MMG Limited (1208) Earnings Call Transcript & Summary

Good morning, everyone. Welcome to MMG's 2026 Third 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. 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.

Good morning, investors and analysts. Welcome to MMG 2026 Third Quarter Production Report Briefing. Joining us today are members of MMG's Executive Committee; Mr. Ivo 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. Sandra Guan, Interim Executive General Manager, Commercial and Development; and Mr. Xuesong Chen, President of Las Bambas. Today's briefing will have 2 parts. First, Mr. Zhao will take us through the key operating developments for the third quarter. The management team will then answer your questions. The meeting host will explain how to ask the question at the end of the presentation. Mr. Ivo Zhao, over to you.

Thank you, Godfrey. Good morning, everyone. Thank you for joining MMG's webcast. We released our third quarter production report yesterday, and I will take the detailed report as read. Rather than repeating every number, I would like to focus today on the key operating highlights, what they say about the performance of the business and how we are thinking about the company's future development. The management team and I will be pleased to take your questions afterwards. Before turning to operations, I would like to begin with safety. Safety is MMG's first value and the foundation of everything we do. Tragically, 2 employees lost their lives in an incident at Las Bambas in August. We are deeply saddened by this loss and once again extend our sincere condolences to their families, friends and colleagues. This incident is a powerful reminder that there can be no compromise when it comes to safety. We are committed to learning from what happened, taking a hard look at the weaknesses in our management practices and continuing to strengthen our safety management system. We'll keep working to improve our safety performance and our ability to identify, manage and prevent risk. In Q3, both our total recordable injury frequency and our significant energy exchange event frequency increased compared with the second quarter. We take this very seriously. Across our operations, we're strengthening the identification of material risk and encouraging more proactive reporting. We're also reinforcing frontline execution, supervision and oversight so that accountability for safety is embedded in every role and at every stage of our operations. Safety is a long-term commitment and the work is never finished. Ensuring that every person goes back safely remains our most important responsibility. Overall, MMG delivered another solid quarter. Our core assets continue to operate reliably. New capacity continued to ramp up, and our key growth projects advanced as planned. If I were to sum up the quarter in one sentence, it would be this. Our operating foundations are stronger and the business continues to build momentum. Group copper production was approximately 131,000 tonnes, up 3% year-on-year, driven primarily by higher output from Kinsevere and Khoemacau in Africa. Zinc production was 56,000 tonnes, down 5% year-on-year. Across our zinc business, operations remained broadly stable with Dugald River continuing to deliver strong grades, recoveries above 90% and consistent production. Silver production reached 2.95 million ounces, up 13% year-on-year, further increasing the contribution from byproducts. Taken together, these results highlight the strength and resilience of our diversified portfolio. Las Bambas continues to provide a strong foundation for the business, while our African growth assets are gaining momentum and increasingly contributing to MMG's future growth. Let me now take you through some of the key developments across our major operations. I will start with Las Bambas, our flagship asset and the cornerstone of the company's earnings and cash flow. Las Bambas produced more than 100,000 tonnes of copper in copper concentrate during the quarter. The operation continued to run efficiently and reliably, processing 14.28 million tonnes of ore, the second highest quarterly throughput since operations began. This once again demonstrated the team's capability to operate a world-class mine at scale. As expected under our mine plan, grades were lower during the quarter. We also saw higher levels of ore oxidation together with increased calcium and magnesium content in the ore being processed, which put some pressure in recoveries. Despite these challenges, the operation continued to perform strongly. Higher mill throughput helped offset much of the impact and supported a solid production results. Molybdenum was another highlight with production increasing by 61% year-on-year to 1,098 tonnes, supported by improved recovery. A new molybdenum flotation column is scheduled to be commissioned in Q4. This is expected to support further recovery improvements, helping us capture more value from this important byproduct and contributing positively to both cost and overall value. By the end of Q3, Las Bambas had produced more than 310,000 tonnes of copper year-to-date. Based on current operating performance, we expect full year copper production to reach around 400,000 tonnes. Cost performance has also continued to improve. Year-to-date C1 costs were USD 0.68 per pound, and we have lowered our full year C1 cost guidance to USD 0.8 to USD 1 per pound. Overall, Las Bambas continued to deliver reliable production and cash flow while demonstrating strong operating resilience and cost competitiveness. Through different commodity cycles, it has remained a cornerstone of MMG's business and an important driver of long-term value creation. Turning to Kinsevere. Copper production increased to 19,400 tonnes in Q3, up 31% year-on-year, continuing the operation's strong growth trajectory. During the quarter, operating performance continued to improve. Optimized dewatering increased equipment availability and operating time, driving a significant increase in mining activity. Ore processing volumes also increased, providing a stronger foundation for production growth. At the same time, the sulfide circuit continued to ramp up successfully and is making an increasingly important contribution to overall copper production. We also continue to strengthen the operations infrastructure. A new 12-megawatt diesel backup power system is now in service, and the battery energy storage system is scheduled to be commissioned before year-end. Together, these initiatives will further improve power reliability and support continued ramp-up of the operation. The cobalt plant resumed production in July, marking another important milestone in the ongoing development of the Kinsevere expansion project. By the end of Q3, Kinsevere had produced 53,235 tonnes of copper year-to-date. And we expect full year production to be towards the upper end of the guidance range. On cost, year-to-date C1 costs were USD 3.05 per pound, primarily reflecting higher diesel and sulfuric acid prices during the period. As a result, we have revised full year C1 cost guidance to USD 3 to USD 3.1 per pound. Next, let me turn to Khoemacau, one of MMG's most important growth assets and a key contributor to the future growth of our copper business. Copper production increased by 24% year-on-year to 11,200 tonnes in Q3, supported by higher grades and improved recoveries. Operationally, the team continues to make good progress. Underground development is advancing. Development efficiency is improving through the addition and refurbishment of mining equipment. And the paste fill plant has now been commissioned and is ramping up. Over time, this will increase mining flexibility and support more consistent production. We also reached an important milestone at Plutus. Early works for the new open pit operation were completed in September with mining expected to commence in Q4. Ahead of the 130,000 tonne expansion project, Plutus will provide an additional source of ore and help optimize the overall mine plan. By introducing open pit feed, we can give Zone 5 greater flexibility to focus on development and resource preparation, strengthening the long-term sustainability of the operation. Cost performance was another highlight. Year-to-date, C1 costs were USD 1.4 per pound, and we have lowered full year C1 cost guidance to USD 1.6 to USD 1.9 per pound. Higher grades, improved recoveries and stronger byproduct contributions all supported this performance. While we have revised full year production guidance to 43,000 to 48,000 tonnes, the operation continues to build momentum. Underground development is progressing. Plutus is moving towards production and operating performance continues to improve. Together, these factors are strengthening the platform for future growth. Importantly, the investment case for Khoemacau extends well beyond its current production profile. What excites us most is the scale of its long-term growth potential. So in the strategic agreement, joint declaration, it is stated that both parties are satisfied with the situation. And Khoemacau expansion project continues to advance and is expected to increase annual copper production capacity. So it is not only about growth in production volume and also improvement. In fact, for example, political investment environment is also being improved. Khoemacau expansion project continues to advance and is expected to increase annual copper production capacity to 130,000 tonnes. At the same time, we are progressing a pre-feasibility study for a potential expansion to 200,000 tonnes of copper per year, which now incorporates the newly discovered Kgwebe deposit. Kgwebe contains approximately 1.4 million tonnes of copper and 90 million ounces of silver in resources, further strengthening the resource base and reinforcing our confidence in Khoemacau as a long-term growth potential or platform for MMG. Stepping back, the roles of our 3 copper operations are becoming increasingly clear. Las Bambas remains the cornerstone of the business, providing strong foundation of production, earnings and cash flow. Kinsevere is continuing to build on the success of its sulfide expansion and is making growing contribution to the group. At Khoemacau resource development project execution and expansion activities are creating a powerful platform for future growth. Together, these assets combine scale growth and long-term optionality. They not only support continued development of MMG's copper business, but also give us confidence in our ability to deliver long-term growth and value creation. Now zinc operations starting with Dugald River. Dugald River produced 47,800 tonnes of zinc and zinc concentrate during Q3, broadly in line with the same period last year. The operation continued to perform strongly. Good grades and recoveries of more than 90% supported consistent production, while lead and silver production increased by 15% and 31%, respectively. In particular, silver production reached a record quarterly high for the operation. By the end of Q3, Dugald River had produced 135,000 tonnes of zinc year-to-date and remains well positioned to achieve full year production guidance of 170,000 to 180,000 tonnes. Cost performance also remains a key strength. Year-to-date, C1 costs were USD 0.52 per pound, and we have lowered full year C1 cost guidance to USD 0.7 to USD 0.85 per pound. Overall, Dugald River continues to stand out as a high-quality asset within our portfolio. Its combination of high-grade resource, consistent operating performance and growing byproduct contribution continues to support strong margins and long-term competitiveness. Turning to Rosebery. The operation produced 26,700 tonnes of zinc equivalent in Q3, down 16% year-on-year. Since July, mining plans in parts of the X-South ore body have been adjusted following seismic activity in the area, which affected zinc production during the quarter. The team is actively managing the impact through mine sequence optimization and additional development work with mining in the affected area expected to progressively resume from early 2027. While zinc production was lower, stronger contributions from higher-grade silver areas lifted silver production by 3% year-on-year. This helped partially offset impact on zinc output and once again highlighted the value of Rosebery's highly diversified polymetallic resource base. As a result, we have revised Rosebery's full year zinc and zinc equivalent production guidance. Importantly, the operation continues to deliver strong value through its byproduct credits with year-to-date C1 costs remaining at negative USD 2.18 per pound. That concludes the operating update for the third quarter. Looking ahead, we remain increasingly confident in the long-term outlook for copper and other critical metals. The global energy transition, investment in power infrastructure and the rapid development of AI are all expected to be significant drivers of demand in the years ahead. Against this backdrop, our focus remains clear. We'll continue to put safety first, drive operational excellence, strengthen cost competitiveness, advance our key growth projects with discipline and invest in expanding our resource base. What gives us confidence is not just the performance we are delivering today, but the quality of the assets we own and the opportunities we see ahead. Las Bambas continues to provide strong foundation for the business. Kinsevere is delivering next phase of growth, and Khoemacau is building a platform for even greater growth in the future. Together, these assets gives us a clear pathway to grow our copper business while maintaining operational discipline and financial strength. We remain focused on creating long-term value for shareholders by operating our assets safely and efficiently, delivering our growth projects successfully and positioning MMG to play an increasingly important role in supplying the critical metals needed for the global economy. Thank you for your time today. We look forward to continuing the conversation during the Q&A session.

[Operator Instructions] Jimmy is going to ask a question. Please state your own name and your organization. Please go ahead.

I'm from Citi. My name is Jimmy Feng. Congratulations on your good Q3 production report. I have 3 questions. So I will ask the questions one by one. First question about Las Bambas. I realized that in Q3, C1 cost is USD 0.95. So comparing with Q2, there is some increase. And of course, some is contribution from byproducts. If we exclude byproducts, then there is a 0.3% increase quarter-on-quarter. So is there any reason behind the increase after the decline in your C1 cost when it comes to Q4 cost, well, you are still cautious? So regarding Q4, so what are the reasons behind further increase from Q3? If you do not consider byproducts, then what would be the situation? So my first question is about cost.

Okay. Thank you, Jimmy, for the question. We will ask Xuesong to answer the question about Las Bambas.

Thank you for your question, Jimmy. So main factors affecting C1 are byproduct, production volume and price and also our operating efficiency. Every year, in April and May, we start a full life cycle plan updating in order to make sure that given the current situation, for example, metal price and material price, we will do a whole life cycle plan so that we can maximize value for the mine. But as you know, the ore body itself needs to have some mining sequence. So the production volume is not the same every month. As I mentioned in our production plan, so we have made a full year projection for the whole life cycle plan in 2026, well, it is a presidential election year in Peru. And last year, we did not expect such severe impact. And as a result, our full year production volume would be affected by external factors. So within the area that we can adjust, so for regions with better grades, we mine them in the first half of the year. However, because of the limitation to the ore body structure, and we have to maintain our full life cycle value, then the scope or the room for adjustment is limited. We have to ensure a balance in our mining and recovery for the whole year. So for the production volume of metallic copper, there would be some decrease on a quarter-on-quarter basis. As a result, C1 costs will go up. Q1 C1 cost increase doesn't mean that our operating efficiency has come down. There has no -- there has been no impact. Just now our CEO said that we have effectively improved our processing capability to offset the decline in grade. So we suggest that you should look at the whole year C1 cost guidance as reference instead of just looking at C1 of this prevailing quarter. I think in this way, you can do your calculations and analysis in a better way.

Understood. So let me further ask a question. So for Q4, there will be some increase in operations. So is it true that there will be a decrease in copper production as compared to Q3? So as a result, you have made the full year estimate of 400,000 tonnes. Is that the case?

Well, you can put it that way. Now we have to worked hard to achieve the upper range of our production volume guidance.

Okay. Understood. My next question is about Khoemacau. For Khoemacau, for the whole year, production volume guidance has decreased. So there is the Plutus open pit mine, and you are now doing preparation work. And next year, there will be some contribution from it. From that mine, will there be some increase to the overall production volume for Khoemacau next year? That's my question.

Yes, Jimmy, thank you. Thank you for your question. For Plutus pit, basically, it cannot replace the Zone 5 contribution or supply. As mentioned earlier, well, it can contribute to the expansion of ore supply, there will be a bit better room and more flexibility. That's the role of it.

Understood. In that case, in Q3, the decline in production volume. So in Q3, there is no increase in production volume as compared to Q2. What are the major reasons about production volume?

So for production volume, at the beginning of the year, so after making the decision, the utilization rate of some mining equipment has come down at the beginning of the year and supply of ore in Q3 and Q4 is affected. So there is a decline in production volume. However, in Q3, there was new equipment delivery and also there has been increase in the overall condition. So for Q4 and also early next year, there is very big guarantee for production volume.

Okay. Your answer is very clear. Finally, about Rosebery. So for the whole year guidance, there is some decline. So when we do the calculation, comparing Q4 and Q3, the production volume is more or less the same. But in some cases, there may even be an increase. So looking at cost and doing a comparison in Q3, then in Q4, your cost may be a bit conservative. So regarding Rosebery, in Q4, based on your full year guidance, what are some of the factors that will lead to the big decline -- possible big decline in cost? Or is it because you have made more conservative assumptions about byproducts. So that's my question about Rosebery.

Thank you, Jimmy. Let me continue to answer your question about Rosebery. For Rosebery in July, so in the X-South area, there was the mine. So we have to suspend the volume there for a short period of time so that we can complete our work there. So we have to enhance the -- our work there. So looking at the mining and production sequence, the production volume sequencing has to be reworked with other regions. So in Q3, there is this emergency adjustment. During that period, we have to make preparation in other regions. So for the overall year, in Q3, Q4, production volume will decline. So we have also made the relevant adjustment. When it comes to cost, for the whole year, we suggest that you look at the whole year, full year cost range to do your calculations. Because for Q3, there was this impact and the mine volume will be adjusted. And in Q4, there is also relevant impact. So overall speaking, the full year guidance has not changed. But for Q3 and Q4, there will be these quarterly changes.

I look forward to very good results for your whole year.

Lawrence of BOCI, please.

I have 2 questions. First, regarding Las Bambas, in your presentation, you talked about an increase in molybdenum recovery in Q3. And then in Q4, there is commissioning of equipment. So regarding recovery of molybdenum in the future, how much will be the increase in production volume besides? I also want to ask a question about Las Bambas. In Q3, your processing and your mining grade has come down. So in the future, will you stay at this level for quite a long time? Or is this decline just a transient phenomenon?

Thank you for your question. Xuesong will answer your question.

Greetings. Thank you for your question. Regarding molybdenum, in Q3, we have started some experiment work in relation to certain chemicals and agents and our molybdenum grade is higher than expected. So as a result, we achieved very good production volume. Looking into Q4, as mentioned earlier, that would be the good transportation arrangement. At the same time, we'll optimize our processing and milling for increase in recovery. I think that will be at a good level. For the whole mine, copper is the main product. So that means that when we make mining plan, so copper production is our main goal in making production plan. Now molybdenum is only secondary in nature. So there will be volatility. But this year, we still have confidence that molybdenum production volume will exceed our overall production guidance.

Second question. is about a decline in grade, mill grade. Also about Las Bambas.

For milling grade decline, just now, as I mentioned earlier about cost, our mining plan is based on many factors. But most importantly, we have to consider the full life cycle value maximization. We also have to face up to some risks. This year, it is election year, and there are risks about climate change. So our production volume plan, mining sequence will focus on high-grade areas. So we place priority in high-grade areas. In our production process, we have to achieve a balance. So in Q3 and Q4, there will be some decline in grade, but there won't be a big decline. So it can ensure our full year production volume reaching our production volume guidance.

Chris, please.