on here. And obviously, if we get good results there, we're going to invest more heavily in the drilling program at Cameron.
Right. The -- has it ever been permitted or any issues that you might see if you do find something that could delay that? And is the delay -- not delay, but the time taken for the decision at year-end on Eva, is that in some part related to wanting to see the results from Cameron?
No, no. They're really actually -- we kind of view these as separate. You're starting to get a little bit of a far distance to Eva. Now if we have something of significance there, we'll have a choice. Do we put another concentrator in operation there? Do we take ore transportation costs and enlarge what we have at Eva? But I think our view here is that we'd be looking for another mine, and Eva is going to do -- that we're going to be doing more drilling at Eva. That's going to be kind of like Copper Mountain where we build a mine, it has a good mine life, we invest in drilling and we set it up so that it's expandable in the future. And I think with Cameron, we view this today as potentially being another operation. The permitting with respect to Eva, we're -- the project is development-ready. And what we're doing is really spending the time now on advancing the engineering so that we can get that definitive capital estimate.
Yes. And for Cameron, there's nothing to inhibit a similar type of permitting, you would say?
Absolutely. No, we would -- yes. No, no, no. If we do -- if we're successful with our exploration at Cameron, it's going to be assessed independently.
[Operator Instructions] Your next question comes from Stefan Ioannou from Cormark Securities.
Great to see the quarter. Just wondering on the production decision for Eva later this year, the detailed engineering in the interim, is there any sort of heavy lifting field work that still needs to be done for that? Or is it more just an exercise of sort of crossing the Ts and dotting the Is now?
Yes. It's really getting the definition on -- we've -- you're advancing your engineering so that you can get the engineering advanced to the point where you can get some -- you can get these large scopes of work, whether they're the earthworks or other elements, foundation work and bulk commodity estimates refined. And our whole goal here is to do a project that is an EPCM overlay on top of large elements of scope that are well defined so that you can get some firm pricing on various large elements of scope.And the first order of business that we're doing is that we're engaging an EPCM contractor. We'll be doing the procurement. We have an integrated team with our management team. We have a lot of project management experience in our company and experience on project execution plans and protocols. And so we'll have an integrated EPCM team managing this.So you've got to get the engineering advance to -- we'd like to see the engineering to almost 80% engineered before we hit the field. And at that, when you do that, you eliminate project execution risk and cost risk, and your opportunity, your chance to be able to bring in your project on budget and on schedule is very high. So that's our philosophy of project development. So this is really what we're doing. We're in the -- we're moving into the detailed engineering phase here right now. So we're pre-investing on that, I guess, you could put it that way.
Okay. Great. And then maybe just a general curiosity, the ShovelSense technology, so is that just -- is that some sort of XRF sensor in the shovel that just is basically reading the face that it's about to dig into or what it's actually scooped up? How does that actually work?
It's a pretty cool technology. I'm going to turn this over to Don again, but we're -- we've been working on this for a couple of years, 3 years almost now. And we're really excited about it. Yes, it actually measures the grade in the bucket so that when you're loading a shovel and it's pulling the bucket through the face, you get a grade. The shovel operator sees the grade of material that's in that bucket. And it accumulates the grade -- the average grade that's in that truck. And sometimes when you're mining a large waste blast or something like that, we'll have pockets of ore in there that you'd never be able to separate out normally. Now we can identify that as ore with this technology, and it will get flagged and sent to the crusher. And so we've been having very good results with it. And we're excited about that technology, which works really, really well in our operation. But I'll let Don talk a little bit more about that.
Okay. Great. I think Gil covered the majority of it there, but it really does measure what's coming into the bucket on a bucket basis, and then we're able to, as Gil says, to actually take the average grade of the truck, and the truck is -- the grade of the truck. And so that's actually incorporated now into our dispatch system, automatically incorporated into a dispatch system to direct the truck to the crusher or to release them. So it's a pretty tough application, and that's why we spent a lot of time working with MineSense to make it robust and get a good measurement. And now we're quite excited by it. And as we change the shovel buckets out this year on the remaining diggers, we'll put those ShovelSense technology on those units. So it is quite exciting and it creates a lot opportunities for us as we look forward. Certainly putting on BeltSense and understanding what's coming into the mill on copper, but the additional elements that it reads may give us some opportunity to advance or increase tonnage of recovery, so it's exciting.
I have no further questions in queue at this time. I turn the call back over to the presenters for closing remarks.
Thanks, everyone, for joining us today. Everybody, have a great day, and stay healthy and safe. And we'll talk to you next time. Thanks. Bye.
Thank you, everyone. This will conclude today's conference call. You may now disconnect.