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2/20/2025
Good day, and thank you for standing by. Welcome to the Lundin Mining Fourth Quarter 2024 in-year and financial results conference call. At this time, all participants are in listen-only mode. Under the speaker's presentation, there will be a question and answer session. To ask a question during this session, you'll need to press star 1-1 on your telephone. You'll then hear an automated message advising your hand is raised. To withdraw your question, please press star 1-1 again. Please be advised that today's conference is being recorded. I'd like to hand the conference over to your first speaker today, Jack Lundeen, President and CEO. Please go ahead.
Good morning, and welcome to Lundeen Mining's full year and fourth quarter 2024 earnings call. Last night, we reported our operating and financial results. A copy of our news release and presentation are available on the Lundin Mining website, where a replay of this webcast will also be made available. All figures presented today are in U.S. dollars unless otherwise noted. Before we begin our presentation, I would like to remind everyone that yesterday's results and certain comments on the call include forward-looking statements. Please refer to the cautionary statements on slide two for reference. Joining me on the call today is Titor Poulsen, our CFO, and Juan Andres Morel, our COO, to present the financial and operating results for the company. 2024 was a milestone year for the company. We posted record copper and zinc production for the year, which translated to strong financial results for Lundin Mining. On the business development front, we increased our ownership in the Casaronas mine from 51% up to 70%, which contributed just under 24,000 tons of annualized attributable copper production to the company in 2024, as these benefits were realized from the 1st of January and equates to approximately $14,500 per ton acquisition cost, which is highly accretive for our portfolio. In July 2024, the company announced the acquisition of Filocorp, owner of the Filo del Sol Copper-Gold-Silver project with BHP valued at $3 billion and the 50% sale of the Jose Maria project to BHP for $690 million to form a 50-50 joint venture called Vicuña Corp. This transaction recently closed on January 15th and Vicuña is currently operating as an independent JV unifying the Filo and Jose deposits. The transaction was the largest copper miner acquisition in 2024 and a top five M&A deal in the sector last year. The formation of Vicuña Corp has positioned the company on a clear path to becoming a top tier copper producer. Vicuña is targeting a new and updated mineral resource estimate at Filo del Sol and Jose Maria within the first half of 2025. These resource estimates will form the basis of an integrated technical report, which will outline the development plan for the phase construction of the district in Argentina. In December, we announced the sale of Nevis Corvo and Zinc Reuven to Boliden for a consideration of up to $1.52 billion. This transaction streamlines our portfolio by reducing the number of operating assets from six to four and removes two operating jurisdictions. while simultaneously strengthening the company's balance sheet to support our ambitious growth plans in the Vicuña district. We updated our mineral reserves and resources, which contains approximately 10.8 million tons of proven and probable copper reserves. We successfully offset mine depletion and replaced reserves associated with the pending sale of our European assets driven by a combination of the phyllo acquisition, which adds an oxide mineral reserve, and continued success from conversion drilling, mainly at Candelaria. Lundin Mining also celebrated its 30th anniversary in 2024, reflecting our longstanding legacy of creating value in the base metal sector, a great milestone and a testament to the amazing people that have worked and continue to work within the organization. Operationally, our assets performed well, delivering on guidance in all consolidated metal categories. As mentioned, annual copper production was another record for the company at 369,072 tons, and zinc production hit a new record at 191,704 tons. We produced also 158,000 ounces of gold in the year. Candelaria had one of its best half-year performances in its 30-year history, producing nearly 100,000 tons in the second half of 2024. We generated adjusted EBITDA of $1.7 billion, $1.46 of which was coming from our continuing operations when excluding Nevis Corvo and Zinc Reuven, and free cash flow from operations of $873 million during the year. In 2024, we directly returned $227 million in dividends and buybacks. Of note, we purchased 3.3 million shares under our NCIB program in December. I will now hand it over to Juan Andres to go through the operational results in more detail. Thank you, Jack, and good morning, everybody.
We previously released our production results earlier this year, and today I will speak briefly to some of the details provided in our year-end release. As mentioned earlier, the company met metal production guidance on a consolidated basis for all metals in 2024. Copper production was a record for the company at 369,000 tons for the year and 101,000 tons for the quarter. Gold production for the fourth quarter was approximately 46,000 ounces, and for the full year, 158,000 ounces, which was in line with guidance. Candelaria had a strong second half, producing almost 100,000 tons of copper. In the fourth quarter, the mill processed 7.6 million tons of ore and produced 49,000 tons of copper. Full year production at Candelaria was 162,000 tons of copper, which was just under guidance as higher grade material in the second half of the year trade off in December, which was expected to continue to the end of the year. Cacedones performed well and hit the midpoint of the original guidance of 120,000 to 130,000 tons. The labor action in Q3 impacted overall production for the year. During the fourth quarter, the mine produced 32,000 tons of copper. Higher production volumes were driven by higher throughputs, which totaled 8.8 million tons for the quarter, with an average of 4,300 tons per hour, also a record for Cacerones. Checkpata was second half of the year weighted. During the fourth quarter, throughput was good at 5.9 million tons, which produced 12,300 tons of copper. Combined with higher grade, it was the best quarter of the year. In the first half of the year, Chapada produced 19,300 tons versus the second half at 24,000 tons of copper for a total on a full year basis of 43,300 tons. Zinc production was higher quarter over quarter at 52,000 tons and a new quarterly record which contributed to a yearly zinc production record for the company. Production at Neves Corvo was 28,000 tons of zinc and production at Zingruben was 24,000 tons for the quarter. In December, we announced the sale of Neves Corvo and Zingruben to Boliden for a total consideration of up to $1.52 billion. We expect this transaction to close in the second quarter of this year. As such, these assets are held in our portfolio as discontinued operations. On consolidated basis for the year, Lundin Mining produced 192,000 tons of zinc, which was in line with 2024 guidance. Nickel production was 1,600 tons for the quarter. and 7,500 tons for the year, which was in line with the revised guidance for EGLE. The fall of ground that occurred in the lower ramp in the second quarter impacted production in the second half of the year. This has been remediated and we expect throughputs to return to normal this quarter and for the remainder of 2025. We continue to see progress at our assets and 2024 was a good year. The team will continue to focus on operational improvements in 2025 to drive margins and improve the cost profile of our assets. Thank you. I will now turn the call over to Tyler to provide financial summary.
Thank you, Juan Andreas, and good morning, everybody. So, before we go into the numbers, it's worth reminding everyone that due to the pending sale of our European assets, We will be reporting the assets and liabilities for Nevis Corvo and Syncruen as assets and liabilities held for sale. And our income statement will show the financial contribution from these operations as discontinued operations. Also, as the deal is structured on the lockbox principle with the lockbox date being 1st of September 2024, meaning that all economic activity from these operations from 1st of September will be retained within the lockbox at closing of the deal. So with that housekeeping item out of the way, let's move to slide 11. As Jack mentioned, with record copper and zinc production, we generated significant cash flow with record operating cash flow from the operations in 2024. Starting with revenue, we generated a billion dollars during the fourth quarter, including 165 million from discontinued operations. Revenue for the full year amounted to a record 4.1 billion, including 695 million from discontinued operations. Our sales remain predominantly leveraged to copper, with the metal generating 74% of the full year revenue, including discontinued operations, with both zinc and gold also contributing significantly with 9% and 7% respectively. We expect the copper weighting to increase to around 80% copper once the sale of the European assets is completed. Our European assets accounted for 16% of our full-year revenue, but only 14% of our adjusted EBITDA and operating cash flow and less than 9% of the free cash flow from operation. Moving to the next slide, we sold 92,000 tons of copper during the fourth quarter including the volume from discontinued operations. Our sold volumes were negatively impacted by two scheduled shipments from Casarone being delayed to early January due to weather-related issues and resulting in approximately 20,000 tons of copper concentrate being recognized as revenue in Q1 2025 instead of Q4 2024. However, the payments associated with these volumes, approximately $45 million, were still received in December. Pricing adjustment on prior period sales of concentrate impacted revenues negatively by 46 million in the fourth quarter. Copper price realization during the fourth quarter was negatively impacted by the provisional pricing adjustments resulting in a realized price of 375 per pound copper compared to the average LME price for the quarter of 416 per pound copper. Our full year price realization of $4.18 per pound copper was above the full year average LME price of $4.15 per copper. At the end of the fourth quarter, approximately 78,000 tons of copper were provisionally priced at $3.96 per pound and remained open for final pricing adjustments, as did over 700 tons of nickel at $6.87 per pound. During the quarter, the company put in place a gold hedge for 62,000 ounces in 2025 at a zero-cost collar of $2,500 per ounce with a limit of up to $3,125 per ounce. The hedged volume represents about 75% of the annual attributable gold production after streaming. The company has also hedged 43,200 ounces in 2026 at a zero cost collar of $2,500 per ounce with a limit of $3,455 per ounce, representing around 50% of the estimated 2026 attributable production after streaming impacts. We see this as an opportunistically driven hedging program, which still provides exposure to an increase in price, but will help reduce any downside over the year and protects our cash cost profile with our guidance on cash cost after by-product credits being based on a goal price of $2,500 per ounce. Moving to slide 14, consolidated production costs for the fourth quarter amount to $589 million, including discontinued operations, which is in line with the previous quarter. Costs at Candelaria and Casarone increased from the third to the fourth quarter due to higher mining rates, mill throughput, and increased material placed on leach pads at Caserones. For the full year, production costs totaled 2.3 billion, including discontinued operations, and this represents a 12% increase from the previous year, with most of the year-on-year increase reflecting that Caserone is included for the full year in 2024 versus only half the year in 2023. Production cost savings were achieved at Zapata and at Eagle. The cost increase year-over-year of 12% is significantly lower than the copper production increase over the same period, which was a 17% increase. At an asset level, full-year production costs at Candelaria and Castrone remained relatively flat year-over-year. At Zapata, costs have come down from $317 million to $283 million, with our asset optimization efforts really paying off. An optimized mine plan at Chapada has allowed us to have mined around 8 million tons less compared to the previous year, and this has driven a large part of the savings. Local currencies in Chile and Brazil have weakened during the year, and also this helped side costs to some degree. Switching to slide 15, Candelaria's full-year cash costs were in line with guidance and lower compared to last year due to higher gold byproduct credits. favorable exchange and higher production volumes. Cash costs for the year were $1.73 per pound. Cash costs at Casa Rona were $2.51 per pound for the year, which was below guidance and benefited from favorable foreign exchange and strong castle production during the year. Chapada's full year cash costs of $1.58 per pound were better than original guidance and within the revised guidance range of 155 to 165 per pound. Cash costs benefited from strong gold volumes and pricing compared to forecast, which improved the by-product credits for both the full year and the fourth quarter. Slide 16 shows our total capital expenditure for the year. which amounted to sustaining CAPEX of 704 million, including discontinued operations, compared to our revised guidance of 720 million. CAPEX at Jose Maria was 244 million versus a guidance of 230 million. Capital guidance was revised down by $70 million last quarter to reflect the expected yearly spend. The lower sustaining capital investment was the result of reduced stripping requirements and are delaying capital projects and equipment deliveries. Expansionary capital at Jose Maria was $14 million higher than anticipated, primarily as a result of foreign exchange movements. Our full-year and fourth-quarter key financial metrics are presented on the next couple of slides. As mentioned earlier, the full-year revenue, including discontinued operations, amounted to $4.1 billion, including four-quarter revenue of just over a billion dollars. We generated adjusted EBITDA of 1.7 billion for the year, including nearly 426 million in the fourth quarter, both of which include discontinued operations. Adjusted operating cash flow for the year was in excess of 1.3 billion, with 314 million generated in the fourth quarter. The adjusted operating cash flow reported for the year is net of 184 million of cash taxes paid. Moving to the next slide. Free cash flow from all operations was 873 million for the year and 466 million for the quarter, which includes a working capital inflow during the quarter of 306 million from collections of receivables at Casarona, and due to the timing of taxes payable at Candelaria and of 45 million early payment for the delayed concentrate shipments at the Casarone as previously mentioned. Full year adjusted earnings was 359 million and 119 million during the quarter. Earnings during the quarter were impacted by non-cash tax impairments totaling 545 million relating to Eagle, Suruca, Nevis Corvo and Al Caparosa. The non-cash impairment charge at Nevis Corvo of 291 million will be more than offset by a gain on sale of assets relating to Syncruben upon closing of the European asset sale. We remain in a strong financial position and finish the year in a moderate net debt position of just over 1.3 billion, excluding capital leases. but including discontinued operations. With the sale of the European assets expected to close in the second quarter, our pro forma net debt position essentially leaves us in a net debt free position as of year end 2024. Our current net debt level corresponds to a leverage ratio of less than 0.8 times net debt EBITDA. Slide 19 presents in greater detail the sources and uses of cash during 2024. Our operations including discontinued operations generated cash flow of just over 1.5 billion dollars during the year and after accounting for sustaining capital spend and excluding exploration and business development costs of 58 million the company generated 873 million of free cash flow from all operations. The company spent net cash of 42 million at the on the field of share acquisition and paid 25 million as the final part of the deferred contingent payment relating to the Japada acquisition. The company also spent 350 million on exercising the 19% call option on the Casarona and 10 million related to the Casarona deferred consideration. The company had a cash outflow of 120 million on interest paid. The company paid a full year dividend which amounted to just over $200 million. Lastly, dividends to non-controlling interests in Candelaria and Casarone amounted to 152 million. The company ended the year with 432 million on a consolidated cash basis for all operations. The company continues to have a strong liquidity position with available liquidity headroom within our RGF of 1.5 billion as of year end. With that, I'll turn the call back to Jack.
Thank you, Titor. In January, we announced updated three-year guidance for production, in addition to operating cash costs and capital expenditures for calendar year 2025. Copper production is forecast to be between 303,000 and 330,000 tons on a consolidated basis in 2025. Compared to last year's three-year outlook, the company's European assets have been removed from our future projections. As well, optimized mine planning at our Chilean operations have resulted in changes to the copper production guidance. At Candelaria, a reduction in overall mine movement from the open pit and underground by about 26% has led to changes in head grades for 2025, which impacted copper production guidance downwards by approximately 6%, compared to the midpoint of last year's outlook, thereby improving the operating margin of the mine. At Casaronas, a more conservative estimate on mill throughput has been forecast to be consistent with throughput rates achieved in 2024 of about 32 million tons. Consolidated gold production is forecast to be between 135,000 to 150,000 ounces in 2025. Higher consolidated gold production in 2026 is due mainly to the planned gold grade profile at Candelaria. Ramp rehabilitation has been completed at Eagle, and throughput is expected to average 2,000 tons per day, similar to 2024 levels prior to the fall of ground. Nickel production is forecast to be 8,000 to 1,000 tons per of nickel in 2025, which is an increase compared to last year. A focus on cost control has resulted in cash costs at several of the mine sites decreasing, including Casaronas and Chapada. As can be seen on this slide, we have provided a consolidated C-1 cash cost guidance of between $2.05 per pound to $2.30 per pound for the year. In general, cash costs at the sites reflect lower treatment and refining costs and higher gold byproduct credits. Next slide shows capital expenditures. This year, we plan to spend approximately $530 million in sustaining capex at our four operating mines, which is $130 million lower than last year's guidance. This accounts for the sale of our European assets and incorporates capital reductions resulting mainly from mine plan optimization work. At Candelaria, the aforementioned updated mine plan results in lower tons moved. A large portion of this movement is capitalized stripping, which lowered the sustaining capex by approximately $70 million. We have $50 million in expansionary capital this year at Candelaria, which is primarily budgeted for a power line relocation and other 2040 EIA initiatives. In the next slide, we talk exploration, where exploration this year is estimated to be around $40 million, and we will target drilling of almost 60,000 meters between Casaronas, Candelaria, and Chapada. The drill program at Casaronas will focus on deeper in-pit drilling to better define higher-grade breccia zones and to continue testing the sulfide mineral potential below the Angelica oxide deposit. In parallel, within our large district land package, aggressive field mapping and geophysical programs will continue throughout the year to prioritize our best new exploration targets. At Candelaria, drilling targets are aimed to continue to expand the underground resource while also growing the shallow La Española deposit and neighboring La Portuguesa target. Last year, drilling at La Española largely offset depletion, and the conversion of inferred mineral resources grew the measured and indicated mineral resource categories at Candelaria. While at Chapada, additional drilling at Sauva will continue to further define higher-grade resources that will be incorporated into an updated resource estimate and technical report. At Chapada, as seen on this slide, we will plan to drill up to 20,000 meters. In January, we closed the joint acquisition of Thilo with BHP. This partnership creates the start of a long-term strategic alliance between Lundin Mining and BHP to jointly develop an emerging copper district and sets the stage for a multi-generational growth period for Lundin Mining that will allow us to become a top-tier copper producer. Vicuña is an independent company that is overseen by a four-person board of directors, two from Lundin Mining and two from BHP. The Vicuña Board will be comprised of myself and Titor Polson, and from BHP, Brandon Craig, the President of Americas, and the Chair of the Board will be Carlos Ramirez, who is the VP of the Vicuña JV for BHP. The joint venture is being led by Dave DeCair, the former Executive Vice President of the Jose Maria Project for Lundin Mining. Dave has over 40 years of mining engineering and construction experience from a variety of global projects that includes leading both the owners team and the EPCM team. The development of the Vicuña district envisions an integrated project plan incorporating both the Filo del Sol and Jose Maria projects through a phase development strategy. Capital expenditures for the joint venture are forecast to total $312 million on a 100% basis for 2025, half of which will be funded by Lundin Mining. The work plan is focused on drilling, mineral resource estimation, mine planning, metallurgical test work, and offsite infrastructure works, such as the road access to the project area. Vicuña is targeting a mineral resource estimate for both Filo del Sol and Jose Maria deposits in the second quarter. The resource estimate will form the basis of an integrated technical report, which will outline the development plan for the phased construction of this district project. The integrated technical report is scheduled to be completed in Q1 2026. The work plan that was developed for Vicuña was established to ensure that the integrated projects will be sufficiently advanced and de-risked in such a way that enable eligibility to join the incentive regime for large investments within Argentina, otherwise known as RIGI, as a long-term strategic export project. The RIGI process provides a clear fiscal stability framework for the overall operation during the initial construction period and future phased expansions. As outlined by Titor and Juan Andres, record production in copper and zinc resulted in strong financial performance for the business. The transactions which were announced during the year repositioned the company for an exciting chapter of growth underscored by a strong operations base at Lundin Mining. The joint venture will be key to unlocking the enormous value that the Vicuña district represents. Philo del Sol is one of the largest undeveloped copper, gold, silver deposits in the world, and the partnership with BHP will position the company to create a multi-generational mining district that has the potential to become one of the largest of its kind. The divestiture of European assets has simplified our portfolio, strengthening our balance sheet, and allowing us to focus on future growth opportunities. Increasing our ownership in Casaronas to 70% added approximately 24,000 tons of annualized attributable copper production to the company, offsetting some production loss as a result of the sale of our European assets. It was an exciting year in 2024 for the company, and we are extremely motivated and excited about the year ahead. With that, thank you for your time, and I'd now like to open the lines for any questions.
Thank you. At this time, we'll conduct a question and answer session. As a reminder to ask a question, you will need to press star 1-1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1-1 again. Please stand by while we compile the Q&A roster. And our first question comes from the line of Yannis Masoulis of Morgan Stanley. Your line is now open.
Thank you very much for the presentation. A couple of questions from my side. First on Vicuña and the development options, is the state's development still the base case, or are you also considering a potential parallel development of Josemaria and Filo to accelerate the growth opportunity? Thank you.
Hi, Jonas. This is Jack here. Thanks for the question. Yeah, very much we're focusing on a phase development plan, but first and foremost for us, the key milestone is to come out with an updated resource on Jose Maria and a new maiden resource for the sulfide component of the Filo del Sol deposit. Both these resource estimates will form the basis for the integrated project, which will be envisioned to develop uh you know in in phases um however you know with the work that we're doing this year we'll see kind of how we sequence phases so phase two could come in in parallel as we're ramping up with phase one um but we're definitely looking at doing this in a in a sequenced manner you're very clear thank you and second question on capital allocation um we saw the uh i back of 40 million dollars in in december
which you executed despite the large capital commitments in the years ahead. At the current share price, shall we expect you to scale up the buyback, which I believe you could buy back up to 10% of issued capital? And would it also make sense to potentially look at preserving cash to improve your balance and flexibility going forward? Thank you.
Yeah, so we've remained consistent in our statements saying that we're committed to continue to returning capital to shareholders. So, you know, we've seen our share price and we believe that we're trading at a steep discount to our underlying value. And therefore under our NCIB, we're able to purchase shares in the form of buybacks. So we've initiated that in December, we bought a 40 million Canadian worth or about 3.25 million shares. And we'll remain opportunistic with our share buybacks. And we declared our Q4 dividend as well when we came out with the results yesterday. So, we'll remain opportunistic, but the key for us is to continue to provide returns to our shareholders even while we're looking at growing our portfolio through these development opportunities.
Thank you. And just one last one, if I may, on the growth optionality. Clearly, focus has been in Argentina, but in the past few years, we have been talking about Candelaria, the QGEP project. We've been talking about Chapada potential expansion. How do you think about these projects? Are these on the back burner now, or do you feel you have technical and financial capacity to consider some of these projects as well? Thank you.
Yeah, it's a great question and for us it's very important that we look to pursue opportunities at all of our sites. You mentioned two of them, the underground expansion at Candelaria and then as well a brownfield expansion project called Saúva at Chapada. These opportunities are still very much in the pipeline. We're looking at optimizing and seeing how we can improve margins at our existing operations, but also look at growing production. While we embark on this journey for Vicuna Corp, we're still looking at extracting value by growth and improving margins at our existing mine sites. Thanks very much.
Thank you. One moment for our next question. Our next question comes from the line of Oris Wakada of Squash Bank. Your line is now open.
Hi, good morning. Just following up on the previous question about plans for the Pashuna District. So with the joint venture now closed, I'm just wondering if the scope of Phase 1 is still, if we should anticipate that to be similar to the standalone, the previous plan of about 150,000 ton a day in Jose Maria, or could that materially change in terms of now that it's a joint venture? Sure.
Hey Oris, thanks for the question. You know, obviously right now as we're consolidating both phyllo and Jose Maria together, we open up for new opportunities and very much we're focused on developing phase one in a way that it could allow for, you know, the rapid expansion and likely bringing in, you know, as efficiently as possible the phyllo sulfide zone. And so, You know, we're working through this technical report in parallel. And as I was mentioning, you know, focusing on getting that resource estimate out in Q2. And I think it's going to be, you know, phase one will envision a large scale mining operation, which could therefore, you know, allow for a rapid, you know, increase in throughput and overall size and scale of the integrated project. But I think, you know, where we're at today, phase one definitely looks similar to, what we were designing when Jose Maria was a standalone.
Okay, perfect. And in terms of timing, I think you mentioned we should anticipate a technical report on the integrated level in 2026. Does the timeline then suggest we should anticipate, hopefully, a sanctioning decision around the end of 2026? Is that kind of the right way to think about it?
As we... As we go through and set up kind of these milestone targets for Vicunia Corp, the resource estimate, the integrated technical report, we'll further define kind of when that sanctioning date needs to be targeted. But for us, I think with our partnership with BHP, I think we're both very keen and very focused on advancing these projects at pace. And once we get a full understanding of what the integrated project looks like and our ability to sign up for RIGI and ensure that we've got a clear fiscal stability framework associated to both the Philo and Jose deposits and looking at this as an integrated project, that will help us with when we can define sanctioning. But for us right now, the resource and the integrated technical report and RIGI are really the focus. Okay, thanks for calling.
Thank you. One moment for our next question. Our next question comes from the line of Daniel Major of UBS. Your line is now open.
Hi, thanks for the questions. Two questions. First one, just following up on the Argentina development you mentioned about RIGI, can you Just give us a reminder of the deadlines, timelines around application, and then a reminder of how much capital needs to be spent within what time to ensure that the project's eligible.
Sure. So in July of 2024, last year, the RIGI bill was successfully passed through Congress, and therefore we're able to sign up within a two-year window which would put us into july 2026 of next year um sorry july 26 july 2026 um embedded within that you know summary and detail of the projects that include you know general information on the project obviously location of the activities the um you know proof that the project can be defined as a single project thereby integrating both filo and jose maria various investment data so you know our capital requirements um our schedule of when we would be um you know putting the the capital in the ground um and and then the ability to get up to uh i think 40 percent within 40 percent of the initial capex within the first four grams of two billion which is 40 percent of of two billion within the uh first two years two years is is what would uh make us eligible for REGI.
Okay, so it's just 40% of $2 billion, so $800 million within the first two years of the 26th, July 26th deadline, so after that. So by 2028, you would need to have spent $800 million. Is that correct?
Well, it's 40% of when you start the initial capital schedules. So when you start that initial capital investment, That is when you would basically need to be showing that you're putting that investment in, correct?
Okay, so 40% of the initial capital for the entire project needs to be spent within the first two years, yeah. Oh, phase one.
Yeah, sorry. Maybe just to clarify, it's... Because there are certain thresholds, like there's a billion dollars or two billion dollars. Our project is of such a magnitude that it easily qualifies for the highest bracket, which is over two billion dollars. So the 40% expenditure relates to that bracket of two billion. Irrespective of what our actual cap is, it's 40% of two billion, which is, as you say, $800 million over the first two years, which, you know, given the magnitude of our project, we will easily be spending that in any regards when we are off into the construction phase.
Got it. That's very useful. Thanks. And then second part of my question is a follow-up on the cash return dynamic. I totally understand your comments around wanting to be opportunistic on the buyback. But if we look at the current run rate of the dividend, say out to 2030 or slightly further than that, it's cumulative north of a billion dollars of capital committed and sort of baseline capital returns. Is that the appropriate level as you move into peak capital expenditure in Argentina, or is this something that's going to be reviewed and perhaps more of a skew to a lower dividend and more opportunistic buyback?
Yeah, thanks for the question. So, When we were looking at putting together the formation of Vicunia Corp, when we were looking at the long-term projections for Lundin Mining, we've always maintained that we would like to be returning capital to shareholders at the rate that we have over the last several years. And so we're very much committed to doing that. But the question around the split between a dividend and buyback, I mean, we're going to be commercial in the decision. And given where our share price is trading, we believe right now that buying back stock at these levels is accretive to Lundeen Mining and to the shareholders. And so I think the levels that we've projected and what you're saying is pretty in line with what you can expect.
Okay, great. Thanks for that. I'll pass to someone else.
Thank you. One moment for our next question. Our next question comes from the line of Connor McKay of Venom Financial. Your line is now open.
Hi, guys. Thanks for taking my question. Firstly, I just want to dive into the Filo resource. I know you mentioned that in the press release that it'll be likely focused on the Aurora and Bonita zones. I'm wondering is that should we be expecting a full inferred resource or have parts of the deposit been drilled off to such an extent that we could potentially end up with some indicated supporting future reserve estimates from this first pass?
Hey Connor, so the the field resource will actually be an update on the entire deposit and you know, including oxide and sulfide. where there is more definition around drill hole spacing is tighter, then we will be able to have more definition and therefore be more in the measured or indicated category. So it won't just be an entire inferred resource. But of course, as we put all of this together and update the market in Q2 on that, you'll kind of see the entirety of the deposit, not just focused on one area.
Awesome. Thanks. Um, and then just jumping into, um, uh, potentially some color on the mine planet, uh, at Casserona is, you know, I know you mentioned that, um, there were some challenging hydrogeological conditions in phase five, um, that required jumping into the lower grade phase six or sooner than expected. Uh, are those conditions being mitigated and is it possible to get back into some of that higher grade, uh, zone, um, during the year or, uh, how are you looking at that going forward?
Juan Andres, thank you for the question. We were able to solve the mine dewatering challenges that we had in the first half of the year. So as of now, we think that all the dewatering is under control. So we will resume the original mining sequence. So we don't expect this to become an issue going forward.
Perfect. Thanks. That's it for me. Thanks, guys.
Thank you. One moment for our next question. Our next question comes from the line of Ioannis Maspelis of Morgan Stanley. Your line is now open.
Ioannis Maspelis Yeah, I had a couple of follow-ups. First, in clarifications, first in Cacerones, you indicated that delayed shipment of 20,000 tons in Q4. But if we look at the difference between production and sales volume, that's only closer to 5,000 ton delta. Could you just clarify that point? And then the second point on the locked box arrangement, how will the cash flow from the two assets feed through the financial statements until the deal closes, both balance sheet and your cash flow statement? Thank you.
Hi, Carlos. It's Ty to hear you on. On the volumes, yeah, I should say it's 20,000 tons of concentrated and I think the grade is roughly 30% or thereabouts. So that is the net sort of deferral of sales from Q4 into Q1. But as I said, you know, we got paid upfront for those shipments. So the cash inflow came in December. And then you have where there's other moving parts and just, you know, normal year end sort of shipment, some fall just on the other side of the new year and some come early. So plus the payables obviously versus, versus production where you always have a, have a delta of a few percentage points. So I would say the remaining difference is pretty business as usual sort of difference. Uh, and then on your question on, on the locked box. So, so the principle here is that from 1st of September last year, that is effectively the economic handover of these assets to Boliden subject to final close, meaning that any cash generation or indeed any additional funding going into those assets from 1st September really is for the account of the buyer Boliden. So whatever cash accumulation occurs from 1st September until whenever we close will transfer over to to Boliden, so there will be no adjustment on that cash on closing. The flip side to that is that on the consideration, so we have a firm consideration of $1.37 billion, and we are earning a 5% interest on that amount from 1st of September until we close. So that's roughly an interest income of $6 million per month. So whenever we close, Bolivian will have to pay us 1.37 billion plus the accrued interest on that amount. So that is the mechanic of the cash flows from the deal, which is why we are saying on a pro forma basis, given our year-end net debt of 1.33 billion, on a pro forma basis, we are effectively net debt-free at year-end because of that.
Very clear. Thank you.
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