Capstone Copper Corp.

Good afternoon ladies and gentlemen and welcome to Capstone Copper's Q3 2024 results conference call. At this time, all lines are in listen only mode. Following the presentation, we will conduct a question and answer session. If at any time during this call you require immediate assistance, please press star zero for the operator. This call is being recorded on Thursday, October 31, 2024. I would now like to turn the conference over to Mr. Daniel Sampiari. Thank you. Please go ahead.

Thank you, operator. I would like to welcome everyone to Capstone Copper's Q3 2024 conference call. Please note that the news release and regulatory filings announcing Capstone Copper's 2024 third quarter financial and operational results are available on our website and on CDAR+. If you are logged into the webcast, we will advance the slides of today's presentation, which are also available in the investors section of our website. I am joined today by our CEO, John McKenzie, our President and Chief Operating Officer, Cashel Marr, our SVP and Chief Financial Officer, Raman Randhawa, our SVP Risk, ESG, and General Counsel, Wendy King, and our SVP Technical Services, Peter Amelungsen is also available at the end of the call. Following our brief remarks, there will be an opportunity for questions. Please note that comments made on the call today will contain forward-looking information within the meaning of applicable securities laws. This information, by its nature, is subject to risks and uncertainties, and actual results may differ materially from the views expressed today. For further information on the risks and uncertainties pertaining to our business, please see Capstone's most recent filings, which are available on our website and on CDAR+. And finally, I'll just note that all amounts we will discuss today are in US dollars, unless otherwise specified. Now I'll turn the call over to John McKenzie.

Thank you, Daniel. Good afternoon, everyone in North American Europe, and good morning to those dialing in from Australia. We're pleased to present our third quarter 2024 results and achievements. Starting with slide five. In Q3, our operations delivered consolidated copper production of 47,500 tons at consolidated C1 cash costs of $2.83 per pound. Very importantly, during the quarter, we had several major achievements at our mines in Chile. At our flagship Monteverde development project, we achieved commercial production levels in September. This is a tremendous accomplishment within three months of producing first concentrate from the plant. We also completed our first two concentrate shipments, with the copper concentrate meeting all required specifications. At Montes Blancos, we undertook a two-week shutdown to install the new equipment that will allow us to unlock the design capacity of the plant. Following these milestones and the Q3 results, we've noted that we expected to finish at the low end of our 2024 production guidance. We've revised our C1 cash cost guidance to $2.60 to $2.80 per pound, mainly as a consequence of the ramp ups at Monteverde and Montes Blancos, commencing later in the year than we had expected. On the corporate side, our net debt was largely unchanged at $751 million, as at September the 30th. Our balance sheet is in excellent shape as we ramp up Monteverde ahead of our next phase of growth. During the quarter, we also provided our leadership succession plan that will take effect at our AGM in May next year. The announcement followed a thorough and orderly succession process to ensure continuity of leadership and continued success of the company. It has been a privilege to serve as the Chief Executive Officer of Capstone Copper since March 2022, and I'm thrilled to be nominated to the role of Board Chair at our next AGM. I was also very pleased to announce that Cashel will be appointed as our next CEO. I have every confidence in Cashel to lead the execution of our next stage of growth at Capstone, including our Monteverde Optimized and Santo Domingo projects. Jim Whitaker will succeed Cashel as COO, and this will also allow us to flatten our organizational structure with all my general managers reporting directly to the COO. We also announced today that Gerald Anett has retired after five years with Capstone to spend more time with his family. Gerald has been an important contributor to Capstone's success over the past five years, and we thank him for all of his contributions and wish him all the best in retirement. Turning to slide six. Earlier in October, we released a feasibility study for our Monteverde Optimized projects. MV Optimized is a capital-efficient brownfield de-bottlemaking project that will expand the existing sulfide concentrator at Monteverde from 32,000 to 45,000 tons per day, leveraging the excess capacity in existing infrastructure. This project will bring on an additional 20,000 tons of copper per year. For an initial capital of just below $150 million, implying a super low capital intensity of $7,500 per ton of copper-equivalent production. This positions us to produce over 120,000 tons of copper per year at Monteverde for the next 10 years, with cash costs of $1.80 per pound. Importantly, when combined with the release of our updated Santo Domingo feasibility study earlier in July, we've now defined the next transformational phase of growth for capstone and our world-class Monteverde-Santo Domingo district in the Atacama region of Chile. We see ourselves producing copper by these two processing centers in this well-endowed district for many decades to come. Monteverde and Santo Domingo are separated by only 35 kilometers, and we've identified multiple options to serve a significant further value in the coming years. And with that, I'll pass over to Robin for our financial results.

Thank you, John. We are now on slide seven. In Q3, we recorded copper production of 47,500 tons, reflecting growth of 16 percent, quarter over quarter, driven by the initial production from the ramp-up of MVDP. As a result of the ramp-up, as expected, we have started to build up some concentrated inventory and some accounts receivable, which resulted in copper sales being below payable production levels by 1,500 tons this quarter. That difference between payable production and sales equates to approximately 5 to 6 million of EBITDA. LME copper prices during the quarter averaged 4.18 per pound, down 8 percent compared to 4.42 per pound in Q2. Our realized copper price of 4.24 per pound was slightly above the LME average as a result of our QP hedging program. We realized strong gross margins of $1.41 per pound, or 33 percent. C1 cash cost of $2.83 per pound included made-in unit cost of $2.52 per pound from Mantle Verde Development Project. In September, the MVD's sulfide-posted cash cost were $1.83 per pound. When combined with the larger production volumes from MVDP, this will drive a significant reduction in our consolidated unit cost in Q4 and beyond. As John mentioned, we have increased our consolidated C1 cash cost guidance for 2024 to $2.60 to $2.80 per payable pound of copper produced. The cost increase is largely driven by production volume impact by the start of the MVDP and Mantle's Blankos ramp-ups occurring later in the year than originally expected and the corresponding knock-on effect to our unit cost. At Mantle's Blankos, we have also experienced a higher -to-date spend than expected driven by additional maintenance plus extra materials and labor to complete the de-bottlenecking work to unlock the plant's nameplate capacity. Across the rest of the portfolio, our underlying costs have been fairly in line with our expectations. According to EBITDA, adjusted EBITDA in Q3 of $120.8 million nearly doubled -over-year and was down only 2% -over-quarter despite the 8% decline in copper prices. Going forward, our financial results will be impacted by the achievement of commercial production at MVDP. The achievement of commercial production triggers a few items for Q4 financials, which include additional finance charges being expensed versus capitalized and a commencement of depreciation and depletion on the MVDP capitalized cost. We expect our finance expenses to increase by $25 million per quarter, which includes interest on shareholder loans. This includes both cash finance expenses like the interest on our debt, facilities, and other non-cash finance charges. Similarly, we expect our annualized depreciation to increase by approximately $80 million, which is mainly calculated on a units of production basis and some straight-line depreciation. Moving on to slide 8, on the left-hand side, we summarize our available liquidity, which has at September 30, 2024, was $516 million, which includes $139 million of cash and short-term investments and $377 million of undrawn amounts on our $700 million corporate revolving credit facility. Of note, in the quarter, we commence repayments on our project finance and cost-overrun facilities at Mento Verde in conjunction with a ramp-up of operations. Our net debt of $751 million is largely unchanged from the prior quarter, and we are now entering the next phase of deleveraging with a ramp-up of MVDP to full production rates. The chart on the right-hand side illustrates our EBITDA sensitivity at various copper prices. We are now in the cusp of the light blue bar, which represents EBITDA of close to $1 to $1.3 billion at copper prices between $4 to $4.50 per pound with MVDP at 4 run rates. The EBITDA generation associated with Mento Verde will enable us to focus on generating free cash flow to delever our balance sheet with a pathway to below one-times net leverage at spot copper prices. This provides a strong platform from which to advance our future growth pipeline in terms of Mento Verde Optimized and Santo Domingo. Now I'll hand it over to Cashel for the operations review.

Thanks, Ron. We're on slide 9. Pinto Valley produced 13,980 tonnes of copper to see one cash cost of $292 per palable pound during Q3. Throughput averaged 45,000 tonnes per day in the quarter, which was below our expectations, driven by unplanned maintenance. For the last few quarters, we had seen positive progress and higher throughput after kicking off an asset integrity program. The third quarter showed that this initiative is required to improve the reliability of the plant, and it continues to be implemented. Despite these unplanned interruptions, Pinto Valley is on track with respect to the guidance we provided at the beginning of the year. Moving to slide 10. Bozeman Mine delivered another solid quarter, producing 6,025 tonnes of copper at C1 cash cost of $1.82 per palable pound. Bozeman has remained very consistent despite rolling out a higher volume of cut and fill mining methods this year. In addition to the operation of the Pace Fact Fill Plant. Our Mantos Blancos asset is highlighted on slide 11. Total sulphide and cathode production yielded 9,974 tonnes of copper at a C1 cash cost of $3.41 per palable pound. While production and costs were similar to what we've seen the last couple quarters, they do not tell the whole story of what was a very significant quarter at Mantos Blancos. In July, we concluded a two-week shutdown to tie in key pieces of equipment that we identified were required to ensure more consistent throughput at the backend tailings handling area of the plant. On the right-hand side of the slide, you'll see the new surge tank and fourth positive displacement pump. In August, the plant ramped back up and now and starting from the middle of that month, we averaged over 18,000 tonnes per day, which is a significant improvement over the past few quarters. These modifications now completed are allowing increased plant utilization as designed. We expect to continue with higher output in Q4, which will increase copper production and significantly lower our unit costs. Also of note in Q3, recovery has improved to a more normal 82% from a low of 73% in Q2. After a short-term localized geotechnical issue in Q2, impacting mine plan sequencing of grades and recoveries. Copper grades are also expected to improve in the fourth quarter back into the 0.8 to 0.9 range from sub 0.8 in the last two quarters. Overall for the year, production and costs at Mantis Blancos are trending unfavorably relative to the guidance ranges we provided in January. However, our confidence levels at Mantis Blancos today are much higher than they have been at any point over the last two years and will continue to increase daily production rates through to the end of the year. Now onto Mantle Verde on slide 12, where it was a transformational quarter. Total sulfide plus cathode production yielded 17,481 tonnes of copper, a significant increase driven by a meaningful 8,139 tonnes from the Mantle Verde development project. After producing first concentrate near the end of Q2 in June, we ramped up quickly and efficiently in July and achieved facility practical completion with our construction partner, Asenco. This followed the achievement of seven days operating near nameplate capacity of 32,000 tonnes per day. This prompted a two-week shutdown at the beginning of August. During that time, we took over operation of the plant and all of the OEMs were on site to provide their final sign-off on warranties for all the equipment. Post the shutdown starting in the middle of August, we again ramped up efficiently and achieved commercial production in September. Our quarterly average throughput, of course, includes the downtime and ramp up periods, but in September, we averaged 26,200 tonnes per day. Rates reconciled well with the mine plan and block model, boasting .71% copper in the quarter. We were excited by the recoveries we have seen so far as well. After normalising for work and process inventory builds, we have implied metallurgical recoveries of around .2% in the quarter and above 80% in August and September. Additionally, we delivered our first two concentrate shipments, which meant all required saleable specifications. This was a significant milestone. We are very proud of the accomplishments to date by the project and operating teams. Mantle Verde is poised to produce more consistently and reliably through the fourth quarter. Turning to slide 13. But a month ago, we released the results of a feasibility study for our Mantle Verde Optimised project. This is a capital-efficient and near-term brownfield growth opportunity at Capstone that leverages available excess capacity in our crushing and grinding circuits at our Mantle Verde Concentrator Plant, providing the option to increase throughput from 32 to 45,000 tonnes per day, plant feed, at a capital-efficient cost of $146 million. On slide 14, the plan presented for MV Optimised represents the next major growth in the evolution of our world-class Mantle Verde Santa Domingo District. MV Optimised will increase production to an average of over 120,000 tonnes of copper and 40,000 ounces of gold per year over its first 10 years. On the bottom right of the page, you can see that the study outlines an NPV at 8% discount of anywhere from $2.9 billion at $4.10 per pound copper to close to $4.5 billion on a 100% basis at just over $5 per pound copper. Turning to slide 15. We've highlighted some of the key differences from the new MV Optimised study relative to the technical report release for the development project. First, the mine life has been extended to 25 years and it's important to note this has also been done without any additional drilling, as Mantle Verde hasn't seen a comprehensive exploration program since before 2019. This additional mine life and throughput is enabled by an increase in the total sulfide reserve by 67%, with now 394 million tonnes classified as reserve. The resulting life of mine yields a slight decrease of head grade and an increase in stripping requirements. Opportunity remains through exploration drilling in what we at Capstone view as an excellent prospectivity along the Akatata Camafault for higher grades and potential mineral that can be accessed with less stripping. As previously mentioned, the plant throughput is to be increased from 32,000 to 45,000 tonnes of ore per day. On the bottom of the slide, we've profiled the larger production profile, both over the first 10 years and over the extended life of mine. In the middle, we highlight the attractive cash costs with first 10 years at $1.82 per pound of copper and life of mine cash costs around $2 per pound. The increases in sustaining and deferred stripping capex relative to the old plan incorporate the larger operation with more tonnes moved and higher throughput, while also being refreshed for the inflation that we have seen since the 2021 technical report was released. Turning to slide 16, the MVO study outlines an initial expantry cost of $146 million. This implies a very low capital intensity of $7,500 per tonne of annual copper equivalent production and of course compares very favourably to other projects profiled. Santa Domingo, which is also shown on the slide, also compares very favourably. There is no better place for us to build another mine than 35 kilometres down the road from where we just successfully completed construction at the Manfobirde development project. Turning to slide 17, we show the combined MVSD district production potential on the left-hand side with the first three years of combined production averaging around 250,000 tonnes of copper at a very attractive cash cost. Over time, we plan to further augment these base case numbers with additional opportunities including processing Santa Domingo oxides at Manfobirde, continuing to explore the district to improve our understanding of the long-term potential and assessing the viability of by-product cobalt production. On the right, you can see the various copper occurrences identified to date in the district. We are very excited by the potential for future exploration on our own properties as well as the opportunity for other sterilised deposits to eventually become future feeds for our processing centres in the district. Now over to Wendy King for the sustainability review.

Thank you, Cashel. We're now on slide 18 with a review of our sustainability highlights for Q3. At Santa Domingo, we opened a community engagement office to keep the community informed and engaged on developments as the project ramps up. At Mantos Blancos, we celebrated the 20th anniversary of our partnership with the Delta UCN program. Annually, the education program is offered to nearly 500 elementary and high school students in the Anaheim-Fagasta region. This year, the program was expanded to provide mental health support to more than 100 university students. We're very proud of the positive impact this collaboration has had over the years on the education of the young people in the region. Also in Chile, Capstone Copper received the 2024 Best Midsized Company of the Year award from Tsunami, the Chile Mining Association. A key aspect of the award is the recognition for Capstone's ESG practices and community engagement. At Cozumon in Mexico, we published a biodiversity handbook. This was based on a site monitoring program where we worked with six biologists to gather and classify the data over two years. During the quarter, Cozumon also partnered with its contractors to replant two hectares of land with native species. And at Pinto Valley in Arizona, we replaced three diesel-fired engines with electric units, with further plans to replace two more units in Q4 as part of our PV electrification project. This program will provide scope one reductions for carbon emissions. And with that, I'd like to pass it back to John.

Thanks, Wendy. Turning to slide 19, we've outlined our sector-leading growth plans and some of the additional upside within our portfolio. As can be seen, we expect MVDP at its full run rate to bring us to a consolidated annual production level above 250,000 tons of copper at cost in the low $2 per pound range. From there, the Monteverde Optimized plus Santo Domingo projects would take us to around 400,000 tons of copper production per annum at even lower cash costs. We intend to proceed with Monteverde Optimized following the receipt of a DIA permit amendment. We filed for the DIA permit earlier this year and expect receipt in the first half of 2025. We plan to finance project through internally generated cash flows. At Santo Domingo, we're progressing with the assessment of the optimal financing structure for the project. We're looking at this in a very similar manner to what we were able to achieve at Monteverde. Included in this, we've recently commenced a process to bring in a partner at the minority level. We're also advancing discussions with respect to a project finance facility, which we see forming a part of the financing package for Santo Domingo. Before a potential sanctioning decision at Santo Domingo, we'll also want to see all of our assets operating at or near full production levels and our consolidated net debt to EBITDA at below one times. And of course, we'll also be mindful of the overall macroeconomic environment. As such, we believe we will enter a sanctioning window for Santo Domingo later in the We'll further upside across our portfolio with another low risk brownfield expansion opportunity at Montes Blancos, additional flexibility in the MVSD district to unlock more copper and potentially by-product cobalt production, and the potential developments of another major copper district around our Prince of Valley mine in Arizona. Turning to slide 20, we highlight the timelines for some of the studies that I've mentioned and for other milestones as we execute on our growth plans. This is a significant year for Capstone and the third quarter marked an important step in the transformation of our business with tangible delivery on our peer-leading growth. Over the past few months, our operations in Chile exhibited meaningful milestones at both our flagship Monteverde development project, where we achieved commercial production, and at Montes Blancos, which is now enabled to deliver its nameplate capacity. We expect the fourth quarter to be our strongest of the year, providing a glimpse of the future Capstone with a larger production base and lower unit operating costs. At Capstone, we're now extremely well positioned to become a leading long life and low cost copper producer, playing an important role in supporting the world's decarbonization efforts. With that, we're now ready to take questions.

Thank you, ladies and gentlemen. We will now begin the question and answer session. Should you have a question, please press star followed by the one on your telephone keypad. You will hear a prompt that your hand has been raised, and should you wish to cancel your request, please press star followed by the two. If you are using a speakerphone, please lift your hand before pressing any keys. One moment, please, for your first question. Your first question comes from the line of Oreszua Kidal from Scotiabank. Please go ahead.

Thanks, and good evening. Maybe I could start just by congratulating both John and Gerald on their retirements, and congratulations to Casual on the new role. I wanted to focus on obviously the Mano Verde Sulphide Project. You've been operating now for a couple months. Are you seeing any area of the operation, whether it's mining, crushing, grinding, flotation, et cetera, that you are seeing any concerns that could limit your ability to ramp up or achieve a consistent, call it 32,000 tons a day by the end of the fourth quarter? I'm just wondering is there any area where you see some risks right now?

Hi, Oreszua. Thanks for that question, and thanks for the congratulations, although I would say my retirement is intended to remain pretty closely involved in the business. You're going to be hearing more and more. I'll be passing this across to Casual for a more granular response on that, but just from my perspective, I've been involved in quite a number of mine ramp ups. I've been extremely pleased with what I've seen at Montevideo to date. The equipment has been, I'd say, over designed in pretty much every area. We've been able to run the plants at rates above the design capacity for many continuous days and without any bottlenecks appearing. Obviously, there's work to be done on making sure we get ultimate operational continuity and getting our operators trained up to operate the equipment well. When we look at it from the mine, the mine is operating really well. It's the reconciliation between the block model and what we're actually mining is spot on. The performance of each piece of equipment, whether it's sort of crushes or molds or flotation, I was just talking to Peter on Luxon earlier today. He was just amazed at how we haven't had any issues downstream with things like filtration and thickening, etc. Tailings dams in place. The diesel plant has ramped up really nicely. At this point, certainly from my perspective, I'm really pleased with what I see. I'm looking at this through two ways, one of which is our current ramp up and the other of which is the subsequent Monteverde optimized project and looking to further wind this equipment up to actually do 45,000 tons a day rather than 32,000 tons a day. I've got to say I'm really encouraged there as well. We're not seeing anything that makes us pause in terms of the capability of the plant to ultimately get to that level. Castle, can I ask you to add to that?

Yeah, sure. Obviously, everything John said is correct and it's very encouraging. No ramp up goes without interruptions and we've had interruptions, but fortunately, there have been ones we've been able to mitigate. Early on, we had a failure in a motor, but we had spare motor. That motor is imminently the spare repaired to be delivered back soon. We did have some constraints in our cleaner circuits and we took a minor downtime to be able to address that by increasing pumping capacity and pipe diameters. It was actually restricting some of the grade we could put through. Now, fortunately, we can put through the higher grade that Monteverde has to offer. I'd say they're normal issues. Now, we're dealing with minor issues. It's optimization of reagents. It's setting control parameters for operators. It's modifying operator procedures so that they fit better with Monteverde itself. Things like the de-sal plant has now been all of the sand production is going quite well at the tailings dam. Knock on wood, it's been going really well. We think that we've been driving out the variability in the process. Then this brief modification I said to the cleaners, we see ourselves well capable of achieving that full nameplate production before the end of the year consistently.

That's excellent. With today being Halloween, can you give us an early preview of how the month of October potentially went there just with respect to average throughput and maybe recoveries?

Caswell, do you want to talk to us?

I'm not going to give perfect numbers. There's still today to be complete. It's going really well. We're in the high 20s. And recoveries? It's going really well. Yeah, so recoveries are going well too. We had what we call the buildup. We had to build the inventory within the bedding of the thickener and the cracks and crevices. We also had those issues, I said, with the cleaners. We actually have a storage pond on site that we've got to reprocess and concentrate. So our metallurgical recovery has been in the low 80s right now this month. Prior to that, we were just near 80. So it's going really well. Like I said, there's some optimization on the cleaner rougher circuits, some reagent optimization, and all those things are being done now. So it's nice to be able to not have to focus on throughput and to be able to on metallurgical characterization, so to speak, and optimize that now going forward in the Q4.

Perfect. And just another quick one, if I could. I didn't see anything in the release on CapEx guidance for this year. Is the previous number, the 470 million, is that still valid at this point, or has that changed?

Yes, largely unchanged. We had, sorry, John, or is this largely unchanged? We had authorized a bit of expiration that we had kind of noted earlier in the year.

Thank you. Thanks, Arviz.

Thanks. Thank you. And your next question comes from the line of SRAW. Proceed from 8 Capital. Please go ahead.

Thanks, operator. Thanks, Steve, for taking my questions. Just wanted to get a little bit more specific on recoveries, cash all at Mental Verity. Are you now through the in-process inventories and into the run of mine, or, and just thinking about how we get from sort of 80% to the 88% design rate, and would that 88% be sort of like a year-end 24 target? Is that conceivable?

Yeah, I think it is conceivable. In my experience, we have Peter on the line here, but I would say in my experience, you know, there's always a sequence to ramp up. You know, there's mechanical, there's warranty, then there's throughput, then there's optimization on recovery. And we're really near the end of the throughput. Obviously, we had the facility practice completion where we had consecutive days at nameplate throughput. Now we're working on operational controls. But, you know, wait, we have Peter on the line, so maybe Peter can talk to the process of getting to the desired recovery.

Yeah, sure. Thanks, Cashel. And just before, I'd like to echo John and Cashel's comments that I'm very happy with what I'm seeing on the performance of the plant to date, both in terms of tonnage and recovery. The recoveries of about 80 to 82 percent right now are a combination of losses in the roughing circuit and then the cleaning circuit. The cleaning circuit should be running for a well-designed, well-operated operating plant, should be somewhere around 98 percent, and most of the losses should be in the roughing circuit. In our case, however, because of the constraints that we had in the cleaning circuit, the operators have had to slow down the cleaning circuit, producing higher grade concentrates and sending more copper out to the cleaner tails. And as a result, the recoveries in the cleaning circuit have generally been around about 90 percent, 88 to 92 percent in that range, much lower than what we would expect after we de-bottleneck that. The changes were made roughly late last week. Earlier this week, we put in the new pumps, so we still haven't seen the final results. The operators are going to require some time as well to learn how to operate the circuit at the higher throughput rates. But in general, what I'm trying to say is that if we were to have a recovery issue around the design, we would generally see symptoms of that in the roughing stage, and we're not seeing any of that. So the rougher recoveries are above 90 percent, and we have lots of residence time. We have about 34 minutes in the roughers and about 35 minutes in the cleaner scavengers. So overall, I'm very, very encouraged by what I'm seeing from the metallurgical data on a -to-day basis.

Great. Thanks for that commentary, Peter. And, you know, Pinto Valley, a bit of a step back in Q3, and I've seen the presentation. We're now into its 50th year. You know, if Raman wants to chime in here, how are you thinking about sort of sustaining capex going forward? Historically, I see a run rate sort of 50, 60 million dollars per year. Just wondering, as that operation ages, how we should be thinking about, you know, that part of the equation?

Yeah, yeah.

Well, I think, sorry, what I would suggest is maybe, Castle, if you want to just start off just by introducing what we're doing in terms of, you know, the asset management framework, because I think Raman, after that, I'd ask just to speak to the actual kind of, you know, sustaining capex. But, you know, to me, it's more about actually having the right preventative maintenance program and the right asset management framework in place to make sure that that equipment, you know, operates sort of at or above design. So maybe if I could just ask, Castle, just comment briefly on that and then skip across to Raman.

Yeah, Ralph, what we're implementing is an asset management framework. And the reason is, is two of our mines have elderly infrastructure, we'll call it, whether it's sort of outdated electrical components, conduits, tiring steel fatigue, even down to where you sort of have pipes and pipe brackets require replacement. And what we were seeing over the last few years is that Pinto Valley, we were getting unplanned events of breakdowns of some of these structural, electrical, mechanical components that are critical to the throughput consistency. And so we, when you take these unplanned events, they're really the ones that are conspiring to Pinto Valley missing targets periodically. So we started last year, we brought in a team that's implementing at all our mine sites and asset management framework. It's got 15 components in it that address all the different components of asset integrity, asset management and maintenance, everything sort of from the procurement chain, right through to inspection, repair, time to repair all those types of systems and processes. And we've started implementing it and we got some quick wins, which was great at the start of the year out of Pinto Valley and we were achieving much higher production with less unplanned. But we had a couple of events in the last quarter that were, we would call them one-off events. We had a principal conveyor that moves the ore from our primary crusher to our tertiary crusher system. And that conveyor failed the belt split. And it turns out that it was a splice that was done a year before and the vulcanization was found to be of poor quality. So it's about, we want to have a system set up that we have good evaluation on these systems and processes. That was quite a, it wasn't that it was catastrophic that it broke anything. It took a long time to bring that back online over a week and we lost those production days. So those are the things we're trying to drive out of the system now are those unique events by having regular proper inspections, more modern techniques and systems brought to bear on assets that ostensibly are 50 years old, as you mentioned. So those are the things we're doing to improve it. And so with that, I'll hand it off to Raman for your original question around the capex. Yeah,

the capex number you mentioned Ralph is kind of that range. We're in that 70 to 80 for next few years as we continuously reinvest in the place and upgrade different components of the place over time.

Great. I appreciate that. Thanks to the team for their answers. And let me also echo the congratulations on the leadership transition. Very encouraging to see the continuity of the strategy. Thanks very much all. Thanks Ralph.

Thank you. And your next question comes from Craig Hutchison from TD Coram. Please go ahead.

Hi, good afternoon guys. I wonder if I could ask a similar question that Horace asked for Monteverde but ask at Montefiáncos. How are things kind of progressing here in October with respect to throughput and the pick-up in grades that we're expecting? Thanks.

Thanks Craig. And I'll pass that straight across to Castle just to talk about.

Yeah, it's a similar story Craig to Pinto Valley in that some of the components are aging and we are also implementing an asset management framework and we've already been seeing the benefits of that. I mentioned in my script that we just reviewed that we were over 18,000 tons a day for August, September and I would echo we're doing better in October than we had in August and September. So that's very encouraging. Another very encouraging thing is obviously, you know, recoveries are improving. So that's very encouraging. And then the other one is we had a sort of in the start of the year we had a small geotechnical issue in the mine that forced us to re-sequence the mine and had us going to slightly lower grades and that's also involved. So the work we did with the shutdown of the two weeks to be able to remedy the back end by putting in an extra positive displacement pump because really the three pumps were required to be online 100% of the time. So we needed one in rotation to maintain one of the other three. So now we have four pumps. So three can be online all the time. We're no longer restricted by our what we see is of course is when you remedy one bottleneck there is something else becomes the next bottleneck. And so we do have some improvements in our hydro screens and cyclones on the coarse fraction of the tailings. But we do see where we are now that we will hit several days in a row at the nameplate capacity that we speak about for particular mine. And so we're sort of what we see is incremental improvement week over week, month over month where we're approaching now in the high teens. Like I said, we're sort of steady at 18,000. So we believe we've got a very robust plan to get us to that nameplate capacity to the start of the year, the new year. So we're pretty pleased with the progress we've made. I think some modifications we've done have been impactful and transformational there. And now the team can concentrate on some of the smaller items, things like recovery to be able to bring that up and improve on that end of it.

Okay, great. Maybe just follow up question for me. Araman mentioned about the target to get below one times leverage before I guess the you guys make a decision on incentive Domingo. Do those leverage targets also apply to the Monteverde optimization project?

Yeah, I'll let Araman sort of comment in more detail about that. But, you know, overall, I think Craig, we have a relatively sort of conservative approach to how we manage our balance sheet, how we finance. And we're not inclined to put the company at risk by rushing forward with any capital projects that are potentially going to stress our balance sheet in any way. Monteverde optimized is a fairly specific situation because to an extent, that operation is a little bit ring fenced by the project financing facility that we have in place. Now, what I can say is in the discussions we've had with our project financing banks, they're actually tremendously enthusiastic about us going ahead with Monteverde optimized. And so some of the things that are in our current covenants like cash sweeps, they seem very willing to review those with a view to instead of cash sweeps, reinvesting sort of some of that cash flow into Monteverde optimized instead. But overall, when we look at our sort of leverage levels, I think we're pretty quickly going to be coming to that one time net debt to EBITDA during the course of next year. So I think regardless, we should be in a position by the time we move forward with Monteverde optimized that we're sort of certainly on a leading basis, we're at that ratio, whether we're on a lagging basis, Raman's

probably got a good point. When you look at MV optimizers, we'll work through with the banks in terms of amendments on the PF and ability to reinvest. But when you look at Monteverde in 2025 on a full run rate basis, you're talking operating cash flow, 450, 500 million less than stripping. So you can tell just based on the cash flows at the site level, they'll be sufficient to kind of spend that 146 over a 12 month period. And obviously, it's got a very quick payback. So in look, doing that in step while we're doing the financing for San Andres Domingo obviously just improves our EBITDA and helps actually get lower get to that one time even faster if you think about it that way. Great. Thanks,

guys. Thank you. And your next question comes from the line of Adam Beaker from Macquarie. Please go ahead.

Hi, John and Sam. Thanks for the call. Just wondering if we could get an update on how the Santa Domingo minority sell down process is going and when we should receive an update on this. And maybe if you could give us a feel for the type of parties who in the data room there. Thanks.

Yeah, certainly. So, you know, it's relatively recently that we have released the actual technical report, the full technical report for Santa Domingo. So obviously, we couldn't really progress the process until that was available for parties to look at. So that's been done. I've been very pleased with the sort of interest and enthusiasm that's been shown of we've got now many parties in the data room. You know, I was across in Japan last week together with our head of corporate development. We met with quite a number of Japanese parties that are currently in the data room. I think those are very constructive discussions. Something which is also interesting is just the sort of emergence of interest of a lot of the wealth funds in the Middle East. Again, we've got quite a number of parties from there who are in the data room. And then a bunch of others, I would say. So there's been wide-ranging interest. At the end of the day, you know, we need to look at all these parties. We need to sort of consider what gets put on the table. But we also need to consider that this will be a partnership for sort of 30 or 40 or 50 years and that we need to make sure that there's good strategic alignments between ourselves and whichever party is finally selected to move forward with us. So, you know, I think there's good progress, but I think, you know, it's probably going to be a couple of rounds. I think we're probably looking towards some time in the first half of next year to be able to provide you with any sort of meaningful update.

That's cool. Thanks for that. And maybe just one on the BHP Copper Cities project. From memory, the last update was the exploration agreement that's been to September 2024. Could you maybe remind us what the next steps are there?

Yeah, certainly. You know, I think we've extended that as far as I recall to July 2025. So, that carries on. We're currently jointly doing some studies in terms of what the kind of optimal district looks like. And, you know, those studies need to be concluded before we can then kind of move from there into the commercial conversations. But I think, you know, proceeding very well at this point.

Thanks, John. I'll hand it over. Cheers. Thanks, Adam.

Thank you. And your next question comes from the line of Delton Barretto from Canoe Continuity. Please go ahead.

Thanks, Operator. Good evening, everybody. And, Gerald Cashel, sorry, John Cashel, congratulations. And also to Dan for stepping into Gerald's very big shoes. Most of my questions have been answered. Just one for me, maybe for Cashel. There used to be some talk some time ago about the new tailings facility at Pinto Valley and how the water reclaim system there would unlock a deep bottlenecking up to 70,000 tons per day. I'm just wondering where that stands right now.

Thanks. Can

I just hand it over to you? Yeah, sure, John. Yeah, we're working through designs there. I would say that it's probably something early first half of next year where we'll be in a position where we can disclose our new life of plans at Pinto Valley for a base case. And then that too, we'd be able to align some of the optionality that's available to us at Pinto Valley. So you're quite correct that a new tailings dam could offer the opportunity for reclaimed water. It could also give us the upgrade the horsepower in the current milling system. By doing that, then the circuit would be capable of more throughput. We know we have the capacity in the crushers as installed already. So there is all of that opportunity and those are the things we're sort of working with. It's actually connected with the work that's being done for the copper city's opportunity also because really to unlock the greater district, what you need is more capacity because most of the ore in the region is of the same grade, you know, between 0.3 and 0.35. There's available in resource, close to maybe 2 or 3 billion tons available in the district. And so there are many different iterations between ourselves and BHP we're looking at. And our base case is to optimize Pinto Valley itself.

Thanks, Cashel. That's actually a good segue into my follow-up question. So as you do think about the broader district and as you go to the asset reliability program, are you comfortable with the old Pinto Valley mill eventually being sort of the base case or at some point in time you think you'll need a new mill?

It's a great question. It's one we discuss a lot. Having a mill is the best asset and fixing that mill is the best asset. So I suspect in all the cases that that mill in one form or fashion will be utilized. There's all sorts of permutations. I don't know which one is going to win in the race, but you could see yourself if you wanted to increase capacity to over 100,000 tons, you could simply put a sag mill in front and then utilize these ball mills and maybe then use some of that excess crushing you have to be able to perpetuate some of our sulfide leaching, for example. So there are a number, I think the guys had between 10 and 15 different options that they were sorting through. The other one is building a completely new complex closer to sort of the Copper Cities resource. So there are just so many different options and that's the work that's being done is that trade-off study level, PA scoping level such that we are choosing the best using several criteria. You know, execution risk is very important also. Permitting risk is very important. Water is very important. Like you said, new tailings facilities is very important. So all these things are being considered in there, but we're evaluating all those options.

Got it. Thanks, Cashel. That's all for me. Thank you. And your

last question comes from the line of David Radcliffe from Global Mining Research. Please go ahead.

Hi, good morning. Good afternoon, everyone. So my question is to follow up on Mantis Blancos. I'm wondering if the delays you've experienced and the learnings from those impact on the thoughts for Phase 2 at the project and the current study. So I mean, at this stage, it sounds like you're still confident you can get to capacity with the recent works. But do you think that Phase 2 needs any additional works to the original scope to improve performance redundancies going forward? Yeah, David,

I'll give a brief comment and then just cross to Cashel. Ultimately, to get from 20 up to somewhere between 27 and 30,000 tons a day, we've got an existing plan. So we need to understand exactly where the bottlenecks lie. Now, what we do know is that we've got significant surplus crushing capacity. We've certainly got adequate milling capacity to get us to between 27 and 30,000. So it's really downstream from there that we need to properly identify where the bottlenecks lie. And so until we've actually got the operation running at its steady state, current nameplate capacity, it's not optimal to be trying to define exactly what the best engineering is to move it to that next stage. So we know we have the resource base to support this growth. In fact, the optimal throughput rate today is probably somewhere between 27 and 30,000 tons a day. But I think at this at design, and from that we can push the various parts of the system to be able to see where exactly do the bottlenecks lie and what is the most efficient way of spending capital to get us to that next step upwards and whether that's best done in one step or in multiple steps. Cashel, have you got anything you'd like to say to that?

No, I think you covered it, John. Thanks.

All right. Thank you. I'll pass it on. Thanks, David.

Thank you. Thank you. And there are no further questions at this time. I will now hand the call back to Mr. Chad McKenzie for any closing remarks.

Thanks, operator. So we look forward to welcoming some of you to our operations in Chile in a few weeks' time for our analyst and investor site tour. After that, we'll update you again in February with our Q4 results. Until then, stay safe and feel free to reach out to Daniel or Michael if you have any further questions. Thank you for your continued support and have a good day.

Thank you. And this concludes today's call. Thank you for participating in We All Disconnect.