© 2024 Alpha Spread Limited. All Rights Reserved.
www.alphaspread.com is not operated by a broker, a dealer, or a registered investment adviser. Under no circumstances does any information posted on www.alphaspread.com represent a recommendation to buy or sell a security. The information on this site, and in its related newsletters, is not intended to be, nor does it constitute, investment advice or recommendations. The information on this site is in no way guaranteed for completeness, accuracy or in any other way. In no event shall Alpha Spread Limited be liable to any member, guest or third party for any damages of any kind arising out of the use of any content or other material published or available on www.alphaspread.com, or relating to the use of, or inability to use, www.alphaspread.com or any content, including, without limitation, any investment losses, lost profits, lost opportunity, special, incidental, indirect, consequential or punitive damages. Past performance is a poor indicator of future performance.
You don't have any saved screeners yet
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 Kelsey, and I'll be your conference operator for today. At this time, I would like to welcome everyone to the Copper Mountain Mining Corporation Third 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 third quarter 2021 management's discussion and analysis for more information. I would now like to turn the call over to Mr. Gil Clausen, President and CEO of Copper Mountain. Please go ahead.
Good morning, everyone, and thanks for joining us. We are starting on Slide 3. With me presenting are Rod Shier, our Chief Financial Officer; and Eric Dell, our Senior Vice President of Operations. Also joining us today is Don Strickland, Executive Vice President of Sustainability. I'll begin by providing a brief summary of the quarter. Eric will give a more detailed discussion on our operation, and Rod will speak to our financial results. I'll conclude with an exploration update and our outlook, then we'll open up the call to questions. Turning to Slide 4. We continue to have a solid quarter with a production increase relative to the third quarter of last year. Production was marginally lower than the second quarter of 2021 due to lower-grade ore coming from Phase 2 of the main pit. We expect a higher proportion of Phase 2 ore in Q4 with the commissioning ramp-up of ball mill #3. Eric will get into more details on the mine sequencing plan. Year-to-date, we've had a strong production year, and we're on track to achieve our production guidance of 90 million to 100 million pounds of copper, which was revised upward last quarter. C1 cash costs increased this quarter due to higher haulage costs. Last year's mining costs were lower as we revised our mine plan in response to the lower metal prices associated with the COVID-19 pandemic. This quarter, sustaining capital was higher due to new contact water management systems being installed. In addition, we advanced the development of the Phase 4 pushback of the main pit, which increased some deferred stripping in the quarter. As a result, all-in cost per pound was slightly higher in the quarter at USD 2.17. Year-to-date, all-in cost is $1.97, due to the inflationary impacts basically of fuel and steel-grinding media. And for the year, we expect to be at the very top of our 2021 AIC guidance range of USD 1.80 to USD 2 a pound. Notably in the quarter, we successfully installed and commissioned -- and commenced commissioning of ball mill #3 rather. We will now begin to increase throughput to 45,000 tonnes per day and improve grind size and recovery. We also continued exploration drilling and announced some significant results at New Ingerbelle and Cameron Copper in Australia. I'll go into that a little later in the call. And I'll now turn the call over to Eric, who will detail our operating results and development plan.
Thanks, Gil. I want to first start with an update on safety. To begin, we had no lost-time injuries in the third quarter. Our total injury frequency rate this year continues to trend lower, and our leading indicators are trending positively. I'll now move on to production. Turning to Slide 5. The mine continued to perform in line with expectations. Production remained strong and was more moderate compared to the first half of the year as ore supply transitioned out of the higher-grade portion of the main pit. The mill feed grade in Q3 was 0.37% copper. Phase 2 ore supply will increase in this quarter. This will result in a lower mill feed grade and production in Q4, while we continue to commission and ramp up production on ball mill 3. 7 million tonnes of waste was moved from Phase 4 during the quarter, accounting for 62% of the total waste movement. Phase 4 mining is continuing to progress, and it will be the primary source of higher-grade ore for 2022 and 2023. The 1-kilometer trolley ramp construction is complete, with 0.4 million tonnes of material moved during the quarter. The installation of trolley power poles and electrical power supply lines continued in the quarter, with completion expected in early 2022. The project is on schedule for commissioning in the first half of 2022. Turning to Slide 6. The mill maintained high operating time during the third quarter with copper recovery within expectations. The mill throughput was similar to the second quarter and continued to be restricted at times while processing very high-grade ore to manage copper recovery and filter capacity. As mentioned last quarter, we are advancing the installation of a second concentrate filter press and an additional cleaner column to remove the restrictions to mill throughput, one in very high-grade ore. I will discuss this in more detail shortly. Turning to Slide 7. We achieved a significant milestone as the installation of ball mill 3 was completed and began commissioning in September. The new mill will increase throughput to 45,000 tonnes per day and achieve a finer grind to improve overall metal recovery by 3% to 5%. Wet commissioning will commence shortly, and we expect to add slurry to the mill early this month. Full ramp-up is expected to be completed by the end of this year. Turning to Slide 8. After installing ball mill 3, our longer-term mill plan, as outlined in our 65,000-tonne a day life-of-mine study, includes installing another concentrate filter press and increasing cleaner circuit flotation capacity. Both projects have been advanced and are currently in construction, with commissioning planned for the first half of 2022. This new filter press will be installed in an extension to the existing concentrate storage building, as shown in the schematic on the right side of the slide, allowing the mill to maintain maximum tonnage rates while processing higher grade ore for extended periods. A single new large flotation column cell will be installed inside the existing mill building, as shown in the schematic on the left side of the slide. This cleaner cell will support maximum cleaner circuit recovery on all ore types, eliminating a production bottleneck at high grade and tonnage. These projects are part of our longer-term growth plan, and they generate significant value by increasing our overall return on invested capital in the mill. I will now turn the call over to Rod to go over our financial results.
Thank you, Eric. Turning to Slide 9. The company had a solid third quarter that included sales of 24.4 million pounds of copper; a little over 8,300 ounces of gold; and 142,000 ounces of silver. Revenue for the third quarter was $137 million, net of pricing adjustments and treatment charges. This was based on an average copper price of USD 4.27 per pound of copper as compared to USD 2.97 per pound of copper for Q3 2020. This was a 44% increase in revenue for Q3 2021 compared to Q3 2020, resulting from higher sales volume and metal prices realized in Q3 2021. Cost of sales for the third quarter of 2021 was $70.5 million compared to $52.9 million for the third quarter of 2020. Q3 2021 cost of sales was net of $11.3 million of deferred stripping costs compared to $6.4 million of deferred stripping costs in Q3 2020. This resulted in a gross profit of around $67 million for the third quarter of 2021 compared to $42 million for the same period in 2020. Turning to Slide 10. Net income for the quarter was $25.8 million in Q3 2021 or $0.08 per share compared to $33.2 million or $0.13 per share in Q3 2020. Net income included a noncash unrealized foreign exchange loss of about $7.6 million compared to a noncash unrealized foreign exchange gain of $6.9 million in Q3 2020, a difference of approximately $14.5 million, which is primarily related to the company's debt that is denominated in U.S. dollars. In the third quarter of 2021, EBITDA was about $61.5 million and adjusted EBITDA was $77.1 million. Cash flow from operations was $91 million in the third quarter of 2021 compared to $39 million for Q3 2020. We made investments of $28 million during the quarter into capital projects, of which a majority was for the ball mill 3 expansion project, which commenced commissioning right before the end of the quarter. Other projects included additional expenditures on the cleaner circuit column addition, filter press expansion, the Trolley Assist project and contact water management systems at the mine site. In Q2, the company successfully completed the USD 250 million bond issue. We used the proceeds from the bond issue to retire the mine's senior credit facility. And in Q3, we retired the remaining balance of the term loan due to JBIC, significantly simplifying the company's debt structure and allowing the company to access 100% of the cash flow from the mine. Our total long-term debt at the end of Q3 2021 was CAD 342 million, of which a majority is due in April 2026, almost 5 years out. Based on our Q3 2021 results, including the ending cash position of $199 million, which includes $16 million of restricted cash, the net debt to 12 months trailing EBITDA was $0.6 million. This is a significant improvement over the comparative periods last year. The company is now very well positioned financially for organic growth. I will now turn the call back to Gil.
Okay. Thanks, Rod. Turning to Slide 11. In addition to the development projects we're advancing, we continue to invest in exploration drilling in BC at the Copper Mountain Mine and the Cameron project area in Queensland, Australia. In BC, drill results announced in September at New Ingerbelle doubled the depths of the mineralization and extended it along strike. And still, the deposit remains open. We currently have 4 active drills at the Copper Mountain Mine, with a fifth to be added this month. You can see on this slide, the existing New Ingerbelle pit outline. It's shown as a dashed black line in the inset and on the long section. The current reserve outline is defined by the red dash line in the inset and the gray shaded area in the long section. And you can see how deep we've drilled. Of note, there are intersections of 261 meters of 0.61% copper equivalent and 153 meters of 0.43% copper equivalent that are below the existing reserve pit. There is also a very long 359-meter intercept of 0.41% copper equivalent drilled in that deposit center. This is just some of the continued strong results that bode well for potential significant increases in mineral resources and reserves at New Ingerbelle. The company will continue to drill into 2022 and produce a new life-of-mine plan for publication mid next year. We'll be introducing -- or sorry, we'll be including analysis and trade-offs to contemplate a higher milling rate beyond the 65,000 tonnes per day expansion study released last year. We're also drilling at the Copper Mountain North and main pits. And these deposits have significant inferred resources beyond our current pit limits. We're going to extend and upgrade these resources into the reserve categories. Turning to Slide 12. In Australia, we have a regional exploration program currently underway focused on the Cameron Copper project. Cameron is located about 40 kilometers South of our Eva Copper Project development and consists of high-potential copper and copper-gold targets. The results to date are very encouraging. We've identified 3 large mineralized zones, and the drilling indicates a potential for a more extensive mineralized system. The initial drill program tested the geophysical and geochemistry work that we've done so far, and these mineralized zones show more continuity with increased drilling. So they also remain open to expansion. There are numerous targets yet to be drill-tested. More drilling is required, and we plan to develop these targets in a systematic program for next year. The current results confirm our belief that there is good potential for the discovery of material copper resources, and we're cautiously optimistic about Cameron's potential to meet our goal of finding our next mine project development. And that would be after Eva on our existing land position in the Mount Isa region. To wrap up our formal portion of the presentation, '22 and 2023 will be exciting years for Copper Mountain as we continue to invest and advance our organic growth plans. We continue to have strong financial and operating results, and we're focused on de-risking and reaching our growth objectives. The company is now well positioned to achieve our vision to triple copper production from 2020 production levels within 5 years and do it the right way. With that, operator, we can open up the call for questions.
[Operator Instructions] Your first question does come from Stefan Ioannou from Cormark Securities.
Just maybe first off, I'd just like a quick housekeeping question just on the deferred stripping. Given where you're at year-to-date and Q4, should we anticipate a similar level going into Q4 as Q3? Or will it revert back towards sort of some of the guidance you gave previously for the year?
I think -- this is Eric Dell here. I think our stripping rates will remain similar to Q3. And so that would really apply to the deferred stripping as well.
Okay. Okay. Got it. And then I guess sort of on a more exciting note, just looking at this current quarter, I guess, on Eva itself, can you just sort of remind us of some of the key milestones here coming up in short order that might give the market a bit more clarity on exactly what's happening there?
Yes. Thanks, Stefan. It's Gil. We're completing our capital estimate. As a matter of fact, we're just going through the details of it now. We're updating our OpEx for a Board review in December, and we expect to make some project announcement at that time after the Board has had a chance to review our updated financial models for the project. And so I would expect that we will have market disclosure sometime in December or, in fact, at the latest, early January, but we're on track for December.
Your next question comes from Orest Wowkodaw from Scotiabank.
Gil, could we -- can we get maybe an update on how you're thinking about the sequencing and timing of the Copper Mountain expansion? Like is the technical report that came out, I guess, in 2020 indicated that you'd be building that expansion in '22 and '23 with production hitting in '24. Should we think about that as more now being pushed out in the sense of coming -- sequencing after Eva, assuming you move forward with that?
So Orest, it's -- we've had a long time to -- or we've had the opportunity to significantly review our operating plans since that 65,000-tonne per day technical report has come out. We -- we've had some additional exploration drilling, obviously, with New Ingerbelle. We have to refine that work on New Ingerbelle in terms of the design and sequencing. But more importantly, we've done a huge amount of drilling in Copper Mountain North and the main pit, and we're finishing up a lot of reserve work on the main pit this year. And to be cautiously optimistic about this, we are experiencing some very positive results in the drilling program, which is causing us to revise our sequencing targets just a bit. And that's the whole premise of this updated study for we plan to put out at the end of Q2. So when we look at the sequencing, we have actually a lot of mine sequencing on the Copper Mountain side of good grade production over the next 4 to 5 years. And I would say that from a cash flow perspective over the next 5 years, the best cash flow actually can come from the Copper Mountain side of the operation. So it gives us the time to look at the new information on New Ingerbelle and redevelop a phase plan. So I would suggest that we've got a good, solid 5, even 7 years of really good production coming out of the Copper Mountain side, but we're going to probably phase in New Ingerbelle somewhere in the 3-, 4-, 5-year period on an outlook basis. It just depends on what the sequencing looks like when we're finished our work in the first quarter.
Would you still do the expansion to 65,000 tonnes a day without New Ingerbelle? Like is that a scenario effectively or just feeding it from the main pit?
Well, we have -- let's say, we expect to be significantly updating our reserves on the main pit or the Copper Mountain side as well. So when we complete that study, I don't think we necessarily have to wait for investments on expansion for, let's say, New Ingerbelle coming in right away if we don't -- it may not be necessary to do that, I guess, is what I'm saying. So -- but that will all come to light here as we do the expansion study. So the question now is, in our mind, if we scale up -- if you look at our resource, and including the inferred, we have, currently on our books, over -- about 50 years roughly of resource. And our whole effort and goal here is to continue to expand and grow the reserves and then look at the appropriate scale of the plant to match that reserve and give us a productive output that allows us to accelerate some of the cash flows that we have -- potential cash flows that we have on an -- if you look out a number of years, that's a -- it's a -- I guess it's a bit of an enviable position for us to be in right now as we start to look at all this invested capital that we have at Copper Mountain and making some incremental investments in capacity and scale to be able to affect an even greater return on that capital.
Okay. And just finally, if I could. I mean we're hearing quite a bit about capital operating inflation all across the mining industry, but especially Australia. At this stage, do you have any sense of what the impact could be to your outlook for Eva?
I think you're right. I mean there's inflationary increases across the board. I mean Australia is still a little bit -- it's obviously closed, and it's a little bit of a closed economy a little bit right now with tightness in supply. Generally across the board, everybody is experiencing higher steel costs and some fuel cost escalations, as we mentioned in the presentation. That's obviously the same case in Australia. They have an added issue there with respect to reinforced concrete. So cement costs are higher as well right now. So there's a little bit of a -- there's a little bit of a -- in some of those commodities, there's a little bit of a hyperinflationary environment, and it's not to be expected given where we are currently. We think that, that's just -- it's going to dissipate, but it is having an impact on our capital updates. We'll provide more color on that as we move into December here. But that's going to be part of the conversation we have with the Board and the disclosure we do at that time. Operating cost we see, on the other hand, are actually coming down over what we had in the feasibility study. So net-net, we think we have absolutely a solid project here, and we'll provide some guidance as to what we do at that time. One of the issues and concerns that we have is making sure that the vaccination rates are up to the point where they can open up the state again to travel without significant quarantine, and they're still in that phase right now. So we'll just have a little bit of a wait and see, and we're in no rush or panic here, Orest. I mean, we've got all the control with respect to this project in our hands, and we'll continue to advance detailed engineering and just be ready for a go decision on this project once it gives us a green light.
[Operator Instructions] Your next question does come from Pierre Vaillancourt from Haywood.
Gil, could you just clarify for us what the nature of the announcement is going to be like in the December announcement or early '22? Does this have to do with financing or a decision to go ahead? I'm just trying to get a sense of what to expect in the coming months on Eva.
Well, as I said, we -- previously, Pierre, we've been working on finishing off the capital estimate. And I think that's really well in hand right now. As I said, we're just doing a little bit of the nits on that. We've updated our OpEx rather. We got our labor rates defined. We've got things like nailing down our costs and other things that are actually key cost drivers. So that will be updated in this study. And the project financing is coming together. We've always said that we'll have all those 3 elements in hand to discuss with our Board in December. So without jumping to a conclusion here, all those elements will be in hand. We'll have our conversation with the Board in December, and we will discuss Eva with the market. Whether there's a development decision made at that time or a deferral made at that time or whatever, we will have some disclosure for the capital markets. So from our perspective, the project economics will be ready to be updated for discussion with the Board in December. I'm -- this is a great project. It's got extremely low capital. It is -- its capital intensity is low. The operating costs are very strong. We have a good long reserve life. It's a great project. The only element that we have that we see from a real risk perspective here right now is just whether or not we're going to have Queensland and the rest of Australia opening up as a result of their COVID restrictions because in that environment, there's the potential for some hyperinflation to happen because it is a tight closed market. So we're going to have to just address timing, et cetera, and risk associated with that.
So as things stand now, when would you make a go or no-go decision on this?
We'll let you know in December.
Okay. Can you elaborate a little bit, just update us on financing. I know, Rod, you've mentioned you want to not do equity. Maybe just update us a little bit on your thinking there, how that's evolved.
Sure, Pierre. One of the things that we did, as you know, as part of that bond financing, is it allowed us access to cash flow from the Copper Mountain Mine 100%. And so we view that as our equity source for Eva project. And combining that with stand-alone project financing, we believe we can finance this project without further dilution to the company.
Okay. So does that, for example, involve streaming? Is that still on the table?
I think we keep all options open until you're done at the very end, but we're certainly looking at more traditional project financing.
There are no further questions at this time. Mr. Clausen, you may proceed.
Thanks, everybody, for joining us today. I just want to wish everybody a safe and happy holiday season and certainly have a productive day. Thanks.
Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines.