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spk10: Thank you for standing by. This is the conference operator. Welcome to the first Quantum Minerals Limited second quarter 2024 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 Bonita Cho, Director, Investor Relations. Please go ahead.
spk00: Thank you, operator, and thank you everyone for joining us today to discuss our second 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 references are in U.S. dollars unless otherwise noted. On today's call, we have Tristan Pascal, our Chief Executive Officer, Ryan McWilliam, our Chief Financial Officer, and Rudy Battenhorst, our Chief Operating Officer. And with that, I will turn the call over to Tristan for opening remarks.
spk08: Thank you, Benita. And thank you, everybody, for joining us today for our second quarter update. Operationally, we had another solid quarter in Zambia, which Rudy will cover in his remarks. And both Consanche and Sentinel are set up well for the second half of the year. We remain on track to deliver on the copper production guidance which we provided earlier in the year. We were pleased to announce the commercial production and enterprise on June 1st. However, in April, we made the difficult decision to place Raventhorpe on care and maintenance due to the high cost structure of the operation. Despite this, with enterprise performing better than expected, we have maintained our nickel production guidance, albeit at the bottom of the range. Whilst we are not natural hedgers, the copper price in May reached levels that provided assurance on maintaining balance sheet strength during this time of elevated debt and while we look for a resolution in Panama. As such, in our continued efforts to prudently manage the balance sheet, we initiated a copper hedging program to which Ryan will provide more details in his financial overview. It was pleasing to reach a shareholder rights agreement with Shangxi Copper during the quarter. which formalises our relationship and removes uncertainty for all of First Quantum stakeholders by establishing guardrails with respect to three key areas. Firstly, with a few exceptions, Jiangxi Copper will not vote against board recommended matters. Secondly, Jiangxi Copper remains under a standstill for the term of the agreement. And thirdly, any material block of shares that Jiangxi Copper wishes to sell will have the oversight of First Quantum. As part of the agreement, Jiangxi Copper will have the right to nominate, rather than appoint, one director to First Quantum Sport, with the nominee being subject to the recommendation of the Nominating and Governance Committee of First Quantum Sport. The nominee must fit the skills matrix as required by the board, as well as discharging all of the duties regularly expected of directors sitting on the board of a Canadian company. Over the years, since its initial investment in 2019, The relationship between Junxy Copper and First Quantum has strengthened. Junxy is supportive of the strategic direction of the company, and both parties expressed a willingness to formalize the boundaries of this relationship. This agreement has been many years in the works, and we are pleased to have reached this outcome. In Panama, President Molino was inaugurated on July 1. He has authorized discussions between the company and its various ministers and officials. Initial meetings have taken place and there should be further dialogue in the coming weeks, once his government is ready. In the meantime, there continues to be 121,000 dry metric tonnes of concentrate on site. Shipment of this concentrate is part of the Preservation and Safe Management Program and therefore sale of this concentrate will not take place until the program is approved. We continue to work with the new officials for the approval of the Preservation and Safe Management Program which involves getting the new administration up to speed on the current situation at the mine. In his inauguration speech, President Molino announced that a strict environmental audit would be conducted on Cobra Panama. Our understanding is that the government is currently assembling a list of independent international experts who could conduct this audit. We understand and welcome this move as a necessary step for the new administration and the Panamanian public to learn more about Cobra Panama's exceptional environmental practices and standards, and we are prepared to cooperate fully. The company has always operated its operations with transparency and in full compliance with international environmental standards. We are confident the results of this environmental audit, in line with all previous audits at the mine, will demonstrate the world-class nature of our operations. Moving on to arbitration, the company has taken steps towards two arbitration proceedings, one under the International Chamber of Commerce and the other under the Canada-Panama Free Trade Agreement. The ICC is the most advanced of these two proceedings, with the arbitration initiated in November of last year, with a final hearing scheduled for September 2025. Under the FTA arbitration, an updated notice of intent was filed on February 7, The company has three years from Panama's breaches of the FDA within which to file its arbitration claim. I would once again reiterate that arbitration is not our preferred outcome and we remain committed to dialogue with the new government and to being part of the solution for the country and the people of Panama. Over to Zambia. The severe drought continues to impact the country. I'm proud that First Quantum is supporting Zambia's food security efforts by contributing to transportation costs to import grain into Zambia from Tanzania. The severe drought conditions also continue to impact power availability. In June, Zesco imposed a further 20% in power restrictions across the mining sector, for a total 40% reduction overall. As such, the company made the decision to source power beyond the formal restrictions imposed by the Zesco contract and will be sourcing 193 megawatts of power, or 52% of its needs, from imports. There will be an impact on costs, which Ryan will review. However, the company anticipates it will be able to sufficiently substitute power with imports and avoid operational interruptions. In addition, the company is proactively securing sufficient power for the commissioning and ramp-up of the S3 expansion at Kansanshi with three independent power producers. The situation in Zambia is serious and we will continue to work constructively with government and civil society to achieve the best possible outcomes that ensure employment and income to the country remain stable and Zambia's debt restructuring efforts remain intact. With that said, we are pleased and supportive of the commitments made by the country for additional and reliable power generation capacity, including wind, solar and hydro projects, as well as infrastructure investments, including interconnections with other countries across the Southern African Power Pool to address the country's power needs for the future. With that, I will conclude the opening remarks and pass the call to Rudy to review our operational results.
spk05: Thank you, Tristan, and thank you, everybody, for joining our call today. Total copper production for the second quarter of 2024 was 103,000 tons, a 2% increase from quarter one. This was another solid quarter operationally, and with the work accomplished during the quarter, we are now well set up for the remainder of the year and on track to achieve our copper production guidance, as Tristan noticed earlier. Copper sales volumes did lag during the quarter by approximately 8,000 tons lower due to the timing of shipments, vessel delays at Walfers Bay and Dar es Salaam ports related to weather, port congestion, and scheduled disruptions. Copper C1 cash costs declined by 29 cents to average $1.73 per pound, benefiting from higher gold production at Kansanshi and record gold prices. At Kansanshi, copper production totaled 42,000 tons in the second quarter, an improvement of 10,000 from quarter one driven by higher feed grades. During the quarter, we gained access to higher grade material at the main 15 cutback. This, along with access to main 17, will allow for grades to remain at elevated levels for the remainder of the year. In addition, we will be swapping the mixed and sulfide moles during the third quarter in order to maximize mixed ore and grade through the mills. This will allow us to comfortably achieve our production guidance of 130 to 150,000 tons of copper at Kentucky. Copper production at Sentinel totaled 54,000 tons in the second quarter, a decline of approximately 9,000 tons from the previous quarter. The decline in production was expected as the mine experienced higher grades during the first quarter and have since returned to normalized levels. The ongoing Stage 3 development progress well during the quarter, with the input crushes successfully commissioned well ahead of schedule, they enabled access to softer ore. The access to the Western Cutback at Stage 3 will increase the availability of softer ore and allow for improved mining performance and throughput over the remainder of the year. As such, Copper production guidance at Sentinel has been maintained at 220 to 250,000 tons. At Enterprise, over 6,000 tons of nickel was produced during the second quarter, an increase of over 2,000 tons from the first quarter. Mining volumes have been steadily improving and plant performance has been strong, allowing for the deceleration of commercial production. Due to the stronger than expected performance at enterprise, nickel production is expected to be at the upper end of guidance, at 17,000 to 20,000 tons. As Tristan noted earlier, we made the difficult decision to place Ravensthorpe under care and maintenance. This work commenced in May and should be completed during the third quarter. Care and maintenance costs are estimated to be approximately $5 million per month, during the third quarter and will reduce to $2 million a month thereafter. Production guidance has been lowered to 5,000 contained tons of nickel in reflection of this. We continue to support our personnel, particularly those living near in the locally Ravenstope region, and we are thankful for support from the community and local and state governments to the mine during this challenging phase. Discovery Panama remains in a phase of preservation and safe management. During the quarter, the process plant preservation and maintenance cycle was changed from 14 days to 28 days. The new maintenance cycle will allow for the execution of corrective maintenance activities to maintain optimal conditions. The focus continues to be on environmental, care and maintenance activities for all areas, including cleaning and maintenance work at sediment ponds and pumps, managing surface water at the waste dump and low-grade stockpiles, redirecting rainwater, the treatment of water, to manage the pH levels. These expenses are expected to range from $15 million to $17 million per month for the remainder of the year, depending on the level of environmental stability and asset integrity programs. I wish to thank all our employees at Cobre Panama for their ongoing commitments to safe and responsible environmental management of the mine area and its surrounding communities. Thank you, and I will now hand the call over to Ryan to review the financials.
spk13: Thank you, Rudy. During the quarter, copper prices reached a peak of $4.92 per pound following the collapse in copper treatment charges and resulting concern of smelt production cuts, combined with lower mine supply forecasts. The copper price has since pulled back to around $4.20 per pound on the back of expectations of slower growth in China. During the quarter, we took advantage of the stronger pricing environment and entered into a copper hedging program made up of unmargined, zero-cost collars to the end of 2025 on roughly 40% of our production. The hedge program is the next step in protecting the balance sheet following the successful completion of the financing activities in Q1. We've been consistent that while our goal as a company is generally to be unhedged, we will consider the use of hedging as an insurance policy to protect the balance sheet during more capital intensive phases. The hedging strategy ensures a minimum price on a portion of our production while Cobra Panama is offline and until the S3 expansion is fully commissioned at the end of 2025. The hedges are front end weighted, as this is when the S3 expansion project is most capital intensive. Once fully operational, S3 is expected to return first quantum to a positive, to strong positive free cash flow generation. Revenue and EBITDA increased from the first quarter by 19% and 86% respectively, mainly on the back of higher realized copper prices and improved operational performance, particularly at Constantius. Our Q2 net loss attributable to shareholders also improved to $46 million, Although it was impacted by a further impairment at Ravenslope, we wrote off the majority of the remaining inventories, following the decision to place the operation into care and maintenance during the quarter. As Rudy noted, second quarter C1 cash costs averaged $1.73 per pound, a 14% improvement over the previous quarter. In general, costs have largely stabilised. However, as guided in our Q1 results, electricity costs increased as of May 1st at Kinsanchi and Trident as a result of the power shortage in Zambia and the need to import power at higher rates. As Tristan noted, Zesco has requested further restrictions, so we'll be more than doubling our imported power from July 1 onwards. With these additional imports, the impact to our cash costs increased to approximately $55 million, or $0.06 per pound for the full year. In other areas, input costs and prices are tracking favorably to the assumptions used in our C1 cash cost guidance. Oil prices have averaged in the mid-80s year to date, while we continue to use $90 per barrel in our assumptions. The Quattro has been weaker than the $21 assumed in our guidance. And lastly, gold prices have been a significant tailwind for us, more than offsetting the impact of the higher power prices. as the gold prices averaged well over $2,000 per ounce through the first part of this year. Considering all these factors, we remain comfortable with our C1 cash cost guidance range for the year of $1.80 to $2.05 per pound. In respect of our balance sheet initiatives, the sales process of our Las Cruces mine in Spain remains ongoing, as well as the potential minority investments in the company's Zambian business. We will bring in a partner if it creates strategic value for our business in Zambia. Net debt increased this quarter by $160 million to $5.4 billion. The strong progress on S3 and the resulting increase in capital expenditure was the main driver of this cash outflow. Liquidity remained strong at $1.6 billion at the end of the quarter, comprising of approximately $876 million in cash and $740 million of undrawn revolvers. And that concludes the finance section. I'll now hand the call back to Tristan.
spk08: Thank you, Ryan. Two years ago, First Quantum approved the Enterprise and the S3 expansion projects following a commitment made by Zambia's New Dawn administration to reform the mining sector and establish a platform for more stable, durable and responsible mining in Zambia. It is very pleasing to share with you that Zambia was recognised in the latest annual mining survey by the Fraser Institute for its improved investment climate. Out of 86 countries, Zambia's ranking improved from 58 to 34. The country achieved the third highest ranking in Africa and now ranks ahead of traditional mining jurisdictions, including Chile and Peru. The current administration has made great efforts to improve the investment climate for the mining sector within the country and it is very pleasing to see this bear fruit. At Enterprise, it is pleasing that the mine was completed, commissioned and delivered into commercial operation ahead of schedule. I wish to acknowledge our in-house project teams for another project successfully executed that distinguishes First Quantum's approach to delivering growth. At the S3 expansion project, we continue to receive long lead deliveries, with the last major delivery of flotation cells completed early in the third quarter. Construction continues to focus on the assembly and installation of major components, mainly the mills and the primary crusher, and we are pleased to show you the progress of our S3 project in the presentation on our website. Work has also begun on configuration of the plant control system. The S3 expansion is key to restoring First Quantum's strong cash flow generation, and we remain on track for first production mid-next year. We have also published a 43-101 technical report for Kansanshi. The copper production profile at Kansanshi has smoothed over the life of the mine, while unit costs and capital spending has increased, reflecting inflation since the last report in 2020. Reflected in the higher capital spending are fleet replacements related to the S3 expansion. As part of the report, we were pleased to see an increase in mineral reserves that has extended the operating life of Consanti by five years to 2049. This brings our prepared remarks to an end. There was a lot of information with our second quarter results and I would be pleased to take any questions. Operator, we can open the call for Q&A.
spk10: Certainly. We will now begin the analyst question and answer session. Analysts are permitted to ask one question and one follow-up and are welcome to rejoin the queue if they have more. To join the question queue, you may press star then one on your telephone keypad. You'll hear a tone acknowledging your request. If you're using a speakerphone, please pick up your hands up before pressing any keys. To withdraw your question, please press Start and Choose. We'll pause for a moment as callers join the queue. The first question comes from . Please go ahead.
spk03: Hi, good morning. It's great to hear that the new president of Panama has authorized, I guess, some discussions to restart with the company. The president has made some public comments about potentially restarting the mine to close it. And I'm wondering if you can provide any color on what you think that means from a restart perspective and whether you think that could be a partial restart, a full restart, and under what sort of timeline, potentially.
spk08: Hi, Orest. Sure. Thanks very much for the question. Yeah, so the President, in his inauguration speech and since that day, has made a number of comments around the mine, and we note his comments around open to close. I think it's been very pleasing to see the dialogue around the mine, which is a very important issue for the country in terms of the need to deal with, in particular, the environmental issues and how those need to be managed through an operating asset. It's very hard to manage an immediate closure such as happened at the end of last year. And so it's very necessary that there is a level of activity that can ensure environmental security. So that's the first point. Initially, we see that progressing through the Preservation and Safe Management Plan that we have submitted. And I think that's very important to underline the costs and the ability to keep ensuring assets and environmental security in the interim. But we're very open to and committed to dialogue with the new administration to put in place a framework around which we can have those conversations that will see a stable level of operation to ensure the long-term environmental security of the assets. The timing of that, Orest, is difficult. I think there's a number of complexities to work through. We don't see that happening this year. And certainly, the president's made comments around that. We are committed to engage in the dialogue in order to get to that position.
spk03: Thanks. What's the timing for the environmental audit?
spk08: Yeah. Thanks, Orest. Firstly to say we're absolutely open to the audit and we see it as a necessary step for the government of Panama. We're waiting for the instructions from government. We understand they're currently putting together a short list of international experts. That could take a few weeks. And so we're waiting to hear back on the government of the exact timing. But the indications were that it would come this year and the cost will be, perhaps is to be discussed and agreed with the government, the consequences I think of doing nothing at the mine will be very challenging for the environment and so we welcome this audit which we expect would understand that doing nothing right now is not a good outcome for the country. Thank you.
spk10: The next question comes from Jackie from DMO Capital. Please go ahead.
spk04: Thanks very much for taking my questions. I guess maybe my first question would be for Ryan. On the hedge program, it seems very well-timed and opportunistic and I totally understand the rationale behind it. Can you talk a little bit about what you might look at in terms of adding hedges, what you may need to see in the market to to add further hedges going forward?
spk13: Sure, Jackie. Our intention would be to replace hedges as they roll off and to stay broadly 40% to 50% hedged through to the end of 2025, and that really ties in with the delivery and ramp-up of the S3 project, and then from there we move to a stronger phase of cash flow generation, and therefore we don't need that hedging insurance policy from then on.
spk04: Thanks, Ryan. And as my follow-up question, maybe I'll just ask, have you sort of looked at that in terms of the scenarios for restarting Cobre Panama in 2025 or not? Does that affect your hedge program? I mean, it obviously would in terms of that 40% to 50% calculation, but would you be more comfortable being hedged or not hedged in a different scenario with that restart?
spk13: Jackie, we've made that decision and approach independent of Cobra Panama timing, so it really focuses on what the S3 ramp-up looks like and then matching a program that ties in with that.
spk04: Okay, thank you very much.
spk10: The next question comes from Ionis Mazula from Morgan Stanley. Please go ahead.
spk09: Hello, thank you very much for the presentation. My first question is around asset sales or stake sales, actually. You mentioned that you will only bring a partner in Zambia if it would present strategic value. Would this preclude discussions with certain types of potential bidders that may offer an attractive economic value instead?
spk08: Hi, Yanis.
spk13: Ryan, do you want to take that question? Sure. Yanis, the comment was really focused on the fact that We don't have to do a transaction in Zambia, but we think the improved investment climate there, which Tristan referenced in his script, gives us an opportunity to engage with parties who are now looking at Zambia afresh, following the positive business reforms in the last few years. And if there's a partner that has the capability, the experience in the mining sector, and the desire to work with us and the Zambian government in moving those assets forward, we will really take that very seriously. But the comment really was focused on we'll consider it holistically rather than just the dollar value of any transaction.
spk09: Very clear. Thank you very much. And just to follow up, back to Cobra Panama, certainly lots of uncertainties on the path forward, but... Assuming the environmental audit concludes successfully, what would be the next milestones towards a possible restart? And within that, how should we think about a new contract agreement between you and the government, given recent comments made by the president? Thank you.
spk08: Sure, Ioannis. Thank you. So the milestones as we see them, but we committed to dialogue around that with the government, really initially to address the immediate activities required under the preservation and safe management plan to ensure environmental security. Currently we're covering all of that cost and we outlined that in the second quarter results as to where that cost is now at $17 million a month approximately, but ranging 15 to 20. And that's important that we cover that cost. Initially, the concentrate sale would go a long way to support that, and that's part of the preservation and safe management plan that we would hope is approved. Going forward from that, I think it's important that we provide space for dialogue, and that would really be a conversation around a framework as to how that dialogue could work to really understand the full solutions required for Panama and its people, but to work in order to ensure the ongoing environmental security, asset security of the mine and the conditions there. The mine exists and it needs to be dealt with in a respectful way and in a patient manner. So those are the milestones we think this year. The President has made comments around that timetable. I think he said, you know, not before the summer months, which runs through sort of from December. But really, you know, for us, the importance is not when. The importance is getting to a proper agreement that benefits both parties, that ensures a stable operation forward and must make sense for our shareholders.
spk09: Thanks very much.
spk10: The next question comes from Dalton Barreto from Kennecar Juniority. Please, go ahead.
spk02: Thank you. Good morning, Tristan and team. Maybe I can start by following in that same vein there. Just a point of clarification, Tristan, does the approval of the preservation and safe maintenance plan depend on the outcome of the audit, or are they completely separate?
spk08: Look, we'll go through that process. A lot of that conversation needs to happen with government. From our perspective, though, the preservation safe management plan was really needed just to deal with the immediate environmental requirements. And with or without an audit, with or without the future framework, there are a number of environmental matters that need to be the right framework by which those can be covered and be dealt with. And that's what the preservation safe management plan really does. It was set out, we submitted that in January, and it's really about dealing with those upfront key environmental matters well before we get to the sort of long-term items that we would envisage come into a more holistic framework discussion.
spk02: Got it. But from Melenio's perspective and from the government's perspective, the two are completely separate, or are they waiting to see what the audit looks like for us?
spk08: Look, we see the audit as a key step. There's been a number of environmental audits at Cobra Panama, the last one at the end of last year, from August to October, while the mine was operating. The audit demonstrated that we were 100% compliant with the environmental and biodiversity requirements of the 371 obligations under the ESIA. There were five health and safety areas to be addressed, which we were addressing at that time, and that demonstrates the very strong environmental standard of the operation to international standards at the highest level. So we would welcome the audit. We think it's an important part for Panama to understand the situation on the ground at the mine. to provide transparency, to provide meaningful context around what needs to happen, that the mind just can't stop in midair. There needs to be, you know, to ensure integrity of the environment there.
spk10: The next question comes from Marcio Furry from Goldman Sachs. Please go ahead.
spk07: Thanks, everyone. Good morning. The questions around the operations in Zambia, obviously, have performed quite well in the quarter, both in terms of cost, but also grade improvements as well. You talk about potential further efficiency gains on the release. So just trying to understand what are you thinking about in terms of magnitude of potential cost improvements, if the grades that you reported in the quarter can be sustained into the next quarter, and if the surprise that you published highlight any potential upside to this in terms of cost and grades for S3 expansion as well. Thank you.
spk08: Sure. Thanks for the question, Marcy. I'll let Ryan answer the first part of that question, and then just a look ahead, I can give you some context as well.
spk13: Sure. So in costs, we did see very strong cost performance through the quarter. That was largely driven by the low unit costs at Kansanshi, which in turn were driven by the strong gold production there, which tied in with the strong gold price environment. We do expect through the second half of the year, Sentinel to represent a larger share of the production. Sentinel doesn't come with that byproduct credit. So we would expect higher costs through the second half of the year than what we had in Q2, but still well within guidance.
spk08: Yeah, and then looking forward, Marcio, we were very happy to release the updated 43-101 technical report at Consanti. I think that gives a very fulsome picture and the team has done an excellent job in presenting the overall look forward as we get into South East Dome and as the S3 project comes online. In terms of costs, you'll note in that our assumptions around inflation and as we bring new mining fleets and shift from the traditional the methodology we had, which was a selective mining methodology at Consanti, and as we shift across to a bulk mining methodology, that's the major impact on costs at Consanti looking forward. And we're pleased, being on site very recently in the last few weeks, to see those large trucks operating under Trolley Assist, those Hitachi 250 tonners, including the first battery truck, which we saw running under its own power, completely carbon neutral in terms of emissions from that truck. So it's an exciting time for Consanti as we deliver the S3 expansion, and as we bring on that bulk mining methodology, we expect to see costs reduce in the future.
spk07: Great, thank you. And a quick follow-up on the energy side, obviously Vesco reduced power supply by another 20%, which is probably, it now gets to the 40% you have contract with important sources, right? Just trying to understand what is the risk that you see that further containment happens between now and the end of the year, and what are the actions the company is taking to avoid any production displacement then? Thank you very much.
spk08: Thanks Marcio. The situation is serious with regard to the drought. That appears to be an effect from El Nino in terms of dry conditions in Zambia, similarly dry conditions in Australia and wet conditions in Brazil and in Latin America. A lot of the outlook is for a flip to neutral conditions. by the middle of this year, August, September, is what the metallurgical forecasts seem to be pointing to, and potentially a flip to La Nina, around a 40% likelihood, which would reverse things the other way, and we would see higher rainfall in Zambia, similarly higher in Australia and lower in Latin America. So we're preparing for a heavy wet season, but also planning that if there are limitations to power and the drought does escalate, continue through the dry season as to how to go about that, in particular with relation to the S3 expansion. And Marcio, we put in place the flexibility in the contract with Zesco. We're very pleased with that long-term relationship we have then. Zesco's working very proactively around that in terms of headlining the challenges looking forward in the country for power delivery. But then we're able to secure power through imports with independent power providers. And we feel confident at the moment in those agreements that we'll be able to cover our operational requirements. Although the situation is serious in the country, that's coming from sources that are from gas. And very interesting, on the east coast of Africa, they've had good rainfall in places like Mozambique, Malawi, and so on. and so are not impacted to the same degree. So those are strong sources of supply in the current market environment, and we're able to import that power and believe that we'll be able to see no impact on operations.
spk10: The next question comes from Bryce Adams from CIBC. Please go ahead.
spk12: Hi, everyone. Thanks for the presentation. There was a note about government officials visiting site and the report for the immediate export of the concentrate and the power plant restart. I wanted to clarify, is that a couple of months stale? When was the report? Was it earlier in the year or was it more recent? What's the latest on the concentrate in shed?
spk08: Thanks, Bryce. Officials from the previous administration visited the site in the run-up in June and in the run-up to the inauguration on July 1. So it was up to date at the end of the quarter. The feedback from that site visit, as far as I understand, was positive in terms of all of the structure and the way in which we presented the preservation and safe management plan, including the export of concentrates. although we're still waiting for that approval. We are in dialogue with the government around that approval and the need to ensure that the provisions that are in that preservation and safe management plan, we can enact in order to ensure environmental security as the first priority, both for the country and in order to ensure that the mine is in a good, stable position. So the answer is waiting for that approval, though the technical official visit went well.
spk12: Okay. What are the key drivers for the shareholder agreement? It's a more formalized relationship, but what practically changes? And then I can see the reasons FM would enter into the agreement, but what do you think is the key benefit for Jiangxi?
spk08: Yeah, thanks, Bryce. Look, we were happy to enter into that agreement. It's been a long time coming. We've been working with our partners, Jiangxi, for some time. and really it does now provide for formalisation of the relationship between us. The key provisions are, number one, ensure the guardrails around our relationship and the ongoing relationship with Jiangxi in the form of a standstill, restrictions on dispositions of shares and ensuring board support, not for all matters but encompassing majority of matters that the board will come for. Those guardrails, we think, are very important. They really give the benefit for First Quantum, I think, and for our shareholders, remove uncertainty for all our stakeholders regarding the nature of our relationship with Junk C and their intentions into the future. In terms of JNC, they've been very clear they're backing the strategic direction of the company, backing the strategic direction in which we're heading in, and to your question around motivations for them, to ensure a customer and supplier relationship in a time where copper is scarce, we saw that in the prepay agreement that they were seeking to ensure security of supply into what is you know, the number one or number two largest copper smelting business in the world. And they, you know, a lot of strength and capability in downstream processing all the way from smelting through to rod and bar and into copper foils for battery technologies, a huge capability in those downstream areas. So for Shanxi, I think it provides them access to the front end in terms of, you know, scarce copper, supply and ensures a relationship going into the future where there's certainty for both parties.
spk10: The next question comes from Miles Alsop from UBS. Please go ahead.
spk06: Great. Thank you very much. Could you give us a sense on the timing of the sale of Las Cruces and the stake in Zambia? kind of hoped for over the next six months, or could it take longer?
spk13: Thanks, Miles. Ryan, do you want to take that one? Yeah, we expect both of those to play out through the second half of this year. Okay.
spk06: And then maybe just going back to the environmental audit, would you expect it to take three months like last year? And what are the key sensitive areas do you expect to come out of this audit that we should be focused on?
spk08: Sure, Miles. Yeah, challenging to give a time frame for that, although these things, you know, we would expect a detailed audit would take, you know, a few months to get resolved. But, you know, in terms of where the asset stands, we're and the capability of us to respond to those audits requirements, we can do so very quickly. The President in his comments noted that he wanted it done quickly in order to prepare the ground and so the government and the people of Panama had a good understanding of the conditions and more transparency or understanding of conditions at site. In terms of the main focus areas for the audit, Look, the key always at Cobra Panama has been handling the water, in particular through the tailings dam, and our objectives and our continued strong management of the environmental conditions at site really do relate around water, and in particular the tailings dam, to ensure the integrity of those assets. That's challenging while the asset is not operating because of the buffering, because of the addition that the process plant provides to managing that water. But as we see now, and bringing technical people to site, bringing auditors to site in the past, We continue with a strong track record in terms of the downstream water key indicators. So, you know, fish in the stream, micro fauna is all in a very strong and healthy from the discharge. But the water is really the key issue, always has been, and our continued management of that requires the approval of Preservation and Safe Management Plan in the interim and long-term our ability to operate the plant in order to ensure that that asset integrity continues.
spk10: The next question comes from Russell Winder from Bank of America. Please, go ahead.
spk14: Thank you, operator, and good morning, Tristan, Ryan, and team, Rudy. I wanted to ask about the report that the Panama Canal Authority now has some level of jurisdiction over the watershed in which Cobre Panama is contained. Does that change how the environmental audit might be done or how anything might be considered in any sort of negotiations or arbitration?
spk08: Hi, Lawson. Yeah, not sure on that one. I mean, we're sort of three or four watersheds over from the Panama Canal. Look, you know, I'd need to follow up on the detail and perhaps you can reference where you're looking at there. Not something particularly aware of. We're a long way from the canal. The sort of previous, you know, miscommunication, sort of fake news around that we were taking water from the canal is completely misplaced. I think very positive for Panama. Rainfall in the last few months has meant that the canal has improved its operating capacities. It's getting back towards normal provision of draft and ability to service ships coming through the canal, although I'm aware the canal authority is worried in the long term about ongoing effects of climate change on the canal and how they'll deal with that in the future. Certainly, we would be willing to be part of solutions for the country. and part of solutions for the Panama Canal.
spk14: Okay, fantastic. And then just my follow-up would be on the cash cost guidance. Would you guide us to or suggest that we model on the higher end of the range, just given the power cost impact, or can we still think of it as being the middle of the range?
spk13: Sure. Ryan, will you take that one? Lawson, so no change to the commentary on our cash costs. I'd still use the same range as we provided before, and we wouldn't point you to the top or bottom end of that cash cost, a function of in some areas we've seen tailwinds such as gold price, such as kwacha, such as diesel prices, and in some areas we've seen headwinds such as electricity prices in Zambia.
spk10: The next question comes from Dalton Barreto from . Please, go ahead.
spk02: Thanks for taking my follow-up, guys. I wanted to ask about the partnering process in Zambia. My understanding is that Vedanta is also looking for a partner, and I'm just wondering, you know, given what you said about the improved business climate, the fact that Geonxy is also looking, you know, to secure supplies, is there an opportunity for you guys to do something together?
spk08: Thanks, Dalton. I'll let Ryan take that one.
spk13: I think we monitor developments in Zambia, but our focus in Zambia really at the moment is on the ramp-up of S3 and really pleased to see the delivery of enterprise.
spk08: Yeah, Dalton, we follow the progress at Mapani and Vedanta. We think those operations are very important for the ongoing capacity of Zambia. They're big employers. They're important to the Copper Belt as being the traditional sort of source of mining in the country. And so they're very important providers. We previously had ownership in Mapani. We know that asset very well. We understand the characteristics of underground mining at Mapani and potentially what that would look like at Vipanta. No interest directly in that at the moment and our focus, as Ryan said, is on developing S3 and ensuring that comes in on track, on schedule. Alongside that, we're very excited this quarter to have delivered commercial production from Enterprise. That's a huge step forward. The team there, both on the project side to execute that successfully ahead of schedule. And then on the operating side, we've seen really strong progress and huge, you know, better than expected performance on the flotation, in particular dealing with talc and dealing with what we, you know, typically nickel mines can be very difficult to bring into commercial production. So it's been very pleasing to see that happen and really, Dalton, that's what's taking our focus right now and into the future.
spk02: Thanks for that, Tristan. If I can squeeze in this follow-up, I wanted to ask also about a comment you made on the ICC arbitration.
spk08: Hi, Dalton. You just dropped there. Are you still there?
spk10: Sorry, his line dropped. I'll move to the next question and ask him to rejoin in case he wants to finish his question again. The next question comes from Ralph Profiti from 8 Capital. Please go ahead.
spk11: Thanks, operator. Tristan, when you look at the power supply demand situation across Zambia and you look at sort of excess power, from countries and sort of competing industrial demand outlook, and you think about this 193 megawatts that is currently sourced, does some of that address the increased power draw potentially required at S3? And I'm just kind of wondering, trying to reconcile the 40% requirement versus the 52% actually sourced. And then maybe my second question is, what is the step up in max power requirements once S3 comes on? My apologies, I couldn't find it in the consangie technical report.
spk08: Yeah, thanks, Ralph. Yeah, Rudy, do you want to take that question? Thank you.
spk05: Yeah, I'll just jump in on the first question, Ralph, or the first portion of your question. The reason for us to commit to a slightly larger proportion of imported power right now than Jessica is asking for is because we are in a position to secure power from third-party providers as fixed and firm power so that we are 100% certain of what power we're going to get hour by hour. The legacy power imports that Desco is doing is not all firm power at the moment, which provides less and less uncertainty. However, from August, which is next month, a few weeks from now, there's an additional 800 megawatts of power available coming out of South Africa with the new turbines that have been brought in line and synchronized on the South African grid from Kassili. and that power is available, or some of that power is available for the Southern African Power Pool, either directly to be procured by ourselves on imports or through ZESCO, and that power is substantially cheaper than the existing emergency power imports that are taking place. Similarly, ZESCO has entered into an agreement with Mozambique for additional power imports on a new gas-fired power station that becomes available from January, an additional 250 megawatt from that area. And then we have also gone into various agreements that Tristan has highlighted earlier, including an additional 150 megawatts that we might need for S3 going forward. So we're very comfortable that the commissioning of S3 will not be dependent on power issues.
spk11: Great. Thank you. That's the answer I was looking for. Thank you.
spk10: The next question comes from Dalton Barreto from Kenna Cardinuity. Please continue your last question.
spk02: Thanks, guys. I'm sorry. I'm not sure what happened there. Tristan, just a question, a point of clarification, if you will. I think you said the ICC arbitration is scheduled for a final hearing just over a year from now in September of 2015. And I'm just wondering, will that result in a binding decision?
spk08: Yeah, hi. Thanks for the follow-up. Yeah, that's our understanding that that's the final hearing on the ICC arbitration.
spk10: This concludes the question and answer session. I would like to turn the conference back over to Tristan Pascoe for any closing remarks.
spk08: Thanks, Operator. Thanks, everyone. I want to thank you all for your interest and time today, and I wish everyone an enjoyable summer in the Northern Hemisphere. Thank you.
spk10: This concludes today's conference call. You may disconnect your lines. Thank you for participating, and have a pleasant day.
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