This conference call transcript was computer generated and almost certianly contains errors. This transcript is provided for information purposes only.EarningsCall, LLC makes no representation about the accuracy of the aforementioned transcript, and you are cautioned not to place undue reliance on the information provided by the transcript.
spk05: Welcome to the first Quantum Minerals first quarter 2023 results conference call. As a reminder, all participants are in listen-only mode, and the conference is being recorded. After the presentation, there will be an opportunity to ask questions. To join the question queue, you may press star, then 1 on your telephone keypad. Should you need assistance during the conference call, you may signal an operator by pressing star, then zero. I would now like to turn the conference over to Benita Till, Director, Investor Relations. Please go ahead.
spk04: Thank you, operator, and thank you, everyone, for joining us to discuss our first quarter results. During the call, we will be making forward-looking statements. As such, I encourage you to read the cautionary notes that accompany this presentation, our MD&A, and the related news release. As a reminder, the presentation is available on our website and that all dollar amounts are U.S. dollars unless otherwise noted. On today's call will be Tristan Pascoe, our Chief Executive Officer, with opening remarks, followed by Rudy Battenhorst, our Chief Operating Officer, who will provide an overview of our operations. Ryan McWilliam our Chief Financial Officer will review our financial results and Tristan will then wrap things up after which we will open up the lines to Q&A. And with that I will now turn it over to Tristan.
spk07: Thank you Benita and thank you everybody for joining us on our conference call today. On our call today we will discuss our first quarter results and provide an update on the business. In terms of production, 2023 did get off to a relatively slow start and was certainly lower than normal. Rudy will provide more details on the challenges we faced during the quarter. However, thus far in April, whilst it's still early days, we are back on track. The temporary shutdown of Cobra Panama was a one-off event and the operation was able to reach full capacity within two days of restarting. The rainy season in Zambia is substantially behind us. With the pumping capacity that was increased at Sentinel across the rainy season, we are already accessing higher grade ore in stage one, and by mid-May we expect there will be water only in the sumps at the bottom of the pit. Overall, despite the low first quarter production numbers across the three main operating sites, production will improve in the second quarter and over the course of the year, particularly in the second half, and we remain comfortable with the guidance provided in January. Before we go on to the operations, there were several important achievements in the quarter that I don't want to be overlooked. I am pleased to update the market that commissioning work for the CP100 expansion was completed seven weeks ahead of schedule. We achieved first oar through the new facilities during the quarter and throughput benefits from ball mill six were realised within that week. Similarly, the screening plant is achieving results ahead of plan. Although the optimization to integrate this system into the overall plant will be ongoing over the year, I'm very confident we remain on track to achieve 100 million tons per annum run rate by the end of this year. In Zambia, we fed first ore through the enterprise nickel plant, and we are on track for first nickel production in the second quarter of this year. This operation, along with our Ravensport mine in Australia, will place first quantum as one of the top nickel producers in the world. which complements our position as a leading copper producer and further increases our exposure to energy transition metals. I'm also pleased that during the quarter we signed a new partnership with Rio Tinto to move forward the La Granja project, one of the world's largest undeveloped copper ore bodies. Adding this major project to our portfolio as the operator will give First Quantum one of the leading copper growth profiles in the industry. We look forward to working with Rio Tinto on this exciting development and also potentially on future base metal opportunities and sharing of know-how and technical knowledge. We also formed a technology partnership with Hitachi Construction Machinery for the development of Hitachi's first battery mining trucks, which we expect to be deployed at the Kansanshi mine by December this year. As many of you are aware, we have made a commitment to significantly expand the trolley assist networks at our mines over the coming years. When our trucks are connected to trolley assist and powered by electricity, our diesel consumption is reduced by up to 90%, which reduces costs and emissions and at the same time delivers operational efficiency benefits. This initiative with Atashi represents an important milestone towards the future commercialisation of battery technology and the ongoing decarbonisation of our mining operations. We look forward to sharing similar initiatives with you at our virtual ESG Day on 13 June. Last but not least, at Cobra Panama, after many years of negotiations, an agreement with the Government of Panama was reached in March. In my meeting with the President, while acknowledging that the negotiations were both rigorous and intense, we both agreed that the outcome and terms are mutually beneficial to both parties and provide clarity and stability to Cobra Panama, our stakeholders, and the people of Panama for the next 20 to 40 years. It has been pleasing to see the collaborative efforts of the Cobra Panama team and the government's team working together since that announcement. And with that, I will hand it over to Rudy to review the operations.
spk12: Thank you, Justin. Total copper production for first quarter was approximately 139,000 tons, down from 206,000 tons in the fourth quarter of last year, as each of our three largest operations had negative production impacts during the period. Copper production totaled 65,000 tons in the first quarter at Cobra Canaba, a decrease of 24,000 tons from quarter four last year, as production was interrupted for 15 days as a result of the export restrictions imposed by the Maritime Port Authority. During this temporary suspension, maintenance work that was planned for later in the year was moved to this period, and following the resumption of exports, production at Covered Panama returned to normal and achieved full throughput rates within days. As Tristan highlighted, we were also able to restart with much of the CP100 expansion project coming online, and the already-born Mill 6 and the process water upgrades are being felt in terms of added production capacity. Copper C1 cash cost at Copper Panama was $1.65 per pound, two cents higher than the previous quarter, mainly attributable to lower production levels. At Kansanshi, production continued to be impacted by mining from narrow-veined areas, particularly in the main 11 area. This area is at low elevation in the paint pit, and as such, provides limited flexibility for adjusting our selective high-grade mine methodology when low mineralized veins are encountered. This meant that during the course, we did have a higher than expected reliance on using stockpiles to augment plant feed. Compared to the fourth quarter, there was also the seasonal impact of the rainy season. As such, conscientious copper production in the first quarter was 29,000 tons, approximately 9,000 tons lower than the fourth quarter, while copper's C1 cash cost of $2.38 per pound was 7 cents higher than quarter four due to the lower production. The impact of rainy season was more intense at Sentinel, with the area around the operation receiving the highest rainfall in 25 years. This resulted in a water accumulation in parts of the pit and challenging road conditions, both of which restricted access to certain mining areas in the pits and higher grade ore. As a result, the mine plan was resequenced and first quarter copper production at Sentinel totaled only 36,000 tons as lower grade parts of the pit were mined. The lower volumes impacted C1 cash costs, which rose to $2.70 for the quarter. Despite the challenges encountered for the start of the year, we are maintaining our production guidance for each of the operations, to which Tristan will provide more detail at the end of the call. With that, I will hand the call over to Ryan to review the financials.
spk06: Thank you, Rudy. Starting with the market, the copper price rose 11% through the first quarter, and while data of China continues to create volatility, global inventories remain very low. Despite the near-term uncertainty, the impending medium-term structural deficits in the copper market continues to be a focus, as evidenced by recent M&A activity in the sector. First Quantum remains very well positioned to benefit from the medium-term outlook as one of the few large copper-focused mining companies. During the first quarter, total revenue decreased 15 percent, driven by a reduction in copper sales of 49,000 tons. This decline was the direct result of the lower production levels which Rudy described. As can be seen on the waterfall on slide 16, copper C1 cash costs of $2.24 per pound were 20 percent higher than the previous quarter. This increase in costs on the unit basis was driven by the lower production in the quarter. The slide also highlights that there was relief from inflationary pressures as market prices for fuel, sulfur, and freight continued to ease. As such, we remain confident in our cost guidance for the year. Slide 18 shows that as a result of the lower revenues, Q1 EBITDA decreased to $518 million. Net earnings decreased to $75 million, and adjusted earnings per share reduced to 11 cents. Moving on to slide 19 in our balance sheet. Debt reduction continues to be a priority. Since peak debt in the second quarter of 2020 The company has decreased net debt by $2 billion, and we continue to target an additional $1 billion in debt reduction in the medium term. We've also been clear that in order to reduce financial risk in the future, we'll be open to partnerships and large projects in order to share the capital burden. Our new 55%, 45% partnership with Rio Tinto La Graña is an example of this approach, and we'll continue to explore similar structures going forward. Through the quarter, we redeemed $850 million of senior notes due in 2024, which now means we have no bonds due until 2025. Net debt marginally increased from the previous quarter to $5.8 billion due to the timing of working capital cash flows and higher capital expenditure incurred during the shutdown of Kobe, Panama. This capex was related to the reprioritization of waste stripping and major maintenance, which Rudy mentioned. Net debt has benefited from the agreement we reached with the government of Zambia last year for repayment of the outstanding VAT based on offsets against income tax and receivables and royalties. This agreement continues to operate effectively, and as a result, we have seen a steady decrease in the overall VAT receivable position over the last few quarters. During the first quarter, we were granted offsets and refunds of $66 million. And that brings the finance section to an end, so I'll hand the call back to Tristan.
spk07: Thank you, Ryan. Before I move on to the progress of our brownfield projects, I would like to take this opportunity to discuss our guidance for the year. Despite the slow start, we remain comfortable with the guidance ranges provided in January. To provide the backdrop, 2022 was a difficult year, and when we approached our guidance for 2023, it was through the lens that difficult is the new normal. And seeing the start of this year, it was prudent that we took this approach. At Cobra Panama, while we had the 15-day stoppage, we also budgeted for a six-month ramp-up of the CP100 expansion facilities, particularly the screening plant. The expansion facilities are operating at or above expectations and have been handed over from the in-house projects team to the Cobra Panama operations team, and I would like to thank both those teams for this seamless transition. The expansion is ramping up well, and we remain on schedule to exit the year at the targeted 100 million tonnes per annum. At Consanti, we have made additional steps to address narrow-veined areas, such as those we encountered in the Main 11 area in the first quarter. This includes drilling delineation beyond just our normal grade control holes, with an extensive stab-hole drilling in areas associated with vein mineralisation. Over the last five months, we have built up capacity to now update our mine planning on a weekly basis, which we expect will allow for better planning going forward based on the most up-to-date information. Additionally, efforts have been made on opening up mining areas at high elevations, such as Main 15 and Main 17, which have historically provided higher grades. Although there will continue to be some risk associated with Consanche's production, The adjusted mine plan will reduce reliance on veined areas and lower-grade stockpiles, and so at this stage we remain comfortable with the guidance for the year. Moving on to Trident, and as noted by Rudy, rainfall was unusually high over the rainy season, with Sentinel experiencing higher rainfall than Consantia and some of its other neighbouring mines. Whilst the original mine plan called for more balanced production throughout the year, water in the bottom of the pit restricted access to higher-grade zones, particularly in phase one of the pit, throughout the first quarter. As a consequence, the mine plan has been rescheduled, and even if total volumes remain substantially the same, we will now dispatch those higher-grade zoned areas across the remaining three quarters of the year. While still early in the quarter, April has already seen an improvement in this regard and production is expected to continue to improve over the course of the year, albeit mostly weighted to the second half. On to our brownfield projects. At Cobra Panama during the quarter, we started construction of the Molybdenum plant. This project is progressing well with completion of construction and start of commissioning expected by the end of the year. First Molybdenum production is expected in early 2024. At S3, long lead items remain on track for delivery commencing the second half of this year. Overall project procurement is approximately 25% committed and we continue to expect first production in 2025. At Enterprise, despite a challenging rainy season, as I noted earlier, we achieved first ore through the plant in the first quarter and expect first nickel production in the second quarter and a ramp up towards full production next year, 2024. At Las Cruces the remaining water concession licence was granted in March and all licences and permits are now in place for the approval of the project. However, approval will be dependent on market conditions and our debt reduction objectives. In the meantime work will continue to upgrade the resources to reserves. There is an investor tour to Las Cruces in May and we look forward to highlighting the potential of this asset. As we approach the month of May I will be coming up to one my first year tenure as CEO of First Quantum. When I started this role, I had four primary strategic objectives. Firstly, to work with the government of Zambia for solutions that would be conducive to further investment in the country. This was achieved last year with a change in the royalty regime and agreements in respect of VAT refunds and the ease of doing business in the country. This has allowed us to have comfort in sanctioning the SD and enterprise projects. Secondly, to reach a new agreement with the Government of Panama, which was achieved in early March. We expect that the refreshed contract will be presented before the National Assembly in the legislative term that commences on 1 July. Thirdly, to deliver on brownfield projects. And in this regard, it's been pleasing to see CP100 cross the finish line with Enterprise not far behind. And lastly, to improve the balance sheet. and despite the macro challenges in the inflation environment over the past year, we have made progress and debt reduction will remain a focus. Before I open up the lines for Q&A, I also wanted to mention that we have a video of the CP100 expansion facilities on our website and I encourage everybody to watch it. It certainly demonstrates the in-house capabilities of First Quantum and the remarkable accomplishments of our teams. The market frequently discusses the need for more copper to achieve the global transition goals to clean energy, as well as the challenges of bringing on new supply due to a lack of shovel-ready projects and new discoveries. However, it is often overlooked that the human capabilities to build new projects will also be a challenge to bringing on new supply. For this reason, and with our confidence in the strengthening long-term prospects for copper, I am excited about First Quantum's future. as I firmly believe that we are uniquely positioned as a copper-focused producer, not only with the optionality in our greenfield projects, but also in the in-house capabilities of our teams to deliver these projects. I do hope you enjoy the video. Thank you, and we will now be happy to take questions.
spk05: We will now begin the question and answer session. Analysts are permitted to ask one question and one follow-up question. and are welcome to rejoin the question queue if they have more. To join the question queue, you may press star then 1 on your telephone keypad. You will hear a tone acknowledging your request. If you're using a speakerphone, please pick up your handset before pressing any keys. To withdraw your question, please press star then 2. The first question comes from Emily Zhang from Goldman Sachs. Please go ahead.
spk02: My first is around the greenfield growth that you've outlined. You know, you've got Takataka, Akira now, you know, LaGranja in the portfolio. How should we think about the sequencing of those greenfield projects, and how should they sit among sequencing of the brownfield expansions you've got currently underway? And how does that compare to the comment that you make around the focus on inorganic growth and potentially pursuing other JV structures as well, similar to the Lagrania acquisition.
spk07: Hi, Emily. Thanks for the question. Yeah, so we're very excited to have Lagrania on board. As I said, it's one of the largest undeveloped copper deposits in the world and certainly will require a lot of effort and so on to get up to speed. Rio Tinto has done a fantastic job there in terms of preparing a platform. And we believe we have the capabilities to now take it forward. But in terms of sequencing, in terms of the greenfield projects, at this stage, Argentina and the Takataka project will be ahead of that, just in terms of the knowledge that we already have around it and the processes for permitting and the main question now, which is on the investment climate in Argentina. So at this stage, we have that ahead. La Granja will take some time in terms of at least a couple of years of studies into the right approach to tackle the project, and then we'll be sequenced in that order after Takataka. And Hakira at this stage, although we are making progress with the community, we would hold that after La Granja. In front of that, yes, we do continue to work on these brownfield developments. Certainly S3 fits neatly in terms of delivery by 2025. and our ongoing work on some of the other opportunities that we have in the business, for example, Las Cruces, we will schedule accordingly and to see whether it can fit in and whether it fits with the balance sheet and the debt reduction profile of the business.
spk06: Maybe, Emily, just to answer then the Bill and Tristan's comment in the second half of your question around focus on inorganic growth, perhaps to clarify the allusion to further joint venture projects such as LaGrania may also be within our own portfolio. So as we look at those greenfield projects that Tristan's mentioned, I think given the focus on the balance sheet, we're very happy to work with partners going forward, either outside of our portfolio like we've now done with LaGrania or within our portfolio.
spk02: Elizabeth Mertinko- Okay, that makes sense. Thanks, Ryan. My second question, just around Sentinel and wanting to follow up on the comments around the dewatering there at the Stage 1 pit, I guess it seems like you've made some access to those high grades this year. Should we expect that to come more meaningfully in the latter part of the second quarter, or how should we think about that access to the higher grades?
spk07: Thanks, Emily. Yeah, so no surprise is the highest grades in the mine are at the bottom of the pit. That's why we mine that area first. So when we do get these excessive rainy periods, those are the areas that are challenged the most. And so we didn't have access You know we had a blended approach, obviously in the mine plan we try and smooth that across the year and so we've had restricted access and so in the first quarter we've been taking the lower grades that otherwise would have been blended across the year. So now as we empty water and we expect to have all the water out down to the stumps by mid-May, that high grade will come through and be sequenced across the three remaining quarters. So I think it will be more weighted to the second half of the year. Sort of trending up 70,000 tons or so per quarter and trending up. And certainly, you know, the initial in April, we've already been able to access some of those higher grades lower down, and that should continue to improve.
spk05: The next question comes from Jackie Brzezolowski from BMO Capital Markets. Please go ahead.
spk03: Thanks very much, and I did enjoy that video on CP100, so thanks very much for sharing that. I guess I wanted to follow up on a comment, Tristan, that you made in the opening remarks. You said that you've got an investor tour going to Las Cruces in May, which is a bit of a surprise because we haven't been hearing much from Las Cruces, and I'm assuming that's just sort of convenient timing with an upcoming conference, but can you maybe talk about what you're planning to showcase there? I know you've recently received the licenses and permits you need, but it sounds like there's still a ways away from making a decision. So can you talk a little bit about what you're planning to showcase on that tour?
spk07: Yeah. Thanks, Jackie. So Las Cruces, yeah, we're not planning to sanction that decision, and certainly we're The opportunity to provide a tour there was coinciding with the conference in Barcelona, and that works very well. But we will be showcasing, in particular, the technology development there that the in-house team of First Quantum has really delivered on, which is the polymetallic refinery technology, and we think can unlock a lot in the future in the pyrote belt of Portugal and Spain. But all of that is conditional on... the project on a standalone basis making good sense and that's what we continue to work through. We will be explaining the underground mining methodology, our approach to dewatering there and the good relationship that we have with regulatory authorities and the government there and the need that Europe continues to express in terms of increasing its own domestic production of renewable energy metals such as copper. So we will be showcasing that but and it's really to take the opportunity around the Barcelona conference.
spk03: Perfect, thank you very much. And maybe following up on the processing theme, you talked about Lagrania, and just to follow up on Emily's question maybe, we've heard in the past that this is a high arsenic ore body, and it's maybe been a bit of a challenge from that perspective to date. Can you talk about how you see the opportunities to process that ore body, and has technology evolved in a way that this makes more sense now or will make more sense in the next few years to process the ore, or is there more work that needs to be done on that? Thanks.
spk07: Thanks, Jackie. Yeah, we think Rio have done a fantastic job there in terms of understanding that, but there's some more work to be done in terms of delineation. And in particular, on the zones where arsenic comes into play. And John Gregory, you might just comment a little bit further on how we see the mine plan evolving over time. But at this stage, we wouldn't be deploying any non-conventional processing technology. But we do believe that there's an approach we can take on the mining side to be able to overcome that. We've had that before at Guelph-McRaine. and being able to cope with that high arsenic. But John, you might explain a little bit further.
spk13: Hi. Thanks, Tristan. Yes, Jackie. We've had the opportunity to look at the geological database and some preliminary aspects of the geology. And we're now embarking on a further campaign to understand the domaining. But one of the things that is clear is arsenic is clearly constrained in a structural manner. So therefore it is domain and that's how we want to model it going forward. And in doing so we will be able to optimize the initial mining process through conventional open pit operations with a degree of selectivity which will not inhibit production. And just to confirm that we are looking at conventional sulfide flotation as the means of processing this material.
spk05: The next question comes from Oris Rockadel from Scotiabank. Please go ahead.
spk11: I wanted to come back to the guidance for the year. Based on what you did in Q1, by my math, you'd have to produce an average of 210,000 tons of copper in every quarter for the rest of the year just to make the low end of your copper production guidance. That seems like a stretch to me. Can you walk us through why you think that's a reasonable assumption at this point?
spk07: Thanks, Oris. Yeah, so that's reasonable to say that. But looking at what we have, so just walking through the three main sites at Cobra Panama, bringing on the bore mill six and the process water plant upgrades as have already been put in place, we believe we can be north of sort of 90,000 tonnes a quarter. and that certainly the ore body and so on supports that. It doesn't result in any sort of change in sequencing or rescheduling of the mine plan. We did have some lower grades in Q1 as we went into the closure, and that was really just around managing how much concentrate we had in the shed at that time. We didn't want to push too much through. So we actually reserved some high-grade areas over that period, but no major rescheduling is required there. And we're very confident in the ramp up of the CP100 expansion. It's going very well so far. There is some work to be done in terms of the screening plant and its optimisation in the wider plant. But ball mill six and the process water upgrades are going very well. So that's Cobra Panama. At Sentinel, it's really that all the grade that we had across the year remains available to us. It was always there. It was just that the higher grades were under that water. That just is simply a rescheduling because we didn't have access. It would have otherwise been blended across the year and now we took lower grade areas by necessity in the first quarter and over the next three quarters those higher grades come through. So the total for the year is the same and it's just that the higher grades come over the next three quarters rather than in the first quarter. And at Consanche we were conservative on the assumptions around Consanche There is some work. The challenge has really been on geology and graded dilution. And as Rudy mentioned, we were focused in the Main 11 area and now moving across into areas that have less of those vein structures. And we had a high level of stockpile processing in the first quarter. And we now expect to be taking more directly from mine feeds, particularly from Main 15 and Main 17. And it's the proportion of those we think consensual will be At or above, so around 40,000 tons of copper production per quarter.
spk11: Okay, thank you. And just as a quick follow-up, can you maybe give us a color on the grade at Cobra Panama Q1? I mean, the 0.4% is a pretty low grade. Was that specific to just the operating challenges you're having with storage of concentrate, or is there something else going on?
spk07: No, Oris, it was very much related to that. take the opportunity to go and make sure that we were finishing off on final walls, as the guys say, eating our vegetables, and that sets up the mine really well for the rest of the year, because we were in lower grades for the reason you mentioned, because we were essentially concentrate constrained, we couldn't store it anywhere. So we went and did all of that background work, brought forward maintenance, over that period of time, and now we have the opportunity to go and take some of the higher grades that were put aside and so on over the course of the year remaining.
spk05: The next question comes from Shane Nagel from National Bank Financial. Please go ahead.
spk08: Thanks, operator. Tristan, just wondering. kind of outlined the mine sequencing for Constantia and dealing with some of that grade variability for 2023. As you've done some of the work, is there anything from the mine plan that may give you some hope or some potential upside over the next couple of years in terms of that variability or relying less on that or stockpiles? Or is it going to just kind of be a Q1 issue going forward as we're in the rainy season?
spk07: Yeah, Shane, I think that's the reality. You know, it's tough at Constantia at the moment. You know, the reality is at Main 11 we were sort of at the bottom of the pit where things start to pinch out and, you know, so we limited in flexibility because we are at the bottom of the pit and, you know, the mining methodology there remains selective. You know, that's what we've been at Constantia for 20 years and we need to move across to the bulk mining methodology but that relies on S3. So in the next couple of years, we will have these constraints over us on geology and the challenge on dilution. We've been conservative in our estimates, our guidance for that. And as we go back up in the ore body to higher positions, and that's main 15 and main 17, we expect the impact to be less. But nonetheless, we'll have that challenge. Once we get to S3 and have that running, we can very much take an average approach on a large block size, putting large volume through the mill, and that takes away all this sort of selective mining that we've been doing for 20 years and moves us to a different basis. But until then, we will have these challenges.
spk08: And then just on the, maybe going into the cost of Cobre Panama, could you remind us again, I believe the higher core prices as the hedges roll off next year are in the guidance. But if you could just remind me what assumption went into that in terms of the coal price, and then has there been any work on increasing potentially the amount of power that you draw from renewable sources in country to maybe help offset some of that increase next year? Thanks.
spk07: Sure, Shane. Ryan, do you want to take that question?
spk06: Yes. Shane, so our guidance for next year and the following year assumes $150 coal price based on consensus pricing. You've seen thermal coal prices come below $200, but if we see $200 ton coal prices at Cobra Panama, that makes about a $0.05 increase in our C1 costs. We would note if you see spot prices in general continue, what you'll also see is a higher molly price, which is now sitting around $30 per pound, more than double what we assumed in our byproducts for next year. So if we assume the same, and that also has around a $0.05 per pound benefit. So coal would be, coal stays where it is today, you'd see our costs go up by five cents per pound relative to guidance. If molly stays where it is today, you'd see our costs go down by around five cents per pound relative to our guidance.
spk05: The next question comes from Lawson Winder from Bank of America Securities. Please go ahead.
spk00: Hi, good morning, everybody. Thank you for the update today and taking the question. I wanted to ask about the guidance as well. So, I mean, it makes sense what you're saying about the production. It does look like you've set out a clear plan to achieve that. And I just wanted to ask kind of a similar question about the cash costs. that you've now guided to. I mean, for example, like moving the ramps and changing the mine plan at Sensadon might add some additional cost. I'd be curious if maybe the cash cost guidance is where there's maybe a little bit more risk. I'd love your thoughts on that. Thank you.
spk07: Hi, Lawson. Yeah, Brian, do you want to take that question as well?
spk06: Yeah, Lawson, if you look at slide 16 of the presentation, what it shows at versus Q4 last year, our costs went up by 61 cents due to production, the lower production, which Tristan really talked about. But if you look at what the impacts of costs are due to changes in input costs, it was actually a 23 cents lower per pound impact. So while overall costs were up quite substantially, that really was exclusively driven by the impact on production. And what that to some extent hides is that on things like fuel, things like grinding media, freight, diesel prices, We have seen some tailwinds through this quarter. As an example, our guidance is based on $100 per barrel oil, and you've seen the oil price be at, say, circa $80 for most of the quarter. So certainly some benefits there that we'll expect to see through the balance of the year, together with the improving production that's expected.
spk00: Okay, fantastic. And then just as sort of a second follow-up question, I wanted to kind of get your thoughts on the MOU with Rio Tinto and development opportunities. So you specifically mentioned assets, but I'd be curious to get your thoughts on whether or not those assets could be assets that you jointly acquire and then develop. Thanks very much.
spk07: Yeah. Hi, Lawson. So, yeah, we're very excited about LaGranja and the opportunity that that large project presents in our portfolio in terms of optionality and ability to really bring online something that in a major mining jurisdiction really would make a significant difference to our copper profile but also in terms of delivery of copper that's very much needed in a market that structurally at the moment really looks like there's big gaps opening up between supply and demand. As Ryan mentioned, we're happy to take that model elsewhere, but depending on the asset and the location. So whether that's with Rio or with others, what we do see is there are opportunities out there. And you probably won't see us in a big bidding war or so on, but where we can bring our capabilities to bear, we'll certainly look at it. The challenge will be to schedule those and to make sure that we don't overextend and don't overexert ourselves in terms of the human side of things, and that is that more and more the industry has a limited ability in terms of engineering firms, in terms of the supply chain and so on in order to develop these assets, and so getting that right in terms of sequencing is a key consideration.
spk05: The next question comes from Bryce Adams from CIBC Capital Markets. Please go ahead.
spk01: Hi all, thanks for taking my questions. On dewatering capacity in Zambia, is that something that needs to increase every couple of years due to larger operations? Or when you increase capacity this year, should that then be right sized for Zambia weather?
spk07: Thanks Bryce. Look it's a very relevant question and certainly through the rainy season we dramatically increased our pumping capacity at Sentinel. But Rudy, could you just comment more there on our pumping volumes and where we're going to? We've certainly been upgrading those assets as we've gone along.
spk12: Yeah, sure, Chris. In preparation for this year's wet season, we already increased pumping capacity at Sentinel compared to previous years. We certainly didn't expect double the rainfall. That definitely caught us off guard. We have increased our pumping capacity from the beginning of this year from 65 megabit cubes a day to 82, and there's some additional pipelines of pumping going in again to take it up to about 85, and that should suffice. We also had, in the recent months, made provision to pump back contact water to the plant rather than spending a lot of costs on utilization with lime so that we can safely and within the limits of the regulations discharge that water. So that water is now going back to the plant, which means that we can put, you know, we're not sticking with pumping water from the pit to our environmental treatment ponds for discharge. So we've created more space now as well. in our pond. So as far as the wet season is concerned, I'm quite confident that we won't experience a similar event in the upcoming wet season at the end of this year.
spk01: Okay, certainly sounds challenging. My second question might be for you as well, Rudy, but at Enterprise, first ore to the plant in February, but first production isn't expected until Q2. Does that mean the first ore in February was just to crushing and grinding only, or have I got that wrong?
spk12: No, pretty much. We wanted to commission our crushing facilities and the moulds. The moulds have been there for a long time, and they were bottled originally with the fentanyl. So it's really just commissioning those things to make sure all of it is out of the way. The wet season obviously impacted the enterprise as well, and we didn't mine as much as we wanted to, and deliberately took a decision to open up the ore body a lot more so that when we do get going on the enterprise rotation circuit, we know that we've got the required volume of ore behind us so that we can get the liquid rate up as quickly as possible. So it provides additional opportunity for stripping above the ore block. We have recently started tracking 3,000 tonne a day to the enterprise . So that's going quite well now, but I'll just stop.
spk05: The next question comes from from Morgan Stanley. Please go ahead.
spk10: Hello, Tristan and team. Thanks for taking the questions. My first question is on the Cobra Panama fiscal agreement, as we're still getting questions from investors on this. Can you give us a bit of color on how long will the Panamanian Cabinet debate it? Can they propose any further changes, or are the terms finalized? And any indication on whether there are any residual risks, or you're confident that, as things stand, the proposed agreements go through? Thank you.
spk07: Thanks, Ioannis. Yeah, certainly we're very happy through the quarter to resolve that in terms of contractual terms with the Government of Panama and my meeting with the President was a great point in time to talk about the future and going on with Cobra Panama not only for the mine and for First Quantum but for the community around us and for the country as a whole with a lot more clarity. So the process now is very clear. We've been going through this public consultation period and the last public hearing was on the 24th of April. So that's behind us and we expect that to close out very imminently. And then yes, it will go into a Cabinet decision and really that's around the need for then the government to sign. That's a very straightforward process as far as we understand. And then from there it would go into the National Assembly and as we said in the MD&A, that's likely to be in the legislative term in July and that would then be the final approval and then we go forward from that point in time. In terms of any changes in the interim, whether that comes back from public consultation, we'll just have to see. We wouldn't expect on our side any major changes of major consequence but we'll see how that goes and that's part of our consultation with the government.
spk10: Perfect. Thank you so much for that. And just a second question. We did cover the major copper assets in detail, but if we can talk about Ravensthorpe for a moment. I was looking at nickel payability and continues to come down. It's 73%, I think, in Q1. It's probably the lowest in the asset history. And since you restarted the mine, profitability and cash generation has been probably worse than you had anticipated. Can you talk about any potential additional turnaround initiatives you're considering at the mine and how you're thinking about potential downstream investment or integration to improve the economics of the asset? Thank you.
spk07: Thanks, Jonas. Yeah, certainly the nickel market has been challenging since the disruptions to the LME in March last year. And certainly what we have seen is In recent times, the LME coming back is a benchmark. We are happy with the level of nickel prices that currently stands on the LME, but it is the combination of the nickel price and the pay abilities that do impact on our revenues. The pay abilities have been moving more than the nickel price, I would say, and certainly volatile. It requires a lot of customer to customer conversation whilst the LME was less of a benchmark but starting to improve and it has been going up and down. In terms of improving that situation going forward we're doing a lot of work in terms of the supply chain and we'll continue to do that through the course of the year but in terms of what we can do and what we can control in the operations there's a solid work plan ahead of us and that is we'd really like to get the full Ravensort plant up and running per design and there's a couple of areas that we've been working on that in regards to that beneficiation circuit, particularly from the Benny Ponds and then the Rejects area. And then also in terms of bringing material in from Shoemaker Levy, we've been mining off stockpiles and so on and that has meant that at times you know, we didn't have full picture on the feed and how much magnesium, how much, you know, the content of that oil was going to the plant. So those changes to both mining but also in the plant itself will have a big impact in terms of the cost that we're able to deliver at and that then, you know, alongside the pricing in the market really impacts the profitability at Ravensforth.
spk05: This concludes the question and answer session. I would like to turn the conference back over to Tristan Pascal for any closing remarks.
spk07: Thanks, Operator. Thank you, everybody, for joining us today. We look forward to seeing you at our upcoming investor events in Toronto and London, and we do hope you will join our virtual ESG event on June 13. Thank you again, and have a good day.
spk05: This concludes today's conference call. You may disconnect your lines. Thank you for participating and have a pleasant day.
Disclaimer