Ero Copper Corp

Thank you for standing by. This is the conference operator. Welcome to the AeroCopper Third Quarter 2023 Financial and Operating Results Conference Call. As a reminder, all participants are enlisted only once and the conference is being recorded. After the presentation, there will be an opportunity to ask questions. To join the question queue, you may press star then 1 on your telephone keypad. Should you need assistance during the conference call, you can see the operator by pressing star then 0. I would now like to turn the conference over to Kurt Neelam, Senior Vice President, Corporate Development and Investor Relations for opening remarks. Please go ahead.

Thank you, operator. Good morning and welcome to AeroCopper's Third Quarter 2023 earnings call. Our operating and financial results were released yesterday afternoon and are available on our website, as are our financial statements and the MDNA for the three and nine months ended September 30, 2023. On the call with me today are David Strang, Aero's co-founder and chief executive officer, Marco DiFilippo, president and chief operating officer, and Wayne Dreyer, chief financial officer. We will be making forward-looking statements that involve risks and uncertainties from which actual results may differ materially. We would refer you to our most recent annual information form, available on our website, CIDAR and EDGAR, for a discussion of the risk factors of our business and their potential impact on future performance. As a reminder, and unless otherwise noted, all amounts are in U.S. dollars. I will now pass the call over to David Strang.

Thank you, Courtney, and thank you everyone for joining us today. We are speaking to you today from our offices in Sao Paulo, Brazil, at the end of a weeklong tour with our board, during which we visited each of our operations. I'm happy to share that everyone is buoyed from the visit, especially seeing the great progress our team in Brazil has made in each of our major growth initiatives. Our third quarter financial results reflect our team's exceptional strategic execution and operating performance amid challenging market conditions. Despite the macroeconomic headwinds that led to weaker metal prices and a stronger Brazilian riach against the U.S. dollar, we remained focused on executing and broadening our growth strategy, positioning ERO for long-term value creation as a global energy transition gains momentum. During the quarter, our near-term growth projects achieved several critical milestones. The Tucama project, as announced last month, reached over 70% physical completion. Furthermore, a significant achievement was realized at the Javentino operations, where we successfully initiated production from the Metinha vein, resulting in record gold production at operating margins. Meanwhile, at our Caraíba operations, we continued to advance our Pilar 3.0 initiative as we near completion of the mill expansion project and prepared to commence main sinking at the new external shaft. In parallel, we continued to bolster our medium and longer-term growth pipeline through ongoing regional copper and nickel exploration programs at the Caraíba operations, as well as through the execution of a binding term sheet to earn a 60% interest in Vale based metals financed copper project, which we announced earlier this week. Before I hand over the call to Marco to provide more detail on the execution of our growth projects, I will summarize our third quarter operating and financial performance. At the Caraíba operations, copper production was in line with our forecast at 10,766 tons of copper in concentrate. While our C1 cash costs for the quarter were also in line with our forecast in BRL terms, when converted to US dollars at the average third quarter exchange rate of 488 BRL per US dollar, our copper C1 cash costs in US dollar terms remain elevated at $1.82 per pound of copper produced. Copper production is expected to be strongest in the fourth quarter due to higher anticipated mined and processed copper grades. As a result, we are reaffirming our 2023 copper production guidance of 44 to 47,000 tons. Due to higher expected copper grades and with the current quarter to day exchange rate averaging over 5.05 BRL per US dollar, we also expect to deliver lower C1 cash costs in the fourth quarter. For the full year, our copper C1 cash cost guidance range based on the original assumed exchange rate of 530 BRL per US dollar remains $1.40 and $1.60 per pound of copper produced.

Yet,

given the continued strength of the BRL against the US dollar, we are also providing a sensitivity range of $1.50 to $1.70 per pound of copper produced should the BRL to US dollar exchange rate remain at current levels for the remainder of the year. At our Javentina operations, as I mentioned earlier, we successfully initiated production from the Matinia vein during the quarter, which contributed to a quarter on quarter increase of over 40% in both processed gold grades and gold production. As a result, we produced a record 17,579 ounces of gold at C1 cash costs of $371 per ounce. Due to our strong -to-day operating performance at the Javentina operations, we are increasing our 2023 gold production guidance range from 50 to 53,000 ounces to 55 to 59,000 ounces. We are also reducing our full year C1 cash cost guidance from $475 to $575 to $375 to $475 per ounce of gold produced and lowering our all-in sustaining cash cost guidance range from $1,000 to $1,100 to $900 to $1,000 per ounce of gold produced. Our financial results for the period reflect a combination of our strong continued operating performance as well as the metal price weakness and BRL strength that I mentioned earlier. As a result, adjusted EBITDA for the third quarter was $42.9 million and adjusted net income attributable to the owners of the company was $17.3 million or $0.18 per share on a diluted basis. As planned, our capital expenses remained elevated at just over $120 million during the third quarter, largely due to the strong progress being made at our Tucumã project. In an effort to maintain the momentum we have carried forward from the second and third quarters, we have elected to accelerate select work streams originally slated for the first quarter of 2024 to the fourth quarter of this year. As a result, we have adjusted 2023 capital expenditure guidance for the Tucumã project to include estimated increase of approximately $15 to $20 million due to the expected shift in timing of associative payments. We have also provided foreign exchange rate sensitivities across our capital expenditure guidance ranges to reflect the potential impact of the BRL to US dollar exchange rate remaining at current levels through the end of the year. I will now pass the call to Macco to discuss the highlights

around our

third quarter project execution, after which Wayne will discuss our financial results for the quarter.

Thank you, Dave, and good morning, everyone. With respect to progress in our strategic initiatives, I am incredibly proud of our operational teams, who were able to continue execution through the third quarter after an excellent first half of the year. Before discussing each of our projects in detail, I would like to congratulate all of our employees and contractors at the Tucumã project, currently totaling over 1,700 people on site, on achieving over 2 million hours without a lost time injury. In terms of progress at Tucumã, we achieved a major construction milestone of over 70% physical completion, as you would have seen in our project update from October. Noteworthy achievements on site include the completion of earthworks, completion of all major civil concrete cores, major advancements in steel fabrication and erection, as well as installation of several key pieces of process equipment, including our primary crusher, ball mill and tertiary crushers. As evidenced in our updated site photos, we are making excellent progress in flotation cell installation and site-wide platework and piping. In parallel, our main substation and power line installations are both tracking ahead of schedule, and we expect to tie into the national grid at the end of this month. As a result, mechanical completion testing and the first commissioning phases of installed equipment are expected to commence prior to year end. With the progress made on procurement, manufacturing, equipment deliveries and construction to date, our primary focus on the project has transitioned to piping, cabling, instrumentation installations, as well as our operational readiness planning, all of which is progressing on schedule. As Dave mentioned, given the excellent performance and momentum we have been able to achieve this year, in particular on the pre-stripping and electrical power installation fronts, we expect to accelerate select work streams related to both mining and plant commissioning from the first quarter of 2024 to the fourth quarter of this year, which has been reflected in our updated guidance. While our expected project delivery date remains unchanged, we believe the acceleration of will continue to de-risk our overall commissioning and ramp-up schedule. Our total direct project capital estimate for the completion of the Tucumah project remains unchanged at approximately $305 million. It is worth noting that a Q2 redesign of our haulage route, combined with decreased emulsion costs, below budget earthworks, tailings and waste dump construction costs, and reductions in duties on imported equipment versus our budget have largely offset the impacts of a stronger than anticipated foreign exchange rate and increases in forecast electromechanical erection costs through project completion. At our Caraiba operations, we continue to advance the new external shaft of the Pilar mine and the expansion of our Caraiba mill, both part of our Pilar 3.0 initiative. During the third quarter, we finalized the installation of the head frame for the new external shaft, concluded installations, and are currently commissioning both the stage and personnel winders. We remain fully on track to commence mainsinking activities prior to year end. With respect to supporting infrastructure underground at the Pilar mine, we are in the final commissioning stages on our underground batch plant, are reaming the waste and ore silos for our ore flow system, and are preparing for the second phase excavation of our crusher chamber. I am pleased to report that all of our underground development requirements remain on schedule for shaft handover to operations in Q4 of 2026. Back on surface at the Caraiba mill, installation of our new ball mill, Jameson cell, and associated electrical installations were nearly completed during the third quarter. We anticipate an on-schedule physical completion of the expansion project prior to year end. Last, but certainly not least, at Chavanchina, we successfully developed into and commenced mining of the Matinia vein during the quarter, a fundamental component of our NX60 initiative. During the quarter, we mined ore from three different production levels within the Matinia vein. Our record production results this quarter and revised full year guidance ranges for the Chavanchina operations speak to the positive impact from this initiative. As Dave noted, we are expecting a strong fourth quarter at each of our operations and continue execution across our project portfolio. I will now turn the call over to Wayne to discuss our financial results.

Thank you, Marko. As Dave mentioned earlier, our third quarter financial performance reflected record gold production and operating margins, which partially offset a decrease in copper production as well as continued copper price weakness and a stronger BRL, which averaged $4.88 against the US dollar for the period. The stroke operating cash flows of $41.9 million have helped to fund capital expenditures of $121.4 million, which were primarily directed towards the ongoing execution of our organic growth initiatives. We ended the quarter with a strong liquidity position of approximately $238 million. This includes cash and cash equivalents of $45 million, short-term investments of $43 million, and $150 million of undrawn availability under our senior secured revolving credit facility. Regarding our BRL to US dollar exchange rate hedge program, we reported realized gains of $3.5 million for the quarter. Consistent with our conservative strategy and in response to a favorable move in exchange rates towards the end of the quarter that extended into October, we opportunistically expanded our foreign exchange rate hedge program to cover the majority of projected operating costs and capital expenditures through the end of 2024. These hedges have a weighted average floor and ceiling of 504 and 543 BRL per US dollar and includes approximately $145 million designated for major project capital expenditures with a weighted average floor and ceiling of 510 and 523 BRL per US dollar respectively. It's also worth noting that we remain hedged on approximately 75% of our copper production for the remainder of the year through the zero cost collared hedge program we initiated in January. These copper hedge contracts provide a floor price of $3.50 per pound on 3,000 tons of copper per month through the end of December 2023. With that, I'll now hand the call back to David to share

some final remarks. Thank you, Wayne, and thank you again to everybody who's been on the call. I think the theme for the quarter has been us operating extremely well as a team, both operationally and on the capital projects in a dynamic macro environment dealing with exchange rate and metal price volatility on the copper side of things. I cannot thank our team enough, both in Vancouver and here in Brazil, for the strong efforts they have done in terms of continuing to move our projects forward and continuing to operate our operations. And while we don't want to single out any particular operation versus others, the exceptional performance of our team at the Javentina operations. And with that, operator, I'll turn it over to you for question period.

Thank you. We will now begin the question and answer session. To join the question queue, you may press star then 1 on your telephone keypad. You will hear a tone acknowledging your request. If you're using a speakerphone, please pick up your handset before pressing any keys. To withdraw your question, please press star then 2. We'll pause for a moment as callers join the queue. The first question comes from Dalton Barretto of Canaccord. Please go ahead.

Good morning, guys. Dave, I actually wanted to kick off by talking about this new furnace project that you didn't actually mention on the call. I'm wondering, can you talk a little bit about the project itself, the rationale for the deal, maybe why Vale didn't run with it and how this thing will compete for dollars versus your existing portfolio?

Thanks, Dalton. I think we did mention it at the beginning of the call. But with respect to furnace, I think there's a couple of things we'd like to be able to point out. Number one, we've always said then we always want to continue to grow our business here in Brazil. And when we look on the longer-term basis of the future of this company, when the opportunity came to us with respect to furnace and Vale's approach to us, if we would be interested in looking at it, it was something that for us is extremely dynamic. And I'm being somewhat hesitant here because with respect to the rules under 43.101 and what we can and cannot say with respect to the project. But what I can say with regards to it is, as you know, Mike and the team and from the physiology side of things have a great understanding with regards to a lot of projects here in Brazil. The work that Vale has put into this project, drilling over 90,000 meters and over 240 drill holes. The opportunity to be able to work with Vale, and this is a bigger relationship that's starting to be established. The context between ourselves and Vale were based upon Vale's viewpoint of a partnership that could look at something that they've looked at historically from, let's say, an open perspective in our opportunities in terms of how we operate underground in Brazil. Our strong focus on ESG was something that gave Vale comfort that we are a company that they feel comfortable that they would enter a relationship like this. That's the general realities I can say right now as we continue to move forward, as we continue to work on the project. So I think it will become a lot more self-evident to the world with respect to the opportunity that's available to us with respect to Furnas. Furnas is a long-term growth opportunity for Eurocopter. We will be working on it, as I said, ideally we'd like to be able to accelerate it faster than the program that we have, but it will be real working on that project for the next five years. Within that, the competition for exploration dollars does not exist between what we're doing in the Curitiba Valley and our nickel projects there and what is happening around Furnas. We are extremely comfortable with the budgets that Mike and the team have put together with regards to the work we need to do at Furnas. Remember, with over 240 holes already drilled on the project, the work that Mike and the team there are doing is a lot of compliance-related work with regards to 43.101 and bringing that project into the ability to discuss the resource with the marketplace under 43.101. It is a great, great growth initiative for this company. We will be talking a lot more about it over the course of the next 12 to 18 months and I think in the fruit of time, I think the market will come to understand the great opportunity we have here and also the great relationship that we're starting to develop with one of the biggest mining companies in the world and working with them. And I think that should be taken into consideration as well with regards to this. Brazil and Vale have been synonymous and the opportunity to work with the biggest mining company here in Brazil is a great opportunity for Eurocopper in the future.

Great, thanks for that Dave. And then maybe switching gears to Tucumán. Just so you're still guiding to first production in H2 2024, but the mines almost ended itself by you're going to kick up plant conditioning by year end. Is there any upside to your guidance and what are some of the key risks between now and then?

Yeah, this is Malka. Great question, Dalton. Yeah, look, I think, you know, we're obviously things are going really well. We've continued to build on the momentum from the first half of the year, obviously seen the big jump in physical completion relative to last quarter. I think, you know, in terms of starting the first commissioning phases and having a power site early, obviously it's going to help us de-risk our commissioning ramp up schedule. With respect to project completion, the, you know, we're working as hard and fast as possible to get ahead. I think the risk is always the same and that's the rainy season and how much progress we can make. We've planned for that in our current startup schedule. And I think that's part of the reason that we're moving capital from Q1 next year into Q4 and also continue to maintain our current plan, which is the second half of next year. So while there's some opportunity there, I think, you know, given the uncertainties involved, we're going to stick to our second half guidance for now.

Yeah, Dalton, just to reaffirm that. We're taking a conservative approach with regards to what we're doing. Yes, the project is moving forward very, very well, but we are not in a position, nor do we feel comfortable right now to change any guidance with regards to when commissioning and commercial production comes into play. Maybe we have a conversation with the marketplace in the first half of next year with regards to that, but we're not changing guidance right now.

Thanks, guys. I'll jump back in.

Next question, from some arrest, Bogado. Let's push it back. Please go ahead.

Hi, good morning. Mako, did I hear you say earlier that the impacts of the FX have been largely offset by savings elsewhere on the Kuma and that's why the total project FX of $305 million is unchanged?

Yeah, that's exactly right, Aura. So obviously there was an impact stronger this quarter or in Q3. Relative to where we're at, if you look at the big offset there, it's going to be on the redesign of the mine haulage route, so both in terms of pre-strip and also when we're starting to get into building our -of-mine stockpiles. Q2 redesign was able to shorten that haulage fairly significantly. We've also seen savings on emulsion costs and then primarily as well as import duties on some of the equipment that's arriving on site. That's all flowing through our forecast. Obviously as we look ahead, we're seeing a couple of things moving in the opposite direction, including increased electromechanical erection costs for completion. So I think as we continue to build this project out both in Q4 and through the first half of next year to project handover, we're going to continue to see positive adjustments and negative adjustments. Fortunately to date, those have largely offset each other and we're continuing to anticipate cost of completion of $305 million, but again, that's our best estimate. Things are going up and down on a regular basis.

Okay, and just as a follow-up, I mean given there's a lot of moving parts here, you're bringing forward some capex, you've got some currency changes, and now you're also introducing some spending for furnace. What does capex look like for 2024 on it, if we think company-wide?

Yeah, look, Boris, we're, as I think all companies are from discussions I've had with my counterparts at various companies, we're all in the process of budget season right now, so I think it would be premature to talk about company-wide capital in advance of our budget. With respect to Tucumal, I can say that we're anticipating the cost of completion of that project to be, at the time of handover, to be $305 million US dollars, subject to the variations we talked about, but in terms of company-wide capex, we're in that process right now.

Okay, thank you.

Next question comes from Stefan Iwanel of Commerce Treaties. Please go ahead.

Thanks very much, guys. Just wondering, is there, can you provide any more color just on the exploration at Cueva, whether copper or nickel even?

Yes, Stefan, the program remains ongoing. We would have liked to have had a, and I had spoken in previous quarters of having a more fruitful discussion with the marketplace with respect to our advancement of the nickel opportunities. Unfortunately, the ANM, which is the government organization that manages the management of minerals licenses and exploration licenses in Brazil, went on strike in the middle part of the year, and that strike now ended has had an effect with respect to our ability to both close some transactions that we've been working on, as well as some auctions that the government was going to run. That has resulted in us having to delay the discussion with the marketplace with regards to what we are starting to uncover with respect to the nickel exploration. However, Mike and the team are continuing to explore on the areas that we have been able to explore. We have expanded the exploration program into two to three other areas. The fact that Mike and the team are still got drill rigs turning is the best I can tell you with regards to the success rate that we're having there right now. But it is our hope that sometime, and we've got to be super careful about giving a timeline with regards to when we can talk more fruitfully about our nickel program. I would love it to be the first quarter of next year. I doubt it will be. It will probably be somewhere in the second quarter that we can have a more fruitful discussion. However, as the exploration program continues and we have anything material that we feel we would like to discuss with the market on that nickel results, we will do so in a timely manner.

Okay, great. I bet that's very helpful. So I guess timing aside, not if you want to stay tuned.

Yeah, yeah. I mean like everything else, we'd love to put out the quarterly exploration results. We're having success in some programs that we're doing both in the Pilar Mine itself. Again, we've had success in some work that we've been doing in Vermeos in terms of some exploration there and some extension work there. We have done some work on some copper in the Vermeos district with some very deliberately interesting results there. Our exploration program at Javentina has gone incredibly well and the team have done a lot of great work there, particularly around extensions to the San Antonio vein system. So lots of good work that the team are doing and a number of different areas within our exploration program. And we hope to be able to continue, as I said, to be able to talk more fruitfully about things in the new year.

Okay, great. That's very helpful. And just one other question. Just with shifting back to sort of the Tucumã area and I guess Verna. There was, you know, previously there was sort of high level sort of talking of thinking about Tucumã in sort of in the greater context of a hub and spoke model. You know, furnace is kind of in the same area, but maybe a bit too far away to be hub and spoke if I read between the lines. Is there still other opportunities that you're seeing there as well to feed into that strategy over time or is furnace kind of the next step for, call it the Carajas and Aero copper? Well,

no, I think I think whether furnace was in the Carajas or whether furnace was somewhere else in Brazil, furnace in and of itself is a great opportunity for our company. With regards to Tucumã, it is a foundational asset in the Western Carajas. And as such, we, Mike and the team are broadening their work on regional exploration in and around Tucumã and the area there. There are some opportunities potentially that other people have looked at. We are evaluating these. They were a little bit earlier stage, but we certainly feel we're starting to get our feet wet in terms of the foundation that we have built in the Western Carajas and the opportunities to potentially grow our business there. I think it's very much a stay tuned up thing right now with what's happening in the Western Carajas.

OK, great, great. Well, thanks very much. Appreciate it.

The next question comes from Craig Hutchison of TV Security. Please go ahead.

Hi, good morning, guys. Just with regards to Tucumã, the $305 million, can you just provide some clarity in terms of how much that $305 million is left to spend, just the kind of cash component?

Yeah, sure. So right now, this is Marco again. So right now, you know, physical completion, last at the end of September, physical completion breached 70%, as you know, or physical spend is tracking just behind that. So we're about 60% complete on direct project expenditures through the end of September. Great.

And then just in terms of liquidity, I recognize you guys have a fairly strong position now, but if copper prices are languished here for the next few quarters, are you concerned at all about your liquidity position and any kind of thoughts in terms of bolstering that through an upsize, your credit facility or some other non-divided means to now and get to the next year when the project is complete?

Yeah, thanks for that, Craig. Like any company that has got major capital programs, we are constantly working with respect to scenario analysis on various metal prices with regards to, as you've seen, exchange rates and anything we can do with regards to mitigating that. At current metal price levels, we're generally pretty comfortable, but you can't run a company on that basis. You have to look at risk and manage risk around that and various scenarios and doing your scenario planning with respect to that. We're in the process of doing that. We do it constantly and we're looking at all the levers that we have with regards to making sure that the company is protected in such a way that we can deliver to command on time and be able to bring that great operation into production. So all I can tell you with regards to that is we continually and constantly looking at scenario analysis with regards to that. I will tell you we will not risk this company with regards to anything. And if we feel it's prudent to pull out the levers, we will do so. But this time we're still in works with regards to evaluating various scenarios that we have.

Perfect. Thanks, guys.

The next question comes from Alex Tarrantchou of TIFL. Please go ahead.

Good morning, guys. I caught a couple of questions for me. First, the 17 mine grades in the quarter are really impressive. The first question is from a good contributor to that. Were they higher than expected? And if so, any potential read through to 2024?

So, yeah, we got into Matinio early and we did find some areas which the grade was significantly higher than what we anticipated. And that has been a positive benefit with respect to that. It's too early to say right now where we will continue to go with regards to Matinio. There's some really interesting things that we're seeing. I don't think any of us are going to change guidance with respect to what we think in regards to Matinio right now. It's a great start. We're pretty excited. Our team's excited about what we've encountered. It has had the positive correlation. We continue to see higher grades than we anticipated, but we're not going to change anything with regards to guidance nor thinking on it right now with respect to Matinio.

Okay, good. Well, it's a good start anyways. Second question. At Furness, you said greater than 240 holes drilled so far. That's a lot of holes. So can I read into that then? I mean, do you think you have enough information available already to put a 43-101 compliant resource together? Is that something we could expect over the next few months?

So let's talk about our work at Furness. We have signed a binding letter of intent. We now move into negotiating a definitive agreement. Both ourselves and Valle, in terms of each team's work, going into this letter of intent, spent a lot of time. We've been in conversations with Valle for the last 18 months with regards to this. You can read that both companies are motivated with regards to getting the definitive agreement signed. That's going to take a few months. At the same time, we're doing a baseline study and initiating a baseline study, an environmental baseline study for the basis of our work that we will then be adding to the project. Thereafter, Mike and the team, working with the Valle team, will start our drilling programs. We have a clear idea of what we want to do with regards to the drilling that will be supportive of the work that Valle has done in and of themselves. Valle has been working on this project a long time. Rules have changed with regards to QAQC, and there's a certain portion of the Valle database that needs to be updated, and that work will also be done. Hence the reason we're taking a conservative approach with regards to discussing the project right now, until such time as we can get everything, the I's dotted T's crossed with regards to it being compliant with 43101. We will be working on this project over the course of the next 12 months with regards to getting it there. I can't tell you when the 43101 will be completed with regards to a resource. We have to work with our partner, Valle, to determine that. What you have seen in the definitive agreement is an 18-month program that will be completed initially to generate a PEA on the project. That's what we will be working towards. If there's opportunity, and we feel along with our partner, Valle, that there's an opportunity to put out a 43101 earlier, we will do that. But we're going to be doing and working in partnership with Valle and moving this project forward.

That's very helpful. Thank you.

The next question comes from Jackie Zablowski of BMO Capital Markets. Please go ahead.

Thanks very much. A couple questions for you, maybe one that's on a slightly different subject. Can you give us an update on the PMA smelter and how much of your material you're selling domestically versus internationally right now?

Thanks, Jackie. With respect to PMA, we did not make any sales during the quarter to PMA. PMA has had maintenance issues with regards to the smelter, and so we've been working through that. Eduardo De Como, as you know, our CEO here in Brazil, has been working with PMA, and PMA has been very open with regards to working with us on potential solutions down the road. There has been interest with regards to various things. It's not our role to get involved in this towards PMA coming back on stream in a stronger, healthier position. We remain, because we are an interested party, sitting on the sidelines and talking to various entities. There may be an opportunity to send some material to them this quarter, but we're not relying upon it with regards to any of our projections that we will be selling anything to them in the fourth quarter.

That's helpful, and that's consistent with the guidance you gave earlier. I just wanted to see if that was changed at all. I appreciate that. If I could ask one other question on, I guess it's really related to the startup of Tucumac, but just in general for the company. As we see Tucumac moving into production, can you talk a little bit about your working capital needs and how that may add to the amount of inventory and just sort of working capital that the company is going to need in general next year?

Yeah, Jackie, great question. So, you know, both myself and Wayne have had this discussion numerous times over the past several months. You know, we have, in terms of working capital draw for first production at Tucumac and sales, we have a number of leavers that we're exploring to absorb that working capital impact. So, we don't anticipate a huge change with respect to working capital draw down, given some of the leavers that we're exploring at this stage. Thanks

a lot, Michael.

Yeah, I mean Jackie, it's Wayne here. Obviously, we've had initial indications on the contract coming out of Tucumac is pretty desirable spec. We're in advanced discussions with various off-takers to enter into first-year contracts around that, and obviously there's opportunity in those to manage our working capital needs.

Sorry, Wayne, I didn't mean to cut you off. Thank you very much, Wayne and Michael and David. Thanks for your

answers. Once again, if you have a question, please press star then 1 on the telephone keypad. Please press star then 1 now. The next question is from Gordon Lawson of Paradigm Capital. Please go ahead.

Hey, good morning. My first question was just stolen, so I'll scroll over here. Can you clarify the key components of the pre-final project in terms of timing? I know we've got the mill ramping up to 4.2 in 2024, but what and when does the second chapter add to the mining rate?

Yeah, good question, Gordon. So, yeah, you're spot on on the mill expansion. Obviously, we're completing the inflations and commissioning phase in Q4. As we outlined in our MGMU's release today, the shaft handover operations obviously involves, as I like to say, we're 40 meters complete on the precinct and about 1,460 meters to go on the shaft. So that progress will start here at the end of the year in parallel with our underground infrastructure. We're forecasting an on-time delivery of the shaft project in Q4 of 2026. So it'll be fully operational in 2027.

Okay, and do you have an idea of what that would be to the mining rate?

The overall mining rate from the Pilar mine will be 3 million tons. That's the objective. Okay. Thank you very much. Yeah, that's where the 3.0 terminology comes from. Great.

Thanks a lot.

This concludes the question and answer session. I would like to turn the conference back over to David Strang for any closing remarks.

Thank you, operator, and thank you again, everybody, for coming on the call. I really appreciate the questions that we have, that we received, and we look forward to talking to you at the, I guess it's going to be February with respect to the next call on the annual results. Hopefully we get to see a lot of you in between that and continue to have the discussions. We're always available to answer anybody's questions with regards to how operations are doing. And again, I just need to thank the team, our overall team, for the great work they continue to do in terms of delivering both operationally and on our project spaces and getting to the goals that we're looking to achieve. So thanks to everybody and thanks again to everybody on the call. Thank you, operator.

Thank you. This concludes today's conference call. You may disconnect your lines. Thank you for participating and have a pleasant day.