Lundin Mining Corporation

Thank you, operator, and thank you, everyone, for joining Lending Mining's first quarter 2021 call. I would like to draw your attention to the cautionary statements on slide two, and we will be making several forward-looking statements throughout the course of this presentation. On the call to assist with the presentation and answering questions are Jinhee McGee, our Senior Vice President and Chief Financial Officer, and Peter Richardson, our Senior Vice President and Chief Operating Officer. Across Lumine Mining, we continue our efforts to stop the spread of COVID-19 and to aid our local communities to recover from the socio-economic impacts of the pandemic. The photo on this slide shows representatives from Candelaria. It's Humberto Espejo and Christian Matus who lead our health and safety team here being recognized last month by the Chilean Safety Association for the team's high performance in occupational health and hygiene during 2019 and 2020. On slide four, as the year begins, we are continuing the trend of strong and improving safety performance on almost all leading and lagging indicators. This includes continued strong performance in total recordable injury frequency rate as presented in the chart on this page. We are particularly proud of this achievement as our operations actively managed through second and third waves of the pandemic. I would also like to highlight several areas in which London Mining has further advanced our commitment to responsible mining over this past quarter, which include updates to our human rights standard and diversity policy, as well as action on board renewal. I encourage those interested in additional detail and more information on our approach to visit our website and read our core documents, including our recently issued management information circular. And as always, please reach out to us with any questions. Our 2020 sustainability report, which will provide a full update on all of our activities during the year, is currently being assembled, and we expect to publish this report in late June. I will now turn the call over to Jinhee to run through the summary results of the quarter.

Thank you, Marie. During the quarter, our operations produced nearly 102,000 tons of base metals and approximately 34,000 ounces of gold. We sold over 91,000 tons of payable base metals and approximately 33,000 ounces of payable gold, generating revenue of over $680 million. As the market price for our core metals we produce continued to increase, there was an aggregate positive pricing adjustment this quarter. The positive impact on revenue from settling a prior period sales was over $22 million. A large portion of the settlements occurred earlier in the quarter, meaning that the pricing was skewed to this time. First quarter revenue was also impacted by the timing of sales, with the delay of a vessel at Chapada resulting in a shipment that was scheduled for March, sailing in the first week of April. At Chapada, we ended the quarter with over 18,500 tons of finished concentrate. Copper generated 70% of the quarter's revenue. This is up from 64% in the same quarter last year on a relative basis, primarily driven by increasing copper prices. Nickel contributed 10% up from 6% in the same period last year on increasing production and prices. As seen in the two pie charts on this slide, we remain predominantly leveraged to copper and well diversified geographically. Slide six presents a summary of our quarter's results. We've benefited significantly from higher base level prices this quarter compared to the same period last year, which reflected the onset of the COVID-19 pandemic. In the first quarter of this year, we realized a copper price of $4.20 per pound. This is above the average market price, reflecting the 22 cents per pound of prior period adjustments. First quarter revenue of over $680 million was 80% above that of the same quarter last year. And this is despite the delayed sales at Chapada, which held higher than normal inventories at quarter end. Attributable net earnings from operations were 18 cents per share. Adjusted earnings were 20 cents per share for the quarter, substantially above the net loss in the same quarter last year. Details of the adjustments are broken down in our MD&A. With our operations performing well and improved base metal prices, we generated adjusted EBITDA of approximately $355 million, nearly a 300% increase from the same quarter last year. Cash flow from operations was nearly $160 million and was impacted by a building capital increase given the lower than typical shipments in the fourth quarter last year and related receipts this quarter. Adjusted operating cash flow before changes in non-cash flowing capital with $280 million or $0.38 per share. Our Board of Directors declared a regular quarterly dividend of $0.06 Canadian per share or $0.24 Canadian per share on an annualized basis, an increase of 50% as announced earlier this year. Lundin Mining is in a very strong financial position with cash and equivalents of approximately $180 million at quarter end and net debt of only $8 million. The company's financial position has further improved since the end of the quarter and is now in a net cash position of approximately $25 million with cash and equivalents of $215 million. I will now turn the call back to Marie to discuss our operations and projects.

Thank you, Janine. So moving on to operations in Candelaria on slide seven. Candelaria performed well in the quarter. It produced over 34,200 tons of copper and 21,000 ounces of gold at a cash cost of $1.65 per pound of copper. Tons milled, ore grades, and metal recovery rates were all in line with our plan. Ore process was over 6.9 million tons, and this included the impact of maintenance downtime in February on the crushing and the mill circuits. As discussed on previous calls, the mill seed grade was similar to that of the second half of last year as expected. We continue to forecast increased production over the remainder of the year, primarily on increasing mill seed grades. The first quarter cash cost of $1.55 per pound of copper, while above our guidance for the year, was better than our plan. Similar to production, the cash cost is forecast to significantly improve over the remainder of the year. We have reiterated Kindle Area's 2021 production guidance at 172,000 to 182,000 tons of copper and 95 to 100,000 ounces of gold at a cash cost of $1.35 per pound of copper. Our byproduct gold price assumption is unchanged at $1,700 per ounce of gold, while we have weakened our U.S. dollar Chilean peso assumption to 700 from 675 previously. Candelaria remains well positioned to deliver meaningful production growth this year on improving copperhead grades and achievement of planned processing rates. Looking ahead, we continue to advance internal feasibility level studies on the Candelaria underground expansion project. These studies are evaluating an increase in the mining rate of the two Candelaria underground mines to a combined 26,000 tons per day from the current 14,000 tons per day. We aim to complete these internal studies this year. Moving on to Chapada on slide eight, first quarter production totalled over 9,800 tons of copper and 13,000 ounces of gold at a cash cost of $1.33 per pound of copper. The operation performed well in the quarter with tons mined and tons milled in line with the plan, demonstrating our return to full production capacity. Mill throughput of 5.8 million tons is the second highest quarterly throughput since acquisition. There is some seasonality at Chapada, and first quarter production was expected to be the lowest of the year, given the planned grade profile and recovery expectations of the mill feed blend. Heavier-than-normal rains also meant that more ore was sourced from the stockpile than planned, which impacted our grades and recoveries. Growth and per-ton milled operating costs were better than planned. However, the cash costs and financial results were impacted by lower sales volumes due to the timing of sales, as discussed previously by Jenny Heath. and this was partially offset by our favorable foreign exchange rates. We have reiterated Tupata's 2021 guidance of 48,000 to 53,000 tons of copper and 75,000 to 80,000 ounces of gold at a cash cost of $1.10 per pound of copper. Our gold price assumption for 2021 remains unchanged at $1,700 per ounce, while we have weakened the Brazilian real assumption to $5.10 to the US dollar from $4.75 previously. On the exploration front, we have had an excellent first few months of 2021. We completed nearly 11,000 meters of drilling and had an average of six rigs on site in the first quarter. We're on track to complete our budgeted 60,000 meters for the year. We were very successful in the government land auction that concluded in early April. We were able to acquire 23 highly prospective near mine exploration licenses, and that represents an 80% increase in our exploration land area. These lands included all of our high-priority licenses and cost approximately $6 million. Chapada's 2021 exploration expenditure guidance has increased to $14 million, up from $8 million, reflecting the acquisition costs of the licenses. Looking on slide 9, this view of Chapada outlines some of the near-mine exploration drilling results. On the slide, you can see the surface expression of last year's measured and indicated mineral resources, which includes the proven and probable reserves as a subset. You can also see the inferred mineral resource and other areas we've determined to be highly prospective and priority for near-mine exploration. The assay results are from select drilling all outside of the current mineral resource estimates, with the exception of One Hole and Sarupa to the north. Our primary focus remains on near-mine exploration to better understand and define the mineral resource potential and inform our ongoing expansion studies. On slide 10, I said we were highly successful in the government land auctions, and the left-hand side of this slide illustrates why. We acquired 23 highly prospective near-mine exploration licenses, and as I mentioned, an 80% increase in the licensed land area. The new licensed areas are shown in green. We were able to acquire all of those that we determined to be our high-priority licenses. On the right-hand side of the slide are select assays from drilling completed on the Formiga target on our existing license. This exciting license is located approximately 15 kilometers to the north of the current plant. And with that, I will turn the call over to Peter to discuss European operations and the ZIG expansion project.

Thank you, Marie. Moving to Nevis Coral on slide 11. First quarter production totaled over 7,400 tons of copper over 14,700 tons of zinc and nearly 1,100 tons of lead at a cash cost of $2.61 per pound copper. Zinc production was impacted early in the quarter by rod mill reliner replacement rescheduled for late 2020. The zinc mill feed grade was also lower than planned as mining was resequenced from the Lombarder zinc agate to complete rehabilitation work. Mine development rates continue to improve in the quarter. Our contractor continued to mobilize resources, and between the contractor and Nevis Corvo teams, development steadily increased month on month. Operating costs in aggregate and on per ton milled unit basis were directly in line with the plan, both on a Euro and a US dollar basis. On a cash cost unit basis, considering the first quarter production, operating costs per ton of copper was above plan, partially offset by greater-than-planned zinc by-product credits. We have reiterated Nevis Corbis production guidance for the year at 35,000 to 40,000 tons of copper and 70,000 to 75,000 tons of zinc, primarily as feed grades of both metals are planned to improve. We have also reiterated the full-year cash cost guidance of $2.20 per pound of copper. This considers a revised zinc by-product price assumption of $1.15 10s per pound from $1 previously. The zinc expansion project, ZEC, was officially restarted in early January of this year. Consistent with our previous guidance and timeline, construction is to be completed in stages over the course of 2021 with commissioning to commence by year-end. Pre-production capital of $430 million remains unchanged, as does our 2021 capital expenditure guidance of $70 million with approximately $30 million remaining to be spent in early 2022, primarily reflecting timing of payments. Slide 12 shows some of the progress being made on the underground aspects of the project. In the first quarter, we restarted underground materials handling construction and shaft upgrade engineering. Slicing work on the underground conveyor systems began and contracts were awarded for the material handling, recirculation system, service water pipes, and shaft upgrades. Over the coming months, underground work is to focus on starting installation of the reticulation system and service water piping, establishing the shaft shutdown prefabrication, pre-assembly and structural and electrical works, and commencing construction on the dumping base. Shaft upgrades are to be completed this year, currently contemplated for a third quarter timeframe. Timing is being reviewed in light of COVID-19 restrictions on international travel. Moving to slide 13, these pictures show some of the surface progress. The radial stacker has been commissioned, and in mid-January, we commissioned the sag mill with ore to produce first pass straight. This equipment has been fully commissioned, however, it's not being utilized at the moment as construction of other phases are being completed. Over the coming months, surface work is to focus on starting construction of the new paste fill plant expansion, completing commissioning of the third tailings paste thickener seen in the photo here, and a resumption of construction of the second and third tailings of the flotation and filtration circuits. On slide 14, Zincluent continued to perform very well and is demonstrated by a record 334,000 tons of zinc ore processed in the quarter. In the first quarter, production totaled over 18,600 tons of zinc, nearly 480 tons of copper, and over 4,700 tons of lead at a cast cost of 76 cents per pound zinc. Zinc and lead mill feed grades were slightly lower than originally planned. Graves are planned to increase modestly over the course of this year compared to the first quarter. Operating costs in aggregate and on a per ton mill unit pieces were in line with plan, both on a SEC and a U.S. dollar basis. On a cash cost unit basis, first quarter production operating cost per pound of zinc was modestly above plan, though partially offset by greater-than-plan copper by-product credit. Our 2021 guidance for zinc-2-1 is unchanged at 71,000 to 76,000 tons of zinc and 3,000 to 4,000 tons of copper at a cash cost of 65 cents per pound zinc. Exploration efforts continue with a focus on the extension of Dalby and the areas between Birkland and Yvonor bodies. Over 6,300 meters of exploration drilling was completed in the first quarter. Our 2021 program remains unchanged with 27,000 meters of drilling planned as a part of a $6 million program. With that, I will turn the call back to Marie to discuss EGLE and sum up.

Thanks, Peter. Lastly, the operations on slide 15, EGLE had an excellent first quarter. Both the mine and the mill performed slightly above plan. As a result, first quarter production was over 5,300 tons of nickel and nearly 5,400 tons of copper at an impressive cash cost of negative $1.62 per pound of nickel. Operating costs in aggregate and on a per ton mill basis were in line with plan, while cash costs benefited from better than forecast copper byproduct prices and volumes. With minimal capex of $3.5 million, Eagle generated over $70 million of cash in the quarter, Considering the strong start to the year, we have increased our nickel production guidance to 17 to 20,000 tons from 15 to 18,000 tons. Copper production guidance has been reiterated. Similarly to this, 2021 cash cost guidance has been improved to a negative 25 cents per pound of nickel from 50 cents previously as a result of the exceptional first quarter and revision of our copper byproduct price forecast. We are now forecasting $3.75 per pound of copper for the remainder of the year from $2.95 previously. We anticipate spending more this year on underground development and drilling, including extra meters on the western extension of the Eagle East ore body. We've increased our 2021 full-year sustaining capital expenditure guidance by $5 million to $20 million. With the production profile, current metal prices, and low annual capex, Eagle is well positioned to generate significant free cash flow in the coming quarters and years. On slide 16, a summary of our current guidance as discussed in the operational section. In the table on the left, as discussed, we are making improvements to Eagle's nickel production and cash cost guidance and reiterating production and cash cost guidance at all other operations. We have made a minor addition to 2021 capital expenditure guidance of $5 million, our original estimate of $610 million, with the $5 million increase at Eagle being attributable to underground development and drilling. Full-year exploration expenditure guidance remains at $40 million, including the early April acquisition of exploration licenses. Approximately $14 million is to be spent at Chapada. The $6 million has been reallocated from corporate and new business development expenditure to the Chapada expenditures. While we have not experienced significant disruptions to production, shipments of concentrate or supply chains due to COVID-19, we continue to caution that our guidance does not reflect any potential for suspensions or other significant disruption to operations due to COVID-19. Turning to slide 17, we have an excellent growing production profile from our current assets, with clear exploration potential to expand or extend mine life at almost all of our operations. We have reiterated our 2021 copper production guidance with a midpoint of 287,000 tons. Zinc production is forecast to modestly increase in 2021 as the zinc expansion project is completed and fully ramped up. Zinc production is set to increase 65% in 2023 compared to 2020 and be roughly 230,000 tons per annum. Gold production is forecast to be 175,000 ounces at the midpoint of guidance for this year, of which nearly 110,000 ounces are unencumbered and receive full market pricing. Lastly, on slide 18, the investments we have made over the past several years have positioned lending mining very well to benefit from the current commodity price environment, with multiple years of strong production, leading cash costs, and free cash flow generation ahead. We are in a strong financial position and expect to finish the year in an even more enviable one given the current robust metal price environment. We will continue with our objective to create value by investing in low-risk, high-return opportunities in our own assets. The core aspect of our capital return strategy is our regular dividend. Our policy aims to ensure a regular dividend is sustainable throughout the cycle and can be progressively increased as the asset base improves and grows. We have maintained our six cents per share quarterly dividend and expect to provide an update in July on the conclusions from the review of our dividend policy, which is currently underway. And with that, operator, I would like to open the lines for questions.

Thank you. At this time, we would like to take any questions you might have for us today. As a reminder, if you would like to ask a question over the phone, simply press star, then the number one on your telephone keypad. Again, that would be star, then the number one on your telephone keypad. We have our first question from the line of Greg Barnes from TD Securities. Your line is now open.

Thank you. A couple of questions. On the guidance, and I know you've reiterated, but you had a A fairly weak start at Candelaria was expected in Chapada. I guess it wasn't as expected. Are you targeting the low end of the guidance range now or is the high end just a stretch?

I would say in general that we're targeting the mid-range as we were at the beginning of the year. We were performing where we expected to for Candelaria. You know, we're slightly behind, but, you know, within just around 1,000 tons of our plan for copper at Chapada. So, you know, we're quite confident in the guidance there, and so we're still targeting the mid-range.

Okay. For Candelaria, you're going to have to see a meaningful step up in grade. It's 0.53 in Q1. I think to get to the low end of the range, I have to put in 0.7 for the rest of the year. Is that along the lines of what we should be thinking?

Yeah, so the grades will be back-end loaded. And we do expect the second half to be considerably better than the first half, probably some modest improvement in Q2. But really, it's the back end of the year where we see the significant increase. And I would say that In terms of the grade, going back to our technical report, I think it was 6.4, 6.5, Peter, correct me if I'm wrong, for the year, which we would probably expect to have something in that range. So, yes, we do have an expectation for fairly good grades in the back half of the year.

I just want to touch on Formiga, this new zone at Chapada. Given the grades there, obviously you have no idea how much mineralization is there, but in terms of the options you're looking for, Chapada, could you be looking at a new mill or an additional mill in another location midway between the current plant and wherever else you find substantial tonnage?

Yeah, so right now, you know, Formiga is early stages and it's pretty exciting. We didn't really want to release any results prior to this because of the land auctions and the area that's continuing on trend to the southwest of Formiga, we were able to acquire that in the auction and that was one of our high priorities. So we'll obviously do more and have more information on Formiga, but the current studies are not looking at like a midway type of plant. It's really looking at the existing resource. And if you see the, you know, one of the really key areas that was the number one priority, it's hard to see on the map because it looks like just a thin line, but it's the extension of Copa Sul. There was a small band of property there that constrained us in terms of the continuation of the South Pit. And so that is removed, and we expect that to have a good influence on our R&R for the year. But right now, we're looking at the drilling in and around is giving us really good results with the existing. So the existing expansion is looking at one of the possibilities is a new plant, but it is located in the area of the existing footprint. So that's what we're looking at the moment. And you can see, you know, wherever we put a drill hole there, we seem to be finding good mineralization. So the challenge is to, you know, find places that don't have so that we don't end up putting infrastructure on mineralized zones.

Okay, great. Thanks. Thank you. Our next question is from the line of Jackie Brzezbelowski. from Bienmo Capital Markets. Please go ahead.

I just wanted to touch on the difference between your production and your sales in the quarter. Can you talk about, I think we definitely saw it at Chapada on maybe more on the gold side, but it looked like it was at a few operations. Can you talk about any kind of shipments timing issues and if we should be expecting to see those being caught up next quarter or if there's another source for that difference between sales and production? Thanks.

Yeah, so there will be always some based on payability, some in particular for nickel when you look at the production versus the sales. um but in terms of our inventories we were carrying higher than typical inventories at chapata as you've noted but also at nevis i think we had a quite a bigger balance there and we did have a couple of shipments go in early april that we had expected to go in march for those two operations and so those were really where we were seeing the inventory levels

Okay, so those essentially have already kind of been resolved, I guess, if the ships have already left?

Well, we always target to have low inventories at the quarter end, so I think where we're seeing challenges right now is in the South American, mostly Brazil, seaborne freight, is that the spot prices are quite a bit higher than the long-term prices under contract of a freightman, so... you know, getting the vehicles into port when you expect them has been challenging just because, you know, the providers are trying to take as many spot contracts as they can. So that was part of the challenge is the vessel availability for the quarter. That makes sense.

Thanks for that, Keller. Can I ask you another question? On Eagle East, I think you mentioned in the preamble, part of the call, that you're looking at more drilling there, especially on the, I think you said, western extension of Eagle East. We've been kind of expecting that Eagle was, your exploration opportunities there were probably exhausted. Can you give us a little bit more color on what you're drilling for there and how this new area sort of came to light?

Yeah, so I think where we are exhausted is on, you know, the expectation that we would find a considerable regional play or, you know, something that's going to double mine life kind of thing. But like last year, you know, we continue to drill on extensions to see if we can add, you know, a few months here, a few months there, because given the profitability of this location, you know, every little bit adds significantly. Peter, did you want to give some color on what we're doing there in the various zones?

Yeah, so as you said, Marie, we're drilling on the zones, the edges of the known ore body of the Eagle East and just trying to identify and find potential continuations and adding tons. And as you said, Marie, months, if you add a month here and there, it's all profitable. So that's what we're trying to identify. We know that there is, you know, there is a mineralization. We need to identify and make sure that it's enough to be mineable. We're just following the known intrusion there.

Okay, that's great. Thank you very much. That's all my questions.

Thank you. Our next question is from R.S. from Scotiabank. Please go ahead.

Hi, good morning. Could we get a bit more color on sort of the operational update at Nevis Corvo, specifically around the grade profile and the sequencing for the year? It seemed to me that the grades were fairly low in the first quarter, and I'm just wondering if we should expect kind of progressively improving zinc and copper grades as the year goes on, or whether there's some variation there.

Um, sure. And there will be variability at Nevis just depending on which zone. So I think, you know, we'll follow the typical pattern that you see there, where we historically have had a bit of a slow start to the year. Then Q2 is typically good. And this is for both of the European operations. Q3 is usually a bit of a slow quarter given, you know, especially in Sweden, everybody disappears for the summer. And then we have a strong Q4. So, you know, I, I would expect to see an increase for Q2 and Q4 in the grades. Peter, did you want to expand on, on any, anything there maybe for, for Zinkerman as well?

No, it's, We have our mine plan, and we're following that mine plan sequence. And, you know, we know that the grades aren't constant and the same. They'll be going up and down depending on the slope sequences. But, as we said, Marie, we should be expecting our plans higher grades throughout the year for Nevis Corvo and also a slight increase in the grades for Zincruan. as well, depending on my integrity.

Okay, thank you. And if I could also ask just on your corporate strategic priorities, I mean, you're already at a net cash position. You've already mentioned that the dividend policy is going to be reviewed by July. But I'm just wondering, given that the Capata expansion from, call it a CapEx perspective, still feels like it's a few years away, how... How big of a priority is M&A right now for Lundin Mining and do you see room to add another asset into the portfolio perhaps before you're ready to build Chapada expansion?

In terms of our capacity to do a deal, we definitely have the capacity to do a deal. Our corporate development team has been working extremely hard and been very busy because there are a lot of different processes and a lot of interest happening behind the scenes. But for us, we don't see anything out there that we could acquire that would be accretive for shareholders or would upgrade our portfolio and put us in a better position. While we have a lot of capacity, we do not see the opportunities that we would want to see. We don't have anything on the front burner there, so I wouldn't expect us to be looking at any acquisition. We're really focusing on capital allocation dividend strategy. As you say, it'll be some time before we have to put money into Chapada expansion and and we'll have good cash flows in order to support that. So, you know, M&A right now is not looking like there's opportunities that would add value for us.

Thank you.

Thank you. Our next question is from the line of Abby Agarwal from Doja Bank. Please go ahead.

Yeah, hi, morning, all. Thanks for the presentation. I have a couple of questions, if I may, please. Peter, at ZDP, you talked about action plans to further improve productivity. Is this a normal startup post the COVID stoppages or is it something underlying?

Sorry, I'm trying to unmute. The productivity that I was speaking to there was as the mine productivity. So we have been working hard on improving mine productivity to increase horizontal development and availability of ore. And so that is something that we continue to work on and push hard in the mine.

Got it. And one more question, if I may, please. There's been some news flow around disturbances in Chile. Do you foresee any impact from those at Candelaria?

We haven't seen. I know the latest one, of course, was the stevedores went on strike at various ports. So some of the ports continue to operate normally. Some of them did go on, I think it was a half day plus a day, so five shifts. I think it was five shifts that the ports went on strike. They're back to normal activity after that strike period. Our port workers did not participate in that strike, but the Port of Caldera did, which is where we would receive our diesel. But you know, no impacts to us from that short duration strike. There is another strike that's been called generally by a worker, National Workers Association has called for a national strike this Friday. Our unions are not associated with this group, but we would expect that, you know, there would be disruptions within the community similar to, you know, in November 19, it was a national day of action and a number of groups went on strike. So, We continue to expect to see, in the lead up to the elections, more political activity. But at this point, we don't see any major disruptions for us.

Got it. Thank you very much. Thank you.

The next is from Jack O'Brien from Goldman Sachs. Your lines are open.

Great. Thanks. Good morning, everyone. first question yeah just following up on on on the capital allocation i just want to make sure i i have the kind of uh order um in in in mind so obviously we've got kind of completion of zep um am i right in thinking the next obviously you've got a variety of opportunities across the the portfolio but the next would then be most likely to be chapada and then followed up potentially by this this expansion underground at candelaria is that the right sort of in terms of kind of prioritization of how you deploy your capital, is that the right way of thinking about it? And then secondly, to one of the previous questions on Chipada expansion potentially being a few years down the track, I mean, if you were to go ahead with that, when would the first expected production come through?

Yeah, so in terms of priority, I think that's Probably correct. I mean, there's not a huge spend left for ZEPP and it's happening according to plan, easily funded from cash flow with still a lot of excess free cash flow. And then, of course, the studies for Chapada. In terms of the QGIP at Kendall area, We expect to finish those studies this year, but we're not expecting that we would have a go decision on that this year. We do expect to see a good viable project there, but our focus is going to be on taking cash from the operations. We've had a period of heavy investment there over a number of years, and so we would like to reestablish the baseline, do our post-investment review, that we do for all of our investments, major investments, and focus on cash flow generation and returning cash to the partners. So that one we'll probably put on hold and reassess that in coming years, but not at the point of approval this year. Chapada, we're working through the studies. I think we've guided consistently that we would be coming to a decision probably early next year. We're trying to accelerate that, but we're going through the steps to do that. And then, you know, we would have to move to looking at the timelines then. But, you know, it's not going to be a start of construction in 2021. That's for certain.

Got it. Okay, thank you. Second question, a few investors are obviously kind of keeping an eye on the tax situation in Chile. And I know there's always one or two headlines and perhaps a difference between reality and what's said, but any comments there?

Yes, so this is one also that we've been following very closely. Obviously, there's been more discussion and activity around this. We're not surprised in the lead up to elections. We expected that there would continue to be a lot of noise. You know, there were proposals raised back a few months ago. And a couple of days ago, obviously, there was a proposal that came from the Mining and Energy Committee of the Chamber of Deputies with an extremely punitive tax structure on mining. So, you know, and this on top of the existing sliding scale. which is the five to 14%, depending on your margin. So I think you'll hear a lot more on this. It'll probably go through finance committee and assembly and get raised to Senate. There'll be a lot of rhetoric. There are electoral promises and it's very politicized right now. You know, everyone wants to curry favor with the electorate. The government has stated it has no plans to introduce new taxes during their mandate, which of course the elections are in November. You know, so we expected to hear different things coming out. We believe that the mining sector's contribution is broadly known and appreciated, not just by the right, but by the mainstream left as well. And that it's pretty clear that this type of back scheme would be very damaging to the industry and really make new investment projects in Chile very difficult. No one's going to take on a multi-billion dollar CapEx project with no potential for upside. It's going to put a lot of projects at risk there. Other countries have tried similar things like this and walked them back very quickly. We think it's a lot of rhetoric at the moment, and we expected it. But we continue to monitor with the industry groups. We're in contact with the Mining Council And basically, you know, we'll watch with interest, but I think the potential harmful effects of this are very well known. I think the finance minister just gave the finance report, stated increases in the copper prices combined with the increased economic activity will lead them to about a 6% GDP growth this year. And... and that the finance, you know, the revenues coming from copper are expected to be able to allow them to have stable debt levels despite stimulus spending. So I think the industry's worked very hard throughout the pandemic to keep producing, and people recognize it's a huge factor in keeping Chile ahead of its neighbors. So, you know, we'll continue to watch with interest, and as we've said in the past, we expect that there would be... you know, there would be new taxes at some point and that they'll be reasonable and not cumulative to the industry.

Great. And one just final, briefer question. Chapada, the oil milled during the first quarter, you mentioned the presentation, very, very strong level. Just wondering if that's a sort of sensible level we could now come to expect going forward, or do you think that was slightly abnormally high, perhaps a catch-up from the fourth quarter?

No, I think we've got some good operation in the middle there now. I don't think we would expect to have any drop-off, and we've actually just, during the quarter, commissioned the mobile crusher. So, Peter, any color on that?

No, I think it's according to what we planned, so a little bit better than what we planned, and that's what we aim to push the tons. So I think we should be seeing similar.

Great. Thank you very much.

Thank you. Our next question is from the line of Daniel Major from UBS. Please go ahead.

Hi there, thanks. A couple questions. First one, at Chipati you process more from the stockpile. Does that mean you're behind on the mining schedule, need to catch up due to the rains, or is it more of a logistical issue? That's the first question.

Yeah, so it is seasonal there in terms of the rainy season, and it was a particularly... rainy February so that meant not only that we would have excess water but that the amount of evaporation days were less so we were carrying more water than we typically would you know so basically as we go through the year we'll be able to access the areas that we didn't have access to but our mining rates were according to plan okay thanks

And then second question, perhaps asking the same question in a slightly different way around the timing of the JAPADA expansion, news flow, etc. So two part, I mean, your mid-year annual reserve and resource update, I'm assuming you're expecting to release a meaningful increase in reserves and resources on the basis of the drilling that you've done today. over the past 12 months. And secondly, you'd previously suggested you could release a study on the expansion fourth quarter of this year or early next year. Is there any change to that timeline?

No change to the timeline, and we do expect to have some good results to incorporate into our R&R. What's important in the R&R is the near mine and the grade So we can add tons, but right now it's a very long mine life. So adding 10 years at the end of 40 years doesn't really move the needle. It'll be important to identify near mine sources that we can bring in sooner than later. So that's where we feel we'll have some success.

Great. And then just one more question, if I may, perhaps a slightly conceptual one. But at this stage of the cycle, people calling for some form of regime change and a higher forever kind of copper price. How are you as a company looking at your assessment of how you review capital allocation going forward? Are you considering following that rhetoric and, you know, putting $4.50 in forever, how are you looking at that and what's your process for reviewing how you feed in commodity price assumptions to impact capital allocation?

Yeah, so we have not just put $4 forever into our model, but we will look at you know, different scenarios, we typically would run upside, downside, and base case. And at this point, we haven't changed our long-term copper price assumption. But when we look at, you know, the possibilities, we'll look at different scenarios. We're fairly conservative, as you probably saw from our, you know, our F1 re-forecast of our C1 byproducts, you know, 375 copper for the year, $1.15 zinc, fairly conservative I think in terms of pricing as compared to where we are so we'd like to think it's higher for longer there's differing opinions on that and we'll be optimistic but conservative as we typically have in the past Great, thank you

Thank you. Our next question is from Lawson Winder from BOA Securities.

Hey, Lawson, you might be on mute.

Can you guys hear me now?

Yes.

Okay, great. Thanks, Marie. Good morning, and yeah, thanks for the update. Just more specifically on the September R&R update, would it be fair to assume that reserves at Chapada could be replaced, first of all? And then secondly, could we expect an initial resource at Formiga? And could that, would we be looking at an inferred or M&I level resource with that? Thanks.

Well, on the first one, yes, definitely we should be able to at least replace MIND and fully expect to do that. For MEDA, I think it's a little early on a resource there.

Okay, great. And then... On the expiration budget, Marie, you mentioned that $6 million had been reallocated from corporate to Chapada. So does that mean that Chapada's expiration budget for this year is now $14 million plus $6 million, so $20 million?

No, it's the $14 million.

That's still the $14 million. And would you expect spending that by the June 30th RRR cutoff?

Spending the $6 million?

No, the entire $14 million.

Um, no, not the full amount. No, we'll, we'll continue with the drilling throughout the year. So, um, you know, it'll be an even spend for the rest of the year, probably. It's, it's a little, it's a little light in the first quarter just because of the, the rain. Um, you know, it's, it's harder to get the meters, but we usually pick up kind of mid year and, and have a very good backend in terms of drilling, but we'll continue to drill there. and do as much drilling as we possibly can throughout the year. And if we can spend more than that budget, we will.

Okay, great. And then just one final question on the guidance, more specifically to gold production, though. At Chapada, one, can you remind us, are the gold grades positively correlated with the copper grades? would it be fair to expect a very, very material pickup in the gold grades in Q2, Q3, and Q4 at Chapada?

Yeah, I wouldn't say there's a direct correlation. I mean, there's areas that are gold-rich and areas that are copper-rich, so there's not a direct correlation in terms of the grade. What we do see is Obviously, with stockpiles, there will be a recovery that you'll see. The recovery on oxide material will be difficult on both gold and copper. So that's definitely the case. In terms of the gold, I'm just trying to think. We do have a pickup in the year on the gold grades as well in terms of being better in the back half than it is in the first half But that's just access in different areas of the paint. But we do definitely see an uptick there. Peter, any color you want to give there?

No. As you said, there's no direct correlation. But we're also expecting an uptick back in the second half of the year on gold grid.

And so you're confident in meeting that goal? gold production guidance for Chapada? Sorry, the middle of that gold production guidance for Chapada?

Yes.

Yes, we are. Yes. Okay. Okay, thank you very much.

Yes. Thank you. Our next question is from Stefan Aonu from Gormart. Please go ahead.

Okay, yeah, thanks, guys. Thanks very much for taking the question. Most of my questions have been already sort of answered, but just maybe curious on the sort of thinking from an M&A point of view, You mentioned you haven't really seen a lot of accretive opportunities out there. Just wondering, can you comment if the focus has been on copper specifically, or are you sort of metal agnostic? I'm just thinking about maintaining a diversified profile going forward with Eagle coming off over the next few years, if there's any additional focus on bringing another nickel asset into the mix.

Yeah, I think we do have a focus on copper, and that would be first priority. But we would look at other things as well, and we have looked at other things as well, whether it be zinc or nickel. But we're just not seeing assets that would be an upgrade to our portfolio and be accretive for shareholders.

Okay, okay. I'll leave it at that. Thanks very much, guys. Thanks. Thank you.

The next one is from Dalton Barreto from Canaccord. Please go ahead.

Thanks. Good morning, Maria and team. A couple of questions from me. I want to start by kind of picking up on that Chile event there. You discussed the proposed tax changes in some detail, but what about from a broader constitutional reform perspective? Are you seeing anything there that gives you concern? And how insulated are you by your stability agreement? That's my first one, thanks.

Yeah, so the elections for the Constitutional Assembly were put off. So they're not happening until May. They were originally supposed to happen in April, but they were put back because of the increase in the COVID cases, and they'll be held on May 15th and 16th. So we don't expect any further delay to that timeline, nor for November. So, you know, On that, there's kind of a split. There's basically the right candidates, which are center-right, there's a center-left, and then there's a more extreme left. And we'll really have a better idea after the May elections to understand where that constitutional assembly will be. But there's a lot of rhetoric from all sides at the moment. And so I think if it was a month from now, I would have a better feeling for the types of things that we might see coming out of the discussions. But the Constitutional Assembly timeline is still the same. So the elections have been pushed back a month, but the expectation to deliver a new draft constitution um and to have it reviewed and voted on is still the same and that won't happen until mid next year but we should have some kind of indication as to what might be in that based on the composition of that assembly and we won't know that until mid-may okay but from your stability agreement perspective i guess until you know what's in there it's hard to say what you're insulated against oh so our stability agreement should protect us against any um new taxes um until the end of 2023 so you know commencing in 2024 we could be subject to you know new taxes there but we do have protection until 2023. okay great and then just maybe switching gears a little bit um i think your disclosure flag

localized COVID-19 outbreaks near Candelaria and Chapada. How much of a concern is that?

I would say for us it is a concern. It's more of a concern at the moment in Chapada than it is in Candelaria because Candelaria, Chile's made good progress nationwide on their vaccines. So you know, they've got half of the population has had at least one dose and probably about a third has had a second dose. So we do see, you know, that vaccination program should start to stabilize the case levels and we should see them reduced there. At Chapada, it's different. The national campaign is moving quite slow. You know, not a lot of doses given. I think only Less than 15% of the population right now has a first dose. And locally, you know, we're still trying to assist with getting vaccinations, but the availability of supply vaccine is not there. So that's the one, you know, where we are concerned. We have had our site doctor and our nurses vaccinated, but... you know, in large part the community and the workforce is not vaccinated there and is uncertain when we might get that. So that is, you know, we don't have any concerns about vaccine resistance. People want to receive it. But we're thinking that the general workforce right now, it's probably at least second half before we can have them vaccinated.

Okay. And then I guess my last question, I just want to pick up on something you said on the condo area underground internal fees that you're looking at. I think you said you expect to see a solid project, but you don't expect to move forward on it. What's the argument for not moving forward on it, just given where your balance sheet sits?

Yeah, so I think there's a few things. We have just gone through a heavy investment period in Chile. We would like to reestablish the base case and to do post-investment review on the investments we have done. There are a number of, and Jinhee could speak to this more eloquently than I, but some tax, withholding tax credits and other tax credits that will disappear within the next year or two. that we would like to take advantage of in, you know, taking advantage of those tax credits. And we feel that, you know, with the political uncertainty embarking on a very high CapEx project, you know, it's not a billion, but it's not under $100 million either. So a big CapEx project in a time of uncertainty on the tax regime is probably not... a good decision, and we're not pressed to, you know, we have good production and we have growth in other areas, so it's not like we're desperate to see that increase. So, you know, prudency and just being careful and taking advantage of some tax credits that are disappearing.

That's great, Carla. Thank you, Mary. Good luck, guys.

Okay, thanks.

Thank you. There are no further questions at this time. I will now turn the call back over to Ms. Engster.

Okay, thank you very much, operator, and thanks, everyone, for joining the call today. You know, in summary, our operations are performing according to plan, and we're expected to deliver on all of our guidance this year. So we feel very well positioned, and we look forward to our next update in July. Thanks, everyone.

This concludes today's conference call. Thank you for participating. You may now disconnect. Have a great day.