Lundin Mining Corporation (LUN) Earnings Call Transcript & Summary

Ladies and gentlemen, thank you for standing by, and welcome to the Lundin Mining project update. [Operator Instructions] Please be advised that today's conference is being recorded. I would like now to turn the conference over to Jack O. Lundin, President and Chief Executive Officer. Please go ahead.

Thank you very much, and good morning, everyone. It's an honor to be here today to be able to present the results of the preliminary economic assessment for the Vicuna project. I will be making forward-looking statements as well as the team that will be with me today, and answering questions. And so therefore, we encourage you all to look at this press release, look at this slide and go on to our website for more details on the cautionary statements. So the agenda today is as follows. We're going to walk through the highlights of the PEA. We're going to get into the details of the full-scale Vicuna project. We'll also talk about the recently updated mineral resource estimate that supports this preliminary economic assessment. We're going to get into the details of the stage development plan, so Stage 1, Stage 2 and Stage 3, which will get us to full scale, including and incorporating Josemaria and Filo del Sol deposits, and then at the end, we'll get into a summary followed by next steps before jumping into a Q&A session. I'm pleased to be joined today on the call with members of both the Vicuna Corp. and Lundin Mining executive teams. So Ron Hochstein, who will be calling in from Argentina is on the call. And in the room with me today is Dave Dicaire, the GM of Vicuna Corp; Teitur Poulsen, our Chief Financial Officer; and Juan Andres Morel, our Chief Operating Officer. We have a couple of other members of the Vicuna Corp. project team to help with answering any questions if necessary. So jumping into the highlights of the preliminary economic assessment. So what we can say with these results is that we are clearly delivering on our strategy, outlining a pathway to become a top 10 copper producer by pursuing a clear and disciplined growth strategy. We hope to really acknowledge that and demonstrate the viability of this plan through the update of this project. And what we're classifying and what we're identifying here is a giant metal district. The study that we released the results of yesterday outlined a Tier 1 status project. We call it multigenerational because of the mine life that stretches beyond 70 years. And the stage development plan offers significant upside and optionality, which will continue to refine as we get through later stages of the study. But also because of the stage development, there's huge upside in terms of optimization work that we can focus on, particularly in the later stages. With these results, the project is marked as what has the potential to be the largest ever mining project in Argentina. I mentioned that Ron is currently in Argentina right now. He's in Buenos Aires, meeting with President Milei to discuss the highlights of this study. And this follows on a meeting where our partners BHP, along with myself at Lundin Mining and Ron were able to go to Buenos Aires and meet with Milei to discuss the updated status of where we're at with the project. And I think it's very important for us to state that we're committed to working with local and national authorities to put the best plan in place to maximize value for all stakeholders associated to the Vicuna project. Before getting into the results of the PEA, a refresher on the stage development plan and the overall district concept, I think, is very important for everybody to be refamiliarized with. So we're breaking this project down into 3 stages. Stage 1, which outlines the Josemaria project, building a sulfide concentrator that will get to 175,000 tonnes per day of mineral processing capacity or about 64 million tonnes per annum. That will be the size of the sulfide concentrator for Stage 1, contemplating 3 initial lines, feeding material into the processing facility. And the first 5 full years of production from Stage 1 will outline about 200,000 tonnes of copper and 400,000 ounces of gold before introducing the Filo sulfide ore. Stage 2 is the oxide circuit. So we're contemplating a 60,000 tonne per day heap leaching process to treat initially blended material to recover the copper, followed by a 30,000 tonne per day heap leach to recover the gold content. And so that is what we've identified as Stage 2. The oxide material is the overburden on top of the Filo sulfide deposit, and that is outlined in Stage 3. And Stage 3 is what brings us to full scale expanding the concentrator by adding 2 lines to get us to just under 300,000 tonnes per day or about 100 million tonnes per annum. This would also include, which we'll show in a video, building a conveying system to get the material from Filo to the centralized processing facility in Josemaria. And Stage 3 is what really enables us to get to a peak production of well over 500,000 tonnes per annum of copper and over 800,000 ounces of gold per annum. To achieve this full scale, we've developed an infrastructure strategy, whereby we'll outsource the components of the off-site infrastructure to a third party. This is common for projects of this scale, and we'll talk to it a little bit later in the presentation. Our partners, BHP have experience in this at other large-scale operations in their portfolio, and we'll look to leverage that knowledge. This does not materially impact the NPV as capital savings are offset by operating costs. Now touching on the highlights. So the first row of this slide is showing the 10-year average during peak production for copper, gold and silver. So as mentioned, over 500,000 tonnes of copper, over 800,000 ounces of gold and over 20 million ounces of silver. Putting this at a large scale, Tier 1 district development, which is very exciting for a company like Lundin Mining to have 50% of such a large-scale and exciting project. In the second row, what we're outlining is the first 25-year average before the full scale. So still very impressive numbers over 25 years of over 400,000 tonnes of copper, 700,000 ounces of gold and 22 million ounces of silver. So you'll see that the silver production profile is actually heavier weighted to the initial years of production when compared to copper and gold. In the third row, a couple of other important metrics. So Stage 1 CapEx right now is earmarked for USD 7.1 billion. So that gives us a very strong capital intensity of approximately $21,000 per copper equivalent tonne. Thanks in large part to the strong precious metal byproduct that we're generating, as you can see on this slide. But what's really impressive as well is the 25-year average annual free cash flow. So subtracting the growth CapEx or the Stage 2 and 3 CapEx from this average 25-year free cash flow assumption, USD 2.2 billion using our base case commodity price assumptions. And so very impressive cash flow generations. And that's really, again, in large part due to the commodity mix that's going to be produced from this asset. And that generates or translates into a negative C1 operating costs over the first 25 years. On this slide showing kind of the continued highlights of the overall project. So there's other key metrics that are important to show here. As I mentioned, the generational nature of this project being over 70 years in mine life. When you're adding now Stages 2 and 3 to Stage 1, the overall initial capital is envisioned to be just over USD 18 billion of capital requirement. And that gets us to a capital intensity on full scale of about $26,000 per tonne copper equivalent. So still very, very attractive figures here even given the large-scale nature of this overall combined project. All-in sustaining costs. So the sum of refining costs, third-party royalties, site operating costs, sustaining CapEx and closure costs subtracted by byproduct credits and divided by the pounds of copper sold is $0.47 a pound, so very attractive over the life of mine all-in sustaining cost. And lastly here, what you can see the last -- the lower 2 figures, these are the benefits to Argentina in terms of taxes and royalties, will be approximately $1 billion per annum. What's not mentioned on this slide, but we'll talk to you a little bit later on is the direct and indirect jobs that will be created from this project for the country. So over 5,000 direct jobs to be created during the construction period, and that translates into nearly 20,000 indirect jobs. It's very impressive from an employment standpoint. And I'm pleased to share that the support will be provided for this by the Vicuna Foundation, a newly formed foundation, to support capacity building, construction and operation readiness and local supplier development programs. So here on this slide, what you can see is the leverage to commodity prices. The lighter colored bar is our base case assumption. You can see strong internal rate of returns being generated from our base case commodity prices. But I think it's also very important to highlight at consensus -- or sorry, at spot prices today, the project of this size and scale generates very impressive returns. And I think that the payback period, the ability to fund the later stages through cash flows shows that not only is this project have strong leverage to commodity prices, but also at conservative price assumptions we have the ability to get to full scale without stretching the balance sheet too significantly for Lundin Mining and its 50% share. Most of you that have been following the story would be familiar with this slide where we're showing how the Vicuna project stacks up against the mining giants today. These are compared to existing mining operations. And what you can see when we get to that 10-year peak production average the Vicuna project does get into a top 5 category for copper, for gold and for silver. And that really, I think, is what attracts us to really pursuing this project at a rapid pace. Phenomenal numbers that we're generating. And what's unique about Vicuna is that it gets to be top 5 status across all 3 of these commodities. And that's unique when you compare to the other large-scale operations that are producing in the world today. This also demonstrates the Tier 1 nature of Vicuna. So the global cost curve shows first quartile, first quartile pricing as well as, in many years, first decile cementing this has the potential to be that true Tier 1 operation. And so I think we see significant upside today to even refining those costs and improving as we refine the studies, but already looking at the preliminary economic results for this project, we are comfortably within first quartile and, in many years, first decile of the cost curve. And this slide is very important to demonstrate the disciplined approach to our staged construction strategy. What you can see here is the cash flows being generated already in the first full year of operations, so in 2031. Following expenditures for Stage 2 and 3 CapEx, we're going to be in a positive cash flow position. So these are showing unlevered cash flow figures, which essentially means that we're going to be in a position to not only fund our growth, but also to pay down any debt that would be taken on to advance this project. And this does not include any cash flows from Lundin Mining's other operations. So I think the disciplined approach aligns very well with our partners, BHP, on being able to support getting into first stage operations and then using those operation returns to fund Stages 2 and 3. Now I want to spend a little bit of time touching on the resource, the mineral resource estimate that we're outlining and forming the basis of this study. We're going to show kind of the comparison here from the 2025 May mineral resource estimate, which was the maiden resource estimate for Filo sulfides and an update to the Filo oxides and Josemaria mineral resources. So when combining all categories, what you see here is now a combined mineral resource of 46 million tonnes of copper, nearly 100 million ounces of gold and nearly 1.8 billion ounces of silver. So we've added 9 million tonnes in all categories of copper, which is another 1.5x Josemaria's mineral resource in the M, I & I category. Looking at gold, we've added 16.5 million ounces of gold. So basically another 1.7x Fruta del Norte in less than 1 year of drilling, which really shows the uniqueness of this deposit continuing to grow in all directions. And with the amount of drilling that we've done only in the last few months, we've substantially increased the size of this mineral resource. Here's another slide showing the resource comparison from our May update to the now newly updated PEA resource model. So we're taking a cross section, so you can see the lateral expansion of the mineral resource estimate, showing that both to the east and to the west, mineralization continues to expand and that we've already seen that the deposit is continuing to grow in all directions. So to support this updated study, in the last 8 months, we've drilled 35 holes over approximately 45,000 meters. And really, it just demonstrates the remarkable resource growth from that amount of meters drilled. As I've said, the resource is open in all directions. And in 2026, we will continue to follow up with another approximately 50,000 meters of drilling, focused on supporting really optimizing the mine plan to generate improved early cash flows to support mine plan optimizations. So now we're going to show a video that really shows kind of the overall scale of the project and puts kind of what we've been talking about into perspective. Starting with the Caserones open pit mine, which is located approximately 40 kilometers away from the Vicuna project on the Chilean side of the Vicuna District. This is Lundin Mining's operating mine in the Atacama region in the Vicuna District on the Chile side. If you follow the project south, you'll get to the border between Chile and Argentina, and you'll enter into the Vicuna District and the Vicuna project on the Argentinian side. Here, we're showing the Josemaria deposit, which forms the basis for Stage 1. You can also see now the associated infrastructure and the location of what will be the centralized processing facility. Now stepping out and looking at the proximity of Josemaria in relation to the Filo del Sol deposits. Stage 2 contemplating the oxides or the capped mineralization over the Filo sulfide deposit. You can see the location of the leaching pads and the associated Waste Rock facilities. As mentioned earlier, this will be a sequential leaching circuit so that we can capture both the copper and the gold. Now what you'll see is the mineral resource for the Filo sulfides and the final pit outline. The high-grade core of Aurora is we anticipate to get into the Aurora zone within the first 8 years of operating the sulfides at Filo. This demonstrates the scale and high-grade nature of the deposits continue to expand in all directions. And for us, the importance of optimizing the mine plan to get into the high-grade material as soon as possible. We will be sending the crushed material from Filo sulfides via a network of conveyors to the central processing facility, which is located near Stage 1 Josemaria. You can see the Josemaria pit. And now you'll see adding another 2 lines from the ore stockpile to the processing facility. And this is where we get to approximately just under 300,000 tonnes per day or over 100 million tonnes per annum of processing capacity. Okay. So just couple more slides before opening it up to Q&A. So as mentioned before, the offsite infrastructure strategy here, there are a few components that are important to mention. So water supply for Stage 1 is expected to be sourced from well fields in the project area. But to accommodate the Stage 3 Filo del Sol mine expansion and mill expansion, a desalinated seawater system has been proposed along the Chilean coast. And this is engineered to deliver 2,000 liters per second to the Vicuna project. This initiative includes the development of a dedicated seawater intake, a desalination facility and a pipeline extending across to the freshwater pond at the project milling site in Vicuna. To accommodate the increased throughput associated with Stage 3 as well, a new concentrate pipeline and associated pumping system will be installed to link the concentrator with a designated roaster to deal with the arsenic content from the Filo sulfide material. All works associated to the off-site infrastructure strategy will continue to be matured through the advanced project phases and advance in parallel to all of the on-site project work that we're doing. And as mentioned, the costs associated to the infrastructure are embedded as operating costs and the overall project economics are maintained through this strategy. Now touching on next steps. So this PEA forms the basis for us to advance through project definition and eventually to what we would see as a sanctioned decision as soon as before the end of this year. But there are significant opportunities that exist to improve overall project economics. So engineering for Stages 2 and 3 will continue, trade-off studies, as I mentioned, drilling and mine plan optimization will all continue. Mineral process, flow sheet optimization and the stage sequencing is all looking to be advanced in these parallel work streams. And Stage 1, which is Josemaria, is advancing now through a Class II estimate, which will be ready prior to year-end and will form the basis for our sanction decision. The RIGI application that we submitted in December is going through the formal review process. And so we anticipate to receive approval on that application, and that would be, of course, a requirement prior to coming up with a final investment decision. And as mentioned, all of this work will support the FID coming as soon as the early -- as soon as the end of this year. So with that, I'd like to open up the floor to questions and allow some of the team to support with some of the responses. Thank you very much.

[Operator Instructions] And our first question will come from Orest Wowkodaw with Scotiabank.

Congratulations on the update. I was wondering, could we get some clarification on the infrastructure assumptions? Just how much CapEx is involved if you -- if the project did have to build the infrastructure? And then corresponding, I'm wondering how much is that impacting the cash cost either per pound or per tonne by assuming, I guess, user fees for the third-party outsourcing?

Thank you for your question. So the -- as I mentioned, the offsite infrastructure is embedded within the operating cost. And so we're actually not publishing the capital cost estimate. This plays into the strategy for us to be able to spin out that infrastructure into a new entity, and therefore, we would be a receiver of that infrastructure by utilizing it via a tariff. And so we're actually not providing the capital estimate for the offsite infrastructure at this time.

Okay. And how much is it impacting the user fee, how much -- or tariff? How much is that impacting the cost per tonne or the cost per pound?

Yes. No, it's Teitur here. So I mean there will be just some commercial sensitivities around this, given that we are looking to potentially spin this out into a separate vehicle. And obviously, the rationale here is that these infrastructure investors are requiring a lower rate of return than what mining companies normally are looking to achieve. So with that cost of capital offset, we believe there is economic benefit to the project to allow a lower risk and lower returning assets to be held by somebody else. So there are certain commercial sensitivities around this, which is why we are not disclosing these metrics.

Okay. No, fair enough. I mean, obviously, your balance sheet is well positioned here with negligible net debt and your credit facility. But I'm just curious whether you would consider streaming any of the precious metals to help finance this project from a Lundin perspective? Obviously, we just saw BHP do a very large silver stream overnight. Is that something that Lundin is considering?

Yes. I mean what needs to happen from now until we sanction the project potentially as early as late this year is that we do need to agree with BHP on the exact funding mechanism and strategy around Vicuna. I mean, as you saw last week, we raised $4.5 billion in our new upsized RCF. So if the decision is that we -- each shareholder is going to fund this project from their respective balance sheets, we are fully funded to do that already. But there is a scenario where the project itself, as you mentioned, raises some debt, whether it's project finance or whether it's streaming or whether it's something else. And there's also a third scenario where it's going to be a blend of shareholder funding versus asset-based funding. So all those details are still to be worked out and agreed with BHP prior to sanctioning, but whichever avenue we take, we, at this point, are fully covered to fund our share of it.

And our next question is going to come from Ralph Profiti with Stifel.

Jack, I got a question on the updated mineral resource estimate at Filo. And just wondering on some of your learnings on how well defined the transition zone is between those 2 domains there? And I'm just trying to quantify the risk of acid-consuming sulfides entering the leach pads. And it doesn't seem like the recovery has changed as much, but just wondering what the new MRE is telling us about that?

Yes. Thanks for that question. We've actually got the Director of Resources for Vicuna here -- -- Vicuna Corp here, [ Cole Mooney ], so I'll hand it over to him to answer that.

Yes, it's a good question. Thank you. The transition zone has been -- will be a major focus of the 2026 studies going forward. We're currently working on a lot of geo-metallurgical test work and studies. So currently it's -- the transition zone is defined, but it's not fully defined. We're going to continue to advance that understanding throughout the year.

Okay. Great. Helpful. And just coming back to the last question, can you talk a little bit about the landscape and the appetite for third-party infrastructure development plays? And because it sounds like that once this is spun out into a new entity that we may see the joint venture provide some or part of the funding? Or will these truly be stand-alone entities?

Yes. I think it's really too early to conclude on any of that. I mean it will be -- first of all, we need to agree on the details with our partner, BHP in terms of how we go about this. I mean it's fair to say we've already received inbounds from infrastructure investors inquiring about this. It's obviously fairly big pieces of infrastructure. So this, I think, registers on anyone's radar screens. But it's a process we need to go through and whether we launch an official tender process around this or how it's done, it's still to be -- details are still to be worked out. But as I said, the rationale for it, I think, is very sound, and we've had preliminary discussions with BHP. In fact, you've seen BHP doing something similar on other assets already. So I think we're fairly well aligned with BHP in terms of how to go about this, but details still to be worked out.

And our next question will come from Ioannis Masvoulas with Morgan Stanley.

And congratulations on the update. A couple of questions from my side. The first, we've seen several mining companies looking to develop projects across scope and other minerals in Argentina over the coming years. How do you anticipate to manage the potential scarcity around labor and other resources during the construction cycle? Do you expect to bring over contractors from Chile or further afield? Some color on that would be very useful.

Yes, this is Dave Dicaire from Vicuna. One of the benefits we have with Vicuna is we're kind of the first ones of the large-scale projects that we're going to build. So we're not seeing any issues with labor sourcing. And Argentina has relatively high unemployment right now. We already are in the midst of our training programs to ensure that we have adequate skilled labor and also prioritizing local labor. We've also gone down and got early contractor involvement to discuss with the contractors the planning of the project, the labor sourcing. And some of these contractors are continuing contractors are also looking to JV with other larger foreign companies to assist them in managing the workload. So we're not seeing it as a high risk or an issue at this time.

Okay. Very clear. Just second question, going back to the funding topic. If there were to be streaming as part of the funding solution for the JV partners, how could that work? Could it be the case that streaming only happens on the 50% share of the BHP while you use a different funding mix given that you don't really need the capital? And then related to that, how do you feel about hedging during the development phase to backstop the balance sheet or the cash flow on any downside scenarios?

Yes. I mean on the streaming part, obviously, there's a big contingent of both gold and silver here. But I do believe if we were to enter into streaming arrangements, it would be done at asset level. I mean the arrangement is that the offtake here is allocated 50-50 to BHP and Lundin. So we will market our 50% net attributable share of the copper. And if we get the gold and silver as well ahead of streaming, then we will market all of that on our account and BHP will market their 50% share on their account. But I think normally, you would expect a streaming arrangement like this to be implemented at asset level. And the second part of the question was...

Hedging.

No. I mean, as you've seen, we -- if the scenario is that even if we fund 100% of this project from our respective balance sheet, parent company balance sheets with our facility of $4.5 billion, even in a very, very low copper price environment, we are fully funded to do that. So we would not envisage entering into any commodity price hedging. We have traditionally done some FX hedging just to protect our operating costs in Chile and Brazil. So we might continue to look at that. But in terms of commodity price hedging, that's not going to happen.

And our next question will come from Lawson Winder with Bank of America Securities.

Congratulations on moving this project a long way towards an ultimate completion. If I could just get a sense of the CapEx and the contingency applied, can we think of that as accounting for inflation? Or is there other more design-related considerations that make up that contingency? And then I guess, actually, where I'm coming from is, what's the risk that once we get to a feasibility level that ultimately, CapEx is higher than what we are today?

Yes. Thanks for the question. This is Dave Dicaire again. We've updated the estimate based on where we were at a couple of years ago. But we're right in the middle right now of doing a complete bottoms-up estimate. We have done some factors in where we had done provisions for inspection and things like that in those areas. So we're doing a complete bottoms-up estimate. We're very confident in the CapEx numbers. We've had pretty in-depth reviews of those. And we've also benchmarked them against other projects and other capacity factors and things like that. So we're not concerned. We have current pricing. We're actually seeing very competitive pricing right now in the market also on things like bulks and commodities and equipment. So we have a lot of confidence in our CapEx number.

And maybe we should add also that all the costs you see here and all the economics are based on real 2026 money. So there's no escalation on either cost or on commodity pricing. So the IRR you're seeing here is in real term ahead of inflation -- before inflation.

Okay. Great. And then as a follow-up, with respect to the infrastructure company, to what extent could the existing desal, port and other infrastructure at Caldera that's now associated with Lundin Mining and Candelaria be part of that infrastructure company? Or is that just not something that's being contemplated?

Lawson, yes, that definitely is part of the strategy that is being contemplated. So we do have a significant amount of infrastructure already that is supporting our Chilean operations. And so this is something that we're looking at right now that could be added to this strategy, whereby we are ensuring that we have sufficient spare capacity at the Caldera port. We'll look at pipeline routing as well. We'll look at key locations for infrastructure such as pumping stations, and we'll see if we can tap into economies of scale through the assets that we already have in the Atacama region. So all of that is being contemplated and further refined through these advanced studies.

And the next question will come from Johannes Grunselius with SB1 Markets.

I have one question on the tax environment and when you present and provide us the different NPV values, you say it's after tax. How should we think about that? Have you sort of applied existing tax law, in other words, 35% or the most likely coming tax of 25% in your models? That's my question.

It's Teitur here. So the tax or after-tax cash flows have been modeled on the RIGI PEELP framework, which we have in the slide deck, you can see the key factors in terms of tax rate and the other aspects of that is a 25% corporation tax rate. And we have assumed the RIGI to be applicable for 40 years, which is the current rule. And obviously, the mine life here is 70 years. So after the 40 years, we revert back to the current framework, which is then getting back up to 35% and there's an export royalty applicable from that point onward. So that's how we have modeled it. And all the numbers you see here are on a stand-alone unlevered project basis. So this is before dividend is streamed out of the country, which would attract certain smaller withholding tax numbers as well.

Yes. Maybe you have discussed this in the earlier presentation, but is that like how should we be considering the lower 25% tax versus existing tax laws? Is that a dumb deal to you or are this discussed? Or have you sort of -- what's your discussion where -- what's the status on that?

Yes. So we submitted the application for fiscal stability under the RIGI scheme in December. And upon receipt of approval of that application, we would then be working from the updated kind of fiscal regime. So we feel comfortable and confident that you can be modeling under the benefits from the RIGI regime when you're looking at the economic parameters for the full-scale project.

And the next question will come from Craig Hutchison with TD Cowen.

Just with regards to the concentrate roaster plan for Stage 3 to deal with the elevated arsenic levels, how critical is this from an economic perspective? Like have you guys -- I'm sure you've looked at the alternative of just doing a blend and taking the penalties. But in the event that permitting a roaster is challenging, just kind of curious like from an economic perspective, how critical it is to have it in the project?

Yes, this is Dave Deciare. We're in early stages on a lot of the test work and the roaster is a proven technology, and we will continue to test and look at alternative scenarios. There are scenarios looking at different leaching technologies of the concentrate also, and we'll have a better idea on that as we get closer to sanctioned as that test work comes out of the labs.

Okay. Great. Maybe just a follow-up question. Just on the CapEx, the $7.1 billion, does any of the spend this year a credit against that $7.1 billion? Or should we just assume it's $7.1 billion from project sanction?

No, none of that $7.1 billion is -- has including costs for this year. This is kind of pre-CapEx period. And so we've classified CapEx following the sanction decision and starting in our model in Jan 1 of 2027.

And the next question will come from Anita Soni with CIBC.

A few questions. First question, I guess, is next steps. Will you file this PEA on SEDAR? And after that, will you do an updated feasibility study?

Yes. We will be filing this technical report on SEDAR once it's fully completed within the 45-day window of when the results were published as of yesterday. And then we will continue to refine and update studies for all stages as we continue to advance the project, and we'll likely have another published estimates prior to sanction.

Great. And did you give us a time line for construction on how long you think it will take once the project gets sanctioned?

Yes. I think we're outlining in what we've stated in the press release and what will be outlined in the PEA is around a 40-month construction period from when you start to when you get first material through the mill and start commissioning, so about a 40-month period. And we're obviously looking at opportunities to improve that time line as well as opportunities to improve and refine the time lines for Stages 2 and 3 as well. So all of that is part of the work program that continues to advance as we're moving towards the end of this year.

Okay. Secondly -- or sorry, I guess this is third. On the -- can you give us a breakdown of the CapEx spend by year? You've given us the $7.1 billion, but I don't see anywhere where you -- and then you've broken out Stage 2 and Stage 3, how much it is per annum in CapEx spend, but I don't think there's a breakout of the $7.1 billion for each year.

Yes. That information will be readily available when we publish the results, and I think as well as an updated presentation online that we're going to be sharing, which we'll get into more details on the cash flow for expenditures for all phases, but spending a lot of time in demonstrating the viability of Stage 1 as that is the most advanced kind of stage for us with the most definition. So that will become available to you, Anita, and we can have a follow-up call if you have more questions on specific details of staged CapEx or any components to the different phases.

Okay. A couple more. Just in terms of the mining rates, is it fair to assume that it's direct ore feed, there's no stockpiling going on or any of that?

Thanks for the question. Yes, the majority of it is direct ore feed. There always is some stockpiling in any operation, especially of the scale, but the majority of it is direct ore feed, you're correct.

And then lastly, on the tailings management, between all of the phases, there's $300 million in tailings. Is there something -- can you just explain what the tailings philosophy is there?

Yes. It's Dave Dicaire again. You'll see that when the report comes out, that there is 3 proposed tailings sites and they're all within the vicinity of the plant site. So they're all very close. So there is good sites close by for expansion. So there is a capacity for the tailings, and you'll see those when we produce the drawings in the report.

And the next question will come from Stefan Ioannou with ATB.

Congratulations on the study, looks great. I was just curious, when you talk about optimizing Stage 2 and 3 going forward and maybe more so Stage 3, is that really focused on the existing deposits? Or do you start to maybe think about things like Cumbre Verde potential and/or other opportunities in the immediate region?

Yes. Great question. I think those would be classified as later stages at this point in time. Like when we go across, when we look at the level of maturity of the various stages that we've outlined, there's a lot of work that goes into ensuring that we've got the optimal kind of mine plan and the supported drilling to get us to a reserve base that we could then look at refining that mine plan and that milling plan. So anything beyond kind of yet to be discovered material would be seen as later-phase opportunities. But it is good to mention that given the nature of the Vicuna District and continuous mineralization kind of in all directions, there does remain significant upside for us to see future expansions beyond Josemaria and Filo.

And our next question will come from Dalton Baretto with Canaccord.

Congrats on getting this out. My first question is on the roaster assumptions that's part of the study here. And I guess 2 parts to that question. The first one, is that roaster part of the Stage 3 CapEx? Or is that part of this infrastructure vehicle you're thinking about? And then Part B is, you're probably assuming that you're going to build your own, but would something off the shelf like Mount Isa is up to sale with that work as well?

Sure. I can take that. It's David Dicaire. The roaster is in the infrastructure CapEx at this time. And we haven't really looked at details about available facilities. There is available capacity in Chile also with Codelco that we'll talk to them about also. But right now, that's in the CapEx for the infrastructure -- or in the OpEx for the infrastructure.

Great. And then maybe just a follow-up with Teitur on a comment that was made earlier around infrastructure cost of capital. When you compare that versus the implied cost of capital on the stream that was announced yesterday in Antamina, is the infrastructure piece still lower or comparable? I mean because we're talking low single-digit IRRs on the stream here.

Yes. I mean I can't really answer that, I don't think. But I mean, I think conceptually, as we said, infrastructure investment, whether it's desal or whether it's port or slurry lines, in its very nature, it is infrastructure. So the risk profile on those assets is significantly lower. Obviously, still the offtake is reliant on Vicuna and potentially other assets in the area. We have a few other assets there, which could tap into some of that infrastructure. So there could be some risk sharing as such for the infrastructure investors. But it's early days on this, and it will be -- first of all, strategically, we need to decide whether that's the path we want to go down, which is likely. And then we need to go through the commercial negotiation with the infrastructure owners as to how we structure it and what the cost of funding is going to be.

And the next question will come from Matt Greene with Goldman Sachs.

Congratulations. I have a couple. Just you touched on your benchmarked CapEx against other projects, but the productivity, I guess, just looking at the time line and execution, BHP flagged this at Jansen productivity as being a big issue. So can you just touch on how you've benchmarked productivity just given the remote nature of this district and the elevation?

Sure. It's Dave Dicaire. I'll take that. The bulk of the estimates done by Fluor, and we benchmarked a lot of it off their database for labor and high altitude projects in South America. We've also checked the benchmarks against what was experienced in other high altitudes sites that we're aware of. We've also got some engagement with [indiscernible] to review some of the construction planning and some of the productivity. So we're fairly comfortable with the productivity that we've used that's had a lot of review and a lot of scrutiny.

And just my last question is around the glacier reform. With the RIGI PEELP submission, are you happy with the proposals or has the government actually reformed some of the, I guess, ambiguity around the previous glacier reform?

Yes, we're happy with what's been proposed in that glacier reform language or clarification. So yes, we're comfortable with that, and we're happy with it.

And the next question will come from Daniel Major with UBS.

A couple of questions. You mentioned you're targeting FID at the end of the year. Could you just give us a sense what is the key determinant around that? Is it the RIGI approval time frame? Is there a specific level of detailed engineering you would need to achieve for the first phase to feel confident in the FID? So is it more internal or external that determines being comfortable and ready to FID?

Yes. Thanks for the question. There's a number of stage gates that will get us ready to come out with an FID or sanction decision. So you've mentioned those. I mean, of course, this PEA is a significant step forward, but it also forms the basis for us now, as Dave was speaking about, to further refine the Stage 1 estimate, and that will give us more definition and more accuracy in that estimate, which would be something we would use to put forward to -- or Vicuna would put forward to the shareholders for an FID. We've got various secretarial and provincial approvals that we're looking at obtaining and the status of those are moving forward as per our baseline schedule. And the RIGI application, which is working through its way through the review process, I would say, is on track as well. So permit approvals, updated estimates, line of sight to financing and ensuring that we're hitting all of our milestones that we've agreed on with our partners will be required before sanction. And what I will say is we've been moving on and hitting kind of our baseline targets from when we established Vicuna Corp. back in January 2025 up until this point in time. So momentum is definitely building, and we are making positive progress to that eventual decision to be made by both BHP and Lundin Mining jointly.

Okay. Second question, can you tell us what the level of contingency is included in the CapEx estimates you provided in this presentation?

This is Dave Dicaire. I think on the Stage 1 contingency is about 17%. And on the other stage, it's probably up around 20%, 20% to 22%.

Okay. That's clear. And then a final one, just thinking about the latter stages of the project, cross-border project development didn't work out so well further down south historically. Have you got a clear legal framework in place for the cross-border requirements for the latter stages of the project? It's the first part of the question. And then the second is permitting on the Chilean side of the border historically has been more challenging. Do you have a clear pathway to permitting the required infrastructure to complete the final stages?

Yes, the permitting strategy is, of course, part of the overall strategic plan for developing and getting into full-scale operations. There is a binational treaty that exists today between Chile and Argentina. In fact, we have a Vicuna protocol that exists for this exploration stage that the projects are in. And so we can move in and out between Chile and Argentina without having to clear customs each time. Now what we would look at doing is escalating that to an exploitation agreement between both countries, and that would enable us to move product and personnel through this operations phase more freely. So we're working both with Chilean and Argentinian authorities as part of that binational treaty commission to establish this. And we do have time to ensure that we tick all the boxes and get the necessary approvals to really bring that to that exploitation phase. We're seeing as well and understanding the permitting time lines and using those assumptions for unlocking the full scale. So I think we've got a good strategy in place, a collaborative effort between people that are working for BHP, Lundin Mining, Vicuna Corp. and working with the Argentinian and Chilean authorities as well. So no doubt, it's a big undertaking, but I think we've got a good plan in place, and we do see it as a feasible and viable option to get to full scale.

And our next question will come from Orest Wowkodaw with Scotia Bank.

You've already got a plus 7-year mine life. Clearly Filo is probably going to get bigger. Is there any plans for a Phase 4 at this point in terms of expansion. And I'm just wondering if you feel like you're capped out at the Phase 3 design throughput with respect to your ability to mine at Jose and Filo? Or do you think the ore bodies could support a future expansion well beyond what you're currently thinking?

Great question, Orest. And I think that given the size, the scale, the life of this project, it gives us flexibility to look at a multitude of options. And really what we would be trying to do is enhance near-term cash flows and economic viability in the earlier year. So improving mine plan, seeing if we can get the grade profiles up so we can be feeding higher-grade material earlier on, establishing that kind of peak production profile earlier on and seeing how long we could plateau that out rather than trying to extend mine life beyond 70 years. But I think ultimately, this is a unique district that once you get into production, you're going to be operating for many, many decades. So we've got the optionality because of the size of the mineral endowment. And I think exploration also lends to looking at future optimizations if we were able to find high-grade near-surface mineralization that could supplement maybe lower grade material that's currently contemplated in the existing resources. These are the types of things that we'd look to kind of pursue in parallel to all of the ongoing work streams.

And just one follow-up, if I could. It looks like BHP has put out a slightly different number or range, I guess, for Phase 1 CapEx of they're saying $7 billion to $8 billion. And it looks like they've applied some kind of plus 10% to the $7 billion number. Is that just a difference in philosophy? Or is that essentially putting a contingency on a contingency? How should we think about that?

Yes. So we're all aligned on the initial capital number of being $7.1 billion. And so think that's BHP's method of presenting the data. So at Lundin Mining, we've presented the absolute figure and not giving ranges to those numbers. So it's just a difference in reporting standards. But overall, both BHP and Lundin Mining through the Board of Directors of Vicuna Corp have signed off on the results of the PEA, and those are seen the same way between both companies.

And our last question will come from Ioannis Masvoulas with Morgan Stanley.

I think you partly answered it, but if I look at Slide 31, where you show the concentrator feed by source, we do see quite a lot of great variability after the first sort of 10 years of operation. Is that something that, as you indicated, you're planning to improve as you continue your visibility work and your exploration, and therefore, we might end up with a flatter grade profile at high levels? Or due to the nature of the mining district, we might have to accept some variability depending on the phase of our production?

Ioannis, I think it's very common to see during this kind of level of study grade variability in the manner that you're seeing on the presentation and the material that we're providing. So absolutely, the work of the mining engineering team, together in collaboration with the exploration and geology department will be to refine that reserve and mine plan to look at having less variability and bringing forward higher-grade material. So that all comes down to further refinements of the updated studies. And we believe there's significant kind of upside to ensure that we can do that.

This does conclude today's conference call. Thank you for participating, and you may now disconnect.