MMG Limited ($1208)

[Interpreted] Welcome to MMG Limited's First Quarter 2026 Production Results Conference Call. Before we begin, please allow me to read the safe harbor statement. The information presented in this call is intended solely for the participating investors and analysts. The audio recording and written transcript are for reference purposes only. MMG has not authorized any third party to distribute the content of this call. The company and its affiliates assume no responsibility or liability of any kind for any loss arising from the republication, redistribution or use of any part or all of the content of this call. We would also like to remind you that market conditions involve risks and investment decisions should be made with due caution. So now I will pass the time to our management.

[Interpreted] Good day, everyone. Welcome to MMG Limited's First Quarter 2026 Production Results Conference Call. Joining us today are members of the company's senior management team, including Mr. Zhao Jing Ivo, Chief Executive Officer and Executive Director; Mr. Qian Song, Chief Financial Officer and Executive Director; Mr. Troy Hey, Executive General Manager, Corporate Relations; Mr. Wang Nan, Chief Operating Officer; Ms. Guan Xiangjun Sandra, Interim Executive General Manager, Commercial and Development; Mr. Xia Weiquan, President of Africa Operations; and Mr. Chen Xuesong, President of Las Bambas. I will now hand over to Mr. Zhao Jing Ivo, who will walk you through the company's operating highlights for the first quarter. Following the presentation, the management team will be pleased to take your questions. The moderator will announce the Q&A instructions after the presentation. So Mr. Zhao, please go ahead.

[Interpreted] Thank you, [ Godfrey ]. Good morning, good afternoon, everyone. I'm pleased to share an update on MMG's operational performance for Q1 2026. Safety comes first in everything we do. It is a core principle that guides all of our operations. Before turning to our operational highlights, let me briefly touch on our safety performance. In Q1 2026, MMG saw further improvement in safety performance. The total recordable injury frequency was 1.85 per million hours worked. Significant Events with Energy Exchange Frequency was 0.34 per million hours worked. Both metrics improved from the previous quarter, providing a solid foundation for stable operations throughout the period. During the first quarter, we made steady progress across production growth, cost control, project development and sales. Overall, our results were in line with expectations. Let me now walk you through 5 key highlights. First highlight, copper growth, zinc resilience, precious metals uplift. In the first quarter, our total copper production reached nearly 130,000 tonnes, up 9% year-on-year. Las Bambas produced over 100,000 tonnes of copper in concentrate, a 6% increase with mill recovery improving to 89.5%. Kinsevere delivered nearly 17,000 tonnes of copper cathode, up 44% year-on-year as the sulfide expansion project continued to ramp up. Khoemacau produced nearly 11,000 tonnes of copper in concentrate, broadly flat compared to the same period last year. Turning to zinc. Our 2 Australian operations continue to demonstrate resilience. Total zinc production for the quarter was about 50,000 tonnes. Dugald River delivered over 40,000 tonnes of zinc in concentrate, up 1% year-on-year with recovery rates remaining above 90%. And Rosebery produced about 9,000 tonnes of zinc in concentrate, while zinc equivalent production exceeded 31,000 tonnes, up 8% year-on-year. In terms of by-product precious metals, gold production exceeded 32,000 ounces up 24% year-on-year. And silver production reached approximately 2.9 million ounces, up 27% year-on-year. The increase in precious metals production continue to have the positive impact on our financial performance. Second highlight, C1 cost speeds guidance across the Board. Higher byproduct credits from strong precious metal prices, together with continued operational efficiency improvements drove a reduction in actual C1 cost during the quarter. Las Bambas reported a C1 cost of USD 0.45 per pound of copper, well below the full year guidance range of USD 1.2 to USD 1.4 per pound. Khoemacau delivered USD 1.25 per pound below the guidance range of USD 2 to USD 2.3 per pound. Kinsevere came in at USD 2.69 per pound, in line with full year expectations. Dugald River reported USD 0.77 per pound of zinc, below the guidance range of USD 0.80 to USD 0.95 per pound. Rosebery reported negative USD 1.8 per pound of zinc, outperforming the guidance range of negative USD 0.6 to negative USD 0.1 per pound. Should precious metal prices remain at current levels, where we assess our full year C1 cost guidance across relevant operations taking into account all production metrics and provide updates and subsequent reports. Certain highlight our operate held firm despite the complex external landscape. Las Bambas, our flagship asset, took proactive steps ahead of Peru's election year. During the first quarter, the mine maintained stable performance across production, community relations and logistics providing solid support to the company's overall results. On production front, Las Bambas delivered over 100,000 tonnes of copper in copper concentrate, laying a strong foundation for the full year target of 400,000 tonnes. On sales, thanks to the drawdown of port inventories and stable road logistics, payable copper sold, we reached about 120,000 tonnes in third quarter, significantly exceeding production for the period. On community relations, the Corazon de Las Bambas initiative continued to deepen, helping the mine achieve nearly 3 years of stable operations, the longest such period in the mine's history. Through the work for taxes mechanism, the mine continued to support local public infrastructure, including education projects, further strengthening community trust. Recently, Las Bambas and the local government of [indiscernible] formally signed an agreement for the improvement of the educational services of the [ Erasmo Delgado ], the [ Vanco ] comprehensive educational institution project with total investment of over 30 million Peruvian sol. The project will directly benefit 548 local students. It plans to build 22 new classrooms and library and other supporting facilities, equip them with modern teaching materials and furniture and introduce teaching, training programs systematically improving both teaching conditions and quality. In light of the unique external environment around this year's Peruvian general election, we'll continue to closely monitor local political and social development, maintain proactive engagement with communities and government authorities and take appropriate steps to ensure operational continuity and achievement of our full year production targets. Fourth highlight, Khoemacau drives operational improvements and advances expansion, strengthening long-term foundation. As main activities progress to the northern part of Zone 5, Khoemacau's ore mill grade improved to 1.63% in Q1. However, ore supply was constrained during the quarter due to lower than pending contractual equipment availability and mining sequence. With new equipment arising in March, development advance reached 1,400 meters for the month, and we expect ore supply to gradually increase in the coming quarters. On Phase 2 expansion, the company held a groundbreaking ceremony in February. Key long lead equipment has arrived on site and early works, including chem construction, road development, land acquisition and recruitment are already underway. Construction of the new process plant is progressing as planned with first concentrate expected in the first half of 2028. Upon completion of Phase 2 project, Khoemacau's annual copper capacity will increase from approximately 50,000 tonnes to 130,000 tonnes with associated sulfur output exceeding 4 million ounces per year. The mine's life of mine average C1 cost is expected to fall below USD 1.6 per pound of copper. In addition, the company has already initiated a pre-feasibility study for Phase 3, targeting 200,000 tonnes per annum. Khoemacau is one of MMG's core growth engines over the next 5 years with a clear project time line and well-defined cost target, it will provide strong support for the company's sustainable growth. Fifth highlight, market tailwinds supported margins and profitability. Although metal prices experienced some volatility during the first quarter, they remain elevated overall, providing strong support to the company's profitability and further highlighting the value advantage of our mining assets. Among base metals, the LME copper price averaged USD 12,800 per tonne. Copper concentrate supply remains tight with spot treatment and refining charges averaging negative USD 79.5 per tonne. This trend allows mine site to capture greater value, which benefits our copper business directly. Meanwhile, the average zinc price was USD 3,240 per tonne and spot zinc TC/RCs fell to near 0, providing a favorable environment for our zinc operations. On precious metals, prices remained elevated with gold averaging USD 4,875 per ounce, and silver averaging USD 84 per ounce. The strong precious metals prices not only helped lower C1 cost across our mines, but also directly contributed to higher earnings. Our stable operations combined with favorable market prices have further highlighted the value of our asset portfolio and put us on a solid footing to achieve our full year target. Overall, MMG made steady progress across all key areas in first quarter of 2026, operational results at each of our mines met and exceeded expectations, laying a solid foundation for the full year. Going forward, our work will remain focused on 4 key areas. First, continuing to strengthen safety management to safeguard our operations. Second, steady advancing the Khoemacau expansion project to reinforce medium to long-term growth. Third, continuously optimizing cost structure to enhance core competitiveness. Fourth, maintaining stable operations across production, community engagement and logistics at time, consolidating performance and mitigating operational risk. In closing, I would like to express my sincere gratitude to all MMG employees for their hard work and to our investors for your continued trust and support. That concludes my remarks. My colleagues and I would now be happy to take your questions. Moderator, please open the floor for Q&A. Thank you.

[Interpreted][Operator Instructions]

[Interpreted] I have several questions. First question is about Las Bambas. So in the first quarter, the share of copper concentrate is actually higher in the overall copper volume. So it has risen as compared to the past quarters, I would like to know what is the reason behind? And will this be sustainable in the coming period? And then the second question is for gold and silver, production volume has risen and the rise is actually bigger than the growth in copper volume. So will this last in the coming period? Or is it only for this period that there is a higher volume for precious metals? The third question is about Kinsevere. In the first quarter, there was no sale of cobalt. So what is the company's plan on that? Fourth question, regarding Khoemacau. In the first quarter, the sale of copper sales volume is smaller than production volume. What is the reason behind that?

[Interpreted] Let me answer the first question concerning the concentration of copper concentrate. Well, first of all, because in the first quarter, well, 70% of the copper was taken from Ferrobamba and only 30% from Chalcobamba. And for Ferrobamba mine, because of the proposition of the copper extracted, well, there is a higher concentration of copper concentrate as a result. And also the quality of the copper is also higher. So that's the situation regarding Ferrobamba. Besides, we have also enhanced our milling and processing arrangement and process. So as a result, the overall grade has also been enhanced.

[Interpreted] Now let me answer your question about sale of cobalt. In fact, we have already started the sales process of cobalt. However, within the territory of Congo, the logistics route is relatively longer. And when it comes to cobalt sales, actually, it is taking place within the territory of Congo. And according to the arrangements and process, in April, we're going to upload the Congo -- upload the cobalt onto the vessels. And when the cobalt is uploaded to the vessels, then sale will be recognized in the books. So you will be able to see the sale of cobalt in our financial statements starting the second quarter.

[Interpreted] Then the next question is about Khoemacau. So why is it that the sales volume of copper is lower than the production volume?

[Interpreted] Well, this is because of a change of the sales conditions this year. As a result, some of the products are still on the route, on transit. So we are now catching up in terms of the sales rhythms. And very soon, we will be able to see the volume of sales catching up with production volume.

[Interpreted] Just now you -- the difference in composition of the mine between Ferrobamba and Chalcobamba of Las Bambas. So this year, for the whole year, do you have the mine composition of these 2 mines, please.

[Interpreted] This year, for the whole year, the breakdown is like this. Ferrobamba, it is 56%, Chalcobamba, 44%. So as a result, in the first quarter, as I mentioned earlier, the share of Ferrobamba is bigger than Chalcobamba. And as a result, the production volume of both silver and gold has increased. At the same time, the grade of the copper also improved. Right now, it is roughly at a 50-50 proportion.

So my first question is for Troy about the Peruvian presidential elections and Las Bambas. So let me use English to us directly. From the perspective of Corporate Relations, I would like to ask Troy, do you have any latest updates on the Peruvian presidential election? And how to assess whether the election would affect Las Bambas operation. This is my first question, and I will ask one by one.

[Interpreted] First of all, congratulations on your very good results. And you have also done a good job in relation to C1 costs. Actually, your results have exceeded expectations.

Thank you for the questions. Let me just take a step back. The elections were something we were looking out to from late last year. We have set the site up very well to deal with any disruptions. And so far, the result has been very good. The site continues to operate. We have no significant disruptions from the current election process. The process itself has gone through the first round. There has been some intellectual difficulties and that count will take longer. But I think most people are expecting that there will be a runoff election somewhere in around the 7th of June.

I'm sorry, sir. Can you move closer to the microphone? Because your line is very blurred. I cannot hear you clearly.

Sure. Is that any better?

Yes, it is now much better. Can you repeat your answer?

Sure. So we have -- thus far, we have seen no significant impact from the election process on Las Bambas operations. But very much we're watching the development of election closely. The first round has been held due to some electoral difficulties. It's -- we don't have an outcome, but we expect that somewhere in mid-May, and that will most likely lead to a follow-up election runoff in about June 7. The focus on Las Bambas is very much on making sure we are prepared for any delays that may come. But I said so far, we have been not seeing any impact and also to work with whichever new government forms. The experience we've had since 2014 is that even when there are periods of significant uncertainty or disruption according because of political change, the institutions are Peru strong. Our relationships are well developed and they're increasingly strong, working, understanding with communities means that especially over the last 3 years, we have had largely uninterrupted operations at Las Bambas and including keeping our logistics chain open and our flowing. So we see this election continuing through midyear. We are working really hard to prepare for anything that might happen. But so far, so good. And we hope that the election delivers a clear outcome, and we believe Peruvian can return to a period of more stable political leadership. But just to your question, even there, there has been times of vertical uncertainty, I think Las Bambas has shown its ability to work very closely with the government and Peru has shown the strength of institutions that have kept the mining industry over. So thanks for the question.

[Interpreted] My second question is related to Las Bambas C1 cost. In the first quarter, the C1 cost was low. And then in the first quarter, behind this low C1 cost, was there some one-off factor? And in the future, will there be other one-off factors contributing to the low C1 cost? And also in C1 costs, well, some factors are related to byproducts. So basically, in the first quarter, production volume is in line with expectation, and we believe that if production volume is going to continue for the full year in this similar pattern, then the numbers will be within expectation. So I would like to know what will be the overall situation and your projection in relation to the volume as well as the byproducts.

[Interpreted] My answer is your analysis is correct. In the first quarter, apart from the price of byproducts, there was no other factor affecting C1 cost.

[Interpreted] Then in the coming quarters, will there be other one-off factors or events that may affect the C1 cost apart from this impact in relation to byproducts?

[Interpreted] I believe you are asking about the employee or staff profit sharing arrangement. Well, there is no impact from this on C1 cost. So my conclusion is that there is no other factor that may cause an impact on C1 cost.

[Interpreted] My last question is now that there is a conflict in the Middle East and oil price has risen, and there is also a shortage in diesel. So with the cost increase, will that affect your mine operations? At the same time, how is the diesel supply situation, please?

[Interpreted] So let me comment, first of all, on the security of diesel supply. Well, in the near-term period, we don't see any risk arising from diesel supply, but we will continue to watch the situation in the Middle East. And then there is also the fuel price situation. So recently, there was quite big international volatility in fuel price. But when it comes to the share of oil consumption or oil-related consumption in our overall metrics, well, of course, there is some price impact. However, because the overall share of oil consumption in our total matrix is relatively small. For instance, in the low-priced products, the share is only 2% to 3%. And in other different products, its share is also only 10% to 11%. So overall speaking, its share in percentage is rather small in our overall total. So the impact as a result is also small to us.

[Interpreted] Miriam Chan of Bank of America.

[Interpreted] Congratulations on your very good first quarter results. First question is about Las Bambas. In the first quarter, copper sales volume is bigger than production volume. So this is because of a decline in port inventory. Now right now, how much is the situation regarding cost inventory? In the future, are you going to see sales volume gradually be more or less the same as production volume? Second question is about Kinsevere. So regarding the supply of sulfide and also procurement of sulfide. Now that the Middle East conflict situation is continuing. So in the future, will that be impact on your copper production volume arising from sulfide supply and sulfide procurement? And how much is the share of sulfide costs? How is the cost sensitivity in this regard? The third question is about Khoemacau. In the first quarter, there was some restriction in relation to the use of contractor equipment. So how is the situation now in the second quarter? Do you think that your production volume can gradually pick up, as you said earlier?

[Interpreted] Let me answer your first 2 questions. For the first question, it is about the sales of copper at Las Bambas. In the first quarter, it is true that sales volume is bigger than production volume. That is because of the inventory at the port. So -- but then gradually in the first quarter, it has been digested in relation to the pot inventory. And so in the second quarter, we expect that the sales volume will gradually be more or less the same with production volume. But there will be a time gap for sales volumes to gradually move to the Zing level as production volume. And so as a result, there would be a small amount of inventory remaining, this is a normal situation about inventory. So we don't see that there will be a big difference between production volume and sales volume. The second question is about Kinsevere and also sulfide. Well, it is true that sulfide would cause a big impact to our Kinsevere operations. However, we have already gradually built up our own capability in terms of sulfide consumption. So as a result, right now, with our self-supporting capability, we're able to satisfy 75% of our use of sulfide and consumption amount of sulfide. So the sulfide supply and sulfide price will only cause limited impact on our costs. Of course, if there is an increase in sulfide price, there will still be some impact on us. However, we already have some sulfur inventory, and we are talking with the suppliers to try to make sure that we can actually stabilize the sulfide supply so that we can minimize the impact on our overall operations.

[Interpreted] Regarding Khoemacau production volume, it is true that in the first quarter, it has been impacted by equipment availability as a result, production volume [indiscernible]. In April, we had already seen the equipment coming to place for mining. So as a result, production volume has started to pick up. In the second quarter, we believe that there would be an increase in production volume of copper concentrates. So it will be subject to the availability of the equipment. But overall speaking, the trend is an upward one.

[Foreign Language]

[Interpreted] First of all, congratulations about last night's report on QPR, which is bigger than expectation, it's very good. My first question is in relation to C1 costs in the third quarter. So I think as mentioned earlier, C1 cost has actually been better than expectation, including Las Bambas mine, though this is mainly because of the gain or yield from byproducts. And you also mentioned just now that the share of Ferrobamba is bigger in Q1. Now I want to know for the whole year, what is the production volume guidance for precious metals? And then my second question is related to Kinsevere. So for the increase in copper volume, the contribution from Kinsevere was quite big. So this is stated to -- my question is related to electricity supply and also your production capacity ramp up. Can you give more details on these 2 points?

[Interpreted] Let me first answer your first question in relation to precious metals. So you just asked for guidance on production volume of precious metals. In fact, we have not disclosed or reported on guidance of precious metal production volume. However, since this is closely related to our core products of copper and zinc, so if you can refer to our production volume guidance of copper and zinc, then you will be able to somewhat tell production about precious metals.

[Interpreted] Now let me comment on production volume at Kinsevere. Production volume has increased. That is because we have put in place a number of solutions on site, including replacement and also overhaul of some old and broken down equipment. So in the first quarter, basically, we have already completed 70% of the on-site solutions and arrangements. That's why there is going to be a contribution to the production volume. In relation to the production ramp-up, so far, we have seen quite satisfactory performance. So there is an increase from [ 2,000 ] per tonne to [ 3,000 ]. And then in terms of power grid, again, we have seen improvement comparing first quarter 2026 and fourth quarter 2025, there is already an improvement of around 80-kilowatt hours. And then in the first quarter, we believe that production volume has been better than expected. So production volume had also achieved the budgeted or expected levels set at the beginning of the year.

[Interpreted] My question is regarding the breakdown in share between Ferrobamba and Chalcobamba of Las Bambas last year.

[Interpreted] Last year, the breakdown was around 50-50.

[Foreign Language]

[Interpreted] My question is about Khoemacau. So there is a 200,000 tonne of pre-research volume. So I would like to know the timetable from the pre-research stage all the way to the formal research stage to making a final decision. So if there is indeed the production of 200,000 tonnes being put in place, were actually, in terms of timing, do you need to wait for the completion of the 130,000 tonnes that would be round about at around first quarter in 2028. Is that the time line?

[Interpreted] Now let me answer your question in relation to the timetable. So first of all, in terms of our investments and research, we have to follow established rhythm, and it has to be done in phases. So first of all, for this year, we will be working on the pre-feasibility stage. And then next year, in the first half, we hope to be able to get approval for the pre-feasibility so that we can get into the stage where we can really start to do research. And then in 2028, we believe that at that time, we will be able to get the approval process done for the research, that is the possibility to do research. And then basically, when it comes to some fundamental infrastructure, for example, the building of roads, we can advance our work on that a little bit. But then in terms of investment, you really have to wait until the approval of research for us to start the investment stage. So basically, we have to follow all the investment and research processes. So you can say that it is really not easy to introduce and start new projects. So that is the reason why it is not easy to increase production volume. In terms of timetable, there is the possibility of advancing the overall work and progress, but such possibility will be rather small.

[Interpreted] My next question is about the project, Nickel Brazil. How is the progress so far? Is it true that it has to wait till the end of this year?

[Interpreted] So concerning Nickel Brazil, first of all, the deal has to be approved by EU. And recently, we saw some progress. We have already submitted some documents. And we are also working on some outstanding questions. It is very difficult to predict the time table. But based on our experience and observation of EU's practice, the work may take longer than 90 days. But we are now working with our counterparts. We are trying our best to expertise the overall procedure and approval process. But it is very difficult to predict an exact time as to when the whole process can be completed. Overall speaking, we are making a lot of efforts to expedite the whole process.

[Interpreted] Congratulations on your very good results. Many of my questions have been asked earlier by other participants. So now I have 2 more questions to ask. The first question is about Nickel Brazil. Just now I heard that there is the 90-day timing in relation to the overall process. So is it true that after getting approval from EU, then there can be the completion or settlement of the Nickel Brazil transaction? My second question is about your financial situation. Now you enjoy quite good cash flow, especially after selling out some inventory in the first quarter. So in the past 2 years, you focused a lot on debt repayment. In the coming period, what will be the share between debt repayment and dividend payout?

[Interpreted] Okay. Regarding the 90 days, let me clarify the situation. So 90 days is the maximum period for the second stage of EU approval process. So for the other settlement conditions, those had already been satisfied. So now we are only waiting for approval from EU. Once EU gives approval, the settlement of the deal can take place.

[Interpreted] Now let me answer the question in relation to our financials. So first of all, our operation was in good shape. So that's why we enjoy quite good cash flow. And right now, what we need to do is continue to do a good job with our operations and to complete all our mine expansion projects. So these are related to structural changes. So in fact, our leverage ratio has already improved. Right now, we are at around 30%. So we are no longer in the situation in the past few years when we need to focus a lot on debt repayment. And then when it comes to the work that we need to do, well, first of all, there are several potential uses of our cash flow, including dividend payments and also the Khoemacau CapEx. But right now, we have to work on solving all the technical obstacles in relation to the payment of dividends. We believe that at the end of 2026, we may be able to solve the technical obstacle. And then we will have the condition to make payment of dividend to our shareholders. But we have to look at the situation at that time in making decision as to dividend payments.

[Interpreted] So congratulations on your first quarter results. My first question is Khoemacau. In the first quarter, Khoemacau cost was relatively smaller than your annual guidance. So that was because of high price of silver. Apart from this, are there other factors leading to such decline in cost? And then the second question is about Kinsevere electricity. So what is the electricity structure? And also what is the latest update in relation to photovoltaic energy storage? Third question is that now you enjoyed a search or an increase in your revenue. So does your company have any 15th Five-Year Plan?

[Interpreted] Regarding the cost of Khoemacau, in the first quarter, coal was lower than guidance. This is mainly because of credit from byproducts. So only this sector had already made contribution of around USD 1 per pound. So other than that, there is no other impacting factor.

[Interpreted] So your question about electricity supply in Kinsevere. So basically, in the second -- at the end of the second quarter, we'll be able to complete the building and construction of the related facilities project. And we believe that it will commence operation in the third quarter. As a result, our overall operating quality can improve, and there would be more stable electricity supply for Kinsevere mine.

[Interpreted] Let me answer your last question on company strategy. So first of all, as you know, our strategy has been stable for the long term. Our company is a growth style company. So basically, in terms of growth, there are 2 major avenues. There is organic growth as well as strategic growth. For organic growth, basically, we are expanding our production. We are optimizing and improving our assets and we are removing bottlenecks in our production. And we are also increasing. We hope that we can increasing -- we hope production capacity and production volume in a sustainable way. And then when it comes to strategic growth, basically, it includes M&A and also our collaboration with our strategic partners. All these will be carried out according to our strategy and our plan with discipline. And all these are done in order to improve our long-term shareholders' value. And in fact, our strategies are well aligned with our parent company's 15th Five-Year Plan strategy. This time, we have added a new pillar about technology and innovation. So by including this new pillar, we will be hoping to reduce cost, improve efficiency and also to improve our safety dimension. Thank you.

[Interpreted] We do look forward to the contribution of technology and innovation to your improvement in operations and results.

[Interpreted] Thank you very much for joining this conference call. If you have further questions, please feel free to contact IR department. Thank you.

[Interpreted] The call is concluded here. Thank you. [Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]