MMG Limited (1208) Earnings Call Transcript & Summary

Thank you for standing by, and welcome to the MMG Limited third quarter production report. [Operator Instructions] I would now like to hand the conference over to Mr. Jarod Esam, Head of Investor Relations. Please go ahead.

Hello, and welcome to MMG's quarterly production report teleconference. This report and today's discussion cover the operational performance of MMG's sites for the third quarter of 2023. Joining us today are MMG Interim CEO, Mr. Li Liangang; and CFO, 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.

Yes. Thank you, Jarod. Good morning to everyone, and welcome to MMG's third quarter production report teleconference. As always, at MMG, our first value is safety. Our total recordable injury frequency for the third quarter is 2.83 per million hours worked. The higher number of injuries in the quarter is concerning and is being closely monitored. Each site will continue reporting, investigating and learning from actual and potential workplace incidents. Let's now turn to our production performance for the third quarter of 2023. We achieved production of approximately 94,000 tonnes of copper and 59,000 tonnes of zinc, an increase in both metals compared to the previous quarter. Las Bambas copper production in the third quarter reached 82,000 tonnes, representing a 1% increase compared to the same period last year. Las Bambas operated at full capacity throughout the quarter without transport interruptions and with higher throughput and recovery. Throughout the third quarter, transportation along the Southern Corridor has been stable, assisted by the government declared State of Emergency. Recently, the Peruvian government has announced an extension of the State of Emergency for 60 days until the 12th of December. As a result of stable transportation, Las Bambas has reduced the on-site inventory levels of concentrate. At the end of the second quarter, Las Bambas had approximately 60,000 tonnes of copper metal in on-site inventory. However, by the end of September, this inventory level had decreased to around 10,000 tonnes of copper metal. Now I will provide the update on community dialogue. MMG remains committed to working closely with the government of Peru and community members for transparent and constructive dialogue. Progress has been made in discussions with the Huancuire community on Chalcobamba with an agreement on the regulations for the dialogue process reached on the 13th of September. With the participation of the government of Peru and the new negotiating commission of the Huancuire community formed in July, we have established the agenda and recommenced the formal dialogue process on the 2nd of October. MMG is optimistic that more lasting agreements for the development of Las Bambas can be achieved. Now turning to the Las Bambas outlook for 2023. We anticipate Las Bambas copper production to be in the range of 285,000 tonnes and 305,000 tonnes. This revised guidance reflects the stability in operations since March and positions us at the higher end of our original guidance for 2023. Additionally, C1 costs for Las Bambas are now expected to fall within the range of USD 1.65 and USD 1.75 per pound. This reduction in cost is attributed to production being at the higher end of the previous guidance range and higher by-product credits. Moving on to Kinsevere. During the second -- during the third quarter, copper cathode production decreased by 16% compared to the same period in 2022, resulting in a quarterly production of around 12,000 tonnes. This decline was primarily attributed to lower throughput as a result of unstable power supply from the national grid. Power supply stability is increasing, and copper production increased by 8% on the second quarter of this year. I'm pleased to report that the construction progress of our Kinsevere Expansion Project remains on track. During the third quarter, we completed in the mechanical construction of the cobalt plant. The commissioning of the cobalt plant began in September and will continue in the fourth quarter. Additionally, the pre-stripping of Sokoroshe II is on track with the establishment of all mining infrastructure and the construction of 30-kilometer haul road connecting the satellite site to the Kinsevere plant. The initial phase of Sokoroshe II contains oxide ore and is expected to contribute to reducing reliance on third-party ore. Looking ahead, our primary focus will be on the construction of the sulfide plant, which includes the concentrator, roaster, gas cleaning and acid plant facilities. We expect first copper cathode from sulfides to be produced in 2024 with full ramp-up completed in 2025. The Kinsevere Expansion Project is projected to extend the mine life to 2035 and increase annual production up to 100,000 tonnes of copper equivalent production once we reach full ramp-up in 2025. Our expectation of full year copper production has been adjusted to a range of 43,000 to 48,000 tonnes, which is towards the higher end of the previous guidance. We anticipate C1 costs to remain between USD 3.15 and USD 3.35 per pound -- sorry, the range is $3.15 and $3.35 per pound. I will now move on to our Australian operations, Dugald River and Rosebery. At Dugald River, we produced approximately 47,000 tonnes of zinc in the third quarter, which is 4% lower compared to the same quarter last year, but 30% higher than the previous quarter. Additionally, Dugald River achieved a 1% increase in lead production compared to the prior corresponding period and a 51% increase compared to the previous quarter. The mine has achieved full production rates following the ramp up in the second quarter. The processing plant's performance remained strong, achieving a zinc recovery rate of 90.6% and with a record-high lead recovery rate of 69% -- 69.3%, driven by continuous operational improvement activities. Supported by the strong and stable operations during the third quarter, Dugald River now expects a production range of 140,000 tonnes to 150,000 tonnes of zinc in zinc concentrate, which is towards the higher end of the previous guidance. The C1 costs in 2023 is expected to remain in the range of USD 1.05 to USD 1.20 per pound. At Rosebery, we produced around 12,000 tonnes of zinc in zinc concentrate and 5,000 tonnes of lead in lead concentrate during the third quarter of 2023. This represented a 2% and 15% increase in zinc and lead production, respectively, compared to the prior corresponding period, primarily due to higher milled ore grades resulting from the mining sequence, partly offset by lower mill throughput. Rosebery is now expected to produce between 48,000 tonnes and 53,000 tonnes of zinc in zinc concentrate in 2023. This is below the prior guidance due to lost production time in the first quarter related to the bushfire incident, slower stope turnover, reflecting challenges with mining at depth and lower-than-expected milled ore grades due to mining sequence. C1 cost at Rosebery is expected to be at the lower end of prior guidance of USD 0.35 and USD 0.50 per pound primarily due to higher by-product grades and strong precious metal prices. I will now hand it over to the moderator to take your questions. Thank you.

[Operator Instructions] Your first question comes from Jimmy Feng from Citi.

Can you hear me clearly? Hi. Hello?

Hello? Yes. Jimmy, can you hear us?

Yes, I can hear you. Yes, it is very clear. Okay. I just want to have a quick check for the cost guidance for Las Bambas. I have seen that the cost guidance has been revised down, but it still implies a higher cost in the second half than the first half despite a higher run rate in the second half. So I want to check what's the main reason for a second -- for higher costs in second half? And what should we expect regarding the Las Bambas into next year? This is the first question. And the second question is for the Huancuire negotiation and also the Chalcobamba project. So if the development can commence by end of this year, let's say, in November or December, when do you expect that Chalcobamba will contribute some copper volumes?

Jimmy, I'll take the first -- it's Ross. I'll take the first question on the cost guidance. The -- yes, it is true. And part of the reason why the cost guidance is a little bit conservative is we never quite know when we might get roadblocks and other sort of social-type issues. Now I think our expectation is, with the State of Emergency being extended into December, that we do expect for this quarter to have a clear run at the operations. But having said that, we probably are maintaining a bit of conservatism. And it's also to -- with this clearer run at the operations, we do spend more money in the community and development programs then as well in addition to the sort of ongoing operating costs. So hopefully, if everything goes well for this quarter, we should finish at the lower side of the guidance again. So I hope that answers the question. And then I think with Huancuire, yes, our plan is -- I guess, discussions have commenced with Huancuire, and our plan is -- well, we're hoping to have access by the start of the year. Now unfortunately, that would occur in the rainy season. So it would take us 3 to 4 months to do the development and build roads and the like. So we're then hoping to get mining access in about April of next year and then have first ore sometime, so around July or August. So that's sort of the plan. I think that would be similar to what we gave -- the message we gave at the last update.

Okay. Got it. So I just want to confirm. So the production will start in around July or August next year, is that right?

Yes, that's right. Because we would do a pre-strip, taking the -- removing the waste in that sort of April to July period. So that's the plan. But obviously, it's subject to us reaching agreement with the community.

[Operator Instructions] Your next question comes from Chris Shiu from Balyasny Asset Management.

Congratulations on the upward revision for the guidance. My question is, so regarding the emergency period, so it's been extended to December 12. Do you expect that to be further continued? And I mean has that been the main reason for the relatively peaceful and stable conditions at Las Bambas?

Thank you, Chris. There's no doubt the State of Emergency has been a huge help during this year, and we're almost kind of down to normal stock levels at site, which is fantastic. Alongside that, we haven't stopped the dialogue processes in the communities along the haul road, and we are working really hard with those communities to make sure that we can -- we could work successfully under -- without a State of Emergency. The government is working with us, and the State of Emergency has been extended. [ If they ] want to allow those conversations to take place for us to reach enduring agreements, we put it with those communities then to be able to operate like this in an extended period. So I don't want to flag the government's attention, it's up to them about what happens after December. What we're trying to do is work with the communities along the haul road, around the mine to get those kind of agreements in place that blocking the road is of no great interest to them because they've got a relationship with us that is working. And it has been a much better year on that progress along the haul road. And I think just while I'm here, the Huancuire negotiation also is underway, very intense at the moment and meeting regularly. And we're working really hard with those communities to come to an agreement. We're not there yet. But as Ross said, we have a clear plan, and we're hoping to get the community across the line to work with us.

Got it. And one other question is regarding the DRC. So given the upcoming election, do you see any sort of differences for the various candidates towards our operation exclusion in the DRC?

Yes. Chris, at this stage, operation remains normal. We don't see any issues at this stage.