MMG Limited (1208) Earnings Call Transcript & Summary

Thank you for standing by, and welcome to the MMG Limited Second Quarter Production Report. [Operator Instructions]. I would now like to hand the conference over to Jarod Esam, Head of Investor Relations. Please go ahead.

Hello, and welcome to MMG's Quarterly Production Report Teleconference. This report and discussion cover the operational performance of MMG's sites for the second quarter of 2023. Joining us today are MMG interim CEO, Mr. Li Liangang; and CFO, and Mr. Ross Carroll, together with other exco members. I'll now hand over to Liangang who will discuss the highlights in the report before we provide an opportunity to ask questions.

Thanks, Jarod. Good morning to everyone, and welcome to MMG's 2023 second quarter production report teleconference. As always, at MMG, our priority is safety. Our total recorded injury frequency rate for the second quarter is 1.7 hours work. This represents a decrease on the full year 2022 TRIFR of 1.25%. Let's now turn to our production performance for the second quarter of 2023. During the quarter, we provided approximately 93,000 tonnes of copper and 50,000 tonnes of zinc. We are pleased to report that we achieved increased production at each of our operations compared to the first quarter of 2023. Las Bambas copper production in the second quarter was 81,000 tonnes, representing a 153% increase on the same period last year. After resuming money activities in March, Las Bambas has remained at full capacity, with uninterrupted operations. During the quarter, various operational improvements, including optimization of [indiscernible] have resulted in ore mill throughput, reaching 13.6 million tons, the strongest quarter since 2019, and the second highest quarter in operations history. In the second quarter, the state of emergency implemented by the government of Peru and implemented throughout the quarter has allowed for stability along the Southern corridor. With the stability, Las Bambas concentrate transportation has remained uninterrupted since the removal of roadblocks in March. Recently, we achieved record high sales of around 470,000 tonnes of copper concentrate in the second quarter with around 43% of sales revenue contributed by drawdown of stockpiles. The reduction in stockpiles for the first half of 2023 is around 70,000 tonnes of copper concentrate. And when combined with movements in oil inventory, we expect an associated stock cost of around USD 157 million to be recognized in our interim accounts. Now turning to our update on community dialogue, we received a formal dialogue process with the Chalcobamba community in April, and the discussions are progressing. MMG remains committed to working closely with the government of Peru and community members with the aim of ensuring transparent and constructive dialogue. Discussions with the Huancuire community were [indiscernible] due to the [indiscernible] of the [indiscernible] of community on the 12th of June. The community has elected a new community president on 5th of June, and the appointment that was registered as the company's registry on the 6th of July. The Huancuire community has formed a new negotiating commission for the dialogue with Las Bambas with the first meeting held on the 17th of July. Las Bambas is a significant contributor to the local, regional and national economies in Peru. Our average base communities with these communities, together with others around the Southern Road corridor is to strengthen relationships and lead the long-term sustainable development of our host communities the start of Las Bambas. We are optimistic that we'll enjoy agreements from the continued development of Las Bambas can be reached. Now turning to the Las Bambas outlook for 2023. In line with prior guidance, we expect Las Bambas copper production to be in the range of 265,000 tonnes and 305,000 tonnes subject to continuous supply, people and logistics success to site. We are hopeful to be able to commence the development of the Chalcobamba deposit before the end of 2023. Moving to Kinsevere. In the first quarter, Kinsevere copper platform production decreased by 7% to around 11,000 tonnes compared to the same period in 2022. This was mainly due to lower ore mill throughput caused by unstable power supply from the national grid and a planned shutdown for the installation of the cobalt plant. However, a higher ore feed grade and improved recovery rates resulting from an increased supply of higher-grade third-party ore partially offset the lower mill throughput. The Kinsevere team progressed proprietary work [indiscernible] in the second quarter. We expect that fine ore from [indiscernible] restart to be transported to consumer in midsize in the second half of the year. I'm happy to report that construction progress of our Kinsevere extension product is on track. During the second quarter, we completed the majority of the structural and mechanical installation for the cobalt plant. Simple work continues for the construction of the concentrator and commenced for the [indiscernible] and asset plant. We expect the first cobalt production in 2023 and the first copper cathode from sulfide in 2024. The Kinsevere expansion product is expected to extend the mine life [indiscernible] and take annual production after 100,000 tonnes of copper equivalent production once we reach full ramp up in 2025. As for prior guidance, the expectation of copper production in 2023 remains between 40,000 and 48,000 tonnes. However, we expect C1 costs to increase to between USD 3.50 and USD 3.45 per pound from the prior guidance of between USD 2.50 and USD 2.80 per tonne. This was driven by a lower-than-expected cobalt price, reduced ore milled volumes caused by unstable power supply and increased reliance on third-party ore to offset the reduced oxide ore mine. And now moving on to our Australian operations, Dugald River. At Dugald River, we produce approximately 46,000 tonnes of zinc in the second quarter, which is a 12% increase -- sorry, which is a 12% decrease compared to the same period last year. The mine has been prioritizing the [indiscernible] of operations since restarting in late March after a 44-day subscription due to a fatal incident in February with 4 ways of mining and processing achieved in May. So zinc production was also impacted by lower margin grades due to the mining sequence and work area accessibility. However, the processing team achieved a record high quarterly recovery rate of 90.9% by driving incremental improvements from various optimization initiatives. The safe and successful ramp up of operations at Dugald River have allowed the mine's full year production guidance to remain unchanged from last revision, with an expected range of between 145,000 and 150,000 tonnes. C1 cost is expected to be in the range of USD 1.05 and USD 1.20 per pound. At Rosebery, zinc production of approximately 13,000 tonnes and lag production of around 5,000 tonnes were 13% and 12% higher than the same period last year, respectively. During the second quarter, mine and new volumes recovered from lost production time in the first quarter related to the push price. Workforce availability also improved supporting more stable production. New grade from both zinc and product by products were also higher, largely to due to margin sequence and a higher contribution from revenue stops. In line with prior guidance, we expect rotate to produce between 55,000 and 65,000 tonnes of zinc concentrate in 2023. However, due to higher byproduct price and strong precious metal prices. C1 cost is expected to be at lower of guidance of USD 0.45 and USD 0.50 per pound. We are now happy to take your questions. I'll now hand over to the moderator. Thank you.

[Operator Instructions] Your first question comes from Lawrence Lau from BOCI.

I have actually 2 questions about Las Bambas. First of all, we had a very strong quarter for Las Bambas in terms of production. Now I would like to know that in case we cannot start development of Chalcobamba before the end of this year, what kind of production will be for the full year? Can the strong performance continue in the next 2 quarters, even without Chalcobamba? This is my first question. Second, in the presentation, Mr. Li talked about the extension of state of emergency on the Southern corridor. So it will expire next month. So what will happen by then? Can the government continue to expand the state of emergency without limit?

Hi, Laurence, it's Ross [indiscernible]. Yes, thanks for the questions. Firstly, with our production guidance, and if there is no Chalcobamba and we're able to operate continuously for the rest of the year. We should be looking at total volume of around about 300,000 tonnes. So that's with Chalcobamba. So yes, so obviously, it's a little bit hard to predict because we've got the impact Chalcobamba [indiscernible] and also the fact of whether we get a rate of [indiscernible] major sort of civil disturbances again. But basically, if we can produce uninterrupted for the rest of the year and no Chalcobamba of about 400,000 tonnes. And then I think with your second question regarding the state of emergency, it's been renewed to the middle of August. And I think the Minister of Energy and mines has come out and said openly that the government will continue to be utilizing [indiscernible] and the police to protect [indiscernible]. So I think that rating that is that obviously, this social disruption earlier in the year that had an effect [indiscernible]. So happy that a piece of the government is going to continue supporting our other mining companies that are impacted.

Your next question comes from Chris Shiu from BosValen Asset Management.

My question is regarding Chalcobamba. So your announcement that you remain hopeful that the development can commence by the end of 2023. So how long would it take to come on stream, assuming that you can commence by the end of 2023? And how quickly will that be ramped up to full capacity?

Chris, we said it depends a little bit on the weather conditions. And if it's in the wet season, it becomes more difficult because we have to put all the infrastructure and will continue building the infrastructure and finishing that. But then if it happens earlier in the year when it's still dry, we're able to sort of [indiscernible] the infrastructure construction together or more in concert. Now the wet season sort of starts in November and goes to about March. So if we happen to get approval in the wet season, we'll probably take us 3 months to prepare the mine or the pits of production and then the [indiscernible] in the mining after that. So it depends on the season, but you're roughly looking at about 3 months of preparatory.

And how about the ramp up to full capacity?

No to the ramp up of full capacity, that would take probably 6 to 9 months before we'll be at full capacity.

The next question comes from Jimmy Feng from Citi.