Copper Mountain Mining Corporation

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.

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.

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.