MMG Limited (1208) Earnings Call Transcript & Summary

[Interpreted] Good day, everyone. Welcome to MMG's 2026 Interim Results Investor Webcast. [Operator Instructions] I will now hand over to Godfrey Guo Yu, Chief of Staff of the company.

[Interpreted] Good day, investors and analysts. Welcome to MMG's 2026 Interim Results Investor Webcast. You are joined today by members of the company's Executive Committee, including Mr. Jing Zhao, CEO and Executive Director; Mr. Song Qian, CFO and Executive Director; Mr. Troy Hey, Executive General Manager, Corporate Relations; Mr. Nan Wang, COO; Ms. Xiangjun Guan, Interim Executive General Manager, Commercial and Development; Mr. Weiquan Xia, President of Africa Operations; and Mr. Xuesong Chen, President of Las Bambas. Please take a moment to note the disclaimer on the screen. This presentation should be read together with the company's interim results announcement for the 6 months ended 30th June 2026, released on 11th August 2026. The presentation contains forward-looking statements that are subject to risks and uncertainties, and actual outcomes may differ from those statements. So we will start today's presentation. Today, we will cover the company's overall performance for the first half of 2026, our financial results and our strategy and outlook. In addition, following a very strong period of resource growth, we will also provide a dedicated update on our latest resource growth results and what they mean for MMG's future development. The management team will take questions after the presentation. I will now invite our CEO, Mr. Ivo Jing Zhao, to begin.

[Interpreted] Thank you, Godfrey, and welcome, everyone, to today's results presentation. In the first half of 2026, MMG remained focused on safety, operational stability and growth. We continued to advance stable production across our mines, progress key projects and improve costs while delivering a record interim results. I'll begin with an overview of our performance for the first half. As always, I would like to start with safety. Safety is MMG's most important value and the foundation of everything we do. No matter the market environment or stage of growth, there is no trade-off between safety and results. In the first half of 2026, our safety performance improved compared with the same period last year. Our significant event frequency with energy exchange was approximately 0.6 per million hours worked. Total recordable injury frequency was approximately 2.1 per million hours worked. At the same time, we recognize that every incident matters to the individual, their family and their team. In the second half, we'll continue to strengthen visible safety leadership, deepen critical risk management, particularly for vehicles and mobile equipment, embed safety more deeply into planning and execution and further improve contractor safety management. Our goal remains unchanged. Every employee and contractor must go home safely. This is a core responsibility of management and our most important commitment to our people, their families and the communities where we operate. Let me first share the company's overall performance for the first half. What stands out is that while maintaining safety and operational stability, MMG delivered record operational and financial performance and further strengthened its capacity for future growth. Revenue reached USD 4.54 billion. Profit after tax was USD 1.37 billion, including close to USD 900 million attributable to equity holders of the company. Operating cash flow exceeded USD 2.2 billion with profitability and cash generation both substantially stronger. Operationally, copper production reached 267,000 tonnes, the highest first half level in nearly 8 years. Our major operations remained steady and continue to progress towards full year production targets. At the same time, stronger contributions from byproducts such as gold and silver further supported earnings quality and cost competitiveness. These results reflect a higher quality operating performance. They also strengthen our balance sheet, support our project pipeline and reinforce the platform for long-term sustainable value creation. In summary, there are 4 areas from the first half that I would highlight. First, our operating foundation is stronger. Our mines continued to perform well overall. Las Bambas continued to demonstrate its scale, cost and cash flow strength. Kinsevere continues to ramp up its expansion project and release benefits. Khoemacau's operating performance improved, while our 2 Australian operations further enhanced profitability through operational excellence and their multimetal advantage. Second, our financial position has improved significantly. Strong operating cash flow together with approximately USD 1.6 billion financing completed in June, further improved liquidity and capital allocation flexibility. With net debt significantly reduced, we now have a stronger balance sheet, greater funding capacity and more strategic flexibility. Third, our copper growth pathway is becoming clearer. The Khoemacau 130,000 tonne expansion is progressing steadily, and we are also actively evaluating the longer-term pathway to 200,000 tonnes. The significant resource growth achieved this year further expands our development options and provides a stronger foundation for future production growth and value creation. Fourth, we are building MMG for the future. By advancing remote operations, automation, electrification and digital platforms and by scaling proven technologies across our global assets, we're improving safety, efficiency and sustainability and strengthening the company's long-term competitiveness. Overall, the first half was not only about record financial results. More importantly, we strengthened our operating base, improved our financial capacity and created more opportunities for future growth. Looking ahead, we believe the energy transition, electrification, digitalization and new forms of infrastructure will continue to drive long-term demand for critical minerals. The metals we produce, including copper, zinc, gold, silver, molybdenum, nickel and cobalt are fundamental to these trends. They are used in power and data infrastructure, renewable energy, battery storage and advanced manufacturing. This is an important reason why we remain confident in the long-term outlook for our industry. MMG's value is not based on a single commodity. It is supported by a diversified metals portfolio that underpins energy transition and modern industrial development. As the Nickel Brazil transaction progresses, our future-facing metals portfolio will be further strengthened. Against this long-term backdrop, regarding our growth strategy, it is focused on increasing asset value and unlocking growth potential from a stable operating base. In copper, Las Bambas has operated stably for more than 3 years and remains a key pillar of cash flow and earnings. Kinsevere continues to release benefits from its expansion. The Khoemacau Phase 2 expansion is under construction and will lift copper production capacity to 130,000 tonnes per year. We're also assessing the longer-term pathway to 200,000 tonnes. In zinc, Dugald River and Rosebery are more than zinc assets. Contributions from gold, silver, copper and lead byproducts continue to improve profitability and cost competitiveness, allowing us to create more value from each tonne of ore. Beyond organic growth, we'll continue to expand our opportunity sets through exploration, development stage investments, innovation-led improvements and disciplined acquisitions while maintaining capital discipline. Growth depends not only on high-quality resources, but also on our ability to keep improving how we operate. Technology and innovation are not separate from operations. They are practical tools to improve safety, efficiency and long-term competitiveness. In recent years, we have continued to advance remote operations, automation, electrification and digitalization. The Las Bambas remote operations center, the Dugald River digital twin, electric equipment trials and green energy projects are all practical examples of this strategy. Through these investments, we aim to operate more safely, more efficiently and with a lower carbon footprint while replicating proven practices across our global asset base. Regarding community and sustainability, growth also depends on long-term trust with communities, governments and other stakeholders. We believe stable operations create more than production and financial returns. They also support employment, education, health care, infrastructure and community capability. Over the past year, MMG continued to invest in communities across our operating regions, covering areas such as poverty reduction, health and well-being, education and access to clean water. Community investment exceeded USD 60 million with Las Bambas accounting for the majority. These investments support local development and also provide the foundation for long-term operational stability. We'll continue to operate responsibly and create shared value in a stable, transparent and sustainable way. Looking ahead, our vision is to become a leading international mining company for a low-carbon future. To achieve this, we're focused on 3 layers of growth. First, we'll continue to increase the value and competitiveness of our existing assets through operational improvement, capital discipline and technology innovation, improving safety, efficiency, cost and cash flow. Second, we'll drive organic growth around our existing regions and core commodities, particularly copper through expansions, optimization and exploration-led resource growth. Third, within an appropriate risk framework, we'll position the company in new regions and future-facing metals using development projects and quality acquisitions to preserve long-term growth options. Through this pathway, MMG will continue to play an important role as China Minmetals overseas mining platform and contribute to the China Minmetals strategic target of reaching 1 million tonnes of copper production by 2030. Delivering these goals require stronger earnings, cash flow and balance sheet capacity. I will now invite our CFO, Ms. Song Qian, to present the company's financial results.

[Interpreted] Thank you, Ivo. In the first half of 2026, MMG delivered a record interim result. Operational improvements, higher sales volumes and stronger prices for key metals supported record first half financial metrics. Revenue increased 61% to USD 4.54 billion. EBITDA reached USD 2.73 billion with EBITDA margin rising to 60%. Profit attributable to equity holders was approximately USD 900 million, up 164%. Net operating cash flow reached USD 2.23 billion, up 89%. At the same time, net debt fell to USD 610 million and gearing reduced from 33% to 6%. Overall, profitability, cash generation and the balance sheet all improved materially, providing a strong platform for the next phase of growth. Revenue growth was driven by 2 main factors. First, prices for major products, including copper, gold and silver remained at strong levels. Second, our operations remained stable and sales volumes improved, amplifying the benefits of higher prices. Copper remains our most important source of revenue and cash flow. At the same time, higher contributions from gold, silver and molybdenum byproducts improved earnings quality and added resilience to the portfolio. Higher earnings translated into stronger cash flow. In the first half, operating activities generated USD 2.23 billion of cash inflow, reflecting significantly stronger cash generation. We also completed a financing transaction, further improving liquidity and financial flexibility, while continuing to support existing operations and growth projects, we increased our cash position and strengthened our capacity to fund future developments. Looking at the individual operations, I will start with Las Bambas. Copper production reached 210,000 tonnes in the first half and full year production guidance remains at 380,000 to 400,000 tonnes. Ferrobamba and Chalcobamba were mined at an integrated manner, supporting stable grades and recoveries. Increased contributions from precious metals and molybdenum byproducts further improved operating performance. Las Bambas delivered revenue of USD 3.31 billion, up 65% with an EBITDA margin of 68%. Three consecutive years of stable operations, together with a high-quality resource base and a strong cost position mean Las Bambas remains MMG's most important source of earnings and cash flow. Kinsevere is moving into a phase of capacity release as the KEP project continues to ramp up. Copper production reached 34,000 tonnes in the first half, up 33% year-on-year. Mining volumes and throughput both improved significantly. Power reliability continued to improve and the battery energy storage system expected in the fourth quarter should further strengthen power security. With higher production and improved operations, revenue increased 70% to USD 398 million, and EBITDA was 4x the prior year level. As ramp-up continues and operational improvements take effect, the mine still has meaningful upside. Khoemacau produced 22,000 tonnes of copper in the first half. The mine continued to progress equipment mobilization and underground development. Stable supply of high-grade ore from Zone 5 supported improving head grades. EBITDA was approximately USD 120 million, up 35%. At the same time, the 130,000 tonne expansion remains on track with first copper concentrate targeted for the first half of 2028. As the expansion is delivered, Khoemacau will become an important engine of future copper growth for MMG. Dugald River. Despite weather impacts early in the year, Dugald River returned to normal operating and logistics rhythm in the second quarter. Zinc production reached 87,000 tonnes, up 3%. Higher throughputs and zinc recovery above 90% helped offset lower grades. Supported by higher byproduct volumes and stronger zinc and silver prices, Dugald River again demonstrated strong operational resilience and cash generation. Revenue increased 50% to USD 340 million and EBITDA rose 92% to approximately USD 130 million. Finally, Rosebery. Zinc production declined 21% to 19,000 tonnes, reflecting lower grades in the deeper ore body. However, on a zinc equivalent basis, production increased 3%, demonstrating the strength of Rosebery's multimetal operating model. Higher silver and gold production, together with stronger metal prices significantly increased byproduct credits. Revenue increased 73% to USD 244 million, and EBITDA reached USD 130 million. Rosebery once again showed that a multimetal portfolio can continue to create value across different market conditions. In addition to improved earnings, our balance sheet was also strengthened. At the end of the first half, total borrowings were approximately USD 2.57 billion, and net debt had fallen to USD 610 million. In June, we completed approximately USD 1.6 billion of financing, which will be used to refinance existing loans and is expected to save approximately USD 30 million to USD 40 million of interest expense per year. This transaction further optimized our capital structure, improved liquidity and created additional capacity for future growth. With significantly stronger operating cash flow, a much stronger balance sheet and an expanding set of growth opportunities, we believe it is important to provide greater clarity on our capital allocation principles and priorities. At MMG capital allocation is ultimately about creating long-term value. On one hand, we continue to strengthen operating cash flow through our portfolio of high-quality, cost-competitive assets. At the same time, our diversified funding sources enhance financial flexibility and provide capacity to support future growth. Our capital allocation framework is built around 5 priorities. First, maintaining our existing operations. We'll continue to invest in sustaining capital, safety and asset reliability to ensure our operations remain safe, stable and reliable. This is the foundation of long-term value creation, consistent production and sustainable cash generation. Second, meeting our financing obligations and maintaining strong balance sheet. Over recent years, we have significantly reduced net debt and strengthened our financial position. Today, our balance sheet provides strong support for future investment while enhancing our ability to navigate commodity cycles and capture new opportunities. Third, supporting growth. We will prioritize high-quality growth opportunities, including brownfield expansions, resource growth through exploration and investment opportunities that align with our strategic direction and create long-term value. Together, these initiatives will continue to grow MMG's resource base and future production capacity in a low-carbon future. Fourth, technology and innovation through digitalization, automation and smarter mining operations, we will continue to improve safety, sustainability, productivity, efficiency and cost performance, strengthening the long-term competitiveness of our business. Fifth, shareholder returns. We'll progressively establish a sustainable approach to shareholder returns, allowing shareholders to share in the benefits of MMG's future growth. From a capital allocation perspective, MMG is in the strongest financial position it has been in for more than a decade. We have a significantly stronger balance sheet and are generating cash flow at levels we have not seen for many years. With the strong support of our major shareholder, China Minmetals, we also have the capability to execute our projects and deliver on our growth ambitions. Looking ahead, we do not see growth and shareholder returns as a trade-off. Supported by our strong balance sheet and growing cash generation, we believe MMG is well positioned to pursue both. Supported by our strong balance sheet and growing cash generation, we believe we can continue to invest for growth while progressively establishing a sustainable shareholder return framework, allowing shareholders to share in the benefits of MMG's future growth. We believe disciplined capital allocation, a strong balance sheet and a clear growth pathway will provide the foundation for sustainable long-term value creation. I will now hand back to Ivo.

Thank you, Mr. Qian. For a mining company, resources shape both today's performance and tomorrow's potential. This year, MMG achieved significant growth in its resource base. This reflects the results of sustained exploration investment over recent years and further strengthens our long-term growth potential. Let me now take you through the latest resource and reserve update. As of 30th June 2026, after depletion, mineral resources increased across all reported metals. Copper mineral resources reached approximately 20 million tonnes of contained metal, up 7%, with net increase of about 1.4 million tonnes. This marks the third consecutive year of copper mineral resource growth for MMG. Zinc, silver, gold, lead, molybdenum and cobalt resources are also increased. In all resources, copper, zinc, silver, gold and molybdenum all increased, demonstrating our ability to convert resource growth into future mineable value. The most important point on this slide is the approximately 1.4 million tonnes of newly added copper resources. That is equivalent to more than 10 years of production from a 100,000 tonne per year copper operation. Importantly, this growth was primarily generated through our own sustained exploration and resource evaluation work. It demonstrates our ability to create value through exploration and to support growth through resources. MMG's resource base spans South America, Africa, Australia and North America, giving us a global and diversified resource portfolio. The standout achievement this year was the maiden mineral resource for the Kgwebe copper-silver deposit at Khoemacau in Botswana. Kgwebe contains about 1.4 million tonnes of copper and 90 million ounces of silver, significantly enhancing Khoemacau's long-term growth potential. At the same time, the Izok Corridor project in Canada reported a maiden mineral resource for the High Lake East deposit, adding a new resource base for future development. In Australia, the Hercules deposit at Rosebery was returned to the mineral resource for the first time since 2015, further supporting a longer operating future for the mine. These results show that we can continue to increase the value of our existing assets while also discovering and developing new growth opportunities. Resource growth does not happen by chance. It is the result of sustained investment over time. Over recent years, MMG has increased exploration expenditure from USD 19.1 million in 2020 to USD 102 million in 2025, with a further USD 56.3 million spent in the first half of 2026. This investment is creating value in 3 ways. First, it is creating value beyond our original expectations within existing assets. Khoemacau is a good example. Since acquisition, sustained exploration has added approximately 2.2 million tonnes of copper resources and 124 million ounces of silver resources, significantly exceeding the original acquisition assumptions. This has materially enhanced the value of the asset and strengthened its future expansion for long-term growth potential. Second, it is extending mine life. The return of the Hercules deposit to the Rosebery mineral resource provides additional support for decades of future operations. Third, Well, this year, we are celebrating the 90th anniversary of the Rosebery mine. Third, it is building the next generation of growth opportunities. The maiden resources at Kgwebe and High Lake East, together with high-grade drilling results at Wongaroo near Dugald River show there remains significant exploration potential around our existing assets. Looking ahead, we'll continue to pursue a value-led exploration strategy, linking resource growth, reserve conversion and project development more closely and turning resource potential into growth and long-term value. This final slide summarizes the latest resources and reserves across our major assets. From a portfolio perspective, Las Bambas remains our largest core asset and our strongest source of cash flow. Khoemacau has further strengthened its long-term growth potential through the Kgwebe discovery and the progress of the expansion project. Our Australian assets continue to provide a stable multimetal resource base, while Kinsevere and Izok corridor provide important future options for the company. Overall, in the first half 2026, MMG not only delivered record operating and financial performance, we also further strengthened our future growth capacity. We improved safety performance, maintained stable operations, strengthened balance sheet, advanced key projects and delivered significant resource growth. Resources shape both today and tomorrow. A third consecutive year of copper resource growth, together with a series of new discoveries gives us confidence in MMG's long-term outlook. In the second half, we will remain focused on disciplined execution and delivery of our full year targets. With a stronger balance sheet, a richer resource base and a clearer growth pathway, we'll continue to create long-term sustainable value for shareholders. Thank you. This concludes our presentation. We will now move to Q&A.

[Operator Instructions] Chris of Balyasny.

[Interpreted] Can you hear me?

[Interpreted] Yes, you are very clear.

[Interpreted] Okay. First of all, congratulations, management, for the very good results for the first half. I have 2 questions. First, regarding dividend. Just now, Mr. Qian said that in the future, dividend is going to be sustainable. So in the future, regarding dividend, company management is more inclined towards a fixed dividend ratio. And then every year, concerning the actual dividend, it is going to fluctuate according to results. Is this the way? Or are you going to set a fixed arrangement? So every year, the dividend will not be lower than last year. So it is going to be a progressive dividend. So that's my first question.

[Interpreted] Mr. Qian, please?

[Interpreted] Thank you, Chris. I have heard your 2 suggestions. They are very good suggestions. So as you said, now we are working on solving some technical obstacles. Last year, there was the $500-odd million retained loss. And this year, in our report, we already said that in July, Las Bambas received the first dividend. And this had effectively lower the retained loss to a certain level. So it has been reduced by about $400 million -- it is now at $400 million. So in the second half, we'll continue this work. We'll make further improvements. Within the year, our target is that within this year, if we can -- we hope to overcome the technical obstacle. After that, on that foundation, we will see what dividend capability we have so that we can deliver good returns to shareholders. As we disclosed just now, we have already decided on this. So we would like to achieve our company's growth as well as shareholder returns at the same time.

[Interpreted] My second question is also about finances. In the first half, CapEx was around USD 550 million. For the whole year guidance is about USD 1.6 billion to USD 1.7 billion. So now we are already in mid of August. So regarding CapEx progress, how is it like? Are you really going to spend this much, USD 1.6 billion to USD 1.7 billion for the whole year?

[Interpreted] Yes, Chris. At the beginning of the year, we made that estimate. Well, CapEx of various mines are in accordance with our plan, and they progress gradually. For Las Bambas, many projects have to wait until Q3, Q4 to reach the peak. So there is no change to our annual plan.

[Interpreted] Next, Jimmy of Citi.

[Interpreted] Mr. Tian, Mr. Chen, leaders. I am Jimmy from Citi. First of all, congratulations on your very good first half results. Looking at your balance sheet, it is improving. So I have several questions. I will ask them one by one. My first question is about Kinsevere. So the C1 cost of Kinsevere in Q1 comparing with Q2 increased quite a lot. So for Q2 and Q1, can you explain the factors behind this increase and give us a breakdown. Full year guidance is $2.5 billion to $2.9 billion in the first half -- $2.96 billion. So is it true that for the second half, there would be a decline expectation? So for this full year guidance, so what kind of sulfuric acid price and diesel price is it based on? So how are the prices right now in the second half, what are the factors leading to the decline in C1 cost? That's my first question.

[Interpreted] Thank you, Jimmy, for your question. We will ask Mr. Xia to answer the question.

[Interpreted] Okay. For Kinsevere, in Q2 cost comparing with Q1 increased significantly. This is because of the impact from the Middle East war. So for diesel and sulfuric acid, the price was pushed up. And then regarding explosives, that's another factor, leading to a higher cost within our guidance range, higher than our guidance range. So for the price estimate, well, last year, diesel price was around $1.5 to $1.7. Now it is being adjusted by the government to about $3.15. Sulfuric acid at the beginning of the year, the budget was about $300, and now it is already $1,000 per ton. So our guidance range did not change because in the second half of the year, so when Middle East war came to an end and also, we are also bringing in energy storage, battery energy storage system. So that will reduce our diesel consumption for sulfuric acid. So we -- when we increase production and our TMO system is in place, then sulfuric acid production capacity will be enhanced, referring to our roasting system. So we have maintained the price at the beginning -- at the guidance set at the beginning of the year.

[Interpreted] Second question is about subsequent acquisition. Now reading -- looking at your balance sheet for this half year is very healthy. Gearing is down to 6%. And then your reserve has turned positive already in your statements. So concerning cash allocation, dividend payments and acquisitions, what is your guidance and direction for Nickel Brazil acquisition, is there any update?

[Interpreted] Ms. Qian. Let me answer the question on Nickel Brazil. Right now, it is still in the approval process by EU and all the documents required by EU had been submitted by us already. Subsequently, I believe that in the process, EU will continue to scrutinize information from us. And according to that process, in the future, in the coming 2 to 3 months, so they should be able to complete their scrutiny and their vetting within the specified time. So we will work with our counterparty, and we hope to complete the EU approval and settlement as soon as possible. So when it comes to our preparation apart from EU, all the other administrative approval has been obtained and our capital is in place. So once EU approval is completed, then we can very quickly complete settlement of the project. That's the first question. Second question is about use of funds. Just now, Mr. Qian already commented, overall speaking, we will strike a balance between shareholder returns and our company's business development. Regarding business development and future business growth, there is no way we can give a timetable. However, some time ago, when we communicated with investors from our company's strategy point of view, we are a growth style company. We'll continue to explore different pathways of development, including M&A. And for M&A, that would include projects in production and also greenfield projects or early-stage projects. So we are still examining all these targets. So far, there is not a definite timetable. If there is concrete progress, we will disclose to the market.

[Interpreted] My last question is about Las Bambas community. So, Troy my question is for you. Happy to see stable operations of Las Bambas in South America for over 3 years. It benefits from the significant improvement in social community relations in overseas. We know that MMG has mines in various countries. And could you share the experience in relationship management for community and other stakeholders in various regions? In addition, could you introduce the progress and the achievements in ESG field in recent years?

Thank you for the question, Jimmy. And I think we've learned so much at Las Bambas since 2014 when we took over around the way we approach community, how we build relationships and our approach. And we're applying that increasingly to our operations in other countries. I think there is no doubt Las Bambas is one of the greatest challenges in global mining in terms of sharing benefits and involving community in that complex operation. And we've learned a lot from looking to others, but also from the team we've built there. And now we are applying those approaches around the world and particularly in Khoemacau, which is our next biggest challenge in terms of expanding that operation in a new country. And I think what we call the Corazón Las Bambas project around building benefits for the country, for the community, for all stakeholders around our development, we are applying those principles at Khoemacau now, and we really look forward to working with both communities, government of Botswana and others to make that model work. That goes to our sustainability practices generally. If you look at the way the world of sustainability is moving in mining, it is becoming increasingly demanding at an asset and at a national -- at an international level around how we comply with all of the requirements of accreditation, whether that's tailings, whether that's compliance to international transparency, whether that's the geopolitical challenges of moving in a critical minerals world and investing in countries. And MMG's position since its birth as an ICMM member has always been to do and to be at the benchmark, if not leading in terms of how we approach all aspects of sustainability management. That is even more relevant now because governments communities are looking at how projects are developed and how they participate in the benefits more than they ever have and including looking at how benefits are kept in country, including beneficiation and downstream benefits. And so while we've come a long way in the years of MMG's existence, we also know that the expectations are rising all the time. And we can see that in our group and in how we resource and how we approach all of the operations in the countries. And we would say that I think when we look at the partners we will need to work with in the future, MMG is really well positioned now, but we have a huge both compliance and relationship management challenge to keep working. And we have full support from China Minmetals as our major shareholder and from the Board and management of MMG to make this work. And we know that, that is a critical enabler for us as a company to be successful in the future. So thanks for the question, Jimmy.

[Interpreted] Can you please state your name and your organization.

Can you hear me?

Yes, very clear. Please.

It's Hagen Bahnemann from Mercury RC. Apologies, I've logged in from my personal account. I couldn't update the profile name. Congratulations on a fantastic financial result. I just had a couple of questions. One was where does the management team see the largest opportunities for efficiency and productivity coming from in the mining and processing activities over the next 12 months?

Okay. Yes, thanks, Hagen. Just a good question. Nan, would you like to take the question?

Yes, Hagen, this is Nan here. Thank you for the question. I guess as a mining company, the fundamental is our safety and safety is the foundation of our operations. And then that will ensure the continuity and the safety of our operations and then also our people. Secondly, in terms of mining efficiency is in terms of our cost and then the mining productivity, mining rate and then how we leverage our existing equipment capacities to maximize the production. So in terms of resource, we want to look at sort of high-quality resources to support our production and then support our long-term sustainability of the operation. So the stability and then gradually improve our productivity, I think that's our focus.

Right. Okay. And then the second question was just in relation to Dugald River zinc mine and understand that there's been some growth in copper resources at the site. Is there any time line -- is that meaningful? And if it is meaningful, is there any time line around changes in mining activities to take advantage of that? And if there is, will that require significant changes or capital for -- to the processing facilities?

Yes. Thank you. I'll continue to answer that question, Hagen. In terms of that Wongaroo, the copper target was very significant for Dugald River as a zinc mine. So that really diversified our view from zinc. At this stage, we can see a high-grade ore and then with some surrounding materials. So the geological feature is different from our zinc structure there. So we still need a fair bit of analysis to understand that particular target and an ore body. And then right now, so we'll do some background analysis and then also further drilling. Hopefully, in the near future, we'll bring that into our resource book. And then after that, there is further studies and then look at what will be the best value proposition for Dugald and then maybe sort of some synergy between copper and zinc.

[Interpreted] Next question is from Miriam of Bank of America.

[Interpreted] I am Miriam from Bank of America. Congratulations on your excellent results. From the perspective of cash flow, balance sheet and also profits, we have seen your growth. I have several questions. First, for Las Bambas, in July, you talked about your operations and you also discussed with us the guidance. So in the first half, regarding copper production volume, it reached 52% for the whole year. And for C1 cost in the first half is $0.55. Now if we look into the second half and compare it with the first half for production volume, so do you think it will stay at the level in the first half? And then the next point is about Ferrobamba and Chalcobamba -- or would there be other factors that may affect production volume? And then for C1 cost, if we exclude the impact of byproduct cost, if we look at the other costs in the second half of the year, do you think you will be able to maintain the level in the first half of the year? My second question is we have seen a very good growth on your part. So given that background, regarding inventory, so are you going to keep the 130,000 tonnes of reserve in 2028? And then for the Canada project, will there be further progress? My third question is regarding finances. Do you have plan for financing and for interest for interest rate, after this year and last year financing, financial interest expenses came down. So do you have any assessment of the room of decline in financial cost for the second half of the year? My next question is about your hedging policy. How is it like? Looking at your cash flow statement, there is a hedging outflow of $220 million. So are you going to make adjustment to your future hedging policy?

Thank you, Miriam, for your questions. You asked many questions. We'll answer them one by one. First, about operating cost of Las Bambas. We'll ask Mr. Xia to take your question.

[Interpreted] Okay. Thank you for your questions. Regarding production volume, well, production volume will go according to the grade of the mine and also other conditions. So in the first half of the year, our performance was better than expected and our budget will continue to maintain this current condition. As said just now, according to our mining sequence, there will be changes. This year, production volume will be maintained at 380,000 to 400,000 tonnes, this guidance range. We will try our best to work towards 400,000 tonnes. Second question is about the 2 pits, Ferrobamba and Chalcobamba, the allocation of them. In the first half, Ferrobamba volume is bigger. Chalcobamba is of a lower volume. So byproduct volume is then better because Ferrobamba byproduct grade is better. In the second half, we'll make adjustment. slightly. So there will be more from Chalcobamba and less from Ferrobamba. But for the whole year, basically, they will be more or less the same. Chalcobamba, 52%; Ferrobamba, 48%. So when we look at the split between these pits, we do not look at the prevailing production. We will also look at future production. Every year, we will do a whole life cycle plan so that we can maximize the value of the whole mine. The third question is about cost. In the first half, our cost was actually very good, thanks to byproduct volume and our main product volume. In the first half, we maintained our guidance production volume. Overall speaking -- so it is close to our newly reported cost. But of course, there will be some other objective and unforeseeable factors like commodity price. So we will make use of our own management to try our best to overcome cash flow pressure. So that's the above is my answer regarding Las Bambas. Thank you.