Capstone Copper Corp

TSX:CS

Good afternoon, ladies and gentlemen, and welcome to the Capstone Mining Corp. -- Capstone Copper Q1 2025 Results Conference Call. [Operator Instructions] Following the presentation we will conduct a question-and-answer session. [Operator Instructions] This call is being recorded on Thursday, May 1, 2025.

I would now like to turn the conference over to Daniel Sampieri. Please go ahead.

Thank you, operator. I'd like to welcome everyone to Capstone Copper's Q1 2025 conference call. Thanks for joining us today. Please note that the news release and regulatory filings announcing Capstone Copper's 2025 first quarter financial and operational results are available on our website and on SEDAR+. If you are logged into the webcast, we will advance the slides of today's presentation, which are also available in the Investors section of our website.

I am joined today by our CEO, John MacKenzie; our President and Chief Operating Officer, Cashel Meagher; our SVP and Chief Financial Officer, Raman Randhawa; and our SVP, Risk, ESG and General Counsel, Wendy King. Our Head of Chile, Jim Whittaker; and our Head of Technical Services, Peter Amelunxen, are also available at the end of the call for questions. Following our brief remarks, there will be an opportunity for questions.

Please note that comments made today on the call will contain forward-looking information within the meaning of applicable securities laws. This information, by its nature, is subject to risks and uncertainties and actual results may differ materially from the views expressed today. For further information on the risks and uncertainties pertaining to our business, please see Capstone's most recent filings, which are available on our website at www.capstonecopper.com and on SEDAR+. And finally, I'll just note that all amounts we will discuss today are in U.S. dollars unless otherwise specified.

It is now my pleasure to turn the call over to John MacKenzie.

Thank you, Daniel, and hello to all of you dialing in from the Americas, Europe, Australia and around the globe. We're pleased to present our first quarter 2025 results and achievements. Over the past 3 years, we've been in a period of significant transition at Capstone, building and ramping up mines and establishing standardized processes and systems. Today, amidst heightened global economic uncertainty, we're positioned well with our ramp-ups behind us and no major expansionary projects underway. To date, we've not seen any material direct impact on our business from tariffs. We continue to see strong physical demand for copper in the current market and believe that the medium- and long-term fundamentals for the copper market remain extremely attractive. However, the uncertain outlook for global growth in the short term reinforces the importance of our ongoing focus on safety, operational execution and maintaining a strong financial position. Over the remainder of this year, we're looking forward to demonstrating reliable copper production, lower costs and increased cash flow generation while continuing to advance our production growth projects.

Starting with Slide 5. In Q1, our operations delivered consolidated copper production of 53,800 tonnes at consolidated C1 cash costs of $2.59 per pound, which was in line with our expectations amidst the maintenance heavy quarter and an unplanned nationwide power outage in Chile. In Q1, we continue to realize the benefits associated with the ramp-ups at Mantoverde and Mantos Blancos with record sulfide production of 46,000 tonnes. This represents a 50% increase compared to Q1 last year. We've been pleased to see the performance at both assets meeting and exceeding expectations post ramp-up. I know that our teams are eager to continue demonstrating the ongoing potential of these mines, including at Mantoverde, where we remain hard at work preparing to execute on our Mantoverde Optimized Project.

At Pinto Valley, the challenges we experienced in the latter half of 2024 impacted the beginning of Q1. However, our team worked hard to remedy the situation by mid-quarter. We remain focused on the implementation of our asset integrity program to deliver stable operations and to achieve the design throughput capacity. And at Cozamin, we saw another steady quarter with strong production and low unit costs. On the corporate side, we're pleased to announce inclusion in the ASX 200 Index during the quarter, recognizing the continued success of our secondary listing in Australia after commencement of trading last year. We also took steps to improve our balance sheet strength and flexibility this quarter, completing an upsized offering of $600 million in senior unsecured notes. Our balance sheet is in excellent shape and we're committed to deleveraging further through internally generated cash flows.

Turning to Slide 6. This year represents an inflection point for Capstone, confirmed by our reiterated annual guidance. In 2025, we continue to target 220,000 to 255,000 tonnes of copper production at cash costs between $2.20 to $2.50 per pound. This represents significantly higher production and lower cash costs compared to 2024. The chart on the right-hand side of the page illustrates our EBITDA sensitivity at various copper prices based on the midpoint of our 2025 guidance as well as upside related to MVO and Santo Domingo at run rate production. This level of EBITDA generation will enable us to focus on generating cash to delever our balance sheet, which will enhance our financial position and provides a strong platform to weather any macroeconomic volatility.

And with that, I'll pass over to Raman for our financial results.

Thank you, John. We are now on Slide 7. In Q1, we recorded copper production of 53,800 tonnes, reflecting record sulfide production driven by the growing production from the Mantoverde sulfide concentrator. Strong copper sales, along with a higher realized copper price of $4.36 per pound drove record quarterly revenue of $533 million. LME copper prices averaged $4.24 per pound in the quarter, up 2% compared to $4.17 in Q4. Despite volatility in LME copper prices of late, they currently sit at a similar level, just below $4.20 per pound.

During Q1, we observed a significant premium emerge for the U.S. COMEX benchmark price. A small portion of our production in the form of PV Pinto Valley cathodes in the U.S. benefits from this premium, while the majority of our copper production is priced based on the LME. Q1 cash cost of $2.59 per pound decreased by 10% compared to Q1 2024. This was driven by the ramp-up of our Mantoverde sulfide operation, which contributes some of our lowest cost production as well as Mantos Blancos operating at nameplate capacity, which led to sulfide cash costs decreasing from $2.55 per pound in Q1 2024 to $2.23 per pound in Q1 2025. As a result, in Q1, we realized strong gross margins of $1.77 per pound or 41%.

Adjusted EBITDA in Q1 of $179.9 million more than doubled year-over-year by higher realized copper prices and the higher copper production. And lastly, we reported adjusted net income attributable to shareholders of $8.1 million or $0.01 per share in Q1 2025. Now that we have ramped up Mantoverde and Mantos Blancos, we booked depreciation of $120 million this quarter, which is a more appropriate run rate level when compared to the $68 million we recorded in Q1 2024. Meanwhile, now that we have ceased capitalizing interest expense to the Mantoverde development project, we also booked finance expenses of $37 million compared to only $10 million last year. Of the $37 million, approximately $15 million are reoccurring noncash expenses like accretion of liabilities.

Moving on to Slide 8. Topical this quarter was, of course, a discussion around tariffs and the resulting impact of various areas of the global economy. While the situation continues to evolve, first, we want to highlight that to date, we have experienced no impact to our revenue as a result of tariffs. Meanwhile, currently, the direct impact to our consolidated operating cost is expected to be minimal. Pinto Valley is our only operating asset in the U.S. We have provided a breakdown of operating cost drivers at the site after the review we performed to determine the potential impact of tariffs. As can be seen, a significant proportion of our costs such as labor, diesel, contractors and services and power are not directly impacted by tariffs. Certain spare parts and grinding [ parts ] are examples of types of purchases that could be exposed.

We estimate that the proposed tariffs announced today could have a potential to increase the cost of goods that Pinto Valley purchased in the U.S. by approximately 5% or $0.10 to $0.15 per pound of PV, reflecting the potential pass-through of tariffs incurred by suppliers. Efforts are underway to evaluate alternative options to mitigate these potential impacts. And on a consolidated basis, this would imply an impact of less than 1% or $0.02 per pound. We will continue to monitor global inflationary impacts, but at this time, we see ourselves tracking within our 2025 cash cost guidance range.

Moving on to Slide 9. On the left-hand side, we summarize our available liquidity, which as at March 31, 2025, was greater than $1 billion, including $345 million of cash and short-term investments and $700 million of undrawn amounts in our corporate revolving credit facility. We finished the quarter with net debt of $788 million, which modestly increased from $742 million at year-end, driven by a working capital draw of $46 million, largely related to a buildup of accounts receivable, in addition to nonrecurring payments of $35 million for the final installment payment relating to the 2021 consolidation of the 100% interest in Santo Domingo de Cores and $10 million to repurchase a portion of the royalty at Santo Domingo. In Q1, we have continued to see our net leverage decline with a net debt-to-EBITDA ratio of 1.3x at the end of Q1 compared to 1.5x at year-end.

Moving on to Slide 10 now. Towards the end of March, we announced an upsized offering of $600 million of 6.75% senior unsecured notes due 2033. This was part of a debt refinancing transaction that achieved the objective of replacing our higher cost, amortizing and very restrictive Mantoverde project debt facility with a lower cost, longer-term senior unsecured note while also increasing our pro forma liquidity. The new high-yield bond closed on March 25. We anticipate refinancing the Mantoverde project finance facility to close in Q2. As a result, at the end of Q1, we repaid our corporate revolving credit facility in full. We expect to refinance Mantoverde project facility during Q2 with the intention of repaying our 70% share out of cash and a redraw on the RCF. Meanwhile, we expect our partner, MMC to refinance their portion of that facility with a new loan at the asset level. Overall, this refinancing lowers our cost of debt capital and terms out our debt maturities, creating a simplified structure.

Now I'll hand it over to Cashel for the operations review.

Thanks, Ron. We're now on Slide 11, where we will first run through our Chile operations. Overall, we're excited to see our recently ramped up projects operating in line with our expectations. Unfortunately, in February, there was a nationwide power outage in Chile, which resulted in downtime at both Mantoverde and Mantos Blancos. We are fortunate that the impact was limited to around 2 days, thanks to the hard work from our teams in Chile. Additionally, both assets had 5 days of planned maintenance in February, which is already a short month. In total, this resulted in about 7 days of impact at both mines during the quarter, which explains the pullback in throughput for February.

On operating days, we were pleased to see both Mantoverde and Mantos Blancos executing according to plan and look forward to seeing performance continue to improve throughout this year. Starting with Mantoverde, we achieved continued improvements in sulfide production and costs driven by the ramp-up of our Mantoverde sulfide concentrator. Total production yielded a record 22,540 tonnes of copper at C1 cash costs of $2.46 per payable pound, including a lower $1.53 per payable pound from the sulfides. Plant throughput averaged above 31,000 tonnes per day during the quarter, with rates in January and March exceeding the nameplate capacity, partially offset by lower rates in February, as previously outlined. Copper grades averaged 0.71% in the quarter, while sulfide copper recoveries continued their upward trajectory, averaging around 82.3% in Q1.

As mentioned, in February, we completed a planned 5-day shutdown, which included liner change-outs on our mills, but we also continue to make further minor modifications to the flotation area to improve recoveries. Currently, our focus is on operator training to respond to different ore characteristics as it is fed through the mill. We see ourselves starting to achieve our design recoveries within the second quarter. Q1 was expected to be the lightest quarter due to maintenance. As such, we expect copper production and cash costs to improve throughout the course of the year. As John mentioned, our team is also eagerly awaiting the opportunity to execute on our Mantoverde Optimized Project. We are advancing detailed engineering and preparing to start the project as quickly as possible once we receive a DIA permit amendment, which is expected around the middle of the year. We've been encouraged so far by individual peak daily throughputs in excess of 45,000 tonnes per day and we look forward to debottlenecking the plant to achieve these rates consistently.

Our Mantos Blancos asset maintained momentum going into 2025 as highlighted on Slide 12. Total sulfide and cathode production yielded 13,846 tonnes of copper at C1 cash costs of $2.43 per payable pound. Production and cash costs both improved significantly quarter-over-quarter, driven by successful ramp-up of the concentrator in 2024. We have now sustained an average throughput of 20,000 tonnes per day at Mantos Blancos since November, excluding February due to the maintenance and power outage impacts. It's great to see the overall variability of the milling process having been significantly reduced at this asset. We also benefited from strong grades to start 2025 at an average grade of 0.89% in Q1.

Pinto Valley produced 10,886 tonnes of copper at elevated C1 cash cost of $3.84 per payable pound during Q1, as shown on Slide 13. As we discussed on our Q4 conference call, Pinto Valley experienced setbacks in the latter half of 2024 that continued into the first part of Q1. As a result, throughput averaged 50,000 tonnes per day in Q1, unplanned downtime due to electrical and mechanical issues that resulted in 1 of our 6 ball mills being down for the first half of the quarter. We were able to remedy these issues mid-Q1 and finished off the quarter with all mills turning at an average throughput in excess of 53,000 tonnes per day in March. We are committed to the implementation of our asset integrity program with the goal of improving the reliability of the plant to drive higher production and lower costs. We continue to expect copper production to be weighted towards the second half of the year, driven by grades and throughput with lower first quarter as a result of the previously mentioned maintenance.

Moving to Slide 14. Cozamin delivered another solid quarter, producing 6,524 tonnes of copper at C1 cash costs of $1.28 per payable pound. In Q1, Cozamin cash costs benefited from improved contractor utilization, higher silver byproduct and a weaker Mexican peso and lower treatment charges, which continue to represent a tailwind for the remainder of 2025.

Now over to Wendy for the sustainability review.

Thank you, Cashel. We're now on Slide 15 with a review of the progress we made on our sustainability priorities and targets to start off 2025. In Q1, we signed a 35-year water agreement with Econssa to secure long-term water supply by reusing treated wastewater from Antofagasta. The project will also reduce marine discharge and increase water recycling and is expected to be operational in 2028. We continue to refine our approach to sustainability by adopting a water stewardship policy aligned with ICMM Water Stewardship Framework as well as a tailings leaching and waste rock management policy, expanding the scope of Capstone's Tailing Management Framework. These policies represent an important element of improving governance and accountability across all of our sites.

This quarter, we continued to advance towards our sustainable development strategy goal of implementing the global industry standard for tailings management across all of our TSFs by year-end 2028. We are tracking well compared to our internal forecast. In the area of climate, I'm particularly pleased by the installation of a solar array at our Pinto Valley mine, replacing some of our diesel generators with a renewable source of power. Additionally, at our Chile operations, 100% of our electricity use in 2024 was covered by renewable energy certified sources as defined by the International Renewable Energy Certificate standard. We had many opportunities to interact with our local communities and stakeholders this quarter, especially at Mantoverde, Pinto Valley and Santo Domingo. These initiatives are aligned with our newly adopted social performance standard, which governs community engagement across the company.

And with that, I'd like to pass it back to John.

Thanks, Wendy. Turning to Slide 16. Our goal this year is to realize the benefits from the projects we completed in 2024, while we focus on operational execution and strengthening of the balance sheet. This will provide us with a strong foundation to execute on our next phases of organic growth as and when it makes sense for our company. We've outlined our sector-leading growth plans on the slide and some of the additional upside within our portfolio. Our first priority for growth is the Mantoverde Optimized Project, an outstanding project with high returns, quick payback and low capital intensity of only $7,500 per tonne. We plan to finance this project through internally generated cash flows. This is the type of project we believe we can and should execute in almost any economic environment. We intend to proceed with this project following the receipt of a DIA permit amendment filed in mid-2024, which we continue to expect around the middle of this year.

At Santo Domingo, we continue to progress with the assessment of the optimal financing structure for the project, including running a process to bring in a minority partner at the asset level. We're very encouraged by the progress we've seen so far. Beyond these projects, we're spoiled for choice with optionality across our portfolio of low-risk, high-return projects. This includes another brownfield expansion at Mantos Blancos, flexibility in the MVSD district to unlock more copper and potentially byproduct cobalt production and the potential development of another major copper district around our Pinto Valley mine in Arizona.

Moving to Slide 17. We wanted to articulate the path forward for Santo Domingo as it pertains to what we need to see before a potential sanctioning decision. Our main goal with these criteria is to ensure we execute on the project when it makes sense for Capstone while maintaining optionality and continuing to increase the value of the project. First, as I mentioned on the last slide, we believe a minority interest sell-down, possibly similar to what we were able to achieve with our 30% partner in Mantoverde is an attractive solution that balances the risks of the project. We're running a process and it continues to progress well with parties in Phase 2 of the process attending sites during the past few months.

Once this process has run its course, we then look to ensure the optimal financing structure for the project and we've already received early indications for a project finance facility of $1.1 billion to $1.3 billion. Before a potential sanctioning decision at Santo Domingo, we want to ensure our balance sheet is well prepared to support a new growth project. For us, this means our assets operating at or near full production levels, strong liquidity and net debt-to-EBITDA leverage below 1x. We made good progress on our balance sheet in Q1 and are focused on continued strengthening throughout 2025.

Our fourth criteria is ensuring that the scope of the project is appropriately defined and optimized. We're targeting to achieve at least 40% detailed engineering this year, while we continue to advance various options to optimize key infrastructure and increase the value of the project with incremental upside opportunities, including potential additional copper production from Sierra Norte and oxide production. And as we've said on previous conference calls, we're also very mindful of the overall macroeconomic environment, which has come into increased focus today. The way we see it right now, that opens up a potential sanctioning window for Santo Domingo starting around the middle of 2026. Santo Domingo represents a transformative opportunity for Capstone with the potential to take our production up to approximately 400,000 tonnes of copper per annum at even lower consolidated costs and with a capital intensity that compares favorably across our industry.

With that, I'll turn to Slide 18 to conclude today's presentation. This quarter, we've begun to realize the benefits from the first phase of the transformation of Capstone Copper with tangible delivery on our peer-leading growth. Our focus on operational execution and balance sheet strength and flexibility means we're well prepared for the future. We're extremely well positioned to become a leading long-life, low-cost copper producer, playing an important role in supporting the world's decarbonization and electrification efforts.

And with that, we're now ready to take questions.

[Operator Instructions] Your first question comes from Orest Wowkodaw from Scotia Capital.

Just on Mantoverde, it's nice to see the throughput performance reach nameplate, I guess, 2 out of the 3 months. What about recoveries? I mean, you're tracking kind of low-80s versus design of 87% to 91%. I realize recoveries always sort of come last in terms of the debottlenecking optimization. But what do you think the time line is to achieve that design recovery on a sustainable basis?

Yes. Thanks, Orest, for that question. And it's something we've obviously -- it's now the major focus. I think we're very comfortable with the throughput rates. So obviously, as you said, the next phase is getting the recoveries right. And I think we're looking by the sort of middle of this year to be sort of up at design recovery. But perhaps if I can pass across to Cashel, just to sort of flesh that out a little bit.

Yes. It's a good observation, Orest, exactly with -- in line with what John said, we believe in Q2, we're making good progress towards the recoveries. I sort of will point out that we have been milling transition ore and perhaps it was smooth in the original model. So we're getting a little bit higher oxide as a component, which is biasing down that, but we're working through that ore now. And so we see naturally that maybe an 82.3% is actually a bit higher when you put it in respect to sulfide, 100% sulfide typed ores versus a little bit of mix in the upper benches on a couple of our satellite pits. So we -- the team has said they worked their way through that and we continue with an education process with our operators on the different types of ores and reagent mixes. And we continue to work on our operational controls within the mill. And so we're seeing improvements. So like John said, we see ourselves sort of getting there in the middle of this year.

And just as a follow-up, I think John said you're now targeting Santo Domingo FID potentially by mid-'26. If I'm not mistaken, that's probably a 6-month pushback from sort of previous expectations. Could there be further room to defer that if the -- just given the uncertain -- well, copper environment and macroeconomic uncertainty, could that -- have you thought about actually just parking it for another year and just harvesting free cash flow?

I think, Orest, the way we look at it is we don't want to have multiple projects running at a time. So our next project is Mantoverde Optimized. The returns on that project IRR is unbelievably good. And the cash it generates for us is fantastic. So we basically, we've got everything waiting for that. We're just waiting for the permit and we expect to get that, I think, sort of as we've said, midyear. We expect that to be sort of roughly in the region of sort of 9- to 12-month execution period. And I think Cashel mentioned, we've already actually had some days of throughput at around 45,000 tonnes a day. So it's just making -- getting the equipment there to allow us to do that on a sustainable basis.

So I'd be pretty uncomfortable about starting another project while we're focusing our efforts on a ramp-up of a project. It's obviously a much smaller, much simpler project, the Mantoverde Optimized. So that's why we're sort of now saying that the sanctioning window will open probably around the middle of next year. But I mentioned all the sort of criteria we want to have in place, but that doesn't necessarily mean we will take the decision to proceed. There's nothing forcing us into a sort of construction decision at this point. So what we're saying is that we will have everything that -- right now, we have the studies, we have the permits. The detailed engineering is well underway, which to me is sort of best practice in terms of ensuring we deliver the project on budget and on schedule. Getting the financing in place, making sure we've got an optimized project.

I saw a study the other day that suggested that on major mining projects, companies on average leave about $0.5 billion of NPV on the table by not properly optimizing the project design. So we want to extract every penny from this. So we're doing quite a bit of work around whether it's infrastructure optimization or process flow optimization, just making sure we've subjected every aspect of it to sort of rigorous review. And once we've done all of that, we're then in a position where at any point, I would be comfortable sort of that the Board is approached to take a decision on that project. But there are other factors as well. We need to look at the rest of our portfolio, how much cash is being generated. Are we comfortable with how each of our assets is performing. And obviously, the macro environment as well.

But that said, it's not necessarily the case that hard times are a bad time to start a project. Sometimes those are the best times to start and build a project with a view to actually bringing it on into the upturn. So we need to sort of carefully consider all of those parameters and then come to a decision that's sort of really in the best interest of the company and its shareholders. And as I say, I think that window will open in the middle of next year, but there's nothing that forces us to move at that point.

Your next question comes from Dalton Baretto from Canaccord.

Maybe I can stay on that same vein there that Orest wrapped up on in terms of timing. And I know you just said that there's nothing sort of pushing you to take the sanction decision at that date. Do you have a sense for what other projects might be going ahead and whether actually getting contractors and so on might be a concern at that point in time?

Yes, it's an interesting question, Dalton. And that's one of the criteria that obviously we take into account sort of at the end of the day, within that region, there's a limited pool of A-grade contractors, A-grade engineers, et cetera. I think we're very fortunate that we already have a project team that has multi-decade experience before they came across to Mantoverde. They've now worked together for the past sort of 3 years at Mantoverde as a team. And so we'll be stepping across to do exactly the same thing at Santo Domingo. So I think we're in a much better position than most.

We have already sort of identified the most likely suppliers and contractors for that project. And that gives us a lot of confidence. But we obviously do need to make sure that what is the overall environment, what are the availabilities. Quite frankly, I think the current economic volatility is likely to further. I think actually Santo Domingo is ahead of the pack in terms of readiness in Chile in terms of sort of development. So we're kind of ready to pull the trigger, if not now, just because we're carrying on with detailed engineering and a few government things that we like to have in place before we start a project. But I would say we're well ahead of pretty much all the other projects in that region. And I have a feeling that the current sort of macro volatility that we see is going to cause a lot of companies to sort of go pens down on their projects. So I actually think we're likely to be, as I say, ahead of the pack in terms of access to all the resources that we need to build that project.

Great. And then just as my follow-up, I'll stay on Santo Domingo here and maybe a bit of a 2-part question here around the JV process. First question is, I guess, you've talked in the past about maybe like a straight equity partner versus an infrastructure sharing agreement. And I'm just wondering, is there any reason you couldn't do both deals? And then part B of that is, how do you plan to price in the upside with Sierra Norte and the oxides and so on when you go forward with this?

Both very good questions. I think, yes, absolutely. We need to look at all options. And I think I spoke a little bit about how we think about optimizing the project. And part of that is looking at each aspect of infrastructure. If we can reach agreements to utilize existing infrastructure rather than build our own, potentially, that's a better economic and risk outcome to us than doing it all ourselves. We need to properly evaluate that. In an ideal world, I'd say one would normally look to having one partner, but I've operated in many JVs where we've had multiple partners. It's really just about having the right sort of shareholders' agreement, the right JV agreement and the right JV governance that ensures that things run very smoothly. So I don't really see any reason why we couldn't have a combination of both the sort of equity type partner and an infrastructure partner. I think we're going to look at all of those options.

And I think I've said before, the process that we're going through, it's not a sort of conventional sale process where you kind of run an auction, you sell it and then you walk away. We're obviously going to be partnered up with our partners for the next sort of 30, 40, 50 years in this district. So we do need to be kind of very thoughtful about how we set up that arrangement and make sure it's something that's not just good sort of this month, but is good for the next sort of multiple decades.

I think just on your question about sort of how we build in those -- that sort of future value that's going to be created. We need to think about that. We're obviously -- it's very difficult to align the same level of technical work all at the same point. Today, we've obviously got a technical report that's out there. That's our base case feasibility. We've got a number of other opportunities that we believe are very high probability, but they still further back on the sort of development -- technical development curve. So that's work that's to be done. And I think when we enter into the sort of final negotiations with a partner, that will be part of the discussion as to how we think about value for those projects.

Your next question comes from Ralph Profiti from Stifel.

I want to come back to Mantoverde, above design in January and March, and that included 1 day at 45,000 tonnes per day plus. It begs the question, Cashel and John, whether or not the base is higher than the 32,000 tonnes a day? And are there any advantages to seeing not only if the base is higher, but stable at higher throughput ahead of Mantoverde Optimized and then mid-2025? I mean maybe this is just a question of scaling up would be potential after MVO. But just wondering if there's any advantage to seeing if that rate -- if that stable rate is at a higher level.

Thanks, Ralph, for the question. And I'm going to ask Cashel just to respond to that.

Yes. Yes, I think you're on to it. Right now, our permit allows us basically to average 32,000 tonnes a day and we expect to get that DIA modification in the middle of this year. And it ostensibly rates the throughput, the new permit at 45,000 tonnes a day average. However, we can peak out up to 55,000 tonnes a day. So it's been very encouraging to see the performance of the crushing and grinding circuit and also the current installed capacity at our tailings that occasionally, we can get to that volumetric that allows us to mill over 40,000 tonnes a day.

So while to be able to sustain an average of 45,000 tonnes a day will require the $150 million in capital, half of it is actually mining fleet that will deliver the ore. So that's one of our constraints. But it does give us the opportunity to exceed our sort of guidance that we put out. The midpoint would have suggested 30,500 tonnes a day this year. We're already exceeding that throughput of guidance in our first quarter. And it would give us the opportunity when we receive that permit to see if we can push higher in maybe the mid- or high-30s. But that remains to be seen and it's a great option for us to have going forward and a great opportunity against our stated guidance.

Okay. Yes. That's excellent. Very helpful. And I want to come back to Mantos Blancos also. And your presentation talked about the variability of milling having significantly been reduced in the last little while. And I'm looking at sort of the non-throughput KPIs on sort of benchmarking the performance there and whether you can help me understand whether or not those are within spec, things like tonnes per day and mill availability.

So the answer is yes. Yes. Sorry, John. Yes, the answer is yes. We are sort of hitting every one of our ambitions at Mantos Blancos. And the team has done an incredible job. And to say that, that is partially the merit of the asset integrity program and system we've been implementing and its adoption by that management group. So we are replicating that at Pinto Valley. Pinto Valley is a bigger mine, more complex. But Mantos Blancos is the example of how you can turn around an old asset and make it reliable, get the availability you require as such to have the throughput design and meet those -- that plant utilization, plant availability numbers as we sort of laid out our ambitions to be at the start of this asset integrity program. So we're super happy with the way it's been working out.

Your next question comes from Daniel Morgan from Barrenjoey.

First question is I was just wondering whether you might be willing to share just an update on April around the grounds. Obviously, April is now finished and whether you might have throughput numbers for different assets you might be willing to share and maybe just recovery at Mantoverde.

Cashel, it's close to you.

Yes. Like -- so as far as metal balances go, recoveries sort of can't give those yet because we get daily, so we get indication of which way they go, but we don't have our metal balances. That usually is a lagging metric that we get a week or 2 into the next month. But I can speak that more or less, our performance in Q1 has been repeated in April, and the throughputs are hitting sort of design capacities as we sort of did in Q1 at Mantos Blancos, Mantoverde. And of course, no one talks about Cozamin, but it's steady as it goes and it continues to perform as designed. The way I would sort of describe Pinto Valley is sort of we've sort of -- we had a couple of unplanned events again where we had a little -- while we exited Q1 at 53,000 tonnes a day, we rolled back maybe to about 50,000 tonnes a day in April. So -- but now the plant is up and going again. So a little bit of a stutter step there at Pinto Valley, but the other assets are performing as designed.

Okay. That's very helpful. And another question, I just note that within Mantoverde, the cathode cost guidance is $4.10, $4.40 a pound. Obviously, the world economy is more uncertain, the copper outlook more uncertain as we stand here today. I'm just wondering what would happen if you decided to maybe cease cathode production? Is that the true cost of cathode? Or just noting that the site costs, obviously, including the sulfides is a lot lower and you're making cash overall at the site. And I'm just trying to work out, I guess, how you might run your business in a lower copper price environment where we would see one.

Yes. So it's a really good question. And I think today, the vast majority of our cash flow is obviously now going to be coming from the sulfides. We do actually have the luxury where we can -- should we choose to sort of wind back oxide production if we feel it's not going to be making a margin. Obviously, the first quarter at Mantoverde was higher cost just because we were in some lower grade areas and we had some maintenance. But the other risk mitigation we took is we knew from our budgeting process that Mantoverde cathodes were going to be in that sort of range, which we mentioned. So we actually we have a sort of overall general policy that we don't hedge copper, but unless it specifically makes sense for risk mitigation during a project construction or if we've got some very high-cost production. And this year, that was the case for Mantoverde's cathode. So we have hedged pretty much most of that production out with zero cost collars, I think, between $4.15 and $4.85 or $4.90.

So we've sort of locked in the margin that we're making there and -- or locked in to make sure we're not losing money on that production. And as we open up the sulfides, we're also finding we're opening up kind of more oxide and that creates opportunity for us as well. So it is something we constantly monitor. One of the kind of restrictions we have a little bit is we need to pretty much on an annual basis, lock in our sort of our asset purchases, sulfuric acid purchases. So once we've done that, that kind of -- not totally, we don't lock all of it in. We lock about 2/3 of it in. But it does mean that's the amount of oxide production that we've sort of committed to for the next 12 months. But obviously, that is the major cost element in generating that copper. And so we're able to have a pretty good idea as to what it's going to cost us and hence, make sure we sort of protect ourselves on the downside but leave ourselves the upside in terms of opportunity for some additional margin.

Raman, I don't know if there's anything you want to add to that?

No. I just -- Daniel, I think your question initially was like is that guidance range kind of incremental basis. That's kind of sharing the mining costs. So if you truly were to kind of shut off the oxide, there are -- that's not on a true incremental basis. So there are some mining costs that are split between oxide and sulfide cash costs. And if you only ran the sulfide, you would see that cost go up slightly. So on an incremental basis, the actual cash costs are probably a little bit lower than the guidance just on an allocation basis.

Exactly. I mean both of you have got to the answer I was looking for.

Your next question comes from Kate McCutcheon from Citi.

Just a couple of quick ones. So you had the Cores payment come out this quarter and you flagged the Minto obligations this year. Can you just call out any other cash outflows to come out over the year? And also what do those Minto outflows sort of look like throughout the year?

Raman, do you want to take that one?

Yes. I think the Cores was a big one, and we had this ENAMI royalty that we bought back this quarter. The rest of the year, we don't really have any other large one-offs. The Minto, I think the short term next 12 months is about USD 17 million, USD 18 million. So you divide that by 4 quarters, right? So it's like $4 million or $5 million kind of coming up. But other than that, no other one-offs you should see.

Okay. Excellent. And then just the MVO throughput opportunity that you spoke about earlier on the call before that CapEx is spent. With the permitting, I think you're expecting that midyear. We're nearly there, May. What is the update on the timing there or where you're at with that process?

Yes, that's a good question. And maybe I'll ask Cashel just to talk -- I think we're very confident about it. But Cashel, do you want to just talk through sort of where we are in that permitting process?

Yes. So we've gone through some Q&A periods, I think 2 back and forth with the administrative departments that are handling the approvals. So typically, we've been told under the process because we submitted it sort of mid or late May, it was supposed to be 12 months. But we've sort of been telling everybody June or July, the middle of the year simply because things sometimes take longer than they should. So we're still expecting it. All our indications and communications with the various authorities are indicating that it will be expected as expected in the middle of the year and we've answered all their queries and questions. So we're looking forward to receiving it and then to be able to utilize the installed capacity we have and then the modifications and some of the metrics we see out of MBO, which is a terrific return on the capital we'll employ.

Your next question comes from Emerson Verrier from Goldman Sachs.

So I got 2 questions. The first one is on Pinto Valley. Just running back of the envelope calculations here, I mean, for the mine to deliver on the upper range of the guidance in terms of Q1 cash cost, you would have to be running in the lower end of the guidance cost for the coming quarters. So just wanted to understand what can we think of Pinto Valley's C1 cash cost compared to the guidance? Is it more likely that we see that figure reaching the top end of the guidance? And even so considering that potential cost increase due to the tariff discussion. So that's the first question.

And then the second one would be on cash flow generation. You guys just mentioned that there was a slight increase in net debt on a quarter-over-quarter basis and working capital was one of the reasons for that. So I just want to understand if that working capital dynamic should improve going forward. And then considering the ramp-up in production and lower costs, we should finally see net debt decreasing going forward.

Thanks, Emerson. And on the first question, I want to ask Cashel to respond. I think it's very much a story of grade and throughput for Pinto Valley as to why we're confident in the cost. I'll ask Cashel to talk to that. And then I'll ask Raman just to respond on sort of what our expectations are in terms of bringing the working capital number down.

Yes. So it's -- with Pinto Valley, it's volume driven. One of the big variances or opportunities to reduce the cost per pound is the grade. And the grade in the first quarter is the lowest grade that we've budgeted to be mining this year and then the grade goes up. And with that and improvements on throughput, we expect the cost -- unit cost to come down and fall within the guidance range. So we sort of have been sort of signaling that. I do know that when we put out our guidance, we put out a 1 number for the 12 months, but there is a sort of profile to the grade. And we also have communicated that our improvements incremental over the year will increase the throughput at Pinto Valley. So the combinations of those 2 will bring down the unit costs.

And just on the net debt, like the biggest variance this quarter, while it kind of went up was those one-offs with Cores and ENAMI. So if you take those out, net debt was flat. And then working capital is a function depending on quarter. Mantoverde sulfides obviously are new in terms of the sales for this year. And there's a couple of different customers they go to and some of them have a, call it a longer sales leg. But I think you'd see in this quarter us receiving obviously, that buildup of receivables. So you should see that kind of ebb and flow, but it should turn back to positive this quarter.

Your next question comes from Dalton Baretto from Canaccord.

Just one quick one from me. We saw Mitsubishi Materials sell back their stake in another mine up in BC to one of your peers. And I'm just wondering if there's an opportunity for you to buy back their stake in Mantoverde.

Yes. Thanks, Dalton. Look, we do have a right of first offer to acquire their stake should they ever wish to sell it. I think Mantoverde is an absolutely spectacularly good asset. And so we'd obviously love to increase our shareholding to sort of the maximum that we could. On the other hand, I'd say MMC have been really fantastic partners. And we can't really speak on their behalf in terms of if they would have any intention of exiting their stake. Certainly, in my discussions with them, they state that this is their most core asset in their portfolio. They're super happy with it. So I think it's been a really great partnership, and I suspect that's going to continue for a long time to come.

[Operator Instructions] There are no further questions at this time. I will now turn the call over to John MacKenzie. Please continue.

Thank you, operator. It's been an honor to serve as the Chief Executive Officer of Capstone Copper for the past 3 years. I look forward to continuing to serve the company and all stakeholders as Chair of the Board of Directors following our AGM tomorrow. Cashel will become the new CEO of Capstone and I have every confidence that he has the experience and capabilities to lead our company through its next phase of transformational growth. We look forward to updating you in late July with our Q2 results. Until then, stay safe and feel free to reach out to Daniel, Michael or Claire, if you have any further questions.

Thank you for your continued support, and have a good day.

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.