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spk02: Good morning. My name is Sylvie and I will be a conference operator today. At this time, I would like to welcome everyone to the Copper Mountain Mining Corporation fourth quarter and full year 2021 results conference call. Note that all lines have been placed on mute to avoid any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star then number one on your telephone keypad. And if you would like to withdraw your question, please press star then number two. Please note that comments made today that are not of a historical factual nature may contain forward-looking statements. This information by its nature is subject to risk and uncertainties that may cause the stated outcome to differ materially from actual outcomes. please refer to slide two of today's presentation in Copper Mountain's fourth quarter 2021 management discussion and analysis for your information. I will now turn the call over to Gil Klassen, President and CEO of Copper Mountain. Please go ahead, sir.
spk07: Good morning, everyone, and thanks for joining us. We are starting on slide three. Presenting with me are Rod Shire, our Chief Financial Officer, and Patrick Redman, our Senior Vice President of Exploration and Geoscience. Unfortunately, Eric Bell, our Senior Vice President of Operations, won't be able to participate this morning. I'll begin by highlighting some of our main achievements in 2021, then give a more detailed discussion on our operation during the quarter, along with an update on some of the projects we have at the Copper Mountain Mine. Rod will speak to our financial results and Patrick will provide an update on our drill programs. I'll wrap up with a further update on our EVA copper project in a brief discussion of our 2022 guidance. We'll then open the call to questions. Turning to slide four. We had a strong 2021, finishing the year with record revenue, net income, EBITDA and cash flow. These results were driven by record annual production of about 90 million pounds of copper and higher copper prices. This was achieved in the face of a very demanding fourth quarter in which we experienced severe weather impacts and a major failure of our secondary crusher. We had heavy rains and flooding, followed by severe cold temperatures, which caused extremely difficult operating conditions in December. I'm very proud of our team for coming together and pulling through. It's because of them that we met our production guidance range, which we had increased earlier in the year. We ended up coming right in at the midpoint of our original guidance and the bottom of our revised guidance range. With these strong financial and operating results, we finished the year in a very solid financial position with nearly 180 million of cash and a low net debt to EBITDA ratio of 0.6. This is a significant improvement from the end of 2020. Also, we completed a transformational financing earlier in 2021 with the US $250 million bond raise. allowing us to repay the more restrictive debt we had in place so that now we can access 100% of our cash flow from the mine. Also in the year, we commissioned our new third ball mill, which completes the 45,000 ton per day mill expansion project. This increases throughput and improves recovery, resulting in higher production going forward. We made another step forward in our growth plans with the approval of construction for the Eva Copper project, contingent, of course, on the lifting of COVID-19 restrictions in Queensland, easing of material and labor flow, getting project financing complete, and completing the detailed engineering to an 80% level. A big achievement in 2021 that we are very proud of is hitting our sustainability targets for the year. Our goal was to meet or exceed an A rating on each of the TSM protocols, and we did just that. I'll now detail our operating results and development plan. First, I'm going to start with an update on safety. a significant reduction in our total injury frequency rate in 2021 compared to 2020, achieving a record low since the start of Copper Mountains operations. Our lost time injury frequency rate is also below BC average for mines. So we're proud of the accomplishments for this year and we're demonstrating a steady trend of declining injury frequency rate. I'll now move on to production, turning to slide five. As I mentioned, the fourth quarter was challenging with production of 16.7 million pounds of copper. Production was lower than the fourth quarter of 2020 due to lower grades and reduced throughput. The lower grade was a result of ore being mined mainly from the lower grade phase two area for most of the quarter. We did plan this for the commissioning of ball mill three. Lower throughput was a result of that commissioning, damage to the secondary crusher's main shaft in the second half of November, and severe cold weather in December. The severe cold weather created more difficult operating conditions, including frozen bins, and conveyor system damage due to frost chunks and feeders, particularly for the feeder billet from the sagnell. The secondary crusher main shaft was temporary fixed, weld repaired by early November. However, the temporary nature of that fix required us to reduce power to preserve that shaft repair, and that reduced power results in a coarser coarser crushed product, and so therefore we have lowered sag throughput as a result. Because of the temporary nature of this fix, the mill throughput is expected to remain at a reduced level of about 35 to 38,000 tons per day as we baby this crusher along through to mid-two, and that's when we expect to install a new main shaft in or around the end of April. We expect production to be stronger in the second half of the year compared to the first half of the year with the installation of the new crusher shaft, the completion of our plant improvement projects, and as we begin to mine higher grade ore from phase four. Just to touch on cost before we move on, cash costs on a per pound basis were higher in the fourth quarter, largely due to lower production and higher operating costs from diesel and steel grinding media supply and subsequent cost pressures. Turning to slide six, as mentioned, most of our ore came from the lower grade phase two area of the main pit. The phase four pushback continued in Q4, removed 5.4 million tons of waste from phase four, accounting for 65% of the total waste movement in the quarter. Phase four mining is continuing to progress, and it will be the main source for the second half of 2022 and into 2023. We have now started the North Pit pre-stripping development as well. Turning to slide number seven, the company has been investing in our plant to improve efficiencies, copper recovery, and production. We achieved a significant milestone with the commissioning of ball mill three. The new mill will allow us to increase throughput, as I mentioned, to 45,000 tons per day and achieve a finer grind. And that will help us improve our overall metal recovery by about 3% to 5%. We've run ball mill three up to capacity but we won't be able to get to a steady 45,000 tons per day until we fully repair the secondary crusher and it begins to run at its design rate. So the sag mill won't be able to get up to feeding the three ball mills fully until that crusher is repaired. We're also installing another concentrate filter press and increasing cleaner circuit quotation capacity. This new filter press will be installed in an extension to the existing concentrate storage building as shown on the bottom left of this image. A new large flotation column cell is being installed inside the existing mill building and an expansion of the rougher flotation circuit will take place to the north of the building. Turning to slide eight, this new filter press will allow the mill to maintain maximum tonnage rates while processing higher grade ore for extended periods. Concrete installation is nearing completion and the filter press is expected to be delivered on site by the end of March. The cleaner column expansion will support maximum cleaner circuit recovery for all ore types, eliminating a production bottleneck at higher grade and tonnage. The concrete work has now been completed and we're starting the assembly of the column. The expansion of the rougher flotation circuit will enhance rougher recovery for all ore types and provides expanded retention time in the rougher circuit. All of these projects are advancing well, and we expect to complete construction by the end of Q2 this year. These projects are part of our longer-term growth plan, and they will generate significant value by increasing our overall return on invested capital in the mill. Turning to slide nine, we're rather excited about this project at Copper Mountain. It's the Trolley Assist Project. It'll significantly reduce our greenhouse gas emissions as we reduce our diesel usage. We completed the one-kilometer haul road in the third quarter last year. The trolley e-house has been delivered to site and installed, and we finished installing the 25 kV transmission line to the e-house. We're targeting to commission the first four trolley assist haul trucks by the end of Q1 2022. I'll now turn the call over to Rod to go over our financial results.
spk00: Thank you, Gil. Starting on slide 10, and as noted by Gil, the company had a record-breaking year, and the financial results and the year-end cash position definitely show it. Revenue for the fourth quarter of 2021 was $137 million, on the sale of nearly 19.4 million pounds of copper, approximately 6,300 ounces of gold, and about 108,000 ounces of silver. Increased revenue was a result of higher copper sales and prices, which averaged about US $4.44 per pound of copper for the quarter versus US $3.35 per pound of copper for the fourth quarter of 2020. Revenue for the full year of 2021 was 578 million on the sale of 93 million pounds of copper, approximately 29,700 ounces of gold, and 533,000 ounces of silver, compared to revenues of 341 million for 2020. The increase in revenue was due to higher copper prices realized during the year, as well as due to selling more pounds of copper and more ounces of gold and silver. Cost of sales for Q4 2021 was $64.6 million as compared to $59 million in Q4 2020. The increase in cost of sales can mainly be attributed to the increase in pounds of copper sold in Q4 2021 as compared to Q4 2020. Cost of sales is also affected by the allocation of mine operating costs to deferred stripping. with $5.3 million allocated to deferred stripping in Q4 2021 as compared to $8.4 million in Q4 2020. This resulted in a gross profit of $72 million for the fourth quarter of 2021 as compared to $47 million for the fourth quarter of 2020. Costs of sales for the year end at 2021 were $257 million compared to $237 million for the prior year. This increase in cost of sales is mainly a result of increased volumes of copper sold during the year. It should be noted that cost of sales for 2021 is net of $35.5 million of mining costs allocated to deferred stripping as compared to only $23.8 million in the prior year. This resulted in a gross profit of about $321 million for 2021 compared to 105 million in 2020. Now turning to slide 11. Net income for the fourth quarter of 2021 was 31.5 million or 11 cents per share as compared to 28 million or 10 cents per share for the fourth quarter of 2020. Net income for the fourth quarter of 2020 included a non-cash unrealized foreign exchange gain of about 13.9 million compared to a non-cash unrealized foreign exchange gain of only $1.2 million for 2021. For the fourth quarter of 2021, the company recorded EBITDA of $67.7 million, and after backing out the unrealized foreign exchange gain and the mark-to-market adjustment for the quarter, adjusted EBITDA was approximately $59 million. The company recorded EBITDA of $306 million for the year end at 2021, as compared to $118 million for the prior year. Adjusted EBITDA was $288 million for the year end at 2021, as compared to $88 million for the prior year. Again, this strong showing of EBITDA and adjusted EBITDA is directly attributable to the increased sales and higher metal prices realized during the year. Cash flow from operations was $47 million for the fourth quarter of 2021 and $312 million for the full year. This strong result has allowed us to end the year with approximately $180 million in cash on end and a net debt to EBITDA of 0.6, which is significantly lower than the prior year. This was very much a strong year for the company, which saw the balance sheet improve significantly. I will now turn the call over to Patrick.
spk04: Thanks, Rob. We've been drilling extensively on the Copper Mountain mine property. The current drill program comprises around 37,000 meters of diamond drilling and 14,000 meters of RC drilling and will be completed in Q1. Slide 12 summarizes the ongoing New Ingrebell portion of the program. comprising approximately 27,000 meters of diamond drilling. The inset map on the right shows the historical New Ingram Bell pit outline as a dashed black line and the current reserve pit as a dashed red line. The long section also shows the historical pit outline as a dashed black line and the current reserve pit as a shaded gray area. You can see the extent of the deeper drilling below the current reserve pit which is double the vertical extent of copper mineralization, as well as extending mineralization to the west. The long section also shows the most recent positive drilling results, which we expect will result in a significant increase in the New Ingrebell resource and reserve. We will complete the drill program this quarter and incorporate the results into an updated resource and reserve estimates to support a new life and mine plan for publication around mid-year And this new life and mind plan will also include a larger meal expansion study. And I'll turn it back to Gil.
spk07: Thanks, Patrick. Turning to slide 13. During the quarter, our board approved the construction of EVA subject to the completion of detailed engineering to an 80% level, having project financing commitments finalized, and most importantly, As I mentioned before, the lifting of COVID restrictions in Queensland, that would allow for the normal flow of labor and materials for construction. Project financing and detailed engineering are advancing well and we expect to be complete in Q3. Concluding on slide 14, the company is providing two-year production guidance as we expect our life of mine plant to change materially beyond 2023. with the release of a new life of mine plan mid this year. The study will be based on a new mineral reserve and mineral resource estimate at the Copper Mountain Mine and test increased throughput rates at the mine. We're guiding this year's production to be around 80 to 90 million pounds, which is slightly lower than last year due to some lower head grades and lower throughput in the first half of the year. Grades will be lower as we will mine from phase two in the first half of the year and advance stripping in phase four of the main pit and do the north pit development. Production is expected to be higher in the second half of the year as we increase throughput. Also with the installation of the new replacement secondary crusher shaft in Q2 and we commission our plant improvement projects by mid-year. Most importantly, we'll begin delivering the higher-grade Phase IV ore to the mill in the second half of the year. We will mine from Phase IV through the following year, which drives higher production guidance range of 90 to 105 million pounds of copper for 2023. Our all-in cost per pound in 2022 is expected to be in the range of US $2 to US $2.50, a wider and higher range than last year due to the forecasted copper production, slightly lower, inflation pressure uncertainty, and COVID-19 and its potential impact on our supply chains and labor. Our all-in cost includes U.S. $10 million of sustaining capital, and $27 U.S. million of deferred stripping. Phase 4 and North Pit Development accounts for most of our deferred stripping this year. Other costs for 2022 include expansionary capital, which we are budgeting to be approximately U.S. $60 million total for EVA development and our Copper Mountain project, concentrator improvement projects. We are about US $4 million in exploration, about $2 million for the Copper Mountain Mine, focused on reserve and resource expansion, and the other $2 million for Australia. 2022 will be a year we invest in growth. We expect to see large reserve and resource expansion growth at the Copper Mountain Mine, and a new life of mine study will demonstrate its scale potential. The concentrator improvement projects now in construction will allow for further improved metal recoveries and higher copper concentrate output. On top of that, we're advancing EVA, a big contributor to future production growth. And with more exploration upside at Cameron Copper, we have clearly begun a transformative organic growth phase for the company. With that operator, we can open the call for questions.
spk02: Thank you, sir. Ladies and gentlemen, if you would like to ask a question, please press star followed by one on your touchtone phone. You will then hear a three-tone prompt acknowledging your request. If you wish to withdraw your question, please press star followed by two. And if you're using a speakerphone, we do ask that you please lift the handset before pressing any keys. One moment, please. And your first question will be from Oris Workadel at Scotiabank. Please go ahead.
spk03: Hi, good morning. I realize there's a lot of moving parts that are embedded in the guidance, the production guidance for 22-23, but I was wondering if we could get a bit of granularity specifically in terms of what you're expecting on average throughput and head grades for copper in 22 and 23. Hi, Oris. Sure.
spk07: Throughput rates, as we mentioned, in the first half of the year are going to be reduced due to that crusher impact. The whole crusher shaft was severely damaged. We had to weld repair that shaft, gouge out the cracks and weld repair it. During that period of time, we were running the sag mill on just primary crusher course or feed, and that really knocks our throughput down. Once we got that crusher reinstalled, we had to replace the bushing and the frame was cracked. We had to repair that and the main shaft repair. Once we got that back up, we've been operating at a reduced power rating on that crusher. So we've cut the power to the crusher and opened it up to get a coarser crush product. So that that's really knocking down our throughput rate. So that's why we're saying about 35 to 38,000 tons per day you should expect through till the end of April. We have a new shaft coming online and that to be installed at that time. So in April, we'll be installing the new secondary crusher shaft. The other parts have been repaired and exchanged. that will be the main driver of getting the throughput rate up. So we really can't take full advantage of the three ball mills we have because the sag mill can't provide enough feed with its reduced levels as a result of the coarse secondary product. So now we're in a situation where we've got – the lower tonnage and lower grade in the first half of the year. So I would expect Q1 and Q2 to have lower grade and lower tonnage. On average for the year, you could expect grades in the range of about 0.27. And we should also expect for 2023 that the head grade will be higher, somewhere around 0.32, 0.33, somewhere in that range.
spk03: Okay, that's really helpful. Thank you.
spk07: No problem, Morris.
spk02: Thank you.
spk07: As they say, crap happens sometimes. You just have to deal with it. Absolutely.
spk02: Thank you. As a reminder, ladies and gentlemen, if you would like to ask a question, please press star followed by one on your touchtone phone. And your next question will be from Craig Hutchinson at TD. Please go ahead.
spk08: Hi, guys. Good morning. Hi, Craig. Can you provide a bit of a breakdown in terms of the growth capex of $60 million? How much of that is at EVA versus the Copper Mountain mine?
spk07: I'll turn that over to Rod.
spk00: Sure, Craig. The split there is about 50-50 on what we have planned budgeted for EVA and work that's still ongoing at the mine.
spk08: Okay. And is that, you know, the money you spent at EVA, can we consider that a direct subtraction to the capital estimate you guys provided in the fall? Yes. Okay. And then in terms of just the plant improvements this past year, the filter press expansion, the cleaner column expansion, the rough earth flotation circuit expansion, What kind of throughput do those upgrades allow you to get to? Is it just the 45,000 tons, or could you go beyond that with those upgrades that you've made?
spk07: The improvement to the concentrator itself, those projects, they reduced the bottleneck that we had in flotation, both in the rougher flotation circuit and the cleaner flotation circuit. and in the actual production of copper concentrate. So we will no longer have that sort of bottleneck where we have to throttle our tonnage, so to speak, in order to not overflow the circuit when we have high grade, which is kind of a problem we were running into earlier in 2021. So we have designed these to be, I guess, in line with our previous expansion study to bring a normal operation up to 65,000 tons per day, let's say. So at lower tonnage rates that we have right now, we won't have the limitation on our existing grinding circuit. So we should be able to bring it up from 45, and we'll test bringing it up to maybe 50,000 tons a day if we have that opportunity to do so with the grinding circuit, the current grinding circuit. But I think 45,000 tons per day is a good, healthy target, but we have the ability, if we have higher grade and we have good grinding days, we should be able to run it at a good high grade. But it'll definitely improve recoveries. Our goal on the recovery side with these expansion projects is to is to move recoveries higher than what we announced with the ball mill three circuit. So where we have 3% to 5% improvements in recovery with the addition of ball mill three and the finer grinds that we now have, we're anticipating with these projects in place, we can continue to work that recovery up. And our targets will be to continue pushing recovery to see if we can't get closer to 90% recovery than 85%. So we'll slowly work throughput and grind and see where we optimize. But now we don't have the bottlenecks that we had previously.
spk08: Okay, thank you. So can we expect those recovery improvements or second half of this year? Or is that still kind of close to the ball mill ramp up?
spk07: Yeah, I think we'll be, you know, just optimizing our circuit at 45,000 tons a day initially at first. And once we feel comfortable with the full operations with the new secondary shaft and we've got the circuit running properly and the new expansion circuit in place, yeah, we'll continue to work our recoveries up through the second half of the year.
spk01: Okay, thanks, guys.
spk02: Thank you.
spk01: Thanks, Greg.
spk02: And your next question will be from Pierre Vaillancourt. at Haywood. Please go ahead.
spk06: I just wanted to get a little clarification on the plans for EVA. Recognizing that the situation in Australia with respect to COVID is improving, what can you tell us about milestones and really probability of starting construction, completing financing? I mean, have you set targets for that based on where things are at in Australia right now?
spk07: Yeah, there are two things that we have committed to complete, Pierre, and one was, you know, basically taking all the a lot of the execution risk out of a normal project by getting the detailed engineering up to about an 80% level before we break ground. And that's really detail engineering complete so that you can take away a lot of the execution risk and the contingency requirements in the project. We anticipate that work being done by Q3. And concurrent with that will be you know, a finalized construction estimate. We're already starting to see, you know, we put together our update and we published it in December and it was kind of at the peak of pricing. We've already seen steel prices coming down and some other commodity costs coming down that we had baked into that construction estimate in December. So we'll just do an update at that time, present it to the board. along with the project financing commitment. So as we advance that estimate and start to finalize that estimate, we can then finalize the financing package with the lenders. So we've been doing a lot of work on the project financing side. We just need to plug in some of these final estimates of the financial models so that the lenders can go to their back to their respective credit committees with timing for completion in the third quarter as well. And we'll bring it all back to the board for a start decision. So I would anticipate that given that sort of timing, we would likely, in the event of a positive decision, be... be thinking about an early start to EVA in the beginning of the following year, 2023. Okay.
spk06: And are COVID restrictions, are they improved enough to allow for that or, you know, based on where things are at right now?
spk07: Well, you know, Australia has been opening up and they've got a good level of vaccination there now. Western Australia is still closed up. So from our perspective, to start a project like this, and I think this is the real important point, you've got to have the ability to have unrestricted labor flow. You've got to be able to move people in and out. You've got to have your construction force be able to mobilize people. You've got to have the skills available, whether it's mechanical or electrical principally. Those are the most important skills on a construction project. And you have to have a free flow of goods and materials through the port and the rail systems available to get to the project area. So we're not there yet. I mean, there's still a bit of a backlog in – in Queensland and Australia with respect to material flow, but it's making progress in the right direction, so we're just going to keep monitoring that, and when we feel comfortable, we can execute the project cleanly without any risk of delays or disruptions with supplies and suppliers. We will be ready. I would anticipate by the third quarter that should be That should be cleaned up as well, but we're going to be watching it very closely.
spk06: Okay. So a startup construction, let's say in early 2023, puts you on target to be in production by 2025, let's say? Yeah. That's the goal. Okay. All right. Thanks, Gil. All right. Thanks, Jerry.
spk02: Thank you. As a reminder, ladies and gentlemen, should you have a question, you will need to please press star followed by 1. And your next question will be from Bryce Adams at CIBC Capital Markets. Please go ahead.
spk05: Yeah, thanks, Gil and Tim. Good morning, and sorry if I missed it. But on the crusher damage, can you talk to what happened, what caused that shaft failure, and any protections you're putting in place to prevent a recurrence?
spk07: Yeah, we had a... an issue where we had in July, we had basically a chunk of underground steel get through the primary crushing system, and it wasn't picked up by our metal detection before the crusher, and we sustained some damage back in July of the year. And then we've been in phase three of which is our high grade area, we've been mining through underground working. So there's always a little bit of tramp steel from the underground development and workings that are there. So we have rip detection systems, or sorry, metal detection systems in place. And what we've done is we've fixed that system and improved its operation. But as you mine through these underground workers, you've got to be very cognizant of it. So we had a piece that did go through and cause initial damage, which was exacerbated in November when we had the bushing failure and the failure to the main shaft. Now, there was some cracking earlier. We just had cracks that were propagated further in November, and the bushing burnt out. in November as well. So with that failure, we did a couple of things. We made sure that we improved the heat detection systems for the heat on the bushing. And we've doubled our efforts in terms of steel and metal detection on the system as well.
spk05: Yeah, okay, thanks for the extra call. That piece of steel that made it through, how big are we talking?
spk07: You know, it was, I don't know, just a chunk of either, you know, support steel underground that got its way through. I would imagine it would be no bigger than on one side, at least six inches, because it had to get through the closed sides setting of the primary crusher, so four to six inches in one dimension to be able to slip through.
spk05: Okay. Thanks a lot. Talk soon. Cheers.
spk07: All right. Thanks, Bryce.
spk02: Thank you. And at this time, we have no further questions. I would like to turn the call back over to Mr. Clausen.
spk07: All right, everybody. Thank you for joining us today for the call. Stay healthy and safe, and we all look forward to COVID-free 2022. Anyway, take care, everyone. Bye-bye.
spk02: Thank you, sir. Ladies and gentlemen, this does indeed conclude your conference call for today. Once again, thank you for attending. And at this time, we do ask that you please disconnect your lines.
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