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spk07: Good morning, ladies and gentlemen. Thank you for standing by. Welcome to the Hot Bay Minerals' first quarter 2024 results conference call. At this time, all participants are in listen-only mode. Following the presentation, we will conduct a question-and-answer session. To join the question queue, you may press star, then 1 on your telephone keypad. Should you need assistance during the conference call, you may signal an operator by pressing star and 0. As a reminder, this conference call is being broadcast live on the webcast and is being recorded today, May 14th at 11 o'clock a.m. Eastern Time. I will now turn the conference over to Ms. Candice Brulé, Vice President, Investor Relations. Thank you. Please go ahead.
spk08: Thank you, Operator. Good morning and welcome to HUD-based 2024 First Quarter Results Conference Calls. HUD-based financial results were issued this morning and are available on our website at www.hudbay.com. A corresponding PowerPoint presentation is available in the Investor Events section of our website, and we encourage you to refer to it during this call. Our presenter today is Peter Kakilski, HUD-based President and Chief Executive Officer. Accompanying Peter for the Q&A portion of the call will be Eugene Lee, our Chief Financial Officer, and Andre Lauzon, our Chief Operating Officer. Please note that comments made on today's call may contain forward-looking information, and this information by its nature is subject to risks and uncertainties, and as such, actual results may differ materially from the views expressed today. For further information on these risks and uncertainties, please consult the company's relevant filings on CDAR Plus and EDGAR. These documents are also available on our website. As a reminder, all amounts discussed on today's call are in U.S. dollars unless otherwise noted. And now I'll pass the call over to Peter Kekilski. Peter Kekilski Thank you, Candice.
spk00: Good morning, everyone, and thanks very much for joining us. In the first quarter, we delivered another consecutive quarter of strong operational and financial performance with steady free cash flow generation and continued debt reduction. This was largely a result of our unique copper and gold production diversification that provides meaningful exposure to higher copper and gold prices and attractive free cash flow generation. I'll go into more detail on our first quarter operating and financial achievements throughout today's presentation, along with providing an update on many of the exciting growth initiatives underway to further enhance our copper and gold exposure. Slide 3 summarizes the strong financial performance that we delivered in the first quarter. Consolidated copper production was 35,000 tons, and consolidated gold production was 90,000 ounces in the first quarter. First quarter production demonstrated the strength of our diversified operating base with benefits from the continued mining of high copper and gold grades at the Pampa Cancha deposit in Peru, continued high gold grades at Lalor, and strong performance from the New Britannia Mill in Manitoba, as well as the operational stabilization efforts at the Copper Mountain Mine in British Columbia. We are well on track to achieve the production guidance metrics for all metals. Consolidated cash costs were a remarkable $0.16 per pound of copper for the second quarter in a row. This was primarily the result of continued high byproduct credits partially offset by higher mining costs and lower copper production. Consolidated sustaining cash costs were equally impressive and decreased to $1.03 per pound in the quarter. Given this strong cost performance, we have affirmed our full year 2024 consolidated cost guidance. And we are pleased to see continued cost efficiencies being realized throughout the business, which is a testament to the outstanding team we have at HUD-Bay. Revenue in the quarter was $525 million, driven by gold production and sales volumes that exceeded our expectations. This, together with impressive cost performance, led to adjusted EBITDA of $214 million and adjusted net earnings of 16 cents per share. Operating cash flow before change in non-cash working capital of $148 million also exceeded expectations. After deducting sustaining capital expenditures and cash lease and community payments, we generated $87 million in free cash flow this quarter. This continues our quarterly trend of generating positive free cash flow, and over the last 12 months, we have generated more than $350 million in free cash flow. Our strong free cash flow generation enabled us to make additional progress against our deleveraging targets by completing a $10 million repayment on our revolving credit facilities and reducing net debt by $44 million during the quarter. As at March 31st, Our total liquidity increased to $619 million, including $284 million in cash, as well as undrawn availability of $335 million on our revolving credit facilities. The decline in net debt, together with the strong EBITDA generation, has improved our net debt to EBITDA ratio to 1.3 times compared to 1.6 times at the end of 2023, and we are well on track to achieve our 3P plan leverage target of 1.2 times. Moving to slide four, our Peru operations produced 25,000 tons of copper, 29,000 ounces of gold, 640,000 ounces of silver, and approximately 400 tons of molybdenum in the quarter. While high-grade copper and gold all continued to be mined from Pampacancha in the quarter, the mill processed less Pampa Concha ore than in the fourth quarter of 2023. This was in line with the mine plan and the typical ore feed blend of approximately one-third from Pampa Concha and two-thirds from Constantia. As a result, we are on track to achieve our 2024 production guidance for all metals in Peru. Total ore mined in the first quarter decreased by 27% compared to the prior quarter in line with the mine plan, which included supplemental ore feed from stockpiles during the quarter as the operations advanced pit stripping activities. The Constantia mill performed well during the quarter, with throughput averaging 89,000 tons per day. Ore mill was 2% higher than the fourth quarter of 2023, mainly due to the treatment of soft ore from stockpiles. Recoveries continued to be strong and in line with our metallurgical models, with 84.9% copper recovery and 73.4% gold recovery. The operations benefited from strong cost performance, achieving lower cash costs and sustaining cash costs compared to the fourth quarter. Peru's cash costs were at a record low of 43 cents, a 20% improvement over the favorable levels achieved in the fourth quarter, and benefited from higher gold byproduct credits and lower operating costs. Sustaining cash costs were $1.06, or 12% lower than the fourth quarter, primarily due to the same factors. We are positioned well to achieve our 2024 cash cost guidance in Peru. Our Manitoba business also saw another quarter of strong operating performance, as summarized on slide five. First quarter production included 57,000 ounces of gold, 3.1,000 tons of copper, 8.8,000 tons of zinc and 220,000 ounces of silver. Production of gold in the first quarter was better than expected as a result of many operational improvement initiatives and record performance from the New Britannia mill. We are well on track to achieve our 2024 production guidance for all metals in Manitoba. The strong gold production was partly attributed to the successful implementation of improvement initiatives at Lalor that were completed in 2023 and early 2024, including higher shaft availability, efficient ore hoisting, stope fragmentation reduction, and mucking productivity enhancements. The New Britannia mill achieved record quarterly throughput of 1,870 tons per day in the first quarter due to ongoing improvement initiatives and effective preventative maintenance measures. The New Britannia Mill recoveries of gold and copper were 89% and 96% respectively in the quarter. During the first quarter, we received a permit approval from the Environment and Climate Change Manitoba to increase the New Britannia Mill production rate to 2,500 tons per day. This approval aligns well with our long-term objective to further increase gold production at the Snow Lake operations by directing more gold ore from LALOR to the New Britannia mill to achieve higher gold recoveries. The stall mill processed 4% less ore in the first quarter than the prior quarter, aligned with our strategy of allocating more LALOR ore feed to New Britannia. With the stall mill recovery improvement project completed last year, we saw consistent strong recoveries of gold, copper, and silver in the first quarter and achieved our targeted gold recovery levels of 68%. Manitoba's gold cash cost was $736 per ounce, which is well positioned at the lower end of our 2024 cash cost guidance range. Gold sustaining cash costs were $950 per ounce in the quarter. Now moving to slide six, we continue to focus on advancing our operational stabilization plans at our British Columbia business unit. In the first quarter, Mountain produced 7,000 tons of copper, 4.4 thousand ounces of gold, and 88,000 ounces of silver. Production of copper and silver was lower than the prior quarter, while gold production was higher as a result of higher gold grades and overall higher recoveries. We are on track to achieve 2024 production guidance for all metals in British Columbia. Total ore mined in the first quarter was 3.7 million tons. which increased 42% from the fourth quarter in line with our fleet production ramp-up plan. The mill processed a total of 3.2 million tons of ore during the quarter, with mill availability averaging 90.4% while maintaining a stable throughput rate. Mill throughput was impacted by reduced reliability of the crushing circuit, which was caused primarily by elevated levels of magnetite and scrap metal as the mining progresses through areas of historical underground workings. First quarter milled copper grades averaged 0.27%, which was lower than the fourth quarter of 2023, but higher than the reserve grade of 0.25%. Copper recoveries of 83.4% were higher than the prior quarter and higher than expected due to relieving the regrind circuit constraint and implementing the flotation operational strategy improvements, including reagent selection and dose modification. Cash costs were $3.49, above the upper end of 2024 guidance range, but we expect these to decline during the remainder of the year as we continue to implement the stabilization initiatives. We have affirmed our full year cash cost guidance range for BC. Slide 7 highlights the improvements we have seen at Copper Mountain through the early stages of our stabilization initiatives. Since the acquisition in June of last year, we have achieved and exceeded the targeted $10 million in annualized corporate synergies, and we are on track to realize the three-year annual operating efficiencies target. On the mining side, we have remobilized idle haul trucks. and accelerated the purchase of five new ore trucks to increase mining activities and improve flexibility in the mine with additional mining faces. To open up the mine, we have begun a campaign of accelerated stripping over the next three years to enable access to higher-grade ore and to mitigate the reduced stripping undertaken by Copper Mountain over the four years prior to our acquisition. As a result of the remobilization initiatives, Total material moved will continue to increase quarter over quarter in line with the mine plan. We continue to hire and train additional haul truck drivers and expect to have a fully trained complement of truck drivers this summer to support the expanded mining fleet, which is expected to increase material move, improve operating efficiencies, and reduce unit operating costs. We are implementing plant improvement initiatives that mirror the successful processes at our other operations, specifically Constantia. We have seen stronger mill performance as demonstrated by higher mill availability and above target copper recoveries of 83.4% in the first quarter of 2024. The first quarter saw the highest quarterly copper recoveries achieved in the last decade at Copper Mountain. Stabilization benefits continue to be realized into April, with 83% copper recoveries and approximately 40,000 tons per day average mill throughput, an increase of approximately 9% over the first quarter. We are also accelerating engineering studies to de-bottleneck and increase the nominal plant capacity to 50,000 times per day earlier than was contemplated in the technical report. Maintenance practices to improve mill availability continue to be a key pillar of the stabilization initiatives. The average mill availability during the first quarter increased to 90.4% from 85.1% last quarter, as I mentioned earlier. The maintenance programs completed during the quarter were fully executed according to plan. Additional maintenance practice enhancements are planned for rollout over the second and third quarter to implement the improved maintenance management processes and change the maintenance organizational structure. Several mill initiatives to target higher mill throughput were advanced during the quarter, including reprogramming the mill expert system, installation of advanced SAG control instrumentation, redesign of the SAG liner package, and updated operational procedures to remove magnetite from the pebble stream. The mill throughput in April increased to close to 40,000 times per day as the mill began realizing benefits from the recalibrated expert system. The benefits of the operational stabilization improvements are expected to be realized through the remainder of 2024. In March, we released our annual mineral reserve and resource update and provided our updated three-year production outlook, which is shown on slide eight. We expanded the mine life at Constantia by three years to 2041 as a result of the successful conversion of mineral resources to mineral reserves by adding an additional mining phase at the Constantia pit. Manitoba reserves continue to support a mine life to 2038 with significant extension potential through a conversion of the remaining 1.4 million ounces of gold in inferred resources in Snow Lake. British Columbia reserves support the 21-year mine life disclosed in our technical report released in December of 2023 with additional optionality and upside potential for reserve conversion through 370 million tons of inferred resources. Our three-year production outlook highlighted that Constantia operations are expected to produce 101,000 tons of copper and 62,000 ounces of gold over the next three years. British Columbia's annual copper production is expected to average 41,000 tons of copper over the next three years. Manitoba annual gold production guidance continues to average 185,000 ounces over the next three years. HUD-BAY offers investors meaningful copper exposure, complementary gold exposure, and strong near-term cash flow generation. We are well positioned to benefit from strong copper and gold prices with our low-cost, stable operating platform in Tier 1 jurisdictions and our leading copper development and exploration pipeline. As shown on slide 9, today HUD-BAY produces more than 150,000 tons of copper per year, which is further augmented by our complementary gold exposure that offers cash flow resiliency in volatile pricing environments. For each $0.25 annual change in copper prices, HUD-B will gain an additional $75 million in cash flow and EBITDA. Similarly, for gold, for a $100 per ounce annual increase in price, HUD-B will see $25 million in increased cash flow and EBITDA. Our portfolio also generates the highest increase in net asset value with rising copper prices amongst our peers. Turning to slide 10, CopperWorld is the next promising greenfield copper development project in our growth pipeline. As we progress towards making a sanctioning decision, we will continue to be prudent with our financing plans for CopperWorld by remaining focused on meeting all of the prerequisites outlined in our 3P plan that we introduced in late 2022. Copper World is one of the highest grade open-pit copper projects in the Americas with proven and probable reserves of 385 million tons at 0.54% copper in phase one. There is roughly 60% of the total contained copper remaining in the measured and indicate resources excluding reserves. which provides significant upside potential for Phase 2 expansion and mine life extension beyond 20 years. The Phase 1 PFS released in 2023 showed enhanced project economics, an optimized flow sheet, and a simplified permitting process with extended mine life to 20 years and an internal rate of return of 19% at a copper price of $3.75 per pound. The first key state permit required for copper wilt The mined land reclamation plan was initially approved by the Arizona State Mine Inspector in October 2021 and was subsequently amended to reflect a larger private land project footprint in June 2022. In late 2022, we submitted the applications for an aquifer protection permit and an air quality permit to the Arizona Department of Environmental Quality. We continue to expect to receive these two outstanding permits in 2024. We also received the floodplain use permit approval from Pima County in April 2024. We expect to launch the formal joint venture process later this year after we secure our permits and prior to commencing a definitive feasibility study which would allow the potential joint venture partner to participate in the funding of definitive feasibility study activities as well as in the final project designed for Copper World. We have seen strong initial interest from potential joint venture partners as many industry participants are focused on increasing copper exposure. Securing copper supply becomes a growing global concern as evidenced by BHP's recent bid for Anglo American in an effort to increase their copper exposure. Copper world will be a key contributor to the domestic US supply chain with our intention to produce made in America copper cathode by building a concentrate leach processing facility in the fourth year of operations. Local production of copper cathode would reduce the operation's total energy requirements and lower greenhouse gas and sulfur emissions by eliminating overseas shipping, smelting, and refining activities relating to processing copper concentrate. The project is expected to contribute more than $850 million in US taxes, including $170 million in Arizona state taxes. The mine will also create more than 400 direct jobs and up to 3,000 indirect jobs in Arizona. Copper World is an attractive copper growth project for HUD-BAE and our stakeholders, which will generate strong project returns and bring many benefits to the community and local economy in Arizona. We are also encouraged by the progress that the United States Mining Regulatory Clarity Act of 2024 is making through legislative approvals, as the government recognizes the importance of supporting the domestic critical mineral supply chain. Consequently, this bill aims to clarify the use of federal lands for mining critical minerals and also effectively overturns the prior Rosemont decision. While it doesn't change our path forward on phase one of our Copper World Plan, if passed by the Senate, The bill would be a positive development for the second phase of Copper World when we expand onto federal lands and significantly increase the annual production and mine life at Copper World. It would also simplify this future permitting process for our mason copper project in Nevada. Turning to slide 11, in Peru, our exploration activities surrounding the Maria Reyna and Caballito properties near Constantia continue to focus on permitting and drill preparation. We commenced early exploration activities after completing a surface rights exploration agreement with the community of Chicago in August 2022. As part of the drill permitting process, environmental impact assessment applications were submitted for the Maria Reyna property in November 2023 and for the Caballito property in April 2024. And in Manitoba, we initiated the largest exploration program in the company's history in Snow Lake, as highlighted on slide 12. Much of the newly acquired land from the Cook Lake and Rockcliffe transactions last year has been untested by modern deep geophysics. During the first quarter, a surface geophysical survey was conducted over a portion of our Cook Lake tenements using cutting-edge techniques that enabled the team to detect targets at depths of almost 1,000 meters below surface. The multi-phase 2024 drilling program with up to eight drill rigs during the winter focused on testing potential for deep extensions of the gold and copper gold zones at Lalor and will continue throughout the year testing other targets identified from current and past geophysical surveys. The goal of the 2024 exploration program is to test mineralized extensions of the Lalor deposit and to find a new anchor deposit within tracking distance of the Snow Lake processing infrastructure which has the potential to extend the life of the Snow Lake operations beyond 2038. Additionally, we are advancing an access drift at the nearby 1901 deposit to enable infill drilling aimed at converting the inferred mineral resources in the Gold Lenses to mineral reserves. In the first quarter, we commenced the development of the smaller profile drift from the existing Lalo ramp, The 1901 development and exploration drift is proceeding on schedule and on budget and is expected to reach the mineralization in late 2024. Definition drilling is planned for 2025 to further confirm the optimal mining method, evaluate the all-body geometry and continuity, and convert gold-inferred resources to reserves. Additionally, in March 2024, HUD-BASE signed a five-year option agreement with Marabeni focused on three exploration projects within trucking distance of Flin Flon. The agreement grants Maribene an option to acquire a 20% interest in the projects following the completion of funding 12 million Canadian dollars in exploration activities over a period of five years. All three properties host past producing mines with attractive copper and gold grades and remain highly prospective for further mineral discoveries. Concluding on slide 13, We believe that copper has the best long-term supply and demand fundamentals in the sector as global copper mine supply will be unable to meet demand from global decarbonization initiatives and growing demand from the use in AI data centers. HUD-Bay is uniquely positioned to benefit from the strong outlook for copper with a steady copper production profile of over 150,000 tons per year through to the end of the decade. HUD-BAY's resilient operating platform offers leading exposure to copper and unique complementary exposure to gold, which together with our quality pipeline of growth assets provides significant upside potential for further value creation at higher copper and gold prices. And with that, we are pleased to take your questions.
spk07: Thank you. Ladies and gentlemen, we will now begin the question and answer session. To join the question queue, you may press star, then the number one on your telephone keypad. You will hear a tone acknowledging request. If you are using a speakerphone, please pick up your handset before pressing any keys. To withdraw your question, please press star, then the number two. We will pause for a moment as scholars join the queue. Your first question comes from the line of Jackie Shibulowski from BMO. Please go ahead.
spk09: Hi, good morning. Thanks for taking my question, and congratulations on a really tremendous quarter. It's really great to see you. My question is just on Toru. You mentioned in the MD&A that the Peruvian government is considering expanding or an option, I guess, to expand Toru. permits, including potentially, I guess, at Constantia. Can you tell me, like, is that something that practically, if you were able to extend your permit by 10% or so, is that something that would be within the mill's capacity to achieve that higher throughput? Or what would you guys need to do to get there? Thanks.
spk00: Thanks very much, Jackie. So the way that I would characterize it is there's a potential that this could increase future copper production at Constantia after the public-country deposit is depleted in 2025 by achieving further economies of scale to offset lower grades. But I think what we've got to remember is the regulation is currently a proposal and will continue to monitor its progress and the potential impacts on Constantia. Now, that said, the team and I were in Peru a couple of weeks ago and we met with the Minister of Energy and Mines, the Minister of Economy and Finance, the First Minister, et cetera, and they intimated that the proposal is in highly advanced stages and is likely to be implemented very soon. That remains anecdotal, and specifically what it will allow us to do is uncertain at this point, but we certainly would be looking at options to actually increase production by supplementing the process facilities that we have in place if needed. Andre, anything you want to add?
spk01: Yeah, sure. That covers, I guess, what I'd say the permitting process and what they're looking at. And so in simple terms, what they're proposing is to increase copper production in Peru is authorizing within your existing permitted facilities opportunities for process improvement. So existing crushers and infrastructure that you currently have. And so what we do have, which is a benefit for us, is we do have permitted pebble crushers that haven't been implemented. And the reason why we haven't implemented in the past is because we are throttled on the throughput capacity. So the teams are looking actively at what are the levers, if you will, around around what we can do within that framework to take advantage of that 10% reduction. It's still early days, it's still early days yet, but we are running on days up to 94,000 tons per day, and so they're making continuous improvements in the process, and so we're quite optimistic that if this happens, that'll be an upside for us.
spk09: Thanks very much, Andre and Peter. And maybe just as a follow-up question, I attended the presentation by the Peruvian minister at PDAC in March, and there was some talk there about streamlining permitting in general. I know your exploration projects in Peru have been very thoroughly going through the permitting process. Do you have any color or any optimism on whether whether streamlining of the permitting process for your exploration projects might be kind of forthcoming as well?
spk00: I think, Jackie, so yes, I'm optimistic that that is the case. All of the ministers with whom we met in Peru were keen to confirm that they're working hard to do that. That said, it remains to be seen what the bureaucracy can actually achieve. The key elements really are submittal of the EIA. After that, there are a couple of other permits that need to be granted like archeological permits and water use permits, but the primary permit required subsequent to EIA approval is consulta previa. Consulta previa dwarfs the others. We suspect that we'll be able to conduct the things like archeological permit and the water use permit in parallel, potentially with consulta premia, but the total duration we estimate right now is 12 to 18 months. We're hopeful that the 18 gets reduced to 12 or so.
spk09: That's great. Thank you very much for taking my questions and congrats again.
spk08: Thank you.
spk07: Thank you. And your next question comes from the line of ORS, Will Cadell. Please go ahead.
spk03: Hi, good morning. It's nice to see the pre-cash flow generation continue here in the quarter. My question has to do with costs. We saw very low cost per ton in Peru this quarter of just below $11 a ton. I mean, that's probably the lowest number we've seen in quite some time. Is that sustainable? And can you talk about some of the drivers there? And then conversely, the cost per ton in Manitoba, Canadian 235 were among the highest we've seen in quite some time. Just wondering if we should, or can we anticipate cost to ease there for the rest of the year? Thanks.
spk01: Sure, sure. So I'll take the orders. So I'll start with the cost in Peru. So the team has done an excellent job on cost conservation and looking for for opportunities to reduce and the forecast to the end of the year is pretty much in line with what you're seeing and within our budget ranges, maybe even towards the lower end like you're seeing this quarter. So there's nothing unusual about this quarter, it's just good operating practice, good cost control. And they did overcome challenges with flooding and water, and they did that. So we're really proud of the efforts of the team there. In terms of Manitoba, so the Manitoba one, if you look at it at face value, there's some increases at stall and overall a little bit in the mine. But it's part of the strategy. And so what we trialed in the quarter was with increased – opportunity to put more ore through. Our productivity improvements are really taking hold. We've trialed putting some higher base metal feed, if you will, from stall that would normally go through stall through New Britannia at better recoveries. And we were successful at that. So we're putting stuff from the lower cost mill or ore feeds through the higher cost mill, but we're generating a lot more cash by producing more gold ounces. And so So at face value, the costs look a little bit higher than what they were, but it's all part of the strategy to make more cash. And so you saw the results in the gold for the quarter.
spk03: Okay, just to clarify. So in Peru, we should then, I think what I'm hearing you say is we should expect costs to increase for the rest of the year in order to get closer to your guidance range?
spk01: It'll be within the... the bottom to mid range of the guidance, yes.
spk07: Okay. Thank you. Thank you. And your next question comes from the line of Fal Profiti from Aid Capital. Please go ahead.
spk02: Thanks, operator. Good morning, everyone. Peter, do you have a handle on the issue related to these elevated magnetite levels at Copper Mountain? It seems to be impacting the front end of the plant as opposed to the back end of the plant when we look at the success you've seen on copper recoveries. Just wondering what's the mitigation plan look like and just trying to get a sense of how important this issue is.
spk01: Sure. I'll take that one as well. It's Andre. So I was up at site last week and I actually saw the site. So what the challenge is is the pebble crusher as it – as the pebbles get rejected from the sag mill, there's a magnet on there to identify trap or balls of metal that came out of the sag mill. And when you put high magnetite through, the magnets can't discern between these steel balls and the magnetite. And so by default, so you don't damage the pebble crusher, we were surging the pebbles back into the sag mill, which reduced throughput. And so over the course of April, where you saw the increased throughput, what we did as a trial is we just rejected the pebbles. So while we worked for technologies to try to separate out what's magnetite versus the steel balls that are coming out, we just discarded the pebbles. We're storing them in a safe spot for the future. Longer term, so we're seeing the benefit of increased throughput capacity by doing that in the short term. longer term some capital projects that we're looking at that will increase our throughput through the mills, will allow us to just recirculate those pebbles back into the pile and have come run of mine feed and not a surge into the mill of pebbles. We believe we've got it under control right now. We're looking at technologies to separate or differentiate between magnetite and steel, Those problems will ultimately be solved early next year with some improvements that we're planning in the mail.
spk02: Got it, got it. And Peter, I wanted to come back to the issue of the 10% potential permitted capacity increase at Constantian. Just wondering what special considerations outside of the plant that you may need to consider, things like power purchase agreement, things like trucking and logistics, things like tailings. Outside of the plant, are there anything that... you're going to be paying closer attention to when you think about that cost-benefit analysis?
spk00: That's a great question. I think that we are so used to the need to be a resilient operation in Peru that we plan for these types of things in advance in any case. We have sort of search requirements for various aspects of our operational activities there. I think this will be nothing exceptional for us. I don't think there will be any additional logistics requirements. We have ample trucking capacity. We've increased our concentrate storage capacity. Frankly, I don't see any particular requirements arising out of this. Understood. Well done.
spk02: Thank you. Thanks again. You're welcome.
spk07: Thank you. And your next question comes from the line of Greg Barnes from TD Securities. Please go ahead.
spk05: Yes, thank you. Andre, question on Copper Mountain. You saw a step change in April, both on mill throughput and mill availability. What happened in April, and is this sustainable?
spk01: Yeah, great question. Thanks for that, Greg. So one of the – there's an analogy, one of our – our head metallurgist, he uses, it's like boiling water. You put a lot of energy into it and then eventually the bubbles start coming up. We've been putting a lot of energy and effort into the mill and all of a sudden you start to see the benefits coming through. The mill reliability in terms of, so it's a measure that we've been, it's a new measure we've been tracking and it measures the percent downtime due to unplanned events. For the quarter, we were about 96.4%. And month to month, from January, we were at 94. February, we were at 96.4. And March, we were at 98.4% reliability. And so month to month, we're seeing that reliability. The big step change that happened in terms of throughput was the implementation or the optimization of the expert system. So the expert system is what controls the sag mill feed. and throughput and so we have a three-part system one controls the speed of the mill one can monitors the density and one is the tonnage and in prior prior days only one of them was used which was the tonnage input in in the month of april we turned on all three so we were running the expert system with all three parameters and and so that where the operators we're more in a monitoring mode rather than dialing up the individual components. And so we're seeing the benefits of that going through, in addition to the prior question about the rejection of pebbles. So our intention is to continue, as we're in high magnetite scenarios right now, to reject them until we have some capital projects come in early next year that will solve the overall throughput.
spk05: That's fantastic progress. And a question for you, Eugene, on the gold hedging. Obviously, you've done a little bit. I think it's about 15% hedged on collars for the balance of the year. Do you intend to do more of that?
spk06: Thanks, Greg. No, not at this time. I think we did some modest hedging at Copper Mountain to protect some cash flows as prudent financial management during this stabilization period. given the volatility we've seen in prices in prior years, it was sort of a prudent measure to keep ourselves free cash flow positive. In general, our strategy is to provide the investors with the increasing exposure to both copper and gold, and by prudently managing our cash flow to, you know, one, acquire copper mount and stabilize it, we think we're giving investors, you know, kind of more exposure to that. So at this time, given where prices are, I think we're comfortable to let With callers we have, if we see sort of a decline, we may want to ensure that we underwrite some of that. But given the strong copper and gold prices today, I don't feel the need to add additional hedges at this time. We'll let it ride.
spk05: Great. Thanks, Eugene.
spk07: Thank you. Once again, that is star and one to ask a question. Your next question comes from the line of Dalton Barreto from Canaccord. Please go ahead.
spk04: Thanks, operator. Good morning, Peter and team. I've got a couple of questions as it relates to the 3P plan, given what's happening in the copper market currently. I guess my first question is, how are you guys thinking about a hurdle rate for copper world, given the movement in the copper price?
spk06: Hi, Dalton. You know, the free-free plan is a thoughtful plan that kind of looks throughout the cycle and, you know, the basis of that potential sanction decision on the rate of return part was 15%. IRR, a minimum of that at base prices and when we put out that study that was 350 copper and certainly the PFS that we released last year achieved that. Obviously at today's higher prices that we're going to see in the IRRs if they were to hold during the period of build and through first production at those levels IRRs north of 20 and so certainly that's one element of the plan that I think is is clear on track. I mean, the current prices have allowed us to achieve deleveraging faster than originally planned. And, you know, we're very pleased with that result. And as I think Peter mentioned, over $200 million of net debt reduction in the last three quarters since the acquisition of Copper Mountain. And now we're at 1.3 times net debt to EBITDA. So from a financial standpoint, we're getting towards that. I don't think we... there's nothing to relax on the hurdle rate for investment in copper world. We think it's still prudent to have those strong IRRs, that there's significant work needs to be done on planning and the feasibility studies still. So the production, we know the project's a great project. As Peter mentioned, it's the highest grade undeveloped copper deposit in the Americas at the reserve stage. Consequently, it has very high returns. That's the type of projects that Hy-Vee wants to invest in.
spk04: Thanks, Eugene. Given everything you just said, I guess my second question is, do you still want or need to do a deal on the project? Then part B, I guess, is would you consider doing a deal ahead of the permits just to take advantage of current market conditions?
spk06: Again, we're going to stick with the plan here. The plan is to get the permits and get a partner. Given the attractiveness of the project, we expect that there's certainly lots of interest. I don't think front-running the permits with a partner today in today's sort of hot environment is the right thing to do from a prudent planning basis. We're going to evaluate once we have the permits and how we move the project forward to create the most value for shareholders and potentially that partnership, but I don't think you get the stained highest value by doing this in front of the permits to try to get a quick win here. We want to look at this over long term in terms of what's best for the company in terms of the percentage we sell, the valuation of the project. And also, as I think Peter highlighted in his remarks, the optionality of phase two, given the improved permitting environment. There's a lot of value there by just sticking with the plan here and executing.
spk00: I think I'd add, Dalton, that there is occasional fierce debate amongst the management team about the options. But we typically land back at where Eugene, at the scenario Eugene has described. But we'll continue to debate this going forward.
spk04: And so then maybe one last one, if I can squeeze it in. As you look at Copperworld and you think about buy versus build in the current environment, can you talk a little bit about how Copperworld compares to market valuations on a per ton of copper basis?
spk00: I'll kick off by saying that if you look at capital intensity, Copper World has a capital intensity of sub $16,000 an annual ton. So in comparison, Copper Mountain cost us about $12,000 an annual ton. But when you look at projects that others are building, they cost $20,000 to $30,000 to $40,000 per annual ton. So, you know, if you could acquire, if we could acquire something like the Cotton Mountain at $10,000 or $12,000 an annual time, of course we'd be happy to do it, but, you know, it's a bit of a unicorn. So we continue to try to find, but the ease of implementation of Copper World is extremely attractive, I believe, and it makes that, the capital intensity which stacks up very well against peer projects, highly, highly attractive. So in the absence of good acquisitions to buy, this is the way to go. And we've demonstrated in the past that we're good at this. And so, you know, we're excited to do it. I have nothing further to add. Peter? All right.
spk04: Well, thanks very much, guys. That's all from me. Congratulations.
spk08: Thanks, Dalton.
spk07: Thank you. This concludes the question and answer session. I would like to turn the conference back over to Ms. Candice Burleigh for any closing remarks.
spk08: Thank you, operator, and thank you, everyone, for joining us today. If you have any further questions, please feel free to reach out to our investor relations team. Thank you. Have a good day.
spk07: Ladies and gentlemen, this concludes the conference call for today. You can now disconnect your lines.
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