MMG Limited (1208) Earnings Call Transcript & Summary

[Interpreted] Good day, everyone. Welcome to MMG's 2026 Second Quarter Production Report Briefing. [Operator Instructions] Before we begin, please allow me to read the disclaimer for today's briefing. The content of this meeting is intended solely for participating investors and analysts. The audio recording and transcript are provided for reference only. MMG has not authorized any third-party organization to distribute materials relating to this meeting. The company and its affiliates accept no liability for any loss arising from the reproduction, redistribution or use of any part or all of the meeting content. Investment involves risk and investors should exercise caution and make their own assessment before making any investment decision. I will now hand over to MMG's Chief of Staff, Godfrey Guo Yu.

[Interpreted] Good day, investors and analysts. Welcome to MMG's 2026 Second Quarter Production Report Briefing. We are joined today by members of the company's Executive Committee, including Mr. Jing Zhao, Chief Executive Officer and Executive Director; Mr. Song Qian, Chief Financial Officer and Executive Director; Mr. Troy Hey, Executive General Manager, Corporate Relations; Mr. Nan Wang, Chief Operating Officer; Ms. Xiangjun Guan, Interim Executive General Manager, Commercial and Development; Mr. Weiquan Xia, President, Africa Operations; and Mr. Xuesong Chen, President of Las Bambas. Today's briefing will consist of 2 parts. First, Mr. Jing Zhao, our CEO, will provide an overview of our second quarter operations. After the presentation, the management team will take questions from investors and analysts. The operator will explain the Q&A process after the presentation. With that, I will hand over to Mr. Zhao.

[Interpreted] Thank you, Godfrey. Good day, everyone. I'm pleased to provide an update on MMG's operating performance for the second quarter of 2026. Before discussing our operating results, I would like to begin with safety, which remains our highest priority. Safety remains the foundation of our operations and the responsibility on which we will not compromise. In Q2, the company recorded a total recordable injury frequency of 2.19 per million hours worked and a significant event with energy exchange frequency of 0.82 per million hours worked, both higher than in the previous quarter. We are treating this seriously. Across all sites, we are strengthening proactive reporting, reinforcing critical risk controls and increasing focus on contractor management and frontline supervision. We remain committed to improving safety performance and ensuring every employee returns home safely. Turning to operating performance. In Q2, the company made steady progress in stabilizing production, improving efficiency, optimizing costs, advancing key projects and strengthening capital management. MMG's total copper production reached approximately 138,000 tonnes, while zinc production totaled around 56,000 tonnes, both remaining broadly in line with the same period last year. Byproduct output increased strongly with silver production up 13% year-on-year to 2.826 million ounces. Molybdenum up 35% to 955 tonnes, gold production reaching 28,000 ounces. Stable core production, together with stronger byproduct performance demonstrates the resilience of our asset base and the benefits of a diversified production mix. Against this stable production backdrop, our sites continue to improve costs, while key growth projects progressed in an orderly manner. I'll now review the performance of our core assets. Starting with Las Bambas. Copper business. Las Bambas continues to reinforce its position as a large-scale, low-cost copper operation and remains a key contributor to MMG's cash flow and earnings. In Q2, Las Bambas produced 109,000 tonnes of copper in concentrate, 8% higher quarter-on-quarter, but 5% lower year-on-year. Ore grade and recovery remained healthy, supporting a solid production base. Notably, Las Bambas has now sustained stable operations for more than 3 consecutive years. During the second quarter, logistics and concentrate transportation were relatively smooth with no major disruptions. First half payable copper sales reached 213,000 tonnes, up 12% year-on-year, underscoring the operations reliability and the effective execution of our logistics system. On community relations, the company continued constructive engagement with local governments and communities, supporting regional development and strengthening the basis for long-term cooperation. These efforts continue to foster a supportive environment for sustained mine operations. Following a solid first half performance, Las Bambas is well positioned to reach the upper end of its full year production guidance of 400,000 tonnes of copper. Cost performance was also strong. First half C1 costs were USD 0.55 per pound, placing Las Bambas in the first quintile of the global cost curve based on publicly available industry data. Reflecting this performance, the company has lowered full year C1 cost guidance to USD 0.85 to USD 1.05 per pound. Overall, the most significant changes at Las Bambas in recent years are not only reflected in production and cost performance, but also in continuous improvement in the operational quality and asset resilience. After years of effort, the mine has achieved over 3 consecutive years of stable operations with stronger community relations, more mature logistics system and significantly enhanced operational certainty. As a high core quality core asset and a strong source of cash flow for the company, Las Bambas not only provides solid support for current performance, but also lays a strong foundation for advancing the company's growth strategy. Optimizing capital allocation and enhancing shareholder returns is a key pillar in ensuring the company's fundamental stability navigating through cycles and achieving long-term value creation. Turning to Kinsevere, copper production in Q2 was close to 17,000 tonnes, a 24% year-on-year growth and demonstrating strong operating momentum. Sulfide processing project continued to ramp up with benefits becoming increasingly visible. In Q2, ore processed by the sulfide concentrator increased 12% year-on-year, providing stable source of new copper concentrate feed for the roasting and SX-EW plant system. Looking to the second half, continued mining and pushback activities at the Central and Mashi pits are expected to further improve head grades, supporting capacity ramp-up and stronger site performance. Overall, the Kinsevere expansion is gradually entering the value realization phase. We expect to support this year's production growth and cost improvement targets while contributing meaningful incremental copper output for the company. Next, Khoemacau. Khoemacau is the key driver of MMG's medium- to long-term production growth. In the second quarter, Khoemacau produced 11,000 tonnes of copper in concentrate, broadly in line with the same period last year and 7% higher quarter-on-quarter. Ore processed was lower due to earlier delays in development mining and equipment supply. As new equipment is progressively commissioned and development work continues, ore availability is expected to improve in Q2 or in the second half. Mining has also advanced into the higher-grade Zone 5 area. During the quarter, head grade remained above 1.6% and concentrator recovery stayed above 88%, providing solid support for production. Cost performance continued to improve. First half actual C1 costs were USD 1.25 per pound. Reflecting this performance, the company has lowered full year cost guidance to USD 1.7 to USD 2 per pound, while maintaining production guidance at 48,000 to 53,000 tonnes. Expansion work is progressing as planned. First copper concentrate from Phase 2 is expected in the first half of 2028. Once completed, annual production capacity is expected to rise from approximately 50,000 tonnes today to 130,000 tonnes, while life of mine average C1 costs are expected to fall below USD 1.6 per pound. In parallel, the company has started the pre-feasibility study for Phase 3, which targets annual production of 200,000 tonnes and will further expand the asset's long-term growth potential. In summary, each of our 3 copper mines plays a distinct and vital role. Las Bambas provides stable cash flow. Kinsevere is starting to unlock the value of its expansion and Khoemacau offers substantial future growth potential. Together, these core copper assets are driving sustained growth in production, positioning MMG to steadily advance toward its strategic goal of becoming one of the world's top 10 copper producers. Turning now to zinc business, Dugald River. In Q2, Dugald River produced 46,000 tonnes of zinc in concentrate, up 6% year-on-year. With concentrator recovery consistently above 90%, mining and processing activities were broadly in line with plan, operations remained stable. As the impact of first quarter weather events on logistics gradually eased, concentrate transportation and shipments normalized in Q2, previously accumulated inventory was released effectively and quarterly sales exceeded production. Higher grades and improved recovery also drove strong byproduct performance with lead and silver production increasing 53% and 63% year-on-year, respectively, further strengthening the mine's earnings contribution. For the full year, Dugald River remains on track to produce 170,000 to 180,000 tonnes of zinc in concentrate. On cost, stronger silver prices, higher lead and silver output and lower zinc treatment charges supported the first half actual C1 cost of USD 0.6 per pound of zinc, well below the full year guidance range of USD 0.8 to USD 0.95 per pound. The company will continue to monitor silver prices and adjust full year cost guidance as appropriate. Turning to Rosebery. Rosebery continues to benefit from its polymetallic resource base. Second quarter zinc equivalent production reached 34,000 tonnes up 7% quarter-on-quarter. Zinc output was lower year-on-year due to mine sequencing, but the site continued to optimize product mix and byproduct value through its zinc equivalent production strategy. Higher precious metal grades also supported strong byproduct performance with silver and gold production increasing 36% and 9% year-on-year, respectively. Higher precious metal output and stronger prices supported first half actual C1 cost of negative USD 2.23 per pound of zinc. Reflecting this performance, the company has lowered full year cost guidance from negative USD 0.6 to negative USD 0.1 per pound to negative USD 1.5 to negative USD 1 per pound. With continued contribution from precious metals, Rosebery remains on track to achieve full year zinc equivalent production of 125,000 to 140,000 tonnes. Overall, Dugald River continues to deliver stable operations and cost advantages, while Rosebery is realizing further value from polymetallic exposure. Together, the 2 zinc mines provide resilient cash flow and support the company's profitability and cost competitiveness. Now I would like to briefly discuss the company's recent corporate developments. During Q2, the company achieved significant milestone in the capital markets. In June 2026, with strong investor support, we completed a new share placement and issued 0 coupon convertible bonds at premium, raising approximately USD 1.6 billion in net proceeds. Despite the challenging market environment, the transaction was well oversubscribed, reflecting investor confidence in the company's strong fundamentals and promising growth outlook. The proceeds from this transaction will primarily be used to repay higher cost debt and support expansion at our core mines, whilst also building up our financial capacity for future growth initiatives. The capital raise allowed us to reduce our interest expense, increase cash flows and provide us with greater flexibility in how we execute our organic growth expansion. As a result, the company's financial resilience has been significantly strengthened, laying more solid foundation for future growth. However, funding is only the enabler to a clear and actionable growth strategy. Looking ahead, our priorities are centered on 3 key areas: operational improvement, project delivery and resource growth. MMG will account for the majority of Minmetals announced 1 million tonnes of annual copper production by 2030. This production target will be driven by 3 key factors: ongoing optimization of existing operations, capacity expansions from projects currently under construction and the development of untapped resource potential in regions like Botswana. Each of these drivers is supported by well-defined projects, ensuring that our growth is firmly rooted in execution rather than mere ambition. We're also focused on positioning the company for long-term success. The value of a mining company is driven not only by its current production, but also by the resources it secures for the future. As such, we'll continue to intensify exploration efforts and actively assess external M&A opportunities to support sustained long-term growth. In summary, our goal is to maximize the value of our existing assets while laying a solid foundation for future expansion. Thank you. This concludes my presentation. Next, we will address any questions you may have and engage in further discussion. I'll hand back to the operator to begin the Q&A session.

[Interpreted] [Operator Instructions] Jack from Citi.

[Interpreted] Okay. I am Jack from Citi. First of all, congratulations on the very good operating results during the first half. Mr. Zhao, Mr. Chen, I have 4 questions. First question, I will go through the questions one by one. The one -- the first is about Las Bambas. In the first half, production volume exceeded expectation. So my question is, in the second half, do you think production volume can be kept at the first half level? So that is a very simple question. You will expect that for the whole year, for the whole year production volume, will there be the possibility of upward adjustment? Second question also about Las Bambas. So according to our understanding, the company had achieved quite low C1 cost. To a large extent, this is because of byproduct and price. Apart from that, are there other factors? Because in the first half, operating price had declined a bit. Actually, the decline is quite apparent. So apart from that factor, are there other operating factors so that Las Bambas cost is kept at low level. So these are the questions about Las Bambas.

[Interpreted] Okay. Thank you, Jack, for your questions. We will ask Mr. Chen to answer the question, please.

[Interpreted] Okay. Thank you, Jack, for the question. So for production volume, well, for our production volume, so it is based on the mining, sequencing, mining or ore grade and also nature of the ore. So there will be volatility. So we have to continue to optimize our ore processing, our mining and also equipment, the synergy coordination among different equipment in order to maintain this level. In the second half, our volume, as Mr. Zhao said just now, will be maintained as our guidance. However, we will try our best to achieve the upper range of the guidance. Secondly, regarding cost control, your observation is very detailed. Operating price showed volatility, but our costs performed very well. The main reason is that in our daily work, we have reinforced our control of production costs, and we have achieved some good results. Looking into the future, cost control will continue to be stable. There will be also some impacts from diesel. However, the impact is not big. So with diesel suppliers, we have negotiated on a new price mechanism. So the main purpose is to achieve risk sharing and also benefit sharing. So we want to be able to truly reflect changes in the market. So as just said, we want to be able to lower our C1 cost.

My second question is about Kinsevere. So we realized that in Q2, C1 costs on a quarter-on-quarter basis rose. What are the reasons behind? Is it because of the cost of sulfur, which has risen? So for Kinsevere in the second half, what would be the cost trend, please? And in Kinsevere, when it comes to energy and sulfur, sulfate costs, how will it be?

So okay, we will ask Mr. Qian to take the question.

Okay. Thank you, investor. Thank you. So for Kinsevere in the first half, C1 cost was USD 2.96 per pound. So in Q2, comparing with Q1, costs had risen. This is mainly because of cost increase of sulfate and diesel. However, for the whole year cost guidance will be within USD 2.5 to USD 2.9 per pound. So in the second half, when we ramp up and production volume increases, our cost will come down. Regarding sulfate and diesel, well, there will be some impact to cost, but not a big impact. So in Q2, for stability of electricity, well, grid power can reach 90%, diesel power generation 10%. So in other words, the use of diesel does not cause big impact to us. At the same time, when it comes to sulfuric acid, so when our roasting and also plants ramped up, then there would also be bigger production volume. Production volume every day is risen. So after that, our self-produced sulfuric acid can supply for like 50% to 80% of our need. So it can be digested ourselves. So only 20% will have to be bought from the market. So overall cost impact is not very big.

[Interpreted] Third question, Troy, I will ask in English. So Troy, can you give us an update on the Peruvian presidential election and its potential impact on operations at Las Bambas, please?

Thanks for the question, Jack. We have the new President inaugurated on the 28th of July, which is Peru Independence Day. And so we're looking forward to working with the new government. But as always, it's the last couple of years, as Ivo said, the last 3 years have been very successful in terms of operation and stability, and that has been through what was a difficult time politically in Peru. We're seeing a much more stable period ahead in terms of the new Fujiwara government. We will continue to work with communities, with government. We are in very active negotiations with a number of the communities. Logistics aside from some regular kind of day-to-day challenges have generally been working very, very well. And we see the stability of the Peruvian landscape probably being slightly better than it has been previous years. But also there are many challenges ahead for us to manage. I think the important thing from -- for us is that over the last 10 years or so, which has been one of the more difficult times in terms of Peruvian stability, we've continued to operate very well. And so we're looking ahead. We're very confident we have -- we'll build relationships with the new ministry, which will be announced soon, and we look forward to continuing another couple of years of very stable operations at Las Bambas.

Great work at Las Bambas. My last question is also regarding to -- my last question is regarding the progress on the Brazilian nickel asset acquisition. Can you also give us an update on that?

[Interpreted] We will ask Ms. Guan to take this question.

[Interpreted] Okay. Thank you. Jack, regarding Nickel Brazil acquisition, now we are in the process of getting EU's approval. So well, the transaction date has been extended to 31st October up till now. The documents required by EU had already been submitted. So we hope that EU can very quickly start approval of the project. And we hope that within the year, this deal or transaction can be closed.

[Interpreted] Lawrence of BOCI.

[Interpreted] Can you hear me?

[Interpreted] Yes, you are very clear.

[Interpreted] Mr. Zhao, I have a question. So looking at Las Bambas in Q2, precious metal byproduct production volume is significantly lower than in Q1. So why is that so? In the future, so for example, this year and thereafter, when it comes to precious metal byproduct from this mine, how will it be?

[Interpreted] Okay. Lawrence, thank you for your question. Let me take your question. Regarding the decline in operation quality, it is mainly because of mining sequencing and also structure of processed ore. So we have Ferrobamba and Chalcobamba in Q2 and then the ore processed volume is lower than in Q1. For Ferrobamba, the grade of operation is higher. So as a result, the overall operating quality has come down from the previous quarter. Now we are talking about byproducts. They are not the main products. So the production volume is based on our processing or mining sequencing and also the ore grade and so on. Because of these changes, these are within normal range. They are fluctuations within certain stage, and it doesn't represent a long-term trend. Thank you. I hope I have answered your question.