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 Andrea Atell. Please go ahead.

Thank you. Thank you for joining us for MMG's quarterly production report teleconference. Today's report and today's discussion will cover the operational performance of MMG's sites for the 3 -- for the third quarter of 2024 and the outlook for the remainder of the year. Joining us for this call are Mr. Liang Cao, our CEO; Mr. Song Qian, Chief Financial Officer, along with other members of the executive team. I will now hand over to Cao Liang who will take us through the highlights of the report. Following this overview, we will open the call to questions. Thank you.

Thank you, Andrea. Good morning and good afternoon, everyone. Welcome to our third quarter production report teleconference. These are exciting time for our company, and I'm very pleased to be with you today sharing our results. As you know, our production report was released yesterday. For the purpose of this presentation, I will take it as read and provide a high-level summary of our results and key highlights. My colleagues and I will be happy to take any questions you may have at the end. And safety is our first value. It is pleasing that our overall safety performance for the Q3 is showing improvement of those indicators. We are tracking well against our goal of achieving significant and ongoing improvement. Although I would like to acknowledge it, there is still a way to go. As a team, we will be -- remain vehement and we continue to progress our improvement plans across all our sites and changing safety leadership. Now let's turn to the production results. MMG achieved a significant growth in capital reduction for the Q3 with 22% growth compared to the same period last year and 26% growth compared to the previous quarter. This is driven by our strong performance at Las Bambas, Kinsevere and Khoemacau. Notably, Las Bambas had impressive results producing over 90,000 tonnes of copper in copper concentrate. It's the strongest quarter since 2021. The site will continue to ramp up production in the fourth quarter. And during that time, it is expected to reach annualized copper production of over 100,000 tonnes. This would see Las Bambas reenter the top 10 copper mines in the world, a milestone we will work hard to achieve. At Khoemacau, we had doubled digit growth quarter-on-quarter by increase driven by improved mining and milling volumes and a higher ore grade. Production will continue to ramp up, allow us to maximize our return from MMG's asset. Thanks to increased ore supply from the Sokoroshe II pit and enhanced power supply stability, Kinsevere also performed well. Now our 2024 production guidance off the back of interrupted production and operation at the Chalcobamba pit, we are confident in reaching 320,000 tonnes of production this year at Las Bambas. We also anticipate achieving our targets for our other 2 mines. Now let's move to zinc. Production was impacted by maintenance at those sites. However, volume are set to recover. While Dugald River and Rosebery had decreased zinc production for the Q3, volume did recover in September, and they are expected to stabilize in the coming months. I would like to call out that Dugald River's zinc metal production for September was its second highest since January 2022, an impressive result. With strong feed grades and zinc recoveries, will help with the metal production. Our guidance for Dugald River production has been low; however, Rosebery remains on track. Across all sites, C1 cost guidance is unchanged, and it's worth highlighting that the Las Bambas and Rosebery are each expected to come in at the low end of their respect -- respective range. In recent years, we have been focused on growth across our operations through expansion and mine life extension. And our recent development projects have helped deliver this. I would like to highlight some significant project wins. Firstly, we are pleased to share that copper cathode from sulfide ore was produced in late September as part of our Kinsevere Expansion Project. The completion of this project will, over the coming years, see -- over the coming year, see the team focus on ramping up to reach nameplate capacity. This will extend the mine life to 2035. Our expansion plans to increase the capacity to 130,000 tonnes annually at Khoemacau are proceeding well. The preliminary feasibility study is now complete. The project is expected to move into feasibility study by the end of this year, with construction expected to begin in 2026 and to be completed by 2028. This will help reduce C1 cost as well. MMG is collaborating with the Huancuire community companies on the Chalcobamba pit development, which is in early operation. Constructive dialogue with Las Bambas, the Huancuire community and the Peruvian government continues. Discussions are focused on implementing agreements, including local business and employment opportunities while seeking to finalize development priorities and strengthen relationships. Finally, off the back of the successful completion of MMG's large issue, the proceeds, we'll, this quarter, use that for debt facility repayment. The repayment provides the company greater flexibility with working capital and the funding of corporate costs as well ongoing development of MMG's mines, including essential infrastructure and equipment. In closing, we committed to growing a strong business across the 3 continents, 4 countries and the 3 commodities. Importantly, our portfolio is leveraged to [ mineral critical ] for a low-carbon future. And I'm proud of our reputation and our commitment to international sustainable leadership standards. Moving forward, we will continue to focus on generating more value from our operations and maximizing the growth potential of our assets. On behalf of MMG ExCo, executive committee, many thanks to our team for their hard work and dedication. I'm excited about the future and what is to come. This concludes the result part of our call. Now we are happy to take your questions, and we'll hand back to the moderator. Thank you.

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

I have several questions. The first question is for the Las Bambas mine. It's very happy to see the full year C1 cost towards the lower end of the guidance. In this case, as the first quarter C1 cost was high at $1.8, then the second quarter, if I calculate right, the second half C1 cost would be lower than $1.5. So in this case, what would be the C1 cost expectation in 2025 for Las Bambas mine? So this is my first question.

Thank you, Jim. So Ivo, please. Thank you.

Yes. This is Ivo from Las Bambas. Actually, as you mentioned, the Las Bambas C1 cost right now is, for 2024, expected to be around $1.55 per pound. So given that -- actually, the C1 cost for the first half of the year, it's $1.81. Actually because we have more than 50% of the input from Chalcobamba actually, so that's why we have a very significant improvement. So because of the 3 reasons, the higher production rates we have, an improved [ conceptual intershoots ] and also increase by the by-product credit. As you mentioned, the -- for the next year, we prefer to still maintain the high production have -- that we have. And also we try to always to maximize the efficiency of the current -- the operation we have. So actually, we try to maintain the annual production for the next years between 360,000 to 400,000 tonnes. So -- and we think the Chalcobamba actually probably will contribute around 40% to 50%. So for the C1 cost, actually, I don't have an exact number, just for that. But I really think it to be much better than the first half of the year of 2024. This is what we try to achieve.

Got it. Got it.

Thank you. Any comments from Song to add?

Just we will release the full year guidance for C1 range USD 1.55 to USD 1.75 per pound. So with what Ivo said, with a good production rate, our cost can reach to the lower end of the guidance. Thank you.

That's very clear. Just one quick follow-up. So for the Las Bambas mine, I know that, in the first quarter, it's already annualized at 400 kt, so the guidance for the next year, 350 kt to 400 kt would be relatively conservative because in the [ fourth ] quarter, we already reached this level. Or is there any change of mining series that, I think, may change the -- next year's guidance lower than 400 kt? That's my quick follow-up.

Thank you, for the question. Ivo or Nan will -- please.

I didn't catch the number of the production next year. I'm sorry, just please repeat.

Sorry. I mean that from your previous answer, you said that in the next year, the production would be around 350 kt to 400 kt for Las Bambas. But for the [ fourth ] quarter of this year, the annualized production already reached 400 kt. So I just want to check rather the next year's production, if there is no disruptions like transportation, can reach the higher end of this guidance, like can reach 400 kt.

Yes. Well, actually, just as you know, the production of this year, 2024, we have higher production in the second half of the year because in the first quarter, normally, we have the rainy season. We have lower production. And obviously, with the start of Chalcobamba, we have higher production, and we try to achieve the growth this year with 320,000 tonnes. For the next year, obviously, with Chalcobamba, which contributes more than half of the production and we may reach between 350,000 to 400,000 tonnes. Obviously, the same. In the first quarter of the next year, probably because of the rainy season, we would have a higher production in the second half of the year. But I think we're quite confident that we will try to achieve the higher level of our target.

Got it. Got it. Very clear. And my second question is for the Khoemacau project. When ramping up to 60 Kt per annual output in 2026, what would be the C1 cost expectation? Will be lower to what level? Do you have this expectation?

Yes. Yes, Jimmy, I think once we ramp up obviously to 60,000 tonnes, our range will be sort of somewhere around $1.50 to $1.70 range. As we go, we're still doing some planning, working out the budget for next year and then beyond that. So early next year, we'll have a better clarity on the ramp-up profile, and then we can provide more updates to the market.

Sure. Got it. And that's also a very good improvement in the Khoemacau C1 cost.

The next question comes from Lawrence Lau from BOCI.

First of all, congratulations for the strong performance at Las Bambas in the third quarter. I have 2 questions. First of all, regarding Las Bambas, we noticed that the sales volume of copper actually is below your output for 2 consecutive quarters already. I just wonder if you have any -- you have encountered any problem or difficulty in selling your products. Or is it just some kind of a temporary situation? And secondly for Kinsevere, I just wonder why you are not guiding for the high end of your annual guidance for the full year output because we have seen a very strong third quarter. And are we -- are you expecting a lower output for the fourth quarter on a Q-on-Q basis? I think that's for my question now.

Thank you for the question. For Las Bambas one, Ivo; and Sandra, please comment in terms the product selling. Kinsevere, Nan, please.

Yes. This is Sandra. Actually, I can comment on the sales. So we don't -- while we didn't experience the issues in terms of logistics, when you look at the numbers, probably it's more of a temporary disruption on the road for a few days and also the flow at ports so that we were not able to load the concentrate. So just to confirm, actually, we didn't see material disruptions in terms of logistics. Ivo, I don't know if you've got...

Yes, [ that's correct ].

Okay. Lawrence, this is Nan here. Just in regard to your question on Kinsevere, we do see pretty steady production performance in Q3 and then coming into October as well. But as we go towards the end of our oxide feed and then getting into the sulfide feed, so we finish our mechanical completion of the sulfide plant and then roaster, but yes, we just started the ramp-up. So to build into the conservatism in that ramp-up process because, as you know, when we commission any sort of processing facilities, they will be up and down. So we did bank some conservatism in there. Secondly, as we go towards the end of the year, our oxide grade has started to drop to a lower level compared with now, so obviously aiming to bringing the sulfide component as part of the ramp-up. Overall, we definitely aim for a high end of the production figure for the year. But yes, so we're just getting the range just considering some potential ramp-up issues, yes. That's pretty much part of our plan anyway. Yes. Thanks.

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