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Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Good morning. My name is Julie, 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 2023 Earnings Conference Call. All lines have been placed on mute to avoid any background noise. After the speakers' remarks, there will be a question-and-answer session. [Operator Instructions]
Please note that comments made today that are not of 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 2023 Management's Discussion and Analysis for more information.
I will now turn the call over to Gil Clausen, President and CEO of Copper Mountain.
Good morning, everyone, and thanks for joining us. Starting on Slide 3. Presenting with me today are Don Strickland, our Chief Operating Officer; and Letitia Wong, our Chief Financial Officer. I'll kick off with a summary of our first quarter, Don will provide a more detailed discussion on our operating results and Letitia will then present an overview of our financial performance and also give a recap on our recent announcement regarding our transaction with Hudbay.
Turning to Slide 4. We are very encouraged to see our operating performance this last quarter. We started the year on our back foot actually withstanding a ransomware attack, but we still ended up having a strong operational performance over the quarter with about 16 million pounds of copper produced at cash cost of US$3.11, and all-in cost of US$3.66 per pound. This was our highest production and lowest all-in cost quarter since 2021, which was a record year for our company.
Turning to Slide 5. Our first quarter performance in line with our plan, we remain on track to achieve our 2023 production guidance of between 88 million to 98 million pounds of copper at all-in cost between US$2.45 to US$2.95 per pound. As we said on our last call, we see production increasing sequentially through the first three quarters of the year with improving grade and throughput.
Recovery is expected to improve markedly as the mill and concentrator had been operating without onstream analysis of the process flows, without the expert system and the full utilization of the rougher expansion, and that was due to impacts from the ransomware attack, which prompted us to have to rebuild those systems. And that's all now been resolved.
We also completed our bond buyback during the quarter. We are meaningfully reducing the company's outstanding debt. Earlier this month, we announced an exciting and transformative combination with Hudbay. We believe the strategic rationale is very compelling. The combined company will have a strong diversified portfolio of three long-life assets and a leading organic growth pipeline, we see exceptional upside and potential for significant value to be unlocked with this transaction, and Letitia will speak more about this in just a moment.
But before that, I'll hand the call over now to Don to review our operational results in more detail.
Thanks, Gil. Starting with Slide 6. We continued with our plan of mining the Main Pit and the North Pit during the quarter. Phase 4 of the Main Pit contributed approximately 55% of the total high-grade ore mined at an average grade of 0.32% copper. This was higher than planned, resulting in the mill head grade being ahead of budget for the quarter. We expect the mill head grade to continue to improve in both the second and third quarters as more high-grade ore is mined from Phase 4.
The mine also performed better than planned on tonnage during the quarter. We mined 176,000 ton per day, which is a 21% increase over our 2022 annual average tonnage rate. Trolley assist haulage was heavily utilized during the quarter, with haulage from Phase 4 to the primary crusher. We continue to work closely with our partners and utilize our experience to evolve the [indiscernible] technology. We continue to demonstrate productivity gains and cost savings associated with Trolley assist.
Turning to Slide 7. The mill processed a total of 3.4 million tons of ore during the quarter. Mill operating time is higher than in Q4, but still below our target as a result of the ransomware attack, which impacted early January and a mechanical failure of the reclaim barge in March. The reclaim barge failure restricted water supply to the mill and mill tonnage for 10 days.
However, throughput continued to increase during the quarter and averaged approximately 43,000 ton per day outside of the ransomware and reclaim barge events. We are now achieving our planned mill tonnage rate and our focus on consistency and optimization.
Copper recovery was 78.7% for the quarter. And as Gil mentioned, was impacted by the ransomware attack. The ransomware attack resulted in plant operating without the onstream analysis of the process flows without the expert system control and without full utilization of the rougher expansion for most of the quarter. These systems are now restored full operation and recoveries are being achieved in line with our plan. We continue to focus on our 2023 optimization plan to improve recovery throughout the year.
I now hand the call over to Letitia to go over our financial performance.
Thanks, Don. Turning to Slide 8. As previously mentioned, we had a stronger first quarter. Revenue and EBITDA increased both quarter-over-quarter and year-over-year. We also recorded adjusted net earnings of $867,000 compared to an adjusted net loss of Q1 last year of $8.8 million.
The adjustments to net income this quarter were primarily due to one-time items, including higher finance expenditures due to the bond buyback of about $5 million and a non-cash deferred tax expense of $7.7 million that was related to the increase in the decommissioning liability.
The increase in the decommissioning liability is a result of recently amended BC government policies and regulations that change reclamation-related costs and extended the post-mine closure period to 100 years. We were also cash flow positive this quarter with cash flow from operating activities before changes in working capital of $21 million or $9.1 million after non-cash working capital items.
We finished the quarter with cash, cash equivalents and restricted cash of $71.2 million. This is following the bond buyback we completed in January when we repurchased US$87 million of our bonds and reduced our bonds outstanding to US$148 million. We are continuing our focus on strengthening our balance sheet and maintaining a solid cash balance. We have kept our capital costs at minimal levels as we had guided.
Development capital was just $1.1 million in Q1 and sustaining capital was actually a credit of $0.4 million because we received $3.6 million in funding through the BC Industry Fund for the replacement of a diesel shovel and drill, with equipment that is electric-powered. We are pleased to see the BC government's support of our GHG reduction plan.
Now moving on to Slide 9. Earlier this month, we announced a business combination with Hudbay, which will create a premier Americas-focused copper producer. Summarizing a key few points from the transaction on the slide. Hudbay will acquire 100% of the issued and outstanding common shares of Copper Mountain. Copper Mountain shareholders will receive 0.381 of a Hudbay share for each Copper Mountain share.
On April 12, the last trading day before announcement, the transaction represents a 23% premium based on the 10-day VWAP. After the combination, Copper Mountain shareholders will own 24% and Hudbay shareholders will own 76% of the combined entity.
Post transaction, two directors will be appointed from Copper Mountain and certain members of the Copper Mountain management team will join the Hudbay management team. The transaction is subject to shareholder and customary approvals. We have set the shareholder meeting for June 13, with a record date of April 25. We expect the transaction to close later in the second quarter or early in the third quarter of 2023.
Now turning to Slide 10 to discuss the strategic rationale. The business combination is strategically aligned for both Copper Mountain and Hudbay. The combined company offers significant scale with a portfolio of three long-life operating assets, a leading organic copper growth pipeline and one of the largest copper mineral resource bases in the peer group. All assets are in mining-friendly jurisdictions: Peru, Canada and the United States.
The portfolio of assets will offer greater diversification while still maintaining significant exposure to copper. The combined company is expected to produce over 150,000 tons of copper, with meaningful gold production and will be positioned in the second quartile in the copper cost curve.
Copper Mountain shareholders will benefit from being part of a larger company with greater efficiencies and financial flexibility. The free cash flow generation and strengthened the balance sheet of the combined company will allow for capital to be allocated across the portfolio on the projects with the highest return on invested capital.
Further, we believe the pro forma company will fill a unique place within mid-sized copper companies. This transaction will create an enhanced company that we believe will be well positioned to rerate towards our larger peers with the enhanced production, trading liquidity and scale.
Also of note, Copper Mountain and Hudbay share a strong commitment to operate with the highest ESG principles. We have aligned our GHG reduction targets with global net zero emission goals and our operations are in the lower half of the global GHG emissions curve for copper mines. Through the shared experience and carbon reduction initiatives and innovation, the combined company is well positioned to become a leader in ESG. In summary, we are very excited about the combined company and believe this combination will deliver considerable value for all stakeholders.
With that, operator, we can open the call for questions.
Thank you. [Operator Instructions] Your first question comes from Craig Hutchison from TD Securities. Please go ahead.
Hi. Good morning, guys. Thanks for taking my questions. Just my question with regards to guidance. Just based on what you guys have done in Q1 and some of your commentary in the last call a few weeks back with respect to grades being somewhere around 0.31% for the year, can you just kind of remind me kind of what you're thinking in terms of grades for the remainder of the year? I'm struggling to kind of get to the low end of the production guidance at this point. But maybe I'm missing something with respect to how you guys view the material increase in grades or recoveries. Thanks.
Hey Craig, it's Gil, and I'll let Don follow-up with any comments. No, we're going to see some material increases in grade, not too dissimilar to what we had the year before last, so 2021. We're mining Phase 4, which is essentially into the same part of the ore zone that we were in, in 2020 when we had basically mining out the bottom of the pit in Phase 3. So it's – you should expect that the Phase 4 material will be an improvement over what we've seen in the last couple of quarters, which is why we're saying you're going to see an increasing profile of production through the third quarter.
It moderates a little bit in the fourth quarter, but it doesn't – it's still better than Q1 grades. So I think we're in solid shape to meet our guidance here. And the mill has been operating very well now. We're getting tonnage rates through the mill. Recoveries are really – have really been performing well. So we're quite comfortable with the guidance.
Okay. Is there any other color on...
Go ahead, Craig, sorry.
Yes, just saying is there any color you can provide just through kind of the month of April with respect to recoveries at this point or...
Don, do you want to comment?
Yes. Certainly, in April, as I noted, we're achieving our 45,000 ton a day target and those recoveries are – we're seeing with the rougher expansion running and the control systems ready again that are in line with our stepped-up plan throughout the year for increasing recoveries. So I think, as Gil said, things are setting up well. And just to add a little note to what Gil said earlier, Q1 was meant to be our – certainly a transition quarter, and the grades really maxed out in Q3 as we stated previously. But Q2 and Q4 are good, solid, high production quarters for us with good grade.
Craig, I think if you want a little bit more granular on that recovery, we've been seeing recoveries in the 84, 85, 86 recovery range.
Okay. That's helpful.
Not to say we'll see that day-in and day-out. But we're comfortable with the circuit design now running properly that we'll be able to achieve our targets for the year on recovery.
Best of luck. Thanks.
[Operator Instructions] Gil, there are no further questions at this time. Please proceed with your closing remarks.
All right. Listen, thanks very much, everybody, for joining us on the call today. As Letitia mentioned, we're very excited about the combination with Hudbay Minerals, and we look forward to talking with our shareholders more about that – about this great opportunity, and we'll talk to you all again soon. Stay safe.
Ladies and gentlemen, this concludes your conference call for today. We thank you for joining, and you may now disconnect your lines.