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spk01: Good morning ladies and gentlemen. My name is Michelle and I will be your conference operator today. At this time I would like to welcome everyone to the Copper Mountain Mining Corporation fourth quarter and full year 2022 earnings conference call. 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 the number 1 on your telephone keypad. If you would like to withdraw your question, please press star, followed by the number 2. 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 risks and uncertainties that may cause the stated outcome to differ materially from actual outcomes. Please refer to slide two of today's presentation and Copper Mountain's fourth quarter and full year 2022 management's discussion and analysis for more information. I will now turn the call over to Gil Clawson, President and CEO of Copper Mountain. Please go ahead, sir.
spk08: Thank you, operator. Good morning, everyone, and thanks for joining us. Starting on slide three, presenting with me today are Don Strickland, our Chief Operating Officer, Mr. Wong, our Chief Financial Officer, and Patrick Redmond, our Senior Vice President of Exploration and Geoscience. I'll begin the call with an overview of our fourth quarter results and a summary of the key objectives that were attained last year. Don will follow, presenting our operating results and our 22 ESG achievements and Leticia will provide our financial update and present our newly issued 2023 guidance. Finally, Patrick will conclude with an update on our exploration program. Now turning to slide four and our fourth quarter and full year results. As you all know, last year was an especially challenging year for our company as we faced numerous operational setbacks. From the start of the year, the mill was running at reduced rates from damage to the secondary crusher main shaft. Then we encountered more oxidized ore in the north pit than anticipated. We had worn eccentric bushing in our primary crusher and grinding ball breakage issues and general quality problems with the supply of grinding balls last summer. On top of which, the year culminated with a ransomware attack in late December. Concurrently, we were completing all of our plant optimization projects, so there was a large amount of committed project capital being spent at the same time we were experiencing these operational challenges. Clearly, we did not meet our expectations in 2022, but we are having a solid start to 2023. This year will be focused on operational execution and advancing our exploration of multiple target areas that we have recently identified, which Patrick will speak more about in a moment. But first on to the fourth quarter results. Net earnings were 35 cents per share, including the gain on sale of the EVA copper project. On an adjusted basis, we reported a net loss of 10 cents per share. The adjusted net loss was partially driven by fourth quarter production of 13.3 million pounds of copper, which fell short of our budget. Mill throughput was lower because of the failure of the low or eccentric bushing of the primary crusher and later because of the ransomware attack. We also saw lower than planned grade as higher tonnage again came from the north pit. With production lower than expected during the quarter, our all-in cost came in at $4.20 per pound. Looking ahead, however, we see a strong year in front of us. Production is expected to increase significantly. We see production to be between 88 to 98 million pounds of copper. And so far this year, our results are in line with our budget. We are also expecting costs to be materially lower due to higher production, shorter haul distances, minimal expansionary capital with many one-time project costs now behind us. Turning now to slide five. Despite the operational challenges that we experienced during 2022, we did successfully deliver several important catalysts during the year, which have solidly improved the company and positioned us well for 2023 and beyond. We reported a 70% increase in mineral resources with an updated life of mine plan that outlines a 32-year mine life based only on reserves, and it supports a future 65,000 ton per day mill expansion. We completed the plant optimization projects we set out to do and commissioned during 2022. We announced the sale of our EVA copper project, generating an attractive return on our initial investment in EVA. And with the proceeds from the sale, we materially reduced our outstanding debt and strengthened our balance sheet. Finally, as ESG principles are foundational to our strategy. I'm pleased to say that we achieved our goal of meeting or exceeding an A rating on each of the Mining Association of Canada's Towards Sustainable Mining Protocols again in 2022. I'll now turn the call over to Don, who will provide further details on our operating results.
spk09: Thanks, Gil.
spk05: Starting with slide number six, We continue to advance mining of the main pit and the north pit during the quarter. We have now mined through the top oxidized level of the north pit into solid sulfide mineralization and continue to mine deeper in phase number four of the main pit. With primary crusher mechanical breakdown early in the quarter and the reduced copper production, we focused on minimizing operating costs. We decreased mining from phase number four, which reduced the strip ratio for the quarter and we increased our ore supply from the significantly lower cost north pit. This resulted in approximately 35% of the total mill feed from phase number four with grades averaging 0.29% copper and 65% of the mill feed from the north pit with grades averaging 0.22% copper for a total mill feed grade of 0.24% copper. Looking ahead for 2023, We're budgeting an average mill feet grade of approximately 0.31% copper, with the grade increasing through the first three quarters and the highest grade scheduled for Q3. The higher grade from phase four is expected to be the main ore supply for the year. Phase number four was connected to the trolley ramp at the end of 2022, and trolley assist has now been fully incorporated into our mine production. Trolley assist is a key step in our GHG reduction objective, but also key to increasing productivity and reducing operating costs. Looking ahead with a focus on mine productivity and efficiency, we have a new large production loader scheduled to start operation in June, a new large electric mining shovel scheduled to start operation in August, and a new large electric production drill scheduled for delivery in early 2024. These units will improve productivity and reduce operating costs, while also achieving our sustainability target of reducing GHGs by replacing diesel equipment with electrically operated equipment. Turning to slide number seven. During the fourth quarter, the mill processed a total of 3.1 million tons of ore. Mill availability was low at 77% with the primary crusher mechanical failure in October and the ransomware attack in December. The failure of the primary crusher lower eccentric bushing resulted in seven days of materially reduced mill tonnage followed by a two-day mill shutdown. The ransomware attack at the end of the quarter resulted in the shutdown of the mill for another four days. The events throughout 2022 have resulted in mill operating time of 85.4%, which is low compared to the historical annual mill operating time of 92 to 93%. We expect to achieve 92% going forward. Offsetting the downtime events, the mill operated in excess of the design tonnage rate of 45,000 ton per day for extended periods and achieved record daily mill tonnage rates during the quarter. demonstrating the ability for the mill to operate at design tonnage rates. Copper recovery improved during the quarter to 81.2% as the north pit was developed beyond the upper oxidized benches and the rougher expansion project was commissioned. The rougher expansion project is demonstrating positive recovery benefits. Copper recovery is expected to improve with full operation and optimization of the rougher and cleaner flotation expansions and optimization of the grinding circuit to achieve consistent fine grinds. We are budgeting an average recovery of approximately 84% this year. We have taken a conservative approach, planning for a gradual increase in recovery over the year as we optimize these circuits and move towards achieving the design recoveries as outlined in our technical report. Turning to slide number eight, I want to highlight some of the great progress we made last year on our ESG initiatives. which is an important pillar of our company. As Gil noted, we successfully met our 2022 target of achieving a minimum rating of A or higher on each of the mining associations of Canada towards sustainable mining or TSM protocols. 2022 was our second year of reporting against the TSM standard, and we continue to use TSM to make our systems more robust. Upper Mountain has dedicated leaders for each of the TSM protocols, and meeting our sustainability targets again in 2022 demonstrates our team's commitment to this focus. We proudly achieved the TSM Environmental Excellence Award in recognition of our Trolley Assist project, which reduces diesel consumption and is a key component in moving towards our Net Zero Scope 1 and 2 GHG objective. As discussed earlier, this project is fully incorporated into our production and we are working with our partners to evolve the technology, and we are designing expansion opportunities in our mine plants. In addition to the trolley assist project, we're finishing a full-year renewable diesel trial on two haul trucks. We are working in partnership with Cummins, Komatsu, and SMS to define impacts on engine performance and reliability. All indications are positive at this point. Also, as noted earlier, we're moving ahead with our GHG reduction strategy with further electrification of production shovels and drills. In addition to our GHG reduction efforts, during the year we received an outstanding achievement in mine reclamation. We started this process of progressive reclamation in 2018 and continue to build on it every year. With the publishing of our inaugural ESG report in 2022, we have received the highest ranking on the ISS governance quality score. We will provide a further update on our initiatives in the coming months when we release our second annual ESG report. I now hand the call over to Leticia.
spk00: Thanks, Don. Turning to slide nine. In December, we completed the sale of the EVA copper project and our exploration land package in Australia for US $230 million. which includes upfront cash of $170 million and future contingent payments of up to $60 million. Net of withholding taxes and certain adjustments, we received cash of approximately $149 million. We purchased this property for about US $30 million in early 2018, so a really great return. As a result of the sale, we recognized a gain on the disposal of this asset of approximately $143 million Canadian before taxes and other costs. or $84 million after these adjustments. With the proceeds from the sale, our net debt decreased by 54% from the third quarter to $152 million Canadian, or excluding capital leases of about $93 million. And in January, we used the cash proceeds to repurchase U.S. $87 million of our bonds. This reduced our bonds outstanding to $140 million U.S., We are very pleased that we were able to accelerate one of our key objectives of strengthening our balance sheet. Also in January, we implemented zero-cost collars for 3.32 million pounds of copper per month for the first six months of the year, January to June, with a floor price of US$3.60 per pound and a ceiling price of US$4.40 per pound. Last year, we entered into zero-cost collars for 3.3 million pounds a month for the full year, with a floor of $4.00 and an average ceiling price of $4.91. We were in the money for the last six months of the year as the copper price fell below $4, and we received proceeds of a little over 11 million Canadian. Now moving on to being a little more forward-looking, our 2023 guidance is on slide 10. We expect production this year to increase significantly from 2022. We see 2023 being a very solid year for us. We expect copper production to be between 88 and 98 million pounds this year. And so far, we are on budget and on track to achieve our guidance. We are forecasting production and grade to increase sequentially through the first three quarters, with a third quarter forecast to be the strongest of the year. Average grade for 2023 is budgeted to be 0.31%. We also expect mill throughput to average 45,000 tons per day. With our production returning to much stronger levels, we expect to see a meaningfully decrease our unit cost metrics with our guidance for C-1 cash costs of U.S. $2 to $2.50 per pound, all-in sustaining costs of U.S. $2.40 and $2.90 per pound, and all-in costs of $2.45 to $2.95 per pound. As you all have seen during the fourth quarter, with our plant improvement projects now complete, our capital spending has begun to meaningfully decrease with expansionary capital around U.S. $7 million for continuum operations and zero for disperse stripping. Overall, for 2023, we see much lower capital spending driven by lower deferred stripping and lower expansionary capital. We've also budgeted about $3 million U.S. for capitalized exploration for our Phase 1 exploration program. We have a very exciting program planned for this year, and Patrick will spend some time going over our plans. But before I turn it over to him, in summary, we see 2023 to be a year of increased production, decreased costs, and low capital commitments, which we expect should result in a great year of solid free cash flow.
spk09: Thanks, Leticia.
spk03: Following a successful 61-kilometer exploration drilling program in 2021-2022, the Copper Mountain Mineral Reserve increased by 57%. The deposit, however, remains open both laterally and at depth, and there's clear potential to find higher-grade zones of copper-gold mineralization. Slide 11 shows our tenure outline in yellow, the 2022 resource outline in red, all of our drill holes color coded by copper grade, and the location of seven Titan 24 IP geophysical lines. The reasons we believe that Copper Mountain has significant upside exploration potential are as follows. Firstly, the deposit has not been deeply drilled, and multiple historical drill holes end in copper-gold mineralization. Secondly, The style and high grade nature of mineralization in the most westerly drill holes at New Ingrebell indicate that our drilling has not found the western edge of the deposit. Thirdly, Titan 24 geophysical data from 2007 shows IP chargeability features extending hundreds of meters below the current known resource and strongly suggests that the ore forming system extends to significant depth as shown in the top image on slide 12. So turning to slide 12, A comparison with other similar Alkalic Porphyry Copper-Gold deposits also informs our view of the size potential of Copper Mountain. Copper Mountain is the same age as Red Cris and has the same style of high-grade A-type quartz vein-hosted Copper-Gold mineralization, particularly in the New Ingerbell Zone. Copper Mountain and Red Cris are both similar to the KD Ridge Red deposits in Australia, and this slide shows cross-sectional views of all three of these deposits, all shown at the same scale. It also lists the total mineral inventory, which is past production plus current resource, of these deposits. The top image on the slide shows all diamond drill holes at Copper Mountain, color-coded by copper grade, and the image also shows in red the 35 millivolt per volt chargeability 3D model based on the Titan 24 IP data. Note that this survey did not cover the New Ingrebel Zone on the left-hand side of the image. From measurements on core, we can show that chargeability at Copper Mountain is controlled by the sulphide content of the rock, copper iron sulphides and pyrites. And you can see that this chargeable zone extends from surface to around one kilometre depth, indicating that the mineralising system extends to significant depths. In summary, our 2023 exploration programme is designed to look for higher grade zones below and adjacent to the current resource, similar to the high-grade zones that have been found at Red Chris and Katie Ridgeway. So turning to slide 13, this slide summarizes our ongoing 2023 exploration program. Following completion of drilling last year, we embarked on a re-logging and re-sampling campaign of historical drill core and a reinterpretation of the geological model of the deposit. Significantly, we found porphyry dikes, with A-type quartz veins and chalcopyrite mineralization in multiple historical drill holes, and this style of mineralization had not been previously recognized at Copper Mountain. We have developed a number of target areas based on geological and geophysical data, and our highest priority target areas are shown by the red ellipses. Drill testing of these targets started in February. Phase one of this program will include 8,000 meters of diamond drilling, plus a large geophysical program designed to infill and extend previous coverage. Phase two will include an additional 10,000 meters of diamond drilling, and we expect to have results by mid-year, and we look forward to updating you again on our program during the year. So with that, I will now hand back over to Gil for some concluding comments.
spk08: Okay, thanks, Patrick. To conclude, 2023 will be all about operational execution and exploration investment at the Copper Mountain Mine, and we will see a very strong year ahead of us. Earlier this month, you will have seen that we announced the appointment of my successor, Pat Marin, to be the incoming president and CEO of Copper Mountain following my retirement. Pat was appointed after a comprehensive global executive search. She has extensive operational and technical mining experience and is the right person to lead the company through its next phase. Pat will be joining us on our first quarter conference call in about a month, in April, and together we're looking forward to providing you with an update then. With that, operator, we can open the call to questions.
spk01: Thank you, sir. Ladies and gentlemen, we will now begin the question and answer session. If you would like to ask a question, please press star followed by the number one on your telephone keypad. If your question has been answered and you would like to withdraw from the queue, please press star followed by the number two. And if you are using a speakerphone, please lift your handset before you press any keys. One moment for your first question. Your first question will come from Orist Wokedaw at Scotiabank. Please go ahead.
spk06: Hi, good morning. Obviously a very challenging operating 2022. When I look at your guidance, official guidance now for 2023, the 88 to 98 million pounds, can you please explain to us how that has changed from the technical report that was put out last fall that indicated much higher production of 112 million pounds? Like what's the delta between then and now?
spk08: Hi, Orest. Thanks for the question. I think there's two things that we'll probably point out here to differentiate a little bit between our guidance and the technical report. Firstly, the technical report, if you look at the first five years, you can see a lot of variability in production over the years. What we did after the technical report was published in in January is and with our budget process, we revised and detailed out significantly the five-year plan to try and smooth out some of those years because there was varying equipment requirements that would have us kind of increasing the workforce, decreasing the workforce, et cetera. So what we did was we kind of smoothed out the five years and It took a little bit off the front end, but it took out some of those really low years in the five-year plan where production dropped back down 20 million pounds lower than the average. So it was more or less a smoothing in that schedule. And what that did in essence is it reduced our costs. It allowed us to optimize some of our cycle times and basically get a better five-year plan out. So that was refined after the technical report, but overall in the first five years, it's the same production. The second feature here is that we wanted to make sure that we had a, you know, we're reasonably conservative with respect to our recovery rates. As Don mentioned, we're kind of building them up to the feasibility rate over the year. And I think both those factors you know, brought us to the range that we have right now, which we feel comfortable with.
spk06: Okay. Just as a follow-up, how long do you think it'll take to get back to the recovery rates assumed in the technical report? Is that sort of, we should see that now in 24 or could it take longer?
spk08: Yeah. Yeah. Yeah. Most definitely. I think, you know, you know, we've, We started off the year, you saw where we ended up the fourth quarter, about 81%, 82% recovery. The original feasibility study had us at about 84% recovery, and then we had increasing recovery with the rougher expansion project in place. So you'll see the recovery rates, as Don pointed out, average about 84% this fiscal year, and we'll keep that progress going, and we should hit the recovery rates in the feasibility study, which were just a little bit higher than that, I think. So, yeah, we're pretty comfortable with what we have now. We have a lot of retention time in the mill. We have the grinding capacity that we need, and we have the back end with the new cleaner flotation cell and the additions to the filtering capacity in the plant to handle the grade and the tonnage.
spk06: Okay, and just a final question for me. The throughput guidance for the year, I think it was 45,000 tons a day. Do you expect to achieve that even in Q1, given the winter? Or is that more, should we expect lower than that in the first half of the year and then maybe above that in the second half of the year? I think it'll build up a little bit.
spk08: I mean, we had good grade in the quarter. So... I would suggest that you'll see the tonnage rate build up a little bit. We've been operating at a good tonnage rate in the mill, but we'll wait until the quarter is up to see what our average daily rate is, but I think 45,000 tons per day is very achievable with this plant for the balance of the year.
spk09: Thanks very much, and good luck, Gil. Hey, thanks, Oris.
spk01: Your next question comes from Craig Hutchinson of TD Securities. Please go ahead.
spk07: Hi, good morning, guys. Just a follow-up question on Oris' question about grades, and obviously Q1 is effectively done here. How sharp is the transition to 0.31% copper happening? Can we expect somewhere close to that in Q1, or is it you know, effectively closer to the Q4 result in terms of the overall grades?
spk08: No, the grades will be higher than Q4, definitely. And they'll be probably just under the average for the year. So, you know, we're really building up in grade to the third quarter. Third quarter is really the highest grade quarter of the year in terms of our budget. And so, yeah, You know, on average, we'll be 30.31 for the year according to our budget. But as Letitia and Don pointed out, we're really tracking to our budget plan right now. And our grades and reserve reconciliations are really positive in phase four. So, yeah, I know we're looking forward to a solid grade year, Craig.
spk07: Okay, great. Just a question, I guess, from Q4. There was mention that it's a lower-grade material on top of the deposit from the Phase 4 pit. Has that now been resolved? Have you guys gone lower on the benches and kind of gotten to... Oh, yeah.
spk08: We're solidly into big ore zones in Phase 4, so we're into the meat of the deposit. We're not at the top end anymore. Okay.
spk09: That's it for me, guys. Thanks. All right. Thanks, Greg.
spk01: Your next question comes from Stephan Ayanu of Cormark Securities. Please go ahead.
spk02: Great. Thanks, guys. Just curious on the exploration, you mentioned the Phase 1 and the Phase 2 programs, and I think on the one map you show a bunch of red circles with target areas. Is it fair to assume that the Phase 1 will test all those red target areas and then Phase 2 will follow up where the positive results were, or the red circles kind of split between phase one and phase two. I'm just wondering what the strategy is here in terms of sort of really testing this depth potential throughout New Angrabel and Copper Mountain proper, if you will.
spk08: Hey, thanks.
spk09: I'm going to turn this over to the expert, Patrick.
spk03: Our strategy to begin with is to test a number of those different target areas. And I would say we will We test about half of them with the first phase of the drilling, depending on how results go. Strategic, we'd like to test as many as possible and then come back with the second phase to follow up once we get the assay results back.
spk02: Okay. Yeah, there's that interesting IP anomaly directly to the east, I guess, of Copper Mountain proper. So that would be good to see. Anyways, that's great. That's helpful. Thanks very much.
spk01: Your next question will come from Alex Tarantew of Stifel. Please go ahead.
spk04: Hey, good morning, everyone. Look, I think most of my questions have been asked, but I just want one kind of follow-up to your comments earlier about the grade re-sequencing and stuff. So if 2023 is a little bit lower than the tech report, can I infer – from your smoothing out comment then that 2024 and 2025 would maybe be a little bit higher because I think I believe in the plan 26 and 27 were supposed to be pretty strong years. But can I just assume that we'd see a little bit less troughs and peaks then and 2024 could be a little bit better than the tech report guided?
spk08: Yeah, I think it's basically smoothing out those low years that we accomplished when we redid the five-year plan. And we're looking at opportunities to shorten our hauls and adjust our mining sequence and do some adjustments to our phase plans as well. So I guess the short answer to your question is, yeah, there'll be some moderation in there. And as I said earlier, over the five years, production is about the same.
spk04: Okay, and just as a follow-up, I know your balance sheet obviously is quite strong now with selling Abiva, but with that slight adjustment, no big spend and any sort of big capital spend to make that plan happen, is there?
spk08: No, I mean, I think just some of the ones that Don announced, we have some equipment that will go into our lease process. lease category, new mining shovel, loader, and drill. But no, we're not expecting any major capital over that period of time, just normal mine development activities.
spk09: Okay, perfect. Thank you. Thanks, Alex.
spk01: At this time, there are no further questions, so I will turn the conference back to Gil Claussen for any closing remarks.
spk08: Thanks, everybody, for joining us today. And we look forward to catching up with everybody again in a month from now with Patrick basically just getting kicked off in his new role. So it would be nice to be able to introduce him to everyone. Thanks for joining us this morning. Bye. Stay safe.
spk01: Ladies and gentlemen, this does conclude your conference call for this morning. We would like to thank you all for participating and ask at this time you please disconnect your lines.
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